Leveling income inequality

The biggest problem in modern times depends on which socioeconomic class a person belongs to. For the elite and the ruling class, there are problems like economic growth and technological revolutions. For the majority of the population all over the world, the most pressing issue is the challenge of income inequality. This challenge has in fact become worse in recent years. There are facts that can be recited that are really damning and sometimes, unbelievable.

For example, the richest 62 persons on the planet own as much as the private wealth of the poorer half of humanity or almost 4 billion people. It may be difficult to imagine that the richest persons in the world could fit into a bus.

Another shocking figure is that the richest 1 percent of the world’s households hold more than half of global private wealth. I think that this distribution of wealth would even be worse if wealth of the rich concealed in offshore accounts would be included.

In his book The Great Leveler, Walter Schiedel traces the history of inequality from the Stone Age to today. His thesis is that ever since humans began to farm, herd livestock and pass on their assets to future generations, economic inequality has been a defining feature of civilization.

The paramount question has always been how society can reduce if not do away with income inequality. After all, it takes people with no consciences to accept a world where millions of people are living in poverty with hand-to-mouth existence while a favored few can afford luxury yachts, private planes and luxurious mansions.

The usual solution of the rich is to have economic growth which will then allow the whole population to have a more comfortable life. This is the “trickle-down” philosophy which says that as the rich get richer, their wealth will begin to be shared by the rest of the population. This theory has underestimated the selfishness of the wealthy class.

Even Pope Francis has said several times that “trickle-down” has never worked and will never succeed.

Is there a way that society can address the issue of massive poverty coexisting with the immoral and massive wealth of the few? This is the theme of Scheidel’s book. Unfortunately, he has a frightening analysis of what really reduces inequality. He says that inequality never dies peacefully.  According to him, inequality declines when carnage and disaster strike, and increases when peace and stability return.

The Great Leveler is the first book that I am aware of that writes about the crucial role of violent shocks that lead to reducing human inequality throughout history around the world.

Over thousands of years, only violent events have significantly lessened inequality. Scheidel writes of the four different kinds of ruptures that have flattened inequality: “Mass mobilization warfare, transformative revolution, state failure and lethal pandemics.” He calls these the “Four Horsemen of Leveling.” According to him: “Sometimes acting individually and sometimes in concert with one another, they produce outcomes to contemporaries that often seem nothing short of apocalyptic. Hundreds of millions perished in their wake and by the time the dust had settled, the gaps between the haves and have-nots have sometimes shrunk dramatically.”

In developing countries, certain kinds of income inequality increase the likelihood of internal conflict and civil war. In both developed and developing countries, higher inequality is associated with less economic mobility even across generations. Scheidel says: “Because parental income and wealth are strong indicators of educational attainment as well as earnings, inequality tends to perpetuate itself over time and all the more so, the higher it is.”

In most countries, affluent neighborhoods have become more isolated which affects the life chances of children. The more affluent the neighborhood, the more chances it has of superior public services like clean water, electricity and proper sewage.

In the Philippines, for example, the children of the rich can afford to send their children to the universities with the highest standards like La Salle, UP and Ateneo. Or even send them to foreign universities.

The masses either cannot afford tertiary education or must send their children to colleges and universities with inferior quality. This perpetuates the cycle of poverty.

The ruling elite has found ways to perpetuate the concentration of wealth in the hands of a few. For example, there is this resistance to paying a living wage in most countries, from rich nations like the United States to developing countries like the Philippines. The constant argument is that business firms must be allowed to maximize profitability and keep expenses like salaries and benefits to a minimum.

Today, there is an abundance of proposals on how to reduce inequality. Most economists still insist on focusing on economic growth and relying on the discredited trickle-down theory. The recourse to violence should not and cannot be the only solution. But the rich must accept that the consequence of continuing income inequality will result in violence.

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