This blog post is the 3rd in a 5-part series on income inequality. Click below to navigate between the parts of the series:

Part 3: The Violent Forces that Change Income Inequality

As I outlined in part 2, stable, low-growth societies tend to become increasingly unequal because the rate of return on capital exceeds the growth rate of the economy. Given a long enough period of time without any great shocks, these societies reach very high levels of income inequality at or near the economic subsistence level and stay there.

People Want Big Changes

In part 3, we will discuss how societies become more equal with regard to their income and wealth distribution. But first, I want to address a matter of measurement.

When people today talk about reversing income inequality, I believe they are referring to a specific historical moment in the recent past: the middle part of the 20th century when most western economies had Gini coefficients in the .3 to .35 range as compared to .45-.5 today. A change in the gini coefficient of even a few points (.30 to .33 for instance) would be a substantial change in the income distribution for a country, but isn’t likely to be noticed by individual people in their daily lives. The sorts of changes that are noticed by people at the population level are the big swings. The shift from a Gini coefficient of nearly .8 in Great Britain before WW1 to around .3 in the 1940s was obvious to most people living through the transition.

The distinction between big and small shifts is important to a discussion about the forces that change economic inequality because if people demand big changes, then the list of likely candidates to produce those changes is quite small. By contrast, if people demand only small changes, then the list of forces capable of delivering this are correspondingly large.

I do not think that most people today would be appeased by a 1-2 point change in their country’s Gini coefficient. People are seeking far greater redistribution. So, for the next two parts in this series, I will focus on forces capable of radically altering income inequality vs those that have the potential for small incremental gains. In this section, I will focus on the violent mechanisms of change and in the next part, I will discuss peaceful alternatives.

The 4 Horsemen

If we confine our discussion of forces that change income inequality to just those capable of producing large equalizing results, the historical record is very clear about the most probable and effective mechanism: human violence. But it’s not just human violence - the capacity for changing income and wealth inequality is directly linked to the intensity of the violence. Below a certain threshold of violence, and very little equalization occurs. But if human violence becomes extreme enough, it has a consistent track record of making societies more equal. The primary mechanism is by destroying the wealth of the elites, which doesn’t tend to help the poor so much as make them relatively less poor. There is some actual redistribution of income that occurs during plagues when real wages for the poor rise, but on the whole, violence levels societies by destroying elite wealth.

This is unlikely to be a surprise to most people who have thought about this problem. The richest people enjoy being rich. The poorest people do not enjoy being poor. Without a credible threat of violence, the rich have no reason to share their wealth and the poor have no way to force the issue.

In his book The Great Leveler, Walter Scheidel lumps violence into 4 categories that he calls the 4 horsemen: mass mobilization warfare, revolution, state collapse, and plague. Through exhaustive historical research, he reconstructs the income distribution of societies throughout history and finds consistent evidence that 1) violence is the primary mechanism of income equalization and 2) the intensity of the violence is strongly correlated to the effectiveness of that equalization.

Something that was uncovered in the course of his research that I found surprising is that while these forces are effective at equalizing income, they tend to leave behind societies of relative impoverishment. There are no known examples of mass income and wealth equalization that leave society as a whole in an equal or better material position than prior to the shock.

Mass Mobilization War

Humans have probably been killing one another since the beginning, but war as most people know it is a modern invention driven by agrarian societies with large populations. Conflicts like those described in The Bible and among other ancient empire states, however, tended to be quite constrained in their scope. This was due to population dynamics. Even enormous empires did not have societies efficient or fertile enough to keep more than 1-2% of their population deployed in an active war for any sizeable period of time. Records suggest that Rome, for instance, kept perhaps 400,000 men under arms out of a population of ~60M, representing .6% of the population. Likely the largest military force in antiquity, the Northern Song Dynasty, probably fielded as many as 1 million soldiers in the 11th century CE, but that was still only ~1% of the population. Ottoman mobilization levels were lower still. The reason for this historical constraint on mobilization was due to food surpluses, age distributions, and disease.

In most premodern societies, producing food was orders of magnitude less efficient than today. Even during periods of peace and health, populations frequently bumped up against their carrying capacity. Feeding large armies was a much greater challenge in 1000 CE than it is today. As a result, there was just less excess food that could be given to standing armies.

Then there was the matter of age and gender. Up until the very recent past, and with very few exceptions, militaries only drafted young men. Depending on the exact demographic shape of a society, a 2% overall conscription rate could mean as much as a 50% draft among young men fit for military service. That meant that an ill-fated war could dramatically stifle population growth in the next generation by killing off a sizable portion of future fathers.

Finally, there was disease. Historically, diseases killed more people in war than direct military violence. The longer that an army was deployed, the greater the attrition to maladies like yellow fever, malaria, cholera, and plain old fashioned dysentery. As a case in point, it was only during World War 1 that American medicine was able to curb war deaths due to disease equal to battlefield deaths.

For all of these reasons, historical warfare, for all its horror, was a relatively constrained experience. Most of society was unaffected by the king’s current military conquest because wars were shorter, cheaper, and less fatal.

From an economic perspective, historical warfare also tended to be less impactful because it was frequently zero-sum: the winner plundered the loser and that was that. Because the physical damage caused by war was relatively constrained, wealth was already so unequally distributed, and only the wealthy and professional soldiers participated, there was very little change in a nation’s income or wealth inequality as a result of winning or losing wars in antiquity.

All of this began to change during the industrial revolution. Better farming, medicine, and weapons made it possible to deploy far greater segments of the population in fighting conflicts. In the process, war went from being the pastime of kings and a redistributive game to an experience that completely transformed nations and their economies into war-fighting machines. The exemplars of this mass mobilization warfare were the two world wars at the beginning of the 20th century which witnessed entire nations change their way of life over night to fight and win the conflict.

This graph comes from Walter Scheidel’s The Great Leveler. — This graph comes from Walter Scheidel’s *The Great Leveler*.

And this level of mass mobilization had a profound economic leveling effect:

This precipitous economic leveling has been termed the Great Compression and is largely defined as the period of time from 1914 to 1945. To put this in perspective, we can expand the time window and add additional countries:

What is so striking about this graph is how little most wars appear to have affected top 1% wealth shares. The American Revolutionary War, the War of 1812, the first Opium War, the Crimean War, The Franco-Prussian war, the Napoleonic Wars, the first Boer War, the Spanish-American War, and the Second Boer War (just to name a few) all occurred during this time interval and involved the countries listed above. These wars appear to have had little, if any, lasting effect on the share of wealth held by the top 1%, whereas World War I and II had an enormous effect.

The takeaway here is that mass mobilization warfare is tremendously effective at leveling wealth and incomes, but most warfare throughout human history has been far less effective because most wars did not require societies to reorder themselves as extensively to fund military efforts. These efforts led countries to curb non-military manufacturing, draft large segments of the population, cap profits in key industries, forbid certain resources from being consumed by civilians, and critically, raise taxes to cover war costs. In the following graph, you can clearly see the effect of the two world wars on top rates of income and inheritance taxes across 20 countries from 1800-2013:

These tax rates were necessary for funding the world wars. They were rapidly introduced and then gradually repealed, with the greatest decline in taxation occuring in the 1980s.

Mass mobilization war is capable of the greatest income and wealth equalization that has been recorded in recent history. Minor wars, despite their horror, are unlikely to equalize income or wealth. It is the intensity of violence and its effect on society that has the capacity to bring about change.

Revolution

Continuing the theme of extreme violence creating extreme redistribution, we turn now to the topic of revolution. In the previous section, I focused on the world wars as levelers. In this section, I will dive into prominent revolutionary examples, starting with the Bolsheviks and Mao and wrapping up with some of the lesser-know examples from recent history.

Despite modern preconceptions, Czarist Russia was not particularly unequal. The best guesses for relevant market income Gini for the early part of the 20th century is around .36. Despite this, the Bolshevik revolution began in November 1917 and was successful in wresting power from the Czar. Stalin’s efforts throughout the 1930s to further rid the country of “kulaks” (Lenin’s term which literally means “fists” as in “tight-fisted”) resulted in the deaths of millions of people as those deemed slightly more affluent were jailed, sent to gulags, deported, or simply executed. All of this violence proved to be highly successful at leveling Soviet income and wealth inequality. By 1967, the Soviet Union’s Gini coefficient was at .27. To put this into perspective, the Gini coefficient in the US today is .41.

A similar story played out in Maoist China. Throughout the 1940s, similar processes to the Bolveshik revolution played out in China, resulting in the deaths of 1-2 million people by 1952. But the Maoist leveling of the 1930s and 1940s paled in comparison to the Great Leap Forward in the late 1950s wherein failed government agricultural policy lead to the deaths of millions more Chinese citizens. By the end of the Maoist period, 6-10 million Chinese had been killed or driven to suicide by the state, and another 20 million had died in a gulag-style forced labor system. This, too, culminated in tremendous leveling. The Gini in China in the 1930s, prior to the revolution, is thought to have been around .4. By 1984, it had dropped to .23. China’s Gini coefficient today is ~.61.

But if we turn our attention to other revolutions, it quickly becomes apparent that most revolutions fail to produce much leveling, and there is a strong correlation between levels of violence and leveling outcomes.

Probably the largest survey of revolts was compiled by Kent Gang Deng, who looked at 269 “major peasant rebellions” that occurred in China over 2,106 years. Equality of land ownership was frequently cited as a motivation for rebellion, but very few succeeded in overthrowing an existing government. Among conspicuous examples of those that did (Li Zicheng in the mid 17th century and the Taiping rebellion in the mid 19th) no equalizing effects can be observed.

The list goes on for centuries of uprisings. Even when intentional leveling is the goal of the revolting peasants (which it is often not), revolts are limited in nature, rarely successful at overthrowing even local governments, and rarely re-distributive. As Walter Scheidel puts it: “Deliberate systematic leveling through violent revolt was beyond preindustrial means. Only in the twentieth century do we encounter revolutionaries who wielded both machine guns and radical programs.”

State Failure and Systems Collapse

When governments collapse, societies experience a loss of social complexity, stratification, division of labor, transmission of information, and investment in cultural goods and services like monuments, art, literature, and literacy. State failure and systems collapse are highly effective at leveling inequality in societies by rapidly reducing a society’s affluence back to subsistence levels.

One of the most compelling and well-known historical examples of state collapse is the fall of the Western Roman empire. Prior to this collapse, the Roman state featured some of the most extreme income and wealth inequality in recorded history. During this time, the wealthiest Roman politicians held villas and property across the entire Mediterranean. Two landowners from Gaul are known to have owned estates in Italy and Spain, and in the southern Balkans respectively.

The empire began to disintegrate around 430 CE and eventually resulted in the loss of North Africa, Gaul, Spain, Sicily, and finally even Italy itself throughout the fifth and sixth centuries CE. The resulting collapse of Roman military protection hit hard in far-flung areas of the former empire and has afforded modern economists a unique opportunity to measure the impact of the process.

Using the size of roofed houses in square feet as a proxy for wealth, Robert Stephan studied the changes in house sizes before, during, and after the Roman collapse in Medieval Britain, which was hit particularly hard by the transition. The resulting analysis clearly shows a strong pattern of accumulation and leveling linked to the fate of the Roman empire:

Other empires have followed similar trajectories. The Mycenaean civilization’s collapse around 1200 CE, the polity of Tiwanaku in 1000 CE, and the Mayans in the 9th century CE were all marked by the same general arc. Archaeologists studying grave sites record a growing number of luxury items buried with the dead as these societies reached their zenith followed by a complete disappearance of the same archaeological markers of wealth. There is strong evidence that the fall of states redistribute income and wealth.

During this section, I’ve used the term “collapse,” but I want to reiterate that all of these examples involve invasions, the murder of entire classes of society, or the implied starvation and infighting of a society no longer capable of feeding itself. To call any of these transitions peaceful would be a tremendous misunderstanding. Here again, we find violence to be the key mechanism capable of taking resources from the wealthy and giving peasants the opportunity to economically advance in the rubble.

Plague

Epidemic disease has the potential to be a potent leveler in a way distinct from the forces discussed above. Unlike war, revolution, and state collapse, disease often leaves capital (goods, buildings, boats) behind and simply acts to remove humans from the equation. As labor becomes relatively more scarce compared to capital, labor becomes more valuable, wages increase, and the relative gap between the haves and have nots compresses.

The most famous epidemic in the western world is undisputedly the series of plagues that struck the world in waves starting in 1345. Modern estimates suggest that between 25 and 50% of the worldwide population was killed between 1300 and 1400. England and Wales in particular didn’t recover their populations until nearly 300 years later. The economic effect of this catastrophe was immediate. Jean de Venette, a Carmelite Friar, recorded this sometime around 1360:

“In spite of there being plenty of everything, it was all thrice as expensive: household equipment and foodstuffs, as well as merchandise, hired labour, farm workers, and servants. The only exception was property and houses, of which there is a glut to this day.”

Governments attempted to curb rapidly rising wage demands from laborers and were unevenly successful. In France, initial attempts to prevent wages from rising were initially attempted in 1349, but were abandoned a mere 2 years later at which point wages had risen by approximately 33%. In other parts of the Western world, wages rose by as much as 50-100% in the mid-14th century and remained historically elevated for 2-300 years, falling slowly back to pre-plague levels. This dramatic spike can be seen in the rural real wages measured in grain in England from 1200-1869:

As wages for unskilled labor rose, the wealth of the elite fell precipitously. This was due to the large and sudden increase in labor costs to maintain private enterprise and estates, as well as losses caused by social turmoil. As with all other disruptions to the social order, the wealthiest members of society had the most to lose, and they lost a large portion of it. To illustrate this point, here are the wealth shares and Gini coefficients of wealth distribution in Piedmont between 1300-1800 (first graph) and Lucca 1331-1561 (second graph):

These graphs comes from Walter Scheidel’s The Great Leveler. — These graphs comes from Walter Scheidel’s *The Great Leveler*.

Lethal epidemics have the capacity to rapidly level income and wealth inequality by creating social unrest, spurring violence, and raising the comparative value of labor. These effects are both immediate and long-lasting, but not permanent. With every plague mentioned above, real wages and wealth inequality did return to pre-plague levels as societies stabilized, labor became more plentiful, and elites were able to exert greater control.

Conclusion

Okay, so you made it through the toughest part of the blog series. Now follow me to Part 4 where I cover the topic you’ve been waiting for: peaceful alternatives to all the blood, death, and gore. Only problem is, they don’t work that well, or really at all.