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Killing Inequality (3)

By News Express on 09/10/2017

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Yet another obstacle to reform lies in efforts to discourage the bottom 50 per cent from mobilising. Across the world, elites have promoted ideologies that focus the poor’s attention on non-economic flash-points, such as culture, ethnicity and religion. They also spread conspiracy theories that attribute chronic inequalities to evil-doers, real or imagined. Today’s populist politicians - both the right-wing and the left-wing varieties - demonize particular groups, thereby deflecting attention from genuine sources of economic inequality.

For US President, Donald Trump and France’s Marine Le Pen, it is immigrants; for US Senator Bernie Sanders and France’s Jean-Luc Mélenchon, it is corporations. Even elites who disavow populism deflect attention from the real problems. Many American academics, for example, champion affirmative action, which tends to favour the wealthiest minorities and makes no real dent in inequality. Given all these barriers to reform, Scheidel’s pessimism can seem well founded. 

Equality in peace?

But Scheidel’s own narrative also offers cause for hope: as The Great Leveler acknowledges, some countries have found ways to reduce inequality without a catastrophe. In the 1950s, Scheidel reports, South Korea undertook land redistribution in order to mollify its peasants and discourage them from allying with communist North Korea. During the same period, Taiwan, fearing an invasion from mainland China, ushered in similar reforms to consolidate domestic support.

Both places thus managed to promote equality peacefully, in order to prevent violence that would have proved far costlier for elites. Scheidel explains away these cases by noting that World War II and the Korean War empowered the masses and softened the elites. Yet, he also notes that Mesopotamian rulers from 2400 BC to 1600 BC repeatedly provided debt relief to counter potential instability. Although these resets did nothing to right the structural sources of inequality, they managed to keep economic disparities within bounds.

Until recently, the only way to become fabulously rich was to prey on the fruits of others’ labour

Scheidel could also have mentioned an instructive case from the Ottoman Empire. From the 14th century onward, Ottoman sultans regularly expropriated their subjects, including merchants, soldiers, and state officials. In the empire’s heyday, the 16th century, abrogating that privilege would have been unthinkable.

But beginning in late 18th century, the economic, technological and military rise of Europe caused the sultanate to worry that keeping that privilege in place would hold back economic growth, encourage secessions, and set the stage for foreign occupation. And so in 1839, Sultan Abdulmecid I peacefully gave up this privilege, along with several others, which Ottoman elites had enjoyed for centuries. A few years later, he reformed the judicial system, setting up secular courts available to people of all faiths as an alternative to Islamic courts, which, by discriminating against commoners and non-Muslims, had long contributed to inequality. 

In all these cases, the beneficiaries of entrenched privileges, recognising a looming existential threat, chose to undertake reforms. Today’s populist surge does not yet pose a serious threat to the fortunes of the very rich. But if Scheidel’s forecast of ever-worsening inequality materialises, that might change. The trigger could come from, say, a take-over in some G-7 country by radical redistributionists. At that point, elites might form political coalitions to pursue top-down reforms, now considered hopelessly unrealistic. In times of peace and stability, as Olson recognised in The Rise and Decline of Nations, elites form self-serving coalitions to increase their wealth. Faced with the possibility of losing all, they might do the same to stave off a more drastic redistribution.

As with any collective action, free-riding could get in the way. Certain super-rich individuals might choose to let other elites bear the burdens involved in lessening inequality, such as funding a new bipartisan coalition, and if there were enough free-riders, the overall effort would fail. Yet, the very nature of rising inequality would lessen the disincentives to cooperate: the more wealth gets concentrated at the top, the smaller the number of people who must get organised to form a movement committed to slashing inequality. In the United States today, there are just over 100 deca-billionaires: people with 11-digit net-worth. If only half of them formed a political bloc aimed at raising estate taxes to equalise educational opportunities, the effort would likely gain traction. 

There is another reason to scale down the pessimism, and it has to do with the relative salience of various types of inequality. The Great Leveler focuses on inequality within nations, paying little attention to inequality among nations. But the latter is becoming increasingly relevant to human happiness. Just as mass transportation made national disparities matter to people whose frame of reference had previously been limited to their own local communities, so the Internet is heightening the relevance of international disparities.

It means more to today’s Chinese, Egyptians and Mexicans than it did to their grandparents, that they are generally poorer than Americans. Technologies that give people in the developing world greater contact with people in the developed world - from video chat to online universities - promise to make such global differences matter even more, thus reducing the significance of the national inequality on which Scheidel focuses.

The good news is that global inequality has lessened dramatically since World War II, even as income and wealth have become more concentrated within individual countries. With economically underdeveloped countries growing more rapidly than developed countries - in large part, thanks to falling trade barriers in the developed world - the gaps between people in different countries has narrowed. As late as 1975, half of the planet’s population lived below today’s poverty line of $1.90 a day, which the World Bank considers extreme poverty. That proportion has now fallen to 10 per cent. Countries that entered the early stages of industrialisation just a few decades ago, from India and Malaysia to Chile and Mexico, now export high-tech goods. For anyone who finishes reading The Great Leveler in a state of despair, these massive and rapid transformations, achieved in a remarkably peaceful era, offer grounds for hope.

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•Lawrence Nwaodu is a small business expert and enterprise consultant, trained in the United Kingdom and the Netherlands, with an MBA in Entrepreneurship from The Management School, University of Liverpool, United Kingdom, and MSc in Finance and Financial Management Services from Rotterdam School of Management, Erasmus University Netherlands. Mr. Nwaodu is the Lead Consultant at IDEAS Exchange Consulting, Lagos. He can be reached via nwaodu.lawrence@hotmail.co.uk (07066375847).

Source News Express

Posted 09/10/2017 7:15:11 PM

 

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