top of page

Political Economy of the Redistribution of Wealth

“Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety.” ~ Friedrich A. Hayek in The Road to Serfdom

Fareed Zakaria, an Indian-American journalist, highlights in his recent book ‘Age of Revolutions: Progress and Backlash from 1600 to the Present’ how the Industrial Revolution in the 18th century eventually paved the way for the transformation of feudal society into an industrial one where there was a rising middle class. Since then, this middle class has brought many economic and political changes, including major revolutions, across the globe.

An Illustration on the Political Economy of Redistribution of Wealth

Illustration by The Geostrata

In India, too, this middle class has played a major role in enhancing the country's economic growth potential. As per the PRICE ICE survey published last year, till 2020–21, the number of people classified as middle class is 432 million, along with 56 million who are classified as rich. Apart from these middle and rich classes, millions of farmers and workers in India work on a daily basis to make sure their necessities are being met while simultaneously accumulating some amount of wealth for their future generations and offspring, so that they don't have to suffer the same hardships as their ancestors. 

Now what if someone were to tell them that whatever money and wealth you accumulate for your children, 55% of it will be seized by the government by means of inheritance tax?

Chairman of the Indian Overseas Congress and one of the close confidants of former INC president Rahul Gandhi, Mr. Sam Pitroda, recently, in an interview citing Inheritance Tax provisions in some of the US States, said, “In America, there is an inheritance tax. If one has $100 million worth of wealth and when he dies he can only transfer probably 45 per cent to his children, 55 per cent is grabbed by the government. That’s an interesting law. It says you in your generation made wealth and you are leaving now, you must leave your wealth for the public, not all of it, half of it, which to me sounds fair.” 

While the Congress Party officially distances itself from these comments, the chronological order in which they have appeared compels one to think about the fallacies of a particular political party. During the election campaign, Rahul Gandhi often talks about the redistribution of wealth in the country.

He mentions undertaking a financial and institutional survey to find out who is in possession of the wealth of the country and, subsequently, redistribute it.

The official Congress manifesto talks about addressing the growing inequality of wealth and income through suitable changes in policies. Such ideas are not only politically utopian but also economically unviable. 

17th century English philosopher and political thinker John Locke, in his famous work ‘Two Treatises of Government (1689)’, rightfully put, “The state of nature has a law of nature to govern it, which obliges every one, and reason, which is that law, teaches all mankind, who will but consult it, that being all equal and independent, no one ought to harm another in his life, health, liberty, or possessions (private property),” highlighting the indispensability of life, liberty, and private property in maintaining the modern social contract.

Life, liberty, and private property are the three pillars of the fundamental foundations of the world we live in today. Whatever the wealth or property that people hold today, if attained by ethical and legal means, the state shall have no say in controlling it.


Adam Smith, in The Wealth of Nations, examines the conditions of natural liberty and the self-regulating system under which every man and woman pursue their self-interests. Three main characteristics of this self-regulating classical system are freedom, competition, and justice. 

He comments, “Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interests in his own way and to bring both his industry and capital into competition with those of any other man or order of men.” Through the invisible hand of the free market, the promotion of individual interests leads to the promotion of collective self-interest. 

The fallacies of wealth distribution and establishment of egalitarian society, which attacks the fundamental conditions of natural liberty that Smith talked about, are the remnants of the bygone regressive socialist era that have become redundant in the aftermath of 1991 reforms in India.

 To even imagine that such exercise can benefit the nation is a delusion of grandeur. If everyone is equal there is no motivation for anyone to work. If wealth creators are being attacked there will be no wealth to redistribute. 

Today, India is the fifth-largest economy, and in the next few years, it will be the third-largest economy after the US and China. The open market reforms of 1991 made it possible for us to cooperate and compete on the world stage.

Though there are many issues with the economy, unemployment and wealth inequality are a few of them. But it’s always favourable to have inequality of millions and billions instead of equality of thousands. After all, what is the point of egalitarianism if it leaves us all equally poor and penurious? It’s time for India to let the market function and for the invisible hand to chart its own course.




Recent Posts

See All

7 Yorum

Finding a right balance between promoting fairness and economic growth.


Very well articulated


brilliant and timely take by the authour


25 Nis



Amazing piece!

bottom of page