Scheidel

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Our “Scheidel Moment”?

We are all familiar with what a “Minsky Moment” is.  Or we should be given the disaster of the Great Recession.  Whilst it’s true that economics has bumbled along pretty much unaltered since this dark years of just over a decade ago, and, yes, I am aware of the rumblings around the discipline’s edges, others have taken a bash at looking at facts.

One of those people is Walter Scheidel who has given us a much needed historical context for our discussion about inequality.  In a nutshell his extensive study of the history of inequality suggests that elites will always, and everywhere, succeed in rigging society for their own gain.  Whether they bother to hide their efforts behind socially acceptable or ideologically logical drapes is of no consequence: elites will find a way to enrich themselves at the expense of everyone else.

The forces that counter the elites are not, generally, benign democratic pressures.  They are basic things like plagues, wars, and other devastations that upend the carefully constructed “norms” that form the basis of elite suppression of the masses.  Such events sweep away the existing elite and create a space for a new struggle for power.  During that struggle, whilst there is no elite to create new punitive rents or to exploit the broader population, brief bursts of relative equality break out.

Perhaps the most obvious example would be the shift that followed the Black Death in Europe in the 1300s.  The scarcity of labor, especially skilled labor, after the plague had abated led to a remarkable period of relative wage equality in those nations that suffered through it.

Another good example would be the first half of the twentieth century during which the cataclysm of the world wars destroyed so much capital that elites needed a great deal of time to re-establish their hold over society and thus get back to their rent seeking ways. It wasn’t until the neoliberal ascendancy after the Reagan/Thatcher led installation of anti-social policy that our contemporary elites could exploit society in the manner of elites of old.

Which brings us to our Scheidel Moment.

Does the current global crisis caused by the novel virus spreading rapidly amongst us constitute a potent enough challenge to elite power and entrenched ideology that it opens a space for re-balancing societies away from the egregious inequality produced by neoliberalism?

It’s too early to tell.

But there are rumblings and murmurs enough to suggest that, at the very least, a conversation might be beginning.  Here’s a quote from the New York Times this morning.  The writer is Michelle Goldberg, a reliably socially oriented thinker …

“Since the election of Ronald Reagan, America has tended to value individual market choice over collective welfare. Even Democratic administrations have had to operate within what’s often called the neoliberal consensus. That consensus was crumbling before coronavirus, but the pandemic should annihilate it for good. This calamity has revealed that the fundamental insecurity of American life is a threat to us all.

“There’s no such thing as society,” Margaret Thatcher famously said. “There are individual men and women and there are families.” Tell that to the families effectively under house arrest until society gets this right.”

Naturally America is replete with suitable right-wing counterpoints.  There are states whose governors still haven’t seen fit to react powerfully to the spread of the virus.

Yet the debate over what form an economic support plan should take, and the quite clear difference in impact the crisis will have on various income levels throughout the country, suggest a significant amount of unrest is building.  And, perhaps, more importantly in terms of getting action, even the elite is realizing that its heady wealth and income are insufficient to insulate it from the shoddiness of the healthcare system they refuse to innovate or invest in.  After all if a plutocrat cannot simply buy their own respirator because there aren’t any to be had, and if they suddenly have to make do like the rest of us, what’s being a plutocrat worth?

So, is this a Scheidel Moment?

Who knows.  But it might be if we shout loud enough.

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Inequality Conundrums

What am I supposed to make of the Scheidel book?

Having waded through it I emerge with a grim pessimism — certainly more than when I started.

The basic thesis, as I mentioned a couple of weeks ago, is that periods of relatively greater equality are rare in history and that they ebb away soon after the re-establishment of elite control over the distribution of national resources.  Worse, the relative equality that is then undone was only the result of some disastrous episode such as a war, plague, state failure, or revolution.

Scheidel is relentless in his delivery of historical facts and examples.  He allows us no escape.  We are left with a feeling of hopelessness and a fear that all we can do is to mitigate, but never stall, an inevitable tide.  Humanity, it appears, is doomed to spend most of its existence in societies riven through with various inequalities, and attempts at remedy are futile.

Even the few counterfactual references and the exhaustive list of recent suggestions at the end of the book are swept to one side as folly.

So: what am I supposed to make of the book?

First: it reinforces the thought that the recent past is an extraordinary exception to the norm of history.  We ought no extrapolate from the immediate post-war era and somehow expect it to be lasting.  It was the result of the awesome destruction and disruption of the Great Depression bookended by two catastrophic world wars.  The loss of capital during that period inevitably reduced both wealth and incomes at the top of the scale.  And the pressure of shared emergency and danger induced an unusual and unsustainable social cohesion that allowed redistribution of resources via the political process at unprecedented levels.  The social democracy that still endures in parts of the world is an echo of that cohesion, but is, everywhere, under stress from the steady re-assertion of power by elites determined to establish rents lost during the crisis.

Second: it suggests that the political process is far more significant than the economic process in distribution.  This is of no surprise to many of us, but it does, or ought to, dissolve the hubris of economists who continue to insist that distribution is driven by rational processes and can be explained wholly by notions such as marginal productivity.  People like myself who contest the meaning and relevance of both “marginal” and “productivity” cannot be shocked by what Scheidel says, but we may be disturbed by the sheer nakedness of the role of power in shaping the institutional and network relations necessary to subvert whatever purity may exist in the mythical market.  Being a bully really matters.  Owning the reins of power matter even more.  This cannot be news to any of us.  It’s just disappointing to realize that contemporary understanding isn’t a sufficient antidote to what I suppose can be loosely defines as human nature.  In any case, anyone seeking to study an actual economy, and especially features of it that relate to the distribution of resources, is better advised to begin by studying politics than economics.  Apparently economic forces are all too easily overridden by force and are not “inevitable” the way that we are taught in the textbooks.

Let me give two examples drawn from the book to illustrate this.

During the darkest hours of World War II, the Times newspaper in London, hardly a bastion of leftish thought published an editorial containing these words:

“If we speak of democracy we do not mean a democracy which maintains the right to vote but forgets the right to work and the right to live.  If we speak of freedom we do not mean a rugged individualism which excludes social organization and economic planning.  If we speak of equality we do not mean a political equality nullified by social and economic privilege.  If we speak of economic reconstruction we think less of maximum (though this job too will be required) than of an equitable distribution”

Just a few decades later that same editorial page would bash at anyone uttering those words.  It is simple and convenient for the powerful to slide from a message of unity and equality in the midst of a dire situation in which they need to co-opt the masses for the fight, only to return to the defense of privilege once the crisis has abated.

To reinforce this tendency, and right at the end of his book, Scheidel reminds us that the last time the United States mustered enough political unity and willpower to pay for a war via a rise in taxation was 1950.  Since then the resistance of the elite to being taxed has forced subsequent wars to be financed by debt.  Perhaps the iconic example of this resistance being the Reagan arms build-up at the end of the Cold War.  Not only was that build-up debt financed, but it came at the same time as a major tax cut on higher incomes accelerated the American surge of inequality that so disturbs some of us today.

It is the post-1970s decades and the re-appearance of higher levels of inequality that are the norm.  It is the rampant rent-seeking of our elite that we ought consider usual.  And its is the resistance of that elite to redistribution that is consistent with history.

Scheidel leaves us with little hope.  Every effort to fight against the tide of the powerful seizing more than their share of society’s aggregate resources is futile.  Sooner of later inequality will rise back to levels seen before.

But then there is the libertarian argument that none of this matters.  What does matter to libertarians is the general level of living standards and that consistent economic development delivers a steady increase in such standards.  So what if the elite pilfer a disproportionate share?  As long as the general populace is better off we ought not be distracted by arguments about fairness.  Lucas is famous for taking this position.  Understandably so given the irrelevance of his economics in the face of elitist force.

Is this all we have?

What happens if growth tapers off as it appears to be doing?  What if the pilfering is egregious and leaves the majority worse off?  Will that unleash a storm of unrest and erase enough capital to restore fairness?

Is violence the only way?

Read the Scheidel book.  See what you think of it.