[Blaster]

This theme was covered by Quintus Curinius two years ago in an article on Return of Kings entitled The Cycle of Societal Wealth.
A poster on this forum (poutsara) linked to a truly fantastic article about the same thing: thread-34411...#pid708931

It's an essay by Peter Turchin, author of "War and Peace and War: The Rise and Fall of Empires", entitled Return of the Oppressed:
From the Roman Empire to our own Gilded Age, inequality moves in cycles. The future looks like a rough ride

At first I was skeptical. I find that fallacious appeals to "cycles" very common and tedious. To me, the interesting part is not simply observing that "the pendulum swings the other way" but understanding why. This article does indeed present ideas about what actually drives this cycle, both in abstract terms and in detail.

The article covers many specific scenarios. England population doubled from 1150 to 1300. Poverty went up. Black death hit. When it was over, the middle class boomed. He also describes scenarios where elites appear to act against their interests, out of rational fear of catastrophic revolts and to address the increased infighting amongst themselves. Turchin unsurprisingly cites the end of Republican Rome as an example of when this does NOT happen.

In the case of the United States, he describes the massive increase in the wealth gap that grew following the civil war up through 1920. This was the era of Rockerfeller, Carnegie, and Vanderbilt, whose families have left such legacies that they are household names. What's less well known is what caused the pendulum to swing back:

Quote:

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. Between 10,000 and 15,000 miners armed with rifles battled against thousands of strikebreakers and sheriff deputies. The federal government eventually called in the Air Force, the only time it has ever done so against its own people. 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.

Quote:

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.

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). The deal allowed the lower and upper classes to co-operate in solving the challenges facing the American Republic — overcoming the Great Depression, winning the Second World War, and countering the Soviet threat during the Cold War.

It almost goes without saying that there was a racist and xenophobic underside to all this. The co-operating group was mainly native-born white Protestants. African-Americans, Jews, Catholics and foreigners were excluded or heavily discriminated against. Nevertheless, while making such ‘categorical inequalities’ worse, the compact led to a dramatic reduction in overall economic inequality.

The ‘New Deal Coalition’ which ruled the US from 1932 to the late 1960s did so well that the business community, opposed to its policies at first, came to accept them in the post-war years. As the historian Kim Phillips-Fein wrote in Invisible Hands (2010):

Quote:

Many managers and stockholders [made] peace with the liberal order that had emerged. They began to bargain regularly with the labour unions at their companies. They advocated the use of fiscal policy and government action to help the nation to cope with economic downturns. They accepted the idea that the state might have some role to play in guiding economic life.

Workers revolted. Elites wised up and passed reforms including a halt on immigration. US saw prosperity and success for 40 years.

[not_dead_yet]

That's the old way of handling things. Nowadays, you paper over the wealth gap with bread and circuses. We don't have food lines and men begging on the street. Everybody gets SNAP and enough to pay for Internet and an Obamaphone. Problem solved.

Do you really think children raised by single mothers are going to rise up against anything? Hashtag protests don't scare me.

[zatara]

The Economist had a fairly good piece on this recently. The cliff notes are:

Quote:

"The top 0.1% (consisting of 160,000 families worth $73m on average) hold 22% of America’s wealth, just shy of the 1929 peak—and almost the same share as the bottom 90% of the population."

The bottom 90% of the population is 287 million people(!). This situation is similar (but not quite as bad) across most of the developed world.

I think either the extremely wealthy will make concessions to placate the underclasses (much like Bismarck did in the C19th Germany with health insurance, workers protections acts etc to undermine Socialist support) or sooner or later there will be massive upheaval. The spectacular rise of Sanders and Trump, two essentially non-aligned politicians on either side of the political spectrum, is just the beginning of this.

[TheCroatian]

This was an excellent piece. One of Turchin's more recent books, "Ages of Discord" (which I highly recommend) explains the structural demographic model behind his theory in more detail.

Particularly telling is how few and far between have been Democratic solutions to restoring the social compact between elites and common folk during times of extraordinary inequality. Frankly, the best solutions so far have been plague, natural disaster and war. The reason these events are so good for the Middle Class is that while income and wealth are Pareto-distributed, casualties from such events are typically stochastically or normally distributed, meaning that overall the elites are no less susceptible (according to average expectations) than anyone else. The difference is that they have more wealth.

So all it takes is to expose a very small proportion of their estates, breach a few of their markets, etc. and massive redistribution emerges naturally from the ensuing competition over the newly available economic niches left in their absence. America became a global superpower after WWII. Do you think they really could have in the absence of their involvement? The destruction of Axis capital was a huge opportunity for the Baby Boom generation. Of course, that's just my two cents.

[Handsome Creepy Eel]

@TheCroatian: pa jebem ti mater vidi što nas se nakotilo - dobrodošao!

[TheCroatian]

Naši ljudi se, naravno, probudili. Nisam iznenađen koliko smo od nas ovdje!

[TheCroatian]

If Zuck and the rest of Big Tech are smart, they'll ramp up AR/VR to placate the lower classes. When the marginal cost of realistic simulated sex is lower than the actual thing (let's say cost per novel bang of $14.99 USD), men will have almost no motivation to revolt.

It's always been relative social status/power and political inclusion as opposed to hunger that's driven revolution. Economists and historians get it wrong when they imagine rising absolute standards of living bringing about world peace. Civilization is the pursuit of power, not material well-being (which can be a byproduct, especially in the last 200 years).

If society weren't a game for power, we never would have emerged from hunter-gatherer nomadism, since life expectancies and quality of life dropped significantly after the establishment of agriculture.

[Constitution45]

What is the end result that the academics who bleat about the 'wealth gap' envision ?
Socialism, full equality, all these things have been tried before and just fail; usually cutting off the ladder for those who have the potential of climbing to the top and changing things.

[debeguiled]

(09-25-2017 06:54 AM)Handsome Creepy Eel Wrote:  

@TheCroatian: pa jebem ti mater vidi što nas se nakotilo - dobrodošao!

You two are exploiting your language wealth gap.

[Dan Woolf]

(02-25-2016 06:31 AM)not_dead_yet Wrote:  

We don't have food lines and men begging on the street.

I know you are talking specifically about the US but this made me think of this video I saw a while back:

It's a bread line in a Nordic welfare country.

[godzilla]

The wealth gap has been created by the inflation of assets prices. In 1929 and now. Right now the stock market, bonds, real estate are all way over valued which benefits the richest of the rich. The wealth gap will return to normal levels once those prices return to normal levels. Raising interest rates would cause a massive recession but would help the middle class long term.

[cosine]

Quote:

The wealth gap has been created by the inflation of assets prices.

I found the following article to take that to a slightly deeper level: over the long run, the return on wealth exceeds economic growth. When that happens, inequality is certain. I have recently decided that real estate is the path for me, and this just confirmed(confirmation bias? maybe) that it's worth it.

If the middle class is going to get "hollowed out," I know which side of the divide I'd rather be on.

https://www.economist.com/blogs/freeexch...inequality

Quote:

And third, Mr Rognlie finds that the growing share of national income deriving from capital income has not been distributed equally across all sectors. The return on non-housing wealth, in fact, has been remarkably stable since 1970 (see chart). Instead, surging house prices are almost entirely responsible for growing returns on capital.

[puckerman]

(02-24-2016 11:03 PM)Blaster Wrote:  

This theme was covered by Quintus Curinius two years ago in an article on Return of Kings entitled The Cycle of Societal Wealth.
A poster on this forum (poutsara) linked to a truly fantastic article about the same thing: thread-34411...#pid708931

It's an essay by Peter Turchin, author of "War and Peace and War: The Rise and Fall of Empires", entitled Return of the Oppressed:
From the Roman Empire to our own Gilded Age, inequality moves in cycles. The future looks like a rough ride

At first I was skeptical. I find that fallacious appeals to "cycles" very common and tedious. To me, the interesting part is not simply observing that "the pendulum swings the other way" but understanding why. This article does indeed present ideas about what actually drives this cycle, both in abstract terms and in detail.

The article covers many specific scenarios. England population doubled from 1150 to 1300. Poverty went up. Black death hit. When it was over, the middle class boomed. He also describes scenarios where elites appear to act against their interests, out of rational fear of catastrophic revolts and to address the increased infighting amongst themselves. Turchin unsurprisingly cites the end of Republican Rome as an example of when this does NOT happen.

In the case of the United States, he describes the massive increase in the wealth gap that grew following the civil war up through 1920. This was the era of Rockerfeller, Carnegie, and Vanderbilt, whose families have left such legacies that they are household names. What's less well known is what caused the pendulum to swing back:

Quote:

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. Between 10,000 and 15,000 miners armed with rifles battled against thousands of strikebreakers and sheriff deputies. The federal government eventually called in the Air Force, the only time it has ever done so against its own people. 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.

Quote:

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.

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). The deal allowed the lower and upper classes to co-operate in solving the challenges facing the American Republic — overcoming the Great Depression, winning the Second World War, and countering the Soviet threat during the Cold War.

It almost goes without saying that there was a racist and xenophobic underside to all this. The co-operating group was mainly native-born white Protestants. African-Americans, Jews, Catholics and foreigners were excluded or heavily discriminated against. Nevertheless, while making such ‘categorical inequalities’ worse, the compact led to a dramatic reduction in overall economic inequality.

The ‘New Deal Coalition’ which ruled the US from 1932 to the late 1960s did so well that the business community, opposed to its policies at first, came to accept them in the post-war years. As the historian Kim Phillips-Fein wrote in Invisible Hands (2010):

Quote:

Many managers and stockholders [made] peace with the liberal order that had emerged. They began to bargain regularly with the labour unions at their companies. They advocated the use of fiscal policy and government action to help the nation to cope with economic downturns. They accepted the idea that the state might have some role to play in guiding economic life.

Workers revolted. Elites wised up and passed reforms including a halt on immigration. US saw prosperity and success for 40 years.

You obviously missed this thing called the Great Depression. From 1921 to 1961, people broke even at best. There was a boom for eight years, a horrible bust for ten years, a war for six years, and boom for 16 years.

[Sonoma]

I think there's a massive difference in today and the past, as in the past "wealth" in a country was often the difference between having food and not having food. In the US at least, food is endlessly abundant and there's never been a shortage of it in any real or widespread sense (even in the Great Depression, no one starved to death).

Shelter, in the sense of a roof over one's head, can be more difficult to obtain (rent is expensive). However, if you define shelter as created conditions in which one can survive, then basically everyone has access to shelter (while a jacket from a thrift store is hardly as comforting as a house, it'll keep you alive in most most states most seasons- all states have homeless who manage through even the worst winters)

As well, the wealth of the wealthiest is largely on paper, and has nearly zero affect on anyone. Consider the inflation if the money held in stocks by Bill Gates or Buffet was spread evenly among the people of the US. It wouldn't increase the amount of tangible goods available to people.