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The rising inequality between countries and within countries is posing a huge challenge to economic thinkers the world over. This challenge lies at the heart of The Great Leveler, an impressive new book by historian Walter Scheidel. He proposes that ever since foraging gave way to agriculture, high and rising inequality has been the norm in politically stable and economically functional countries.

And the only thing that has reduced it, he argues, has been some sort of violent shock-a major conflict such as World War II or else a revolution, state collapse, or a pandemic. After each such shock, he writes, "the gap between the haves and the have-nots had shrunk, sometimes dramatically." Alas, according to his research, the effect was invariably short lived, and the restoration of stability initiated a new period of rising inequality.

Today, the risk of violent shocks has fallen considerably. Nuclear deterrence has made great-power war unthinkable, the decline of communism has rendered wealth-leveling revolutions unlikely, powerful government institutions have staved off the risk of state collapse in the developed world, and modern medicine has kept pandemics at bay.

According to Timur Kuran, who reviewed The Great Leveler for Foreign Affairs (Sept/October 2017), the book should set off loud alarm bells. He says Scheidel is right to call on the world's elites to find ways to equalize opportunities, and to do so before driverless cars, automated stores, and other technological advances complicate the task.

Scheidel also seeks, according to Kuran, to explain what causes inequality. Thomas Piketty, in his best-selling Capital in the Twenty-first Century, answered the question by arguing that the rate of return on investment generally exceeds the rate of economic growth, causing people with capital to get even wealthier than everyone else. Scheidel, Kuran says, accepts this mechanism but adds others. The most basic one involves predation.

Until recently, the only way to become fabulously rich was to prey on the fruits of others' labour. Cunning people grabbed power and then accumulated wealth through taxation, expropriation, enslavement, and conquest. They also monopolized lucrative economic sectors, largely for the benefit of themselves and their relatives and cronies.

In the modern world, authoritarian states with ruling cliques preserve political power and acquire immense wealth through violence. Giant corporations also play massive roles in advanced democracies. In these countries, the military and the police are constrained by various institutions, and politicians must maintain popular support to stay in power.

But it is one thing for citizens to have the right to boot out a corrupt administration and quite another for them to exercise that right. The US tax system has plenty of loopholes that benefit the wealthiest 0.1 percent of Americans, but the other 99.9 percent, through their choices at the ballot box, have effectively allowed those privileges to persist.

But it wasn't just destruction that lowered inequality; progressive taxes, which governments levied to fund the war effort, also helped. In the United States, for example, the top income tax rate reached 94 percent during the war, and the top estate tax rate climbed to 77 percent. As a result, the net income of the top one percent of earners fell by one-quarter, even as low-end wages rose.

The mass societal mobilizations that the war required also played a critical role. Nearly one-quarter of Japan's male population served in the military during the conflict, and although the share was lower in most other countries, nowhere was the number of enlisted men small by historical standards. During and after the war, veterans and their families formed pre-organized constituencies that felt entitled to share in the wealth created through reconstruction.

In the United States, the Supreme Court put an end to whites-only party primaries in 1944, no doubt partly because public opinion had turned against excluding African Americans who had shared in the wartime sacrifices.

France, Italy, and Japan all adopted universal suffrage between 1944 and 1946. The war effort also stimulated the formation of unions, which kept rising inequality at bay by giving workers collective-bargaining power and by pressuring governments to adopt pro-labor policies. Mass mobilization for the purpose of mass violence thus contributed to mass economic leveling.

By this logic, modern wars fought by professional soldiers are unlikely to have a similar effect. Consider the wars in Afghanistan and Iraq: although some US veterans of these conflicts have returned embittered, they constitute too small a constituency to command sustained attention, and few Americans feel compelled to support substantial transfers of wealth to citizens who enlisted voluntarily.

Revolutions, The Great Leveler explains, act a lot like wars when it comes to redistribution: they equalize access to resources only insofar as they involve violence. The communist revolutions that rocked Russia in 1917 and China beginning in 1945 were extremely bloody events. In just a few years, the revolutionaries eliminated private ownership of land, nationalized nearly all businesses, and destroyed the elite through mass deportations, imprisonment, and executions.

All of this substantially leveled wealth. The same cannot be said for relatively bloodless revolutions, which had much smaller economic effects. For example, although the Mexican Revolution, which began in 1910, did lead to the reallocation of some land, the process was spread across six decades, and the parcels handed out were generally poor in quality. The revolutionaries were too nonviolent to destroy the elite, who regrouped quickly and managed to water down the ensuing reforms.

In the absence of mass violence concentrated in a short period of time, Scheidel infers, it is impossible to meaningfully redistribute wealth or substantially equalize economic opportunity. Indeed, Scheidel doubts whether gradual, consensual, and peaceful paths to greater equality exist. One might imagine that education lowers inequality by giving the poor a chance to rise above their parents' station. But Scheidel points out that in post-industrial economies, elite schools disproportionately serve the children of privileged parents, and assortative mating-the tendency of people to marry their socioeconomic peers-magnifies the resulting inequalities.

Likewise, one might expect financial crises to act as another brake on wealth concentration, since they usually hit the superrich the hardest. But such crises tend to have only a temporary effect on elite wealth. The 1929 stock market crash, which permanently destroyed countless huge fortunes, was the exception to the rule. The crisis of 2008-which most wealthy investors recovered from in just a few years-was much more typical.

Scheidel argues that the democratic process cannot be counted on to reduce inequality, either. Even in countries with free and fair elections, the formation of bottom-up coalitions that support redistribution is rare. Indeed, the poor generally fail to coalesce around leaders who pursue egalitarian policies. Scheidel doesn't go into much detail about why, but the problem is largely one of co-ordination. According to the theory of collective action, the larger a coalition, the harder it is to organize. This means that because of numbers alone, the bottom 50 percent will always have a harder time mobilizing around a common goal than will the top 0.1 percent.

It's not just that the incentives to free-ride are larger in big groups; in addition, priorities within them can be more diverse. Most Americans agree on the need for education reform, but that majority disagrees hopelessly on the details.

"Yet another obstacle to reform lies in efforts to discourage the bottom 50 percent from mobilizing. Across the world, elites have promoted ideologies that focus the poor's attention on noneconomic flash points, such as culture, ethnicity, and religion. They also spread conspiracy theories that attribute chronic inequalities to evildoers, real or imagined. Today's populist politicians-both the right-wing and the left-wing varieties-demonize particular groups, thereby deflecting attention from genuine sources of economic inequality. For US President Donald Trump and France's Marine Le Pen, it is immigrants; for US Senator Bernie Sanders and France's Jean-Luc Mélenchon, it is corporations.

"Even elites who disavow populism deflect attention from the real problems. Many American academics, for example, champion affirmative action, which tends to favor the wealthiest minorities and makes no real dent in inequality. Given all these barriers to reform, Scheidel's pessimism can seem well founded.

"Today's populist surge does not yet pose a serious threat to the fortunes of the very rich. But if Scheidel's forecast of ever-worsening inequality materializes, that might change. The trigger could come from, say, a takeover in some G-7 country by radical redistributionists. At that point, elites might form political coalitions to pursue top-down reforms now considered hopelessly unrealistic.

"The good news, however, is that global inequality has lessened dramatically since World War II, even as income and wealth have become more concentrated within individual countries. With economically underdeveloped countries growing more rapidly than developed countries-in large part thanks to falling trade barriers in the developed world-the gaps between people in different countries has narrowed.

"As late as 1975, half of the planet's population lived below today's poverty line of $1.90 a day, which the World Bank considers extreme poverty. That proportion has now fallen to ten percent. Countries that entered the early stages of industrialization just a few decades ago, from India and Malaysia to Chile and Mexico, now export high-tech goods."



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