The Great Leveler by Walter Scheidel is a provocative and insightful contribution to our understanding of inequality over the long run. Despite being grounded in economic history it is a book where you find serious questions about the future of inequality and the shape and structure of our societies. It shows that inequality never dies peacefully. Inequality declines when bloodbath and disaster strike and increases when stability and peace return.
Anyway, the book details some principal dynamics of the evolution of economic inequality. There are obviously many different types of inequality we could talk about. Nevertheless, the book limits to income and wealth inequality and in particular to one question – are there some patterns across the full scope of history that have repeatedly reduced economic inequality and how do they compare to other variables.
Walter Scheidel, the author of the book, names four major variables of levelling:
1. mass-mobilisation warfare
2. transformative revolutions
3. state collapses
4. catastrophic plagues
which have repeatedly destroyed the fortunes of the rich and filled up pockets of the poor.
Violent upheavals have been the single, most important means of levelling wealth and income inequality in human history. So violent disturbances are often associated with the death of tens of millions of people have been by far the most effective means of reducing economic inequality.
Starting with state collapse is simply the flipside of state formation. If we look at thousands of years of human history, most people lived in societies that were governed by states and were more or less openly predatory, unfair, hierarchical, exploitative. To a large extent, they were focused on the benefit of a small ruling class at the expense of everybody else. The longer these governments lasted the bigger they became in the form of pre-modern empires, in particular, the more potential there was for the concentration of income and especially wealth among a small ruling class, the worse it was for the rest of the population.
The second main pre-modern levelling force was pandemic, a very severe outbreak of epidemic disease. A few times in our history (black death that killed about half of all people in Britain and a third of all people in Europe, the pandemics in a new world introduced by the Europeans after 1492 that introduced smallpox and measles decimating a local population) what happens after all these occasions was that inequality went down. As a result of these epidemics, tens of millions of people lost their lives but survivors happened to be better off and the real incomes of the working class went up about 150%. Unfortunately, the idyll lasted as long as these plagues and their aftermath were active and once the stabilisation began and everything went back to normal the high levels of economic inequality showed up once again.
The third factor – mass-mobilisation is a capital phenomenon where capital holdings lost their returns on capital dramatically as a result of state intervention in the private sector associated with the war effort. Belligerent states had to raise taxes on income and wealth the rich, in order to pay for the war effort, got higher tax rates. For high earners, there was even a 90% tax introduced, and 70% for income gained large entities in the US and similar rates in Britain, France and Japan. All over the place this effectively resulted in a redistribution of resources from the rich to workers. These countries achieved full employment because of conscription systems and the money ended up, primarily, in the pockets of the working population.
Many of these events worked in the past, let’s say until 1970. In the world, we inhabit today, in an environment that is much more globalized, much more integrated than it was in the past all these things have really begun to fade. The environment today is quite different from the shape it was a couple of generations ago when we could observe significant reductions in inequality. Sadly there are estimations reflecting that it will go up rather than down in the 21st century. Globalisation is enormously beneficial to many people in developing countries but disadvantageous to certain groups in developed countries which we have observed now for some time.
Automation is an ongoing completely open-ended process. Nobody knows what jobs are actually going to be done by robots or by software in the coming years. From now there is certainly enormous potential for destruction of certain types of jobs. Retraining is an answer, but not a perfect remedy because we cannot just retrain our skills overnight. A lot of friction is bound to occur as a part of this process.
Another “development” – ageing of the general populations we already see in Japan and in Western Europe, in particular, is going to become much more widespread. Next generations are going to have a problem because the older population of developed countries is going to receive less public funds. It will be available for aggressively the distributive programs because more money will have to be spent on caring for the pensions healthcare.
The flipside of secular ageing is immigration, the idea that if there are more and more elderly people and not enough young people it will just have more people coming from other parts of the world. In the case of Europe, it would have to be the Middle East. It would have to be Africa which creates new challenges with respect to inequality. Something that we have not really seen yet because the processes really are just beginning on a large scale, but there are lots of answers scholars try to figure out, such as how people would respond would in a long run. Would they be willing to pay high taxes if the beneficiary is the recipients of these texts were people who are ethnically, culturally and religiously very different from themselves? The answer, for now, is generally not really. So we might expect rising resistance to very highly of distributive welfare states in the future as the ethnic composition of country changes dramatically.
In conclusion, we live in a very interesting environment where we have these traditionally effective violent shocks which have gone away at least for the time being and so it’s hard to see any kind of potential for a significant peaceful equalization in the foreseeable future unless something happens that has never happened before. Of course, it is important to realise that history does not determine the future, history can only show what happened in the past and can give us an idea of which things are easy to do and what things are really difficult to do. I think the book gives us an idea of how hard it is to address economic inequality in the absence of violent shocks which is the situation that we find ourselves in right now.
The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century
by Walter Scheidel
In the article I made use of a few author’s interviews.
Size: 528 pages
Other information and reviews of this book on Goodreads: https://www.goodreads.com/book/show/31951505-the-great-leveler
Other useful links:
Financial Times review (shortlisted as the best business book of 2017): https://ig.ft.com/sites/business-book-award/books/2017/shortlist/the-great-leveler-by-walter-scheidel
Walter Scheidel on Wikipedia: https://en.wikipedia.org/wiki/Walter_Scheidel
Opposition to Walter Scheidel’s concepts –> Skin in the Game by Nassim Nicholas Taleb