The deep roots of global inequality

Thomas Piketty, the French economist who shot to fame for writing a colossal work of economics that many people bought but few actually read, recently received some advice. ‘What you write is interesting,’ a friend told him, ‘but couldn’t you make it a little shorter?’ Piketty has answered the call for brevity with a book which by his standards is the equivalent of a Post-it note. It’s certainly ‘brief”– but is it a ‘history of equality’?

Alas, no. What we have instead is an eye-wateringly left-wing manifesto for dismantling economic inequality, both domestically and internationally. ‘Inequality is first of all a social, historical and political construction,’ Piketty writes, and the best way to tackle it is by creating ‘a new form of democratic socialism, decentralised and self-managing, ecological and multicultural, making it possible to structure a different world that is far more emancipatory and egalitarian.’

To start with, we need higher taxes. Much higher. Piketty notes: ‘Confiscatory tax rates have been an immense historical success.’ Any worries that this might crush business formation or choke economic growth are misplaced, as ‘it is the battle for equality and education that has made economic development and human progress possible, and not the veneration of property, stability and inequality’.

Inheritance also needs reform. It should be taxed and shared out, so everyone gets a piece. We need inheritance for all, along with a universal basic income and guaranteed employment, with the aim being ‘the gradual decommercialisation of the economy’. If that fixes inequality within countries, the inequality between countries can be reduced by liquidating the institutions of globalisation, such as the IMF, OECD and World Bank. Instead, we need a new set of transnational organisations with powers to levy taxes on the world’s largest corporations. The proceeds would be shared with poorer states, particularly the West’s former colonies.

In the sections where Piketty finally touches on the history of inequality, he turns his attention to the age of empire, and to the hideous injustices of that time, many of which, he says, still affect lives. ‘Colonialism and military domination permitted western countries to organise the world economy to their benefit,’ he writes, in a sentence that has the feel of tautology about it – the West dominated because it was dominant. This leads him to ponder ‘the reasons for the fiscal and military superiority developed in Europe’, which enabled countries such as Britain, France and Spain to exploit other nations.

At this point you can sense Piketty’s discomfort. An analysis of the deeper origins of European dominance would involve accepting that rapid economic advancement doesn’t only result from the drive for social and economic equality. It can come from more acquisitive instincts, which are politically unacceptable to a collectivist like him. As a result, he condemns the West for being dominant and for driving global inequality, but is unable to say how it came to dominate in the first place. It is a significant gap in the argument.

Oded Galor, an economist from Brown University, locates his investigation into inequality in precisely the terrain where Piketty daren’t look. At the centre of his argument is the idea of the Malthusian Trap, a problem encountered by agricultural civilisations from ancient times up to the industrial revolution. A village that successfully cultivates crops will at first experience a surplus of food. This will allow its inhabitants to sustain more children and the population will increase. But that puts a greater strain on the food supply and the standard of living falls. In this cruel cycle, progress leads to failure. An extreme example is the culture of Easter Island, which flourished, consumed all the island’s resources, and collapsed.

Societies remained stuck in this cycle for thousands of years. But then something happened, a change, ‘triggering the phase transition in which the human species escaped from this poverty trap’, Galor writes. Suddenly ‘the Malthusian equilibrium quite mysteriously vanished and tremendous growth ensued’. The countries that escaped surged ahead. Those that did not were trapped in poverty. This, he argues, is at the root of the global inequality that we see around us now.

The escape was triggered by the industrial revolution, with its combination of population growth and new technology. Larger populations are, Galor writes, ‘more likely to generate both a greater demand for new goods, tools and practices, as well as exceptional individuals capable of inventing them’. This coincides with an emphasis on the value of education, which in turn drives more invention in a self-reinforcing cycle of improvement and growth.

The Journey of Humanity really comes alive when Galor digs into the deepest roots of inequality, explaining that ancient societies with agriculture based on grain developed faster than those based on tubers such as cassava, sweet potatoes and yams. ‘Grains could be more easily measured, transported, stored and therefore taxed,’ he writes, which led to societies that were complex and hierarchical. ‘Thus, the suitability of soil for either grains or tubers meaningfully influenced the formation of states.’