BE CAREFUL WHAT YOU WISH FOR? REDUCING INEQUALITY IN THE TWENTY-FIRST CENTURY.

• Author: Avi-Yonah, Reuven S.
• Position: Book review

THE GREAT LEVELER: VIOLENCE AND THE HISTORY OF INEQUALITY FROM THE STONE AGE TO THE TWENTY-FIRST CENTURY. By Walter Scheidel. Princeton and Oxford: Princeton University Press. 2017. Pp. xvii, 444. $35.

INTRODUCTION

In 2014, a surprising best seller swept the United States. Capital in the Twenty-First Century by the French economist Thomas Piketty was published in English translation in April 2014. (1) Less than two months later, the English edition climbed to number one on the New York Times list for hardcover fiction while becoming the greatest sales success in the history of the Harvard University Press. (2) By January 2015, the book had sold 1.5 million copies in French, English, German, Chinese, and Spanish. (3)

The success of Piketty's book stemmed from the aftermath of the Great Recession of 2008-2009. The recession focused public attention on the increasing inequality in the United States since the early 1970s. The "Occupy Wall Street" movement, as well as the Tea Party movement, were both responses to the realization that, while the recession was over by 2009, over 95% of the subsequent growth in the U.S. economy inured to the benefit of the top 1% of the income distribution. (4)

Piketty explained this phenomenon in detail. Moreover, he posited that it was a historical constant. (5) The main driver of inequality, he argued, was the tendency of returns on capital to exceed the rate of economic growth (r>g):

In slowly growing economies, past wealth naturally takes on disproportionate importance, because it takes only a small flow of new savings to increase the stock of wealth steadily and substantially. If, moreover, the rate of return on capital remains significantly above the growth rate for an extended period of time ... then the risk of divergence in the distribution of wealth is very high. (6) Moreover, Piketty did not just pose the problem--he proposed a solution. In the last part of the book, Piketty advocated several steps to remedy inequality by regulating capital: strengthening the welfare state, dramatically increasing income tax rates on the rich, and imposing a new global tax on capital. (7) While none of these steps were taken, several of them were influential in shaping the Democratic platform for the 2016 presidential campaign, especially through the impact of Senator Bernie Sanders (I-VT). (8)

But, of course, the Democrats lost. The Republicans took the White House, retained both houses of Congress, and immediately proceeded to propose policies that went in the opposite direction of Piketty's proposals. (9) These policies consisted of first, abolishing the tax increases on wealthy Americans that helped fund the Affordable Care Act (ACA); (10) second, rolling back the welfare state, as embodied in the ACA, and especially converting Medicaid from an entitlement to a capped program; (11) and third, proposing an extremely regressive tax reform, including cutting the top marginal individual and corporate rates, abolishing the estate tax, and converting the corporate tax (which falls primarily on capital) to a consumption tax (which falls primarily on consumers). (12)

In this environment, a new book appeared. Stanford historian Walter Scheidel's The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, (13) is, in some respects, the anti-Piketty. Scheidel accepts Piketty's view that inequality tends to grow over time, but adds a crucial caveat than runs directly opposite to Piketty's optimistic proposals. Scheidel argues that the historical record demonstrates that inequality can only be reduced by violent means. (14) Therefore, Piketty's proposals to reduce inequality peacefully are unrealistic. Scheidel concludes his book by arguing that we should accept inequality as the price of peace: "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" (p. 444).

This Review will first summarize Scheidel's thesis and the evidence he presents for his claim (Part I). It will then argue that the twentieth-century history of the United States shows that, in fact, inequality can be reduced by peaceful means, even though such reductions are not easy to achieve and usually require bipartisan consensus (Part II). Next, the Review will address why the Great Recession of 2008-2009 did not lead to a reduction in inequality, unlike the Great Depression (Part III). Finally, the Review will ask what can be done and propose certain steps that may be more achievable than Piketty's proposals (Part IV).

1. THE SCHEIDEL THESIS

   Scheidel summarizes his thesis as follows: For thousands of years, civilization did not lend itself to peaceful equalization. Across a wide range of societies and different levels of development, stability favored economic inequality. This was as true of Pharaonic Egypt as it was of Victorian England, as true of the Roman Empire as of the United States. Violent shocks were of paramount importance in disrupting the established order, in compressing the distribution of income and wealth, in narrowing the gap between rich and poor. Throughout recorded history, the most powerful leveling invariably resulted from the most powerful shocks. Four different kinds of violent ruptures have flattened inequality: mass mobilization warfare, transformative revolution, state failure, and lethal pandemics, (p. 6; emphasis added) The rest of the book marshals powerful evidence in support of this thesis. First, Scheidel shows convincingly (and consistently with Piketty, but Scheidel's data stretches much further back in history) that in peaceful times, inequality tends to grow. For example, historical data enable Scheidel to show that inequality in Europe grew from prehistoric times to reach a peak at the height of the Roman Empire (around 200 CE) (p. 87 fig.3.1), declined with the downfall of the empire, rose again gradually from 650 CE to the Black Death (1350 CE) (pp. 87 fig.3.1, 90), declined sharply and then began rising again until the outbreak of World War I in 1914 (pp. 87 fig.3.1, 110, 112), then declined in the "Great Compression" or 1914-1975 (p. 87 fig.3.1, Chapter Five), and began rising again after the "Great Compression" (p. 87 fig.3.1, Chapter Fifteen).

   Similar trends are visible in the United States. The Gini coefficient, which Scheidel uses as his main measure of inequality, rose from 0.44 in 1774 to 0.49 in 1850 to 0.51 in 1860, and the share of national income earned by the top 1% of the income distribution rose from 8.5% in 1774 to 9.2% in 1850 to 10% in I860. (15) The Civil War reduced inequality in the South but increased inequality in the North: the top 1% income share reached 18% in 1913, and the fraction of all assets held by the wealthiest 1% of U.S. households rose from 25% to 46% between 1810 and 1910 (p. 109). In the long run, inequality in the United States increased steadily from 1650 to World War I (p. 110 fig.3.5). The American Revolution brought only a small reduction and the Civil War produced none at all (p. 110 fig.3.5). From World War I to 1970, however, inequality dropped sharply, rising thereafter but still not reaching the height of the first "gilded age" (p. 110 fig.3.5).

   Second, Scheidel shows convincingly that most reductions of inequality were indeed the result of his "four horsemen": mass mobilization war, trans-formative revolution, state collapse, and pandemic. (16)

   The first horseman, mass mobilization war, is best illustrated by the effects of the two world wars. For example, in 1938 Japan was one of the most unequal countries on earth, with the richest 1% receiving 19.9% of income (p. 115). By 1946, that share had dropped to 6.4% (a decline of over two thirds) (p. 115). The destruction of the elite's wealth was even more dramatic: the value of the richest 1% of estates fell by almost 97% between 1936 and 1949 (p. 115). "Total war compressed inequality on an unprecedented scale" (p. 117). The same phenomenon happened as a result of both World War I and World War II in Europe (pp. 146-47).

   The second horseman, transformative revolution, is exemplified by the effects of the Russian revolution (pp. 214-23). Scheidel estimates that before the revolution, Russia's 1% received about 13.5-15% of all income (p. 221). This value fell dramatically as a result of Soviet confiscation, so that the Gini declined from 0.362 to 0.229 (p. 221). A similar leveling occurred in China after 1949, with the Gini declining from 0.4 to 0.23 (pp. 223-28). In France, the income share of the top 10% declined from 51-53% before the French revolution to 45% after it (p. 237 tbl.8.1).

   The third horseman, state collapse, can be illustrated by the destruction of the Tang elite in China in the ninth century (pp. 260-64), the disintegration of the Western Roman Empire in the sixth century (pp. 264-69), and by contemporary Somalia (pp. 283-86). Scheidel estimates that the Gini coefficient in Roman Britain (as measured by relative house sizes), which stood at 0.6 at the height of the Empire, had reverted by 600 AD to 0.4, nearly the same as in Iron Age Britain (p. 269 fig.9.3).

   The fourth horseman, plague, is best shown by the late medieval pandemic that began with the Black Death of 1347-1349. For example, the Gini coefficient in the cities of Piedmont fell from about 0.72 in 1300 to about 0.61 by 1450, and the top 5% share of wealth distribution fell from 48% to 32% (p. 307 fig. 10.4).

   But Scheidel's hypothesis is stronger than this: he argues that reductions of inequality "invariably" resulted from the four horsemen ("every single one of the major compressions of material inequality we can observe in the record was driven by one or more of these four levelers") (pp. 6, 8; emphasis added). Specifically, he argues that peaceful reform, such as land reform, debt relief, normal (nonviolent) economic crises, and...