Only catastrophe truly reduces inequality, according to a historical survey
As a supplier of momentary relief, the Great Depression seems an unlikely candidate. But when it turns up on page 363 of Walter Scheidel’s “The Great Leveler” it feels oddly welcome. For once—and it is only once, for no other recession in American history boasts the same achievement—real wages rise and the incomes of the most affluent fall to a degree that has a “powerful impact on economic inequality”. Yes, it brought widespread suffering and dreadful misery. But it did not bring death to millions, and in that it stands out.
If that counts as relief, you can begin to imagine the scale of the woe that comes before and after. Mr Scheidel, a Vienna-born historian now at Stanford University, puts the discussion of increased inequality found in the recent work of Thomas Piketty, Anthony Atkinson, Branko Milanovic and others into a broad historical context and examines the circumstances under which it can be reduced.
Having assembled a huge range of scholarly literature to produce a survey that starts in the Stone Age, he finds that inequality within countries is almost always either high or rising, thanks to the ways that political and economic power buttress each other and both pass down generations. It does not, as some have suggested, carry within it the seeds of its own demise.
Only four things, Mr Scheidel argues, cause large-scale levelling. Epidemics and pandemics can do it, as the Black Death did when it changed the relative values of land and labour in late medieval Europe. So can the complete collapse of whole states and economic systems, as at the end of the Tang dynasty in China and the disintegration of the western Roman Empire. When everyone is pauperised, the rich lose most. Total revolution, of the Russian or Chinese sort, fits the bill. So does the 20th-century sibling of such revolutions: the war of mass-mobilisation.
And that is about it. Financial crises increase inequality as often as they decrease it. Political reforms are mostly ineffectual, in part because they are often aimed at the balance of power between the straightforwardly wealthy and the politically powerful, rather than the lot of the have-nots. Land reform, debt relief and the emancipation of slaves will not necessarily buck the trend much, though their chances of doing so a bit increase if they are violent. But violence does not in itself lead to greater equality, except on a massive scale. “Most popular unrest in history”, Mr Scheidel writes, “failed to equalise at all.”
Perhaps the most fascinating part of this book is the careful accumulation of evidence showing that mass-mobilisation warfare was the defining underlying cause of the unprecedented decrease in inequality seen across much of the Western world between 1910 and 1970 (though the merry old Great Depression lent an unusual helping hand). By demanding sacrifice from all, the deployment of national resources on such a scale under such circumstances provides an unusually strong case for soaking the rich.
Income taxes and property taxes rose spectacularly during both world wars (the top income-tax rate reached 94% in America in 1944, with property taxes peaking at 77% in 1941). Physical damage to capital goods slashed the assets of the wealthy, too, as did post-war inflations. The wars also drove up membership in trade unions—one of the war-related factors that played a part in keeping inequality low for a generation after 1945 before it started to climb back up in the 1980s.
The 20th century was an age of increasing democratisation as well. But Mr Scheidel sees this as another consequence of its total wars. He follows Max Weber, one of the founders of sociology, in seeing democracy as a price elites pay for the co-operation of the non-aristocratic classes in mass warfare, during which it legitimises deep economic levelling. Building on work by Daron Acemoglu and colleagues, Mr Scheidel finds that democracy has no clear effect on inequality at other times. (A nice parallel to this 20th-century picture is provided by classical Athens, a democracy which also saw comparatively low levels of income inequality—and which was also built on mass-mobilisation, required by the era’s naval warfare.)
Catastrophic levellings will be less likely in future. Pandemics are a real risk, but plagues similar in impact to the Black Death are not. Nor are total revolutions and wars fought over years by armies of millions. On top of that, since the Industrial Revolution general prosperity, regardless of inequality, has risen. And in past decades global inequality has fallen.
Good news in general, but news which leaves readers who would like to see significantly less unequal individual economies in a bit of a pickle. Futile though Mr Scheidel thinks it may prove, attempts to ease inequality democratically through redistributive policies and the empowerment of labour at least show no signs of doing actual harm. They may, indeed, keep the further growth of inequality in check, but they can hardly dent the direction of change. And they may have opportunity costs; if history provides no support for thinking that deep, peaceful reduction of inequality is possible, perhaps progressives should set themselves other tasks.
There are two other possibilities. One is to note that historical circumstances change. As Mr Scheidel shows, the 20th century was quite different from all those that came before. Is it not possible that another less horrible but equally profound transformation in the way that people and nations get along with each other, or fail to, is yet to come? If, for example, increasingly economically important non-human intelligences decided that they would rather not be owned by anyone, thus in effect confiscating themselves from their owners, could that not make a difference?
The other possibility is that some may see civilisational collapse as a price worth paying for the Utopia they might build in the rubble—or may just like to see the world burn. Individuals and small groups can dream of nuclear- or biotechnologically-mediated violence today on a scale that was inconceivable in the past. Wealth may ineluctably concentrate itself over time; the ability to destroy does not.