The Historical Effects of Wealth Inequality
The Negative Effects of Inequality on a Society
We examine the historical effects of social, political, and economic inequality on society to see how it has led to social unrest and events like revolutions and populist uprisings.
Below we’ll discuss the cycle of political, social, and economic equality and the power gaps it creates, and the relation of this to the rise of tyrannical despots and revolutions, using historic examples from places like Athens, Rome, France, England, Germany, Russia, and America.
The goal will be to show clearly that it is in the global, national-, corporate-, and self- interest of paupers, elites, nations, kings, and global leaders to address power gaps and inequality (marked clearly by features like a growing wealth gap, social unrest, and corrupt senates) before the effects become too great.
BOTTOM LINE: Discretionary money, both in terms of income and wealth, EQUALS power. Thus, the wealth gap over time is in direct relation to the power gap over time, and this leads to political inequality. Or phrased another way: the wealth gap, and other gaps of social standing and political power, create a general power gap between “elites” and “non-elites”. The related social, political, and economic inequality arises from this and then compounds, creating a “downward spiral.” This vicious cycle has historically led not only to insecurity, poverty, and suffering, but to the rise of populist factions and despots. In this ongoing story, we can also see nasty effects like indentured servitude, inflation, and even revolution in many eras (including the eras that led to the American Revolution and Civil War and the World Wars. This can be shown by looking at Anglo-European history and beyond, from Solon to Lycurgus, to the end of the Roman Republic to the end of Weimar Republic, but its effects aren’t limited to any group or nation; the cause and effect relationship between the power gap, instability, and populist revolutions is a human problem.
“[You] desired to know what is that disorder which is generated alike in oligarchy and democracy, and is the ruin of both?”
– Plato’s Republic describing the need of justice and a separation of the powers in a free-trading mixed-Republic. As Montesquieu says, the virtue of a Republic is a love of moderate inequality (thus we can see how the perception of extreme inequality always must necessarily undo a state that is not despotic).
TIP: According to Montesquie’s Spirit of the Laws, the only way to maintain an extremely equal or unequal state is via despotism. Likewise, Montesquie says moderate inequality is best for a republic. We, generally speaking for the 7.5 billion, don’t want despotism, and instead would likely prefer a moderately unequal (and thus fair) democratically minded republic with just laws and checks and balances.
Do you want the state to be solid? Then make the wealth-spread as small as you can; don’t allow rich men or beggars. These two conditions are naturally inseparable: ·any state that has very wealthy citizens will also have beggars, and vice versa·. And they are equally fatal to the common good: one produces supporters of tyranny, the other produces tyrants. It is always between them that public liberty is put on sale: one buys, the other sells.
– Rousseau’s Social Contract expressing the idea that wealth disparity leads to social unrest.
TIP: This page deals with philosophy and history (discussing events like Plato’s Republic and Caesar destruction of his Republic), this page doesn’t focus on real economic or social data of those past ages or here in 2017 (it perhaps should, but doesn’t at the moment). For data to back up the general claim on this page, that wealth inequality is a global problem that impacts social, political, and economic inequality here in 2017, see our section on economic inequality including the page “the basics of wealth and income inequality like the wealth gap” (or this Pew research data for a quick glance). For proofs that economic, political, and social inequality was a problem from the late 1700’s to today, see our review of Thomas Piketty’s Capital. For data stretching back to say Solon’s Athens of 600 BC (which was Oligarchical in every respect according to the Athenian Constitution), or Caesar’s Rome of 30 BC (with their corrupt Senate and history of populist wars), or France before the Revolution during the Flour Wars (where the royals were falsely accused of cakery), or Germany with its hyperinflation that turnt ol’ Adolph against ye’ old globalists, or Russia in the time of Lenin (thus fueling the fire needed to spark a workers’ revolution), or Mao, or Castro, or you know, the North Koreans, etc, etc use Google or see the videos and citations below (until I can add sections on each of these; which I admit are needed, but for now those nods will have to suffice in place of). Inequality and its sociopolitical effects are a big subject. We didn’t illustrate every facet here, but we do have a whole section on it that spans real economic data, to historical insights, to philosophical theories.
“Excellent investigation of this serious problem but you don’t need more data for a stronger article, you need a more simplified, concise way of saying it so more will get it. It’s really very simple. Discretionary money, both income and wealth, EQUALS power. Having spare cash to spend allows one to spend it on choosing how they want their world to become. They can choose their own candidates for office. It allows them to spend it on their choices of products rather than just what they can afford. It allows them to choose whom to raise up as celebrity. It IS the measure of power in all things modern. Read that paragraph 50 times to balance out what you made me read above to say the same thing.”
– A reader (see comments below)
The General Idea; Social, Economic, and Political Inequality are Related and Create Extremes that are Corrosive to Stable Moderate Democratically-Minded Governments
In general, social inequality, political inequality and economic inequality corrupt democracies as they create a negative feedback loop which funnels economic and political power away from the lower classes over time.
This negative feedback loop causes social unrest and creates an environment which eventually leads to phenomena like Civil Wars and Revolutions (like in America’s revolution against taxes and tyrannical governing, and America’s Civil War spurred on by rural Americans economically oppressed by the North and slaves economically oppressed by the South).
This loop may also create a populist rebellion of either the left or right led by a despot and/or tyrant who has popular support (such as in Germany where economic inequality between nations, races, and citizens post WWI first led to hyper inflation, then a rise in nationalism, then that environment led to the rise of the National Socialists and Communists, and then finally to the Rise of Hitler as his National Socialist party jailed the Communists and took the Reichstag).
More specifically, as the political and economic oligarchs and aristocrats (including Barons, Churches, Kings, and their aristocracy) focus on their special interests (rather than the public interest), it continually consolidates power and money toward the elites and away from the growing lower classes as an effect (in a self-perpetuating cycle, explained here).
Then, in cases where nothing is done to correct the problem, a leader (often virtuous or well intentioned) sees the masses in unrest and organizes them to overthrow the oligarchs and aristocrats (the main effect we are discussing here). The new central power then has consequences. The temperament of the usurper (or liberator depending on the situation) and the consequences of the revolution are always different, but the story leading up to this is the same.
“What the bourgeoisie therefore produces, above all, are its own grave-diggers.”
– The Communist Manifesto explaining the old truth that the upper-classes breed the inequality that leads to their own downfall. This is generally true in any historic class system when inequality becomes too great. Learn more about Marx and how his solution to inequality ignores the philosophers old warning of the beast with many heads.
FACT: Both Communism and Fascism (be we talking about the KKK, NAZIs, Lueger, Mussolini’s Fascists, Lenin, Stalin, or other groups) both arise from inequality. There are countless lessons to learn here, we cover many of them on our site. But in simple terms, extremes of any type are corrupting. So when things are too equal, too unequal, too liberal, or not liberal enough, corruption sets in. See Plato’s theory of how democracy leads to tyranny for more on this line of thinking.
Richard Wilkinson: How economic inequality harms societies.
How Does Social, Economic, and Political Inequality Lead to Social Unrest? How Does a Wealth and Power Gap Create Oppression?
For the above theory to be true, we have to show that inequality leads to unrest. This has been well documented. Let’s review the argument for it briefly.
Marx correctly stated, as did Mises, that the economy (and the human capital [labor] behind it) is one of the main drivers of governments and social systems (see the social contract).
A large wealth gap breeds injustice and rebellion in the lowest economic classes, especially when poverty affects education and basic human comforts, and especially when people aren’t free to live with dignity in poverty. For instance, hyperinflation makes poverty unbearable, as does food shortage. A poor farmer might live with dignity if he had some access to a food supply, but a poor urbanite would not be as likely to have the same opportunity.
Marx saw this when he and Engels dreamed up the proletariat (working class with nothing left to lose) revolution, and Mises saw it first hand when he fled Europe in the 1930’s, but both had, of course, read about it in the history books before that.
Our primary focus won’t be on how poverty effects the standard of living. That is well known and discussed in detail here, here, and here. You can read the Negative Effects of Inequality on a Society for more information. I will also refrain from discussing what Mises or Marx thought about the history of philosophy.
Instead, we will accept that economic inequality has negative effects on health, crime, demand, consumption, housing, the environment, and other such factors that create social unrest. This cycle is made worse by the monopolization of assets, labor, and political power by elite business owners and politicians. The result is often an environment of political instability and social unrest ripe for breeding terrorism, war, and revolution.
With the above accepted, below we will focus on discussing how this cycle of oppression and rebellion plays out time and time again using historical examples (like Solon, Julius Caesar, Robespierre, and Lincoln).
“The real vice of a civilized republic is in the Turkish fable of the dragon with many heads and the dragon with many tails. The many heads hurt each other, and the many tails obey a single head which wants to devour everything.”
– Voltaire expressing the folly of thinking that the answer to a Despotic Prince is an angry democratic mob (Anarchy). See Plato on how democracy becomes tyranny when an oligarchical tyrant arises.
“You know the proverb, “the people is a monster of many heads.” You are sensible, undoubtedly, of their great rashness and great inconstancy… On the grounds that the law was desired to keep the king within bounds, not the king the law. And it is by virtue of the law that he is a king; for without it, he is a tyrant.”
– George Buchanan 1579; expressing that which Hayek, Voltaire, and Plato express; that is, a populist tyrant requires many followers to cease power.
09-08-12-Macro Analytics – INEQUALITY Precedes SOCIAL UNREST – Charles Hugh Smith.
TIP: Inequality is not inherently bad, and it doesn’t always have bad effects. With that said, this page is focused on seeing when it is bad and what its bad effects are. The world is complex and paradoxical, for example, see how both equality and inequality corrupt governments.
The History of Economic Inequality in the United States.
Thomas Piketty on Economic Inequality.
A History of Classism, Socioeconomic Oppression, and Rebellion
We know the simple truths stated above because we have piles of history books. Most of these are in the public domain and published online. We can see the results of social inequality in the story of Solon around 600 BC, Julius Caesar around 50 BC, Oliver Cromwell in the 1640’s – 50’s, Maximilien Robespierre or Napoleon, Lenin, Hitler, Lincoln or the Roosevelts, etc.
We may be talking about Spartacus’ slave rebellion, the Plebeian Council and the struggle between Plebeians (commoners) and Patricians (aristocrats), or later the Populares (populists) and the Optimates (aristocrats) which ended with the populist Julius Caesar taking the throne (see more on Rome’s classes). We may be talking about the birth of trade in the Age of Discovery and the story of the monopolistic East India companies and Gandhi’s liberation of India. We may think of the oppressed workers of Tsarist Russia, or hyper-inflation in Germany, or Lincoln in America’s Civil War, or the Roosevelts’ response to the Gilded Age. We know that oppressing people economically, and therefore socially and politically, has historically produced drastic and sometimes paradoxical effects. These have not always been obvious as a good or bad effects, but seemingly they were always drastic ones.
Rome – The Rise and Fall of an Empire – Part IV – Tiberius Gracchus (1/2). One example of a great nation dealing with class struggles.
Cronyism, Oligopolies, and the Formation of Oligarchical Republics
While the above leaders and events don’t have much common, they all share one thing in this case. The leaders came to power, and events came to pass, in environments of perceived or actual wealth inequality. This followed the perceived or actual corruption of an Oligarchical Republican style government. There was a corruption of elected and appointed officials along with wealthy private citizens, but not a single despot.
These events don’t occur in Republics because Republics have inherently negative consequences. They come to pass in Republics because Democracies and Monarchies naturally become Republican-style governments since both need to delegate power over time.
Republics tend toward cronyism for the reasons predicted by many past philosophers from Smith to Madison. The only way to ensure the wealth of nations is through trade and production, and thus, free or not, trade and production must happen via entities in the nation. The entities become the upper merchant, business owner, and landowner classes alongside a class of bureaucrats.
When the government bureaucrats and barons, who amass wealth from trade, naturally coordinate since they are acting in their self-interest. They form cronyist monopolies or oligopolies to further the aims of their short-term interests.
There is little reason to include the plebs in terms of money or power. Thus, power and money is consolidated away from the lower economic classes and toward the powerful classes, and this creates oppression of the less financially strong people.
Below we discuss wealth inequality in Athens, Rome, Britain, France, Russia, Germany, and America from a historical perspective. We paint a picture of how corruption and cronyism create wealth inequality over time. This leads to revolution, war, the redistribution of wealth, and the centralization of power by populist monarchs and revolutionaries. Sometimes a Solon or FDR can emerge from depressions. However, the real danger is when social chaos leads to situations like the Reign of Terror and men such as Stalin or Hitler.
Rome lived upon its principal till ruin stared it in the face. Industry is the only true source of wealth, and there was no industry in Rome. By day the Ostia road was crowded with carts and muleteers, carrying to the great city the silks and spices of the East, the marble of Asia Minor, the timber of the Atlas, the grain of Africa and Egypt; and the carts brought out nothing but loads of dung. That was their return cargo.
— The Martyrdom of Man by Winwood Reade (1871); Illustrating how it wasn’t just a corrupt Senate that led to the inequality of Rome during the times when Caesar took power.
TIP: Adam Smith’s theory of the invisible hand tells us of the benefits of the free-market. We have seen this post-Solon, in the Roman Republic, and in our ages of western industrialization. Likewise, we have seen the visible hand cause real problems, like with mercantilism. Still, a free market doesn’t exist in practice, so there is always a visible hand. When that is paired with corruption, we start down a slippery slope.
Interest Groups: Crash Course Government and Politics #42. Cronyism and Monopolistic entities are special interests. Learn more about special interests and factions.
Cronyism, Corruption, and Government Power. In an effort to present all views, let’s look at Cronyism from the libertarian perspective.
Wealth and Income Inequality in Athens: The Birth of Athenian Democracy
We can trace wealth and income inequality, and the role of factions in this, to one of the oldest constitutions we still have on record today.
The Athenian Constitution was [said to have been] written in 350 BC, but references history starting at around 594 BC. It begins by explaining how wealth and income inequality got so great in Athens that most classes of people were enslaved to the oligarchs (by ownership of land and by selling themselves or children).
After years of suffering, a middle-upper-class leader/revolutionary/poet called Solon came to power and canceled all credits and debits.
Unfortunately, he also told his friends first, and created old money families who became a sort of New World Aristocracy. That one effect of greed aside, he also paved the way for one of the first “Pure Democracies” in the world. It was actually a mixed constitution, which can also be referred to as “Athenian democracy.” White male citizens were able to vote on laws directly. It is perhaps the first known example of a successful Democracy and it started with a revolution spurred on by inequality.
Here is an excerpt from the beginning of the constitution which tells the story leading up to Solon. Supposedly this version is written by Aristotle. Regardless, we can assume the general story to be true:
“…there was contention for a long time between the upper classes and the populace. Not only was the constitution at this time oligarchical in every respect, but the poorer classes, men, women, and children, were the serfs of the rich. They were known as Pelatae and also as Hectemori because they cultivated the lands of the rich at the rent thus indicated. The whole country was in the hands of a few persons, and if the tenants failed to pay their rent they were liable to be hauled into slavery, and their children with them. All loans secured upon the debtor’s person, a custom which prevailed until the time of Solon, who was the first to appear as the champion of the people. But the hardest and bitterest part of the constitution in the eyes of the masses was their state of serfdom. Not but what they were also discontented with every other feature of their lot; for, to speak generally, they had no part nor share in anything.” – The Athenian Constitution
“…As soon as he was at the head of affairs, Solon liberated the people once and for all, by prohibiting all loans on the security of the debtor’s person: and in addition, he made laws by which he canceled all debts, public and private. This measure is commonly called the Seisachtheia [= removal of burdens] since thereby the people had their loads removed from them. In connection with it, some persons try to traduce the character of Solon.
It so happened that, when he was about to enact the Seisachtheia, he communicated his intention to some members of the upper class, whereupon, as the partisans of the popular party say, his friends stole a march on him; while those who wish to attack his character maintain that he too had a share in the fraud himself. For these persons borrowed money and bought up a large amount of land, and so when, a short time afterward, all debts were canceled, they became wealthy; and this, they say, was the origin of the families which were afterward looked on as having been wealthy from primeval times.
However, the story of the popular party is by far the most probable. A man who was so moderate and public-spirited in all his other actions, that when it was within his power to put his fellow-citizens beneath his feet and establish himself as tyrant, he preferred instead to incur the hostility of both parties by placing his honor and the general welfare above his personal aggrandizement, is not likely to have consented to defile his hands by such a petty and palpable fraud. That he had this absolute power is, in the first place, indicated by the desperate condition the country; moreover, he mentions it himself repeatedly in his poems, and it is universally admitted. We are therefore bound to consider this accusation to be false.” – The Athenian Constitution
To summarize the above: Athenians suffered at the hands of Oligarchs for so long that uprising came in the form of a leader turning on the Oligarchs, erasing all credits and debits, creating Democracy, and seizing power for a few close friends in the process.
In this case, the outcome was good and the usurper benevolent, but as we will see below (such as in the case of the French Revolution or October Revolution), nations aren’t always that lucky.
In the case of Athens, despite the upheaval, Athens thrived economically, militarily, morally, and ethically for hundreds of years through the time of Aristotle and Alexander the Great. However, shortly after this Athens begins to fall to the next great empire, Rome. This is an example of a nation’s dominance being ended not by Revolution, but by integration into another empire.
Famous Greeks Series Solon.
History: The Greek Empire Documentary on Ancient Greece.
TIP: For a balanced look at the Athenian Constitution and what America can learn from it see the Athenian Constitution by Libertarian philosopher Roderick T. Long.
Inequality The Rise and Fall of the Roman Republic
Long before taking Athens, and much of the rest of the world, Rome had transitioned from a Kingship to a Republic (which in Rome’s case was a type of Democracy). After taking Athens, they had the whole of Greek tradition to pull from and had what one could argue is the Golden Age of their Roman Republic (not to be confused with the Golden Age of the Empire under Augustus).
The above aside, the Roman Republic is known by a few different stages which see the populists and aristocrats vying for power. This includes the struggles between groups like the Plebeians (commoners) and Patricians (aristocrats), and later between the the Populares (populists) and the Optimates (aristocrats).
Over time, leading up to the time of Julius Caesar, the populist and aristocratic Senators turned the Republic into an Oligarchy via cronyism and corruption, mirroring the story we saw in Athens or will see below in other nations. Wealth and power were consolidated by the greedy politicians (in Rome’s case the unelected Senate) who made deals with special interests and pushed many plebs under their heels.
By the time the populist-Populare general Caesar defeated the Optimate Pompey and declared himself God-king, the Republic had become a Monarchy ruled by the Divine Right of Kings, although this process was not complete until after Marc Antony’s time.
Many Romans preferred their God-King General (their eternal President and Chancellor if you will) to the corrupt Senate. When a ruling class becomes too corrupted by special interests, the people remember men like Caesar and Solon as heroes.
From Augustus on things went through ups and downs, much of this due to the Oligarchical nature of Rome paired with the tyranny of some absolute monarchs like Nero, but not all of it. Regardless, by the end, Rome had about 30% of its population as slaves, including much of its army. When the Gauls (the French and Germanic people of the time) took Rome, there was no one willing to fight for the Oligarchy or Empire, and Rome fell.
After the Roman empire sub-Roman Europe took root. Then, in the time we think of as the Dark Ages, the Italian Maritime Republics thrived. There are many good stories here, including the story of Machiavelli and the Medici, but we’ll move on to the start of the liberal revolutions in the 1,600’s.
The Roman Empire. Or Republic. Or…Which Was It?: Crash Course World History #10.
Fall of The Roman Empire…in the 15th Century: Crash Course World History #12.
Economic Inequality and The British, American, and French Revolutions
Britain in the mid-and-late 1600’s saw two revolutions. They weren’t solely based on wealth inequality, but both were based on an inequality of rights, and certainly there was an aspect of inequality underlying this.
Oliver Cromwell’s revolution was bloody, John Locke’s bloodless revolution was less so. In this case, Oliver’s civil war aside, like in America’s revolution, the result was our modern democracy.
However, in the case of France, there was more inequality and a more drastic response. In their revolution, we saw the Reign of Terror and then later Napoleon the Liberal emperor.
I would discuss these more here, but we have a full page on them, which is coincidentally the birth of the modern usage of left-and-right.
20. Constitutional Revolution and Civil War, 1640-1646.
Oliver Cromwell and the English Civil War.
French Revolution – The Economy under Louis XVI.
Tea, Taxes, and The American Revolution: Crash Course World History #28.
Below is some advice on factions from James Madison. This passage helps us understand that while we know factions are a cause of wealth inequality (as upper-class factions form and rig the game against the common man), taking away the liberty of the people to form factions is not the answer. From the Federalist #10:
“By a faction, I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.
There are two methods of curing the mischiefs of faction: the one, by removing its causes; the other, by controlling its effects.
There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests.
It could never be more truly said than of the first remedy, that it was worse than the disease. Liberty is to faction what air is to fire, an aliment without which it instantly expires. But it could not be less folly to abolish liberty, which is essential to political life, because it nourishes faction, than it would be to wish the annihilation of air, which is essential to animal life, because it imparts to fire its destructive agency.
The second expedient is as impracticable as the first would be unwise. As long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed.
As long as the connection subsists between his reason and his self-love, his opinions and his passions will have a reciprocal influence on each other; and the former will be objects to which the latter will attach themselves. The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests.
The protection of these faculties is the first object of government. From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors, ensues a division of the society into different interests and parties.”
Economic Inequality and The German and Russian Communist and Fascist Revolutions
Although we detail the effects of Communism and Fascism here, we can briefly say Lenin and Stalin and Hitler came to power in socialist revolutions where the masses had become economically oppressed due to the actions of the aristocrats.
In Germany, it was the aftermath of WWI and the nations who imposed the oppressive economic Versailles Treaty which caused hyperinflation in the young Republic. In Russia’s case, it is the oppression of the Tsarist autocracy which incited Lenin to rebel. Lenin was quickly usurped by Stalin who became nothing less than an autocratic Tsar in his own right, making Ivan the Terrible look like Ivan the Great.
Russia, the Kievan Rus, and the Mongols: Crash Course World History #20.
A History of Russia (Tsars and Revolutions).
Horror Stories of Hyperinflation: Germany in 1920s.
Recession, Hyperinflation, and Stagflation: Crash Course Econ #13.
Inequality in the Industrial Era (the Barons and Progressives of the Gilded Age)
We covered the start of America, and we looked at Athens and Rome. We saw inequality contributed to the fall and rise of nations. Of course, we can’t cover every instance of this. It would be like discussing food distribution, sleeping habits, war or some other key element of life. Instead, let’s just take a quick look at the industrial era and monopolies, which in many ways marks the start of global economic prosperity and inequality.
Adam Smith warned of monopolies in his book the Wealth of Nations. You can think of this as akin to the special interests noted by Madison. These occur as a result of Capitalism, which like Democracy are technologies we need to apply with nuance, wisdom, and law, or they will result in oligarchies. This truism can be seen in the story of JP Morgan, Vanderbilt, Rockefeller, and Carnegie, the men who built America.
The great Robber Barons, or Captains of Industry if you will, exemplify everything right and wrong with America (and today the world). These men could rise and drive the industrial revolution because the environment of America allowed for it. They also created monopolistic special interest oligarchies and amassed more wealth than is comparable to Bill Gates today. The laws of today weren’t in place, and America’s rise came at a price to the people (no different from what today is happening on a global scale).
The Robber Barons created the progressives by an effect of their just rise to power; they created modern America, but they also created social liberalism as a response. America did well in finding a balance, but you can use a little imagination to see how this could have gone south.
Every Human Action has an effect; effects are often paradoxical. Physics promises us an equal and opposite result, but we know that equality is defined by its complexity in socio-economics, and thus we must account for its effects.
Coal, Steam, and The Industrial Revolution: Crash Course World History #32.
Gilded Age Politics: Crash Course US History #26.
The Progressive Era: Crash Course US History #27.
Currency Failures from Argentina to Zimbabwe: A Brief History of Inflation | Timothy Terrell.
Inequality in Modern America
The battle that was started in the industrial revolution has in ways become the inequality of today. The progressive Civil Rights and the New Deal came at the expense of what some claim to be a “too big Government” (at least in regards to taxation). This created an Oligarchy of sorts.
The loss of the Fairness Doctrine and the effects of Citizens United don’t help keep the message in the right place. Today we belittle spirituality and praise Wall Street. The income gap is widening, and so is the wealth gap, but we address it oddly, almost as if the policy was being moved by special interests.
The Carnegie’s and Rockefeller’s built monopolies and busted Unions, but they also gave away their wealth to charity in their old age. This is why everything is donated by the Rockefeller fund, or why one goes to Carnegie Hall.
The truth about life and society is that it is complex. There is no real place to point a finger. Instead, moving forward will require complex solutions. Luckily, we can look to Athens, Rome, our founding fathers, and even the industrial era for insight into what does and doesn’t work.
We have the issue of convincing the world’s richest elite to give up some of their wealth and power. This is a huge problem. Luckily we have people like Zuckerberg and Gates, and we have ethics, rhetoric, the internet, and America’s Federal Republic.
TIP: See the history of the American political parties to understand the affects of inequality on American policy better.
Wealth Inequality in America.
POLITICAL THEORY – John Rawls. To understand where there is an injustice, it helps to utilize the political theory of John Rawls and compare that to Robert Nozick (especially his later works).
How to Prevent the Cycle of Oppression and Rebellion
The cycle of oppression and rebellion is ideally offset in the same way you cook a small fish; gently and with care. Ideally, very little “redistribution” of power and wealth needs to take place, a correct government in-line with the General Will doesn’t need drastic correction. Thus, the answer isn’t “redistribute superficially to correct a symptom” it addresses the root of the problem. In practice, extreme redistribution has often been messy and led to worse problems.
Thus, the only thing that could protect from this cycle is 1) a correct form of government that adheres to the General Will and ensures ongoing reform through voting 2) a strong benevolent monarch 3) the plebs seizing power. Thus 2 of the 3 choices are populist revolutions, either by group as with Spartacus or despots like Caesar. The other is a solution of law and ethics and participation, a republic, but this requires unity and respect between people who must adhere to the law and not usurp by corrupting it.
The problem is, for all the benefits of Republics, which include equality under the rule of law with voter participation, a nation of delegated power and factions is fertile ground for corrupt special interests to create laws in their specific or corporate will rather than the general will.
This is why Madison and Montesquieu were such sticklers for mixed governments, checks and balances, and the spirit of democracy. See forms of government for that discussion.
A benevolent and well ordered Republic isn’t by nature bad. In fact, it may be near the best system if not the best. Likewise, an authoritarian government isn’t always a bad thing. I can say many nice things about Lincoln, FDR, and Solon for instance. The problem is rarely the populist usurper or the intentions of the populist revolution, rather, it is almost always the next less-virtuous leader waiting in the wings (Stalin being the best example perhaps).
“As soon as public service stops being the chief business of the citizens, and they prefer to serve with their money rather than with their persons, the state is not far from its collapse.” – Jean-Jacques Rousseau on Special Interests and Deputies or Representatives.
“Real liberty is neither found in despotism or the extremes of democracy, but in moderate governments.” – Alexander Hamilton (Implying that utilizing a centered mix of government styles, rooted in law, was the only way to ensure Liberty).
“In adopting a republican form of government, I not only took it as man does his wife, for better, for worse, but what few men do with their wives, I took it knowing all its bad qualities.” – 1803 GOUVERNEUR MORRIS (see why did America’s founders choose a Republic?)
Economic Globalization: Documentary on the History of Economic Globalization (Full Documentary). If we see the world as a single body politic, then we can equate nations to states. The problem: those poor and uneducated masses and the history of revolution.
TIP: See the Causes and Consequences of Income Inequality: A Global Perspective or Wikipedia’s Economic inequality page. Also our page on Wealth and Income Inequality in general. This page focuses on historical events, not statistics, and is meant to show how wealth inequality is one of the main downfalls of great societies (sometimes with great results). With this in mind, another good article on a similar topic is Return of the oppressed From the Roman Empire to our own Gilded Age, inequality moves in cycles. The future looks like a rough ride.
Excerpts from Experts of Athens on Equality
Below are two excerpts from Athenians that help to tie together the age old argument over inequality. First, a poem by Solon expressing the sentiment behind the removal of burdens.
“I gave to the mass of the people such rank as befitted their need,
I took not away their honor, and I granted naught to their greed;
While those who were rich in power, who in wealth were glorious and great,
I bethought me that naught should befall them unworthy their splendor and state;
So I stood with my shield outstretched, and both were sale in its sight,
And I would not say that either should triumph when the triumph was not with right.” – a Poem by Solon
Lastly, a translation of Pericles’s Funeral Oration, by the account of Thucydides, from the History of the Peloponnesian War. This last lengthy quote is important because it shows that (their slaves aside) Athens dealt with inequality by ensuring some level of dignity to their lowest [non-slave] rungs of society. If there was a perfect nation in the history books perhaps I’d quote them, but this will have to suffice.
“Let me say that our system of government does not copy the institutions of our neighbors. … Our constitution is called a democracy because power is in the hands not of a minority but of the whole people. … everyone is equal before the law … what counts is not membership of a particular class, but the actual ability which the man possesses. No one, so long as he has it in him to be of service to the state, is kept in political obscurity because of poverty. And, just as our political life is free and open, so is our day-to-day life in our relations with each other. We do not get into a state with our next-door neighbour if he enjoys himself in his own way, nor do we give him the kind of black looks which, though they do no real harm, still do hurt people’s feelings. We are free and tolerant in our private lives, but in public affairs, we keep to the law. …
When our work is over, we are in a position to enjoy all kinds of recreation for our spirits. … in our own homes, we find a beauty and a good taste which delight us everyday and which drive away our cares. …
Our city is open to the world, and we have no periodical deportations in order to prevent people observing or finding out secrets which might be of military advantage to the enemy. … The Spartans, from their earliest boyhood, are submitted to the most laborious training in courage; we pass our lives without all these restrictions, and yet are just as ready to face the same dangers as they are. … There are certain advantages, I think, in our way of meeting danger voluntarily, with an easy mind, instead of with a laborious training, with natural rather than state-induced courage. …
We regard wealth as something to be properly used, rather than as something to boast about. As for poverty, no one need be ashamed to admit it: the real shame is in not taking practical measures to escape from it. … We Athenians, in our own persons, take our decisions on policy or submit them to proper discussions ….
Taking everything together then, I declare that our city is an education to Greece, and I declare that in my opinion each single one of our citizens, in all the manifold aspects of life, is able to show himself the rightful lord and owner of his own person, and do this, moreover, with exceptional grace and exceptional versatility. … Mighty indeed are the marks and monuments of our empire which we have left. Future ages will wonder at us as the present age wonders at us now. …
What I would prefer is that you should fix your eyes every day on the greatness of Athens as she really is, and should fall in love with her. … Make up your minds that happiness depends on being free ….”
– See Hobbes’s Thucydides, II. 37-43., this this translation of Thucydides is from “The Athenian Constitution” by Libertarian philosopher Roderick T. Long
TIP: I’m trying to lay out the problem of wealth inequality historically, not suggest the answer lies in monarchs, revolutions, or wealth redistribution. Please comment with your insight below.
- Economic inequality Effects – Wikipedia
- Pew research on 5 facts about inequality
- The costs of inequality: Increasingly, it’s the rich and the rest Economic and political inequities are interlaced, analysts say, leaving many Americans poor and voiceless
- The Consequences of Economic Inequality
- Income and Wealth Concentration in a Historical and International Perspective Emmanuel Saez, UC Berkeley and NBER∗ February 21, 2004
- the Negative Effects of Inequality on a Society
- Jean-Jacques Rousseau Social Contract Book 3 Chapter 10. How government is abused and Book 3 Chapter 11. Its tendency to degenerate and the Death of the Body Politic. and Deputies or representatives.
- Return of the oppressed From the Roman Empire to our own Gilded Age, inequality moves in cycles. The future looks like a rough ride
- “The Athenian Constitution” classics.MIT.edu
- “Solon” Wikipedia.org
- “5 Things You May Not Know About the Men Who Built America” History.com
- “Thucydides, History of the Peloponnesian War Thomas Hobbes, Ed.” Perseus.Tufts.edu
- “The Athenian Constitution by Libertarian philosopher Roderick T. Long.” Freenation.org
"The Historical Effects of Wealth Inequality" is tagged with: American Politics, Complexity Science, Economic Inequality, England, Equality, France, Germany, Happiness, Left–right Politics, Liberty, Money, Rome, Russia, Theories, United States of America, Value
You use too much philosophy. Where are your economic regressions using real data like income? This would pass for a sociology or philosopht study, but not scientific study. Get more real data, you are dealing with a very serious concept.
Excellent point, I don’t disagree. I put a note at the top of the page to see our section on inequality (other pages focus more on real economics).
I will also seek to add more historic and modern economic data to make the article stronger.
Henry George and many others have the solution – collect 100% of the rental value of land and redistribute 100% of it back to every man women and child equally in the form of a land dividend then the rental value of the average parcel of land exactly equals the land dividend received. Free and equal access to land is the key to a true free market economy and, over time, eradicates the beast of unearned income from our society.
Until we, as a species, remove the ability of one man to leverage another man by controlling, through commerce, his/her access to the basic need of land we will never eradicate greed. Free and equal access to land creates a self-regulating social structure that liberates creativity and eradicates unearned wealth.
Excellent investigation of this serious problem but you don’t need more data for a stronger article, you need a more simplified, concise way of saying it so more will get it.
It’s really very simple. Discretionary money, both income and wealth, EQUALS power. Having spare cash to spend allows one to spend it on choosing how they want their world to become. They can choose their own candidates for office. It allows them to spend it on their choices of products rather than just what they can afford. It allows them to choose whom to raise up as celebrity. It IS the measure of power in all things modern. Read that paragraph 50 times to balance out what you made me read above to say the same thing.
But key in there is that it’s also the power to negotiate wages and job conditions toward increasing and maintaining that equality. Without it, the precariat will lose ground with each round. Trend that over centuries and here we are.
Then we can add another resulting factor to this knowledge. In an economy designed to constantly take more from the masses and send it to the owners of the monetary system itself (the top level banks), literally EVERYBODY below them is MANDATED to find increasingly more creative ways to steal from everyone they can. We call it growing or beating inflation or covering risk, but it’s just theft from whomever is more vulnerable. Examples include governments taxing, corporations using planned obsolescence, push marketing, stock trading, building a portfolio for retirement, money laundering, resource wars, police privatization, payday loans, owning a rental property, fundraising for a good cause, an IPO, optimizing, most crime, budget cutting, regulatory capture, compound interest, lobbying, gun rights, propaganda, statism, survival crime, the black market, trade wars, racism, partisanship and a thousand other terms. But they are all the same function. Identically the same. They are basically the collective list of every bad aspect of society that we get distracted into arguing over and they’re all justified as “just business” because of this mandated system to act that way. They’re even so entrenched that they’re often seen as good ways to survive!
They are all forms of survival when that is defined as not going backwards. The takeaway is that it ensures this theft and reduction of power is continued and is equally distributed.
The root cause here is debt based money with a single profit-based, human controlled entity benefiting from that interest.
So how do we reverse this? It’s actually very simple. We make one small root change and the rest filters it’s way down, fixing the symptoms as it goes. We take back control of the money system, and create a new one with the corrected balance of benefits to each player. This will give that precariat their discretionary money-power back and they will regain their power, and optimism, in all areas to change their world.
1 *** Create a single, perfected, free crypto-currency.
That’s all that is really required except that we’re way too far down this path to take the time required to organically fix the rest. So, we now need another step:
2.***Tax all economic activity exactly equally (that means every single account transaction for any reason) and split that dividend equally among all members of society, on a daily basis.
There’s no justification in taxing any one area of the economy any different than another because gaming will always redistribute activity around to avoid it. And since all economic activity is actually the measure of how much it ‘contributes’ to society somehow, let’s treat it all the same. Besides, by doing this, the rate can fall all the way down to less than 1%! In 2015, the US total transactions were $5,000 Trillion. A 1% cut of that would split $50T among 320 million people. More than enough to both run all government AND give each human a great wage. See the Basic Income movement for why this fixes the other problems.
If you’re interested in more details, have a look at my paper on it.
[Editor’s note, I’ve verified this link] https://docs.google.com/document/d/1CrmNChB53dohA4n4ji8NAibEcAirHt7AY1rNO92YiZg/edit
That’s what can be done if we get past endless discussions of what the problems are and move to real solutions of how to fix it.
Thank you for sharing and thanks for the feedback. I’ll take some time to look at your paper.
I like the idea that you are trying to solve the issues of the world’s economy with cryptocurrency. Very cool.