Inequality and Violence (Final)

To sum up the previous posts.  Scheidel offers three reasons to think that violence leads to decreased inequality of both wealth and income.

  1. The sheer destruction of wealth by violence. Since the wealthy have more to lose, if you destroy a lot of wealth, the gap between those with a lot and those with a little will be closed to some extent.  Even the 2008 financial collapse led to a short-term diminution of the percentage of US total wealth owned by the top 10%.  The decrease was not huge, and the lessening of the gap was only temporary (lasting about 18 months), but there was a dip.  The more prolonged and extreme destruction of wealth of the world wars, especially of World War II, was an equalizer (again, only to a certain degree, but of a degree unseen in the West over the past four hundred years).
  2. Income disparities are lessened when labor becomes relatively scarce and can, thus, command larger wages. Total warfare of the 20th century variety renders labor scarce.  There is more work to be done than hands to do it—and thus incomes rise for those lower down the ladder.

 

  1. Total war also has, to some extent, a “moral” effect—or perhaps it is only a prudential one—in that the wider distribution of economic benefits (accompanied by a sense that all should also share in necessary sacrifices such as rationing and the provision of sons to the military) is seen as “fair” and as conducive to patriotic solidarity for the duration. The programs put in place to achieve that wider distribution take a fairly long time to dismantle—if we can generalize from the experience of the post-World War II years.

There seems to me a fourth way to account for (at least in the 20th century context) the connection between total war and greater economic equality.  War seems the only pretext for confiscation of wealth and for sharply progressive income taxes that serves to bring modern democracies to enact those measures.  If capitalism tends toward growing accumulations of wealth in the hands of the few and to sharp differentials in incomes, then only confiscation of wealth can undo accumulation and only progressive income taxes can lessen the effects of widely unequal wages.  Again, Scandinavia may offer the exception here, a place where the need to finance a generous welfare state was enough to put high taxes on both wealth and income into place.  But Scandinavia aside, the US and the UK only had high tax rates in the 1950s and 1960s as left-overs from the war effort.   Nations will confiscate wealth to pay for war–and not for other goals.

There is the revolutionary alternative.  The Russian and Chinese Revolutions did confiscate accumulated wealth.  But doing so required massive violence—either through the outright murder of those who held the confiscated property or by driving the wealthy into exile with much of their wealth left behind.  As Machiavelli already suggested, the wealthy will in most (although not all) cases fight to the death to maintain their wealth—although it is also fair to say that in Russia and especially China the revolutionary regimes preemptively assumed the rich would fight for their wealth and put them to death before they had much chance to take up arms.  American slavery appears another similar case.  Confiscation of the wealth represented by slaves could only be effected through violence.  And if we want to be really brutal about it, we could say that the American Civil War (a rich man’s war, but a poor man’s fight) left the old slave-owners in place and thus did not effect the social revolution required to actually place the enslaved on any kind of equal footing with the slave-owners even after emancipation.  The point: it is not clear that you can confiscate wealth on a large scale and still actually retain the formerly wealthy as citizens in your new regime.  They are very unlikely to come over to your side, becoming instead the reactionaries of the equalizer’s nightmares.

The challenge, then, today is to get enough political support—and, perhaps more importantly, enough political power—to enact the kind of wealth and income taxes that the experts (including Thomas Piketty) say would be needed to reverse the increasing economic inequality in the West.  Opinion polls seem to suggest that a majority of Americans favor higher taxes on the top 15%, but the majority doesn’t hold the power (currently) in the US to put such aspirations into law or practice.  Lots of reasons for that lack of power, but capital flight (in all its varied forms) is not the least among them.  Democracy (political power) is currently subservient to economic power.

I want to make two further points to bring this thread to a conclusion.  Violence is connected with the lessening of inequality, because that lessening (it seems) always requires bringing the wealthy down.  This, of course, is the cry of conservatives, who attribute the project of equality to “envy” and see that project as always about making some people worse off without ever doing anything to make others better off.

The leftist utopia, on the other hand, depends on not shrinking the overall pie, but of distributing its pieces more equitably. Here we get into the territory of Rawls max/min—how much inequality should we tolerate in order to maximize the overall (national) wealth, the amount that can be distributed.  Conservatives, of course, like to insist that the only things holding back even greater production of wealth are high (disincentivizing) taxes and excessive regulations.  Take off those restraints—and we’d see the market really take off, to the benefit of all. (And like my colleague on rural electrification, the conservative will say that inequality doesn’t matter at all.  It is just the raising of the floor, the availability of various benefits of prosperity to all that matters.  Even if the rising tide makes the rich richer, it will also make the poor better off.)

But liberals can also have their own versions of models that see economic growth as a cure for our ills.  We could lessen the pain (and conflict) of confiscation if somewhat more progressive taxes were joined to economic growth managed in such a way that the gains went mostly to those at the bottom.

This is where Piketty’s work becomes important.  Straightforwardly, he tells us that you can’t grow your way into greater economic equality unless the rate of return on capital is less than the economic growth.  So long as R>G (i.e. return on capital is greater than growth), all growth will only increase inequality.  And Piketty’s lesson is that it is just about completely impossible to make R<G in the absence of high taxes that undo what the market will do of itself—which is increase inequality.  You have to confiscate market-derived income and wealth to counteract the market dynamics that always (except in periods of massive catastrophe like the world wars and the great depression) lead to ever larger concentrations of wealth.  On that, Piketty in telling us, Marx was right.

Scheidel—and this is my second (and last) point—wonders if Marx was right about the dynamic that pushes wages ever lower and lower.  Absent catastrophes, are there any governors that would keep us from returning to the conditions in 1840 Manchester and 1890 East London?  Scheidel attacks this question by pondering what is the maximum inequality that a society could reach before failing to reproduce itself.  In other words, how high a rate of inequality is sustainable.  His answer is: quite high.  The current US GINI coefficient is about 48, as is China’s.  Norway is 27, France 30, Brazil 49, Columbia 54, and South Africa 63.  Through a series of mathematical calculations that I admit are beyond my ability to follow, Scheidel believes that a GINI coefficient of 60 is very close to “the level of inequality at which current levels of output could no longer be attained” (453).  At the other end of the scale, he also concludes that “in market economies, disposable income inequality needs to be significantly above zero in order to sustain his levels of per capita output” (456).  He suggests that a GINI coefficient of 10 designates a floor (where, we should recall, a GINI coefficient of zero represents total equality).  Thus, modern economies operate within an “inequality possibility space” between 10 and 60 on the GINI scale.  The US has moved from a GINI of 35 in 1979 to one of 48 in 2017.  So, apparently, [if Scheidel is right about the upper limit] we have room to continue the accumulation of wealth and income in the upper echelons that has characterized the last forty years.

As with climate change, the question is whether there are any political forces organized and powerful enough to reverse current trends.  Or are we doomed to keep traveling in the direction that we have been going?

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