Historically, Income Inequality Is Known As A Destroyer Of Civilizations
In order to get a sense of how income inequality wreaks havoc on societies, one would have to travel through history to the beginning of civilization – back to the time humans began farming and settling down into communities.
Stanford University professor of Roman History Walter Scheidel has done exactly that, and in his book, “The Great Leveler”, Scheidel argues that income inequality is essentially an inevitable byproduct of civilization.
Unfortunately for humans, the only remedy appears to be societal upheaval, produced by war, disease, state collapse, or revolution.
And once income is leveled, inequality begins to build again.
From Scheidel's 2017 interview with MarketWatch:
Getting to the point of your book, you argue that if people want to address income inequality, they shouldn’t be blind to the fact the only policy that has leveled income has been state collapse, disease, and now war and revolution.
That’s unfortunately true. What you are after is a really significant reduction of an existing level of inequality. Those are the forces that used to work in the past. In as much as policy measures have worked, they were usually rooted meaningfully in one or more of these violent shocks.
And your book goes from almost the dawn of civilization.
It is really the first attempt to track the evolution of economic inequality in the very long term, which forces me to be quite eclectic when it comes to sources and that sort of thing. But that is the only way of establishing that this pattern exists — that these violent shocks were critical at reducing inequality at different periods in history.
And political attempts to thwart it were often fruitless. Even as early as 7 BC, advisors to a Chinese emperor tried to limit landownership but were thwarted by elites. And so it goes today?
That is certainly true. It is really striking because so many things have changed, right, we now technically have democracies, and industrial societies, but yet the underlying forces are more or less the same.
So where does this leave the U.S. in terms of addressing – and hopefully mitigating – the social and political unrest that might result from such high levels of income and wealth inequality?
Scheidel suggests that although policy alone is unlikely to curb the widening of the income gap, in the U.S. there are still plenty of policies that can be implemented successfully.
In Europe, for example, public policy surrounding the education of young people and retraining of older people has in part helped countries like the U.K. avoid the higher degree of inequality currently seen in the U.S.
And there are other meaningful changes that could help slow the trend:
In the U.S. there are certainly a lot of low-hanging fruit because income inequality has basically doubled over the past generation. So there are various things that could realistically implement: a wealth tax targeting capital gains more aggressively; fiscal measures that really target the upper-most-sliver of the 1%; that would certainly help, and greater investment in education would be another issue. There are certain things that matter less in the U.S., like offshore wealth which is a big deal in many other countries but doesn’t seem as prevalent in the U.S. So it really depends on the country you are looking at in terms of what measures would work best.
In particular, Scheidel is concerned that some believe the trend can be sufficiently dialed back through policy alone.
Specifically the idea of universal basic income – which has gained steamed among Democrats and progressives – is not the answer, according to Scheidel.
[A] minimum basic income is increasingly being suggested. Which, if it was modest, it wouldn’t make a big difference and if it was substantial, it would be really, really expensive. And it is just hard to see how this would be feasible politically or whether it is a good idea economically to begin with.
Does this mean there is no hope? The professor doesn't think so.
My message is not defeatism. It is really to be realistic about what kind of measures might actually be realistic, what can be implemented in practice. We really need to think harder about this to tackle this problem.
And tackling the problem seems to be increasingly on the radar of Americans and politicians on both sides of the political divide, but Scheidel says even our increasingly divided politics can be traced back to income inequality:
Higher income inequality has the potential of destabilizing society. It is also linked to the growing degree of political polarization that you have in this country and it is already manifested in the election results last year. So we are certainly moving in a certain direction. It is not quite clear, empirically, whether high levels of inequality automatically lead to some kind of social disturbances or violence response. It doesn’t seem to be a systematic effect but the potential is certainly there.
The last presidential election result gave the U.S. an administration that seems unconcerned with income inequality, but Scheidel doesn’t think robust discussion of the issue will disappear.
[I]t is encouraging in a way that is has become a topic on both sides. The current president at least talked about it, when he was campaigning. And Bernie Sanders certainly talked about it a lot. You see similar trends in Britain and France. So this is becoming a pretty pervasive feature of the political landscape.