Can America Solve Its Wealth-Gap Problem without Violence?
715 words
By David Demers
The answer is “no,” if history is our sole guide.
That was the major conclusion of a 2017 book titled The Great Leveler by Stanford University history professor Walter Scheidel.
He scoured world history searching for evidence that economic inequality could be reduced substantially through benign political change. He considered land reform, debt relief, economic depressions, democracy, economic development, and education.
No luck.
Only catastrophic events — like major wars (e.g., WWI, WWII), “transformative revolution” (communism, French revolution), state failure (Roman Empire, Somalia), and pandemics (bubonic plague, Justinianic plague) — significantly leveled wealth and income gaps.
World War II, for example, wiped out wealth and wealth gaps across many countries and forced others, like the United States, to increase taxes substantially on the wealthy to pay war debts. Two-thirds of wealth is held by the top 10 percent.
Economic crises like the Great Depression, unless they are accompanied by violence, have small, temporary effects on reducing wealth and income gaps, according to Scheidel. The default setting is increasing gaps.
His dour findings didn’t surprise social scientists who are familiar with a vast body of research which shows that power in democracies flows down, rarely up. Wealthy elites and their corporate and nonprofit institutions achieve many of their goals by showering politicians with campaign donations and contributions to their personal nonprofit foundations.
But Scheidel’s book was not warmly received by some conservative and mainstream journalists and politicians who conceive of inequality as a force of nature, not under the power of humans to change.
This was the position of Washington Post columnist George F. Will, who panned the book and suggested that “vast economic forces,” not “government policies,” are the main drivers of inequality. Likewise, when Scheidel told New York Times economics reporter Eduardo Porter that “the world of the future is likely to be quite stable and have very high inequality,” Porter concluded, “Maybe we should just learn to stop worrying and love it.”
Of course, that’s exactly what the wealthy want the bottom 90 percent of Americans to do.
To be fair, economies of scale and barriers to entry — structural elements of free-market systems that are difficult to alter without increasing economic inefficiencies — contribute to growing wealth gaps. Inequality also tends to ebb and flow over time, reflecting ups and downs in the economy and modest legislative changes in tax laws.
But it would be a mistake to conclude that nothing can be done about massive wealth and income gaps. After all, in America they were created when Presidents Ronald Reagan, George W. Bush, and Donald Trump signed tax cut bills that overwhelming benefited the wealthy and did little to help the working and middle classes. According to my estimates, the wealthy today are paying about 50 percent less in federal taxes (income, capital gains, estate, corporate, and inheritance) than they did in 1980. The working and middle classes are paying about the same.
The tax cuts also are largely responsible for the $34 trillion national debt.
Contrary to popular opinion, federal spending contributes very little to the debt. When controlling for inflation, the federal budget has only increased at an annualized rate of 2.3 percent since 1980.
The problem isn’t spending — it’s a failure to raise enough taxes revenues from the wealthy.
If economic inequality can be increased through legislative actions, then it surely can be reversed as well, although this is easier said than done. In a democracy where economic power controls the political process, benign change is only possible if the wealthy can see the adverse consequences of their lopsided bounty.
Unfortunately, the wealthy have the mindset of a drowning person who won’t let go of a 25-pound piece of gold. Once tasted, wealth is hard to give up.
But if taxes on the wealthy are not increased and the national debt continues to grow at the same rate it has since 1980, then in ten years the debt will double. At that point, the debt-to-GDP ratio will approach 200 percent, which the Wharton School at the University of Pennsylvania says is the tipping point for economic disaster.
Without violence, such a disaster won’t completely eliminate wealth gaps, according to Scheidel’s analysis, but it will result in a significant loss of wealth to the wealthy.
With violence, the wealthy could lose everything.
715 words
By David Demers
The answer is “no,” if history is our sole guide.
That was the major conclusion of a 2017 book titled The Great Leveler by Stanford University history professor Walter Scheidel.
He scoured world history searching for evidence that economic inequality could be reduced substantially through benign political change. He considered land reform, debt relief, economic depressions, democracy, economic development, and education.
No luck.
Only catastrophic events — like major wars (e.g., WWI, WWII), “transformative revolution” (communism, French revolution), state failure (Roman Empire, Somalia), and pandemics (bubonic plague, Justinianic plague) — significantly leveled wealth and income gaps.
World War II, for example, wiped out wealth and wealth gaps across many countries and forced others, like the United States, to increase taxes substantially on the wealthy to pay war debts. Two-thirds of wealth is held by the top 10 percent.
Economic crises like the Great Depression, unless they are accompanied by violence, have small, temporary effects on reducing wealth and income gaps, according to Scheidel. The default setting is increasing gaps.
His dour findings didn’t surprise social scientists who are familiar with a vast body of research which shows that power in democracies flows down, rarely up. Wealthy elites and their corporate and nonprofit institutions achieve many of their goals by showering politicians with campaign donations and contributions to their personal nonprofit foundations.
But Scheidel’s book was not warmly received by some conservative and mainstream journalists and politicians who conceive of inequality as a force of nature, not under the power of humans to change.
This was the position of Washington Post columnist George F. Will, who panned the book and suggested that “vast economic forces,” not “government policies,” are the main drivers of inequality. Likewise, when Scheidel told New York Times economics reporter Eduardo Porter that “the world of the future is likely to be quite stable and have very high inequality,” Porter concluded, “Maybe we should just learn to stop worrying and love it.”
Of course, that’s exactly what the wealthy want the bottom 90 percent of Americans to do.
To be fair, economies of scale and barriers to entry — structural elements of free-market systems that are difficult to alter without increasing economic inefficiencies — contribute to growing wealth gaps. Inequality also tends to ebb and flow over time, reflecting ups and downs in the economy and modest legislative changes in tax laws.
But it would be a mistake to conclude that nothing can be done about massive wealth and income gaps. After all, in America they were created when Presidents Ronald Reagan, George W. Bush, and Donald Trump signed tax cut bills that overwhelming benefited the wealthy and did little to help the working and middle classes. According to my estimates, the wealthy today are paying about 50 percent less in federal taxes (income, capital gains, estate, corporate, and inheritance) than they did in 1980. The working and middle classes are paying about the same.
The tax cuts also are largely responsible for the $34 trillion national debt.
Contrary to popular opinion, federal spending contributes very little to the debt. When controlling for inflation, the federal budget has only increased at an annualized rate of 2.3 percent since 1980.
The problem isn’t spending — it’s a failure to raise enough taxes revenues from the wealthy.
If economic inequality can be increased through legislative actions, then it surely can be reversed as well, although this is easier said than done. In a democracy where economic power controls the political process, benign change is only possible if the wealthy can see the adverse consequences of their lopsided bounty.
Unfortunately, the wealthy have the mindset of a drowning person who won’t let go of a 25-pound piece of gold. Once tasted, wealth is hard to give up.
But if taxes on the wealthy are not increased and the national debt continues to grow at the same rate it has since 1980, then in ten years the debt will double. At that point, the debt-to-GDP ratio will approach 200 percent, which the Wharton School at the University of Pennsylvania says is the tipping point for economic disaster.
Without violence, such a disaster won’t completely eliminate wealth gaps, according to Scheidel’s analysis, but it will result in a significant loss of wealth to the wealthy.
With violence, the wealthy could lose everything.