The Only Thing, Historically, That's Curbed Inequality: Catastrophe
Plagues, revolutions, massive wars, collapsed states—these are what reliably reduce economic disparities.
Calls to make America great again hark back to a time when income inequality receded even as the economy boomed and the middle class expanded. Yet it is all too easy to forget just how deeply this newfound equality was rooted in the cataclysm of the world wars.
The pressures of total war became a uniquely powerful catalyst of equalizing reform, spurring unionization, extensions of voting rights, and the creation of the welfare state. During and after wartime, aggressive government intervention in the private sector and disruptions to capital holdings wiped out upper-class wealth and funneled resources to workers; even in countries that escaped physical devastation and crippling inflation, marginal tax rates surged upward. Concentrated for the most part between 1914 and 1945, this “Great Compression” (as economists call it) of inequality took several more decades to fully run its course across the developed world until the 1970s and 1980s, when it stalled and began to go into reverse.
This equalizing was a rare outcome in modern times but by no means unique over the long run of history. Inequality has been written into the DNA of civilization ever since humans first settled down to farm the land. Throughout history, only massive, violent shocks that upended the established order proved powerful enough to flatten disparities in income and wealth. They appeared in four different guises: mass-mobilization warfare, violent and transformative revolutions, state collapse, and catastrophic epidemics. Hundreds of millions perished in their wake, and by the time these crises had passed, the gap between rich and poor had shrunk.
The first of these forces was very much a creature of the industrial age. Earlier wars had produced mixed results, as victors profited and losers paid. The Civil War is another example: It launched the careers of John D. Rockefeller, Andrew Carnegie, and other Northern plutocrats, but ruined Southern slave-owners. Not since the times of the ancient Greeks had intense popular military mobilization (paired with egalitarian norms and institutions) helped curb economic inequality.
Second are revolutions that truly transformed societies—the sort that were born of the two world wars. From 1917 on, communists in Russia, China, and elsewhere confiscated, redistributed and collectivized private wealth, and set wages, leveling inequality on an unprecedented scale. Revolutions before these, by contrast, were rarely extreme enough to have the same effect: The French Revolution, by comparison a far less bloody affair, made more modest headway.
Third, violent turmoil sometimes destroyed states altogether, taking the rich and powerful down with them. While everyone stood to suffer in times of collapse, the richest simply had more to lose. Records of equalizing misery reach back thousands of years: The last Roman aristocrats lined up for handouts from the Pope, and Mayan nobility had to make do with the same diet as commoners. More recently, Somalia’s anarchy reduced the inequalities of the brutal kleptocracy that had preceded it.
Humans have long faced competition in inflicting damage serious enough to rebalance the scales, which brings up the fourth leveling force. The first pandemic of bubonic plague at the end of antiquity, the Black Death in the late Middle Ages, and the merciless onslaught of smallpox and measles that ravaged the New World after 1492 claimed so many lives that the price of labor soared and the value of land and other capital plummeted. Workers ate and dressed better, while landlords were reduced to complaints that, as one English chronicler put it, “such a shortage of laborers ensued that the humble turned up their noses at employment, and could scarcely be persuaded to serve the eminent for triple wages.” Surviving tax registers from late medieval Italy also bear witness to the sweeping erosion of elite fortunes.
But what of less murderous mechanisms of combating inequality? History offers little comfort. Land reform often foundered or was subverted by the propertied. Successful programs that managed to parcel out land to the poor and made sure they kept it owed much to the threat or exercise of violence, from Mexico during its revolution to postwar Japan, South Korea, and Taiwan. Just as with the financial crisis of 2008, macroeconomic downturns rarely hurt the rich for more than a few years. Democracy on its own does not consistently lower inequality. And while improving access to education can indeed narrow income gaps, it is striking to see that American wage premiums for the credentialed collapsed precisely during both world wars.
In the 1950s, the economist Simon Kuznets famously hypothesized that economic growth would be accompanied by a fairer distribution of resources, but this has mostly happened in the countries where such growth was shaped by the fallout from the world wars or fear of revolution. By contrast, Latin America, which sat out the 20th century’s largest conflicts in relative isolation, duly did not see inequality drop until the early 2000s—and by then it had scaled such heights that it could hardly have risen much further. Brazil and other countries targeted progressive policies toward the lowest-hanging fruit, but economic headwinds and political backlash cast doubt on the prospects of further peaceful leveling.
If history is any indication, then, the resurgence of inequality since the 1980s should not have come as a surprise. The effects of violent leveling invariably abate over time: Populations recover when plagues subside, failed states are replaced by newcomers. By now the aftershocks of the 20th century’s great wars have faded. Top tax rates and union membership are down, communism is defunct, and globalization, however reviled, is (still) in full swing. The four levelling forces will not return any time soon: Technology has made mass warfare obsolete; violent, redistributive revolution has lost its appeal; most states are more resilient than they used to be; and advances in genetics will help humanity ward off novel germs.
Even the most progressive welfare states of continental Europe are now struggling to compensate for the widening income disparities that exist before taxes and transfers. In the coming decades, the dramatic aging of rich countries and the pressures of immigration on social solidarity will make it ever harder to ensure a fairly equitable distribution of net incomes. And on top of everything else, ongoing technological change might boost inequality in unpredictable ways, from more sophisticated automation that hollows out labor markets to genetic and cybernetic enhancements of the privileged human body.
Greatness remains in the eye of the beholder: making America more equal again will prove the more daunting challenge. Whereas incremental policy measures to shore up the fortunes of the middle class are both desirable and feasible, the past suggests there is no plausible way to vote, regulate, or teach society back to the levels of equality enjoyed by the postwar generation. History cannot predict the future, but its message is as unpalatable as it is clear: With the rarest of exceptions, great reductions in inequality were only ever brought forth in sorrow.