Download To Each Age Its Inequality

To Each Age Its
Inequality
By IAN MORRIS
JULY 9, 2015
The New York Times
The French economist Thomas Piketty says that he was
more surprised than anyone when his treatise “Capital in
the Twenty-First Century” became an international best
seller. But Mr. Piketty had struck a nerve: We were right,
he said, to worry about unemployment, stagnant wages
and the power of the 1 percent, because history shows
that “capitalism automatically generates arbitrary and
unsustainable inequalities that radically undermine the
meritocratic values on which democratic societies are
based.” This raises big questions: How much inequality is
too much? Is it possible for there to be too little inequality? And, most important, is there a “right”
amount of inequality?
Like Mr. Piketty, I seek answers to such inquiries amid the patterns of the past. But unlike him, I suggest
that we can find even deeper insights by looking all the way back to the end of the last Ice Age, 15,000
years ago. This longer-term perspective starkly reveals, quite simply, that each age has gotten the
inequality it needs, different economic systems functioning best with different levels of inequality. Down
through the centuries, groups that have moved toward the most effective amount of inequality reaped
benefits; those that did not paid a price.
Everyone on earth was a forager 15,000 years ago, surviving by hunting wild animals and gathering wild
plants. These methods had low yields and worked best when people lived in tiny bands and moved
around a lot. Foraging also made it difficult to accumulate wealth and power: There was no room for
kings and aristocrats. Foragers tended to be very poor but very equal. (By one calculation, the typical
hunter-gatherer’s standard of living was equivalent to about $1.10 in 1990 values.)
This all changed, though, about 11,000 years ago with the beginning of farming. Because more food
could be produced, the human population exploded. There were roughly 6 million foragers in the world
in 10000 B.C., but by 1 B.C. there were about 250 million farmers. Big social groups that stayed in one
place, working their fields, flourished at the expense of smaller, less sedentary ones. Between 9000 B.C.
and A.D. 1800, almost all foraging societies went extinct.
Farmers were typically richer than foragers, with average living standards equivalent to $1.50-$2.20 per
day. Farming society needed more complicated divisions of labor than the foraging world. Some people
became aristocrats or godlike kings; others became peasants or slaves. And economic inequality surged.
Economists often measure inequality using the Gini coefficient, a scale running from 0 to 1, in which 0
means that everyone in a society has exactly the same wealth, and 1 means that one person has
everything and no one else has anything. Anthropological studies of foraging societies suggest that their
Gini coefficients for income and accumulated wealth both averaged around 0.25. In farming societies,
however, the average income inequality almost doubled, to 0.45. The Roman Empire scored around
0.43, England in 1688 about 0.47, and France on the eve of the Revolution an eye-watering 0.59.
Inequality in accumulated wealth increased even more, regularly topping 0.80.
But then everything changed again with the industrial revolution. Fossil fuels released a flood of energy,
with steam and electricity powering machines that vastly augmented human and animal labor. Factories
churned out huge quantities of goods, liberating humanity from much of the manual drudgery of the
agricultural age and freeing them to create a service economy. People converted part of the energy
bonanza into more of themselves (there were nearly 1 billion humans in 1800; now there are more than 7
billion) and part into higher incomes (the global average has risen roughly tenfold since 1800, to about
$25 per day in 1990 values).
Using fossil fuels effectively requires even more complex divisions of labor than farming, and the
failures of fascism and communism suggest that free markets generally organize this better than
governments. This, however, produces myriad tensions — of which we are only too aware in our modern
era. On the one hand, specialists providing crucial services can turn these into political and economic
power, driving up inequality; on the other, since a market society can only produce wealth if it has
affluent consumers to buy its goods and services, if inequality rises too high it will kill the goose that
lays the golden egg.
So, just as in the farming and foraging worlds before it, our fossil fuel world has a “right” level of
inequality, and societies that move toward it will flourish, while those that move the other way will not.
Successful governments know this and apply taxation and other measures to push economic inequality
toward what they hope is the sweet spot.
The big question, of course, is just where this sweet spot is. By 1970, the Organization for Economic
Cooperative and Development nations had driven post-tax income inequality down into hunter-gatherer
territory, averaging just 0.26 on the Gini scale. The economic difficulties of the following decades,
however, suggest that this was perhaps too low. Most people apparently thought so, electing
governments in the Reagan-Thatcher era that allowed the rich to keep more of their gains. By 2012,
average post-tax income inequality in the O.E.C.D. had drifted up to 0.31, but new waves of economic
difficulty indicate that this is getting too high. The rise of populist, anti-elitist parties suggest that many
people again agree.
If the twists and turns of economic history over the last 15,000 years and popular will are any guide, the
“right” level of post-tax income inequality seems to lie between about 0.25 and 0.35, and that of wealth
inequality between about 0.70 and 0.80. Many countries are now at or above the upper bounds of these
ranges, which suggests that Mr. Piketty is indeed right to foresee trouble.
At the same time, the patterns of the past tend to reveal new questions just as much as they answer old
ones. Farming swept away foraging and fossil fuels swept away farming; today, there are signs that the
fossil fuel world, in turn, is coming to an end. New energy sources, technologies that break down
boundaries between mind and machine, and shifts toward living in virtual rather than physical spaces all
threaten to make the 21st century the biggest rupture in history, dwarfing the agricultural and industrial
revolutions.
If so, then we should learn another lesson from history: that what works well in one age can fail
completely in another. It’s quite possible that a century from now worrying about the right level of
inequality for a fossil fuel society might seem as irrelevant as worrying about the right level of inequality
for Neanderthals does today.