UNDER PRESSURE
Before we address this question, it is worth recapitulating that across the globe, economic inequality is greater than it may seem if we simply rely on standard metrics. First of all, Gini coefficients, the most widely used means of measuring income inequality, are of limited value in capturing the contribution of the very highest incomes. Adjustments for this deficit point to significantly higher actual levels of inequality overall. Second, if unreported offshore funds could be incorporated into statistics of private household wealth, inequality would turn out to be higher in that category as well. Third, I have followed common practice in focusing on relative indices of income and wealth distribution. However, in terms of absolute inequality—the width of the gap between high and low incomes—even the fairly constant or only gently rising Gini coefficients and top income shares observed in some western European countries translate to growing imbalances in actual incomes (in Euros or other national currencies) when economic growth is taken into account.
This effect has been much stronger in societies, such as the United States, that have experienced both an increasingly skewed distribution of resources and stronger growth rates. In China, where the Gini coefficient of income distribution has more than doubled and average real per capita output has grown sixfold since the 1980s, absolute inequality has gone through the roof. Absolute income gaps have continued to grow even in Latin America, where a recent reduction in relative income inequality coincided with strong economic growth. Worldwide, absolute income inequality has risen to new heights. Between 1988 and 2008, the real incomes of the global top 1 percent posted percentage gains similar to those in the world’s fifth, sixth, and seventh deciles but grew about forty times as much in per capita terms. Finally, as I discuss in more detail in the appendix, the maximum degree of income inequality that is theoretically feasible in a given society varies with per capita GDP. When we control for the fact that advanced economies are systemically less tolerant of an extreme maldistribution of resources than their agrarian precursors were, it is not at all clear that the United States today is effectively less unequal than it was 100 or 150 years ago.1
It is true that the last caveat only applies to modern economies with relatively high levels of nominal inequality. There can be no doubt that in much of continental Europe, where high levels of economic development are coupled with a more equitable distribution of disposable incomes, effective inequality—defined as the proportion of maximum feasible inequality that is actually being achieved—is currently much lower than it had been before the world wars. Even so, although top income shares in those countries tend to be smaller than in the United States, relatively moderate inequality in disposable household incomes is very much the result of massive redistribution that offsets generally high levels of market income inequality. In 2011, the Gini coefficient for market incomes—before taxes and transfers—in five famously redistributive societies—Denmark, Finland, France, Germany, and Sweden—averaged 0.474, a figure virtually indistinguishable from that for the United States (0.465) and the United Kingdom (0.472). It was only their mean Gini for disposable income (0.274) that was much lower than in the United Kingdom (0.355) and the United States (0.372).
Although several European countries enjoy somewhat lower market income inequality than the five cases mentioned here, that the scale of redistribution is, with very few exceptions, higher (and often much higher) than in the United States shows that the more balanced distribution of final incomes that is typical of the Eurozone and Scandinavia primarily depends on the maintenance of an expansive and expensive system of powerfully equalizing state interventions. This arrangement does not bode well for the future of European equality. Social and redistributive public expenditure is already very high in large parts of Europe. In 2014, eleven European countries committed between a quarter and a third of GDP to social spending, and in those countries, central governments absorbed between 44.1 and 57.6 percent of GDP, for a median of 50.9 percent. In view of the negative effect of government size on economic growth, it seems doubtful that this share could grow much further. From the early 1990s to the late 2000s, social spending as a proportion of national output had remained fairly flat in the European Union, in the United States, and across OECD countries, which suggests that a plateau had been reached. In 2009, it rose once again as a correlate of faltering economic performance and in response to increased demand caused by the global financial crisis but has remained at that newly elevated level ever since.2
It is an open question how well these high-equilibrium welfare systems will withstand two growing demographic challenges. The aging of European populations is one of them. Fertility rates have long been well below replacement level and will remain so for the foreseeable future. The median age of Europe’s population is expected to rise from thirty-nine to forty-nine by 2050, whereas the number of those at working age has already peaked and may decline by about 20 percent between now and then. Between now and 2050 or 2060, the dependency ratio—the proportion of people aged sixty-five or older relative to those aged fifteen to sixty-four—will explode from 0.28 to 0.5 or more, and the share of those aged eighty or older will multiply from 4.1 percent in 2005 to 11.4 percent in 2050. Demand for pensions, health care, and long-term care will increase accordingly, by up to 4.5 percent of GDP. This fundamental restructuring of the age distribution will be accompanied by lower rates of economic growth than in previous decades, variously projected to average 1.2 percent from 2031 to 2050 or 1.4 or 1.5 percent per year from 2020 to 2060—and, indeed, much less among the core members of the European Union.3
The more modest rate of aging in recent decades has failed to have a significant effect on inequality, but this is likely to change. In principle, the shrinking ratio of retirees to workers is expected to raise inequality, as is the concurrent increase in the share of single-adult households. Private pensions, which are likely to gain in importance, tend to maintain or increase inequality. One study predicts much higher inequality in Germany in 2060 as a result of aging. In Japan, where the foreign-born make up a much smaller proportion of residents than in the European Union or the United States and the dependency ratio has already reached 0.4, rising income inequality has been attributed in large measure to the aging of its population. This is a sobering finding considering that—just as in South Korea and Taiwan—its highly restrictive immigration policy had previously helped maintain a relatively egalitarian distribution of income before taxes and transfers.4
All these projections assume a considerable volume of ongoing immigration: without this demographic contribution, the European dependency ratio could be as high as 0.6 by 2050. The arrival of many millions of newcomers will thus merely mitigate the long-term consequences of the secular aging process. At the same time, immigration may test redistributive policies in unprecedented ways. In his pioneering study of what he labels the “Third Demographic Transition,” the eminent demographer David Coleman calculates that even on conservative assumptions about immigration rates and the fertility of immigrants, by 2050 the share of the national population that is of foreign origin (a concept whose definition varies by country) will reach between a quarter and a third in six out of seven countries he reviews: Austria, England and Wales, Germany, the Netherlands, Norway, and Sweden. These countries contain about half of the population of Western Europe, and many others will undergo similar changes. Moreover, the presence of individuals in this category will be much greater among children in education and young workers—in some cases up to half of national totals. Non-Western immigrants are projected to account for up to a sixth of the German and Dutch population. Because there is no compelling reason to assume that these trends will abate by mid-century, the Netherlands and Sweden might turn into countries having majority foreign-origin populations by 2100.5
Demographic replacement on this scale not only would be without precedent in the history of that part of the world since the emergence of agriculture but also might influence inequality in unpredictable ways. From an economic perspective, much hinges on the successful integration of immigrants. Their educational attainment is and will continue to be much lower than for European nationals, and employment rates are low in a number of countries, especially for women. The persistence or worsening of these problems may produce disequalizing consequences for the societies in question. Moreover, the growth of communities of first-generation immigrants and those of recent foreign-origin family background has the potential to affect attitudes and policies regarding social welfare and redistributive spending. Alberto Alesina and Edward Glaeser have argued that welfare policies are correlated with ethnic homogeneity, which helps explain why the United States developed a weaker welfare state than European countries. They anticipate that growing immigration will undermine the generosity of European welfare states and that anti-immigrant sentiment may be used to dismantle redistributive policies and “eventually push the continent toward more American levels of redistribution.” At least up to this point, this prediction has not been borne out by actual developments. A recent comprehensive survey has found no support for the notion that immigration undermines public support for social policy.6
But more specific observations show there is cause for concern. Greater heterogeneity and more immigration are in fact associated with less extensive social policy provisions as well as higher levels of poverty and inequality. In European OECD countries, ethnic diversity may be only weakly inversely correlated with levels of public social spending but has a stronger negative effect on attitudes that is mediated by the unemployment rate. Affluent Europeans—who carry much of the fiscal burden—express less support for redistribution if many of the low-income members of their societies belong to ethnic minorities. According to British surveys, redistributive preferences in the context of taxation weaken if ethnic diversity causes the poor to be perceived as different. The sources and dimensions of heterogeneity are of vital importance: immigration and religious heterogeneity have a more powerful adverse effect on welfare state provisions than the presence of ethnoracial minorities. The first two of these factors have already become defining features of the European experience, and the likelihood of persistent migratory pressures from the Middle East and Africa will ensure their continuing and arguably growing relevance. In all of this, it is important to realize that Europe’s “Third Demographic Transition,” which will transform the composition of national populations in response to subreplacement fertility and immigration, is still in its early stages. Over the course of the next generation, it may alter established patterns of redistribution and inequality in ways impossible to anticipate. Considering the high costs of current systems and the disequalizing pressures exerted by aging, immigration, and growing heterogeneity, these changes are more likely to raise inequality than to hold it in check.7
Not all demographic factors are equally likely to have a significant effect on the further evolution of inequality. There is no good evidence that the frequency of assortative mating that might widen income and wealth disparities among households has been growing in the United States in recent years. Likewise, intergenerational mobility in terms of income does not appear to have slowed, although a longer time frame might be needed to generate conclusive findings. Conversely, growing residential segregation by income, which has been on the rise in America, may have a stronger effect on inequality in the long run. Insofar as the income of one’s neighbors indirectly affects one’s own socioeconomic outcomes and the spatial concentration of specific income groups skews the distribution of locally funded public goods, growing economic imbalances in the physical distribution of the population can be expected to perpetuate—and, indeed, reinforce—inequality in future generations.8
Piketty’s argument that ongoing accumulation capital will raise both its share in national income and its overall importance relative to national income as rates of return on capital investment exceed economic growth, thereby putting upward pressure on inequality, has attracted a fair amount of criticism and caused its main proponent to stress the uncertainties associated with these predictions. Yet there is no shortage of other economic and technological forces capable of exacerbating existing disparities in the distribution of income and wealth. Globalization, which has been credited with disequalizing effects, especially in developed countries, shows no sign of abating in the near future. Whether this process will create some kind of global super-elite unfettered by the constraints of national policies, exemplified by the much-maligned image of “Davos Man” and heralded in the popular press, remains to be seen. By their very nature, automation and computerization are more open-ended processes that are bound to influence the distribution of returns to labor. According to one estimate, almost half of all employment in 702 occupations across the America labor market is at risk from computerization. Notwithstanding predictions that automation will not indefinitely serve to polarize labor markets between high and low incomes, future breakthroughs in artificial intelligence that would allow machines to catch up with or surpass humans in terms of general intelligence render moot any attempts to forecast long-term outcomes.9
Our remaking of the human body will open up new frontiers in the evolution of inequality. The creation of cybernetic organisms and genetic engineering have the potential of expanding disparities among individual persons and even their descendants well beyond their natural endowments and the extrasomatic resources they command, and they may do so in ways that feed back into the future distribution of income and wealth. As advances in nanotechnology greatly expand the use and utility of artificial implants, applications may increasingly shift from restoration of functions to their enhancement. Over the last few years, advances in gene editing have made it possible to delete and insert specific pieces of DNA both in Petri dishes and in living organisms with unprecedented ease. Although the consequences of such interventions may be confined to individual organisms, they can also be made hereditary by manipulating the genetic makeup of sperms, eggs, and small embryos. The results of the first experiment in modifying the genome of (nonviable) human embryos were published in 2015. Recent progress in this field has been extremely rapid and will continue to take us far into uncharted territory. Depending on cost and availability, the affluent may come to enjoy privileged access to some of these biomechatronic and genetic refinements.
There is reason to doubt that political constraints would prove sufficient to suppress these opportunities: unlike public health, enhancements are an upgrade and thus are more amenable to unequal provisioning. Legal restrictions in Western democracies, which are already being proposed, could well precipitate even more unequal outcomes by handing an advantage to those able to afford private treatment in those countries where it will be offered—most likely, in parts of Asia. In the long run, the creation of designer babies for the rich and well-connected might curtail mobility between genetic or cyborg haves and have-nots and even, at least in theory, ultimately result in a bifurcation into two different species—such as the genetic elite of the “GenRich” and the “Naturals,” or everybody else, envisioned by Princeton geneticist Lee Silver.10
Education has long been the default response to technological change. It may remain so under continuing globalization and—although perhaps only up to a point—in the event of further breakthroughs in computerization. But after humans become more unequal thanks to genetic engineering or body–machine hybridization—or, most likely, both—this paradigm will be stretched to its breaking point. Would education ever be capable of counteracting entirely new degrees of artificial physical and mental enhancement? But we should not get ahead of ourselves. Long before the time has come to worry about super-robots who do the bidding of superhumans, the world faces the more mundane challenge of existing income and wealth inequality. I now return one last time to the central topic of this book: the reduction of inequality. What, then, are the prospects of leveling?
RECIPES
There is currently no shortage of proposals on how to reduce inequality. Nobel laureates in economics have joined their less decorated but sometimes even better-selling peers and assorted journalists in the lucrative business of publishing long lists of measures designed to rebalance the distribution of income and wealth. Tax reform occupies a prominent position. (Unless noted otherwise, the following refers to conditions in the United States.) Income should be taxed in a more progressive manner; capitals gains should be taxed as ordinary income and higher taxes imposed on capital income in general; regressive payroll taxes should be eliminated. Wealth should be taxed directly and in ways designed to curtail its transmission across generations. Sanctions such as trade tariffs and the creation of a global wealth register would help prevent offshore tax evasion. Corporations should be taxed on their global profits and hidden subsidies ended. French economists have even proposed an annual global tax on wealth, withheld at the source. In addition, a larger one-time levy on capital would reduce public debt and help rebalance the ratio of private to public wealth. The demand-and-supply approach to skills referenced earlier has brought attention to the role of education. Public policy should aim to boost intergenerational mobility by equalizing access to and the quality of schooling. Disconnecting school funding from local property taxes would be one step in that direction. Universal provision of preschool would be helpful, and price controls might be imposed on tertiary education. More generally, improved education would result in “up-skilling” of the workforce in a competitive global environment.
On the expenditure side, public policies should provide forms of insurance that protect the value of the assets of lower-income groups against exogenous shocks, from housing values to worker-owned cooperatives to people’s health. Universal health care would buffer against such shocks. It should be easier for the less affluent to secure credit for entrepreneurial activity, and bankruptcy law should be made more forgiving to debtors. Lenders should be offered incentives or otherwise forced to restructure mortgages. More ambitious schemes include a basic minimum income, matching grants for personal savings up to a ceiling, and the provisioning of each child with a minimum endowment of stocks and bonds. Business regulation is another item on the agenda. The market distribution of incomes could be adjusted by changing laws regarding patents, antitrust, and contracts; by curbing monopolies; and by more strictly regulating the financial sector. Corporate taxes might be linked to the ratio of CEO compensation to worker median wage. Rent-seeking behavior of executives should be tackled through corporate governance reform. The standing of shareholders and employees should be shored up by ensuring the latter’s representation and voting rights and by compelling companies to share profits with workers. Institutional reforms should revive union power, raise minimum wages, improve access to employment for underrepresented groups, and create federal jobs programs. Immigration policies should favor the import of skilled labor in order to lower skill premiums. The disequalizing impact of globalization could be mitigated by international coordination of labor standards and taxing foreign earnings and corporate profits regardless of the location of production. International capital flows should be regulated—and according to a particularly bold suggestion, the United States might want to require trade partners to institute minimum wages equal to half their respective national median wages. In the political sphere, America should combat inequality by passing campaign finance reform and take measures to raise voter turnout. Intervention in the media might democratize their coverage.11
Recent discussions have focused mostly (or even exclusively) on the content of policy measures without paying adequate attention to the likely scale of their costs and benefits and their real-life political feasibility. A few examples will suffice. Francois Bourguignon estimates that the effective tax rate on America’s “1 percent” would have to nearly double, from 35 percent to 67.5 percent, to reduce their share in disposable household income even to the level of 1979—a goal that “does not look entirely feasible from a political viewpoint.” Piketty considers a top income tax rate of 80 percent “optimal” in terms of economic costs versus equality benefits but readily concedes that “it seems quite unlikely that any such policy will be adopted anytime soon.” Proposals whose success is predicated on effective global policy coordination raise the bar to dizzying heights. Ravi Kanbur advocates the creation of an international body for coordinating labor standards—akin to a miracle weapon in the fight against globalization pressures—“leaving aside the political feasibility or operational practicality of such an agency.” Piketty states outright that this proposed “global tax on capital is a utopian idea” but sees “no technical reason why” a Europe-wide wealth tax would not be realistic. Lofty ideas of this kind have been criticized, however, as not only unhelpful but also potentially counterproductive for threatening to divert attention from more feasible measures. In all of this, serious consideration of the means required to mobilize political majorities for implementing any of this advocacy is conspicuous by its absence.12
The most detailed and precise equalization program that has been put forward to date, Anthony Atkinson’s recent blueprint for how to reduce inequality in the United Kingdom, illustrates the limitations of this policy-oriented approach. Numerous and often ambitious measures add up to a comprehensive reform package: the public sector should seek to influence technological change by “encouraging innovation that increases the employability of workers”; legislators should strive to “reduce market power in consumer markets” and revive the bargaining power of organized labor; firms should share profits with workers in ways that “reflect ethical principles” or be barred from supplying public bodies; the top income tax rate should rise to 65 percent, income from capital should be taxed more aggressively than earnings from labor, taxes on estates and gifts should inter vivos be tightened, and property taxes should be set based on up-to-date assessments; national savings bonds should guarantee a “positive (and possibly subsidized) real rate of interest on savings” up to a personal cap; a statutory minimum wage should be “set at a living wage”; every citizen should receive a capital endowment upon reaching maturity or a later date; and “the government should offer guaranteed employment at the living wage to everyone who seeks it” (which Atkinson himself concedes “may seem outlandish”). Possible add-ons include an annual wealth tax and a “global tax regime for personal taxpayers, based on total wealth.” In addition, the European Union should be persuaded to introduce “universal basic income for children” as a taxable benefit indexed to median national income.
In his extended discussion of whether this could actually be accomplished, Atkinson focuses on the costs to the economy (which remain unclear); the countervailing pressures of globalization, which he hopes to counter through European or global policy coordination; and fiscal affordability. Unlike other proponents of equalizing reform measures, Atkinson also ventures an estimate of the likely effect of this package: if four major policies were implemented—higher and more progressive income taxes, an earned income discount at low income levels, substantial taxable benefits paid out for each child, and a minimum income for all citizens—the Gini coefficient of equivalized disposable income would fall by 5.5 percentage points, thereby narrowing the current inequality gap between Britain and Sweden by a little more than half. More limited changes would translate to correspondingly lesser improvements on the order of 3 or 4 percentage points. To put this in perspective, by his own account, the same British Gini had gone up by 7 percentage points between the late 1970s and 2013. Thus even a combination of several quite radical and historically unprecedented government interventions would reverse the effects of resurgent inequality only partially, and more moderate policies would yield even smaller benefits.13
A WORLD WITHOUT HORSEMEN?
“Tout cela est-il utopique?”14 Even when they are not outright utopian, many of these policy recommendations suffer from a lack of historical awareness. Reforms at the margins are unlikely to have a significant effect on current trends in the distribution of market income and wealth. Atkinson’s discussion has the unique merit of considering both the price of an ambitious package of measures and its probable effect on disposable income inequality, which for any realistic policy configuration is relatively modest. More generally, there seems to be surprisingly little interest in how to turn such proposals into reality or even in whether they could ever make a big difference. And yet history teaches us two important things about leveling. One is that radical policy interventions occur in times of crisis. The shocks of the world wars and the Great Depression, to say nothing of assorted communist revolutions, generated equalizing policy measures that owed much to these specific contexts and that may not have been feasible under different circumstances—at the very least, not on the same scale. The second lesson is even more straightforward: policymaking can take us only so far. Time and again the compression of material imbalances within societies was driven by violent forces either that were outside human control or that are now far beyond the scope of any viable political agenda. None of the most effective mechanisms of leveling are operational in the world today: the Four Horsemen have dismounted their steeds. And nobody in his or her right mind would want them to get back on.
Mass mobilization warfare has run its course. The format of military conflict has always been decisively shaped by technology. Sometimes this favored investment in high-value assets such as ancient war chariots or medieval knights, and at other times it gave an edge to massed low-cost infantry. In the West, national mass armies replaced mercenaries when fiscal-military states matured in the early modern period. Popular military mobilization scaled new heights with the French Revolution and culminated in the armies of millions raised to fight the two world wars. Since then, trends have once again moved in the opposite direction—from quantity to quality. In theory, nuclear weapons may have made large-scale conventional war obsolete as early as the late 1940s, although in practice it survived for lower-stakes conflicts and those between or involving powers lacking nuclear capabilities. Conscription has faded, increasingly replaced by volunteer armies of professionals charged with handling more sophisticated equipment.
In those relatively few developed countries that still engage in military operations, military service has often become detached from mainstream society, and equalizing “mobilization effects” have disappeared. In the United States, 1950 was the last time when tax increases to pay for war were passed without serious debate. Even at a time when the draft was still in place, the Revenue Act of 1964 provided for the largest tax cuts in American history prior to 1981 even as military involvement in Vietnam was expanding. Surges in U.S. military spending in the 1980s and during the invasions of Afghanistan and Iraq in the 2000s were both accompanied by tax cuts as well as rising income and wealth inequality, the inverse of what had happened during the world wars. The same was true of the United Kingdom before and after the Falklands War of 1982.
Although recent conflicts have been relatively modest in scale or—in the case of the Cold War—never actually progressed to open hostilities, bigger wars, were they to break out, would be unlikely to alter this trajectory in coming decades. It is hard to see how the largest imaginable conflict short of thermonuclear conflagration, all-out conventional war between the United States and China, could productively involve very large armies. Even more than seventy years ago, the Pacific War already privileged expensive ships and airpower over massed infantry forces, and any future fighting in this region would primarily involve air and sea power, missiles, satellites, and all manner of cyber warfare, none of which is amenable to mass mobilization. Nor, in extremis, is nuclear warfare. Russia is currently shedding conscripts in favor of volunteers, and a large majority of European Union countries have already abolished the draft altogether. India and Pakistan, two other potential parties to large-scale warfare, likewise rely on volunteers. Even Israel, whose military capabilities dwarf those of its increasingly unstable neighbors, is envisioning an eventual transition of this kind.
Ultimately, it is simply not clear what very large infantry armies would be able to accomplish on twenty-first century battlefields. Current projections of the nature of future combat focus on “robotics, smart munitions, ubiquitous sensing, and extreme networking, along with the potentially massive impact of cyber warfare.” There will be fewer but higher-performance human combatants, physically and cognitively augmented with exoskeletons, implants, and eventually perhaps also genetic enhancements. They will share battlefields with robots in all shapes and sizes, as small as insects and as large as vehicles, and might operate directed energy weapons such as lasers and microwave rays, as well as force fields. Weapons miniaturization will allow precision targeting down to the level of specific individuals, replacing more indiscriminate projection of force, and high-speed, high-altitude super-drones may make human pilots redundant. These scenarios are exceedingly remote from earlier forms of industrialized warfare and will further reinforce the separation of the military from the civilian domain. Any equalizing effects of such conflicts are likely to be concentrated in the financial markets, triggering dislocations akin to those of the recent global financial crisis that only temporarily depress elite wealth until it rebounds a few years later.15
Much the same would be true of wars that involved the limited tactical use of small-scale nuclear devices. Only all-out thermonuclear war might fundamentally reset the existing distribution of resources. If escalation could be contained at a point where public institutions are still functioning and sufficient amounts of critical infrastructure remain intact, governments and military authorities would freeze wages, prices, and rents; block non-essential withdrawals from banks; impose a comprehensive rationing system for food; requisition needed goods; adopt forms of central planning, including the centralized allocation of scarce resources in favor of the war effort, government operations, and the production of survival items essential to survival; assign housing; and possibly even resort to forced labor. In American planning for the “Day After,” the sharing of war losses throughout the economy has long been a key policy goal. Any strategic-level exchange of nuclear warheads between major powers would wipe out physical capital on a vast scale and wreck financial markets. The most likely outcome would be not only a dramatic fall in GDP but also an equalizing rebalancing of the available resources and a shift from capital to labor.
A doomsday scenario of unrestricted nuclear warfare is bound to take leveling far beyond these projected outcomes. It would represent an extreme version of systems collapse, exceeding in severity even the dramatic fall of early civilizations discussed in chapter 9. Although contemporary science fiction accounts of a postapocalyptic world sometimes envision high degrees of inequality between those in control of scarce vital resources and deprived majorities, the experience of the thoroughly impoverished and less stratified postcollapse communities of premodern history might be a better guide to conditions in a future “nuclear winter.” But this is unlikely to happen. Although nuclear proliferation may change the rules of the game in regional theaters, the same existential risks that have prevented nuclear war between major powers since the 1950s continue to apply. Moreover, the mere existence of stockpiles of nuclear weapons makes it less likely that core regions such as the United States or China will get massively involved even in conventional warfare and serves to displace conflict into global peripheries, which in turn lowers the odds of severe damage to the world’s major economies.16
Weapons technology is only part of the story. We must also allow for the possibility that humankind has become more peaceful over time. Various strands of evidence reaching back to the Stone Age strongly suggest that the average probability of a person’s death from violent causes has been declining in the very long run of history—and that this trend continues. Although this secular shift appears to be driven by the growing power of the state and attendant cultural adaptations, a more specific factor that has already been mentioned is about to reinforce the pacification of our species. All other things being equal, the aging of populations, which has already begun in the West and which will eventually occur everywhere in the world, can be expected to reduce the overall likelihood of violent conflict. This is particularly relevant for assessments of future relations between the United States and China and among East Asian countries, many of which face a dramatic demographic shift from younger cohorts to the elderly. All of this lends support to Milanovic’s hope “that humanity, facing a very similar situation today as one hundred years ago, will not allow the cataclysm of a world war to be the remedy for the ills of inequality.”17
The next two horsemen of apocalyptic leveling do not require a lot of attention. Transformative revolution has even more thoroughly gone out of fashion than mass mobilization warfare. As I have shown in chapter 8, mere revolts rarely succeed and do not normally achieve substantial equalization. Only communist revolutions were capable of greatly leveling imbalances in income and wealth. Yet the massive expansion of communist rule between 1917 and 1950 was rooted in the world wars and has never been repeated. Subsequent communist movements, sponsored by the Soviet Union, only occasionally scored victories—in Cuba, Ethiopia, South Yemen, and, above all, in Southeast Asia up to 1975—before they began to fizzle out. The late 1970s witnessed the final modest takeovers, in Afghanistan, Nicaragua, and Grenada, which proved either ephemeral or politically moderate. Peru’s substantial communist insurgencies were largely crushed in the 1990s, and by 2006, the Nepalese Maoists had abjured civil war and joined electoral politics. Market reforms have effectively eroded the socialist underpinnings of all remaining people’s republics. Even Cuba and North Korea have been unable to escape this global trend. At this point in time, there are no further leftist revolutions on the horizon, nor has any alternative movement with a comparable potential for violent leveling arrived on the scene.18
State failure and systems collapse on the scale discussed in chapter 9 have likewise become extremely rare. Recent instances of state failure tend to be confined to central and eastern Africa and the peripheries of the Middle East. In 2014, the State Fragility Index of the Center for Systemic Peace assigned the world’s worst scores to the Central African Republic, South Sudan, the Democratic Republic of Congo, Sudan, Afghanistan, Yemen, Ethiopia, and Somalia. With the single exception of Myanmar, the seventeen next most fragile countries are also located in Africa or the Middle East. Although the dissolution of the Soviet Union and Yugoslavia in the early 1990s as well as ongoing events in Ukraine demonstrate that even industrialized middle-income countries are by no means immune to disintegrative pressures, contemporary developed countries—and, indeed, many developing ones—are highly unlikely to go down the same path. Thanks to modern economic growth and fiscal expansion, state institutions in high-income countries have generally become too powerful and too deeply entrenched in society for a wholesale collapse of governmental structures and concurrent leveling to occur. And even in the most disadvantaged societies, state failure has often been associated with civil war, a type of violent shock that does not normally produce equalizing outcomes.19
This leaves us with the fourth and final horseman: severe epidemics. The risk of novel and potentially catastrophic outbreaks is far from negligible. Zoonotic infections that jump from animal hosts to humans are on the rise thanks to population growth and deforestation in tropical countries. Consumption of bush meat also sustains this chain of transmission, and industrial livestock farming makes it easier for microorganisms to adapt to new environments. Pathogen weaponization and bioterrorism are growing concerns. Even so, the same factors that are conducive to the emergence and spread of new infectious diseases—economic development and global interconnectivity—also help us monitor and respond to such threats. Rapid DNA sequencing, the miniaturization of laboratory equipment for use in the field, and the ability to track outbreaks by setting up control centers and exploiting digital resources are powerful weapons in our arsenal.
For the purposes of this study, two points are crucial. First, anything that might approximate the relative scale of the major premodern pandemics discussed in chapters 10 and 11 would require the death of hundreds of millions of people in the world today, which far exceeds the most pessimistic scenarios. Moreover, any future global epidemic may well be largely confined to developing countries. Even a century ago, at a time when existing therapeutic intervention made little or no difference, the death toll of the global influenza pandemic of 1918 to 1920 was strongly mediated by per capita income levels. Today, medical intervention would reduce the overall impact of an outbreak of a comparably severe strain, and mortality outcomes would be even more strongly biased in favor of high-income countries. Extrapolating from the mortality rates reported for the “Spanish flu” to 2004, 96 percent of the projected 50 million to 80 million fatalities worldwide might occur in developing countries. Although sophisticated weaponization might produce a more potent superbug, it would hardly be in the interest of any state-level actors to unleash such an agent. Bioterrorism, on the other hand, may well have only a minimal chance of success and is even less likely to result in genuine mass mortality on a national or wider scale.
The second point concerns the distributional economic consequences of future epidemics. It is far from certain that sudden catastrophic mortality caused by infectious disease would level inequality of income or wealth as it had done in the agrarian era. We cannot even tell whether the global influenza pandemic of 1918 to 1920, which is thought to have killed anywhere from 50 million to 100 million people, or some 3 percent to 5 percent of the world’s population at the time, had any significant effect on the distribution of material resources, coinciding as it did with the equalizing fallout of World War I. Although generic infections such as influenza today more severely affect the poor, we cannot simply conjecture a class-specific mortality crisis that would drive up the value of low-skilled labor even as the economy as a whole remained largely intact. For a contemporary epidemic to be truly catastrophic, claiming the lives of hundreds of millions around the world, it would have to be impossible to contain at least in the short term and would have to kill people across national boundaries and the socioeconomic spectrum. In that case, its destructive impact on complex and interconnected modern economies and their highly differentiated labor markets might well outweigh any equalizing effects regarding the labor supply and the valuation of capital stocks. Even in far less integrated agrarian societies, plagues triggered short-term dislocations that hurt people indiscriminately. In the long run, distributional consequences would be shaped by novel ways of substituting capital for labor: in plague-depleted economies, robots might eventually take the place of many of the missing workers.20
We cannot be certain that the coming years will be free of the violent shocks that have punctuated history since the dawn of civilization. There is always a chance, however small, that a big war or a new Black Death might shatter the established order and reshuffle the distribution of income and wealth. The best we can do is to identify the most economical prediction, and it is this: the four traditional levelers are gone for now and are unlikely to return any time soon. This casts serious doubt on the feasibility of future leveling. Many factors contribute to historical outcomes, and the history of leveling is no exception: institutional arrangements have been critical in determining the distributional consequences of compressive shocks. Variation in the coercive power of rulers and capital owners allowed plague to raise real wages in some societies but not in others; the world wars flattened the distribution of market incomes in some economies but encouraged ambitious redistributive schemes in others; Mao’s revolution wiped out “landlords” but promoted inequalities between cities and countryside.
But there was always one Big Reason behind every known episode of substantial leveling. There was one Big Reason why John D. Rockefeller was an entire order of magnitude richer in real terms than his richest compatriots one and two generations later, why the Britain of Downton Abbey gave way to a society known for universal free healthcare and powerful labor unions, why in industrialized nations around the globe the gap between rich and poor was so much smaller in the third quarter of the twentieth century than it had been at its beginning—and, indeed, why a hundred generations earlier ancient Spartans and Athenians had embraced ideals of equality and sought to put them into practice. There was one Big Reason why by the 1950s the Chinese village of Zhangzhuangcun had come to boast a perfectly egalitarian distribution of farmland; one Big Reason why the high and mighty of Lower Egypt 3,000 years ago had to bury their dead with hand-me-downs or in shoddily manufactured coffins, why the remnants of the Roman aristocracy lined up for handouts from the pope and the successors of Maya chiefs subsisted on the same diet as hoi polloi; and one Big Reason why humble farmhands in Byzantine and early Islamic Egypt and carpenters in late medieval England and hired workers in early modern Mexico earned more and ate better than their peers before or after. These Big Reasons were not all the same, but they shared one common root: massive and violent disruptions of the established order. Across recorded history, the periodic compressions of inequality brought about by mass mobilization warfare, transformative revolution, state failure, and pandemics have invariably dwarfed any known instances of equalization by entirely peaceful means.
History does not determine the future. Maybe modernity really is different. In the very long run, it may well turn out to be. It may put us on a trajectory toward singularity, a point at which all human beings merge into a globally interconnected hybrid body-machine super-organism and no longer have to worry about inequality. Or perhaps technological advances will instead take inequalities to new extremes by separating a biomechatronically and genetically enhanced elite from ordinary mortals, the latter perpetually kept at bay by the ever more superior capabilities of their overlords. Or, just as likely, none of the above—we may be moving toward outcomes we cannot even yet conceive. But science fiction takes us only so far. For the time being, we are stuck with the minds and bodies we have and with the institutions they have created. This suggests that the prospects of future leveling are poor. It will be a challenge for the social democracies of continental Europe to maintain and adjust elaborate systems of high taxation and extensive redistribution or for the richest democracies of Asia to preserve their unusually equitable allocation of pretax incomes to stem the rising tide of inequality, which can grow only stronger as ongoing globalization and unprecedented demographic transformations add to the pressure. It is doubtful whether they will manage to hold the line: inequality has been inching up everywhere, a trend that undeniably works against the status quo. And if the stabilization of existing distributions of income and wealth will be increasingly difficult to achieve, any attempt to render them more equitable necessarily faces even bigger obstacles.
For thousands of years, history has alternated between long stretches of rising or high and stable inequality interspersed with violent compressions. For six or seven decades from 1914 to the 1970s or 1980s, both the world’s rich economies and those countries that had fallen to communist regimes experienced some of most intense leveling in recorded history. Since then, much of the world has entered what could become the next long stretch—a return to persistent capital accumulation and income concentration. If history is anything to go by, peaceful policy reform may well prove unequal to the growing challenges ahead. But what of the alternatives? All of us who prize greater economic equality would do well to remember that with the rarest of exceptions, it was only ever brought forth in sorrow. Be careful what you wish for.
1 See herein, chapter 15, pp. 409–410 (Gini adjustments), 422 (offshore wealth), Introduction, p. 13 (absolute inequality); Hardoon, Ayele, and Fuentes-Nieva 2016: 10 fig. 2 (growing absolute income gap between the top 10 percent and the bottom half in Brazil 1988 to 2011). For global inequality, see Milanovic 2016: 11 fig. 1.1, 25 fig. 1.2: real incomes of the global 1 percent rose about two-thirds, comparable to rates of the order of 60 percent to 75 percent between the fortieth and seventieth percentiles of the global income distribution; yet 19 percent of the total gain went to the 1 percent, 25 percent to the next highest 4 centiles, and only 14 percent to those in the middling three deciles. For even larger absolute gains of the global 1 percent relative to the bottom 10 percent, see Hardoon, Ayele, and Fuentes-Nieva 2016: 10–11. Effective inequality: herein, appendix, pp. 452–455.
2 Ginis: SWIID. In 2011 Portugal had an even higher market income Gini (0.502) than the United States. European countries with lower market Ginis include Austria, Belgium, the Netherlands, Norway, Spain, and Switzerland, although Belgium is the only real outlier: see herein, chapter 15, p. 406 table 15.1. In this latter group, only in Belgium and Spain was the gap between market and disposable income Ginis smaller than in the United States. For the redistributive effort required to stem rising market income inequality in Europe, see herein, chapter 15, pp. 406–407. Social spending: OECD 2014: 1 fig. 1 (in descending order, France, Finland, Belgium, Denmark, Italy, Austria, Sweden, Spain, Germany, Portugal, and, a smidgen under 25 percent, the Netherlands). Central government share in GDP: OECD, General government spending (indicator), doi: 10.1787/a31cbd4d-en. Bergh and Henrekson 2011 survey the literature on the relationship between government share of GDP and economic growth in high-income countries. Social spending trends: OECD 2014: 2 fig. 2. For the main components, see 4 fig. 4.
3 European Commission 2007, 2013, and 2015 are key reports on the scale and consequences of aging in Europe. Cf. also briefly United Nations 2015 for global trends. Fertility rates: European Commission 2007: 12 (about 1.5 now, projected to rise to about 1.6 by 2050). Median age and working age population: 13. Dependency ratios: 13 (rise to 53 percent by 2050); European Commission 2013 (rise to 51 percent by 2050) and 2015: 1 (rise to 50.1 percent by 2060). Eighty-year-olds and older: European Commission 2007: 13. Cf. 46 fig. 2.7., 49 fig. 2.9, and Hossmann et al. 2008: 8 on the range of future age pyramids. Growth as share of GDP: 13, with 70 table 3.3 (health care), 72 table 3.4 (long-term care); but contrast European Commission 2015: 4, for an additional 1.8 percent of GDP in spending required by 2060, albeit with great differences among countries (4–5). Economic growth rates: European Commission 2007: 62 (1.3 percent for EU-15 and 0.9 percent for EU-10 in 2031–2050), 2013: 10 (1.2 percent 2031–2050), 2015: 3 (1.4–1.5 percent 2020–2060).
4 Effects on inequality: Faik 2012, esp. 20–23 for the forecast (Germany); European Commission 2013: 10–11, 16. Japan: Ohtake 2008: 91–93 for the disequalizing consequences of aging in conjunction with an expansion of informal labor relations among the young. Restrictions on immigration and domestic equality: Lindert 2015: 18.
5 Dependency ratio: Lutz and Scherbov 2007: 11 fig. 5. Coleman 2006, esp. 401, 414–416. Even a zero immigration policy would reduce the foreign-origin population by not more than a third to a half by 2050 (417). Children and young workers: European Commission 2015: 27.
6 Scale of replacement: Coleman 2006: 419–421. Education, employment and integration: European Commission 2007: 15, 2013: 28. Heterogeneity: Alesina and Glaeser 2004: 133–181 (quote: 175). Survey: Brady and Finnigan 2014: 19–23.
7 Waglé 2013 is now the most detailed analysis, noting throughout the complexities of the relationship between heterogeneity and welfare (esp. 263–275). Ho 2013 argues that ethnic diversity per se does not reduce redistribution once other identities are taken into account. See Huber, Ogorzalek, and Gore 2012 for the different effects of democracy on inequality in homogeneous and heterogeneous countries, and Lindqvist and Östling 2013 for a model that predicts maximization of welfare under ethnic homogeneity. Correlations: Mau and Burkhardt 2009; Waglé 2013: 103–262. Attitudes: Finseraas 2012; Duch and Rueda 2014; and see also European Commission 2007: 15, 104. Immigration and religious heterogeneity: Waglé 2013: 164, 166. Lindert and Williamson 2016: 246 speculate that future immigration might raise European inequality by increasing the labor supply.
8 Greenwood, Guner, Kocharkov, and Santos 2014 find that assortative mating increased in the 1960s and 1970s but not since, whereas Eika, Mogstad, and Zafar 2014 observe its decline among the college-educated and its rise at low education levels. For intergenerational mobility, see herein, in the introduction, p. 20, and esp. Chetty et al. 2014 for stable rates. Residential segregation: Reardon and Bischoff 2011a: 1093, 1140–1141; 2011b: 4–6.
9 Piketty 2014: 195–196; Piketty and Saez 2014: 840–842; Piketty and Zucman 2015: 1342–1365, esp. 1348 fig. 15.24. For a random sample of critiques, see Blume and Durlauf 2015: 755–760 and Acemoglu and Robinson 2015, the latter with the response by Piketty 2015b: 76–77, who notes the uncertainties involved in his prediction (82, 84). Cf. also Piketty 2015a for responses to other work. For the effects of globalization, see herein, chapter 15, pp. 413–414. Disequalizing trade competition from low-income countries is likely to continue: Lindert and Williamson 2016: 250; cf. Milanovic 2016: 115. Global super-elite: Rothkopf 2008; Freeland 2012. On computerization and labor markets, see now esp. Autor 2015: 22–28, and, more generally, Ford 2015. Estimate: Frey and Osborne 2013. Among many others, Brynjolfsson and McAfee 2014 stress the enormous transformative potential of computerization. For AI, see most recently Bostrom 2014.
10 Center for Genetics and Society 2015 surveys recent advances in genetic techniques, most notably genomic editing by means of CRISPR/Cas9; see esp. 20–25 on germline modification, and 27–28 on ethics and inequality. Liang et al. 2015 report on human embryo gene editing at a Chinese university, which was largely unsuccessful. See also Church and Regis 2014 for the potential of synthetic biology. Harari 2015 makes valuable points about the limits of political constraints. Bostrom 2003 considers the equality outcomes of genetic modifications, while Harris 2010 is sanguine about their ethics and desirability. Speciation: Silver 1997.
11 This is a florilegium of the ideas put forward in OECD 2011: 40–41; Bowles 2012a: 72, 98–99, 157, 161; Noah 2012: 179–195; Bivens and Mishel 2013: 73–74; Corak 2013: 95–97; Stiglitz 2013: 336–363; Piketty 2014: 515–539, 542–544; Blume and Durlauf 2015: 766; Bourguignon 2015: 160–161, 167–175; Collins and Hoxie 2015: 9–15; Kanbur 2015: 1873–1876; Ales, Kurnaz, and Sleet 2015; Reich 2015: 183–217; Zucman 2015: 75–101.
12 Income tax: Bourguignon 2015: 163; Piketty 2014: 512–513 (quote: 513), drawing on Piketty, Saez, and Stantcheva 2013. Global labor standards: Kanbur 2015: 1876. Wealth tax: Piketty 2014: 515, 530 (quotes; my emphasis). Criticism: Piachaud 2014: 703, on the idea of a global wealth; cf. also Blume and Durlauf 2015: 765. Others have criticized Piketty’s focus on taxation: 765–766; Auerbach and Hassett 2015: 39–40. Bowles 2012a: 156–157 notes the importance of devising politically viable policy designs. Regarding political action, Levy and Temin 2007: 41 note that “[o]nly a reorientation of government policy can restore the general prosperity of the postwar boom,” and Atkinson 2015: 305 reminds us that “[t]here has to be an appetite for action, and this requires political leadership.” This begs the question of implementation; Atkinson’s reference to the improvements made “in the period of the Second World War and subsequent postwar decades” (308; cf. 55–77 for a historical survey) is very much to the point but offers scant hope for the present. Stiglitz 2013: 359–361, on the prospects of putting his numerous proposals into practice, offers no substantive suggestions. Milanovic 2016: 112–117 voices healthy skepticism regarding the potential of various equalizing forces (political change, education, and an abatement of globalization pressures), placing hope on the slow dissipation of rents over time and the emergence of future technologies that might increase the relative productivity of low-skilled workers. He is particularly pessimistic about the short-term prospects of economic equalization in the United States, where all indicators point to a continuing rise in inequality in the near future (181–190, esp. 190).
13 Atkinson 2014a and 2015. In addition to Atkinson 2015: 237–238, I quote mostly from the summary version (2014a). For the question “Can it be done?” see 241–299. Gini reduction: 294, with 19 fig. 1.2, 22 fig. 1.3 (and cf. also 299 for a probable reduction of about 4 points). The British income Gini fell by about 7 points during World War II: 19 fig. 1.2.
14 Piketty 2013: 921 (English translation in Piketty 2014: 561).
15 Projections: Kott et al. 2015, esp. 1 (quote), 7–11, 16–17, 19–21. For the future use of robots, see also Singer 2009. For the effects of recent economic crises, see herein, chapter 12, p. 364.
16 See Zuckerman 1984: 2–5, 8–11, 236–237, 283–288 for U.S. government planning for the aftermath of a nuclear war. Forced labor: the U.S. Oath of Allegiance requires that citizens “perform work of national importance under civilian direction when required by the law.” See Bracken 2012 on new forms of nuclear conflict and Barrett, Baum, and Hostetler 2013 on the odds of accidental nuclear war. National Military Strategy 2015: 4 assesses the probability of a war between the United States and a major power “to be low but growing,” and predicts that its “consequences would be immense.” For the displacement effect, see international studies scholar Artyom Lukin’s contribution at http://www.huffingtonpost.com/artyom-lukin/world-war-iii_b_5646641.html. Allison 2014 provides an accessible survey of the differences and similarities between 1914 and 2014. Morris 2014: 353–393 considers a range of future outcomes.
17 Declining violence: Pinker 2011; Morris 2014, esp. 332–340. See Thayer 2009 for a survey of the relationship between demography and war, and Sheen 2013 for the irenic effects of future aging in Northeast Asia. Quote: Milanovic 2016: 102–103.
18 Venezuela’s “Bolivarian revolution,” a leftist movement with a strong record of income equalization that continues to work through a parliamentary system, has been facing growing domestic resistance and may not survive its mismanagement of the economy.
19 Index: http://www.systemicpeace.org/inscr/SFImatrix2014c.pdf. For civil war and inequality, see herein, chapter 6, pp. 202–207. I discuss the state failure in Somalia in chapter 9, pp. 283–286.
20 There is no shortage of popular science books describing the emergence of novel infections and considering future threats: see, most recently, Drexler 2009 and Quammen 2013. The best-informed contribution has been made by Stanford-affiliated virologist Nathan Wolfe, who stresses our improved capabilities to monitor and respond: Wolfe 2011. Scale: for what it is worth, Bill Gates reckoning with tens of millions of future deaths: https://www.ted.com/talks/bill_gates_the_next_disaster_we_re_not_ready?language=en. Extrapolation from “Spanish flu”: Murray et al. 2006. Bioterrorism: e.g., Stratfor 2013. For pathogens with weaponization potential, see Zubay et al. 2005.