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Recently, I read "The Great Leveler" by Stanford ancient history professor Scheidler. His thesis is that only extreme violence or a pandemic like the Black Plague can temporarily diminish income and wealth inequality for maybe a couple generations but then it reasserts itself inexorably. In essence we are still in an exceptional circumstance following WW1 + WW2, but we also see that inequality is ramping up again massively.
Not true,
only thing that does it, is socialism (as demonized as it is)
There was huge income inequality in the US until Roosevelt pushed the Great Deal which right wing radio talk shows demonize on a daily basis
Not true,
only thing that does it, is socialism (as demonized as it is)
There was huge income inequality in the US until Roosevelt pushed the Great Deal which right wing radio talk shows demonize on a daily basis
While the New Deal prevented income inequality's rise from the 1920s to continue it wasn't until 1942 and the US entering WW2 that it went down "bigly".
Anything that indiscriminately kills LOTS of people can, although not always, open up opportunities for the survivors, in that you can go from labor ("hands") being in supply to being in demand. If demand is destroyed or suppressed (see Eastern Europe vs Western Europe post-WWII), however...
I'm looking at this phenomenon from yet another perspective - psychology. A recent survey in Germany said that that the number of people fearing to fall down what they call "social ranks or stature" is at an all time low. Downward mobility may not be as high in Germany (yet), but is higher now than almost any time since WW2. Peaceful times (record length of peace in Europe!) create massive over-confidence in people. People think they can conquer the circumstances even though the odds are more and more stacked against them. Reminds me of the overconfidence people have in picking winners in the stock market. The generations scarred by WW2 had an innate sense of fear, of not falling out of line, not risking too much etc. because they remembered what horrible events can happen. This fear is gone. As long as your basic needs are met all is well. I'm not saying this is necessarily bad. It's good people take -hopefully calculated- risks in their lives. However when it comes to estimating your chances at defying the odds most people are completely delusional. Someone told me 60% of Americans are overweight, broke and overwhelmed. IMO there are many conjectures from different areas that work together to kind of proof Dr. Scheidel's thesis.
I think the psychological effect is well founded and has been documented in many works. A funny anecdote I I can recall an early client of mine whose annual income was in the low 10 figures, but he was a depression era guy and would send me his files in used envelopes to save on costs.
I think the key is getting the cause and effect correct. Until there are signs that social stability is in fact falling, the market's participants are quite rational in allocating their attention elsewhere. I may personally be fearful of the west coast being nuked by N. Korea, but that doesn't change the fact that I will need to pony up some significant funds to buy another home here in Silicon Valley, until most people
The danger to society is that after that safety gets..."baked in" more and more into our processes and our outlook, a change to that constant will bring about a swifter reaction. In the last Recession, despite numerous growing warning signs, homes continued to escalate in price. The escalation itself caused some that may have sat on the sidelines to buy before they'd be pushed out of the market. When the market corrected to a new set of conditions, prices fell by 50% in entire neighborhoods, and likely could have fallen further had it not been for several interventions.
And these interventions have become more and more interrelated in the hopes of maintaining stability. A look at the 19th century saw a significant number of "Panics" which the banking industry, in collecting short term deposits and making longer term loans with them, is always in danger of having happen. First protections were made to depositors, and now we see the government actively taking a role in stopping market downside movements that are excessive. The US is not alone in this. China underwent a massive stock buying spree in order to shore up their markets just the other year. Central banks have just met to determine how they would like to shape worldwide money supplies.
In a sense, there are many more safeguards now that, while they do entrench the banks, they also safeguard the well being of market participants. 100 years ago, as a depositor, if your bank went bust, you could lose your money. This is no longer the case. Yet even before a bank closes its doors, the FDIC will actively seek someone to acquire the bank to keep it running.
The net effect on society is that there is less of a hoarding effect, which increases efficiency. Market participants are both free and secure to do what they would like with their funds. There's little fear of market shortages, as what is supplied is governed by supply and demand and free to be distributed. The only fear for the participants is that they individually may not have enough money, but this is often relative to their countrymen, as direct comparisons to other nations are difficult. For those with comparatively less or a varying thought process, utilizing a form of distribution other than marketplace value for the distribution of production may seem appealing, but as capital is often a critical barrier to development, ignoring this puts all participants in peril.
Truly, in agrarian terms, we're all cash crop farmers now...but it's rather nice having fruit that's bigger, juicier and without so many seeds...and what I want to pick and when.
Recently, I read "The Great Leveler" by Stanford ancient history professor Scheidler. His thesis is that only extreme violence or a pandemic like the Black Plague can temporarily diminish income and wealth inequality for maybe a couple generations but then it reasserts itself inexorably. In essence we are still in an exceptional circumstance following WW1 + WW2, but we also see that inequality is ramping up again massively.
The only events ("The four Horsemen") leveling inequality are:
- mass mobilbization warfare (WW2)
- state collapse (Somalia)
- transformative revolutions (October Revolution)
- pandemics (Black Plague)
Obviously, none of these are desirable. They are also much less likely in our time: there will be no more mass mobilization wars, no pandemics and states have become much more stable in our time. Also interesting that areas of the world less involved in WW2 like Latin America have greater inequality.
What does that mean going forward (take this only as rules of thumbs from my own number crunching):
- ~% ofreal income growths will go to top 1%
- ~ lower 70% of incomes will not see real growths - ever again.
- vestiges of "middle class" like home ownership etc. will probably not be available for lower 70% going forward
I find this both disturbing but also convincing. It seems that peaceful human society always evolve to this kind of distribution, regardless of times, cultures or circumstances. There are many examples in the book. What do you guys think?
I think Scheidler is daft, to be perfectly honest. I don't care how much he fudges his numbers to fit a thesis.
Over the past 200 years, the percentage of people living in poverty has shrunk dramatically, and the trend has accelerated. Today, according to the World Bank, roughly 9% of the world lives in extreme poverty, a 78% decline since 1980. More to the point, the poverty rate in 1800 was estimated at 94%.
That kind of means that Scheidler is ignoring a major point. At no time in history was a larger percentage of the human population enjoying relative material comfort or access to opportunity. What's more, even those who could be classified as 'poor' enjoy comparatively much better lives than people in the upper classes 100 or 150 years ago. Yes, the uber rich of the 19th century had scullery maids and the whatnot. But they also had cholera and died in childbirth by the score.
As far as the rest of his thesis, I imagine it kind of supposes a Zero Sum game for wealth. As in there is a finite amount of wealth in the world, so if one group has more money, it automatically takes away from the other group. And that just isn't the case. Wealth is constantly being created, and the fact that so much of the world population has lifted out of poverty kind of puts paid to the notion that it's all gone to the 1%.
To me, the mischievous word here is 'inequality.' Can we all be Warren Buffett or Bill Gates? Well, no. But the rising levels of material comfort and prosperity are there for all to see. At least those paying attention. And fabulous wealth in our day and time isn't earned by primogeniture but rather by developing products, innovations, and systems that are of benefits to others. I find that people who bandy about the word 'inequality' are less concerned with poverty and more concerned that someone else has more money than they do.
I mean, at this very moment you are reading this post on a computer that is receiving this web page on the internet. If there were no financial incentive to create the computer, build the website, develop the browser software, and construct the fiber optic network in order deliver my words to your eyeballs, what are the odds we'd have any of this?
Or even more to the point, where did you buy Mr. Scheidler's screed? Unless you checked it out from the public library, you likely either strolled into a large bookstore that's part of a chain or bought the thing on Amazon. Even if you bought it at a small independent bookseller, it was typeset, printed, and sold in order to achieve a profit by the publisher. Either way, you are taking material advantage of a large delivery system that was created for the purpose of delivering benefit to the world, and return to shareholders.
So I would pigeonhole this man's thesis in the same group of Cassandras as Paul Ehrlich and all the other cranks.
I think Scheidler is daft, to be perfectly honest. I don't care how much he fudges his numbers to fit a thesis.
Over the past 200 years, the percentage of people living in poverty has shrunk dramatically, and the trend has accelerated. Today, according to the World Bank, roughly 9% of the world lives in extreme poverty, a 78% decline since 1980. More to the point, the poverty rate in 1800 was estimated at 94%.
That kind of means that Scheidler is ignoring a major point. At no time in history was a larger percentage of the human population enjoying relative material comfort or access to opportunity. What's more, even those who could be classified as 'poor' enjoy comparatively much better lives than people in the upper classes 100 or 150 years ago. Yes, the uber rich of the 19th century had scullery maids and the whatnot. But they also had cholera and died in childbirth by the score.
As far as the rest of his thesis, I imagine it kind of supposes a Zero Sum game for wealth. As in there is a finite amount of wealth in the world, so if one group has more money, it automatically takes away from the other group. And that just isn't the case. Wealth is constantly being created, and the fact that so much of the world population has lifted out of poverty kind of puts paid to the notion that it's all gone to the 1%.
To me, the mischievous word here is 'inequality.' Can we all be Warren Buffett or Bill Gates? Well, no. But the rising levels of material comfort and prosperity are there for all to see. At least those paying attention. And fabulous wealth in our day and time isn't earned by primogeniture but rather by developing products, innovations, and systems that are of benefits to others. I find that people who bandy about the word 'inequality' are less concerned with poverty and more concerned that someone else has more money than they do.
I mean, at this very moment you are reading this post on a computer that is receiving this web page on the internet. If there were no financial incentive to create the computer, build the website, develop the browser software, and construct the fiber optic network in order deliver my words to your eyeballs, what are the odds we'd have any of this?
Or even more to the point, where did you buy Mr. Scheidler's screed? Unless you checked it out from the public library, you likely either strolled into a large bookstore that's part of a chain or bought the thing on Amazon. Even if you bought it at a small independent bookseller, it was typeset, printed, and sold in order to achieve a profit by the publisher. Either way, you are taking material advantage of a large delivery system that was created for the purpose of delivering benefit to the world, and return to shareholders.
So I would pigeonhole this man's thesis in the same group of Cassandras as Paul Ehrlich and all the other cranks.
Thanks for your comment. You rise very good and valid points. I think I misrepresented Dr. Scheidel's book to bring his central thesis to the fore. He readily acknowledges that inequality between emerging and developed countries is shrinking. This is unanimously good because it means that many many people are lifted out of extreme poverty every day. Something like 135,000 people EVERY DAY exit this terrible state, going on for decades.
You are also correct that rising income inequality does not mean that the lower 60-70% in the developed countries actually lose income in real terms. It just stagnates. There are two different forces at work:
1. Technological advance & productivity growth lifts all incomes across the whole spectrum (this also allows poor people to have AC etc. which not even the richest Robber Barrons had)
2. Rising inequality shifts the income benefit of technological advances and productivity to the rich. I think something like 86% of gross national income growths GNI went to the top 1% since the 1980s.
Net result is income stagnation for the lower 60-70% of US population. Also, this is before transfers. There are public transfers and also a lot of transfers from foundations and endowments... by the rich. Definitively, NOT a zero sum game. Neither here nor for emerging markets, quite the contrary. Paul Ehrlich -> utter nonsense. Not worth discussing. One of the worst charlatans.
While the New Deal prevented income inequality's rise from the 1920s to continue it wasn't until 1942 and the US entering WW2 that it went down "bigly".
Rightwingers trying to re-write history
If that was true, why haven't we seen an economic bust when we have gone to war in the last 20 years?
Rightwingers trying to re-write history
If that was true, why haven't we seen an economic bust when we have gone to war in the last 20 years?
Not sure about the war - economic bust relationship. The book's claim is that mass-mobilization warfare decreases inequality. Case in point, the last US (somewhat) mass-mobilization war was Vietnam with a draft and at its end inequality started to grow again (early 70s) after having been stable from WW2. The thesis checks out here.
Also, the left wanted to end the Vietnam war asap and thereby removed the historically best tool (according to Scheidel) against inequality: mass-mobilization warfare. Now they're the most vocal against inequality. Hmmm. Law of cause and effect and unintentional consequences. Not that anyone wants mass-mobilization warfare... but then live with the ensuing inequality.
There is a new paper from the Bank of International Settlements Swiss think tank out on this topic. They claim that the post Berlin-wall labor supply shock drove the inequality in industrialized countries. It will revert now as the world-wide labor force ages and shrinks. I find it somewhat flawed as inequality started rising in the early 70s already before these events. However we may see somewhat of an improvement going forward. http://www.bis.org/publ/work656.pdf
-Redistribution of wealth is inherently immoral and evil and presumes that you are born into slavery to others.
-Mandating that workers must join a collective and pay that collective to form a mob and steal the wealth of employers against their will is evil and immoral.
-Pension plans can be provided by oneself, and for oneself. They are available and effective in the private market.
-A utilitarian argument that is invalid and does not the address of inherent immorality in stealing from others based on need.
Oh, stop. There's absolutely nothing EVIL about those who believe that "we're all in this together." You may think envy is evil but it's no less so than greed.
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