Monday, December 19, 2011

Nihil tam munitum quod non expugnari pecunia possit.

A few posts ago, we noted a couple of historical tidbits:

"[In America], wealth is two times as concentrated as imperial Rome, which was a slave and farmer society. That's how huge the gap is."

And:

"In his book The Haves and the Have Nots, Branko Milanovic tries to discover who was the richest person who has ever lived. Beginning with the loaded Roman triumvir Marcus Crassus, he measures wealth according to the quantity of his compatriots’ labour a rich man could buy. It appears that the richest man to have lived in the past 2000 years is alive today. Carlos Slim could buy the labour of 440,000 average Mexicans. This makes him 14 times as rich as Crassus, nine times as rich as Carnegie and four times as rich as Rockefeller."

Now, an advanced study has shown that the Roman Empire was more equal than the modern-day United States:

...Thus, in Rome the top 1.5% controlled 15-25% of income while in the United States around 2007 the top 1% controlled 23.5% of income thus suggesting slightly more inequality in the United States. Scheidel and Friesen calculate a Roman Empire gini coefficient of .42-.44 again perhaps slightly less than the U.S. coefficient of around .4-.45 depending on source.

http://marginalrevolution.com/marginalrevolution/2011/12/roman-empire-more-equal-than-the-united-states.html

This makes sense. Technology not only makes wealth, it also concentrates it. Here’s some more detail:

Over the last 30 years, wealth in the United States has been steadily concentrating in the upper economic echelons. Whereas the top 1 percent used to control a little over 30 percent of the wealth, they now control 40 percent. It’s a trend that was for decades brushed under the rug but is now on the tops of minds and at the tips of tongues.

Since too much inequality can foment revolt and instability, the CIA regularly updates statistics on income distribution for countries around the world, including the U.S. Between 1997 and 2007, inequality in the U.S. grew by almost 10 percent, making it more unequal than Russia, infamous for its powerful oligarchs. The U.S. is not faring well historically, either. Even the Roman Empire, a society built on conquest and slave labor, had a more equitable income distribution.

To determine the size of the Roman economy and the distribution of income, historians Walter Schiedel and Steven Friesen pored over papyri ledgers, previous scholarly estimates, imperial edicts, and Biblical passages. Their target was the state of the economy when the empire was at its population zenith, around 150 C.E. Schiedel and Friesen estimate that the top 1 percent of Roman society controlled 16 percent of the wealth, less than half of what America’s top 1 percent control.

Schiedel and Friesen aren’t passing judgement on the ancient Romans, nor are they on modern day Americans. Theirs is an academic study, one used to further scholarship on one of the great ancient civilizations. But buried at the end, they make a point that’s difficult to parse, yet provocative. They point out that the majority of extant Roman ruins resulted from the economic activities of the top 10 percent. “Yet the disproportionate visibility of this ‘fortunate decile’ must not let us forget the vast but—to us—inconspicuous majority that failed even to begin to share in the moderate amount of economic growth associated with large-scale formation in the ancient Mediterranean and its hinterlands.”

In other words, what we see as the glory of Rome is really just the rubble of the rich, built on the backs of poor farmers and laborers, traces of whom have all but vanished. It’s as though Rome’s 99 percent never existed. Which makes me wonder, what will future civilizations think of us?
http://persquaremile.com/2011/12/16/income-inequality-in-the-roman-empire/

And even the Roman Empire imposed taxes to prevent inequality:

Invented by Emperor Augustus to raise funds for soldiers' pensions, inheritance tax has been used by the West to redistribute wealth ever since. It is one of the most ancient and widely adopted state levies on the individual. The rule of Augustus - or Gaius Julius Caesar Octavianus - as the first leader of the Roman Empire ushered in an era of relative peace and he needed cash to pension off the soldiers back from subduing the natives. Like its modern day successors, Augustus's tax was revenue raising and hit only those with an estate worth over 100,000 sestertii. Unlike today's system in the UK, it did not apply to those who were next of kin. With varying tweaks, it's a system which has been accepted by societies over the millennia.
Rome wasn’t the only one. Inequality has been recognized as a danger throughout history:

Death duties have been used since feudal times to redistribute land and property to avoid it being concentrated in too few hands. In France, the tax on estates is not only high - up to 60% - but inheritance laws introduced after the 1789 revolution ensure people have no choice but to break up their estates among children and relatives. Being able to hand down all your wealth intact to one person created too much inequality for the fraternite. The idea of a redistribution of wealth is one which still holds for some today.

"It's trying to neutralise the worst excesses of inequality of inherited wealth," says Tim Horton, of the Fabian Society think tank. "Most modern societies favour equality of opportunity. Inheritance tax doesn't stop parents helping their children, it smoothes off the inequalities at the top." The Fabian Society argues that by taxing recipients of the "unearned windfall", people's faith in the tax will be restored. It proposes that the revenue be more transparently redistributed to poorer children in a form of a state inheritance.

During the debate in the US, some of the staunchest supporters of the tax were billionaires including Bill Gates Sr, father of the Microsoft entrepreneur. In an interview with PBS, Mr Gates Sr said it was a "question of fairness". He also harked back to the motives of the revolutionaries in 18th Century France.

"Wealth is power. And it just is not a good situation. The examples of the aristocracies of Europe are so clear. We don't want to have a country like that." 
http://news.bbc.co.uk/2/hi/uk_news/magazine/7035693.stm

Meanwhile in America:

THE progressive reformer and eminent jurist Louis D. Brandeis once said, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.” Brandeis lived at a time when enormous disparities between the rich and the poor led to violent labor unrest and ultimately to a reform movement.

Over the last three decades, income inequality has again soared to the sort of levels that alarmed Brandeis. In 1980, the wealthiest 1 percent of Americans made 9.1 percent of our nation’s pre-tax income; by 2006 that share had risen to 18.8 percent — slightly higher than when Brandeis joined the Supreme Court in 1916.

Congress might have countered this increased concentration but, instead, tax changes have exacerbated the trend: in after-tax dollars, our wealthiest 1 percent over this same period went from receiving 7.7 percent to 16.3 percent of our nation’s income.

What we call the Brandeis Ratio — the ratio of the average income of the nation’s richest 1 percent to the median household income — has skyrocketed since Ronald Reagan took office. In 1980 the average 1-percenter made 12.5 times the median income, but in 2006 (the latest year for which data is available) the average income of our richest 1 percent was a whopping 36 times greater than that of the median household.

Brandeis understood that at some point the concentration of economic power could undermine the democratic requisite of dispersed political power. This concern looms large in today’s America, where billionaires are allowed to spend unlimited amounts of money on their own campaigns or expressly advocating the election of others.

We believe that we have reached the Brandeis tipping point. It would be bad for our democracy if 1-percenters started making 40 or 50 times as much as the median American.

Enough is enough. Congress should reform our tax law to put the brakes on further inequality. Specifically, we propose an automatic extra tax on the income of the top 1 percent of earners — a tax that would limit the after-tax incomes of this club to 36 times the median household income. 
http://www.nytimes.com/2011/12/19/opinion/dont-tax-the-rich-tax-inequality-itself.html?_r=1

Of course, as most proposals to fix our inequality problem, this one also has no chance in hell of ever being implemented. And let’s not forget that climate change, too, played a role:

An increase in climate variability from 250 AD to 600 AD, coincided with the spread of the Huns and migrations of Germanic tribes, the researchers said in a recent issue of Science. They studied preserved tree rings from that time to determine climate, a science called dendrochronology. During that period, trees had smaller rings, meaning less yearly growth and harsher conditions.

Historians corroborate the researcher's work. Edward Gibbon wrote in The History of the Decline and Fall of the Roman Empire that German tribes crossed a frozen Rhine River on December 31, 406. Others have noted that the freezing of the Rhine was speculation, but the research of Buntgen and his team at least show that the German migrations and invasions coincided with cold weather.

http://news.discovery.com/earth/mongols-vikings-and-romans-connected-to-climate.html

Translation: "Nothing is so fortified that it can't be conquered with money." (Cicero).

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