Income inequality and violence
BREAKTHROUGH - Elfren S. Cruz (The Philippine Star) - January 14, 2018 - 12:00am

Massive income inequality in both developed and developing countries, has been the primary cause for the rise in populism and the growing discontent of even the middle class with traditional institutions like governments, courts, media, business, political parties and academe.

The statistical figures have become familiar. In 2010, 388 billionaires had as much net worth as half of the world’s population. In 2014, 85 billionaires had as much net worth as the 50 percent of the world’s bottom half of the population. The following year, 2015, the richest 62 billionaires owned as much private net wealth as the poorer half of humanity, more than 3.5 billion people.  

The richest one percent of the world’s households now hold a little more than half of global private net wealth. It has also been said that if the assets of the one percent that are concealed in offshore accounts will be included, their share of global wealth will even be higher. 

Income inequality, throughout history has been the cause of revolutions, civil wars, peasant revolts and the rise of extreme ideologies like communism and fascism. Inequality and violence have become fundamental features of human society. History shows us how closely the two – inequality and violence – have been intertwined.

How can income inequality be reduced? Thousands of years of history seems to indicate that only violence and catastrophes can seriously decrease income inequality. Inequality never dies peacefully. Inequality declines when carnage and disaster strikes and income inequality increases when peace and stability return.

Walter Scheidel has written the first book “...to chart the crucial role of violent shocks in reducing income inequality over the full sweep of human history around the world.” The book is The Great Leveler: Violence and the History of Inequality  from the Stone Age to the 21st Century published by the Princeton University Press 2017. It is one of those in the Best Books list by several publications including the Economist.

According to Scheidel, ever since human beings began to farm, herd livestock, and pass on their assets to future generations, economic inequality has been a defining feature of civilization. Over thousands of years, only violent events have significantly lessened inequality. The “Four Horsemen” of levelling – mass mobilization, warfare, transformative revolution, state collapse, and catastrophic plague – have repeatedly destroyed the fortunes of the rich. 

In developing countries, income inequality increases the likelihood of internal conflict and civil wars. Violence might destroy states altogether. Scheidel points out that state failure or systems collapse is one of the four major causes of income leveling. For most of history, the rich were positioned either at or near the top of the political power hierarchy or were connected to those who were. Moreover, states provided a measure of protection, however modest by modern standards, for economic activity beyond the subsistence level. When states unravelled, these positions, connections and protection came under pressure or were altogether lost. Although everybody might suffer when states unravelled the rich simply had much more to lose: declining or collapsing elite income and wealth compressed the overall distribution of resources. Scheidel writes that this has happened as long as there have been states.

Globalization and inequality

There has been a lot of debate whether globalization is good or bad for the world economy. Here is what Scheidel writes in his book about globalization.

“Globalization is generally regarded as a potent disequalizing force. Its waxing and waning has long been associated with swings in inequality. Whereas the first wave of globalization in the second half of the 19th and early 20th century concluded with rising or stable (and high) inequality – not only in the West but also in Latin America and Japan – fell during the hiatus from 1914 to the 1940s which had been induced by war and the Great Depression. 

A survey of trends in some 80 countries between 1970 and 2005 found that freedom of international trade and economic deregulation significantly raised inequality. Although globalization generally favors economic growth, elites tend to benefit disproportionately in both developed and developing countries. There are several reasons for this imbalance.”

Scheidel points out two reasons. The number of workers in the global economy has doubled due primarily to China’s embrace of capitalism, India’s market reforms and the collapse of the Soviet bloc. Capital has failed to increase at the same rate and the proportion of skilled labor in the global workforce declined thus widening inequality in rich countries. 

Globalization also intensified competition, financial liberalization and the removal of obstacles to the flow of capital which encouraged fiscal reforms and economic deregulation. As a result globalization shifts taxation from corporate and personal  to expenditure taxes which tend to be associated with a less equal distribution of after tax income. 

Markets and power

Scheidel’s book has many disturbing historical conclusions. He says: “I was able to trace the concentration of resources in the hands of the few to two principal factors: economic development and predatory behavior by those powerful enough to appropriate wealth well in  excess of what their activities might earn them in competitive markets – what economist call rents. Elite families have not only gained a disproportionate share of markets; but, they have also begun to control markets and lessened competition.

It will be extremely difficult, especially for democracies to meet the challenges of rising inequality. This will require massive redistribution of wealth. But if the world does not meet these challenges, the alternative will be continuous and ever increasing conflict and violence. 

Mario Lopez

Before I end my column, I want to pay tribute to a Filipino patriot, educator and a very good friend who passed away a week ago. Professor Mario Lopez was my classmate at the Asian Institute of Management and we became lifelong friends. He had a passion for his family, his country and for education. 

He was the youngest faculty member of the Asian Institute of Management; and, he was a prolific seminar speaker and writer. He shared his three year or so battle with cancer on social cancer which served as an inspiration to many other people suffering from affliction. He never allowed his sickness to diminish his love for education and his faith in God and his country. It was a joy and a privilege to have known Mayo, as we fondly called him. I know that he is resting in peace with the Lord and he will continue to pray for all those who he passionately devoted his life to serving.

Creative writing classes for kids and teens

Young Writers’ Hangout on Jan. 27, Feb. 10 and 24, March 3 and 17 (1:30 pm-3 pm, independent, stand-alone sessions) at Fully Booked BGC. For more details, email writethingsph@gmail.com.

*      *     *

Email: elfrencruz@gmail.com

 

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