University of Florence

Sep 2, 2020

4 min read

Looking for the islands of equality in a sea of inequality. Why did some societies in pre-industrial Europe have relatively low levels of wealth inequality?

Bas Van Bavel, Utrecht University, Netherlands

Before delving into the actual topic of this paper — wealth inequality in preindustrial Europe and more specifically the cases of relatively low inequality and their causes — I would like to say a few words about the wider topic of economic inequality. First, it may be noted how, in recent years, income and wealth inequality have come back into the picture, in academia and society. Debates about inequality have also changed in character. In previous decades, if discussed at all, discussions were mostly fueled by social concerns about the injustice or unfairness of high material inequality.

Levels of inequality were mostly seen as an outcome of economic, social of political developments and decisions, that is: as a dependent variable, and the focus in academic and societal debates was mainly on income inequality and the resulting disparities in consumption opportunities. This has changed in recent years. Discussions have become more extensive and they became more focused on the real or perceived effects of economic inequality.

First and foremost the effects of inequality on economic growth and development, but also the issue of the compatibility of high economic inequality with the functioning of democratic and inclusive societies has been raised. Accordingly, the focus of debates has shifted more to wealth inequality and to inequality as an independent variable: as a cause.

The effects of wealth inequality, it is argued, may materialize both directly, through negative effects on participation of people in the economy, human capital formation or investments, or indirectly, through the growing leverage of wealth owners or the erosion of societal cohesion and resilience. Striking in the recent debates about inequality is also the interest in historical developments and the insights they offer in the causes and effects of inequality.

This is understandable from several insights won over recent years. First, it is has become clear that there is no equilibrium in material inequality, with levels of inequality being steered, for instance by forces of supply and demand, towards some kind of natural balance. On the contrary, levels of inequality can substantially and fundamentally change over time, as is now becoming clear especially by way of empirical historical research.

Second, it has become clear that history is not a unilinear march from societies that are characterized by poverty, arbitrary power of rulers, coercion and high inequality to societies that offer wellbeing, material equality and equitable outcomes. In the older literature, these latter societies were often equated with the Western ideal type societies of the second half of the twentieth century, which were seen as the realization of historical progress or as the fruit of modernization.

Their fruition would make any comparison to the historical past useless. However, this idea, too, is left in recent years and dismissed as overly teleological. It has become clear, as a result of both empirical and more theoretical studies, that also modern, Western societies can generate high levels of inequality. Modernity, therefore, cannot be automatically equated with equality. This links up with, third, the dismissal of the Kuznets curve, which often has been dominant in the thinking about the historical development of inequality. Especially in the older literature, the relationship between inequality and economic growth was approached within the framework of this curve, which describes how the first phase of economic growth leads to rising (income) inequality, but the second phase to a reduction of inequality.

Kuznets suggested that this reduction of inequality was the result of the dynamism and ongoing economic growth and the sectoral changes associated with the growth process. Even though Kuznets focused on a very specific part of history, that is, developments in the Western World in the nineteenth and first half of the twentieth century, and he himself was very cautious in his interpretation, his curve of first rising and next declining inequality under economic growth conditions was long assumed to hold more generally. This idea of a Kuznets curve is now shown to be flawed, however, both with respect to causality and chronology.

Regarding causality, it has been remarked that, even if a curve like development is found in specific cases, the curve is still more a descriptive than an analytic instrument, and the elements forming the causal link between economic growth and inequality remain unclear.3 In uncovering this causality, the focus likely has to be more on social and political factors than solely economic ones.

What Kuznets actually observed in his research is the decline of inequality in the United States from the First World War, which was not an automatic result of economic growth, but rather that of growing self-organization, social unrest, political reforms and a resulting rise of state redistribution, stimulated further by the need to co-opt workers as soldiers in the mass mobilization during the world wars and the ensuing Cold War.

DOI: https://doi.org/10.36253/978–88–5518–053–5.27

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