Peter Foster: Why growing inequality might actually be a good thing

Cuba recently struck a great blow for the cause of controlling inequality: It stopped issuing licences for private enterprises. President Raul Castro noted that the state had discovered cases where “one same person has two, three, four and even five restaurants.”

Can you imagine that disgraceful level of success? Can’t you see how it threatens to raise the Gini coefficient, that sacred statistic of income and wealth “distribution,” the scale where zero means perfect equality while one means a single guy has everything?

Equalization continues apace in other hot spots. The chaos of Venezuela might be bringing the poor to subsistence, but President Nicolas Maduro, who recently overturned democracy, has done a great job of expropriating and driving “plutocrats” from the country, thus lowering the Gini. Syria and Yemen are among other countries that are becoming more statistically equal by the day.

For the left, material inequality is an obsession. It is bad and always getting worse. Three years ago, French economist Thomas Piketty received lavish praise for an elaborately concocted study, Capital in the 21st Century, which bemoaned the awful prospect of the rich “pulling away” as the returns to capital outpaced those to labour. This after the 20th century had seen much “progress.” All it took was two world wars, several murderous communist revolutions and a Great Depression. 

Another academic, Walter Scheidel, in a recent but less celebrated book — The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century — demonstrates that the links between equalization and misery are hardly novel phenomena.

For most of history, and likely all prehistory, wealth tended to be synonymous with political power. In all settled and stable societies, notes Scheidel, inequality tends to increase until disaster appears in the shape of one or more of “Four Horsemen”: mass mobilization warfare, revolution, state collapse or pandemics.]

Since around the time of Christ the main factors that have halted the trend to inequality are the fall of the Roman Empire, the Black Death and other bubonic plagues and the 20th century’s wars, revolutions and economic downturns.

Scheidel’s problem, as a good left-leaning academic, is that he seems to have trouble getting his head round the fact that growing inequality might actually be a good thing if it means that poor people are doing better. If, in order for the poor to be twice as well off, the rich have to be three times as well off, can that be a bad thing? Scheidel’s related problem is his difficulty in acknowledging that modern capitalist wealth is quite different from the wealth of previous times, although he does coyly admit that “The experience of life at the receiving end of inequal­ity is in many ways very different from what it used to be.” You bet! “Poor people” regularly now have goods and amenities — cars, electricity, running water, refrigeration, telephones, flush toilets — that were unknown to the richest people of the 19th century.

Scheidel’s claim that “[T]he creation of large fortunes frequently owes much to political influence and predatory behaviour” might still be true in Russia, China and Latin America, but it’s not that prevalent in the West, despite people such as the Clintons, Al Gore or Elon Musk. If you want to see somebody who got really rich the old fashioned way, Vladimir Putin is your man.

No group has done more to raise the U.S. Gini than Jeff Bezos, Bill Gates, Mark Zuckerberg and their fellow multi billionaires, but would the world be a better place if they had never been born? What they are guilty of is not taking too much but creating too much. 

One typical sign of Scheidel’s unwillingness to acknowledge the essentially different nature of modern wealth is his reluctance to use the word “earned.” Instead he treats wealth as some kind of collectivist “pie” that is disproportionately “absorbed” or “received” or “captured” or “pocketed” by the rich. 

Another of Scheidel’s problems is that he is not an economist (although there are certainly Nobel economists who wail about inequality). He suggests that minimum wages and higher levels of union membership are effective in reducing inequality. In fact, minimum wages hurt the poorest while unionization achieves higher wages only at the expense of the non-unionized workers.

Scheidel, again following the left-liberal playbook, suggests that we might ignore the actual improving situation of the poorest people in society and instead concentrate on alleged “public attitudes” towards inequality. That is, if people feel more envious and entitled, they are really no better off, no matter how many mod cons they have. But it seems that envy and resentment lives mainly in the mind of left-wing intellectuals.

Donald Trump, as the glitziest of the super rich, obviously wasn’t elected by people too concerned about the left’s obsession with inequality. Still, Kim Jung-Un is a potential equalizing horseman. Things are already terribly equal in North Korea but Kim promises to lower the Gini measurably in South Korea and Japan.

Scheidel’s warning — given the hard lessons of history — to be careful what you wish for raises the deeper question of why left liberals so obsessively wish for more material equality. Perhaps the real reason is that equalization appeals above all to the political equalizers. Income and property don’t redistribute themselves. The role of Robin Hood role is eternally attractive. But the point is that Jeff Bezos isn’t the Sherriff of Nottingham.