To be fair, we need more equality

By Jonathan Power

Plato, the great scholar of ancient Greece, said that the differences between rich and poor should not exceed a ratio of one to four.

In the 18th century, the influential writer Jean-Jacques Rousseau, who gave birth to the notion of “social contract”, argued that the invention of private property and excessive accumulation were at the origin of great discord between the peoples.

He was also one of the first to advocate a return to democracy, a system of government that had been lost once the Greek Empire declined.

He viewed the modest reforms of his day as “garlands of flowers along chains of iron.” He died a decade before the French Revolution but was celebrated by its leaders.

Over the past two decades, we can see, on the one hand, a massive decrease in poverty in the world, especially in China and India.

On the other hand, we have witnessed in recent decades a phenomenon unprecedented in history – an incredible speed towards wealth for the upper classes, making the world increasingly unequal. Some billionaires are now richer than states. According to Oxfam, the third world aid charity, eight of the world’s richest own the same wealth as the world’s poorest half. The 22 richest men have more wealth than all the women in Africa. Since the advent of Covid, the wealth of the world’s richest men has doubled.

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Today, when the powerful individuals of the capitalist system have more financial and commercial autonomy than they have ever had, the situation seems not only unjust but totally exploitative.

By observing, over the past two months, the seizure of the mega-yachts of the Russian oligarchs, we have understood how serious the differentials are. But they are just imitating their western counterparts who seem to get away with hiding their money from the tax authorities, storing it in accounts in some of the Caribbean islands, Panama, the Isle of Man in the UK, in the State of Delaware in the United States and in Swiss and Luxembourg banks.

The United States Declaration of Independence, a profound document if ever there was one, says that the self-evident truth of our existence is the pursuit of “life, liberty, and the pursuit of happiness.” An earlier project substituted wealth for happiness. Philosophers and psychologists may argue for centuries about what “happiness” is, but common sense suggests that having your own big superyacht isn’t that. Happiness is having peace in your soul, a fulfilling job, a modestly sufficient income, and a healthy, well-educated family.

Research by economists in many countries convincingly shows that happiness increases steadily as an individual moves out of poverty up to a per capita income of around $75,000. (This applies in the United States, but in other societies, including European ones, it is much less. You also have to look at the cost of living. So, in India or Africa, it could be, at an estimate, $20.00.) After this amount is reached happiness does not increase so quickly. There are diminishing returns.

Human beings were created not to be greedy. If one goes against this intrinsic impulse, then one pursues ephemera. If this pursuit of unnecessary wealth comes at the expense of the poorest, then it is evil, and we should cry it out.

On the surface these days, it looks like the world has done a poor job of creating more equality. It’s only half true. Since the Industrial Revolution, step by step, the poor in industrialized states have achieved adequate nutrition, improved health care, education, and social support, such as unemployment benefits and childcare. Between 1914 and 1980, income and wealth inequality declined markedly in the Western world. Only in the past 40 years has this rising tide calmed down and even reversed.

In the Third World, the number of poor people is falling sharply. The longevity of their children and women in childbirth, as well as improved literacy and access to clean water and vaccines have exceeded all expectations. United Nations targets have been repeatedly exceeded, perhaps suggesting that economists and statisticians are aiming too low.

It almost seems that large parts of the Third World are on track to reach that ceiling of happiness in a generation. But the harsh reality is that as they get better, their societies are likely to become less equal. This will slow down the rate at which happiness can be achieved for the majority.

Maybe it wouldn’t matter if we could trust the rich to be more responsible and caring. If, like Bill and Melinda Gates and Warren Buffet, they used their money to improve the condition of the poor, we would welcome them, or at least tolerate them. But we know most rich people aren’t like that. Indeed, the well-to-do in general – I mean most of the middle and upper classes, not just the very wealthy – don’t like the way they are taxed and are looking for ways to reduce it. In the United States, the Republican Party has led a fight over the past decades to reduce taxes for the wealthy. In the UK, the current Conservative-led government is doing all it can to cut benefits for the poorest and to make its constituents, who are much better off, even better off.

What can change that? Only the intense social struggles or disruptions of war seem to be the message of the two centuries since the dawn of the Industrial Revolution.

The Bolshevik revolutionaries overthrew the aristocracy and created the first “proletarian state” in history. The Soviet state made considerable progress in education, land distribution and public health, writes Thomas Piketty, the eminent French economist. But when Lenin died, the state was captured by the egocentric Stalin who sought absolute power and wielded it with chilling effect. Mao Zedong who imitated him in China had the same impact.

Was the increase in well-being that most Russians and Chinese achieved during the Soviet and Mao eras worth it? For the ordinary man, woman and child on the street, probably yes. (I still hear my Russian friends say how much better the health services were in Soviet times, when you were in the same queue for the same kind of treatment as the next person.) For those who wanted have a say in how society is governed, no.

Now that post-Soviet Russia has abandoned its brief experiment with democracy and its replacement by the quasi-dictatorship of Vladimir Putin, we may well come to the same conclusion. Likewise, in China, President Xi Jinping’s grip has become so tight that previous moves toward freedom and free speech have been curtailed after two decades of openness. Yet Xi’s claim that China has abolished extreme poverty is probably true.

The good thing about the Bolshevik Revolution was the impact it had on Western democracies. Fear of the advance and spread of communism made even conservatives realize that something had to be done for the plight of their own poor. The slow march towards the welfare state has begun. Gradually, the propertied classes accepted social security and progressive income taxes (and later decolonization and civil rights for blacks and other minorities).

Do we need another revolution or another world war to stop rising inequality? A world war would lead to a nuclear holocaust, so forget it. Revolutions would cause a lot of bloodshed, but could well happen. Last week, the Financial Times reviewed three books that seriously argued that the United States may be heading for another violent civil war between conservatives and liberals.

All of this could be avoided if Plato, Jesus Christ, Muhammad and Buddha, among others, were taken more seriously. But that’s hoping for a lot.