Ran across this yesterday, a piece by Peter Turchin from back in February. The premise if fascinating and rings true, though reading the whole thing I can’t say I think the guy has the complete data to back it up:
From the Roman Empire to our own Gilded Age, inequality moves in cycles. The future looks like a rough ride.
In essence, writes Turchin, the cycle is this: Growing inequality => growing political agitation, even violence and threats of revolution => convinces the elites that, er, maybe it would be in their own best interests to share more with the plebes => plebes get more, period of broad-based prosperity ensues => elites forget that whole revolutionary business and think, “Why shouldn’t we keep more for ourselves?” => They do so => growing inequality.
Rinse and repeat.
Again, it’s simply not possible to have enough definitive evidence/statistics from Medieval England, for example, to fully document this claim. But there are indicators, which Turchin cites.
And his dicsussion on how a surplus of labor leads to falling wages is worth the price of admission (er, free) because it makes the cogent case against immigration:
In fact, the periods of high immigration coincided with the periods of stagnating wages. The Great Compression, meanwhile, unfolded under a low-immigration regime. This tallies with work by the Harvard economist George Borjas, who argues that immigration plays an important role in depressing wages, especially for those unskilled workers who compete most directly with new arrivals.
That’s the argument David Frum and some others have been making against immigration reform, and it’s a valid one.
But what sort of clanged like a bell in the night for me was one aspect of his essay which mirrors something I’ve tried to enunciate here on numerous occasions; Turchin does a better job of answering, what prompted the “Great Compression,” that era of broad-based American prosperity that we now all pine for?
The fear, of the elites, that they might be overthrown:
Put simply, it is fear of revolution that restores equality. And my analysis of US history in a forthcoming book suggests that this is precisely what happened in the US around 1920.
These were the years of extreme insecurity. There were race riots (the ‘Red Summer of 1919’), worker insurrections, and an Italian anarchist terrorist campaign aimed directly at the elites. The worst incident in US labour history was the West Virginia Mine War of 1920—21, culminating in the Battle of Blair Mountain. Although it started as a workers’ dispute, the Mine War eventually turned into the largest armed insurrection that the US has ever seen, the Civil War excepted. … Add to all this the rise of the Soviet Union and the wave of socialist revolutions that swept Europe after the First World War, triggering the Red Scare of 1921, and you get a sense of the atmosphere. Quantitative data indicate that this period was the most violent in US history, second only to the Civil War. It was much, much worse than the 1960s.
The US, in short, was in a revolutionary situation, and many among the political and business elites realised it. They began to push through a remarkable series of reforms. In 1921 and 1924, Congress passed legislation that effectively shut down immigration into the US. Although much of the motivation behind these laws was to exclude ‘dangerous aliens’ such as Italian anarchists and Eastern European socialists, the broader effect was to reduce the labour surplus. Worker wages grew rapidly. At around the same time, federal income tax came in and the rate at which top incomes were taxed began to increase. Somewhat later, provoked by the Great Depression, other laws legalised collective bargaining through unions, introduced a minimum wage, and established Social Security.
The US elites entered into an unwritten compact with the working classes. This implicit contract included the promise that the fruits of economic growth would be distributed more equitably among both workers and owners. In return, the fundamentals of the political-economic system would not be challenged (no revolution) …
It is no coincidence that the life of Communism (from the October Revolution in Russia in 1917 to the fall of the Berlin Wall in 1989) coincides almost perfectly with the Great Compression era. The Red Scares of, firstly, 1919—21 and then 1947—57 suggest that US elites took the Soviet threat quite seriously. More generally, the Soviet Union, especially in its early years, aggressively promoted an ideology that was highly threatening to the political-economic system favoured by the US elites. Reforms that ensured an equitable distribution of the fruits of economic growth turned out to be a highly effective counter to the lure of Bolshevism.
Nevertheless, when Communism collapsed, its significance was seriously misread. It’s true that the Soviet economy could not compete with a system based on free markets plus policies and norms that promoted equity. Yet the fall of the Soviet Union was interpreted as a vindication of free markets, period. The triumphalist, heady atmosphere of the 1990s was highly conducive to the spread of Ayn Randism and other individualist ideologies. The unwritten social contract that had emerged during the New Deal and braved the challenges of the Second World War had faded from memory.
And so we return to policies/an approach that widens the gap between rich and poor, as the revolutionary threat it ignited last time is forgotten.
Which means the revolutionary threat will be re-ignited. One might already say it has been, in the Tea Party or maybe Occupy Wall Street – although the Tea Party is a strange bird, basically advocating for more inequality. Which is why I sort of regard it as bought and paid for by the likes of the Koch Brothers, who are trying to stave off any real challenge to their opulence. Co-opt populism before it comes after you.
But it won’t work for long:
Three years ago I published a short article in the science journal Nature. I pointed out that several leading indicators of political instability look set to peak around 2020. In other words, we are rapidly approaching a historical cusp, at which the US will be particularly vulnerable to violent upheaval. This prediction is not a ‘prophecy’. I don’t believe that disaster is pre-ordained, no matter what we do. On the contrary, if we understand the causes, we have a chance to prevent it from happening. But the first thing we will have to do is reverse the trend of ever-growing inequality.
Things are coming to a head. May be a ways off yet.
But tell me you don’t feel it.