By Prashansa Srivastava
The wealthiest one percent in the world now owns more wealth than the rest of humanity. In 2017, around 82 percent of all growth in the global wealth went to the top one percent, while 3.7 billion people that account for the poorest half of the population saw no increase in their wealth.
Looking back in history
These trends have been met with growing anxiety and possible policy solutions aimed to distribute income more equally and denounce the billionaire class. Economists such as Thomas Piketty and Emmanuel Saez have long studied the reasons and implications of rising global inequality. However, a look back reveals that history has occasionally pressed the reset button on inequality, reducing disparities markedly, though temporarily. These reductions in inequality were rooted in the cataclysm of catastrophic events, broadly, plagues and epidemics, the collapse of states, mass-mobilisation warfare and violent and transformative revolutions. With inequality so deeply ingrained in our economy and society, only violent shocks that upended the established order proved powerful enough to flatten disparities in income and wealth. These shocks led to devastation and trauma but once the crises had passed, the gap between the haves and have-nots had evidently shrunk.
Economic levelling on such a grand scale has not been achieved in the past in a less bloody manner. In a time of rising inequality, what does this mean for our own future? Can inequality decline only when carnage and disaster strike? Do peace and stability only award those at the top of the food chain?
Western Europes first leveller
One of historys most evident instances of inequality can be seen in the Roman Empire. The Empire had achieved unimaginable levels of a monopoly of political power with as many as four out of every five Europeans being ruled by the Caesars. Wealth concentration was far ahead of economic growth, and this trend continued all the way till the fall of the Empire. In the 5th century CE, internal strife, barbarian invasions and bubonic plague brought down the western half of the empire. However, once again economic development and disparities started to rise as the economy recovered. By 1300, the peak of the High Middle Ages, Christian Europe was once again unequal. In the 1340s, the plague returned, with Western Europe facing one of the most devastating pandemics in human history, the Black Death, which resulted in the deaths of an estimated 75 to 200 million people.
The bubonic pandemic, the Black Death and the merciless onslaught of diseases such as smallpox, measles killed so many workers that the price of labour soared, while that of land, now abundant and in need of cultivators, plummeted, leaving the masses better off and landlords poorer. Demand for labour and other fixed assets led to a complete erosion of elite fortunes. The change in relative values of land and labour led to a decrease in gaps between the rich and poor, but at a high price. However, as the epidemic lost ground and population growth resumed, real wages witnessed a significant drop and wealth concentration rose again.
Thus the spread of epidemics and collapse of states resets inequality. Whether it is the fall of the western Roman empire, the end of the Tang dynasty in China or the Russian Revolution, similar patterns are observed everywhere, with incomes of the most affluent falling to the degree that dismantles economic inequality.
The World Wars
The 20th-century versions of such revolutions, that is, the war of mass mobilisation also lead to similar outcomes. The two world wars were among the greatest levellers in history. In 1937, when Japan set out to conquer Asia, the top one percent held one-fifth of all of the country’s income. Eight years later after two atomic bombs leading to the death of three million, their share of what was left had shrunk to a mere six percent. One of the most unequal economies had turned into one of the most egalitarian, at a devastating and traumatic cost.
The wars directly raised the earnings of those at the bottom by increasing the demand for unskilled labour by a manifold to serve the war efforts. The battles also substantially reduced skill premiums, that is, the difference between the wages of skilled and unskilled labour. Greater civilian casualties made unskilled labour more scarce, leading to an increase in incomes of those at the bottom of the economic ladder since in effect the ladder was reducing in length itself. The turmoil also served as a uniquely powerful catalyst for policy changes such as equalising reform, spurring unionisation, extensions of voting rights, increased franchises, and an expanded welfare state.
Physical destruction of capital goods slashed the assets of the wealthy. Increased and aggressive government intervention in the economy, post-war inflation, disruption to global flows of goods and capital, wiped out incomes of elites. The surge of Keynesian economics that advocated increased government role led to high income and property taxation and disruptions to capital holdings that eroded upper-class wealth. This led to a trickle-down of resources to workers as marginal tax rates surged upward. The shocks of the world wars led to what is known as the Great Compression, a decade of attenuation of inequalities in income and wealth across developed countries concentrated between 1914 and 1945. During that time, economic inequality as shown by wealth distribution and income distribution between the rich and poor became much smaller, continuing till the 1970s and 1980s, when it stalled and began to go into reverse.
The future ahead
Historys message is thus clear: with equality comes great sorrow. Though chances of catastrophic levelling such as epidemics and revolutions are far lower in the present, new challenges such as nuclear or biotechnologically mediated violence pose damages whose scale is inconceivable. The expansion of the financial sector also poses the threat of polarising gains. Expanding access to education and increasing employment opportunities helps the state of the poor, however with those at the top accumulating more and more wealth and the two strata facing the consequences of economic downturns in vastly different degrees, inequality remains an imminent threat. Though the full causes of inequality are deep and still left to be learnt, does there exist a trade-off between peace and stability and economic equality? If yes, are we to embrace deepening inequalities or wait for the next cataclysmic event?
However, all hope is not lost yet. Those who cannot remember the past are condemned to repeat it. Thus, the recognition of our deep-rooted historical trends might help us to prevent such catastrophes. Increasing the gains of everyone can only lead to the future being brighter than our past. The issue of the importance of equality must no longer be seen as a problem of those who face its worst but as a problem of the masses. If the problem of inequality is not solved through conscientious and concerted efforts, if history proves any guide, it will only be resolved at the price of high violence.
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