inequality in India and the UK, 1930 and today

(Baton Rouge, LA) In 1930, Gandhi wrote to the Viceroy of India–one of innumerable such letters. His thesis: British rule in India was a “curse.” Among his complaints: the Viceroy was paid five thousand times as much as the average Indian, whereas the British Prime Minister was paid only 90 times as much as the average Briton. Gandhi didn’t quite spell it out, but I think he implied that a government that depends on the consent of the governed will not overpay its leaders, but an empire may.

Today, India has a Prime Minister of its own. His official governmental salary is about US $26,400 per year, which is about 414 times the median income of his countrymen ($616/year).* That ratio is less than a tenth of the ratio in 1930. As Gandhi would have predicted, democratic India pays its leader much less than imperial Britain did, at least in comparison to ordinary incomes.

PM Modi declares assets of about US $350,000, but I have no idea whether such disclosures are credible. Of course, his office comes with many perks–not only the usual ones (official residences, travel, etc.), but also things like free tolls on all national highways.

Gandhi didn’t calculate the ratio between the UK Prime Minister’s salary and the average Indian salary in his time, but based on his numbers, I think it was 640-t0-one. Today, the UK Prime Minister is paid just under US $200,000 per year. That is about five times the mean individual salary in the UK, 100 times the mean income in India, and 7.5 times the salary of his Indian counterpart. The first two ratios represent a considerable improvement in equity compared to 1930. Still, the PM’s salary (by itself) would put him in the top 1% in Britain. Boris Johnson is reported to hold assets of about $2 million. And he has a nice free house in Downing Street.

If someone today were paid 5,000 times as much as a median Indian, as the Viceroy was in 1930, that would translate to about US $3 million in annual income. That would be much higher than any government salary but far lower than the highest salaries in India’s private sector. Bollywood actor Akshay Kumar earned US $65 million last year. That is 105,000 times the median income. Mukesh Ambani, who leads Reliance Industries, has an estimated net worth of $58.4 billion.

What do these changes suggest? First, democratic and independent nations do put downward pressure on the salaries of their leaders. In fact, US $200,000 is a modest salary for the leader of the whole British Government, if one compares it to CEOs’ salaries in the private sector. However, democracies still tolerate large gaps between the pay of their political leaders and average people–perhaps wisely, to attract talent to the government. And they offer sometimes surprising perks that are not only valuable in market terms but also symbolically distance leaders from citizens. (Every Indian toll booth announces that the top officers of the national government can drive through for free.)

Meanwhile, independent democratic nations are currently tolerating enormous gaps between the average income and the highest salaries in their private sectors.

*The mean income in India is $2,016. I find that number less meaningful, but Gandhi may have been using the mean in 1930.

See also defining equity and equality; the remarkable persistence of social advantage; why some forms of advantage are more stubborn than others; and notes from India