All Things Being Equal

Growing up in the 1980s and 1990s, and especially as I went through college and graduate school, I was often confronted with the question, “why does history matter?” The answers always used to seem so banal, so trite: “we learn history so we don’t repeat the mistakes of the past,” right? Or, you’d often hear something like, “Those who forget history are doomed to repeat it.” Through the early 2000s at least, the liability of forgetting the mistakes the past didn’t seem relevant. We were making so much progress on so many fronts—politically, technologically, scientifically, culturally—that any kind of serious historical disruption in our golden age of prosperity through violent revolution, anarchy, censorship, tyranny, civil war, all seemed far fetched. You read about that stuff happening in other times and places, it made for great science fiction dystopia maybe, but nothing like that could ever happen in real life, it seemed.

The power of those statements is much clearer to me now, because I think what we are currently witnessing in 2020 might just be a preview of how society’s fail. And it all seems to start from a critical mass of people in our society forgetting history. Forgetting that all other societies that have ever tried to replace truth with power have not only failed, but miserably so. And yet, living through the widespread resurgence of this trend day by day, it’s hard to recognize that this is how the end of great societies begins. I don’t want us to be the frog in the boiling water. I don’t want us to make George Orwell the wisest prophet of the 20th century.

One of the most corrosive elements in the machinery of modern society, we are told, is wealth inequality. Statistics are somberly cited pointing out that only a few dozen of the world’s wealthiest individuals own as much wealth as the bottom half of humanity combined. Researchers in the United States warn that the wealthiest 20 Americans own more than the bottom half of all U.S. households today. And, what seems most disturbing is that the trend is accelerating; the largest American fortune now exceeds a million times the average annual household income, which is a multiple over twenty times larger today than it was barely 40 years ago.

How disturbed should we be by such statistics? Is wealth inequality of this magnitude actually a historical aberration? And if it’s not, if wealth inequality is the historical rule rather than the historical exception, then what happened to unequally wealthy societies in the past? Historically, has wealth inequality been a sign of a thriving system, or a rotting one? Has wealth inequality typically tracked with prosperity or suffering? We don’t tend to hear these kinds of questions being asked. If anything, they are discouraged. Rising wealth inequality is simply assumed to be a problem, a very serious one. But there’s a book that helps us explore these kinds of questions, titled The Great Leveler: Violence and the History of Inequality, published by the historian Walter Scheidel in 2017.

As it turns out, wealth inequality has been the rule throughout human history. Anytime humans had access to resources beyond the bare minimum for survival, people tended to distribute them unevenly. Archeologists have long recognized dramatic differences in prehistoric burial accessories among members of the same tribes. And, in the more recent past, one need only remember the Egyptian pyramids and pharaohs’ lavish, gold adorned tombs to realize that wealth inequality has been a common feature of history’s most powerful societies. In ancient Rome, over the course of a few centuries between around 200 BC to 100 AD, Scheidel documents that private wealth overall increased by a factor of 40, but the share of wealth controlled by senators and other political elites grew by at least an order magnitude, far outpacing the enrichment of average Roman citizens. As Scheidel writes, “For thousands of years, civilization did not lend itself to peaceful equalization. Across a wide range of societies and different levels of development, stability favored economic inequality. This was as true of [ancient] Egypt as it was of Victorian England, as true of the Roman Empire as of the United States.” So, what history actually shows is that wealth inequality positively correlates with material prosperity. When times are good, wealth inequality rises. When times are tough, it falls. In fact, the most equalizing force of all is the collapse of civilization altogether. The most equal societies in history have tended to be post-apocalyptic; their people were equally miserable. Again, an easy example comes from the collapse of the Roman Empire in the 400s AD. As Scheidel writes, the western half of the Roman Empire “underwent a severe compression in income and wealth inequality that commenced as Roman power disintegrated… this equalization was in large measure the direct result of state failure, a massive violent shock further reinforced by western Eurasia’s first pandemic of bubonic plague from the 6th to the 8th centuries…[and] the leveling may have been at its most thorough in post-Roman Britain, where earlier institutions and infrastructure were largely swept away.”

Scheidel identifies four common forces of apocalypse throughout history: mass warfare, violent revolution, state failure, and lethal pandemics. These forces, sometimes alone but more often in combination, have contributed the most to leveling people’s fortunes across the millennia. In Europe leading up to the Black Plague of the mid 1300s, for example, international trade was expanding, castles and great gothic cathedrals were being constructed everywhere, and mechanization via power technology based on wind and water mills proliferated. In other words, most of the macroeconomic data we have suggests that European prosperity was soaring through the high middle ages. And so was wealth inequality—the gap between the rich and the poor hadn’t been so wide since the height of ancient Rome over a thousand years earlier. The Black Plague collapse wealth inequality, but shattered European prosperity along with it. It’s well documented that much of the leveling out of wealth resulted from higher peasant and craftsman wages after so many workers had died, but to reach that silver lining cost most surviving workers at least a third of their loved ones.

Catastrophes like the violent collapse of Rome and the terror of the Black Plague represent only the most conspicuous historical examples of reduced wealth inequality. There are many more, but the pattern is clear. From the burning of Bronze Age city-states as a consequence of collapsing trade 3000 years ago, to the mass death of Mesoamericans from disease 500 years ago to the artificial famines that starved tens of millions of Chinese under Mao barely 60 years ago, what all these examples demonstrate is that the most significant reductions in wealth inequality throughout human history by far have been caused not by benign policy but by violent disaster. As Scheidel asserts, “Across the full sweep of history, every single one of the major compressions of material inequality we can observe in the record was driven by [apocalypse]… There is no repertoire of benign means of compression that has ever achieved results that are even remotely comparable to those produced by mass warfare, revolution, state failure, and lethal pandemics.”

What appears to be historically unique about modern, democratic societies, then, is not increasing wealth inequality per se, but the modern tendency for wealth inequality to increase as a result of economic prowess rather than political corruption. Whereas in modern America the most notorious concentrations of wealth are often due to monopolistic market control and tax structures that favor capital gains, in modern China, for example, it’s much more common for even provincial government officials to amass huge sums of wealth as a direct result of politically corrupt rewards and property deals. Scheidel provides many examples, including the recent case of a member of the Standing Committee of the Politburo who was able to seize 326 properties across China through the year 2014 worth nearly $2 billion U.S. dollars. Even a mid-level water supply official in a town popular with party leaders, he writes, succeeded in stashing away nearly $200 million dollars equivalent before being discovered by higher ranking party bureaucrats and arrested. Such blatant political corruption was far more common in ancient empires, but it persists most perniciously today in command economies, including not only China but also Russia, Malaysia, and many others. Politically corrupt enrichment is certainly still alive and well in even the freest markets of the world, but not nearly to the same extent.

Another relatively new feature of modern wealth inequality is its concentration in cities. Simply put, wealth creation in modern cities has skyrocketed. As millions of people concentrated in cosmopolitan markets with unprecedented political freedom and excellent access to the worlds best goods, skills, and ideas, people living in cities have enjoyed much greater opportunities to build wealth. A lot of urban wealth inequality, therefore, hasn’t necessarily been the result of the masses getting any poorer, but rather the result of massive new wealth creation among urban entrepreneurs, investors, and merchants. Throughout human history, it was almost impossible for most people to start new businesses, or access startup capital for high risk, high reward ventures. Before 500 years ago, corporations as we know them didn’t exist, there were no limits on liability, and there were few if any regulated exchanges where people could pool their capital to finance large projects like oceanic exploration, mining operations, and factory construction. All of these financial innovations took place in Western cities within the last five centuries, enabling a slice of city dwellers throughout Europe to take advantage of dramatic economic and technology progress while the bulk of humanity simply carried on as it always had eking out a living on the land. In cities where financial innovation progressed the fastest, like Amsterdam and London, some people became fantastically rich, many people climbed out of poverty into the middle class, most people gained access to a dizzying array of new goods and services, and everyone witnessed a rise in wealth inequality along the way because the rich were getting richer faster than the rest.

Scheidel provides copious historical data. For example, he writes, “Economic development and urban growth raised inequality over time as a small fraction of the Dutch citizenry captured a disproportionately large part of the newly created wealth…In the city of Leiden, the wealth she of the top 1 percent grew from 21 percent in [the year] 1498…to 59 percent in [the year] 1722… In Amsterdam between 1580 and 1789, the wages of [new urban elites such as] senior administrative officials, clerks, schoolmasters, and surgeons rose more quickly—by a factor of five to ten—than did those of [conventional trades such as] carpenters, which merely doubled.”

As the power of capital increased through the early modern period, the power of the rich to reinforce their disproportionate increase in wealth did too. With so much new money available to deploy, urban elites found themselves in ever more favorable circumstances to advance over both governments and workers alike. From financing public debt, to investing in real estate, toll roads, and energy production, a new class of capitalists increasingly succeeded in rigging the game, as it were, and for a time, government regulators either failed to keep up or simply found it easier to go along. As a result, Scheidel writes, “without exception, by the year 1800, real wages of urban workers were [relatively] lower than they had been in the late 1400s.” Paradoxically, this is when modern awareness of wealth inequality has tended to reach critical mass—in the absence of violent upheaval due to war, famine, or disease. Modern revolutionary energies gathered precisely when material prosperity rose the fastest, due simply to the fact that the rate of wealth creation among those at the top was so fast when times were good. And historically speaking, times were very, very good throughout much of the West for several centuries leading up to the World Wars. As Scheidel points out, “after the moderate shocks of the American, French, and Latin American revolutions in the late 1700s and early 1800s, the American Civil War is the only event known to have made a dent in one [of the West’s] concentrations of wealth. Aside from such sporadic instances of invariably violent leveling, inequality was mostly ether maintained at high levels or grew even further… Technological progress, economic development, the widening of globalization in the flows of goods and capital, and the ongoing strengthening of states, coupled with… unusually peaceful conditions, created an environment that protected private property and benefited capital investors.”

The only thing that really halted the explosion in wealth inequality among developed nations leading into the 20th century was, what turned out to be, one of the worst catastrophes in human history: the World Wars. Between the outbreak of World War I in 1914 and the end of World War II in 1945, historians estimate that well over 100 million people were killed by bullets, bombs, famine, and disease. Perhaps another hundred million died in the wars’ aftershocks of economic collapse, privation, dislocation, and the tyranny of communism. Wealth inequality plummeted as a result. As Scheidel documents, in the aftermath of the World Wars, “much of Europe and East Asia had been repeatedly wrecked, and mass-murdering communists ruled a third of the world’s population… the income shares of the 1 percent shrank by two-thirds in Japan; by more than half in France, Denmark, Sweden, and probably also in the United Kingdom; by half in Finland; and by more than a third in Germany, the Netherlands, and the United States.” Although many people may assume that war is great business, the great wars of the 20th century made most of the world’s rich people much poorer. As for Russia, China, and Korea, where communist mobs and dictators reduced everyone to society’s lowest common denominator, inequality collapsed by design as famine killed countless additional millions. Things got so bad under Lenin in Russia, for example, that equality of misery extended even to animals. Tens of millions of horses and dogs were either slaughtered for food by starving mobs or died from starvation themselves during the Communist Revolution between 1917 and 1923. Overall, mass warfare and violent revolution had indeed leveled the fortunes of civilization. And, “for the first time since the Black Death, and on a scale perhaps unrivaled since the fall of the Roman Empire, access to material resources came to be distributed much more equally [indeed].”

The mass warfare of the 20th century was unprecedented not only in terms of the scale of death but also in terms of the scale of mobilization. The numbers are staggering, dwarfing anything we’re used to today. For background, the United States currently devotes around 3 percent of its gross domestic product to the military, far more than any country, more than the next half dozen countries combined. During the World Wars, 3 percent was nothing. By 1943, Germany was directing 73 percent of its GDP toward war, and by 1944, Japan was devoting close to 90 percent of its GDP to war. As nations borrowed, printed money, and squeezed as much tax revenue out of their citizens as possible to finance the fighting, inflation skyrocketed. Prices rose by over 100 times in France, 300 times in Germany, and 200 times in Japan. Elite wealth was thoroughly ransacked, and taxation on all business profits derived from war reached 63 percent in Britain, and upwards of 80 percent in France, Canada, and the United States. President Franklin Roosevelt made his own tax policy explicit in 1940, asserting that 80 percent tax rates on military industrial profits would ensure that, “a few did not gain from the sacrifices of the many.” The top 1 percent of all earners in the United States saw their total wealth decline by over 40 percent in absolute terms between 1916 and 1945, with the loss being most extreme among those at the very top. On average, the richest families in America saw their incomes decline by 80 percent, with the vast majority of this collapse in wealth coming from a collapse in capital gains. As millions of American men were sent overseas to fight, and millions of American women entered the factories to build their weapons, the richest Americans saw their federal income tax rates explode to 94 percent by 1944. As the economist Thomas Piketty summarized, “To a large extent, it was the chaos of war, with its attendant economic and political shocks, that reduced inequality in the twentieth century. There was no gradual, consensual, democratic evolution toward greater equality… it was war.” As it was with the fall of the Rome, the Black Death, the Communist Revolutions, and other historical episodes of mass death and immiseration, the World Wars leveled inequality not by expanding access to wealth but simply by destroying the wealth of millions of people.

Now, in the context of this clear historical pattern, it’s important to remember that in the aftermath of many of history’s worst catastrophes there might very well be a phase of exceptional new opportunity for survivors. Like a forest fire that leaves charred ruins ripe for tender green regrowth, some historical catastrophes can leave large swaths of society with improved prospects. This happened after the Black Death in Europe. Surviving workers of every sort enjoyed dramatic rises in income given the significantly reduced supply of labor after so many millions had died. After World War II, massively inflated wartime taxing and spending did not just disappear as soon as the war ended. Severely progressive tax rates took several legislative cycles to reduce, and in the meantime all the new money flowing through the federal government largely shifted from financing military mobilization to financing an unprecedented level of social welfare, civil infrastructure like the national highway system, and education and job training for veterans. In America and elsewhere, the existential disruption of total war had created a sense of solidarity among all classes of people, as fear motivated the entire country to work together like never before. That fear took decades to really wear off; Americans helped win World War II only to face an even more violent prospect of nuclear annihilation during the ensuing Cold War with the Soviet Union, and not until the Soviet Union collapsed in 1991 did fear of war significantly subside. Thereafter, confidence replaced fear and supercharged the economic prosperity of the 1990s. Along with it, American wealth inequality dramatically expanded once again.

Even if we accept the historical rule that wealth inequality rises with material prosperity and significantly falls only with violent shocks, many people cling to the hope that fiscally liberal policies would at least do a better job than fiscally conservative policies in limiting wealth inequality—through fairer taxation and more generous social welfare. But the data doesn’t support this either. The political economists Kenneth Scheve and David Stasavage conducted one of the most comprehensive studies of modern income inequality we have, and they found negligible differences in overall wealth inequality among 13 different developed countries comprised of both liberal and conservative government majorities. The overwhelming factor in determining levels of wealth inequality across all these countries was not economic policy but the rate economic growth. As Scheidel summarizes, “inequality [is] ultimately a function of the size of output above subsistence levels: the more productive an economy, the more concentration of resources in the hands of the few it can support.” And, this positive correlation between material prosperity and inequality is not unique to the modern world—it has been with us ever since our species learned how to progress beyond barely surviving thousands of years ago. “The basic connection between growth and inequality manifested itself in its purest form during humanity’s great transition from foraging to domestication, a shift that greatly intensified the uneven distribution of resources by making it…possible in the first place.” Ever since then, technological and economic innovation have only accelerated the capacity of societies to accrue surplus resources, and when innovation progresses the fastest, so does wealth inequality. This manifested itself in Russia after the fall of communism and in China after it decided to embrace freer markets. Widespread destitution was replaced by re-invigorated economic growth and innovation in both contexts, and wealth inequality exploded.

So, these are the facts of history. This is the truth about wealth inequality. When there is abundance, when our economy is growing quickly, when innovation is rapid, when most people are safe from famine, disease, mobs, and barbarians, and especially when most of us take all of these historically exceptional conditions for granted, that is the time when wealth inequality tends to be most severe, and when critics of wealth inequality tend to think our society is most imperiled. The truth is that wealth inequality is a side effect of many of the things that are going right in our society. This is not to say that wealth inequality is good. But it is to remind us how much worse the alternatives have been throughout human history.

What the historical truth about wealth inequality means is that it is better to think of wealth inequality not as a bad thing in and of itself, but as a consequence of many of the other things we want. This nuance tends to get lost in current political discourse, apparently leading more and more people to believe that wealth itself is bad. If this doesn’t sound realistic, I encourage you to spend some time on the campuses of liberal arts colleges and even some big tech companies; ironically some of the wealthiest institutions in history. But, this is exactly the point of the problem. When people become too far removed from how wealth is actually created and too comfortably sheltered from the violence of history, they tend to forget that the material abundance of the modern world is historically rare and that scarcity and suffering have always been much more natural states of affairs. As I record this episode, the Covid-19 pandemic is providing merely a glimpse of how fragile our prosperity has always been. Thank goodness the full power of apocalypse appears to have left us alone… for now.

Wealth inequality is growing, and for many people, no amount of historical data will convince them that this isn’t one of the biggest problems we face. Reasonable people can certainly agree that we should do our best to manage wealth inequality. We should certainly prioritize investing in education that teaches real skills in communication, science, and technical competency over education peddling postmodernist propaganda. Perhaps we should reconsider the structure of globalization so that economic gains of greater efficiency do not exclusively flow to global elites. Warren Buffett was probably right in arguing that he shouldn’t be taxed at a lower rate than his secretary. These and countless other considerations should be on the table for how we manage rising wealth inequality. But, if people forget the fundamental historical truth that wealth inequality comes with the territory of material prosperity, and seek to substantially level out the fortunes of our society, they may doom us to a cure far worse than the disease. As Walter Scheidel concludes at the end of his book, for those who would seek to impose economic equality upon the world, they should be very careful what they wish for.

I’m Brad Harris. So long.

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