How violent shocks eliminate inequality
Inequality is the biggest threat to the world and source of suffering, pain and disaster for humanity.
Nowadays almost everyone will probably acknowledge that growing inequality has become a pressing issue.
The summary of human history concludes that the only thing that can really dent rampant and long-lasting economic inequality is some violent shock.
This is clear from giving a look at history in the very long run and trying to identify the driving forces behind significant reductions in inequality.
Everywhere it can be seen, over hundreds of thousands of years, that every observation of such a compression, such a reduction, it was always linked to some very massive, violent shock that usually cost millions of lives.
But the conclusion—that one ill can only be solved via some form of suffering—can be an unsettling one.
Throughout recorded history extremely violent shocks have been necessary and substantial in reductions in inequality.
These violent shocks are identified as the Four Horsemen of Leveling—big wars, trans-formative revolution, state failure, and lethal plagues.
An enormous volume of examples from all of recorded history and from all parts of the globe are evident in support of this theory.
High inequality has been the default condition of humanity and part of human DNA for thousands of years as history has alternated between long stretches of rising or high and stable inequality interspersed with violent compression.
This pattern has been a feature of human existence ever since Holocene era as agriculture began producing surpluses that could be captured by predatory elites through hereditary property rights. This process was enhanced by state formation, commercialization and the exercise of political, military, and ideological power by elites.
This has been the norm from the ancient and pre-modern civilizations of Mesopotamia, China, India, Egypt, Rome, Greece, Medieval Europe, Mesoamerica, South America, and others up to the major countries of the modern world.
The first of the Four Horsemen of Leveling, warfare, must rise to the level of mass mobilization to result in widespread reduction of inequality. Big wars, like the First and Second World Wars, were fought by millions of people who had to be clothed, shed, fed, armed and thus kept at least above subsistence while not contributing any marketable goods and services.
Workers in factories too would not be let to starve. For that was a constant fear of the ruling classes: if domestic labor rebels, the war is lost.
Somebody obviously had to pay for all that: and who else but the rich.
Hence inequality had to go down.
On top of that, countries on whose territory wars were fought were devastated, and losses were more than proportionately borne by the rich factory owners, land proprietors and the like.
With wars of sufficient intensity and duration, both winning and losing sides experience substantial decreases in inequality, not just from destruction of capital, but also from a changed political climate with respect to inflation, taxes for the rich, and conditions for workers.
World Wars I and II, where all combatants lost a great deal and experienced considerable leveling, are prime examples of this process.
The First World War was fought from 1914 to 1918, claiming 17 million lives and the Second World War which was fought from 1939 to 1945 is the deadliest conflict in history, with over 70 million fatalities, changed world politics forever. Earlier preindustrial warfare usually did not rise to this level and usually did not contribute to a widespread reduction of inequality because of its more limited scale.
The second Horseman, trans-formative revolution, requires similarly pervasive mobilization of resources in every single town and village to achieve radical leveling. The Twentieth Century Communist Revolutions of Russia, China, and some smaller states are prime examples of this process of trans-formative revolution of unprecedented ferocity.
These revolutions resulted in markedly reduced inequality brought about by expropriation, extreme bloodshed, and considerable loss of wealth. According to Stéphane Courtois’s The Black Book of Communism, Communism is responsible for 100 million deaths.
Communists who expropriated the rich (and often killed them in the process) at first handed out confiscated land to the poor but soon changed their minds, and nationalised assets from farms to industries.
By establishing centrally planned economies that set all prices and wages, they levelled on a dramatic scale. In turn, fear of communism precipitated equalising policy responses, not only in the West but also in developing countries.
In Taiwan, the nationalists who had fled the mainland introduced ambitious reforms to appease the local citizenry. Much the same happened in South Korea, which was also devastated by the Korean War. Many earlier uprisings, including the French Revolution, also sought to redress the grievances but rarely succeeded in significantly reducing inequality, at least in part because the necessary violence and control were beyond pre-industrial means.
Without the world wars, without Lenin, Stalin or Mao, no wholesale leveling of inequality would have occurred.
The third Horseman, state failure, taking the rich and powerful down with them, occurred when earlier states were unable to check internal and external challengers, protect key allies and associates of rulers, and extract revenues required for these tasks and for enriching the power elite.
Typical outcomes included loss of control of subjects and territory and replacement of state officials by warlords. While everyone stood to suffer in times of collapse, the richest simply had more to lose.
Inequality decreased because the wealth of elites had been protected by the state and in many cases had been acquired by close association with the state as a source of rents and corruption. Records of equalizing misery reach back thousands of years and examples of this process include, Bronze-age Greece (Mycenae), the Tang Dynasty in China, the western half of the Roman Empire, the Classic Maya Civilization, and more recently, Somalia’s anarchy reduced the inequalities of the brutal kleptocracy that had preceded it.
The fourth Horseman, lethal plagues, resulted in such massive loss of life that market forces changed to the disadvantage of elites and in favor of workers and peasants.
The outbreak of the bubonic plague in 14th-century killed a half or third of the population of Europe, but does not damage the physical infrastructure as a result, labor becomes scarce, wages grow and the gap between the rich and the poor narrows and resulted in large tracts of abandoned and idle land and a shortage of workers.
Thus the value of lands and rents of elites decreased markedly, and the wages available to surviving workers increased exponentially as the economic law of supply and demand took hold. Interestingly, then as now, elites who favored laissez-faire when it worked for them, now demanded government intervention to suppress the rising cost of labor.
However, the imbalance was so severe that market forces asserted themselves over government fiat and coercion. Examples include the Black Plague, the Columbian Exchange (gold and silver to Spain and Portugal in return for small pox and measles to the Americas, which caused more devastation than the Black Plague), the Justinian Plague of early Byzantium, the early Roman Empire Plague, and numerous others.
The process of leveling of inequality through violence is pertinent in Great Compression of 1914 to 1945, which included World War I, the Great Depression, World War II, and the Great Communist Revolutions. The extreme violence of the time resulted in massive loss of life, massive destruction of property, and extensive redistribution of property by taxation and inflation to fund the war and by confiscation in communist countries.
As a consequence, inequality decreased markedly, particularly after World War II, so that the top 0.01% lost over 90% of wealth in France and Japan and 80% of income in the U.S.
If we study inequality in Europe, there were three major episodes in European history where inequality fell. One is at the end of antiquity, when the Roman Empire falls apart, ruining the Roman’s Ultra Rich class. Inequality rises again, but then falls during the Black Death, in the 14th and 15th centuries. And then the third is the Great Compression, between 1913 and 1945 in Western countries happened during two World Wars.
Inequality remained low for several decades after World War II until about 1980 when it began an inexorable rise back to the much higher levels before the Great Compression. Numerous examples are available to show that this is the usual sequence. Once violent shocks have passed, nothing is left with sufficient strength to restrain the market and other forces that inevitably lead to rebounding inequality. As we are experiencing, today, rise of inequality all around the world.
So what hope is there for those who think extreme inequality is not only unfair but bad for economies?
There are also wide variety of potential candidates for peaceful alternatives for reduction of inequality. These include land reform, farm debt relief, economic development, democratization, education, emancipation, economic crises, and others.
Generally, these peaceful conditions are found to have no correlation with consistently reduced inequality, except when associated with violence after which they don’t remain peaceful anymore, such as with land reform. It’s not to say that these things don’t have an effect.
If we didn’t have a form of social democracy, re-distributive measures and mass education today in world, conditions would be much worse.
But if you’re looking for a sizable reduction in inequality, history indicates that peaceful measures by themselves are not going to make that much of a difference. There are no major episodes of leveling in history that are not associated with some kind of violent disruption.
In addition, trans-formative violence from the Four Horsemen of Leveling is unlikely to return any time soon in the modern world, and no sane person would want it to. Consequently, the next long stretch is likely to be a relatively peaceful return to rising inequality.