Income inequality has always been with us. Ever since humans started farming, some have done better than others. The pattern holds from the Stone Age through Ancient Rome to World War II. Has anything leveled the gap between the rich and poor?
Walter Scheidel, a professor of Roman History at Stanford University, in his new book, “The Great Leveler,” says only the so-called “four horsemen” of war, disease, state collapse and revolution have succeeded in leveling income. And as soon as the devastation is over, income inequality builds again.
What lessons do this rather bleak history have for the U.S., where income inequality has doubled in a generation? Scheidel says there is much “low hanging fruit” that might slow the trend down in the U.S.. He argues against “defeatism,” saying rather that policy makers should “think harder” about possible solutions.
Let’s start in the critical period of the 1970s. That’s when income inequality started to rise again in the U.S.?
That’s certainly true. It is not just true for the United States. It is a phenomenon that we can see in many, not all, but many Western countries starting in the 1970s and 1980s. And that is a trend that has continued all the way to the present.
“I think it is now down to six people who own more than the poorest half of the world’s population, taken together.”
What’s behind that trend?
There is a big debate about the underlying causes — the more obvious ones are liberalization of the economy, globalization really took off in the 1980s, tax reform, so those were factors in the U.S. that really increased the income share, especially of the 1%, the highest few percent, and it was accompanied by a concurrent the concentration of wealth, not just income, in that segment of the population. It is pretty much a global process. Labor unions lost influence, and so reduced their bargaining power, which was conducive to wage inequality. You’ve got a great expansion of the financial sector, created a lot of extremely high paying jobs for a few people, and a number of things really came together to produce this phenomenon
And the fact is that a busload of people now owns as much wealth as the poorer half of humanity?
Well, it used to be a busload. But, my book came out and it has already been superseded. Because at the beginning of the year it was down to a regular car. I think it is now down to six people who own more than the poorest half of the world’s population, taken together. When my book came out it was still a few dozen. It just shows that the process is still continuing.
Is income inequality hurting the economy?
Well it doesn’t necessarily hurt the economy, or not yet. Even though economists have found that if inequality reaches very high levels this could have a negative effect on economic growth. It is just worrisome from a political and social perspective.
We think of the 1950-1960s economy as normal times, but actually they were an anomaly with low inequality?
That’s very true. It seems is exactly that period, the 30 years after the end of World War II, that is the exception. It is not really the period of rising inequality ever since that is the anomaly. It is really the generation before that and was very much determined by what had happened in the previous generation between 1914 and 1945.
Your research found that stagflation played a role in the late 1970s in unleashing income inequality.
I mean that is something that triggered or encouraged economic reforms that led to liberalization and a softening of all the various regulations that had been put in place in the 1930s and 1940s. And that, in turn, allowed inequality to increase once again.
So the Federal Reserve played a role?
Yes, there was certainly a political response to economic crisis linked to the oil shock in 1973. And more structural problems that had emerged since the 1960s and 1970s.
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.
You are not saying we shouldn’t try, but that we should be realistic about it?
That’s exactly the message of the book, to say, look what it was like back in the 1950s and 1960s and 70s and if we can only get back to that, that’s just not very realistic because it leaves out the entire context. It is not good enough to produce sort of a long list of policy recommendations without considering implementation. It would not be realistic in the world today to take things back to where they were a couple generations.
Education is often held out as the solution, but is it really?
Education is certainly a factor. It accounts for the fact that inequality in Western Europe for instance is lower than the U.S., because they are doing a better job in many respects. But it is not a silver bullet. If you look at the effects of education in the U.S. in the 20th century, the entire reduction in wage inequality linked to education, to more people having high-school diplomas or college degrees – all of these things happened during World War 1 or World War 2 so even education is strongly linked to these violent shocks.
Europe is doing a better job on education?
Europe is doing a better job now because they have a more equitable provision of, especially, public education. And they are better at re-training adults. So various things work in favor on European countries and this makes a real difference in terms of wage inequality.
Do you have any policies you think should be tried? Wealth tax? Living wage?
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.
But there are some radical proposals out there but may not even work?
Well, 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.
Is the debate over income inequality like the climate change? Do people dispute the basic facts?
Not really. I think there is now increasing awareness which goes back to the financial crisis, so the whole public discourse about this is largely a phenomenon of the last ten years or so when the media picked it up and academics and the general population has more become aware of this issue. Or what the general public aware of is rather stagnant wages, for the middle class, and that in part is being blamed on rising income inequality which is not entirely unreasonable
Could come a time when income inequality leads to instability?
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.
Are the riots in Charlottesville a symptom of this social unrest?
Well you could probably link it some ways, but what you are more likely to get is increasing socio-economic segregation, people of different classes interact less, live in different places, and go to different schools and the whole system of inequality becomes sort of perpetuated from one generation to the next. That is certainly a trend we are seeing. And that is bound to be socially undesirable in the long term.
Like people are marrying people of their own class, what’s the term for that?
Assortative marriages. People go the same colleges and they have the same educational background and then they are unsurprisingly more likely to marry people just like them. And so they match up well in terms of not just education but income ultimately and then are able to take much better care of their children and that is why our stratified education system plays a bigger role too.
In your book, you delve a little into science fiction, where income inequality goes if it is unchecked... the 1% end up as superhumans with robots.
There are going to be robots anyway. A number of factors are pushing in the direction of even higher inequality, one is automation which is an open-ended story, nobody know how far it is going to go in the next decade, but it will go pretty far. Then if you really want science fiction, the final frontier would be modification of people. Because at this point, we still have inequality amongst people but once we start changing people through genetic engineering or cybernetic implants, you might end up with a group of people who are inherently different, cognitively more capable, healthier, stronger and so on. And so the potential for inequality in that respect is enormous.
But income inequality has been just been a part of humans as long as we’ve been human?
It seems to be almost a default condition of civilization. It goes back thousands of years.
There doesn’t see much willingness to tackle the issue, from this administration at least.
No, that is certainly true. But it 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.
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.