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Our peasants are obliged to pay such high wages to their workersDECLINE AND DISASTER HISTORY: THE EFFECTS OF ECONOMIC INEQUALITY The previous sections show that pure free markets have underperformed well-focused mixed economies, that they must underperform, and that what they offer is not what we want. It is worse yet. Laissez faire is leading us down a well-trodden path to decline and even disaster. Decline Western history has witnessed a sequence of transitions of economic (and most of the time, military and political) hegemony: in the ancient Mediterranean, from Assyria to Egypt to Persia to Greece to Rome; centuries later, from Italy to Spain to Holland and France to England to the U.S. In most of these cases, at least in the last millennium, the dominant country was supplanted not by a mortal enemy but by a country that had previously been allied or neutral, or even by a former colony. The transfer of power occurred, not as a result of an invasion or series of battles, but as a result of economic exhaustion. Even the greatest empire, Rome, did not escape the consequences of economic exhaustion. But the Empire, alas, was ruined. Its exhausted finances no longer enabled it to maintain on its frontiers the compact armies which might have contained at any point the thrust of the Germans driven back by Attila, whose hordes were still triumphantly advancing towards the West, overthrowing, as they came, people after people. Stilicho saved Italy only by leaving undefended all the Transalpine provinces. The result could not be long delayed. (Pirenne, A History of Europe, p. 27.) In light of this history (and in light of the fact that hegemonic powers have always had the arrogance to believe their hegemony would last forever) we may wonder who will supplant us and what will be the cause of our decline to a second- or third-rate power? Historical precedent suggests that the cause of our decline is more likely to be our economic lassitude than the aggression of other countries. So what is it that determines whether a country’s economy will be vibrant or stagnant, whether the country will thrive or falter? What are the early warning signs of secular economic decline? It is characteristic of European history that the prosperity and even dominance of a country can be linked to a large middle class, reflecting a broad dispersion of wealth. One can point to seventeenth century Holland or nineteenth century England or the U.S. in the middle of the twentieth century. During the golden age of Amsterdam, it was “‘commonly said that this city is very much like Venice. For my part I believe Amsterdam to be very much superior in riches.’ At the upper levels of society, this observation of a seventeenth-century English traveller could not be verified: patricians of Amsterdam, at the end of the century, had, on average, little more than half the assets of their Venetian counterparts. The Englishman, however, was more impressed by the diffused prosperity which put peasants with £10,000 in his way.” (Fernandez-Armesto, Millennium, p. 309.) As a burgher complained: “‘Our peasants are obliged to pay such high wages to their workers and farmhands that [the latter] carry off a large share of the profits and live more comfortably than their masters.’” (Braudel, The Perspective of the World, p. 179-80.) Two hundred years later, the second half of the nineteenth century was characterized by the economic, political and military hegemony of England, which enjoyed a broad dissemination of wealth. “[A]s a French correspondent writes, for ‘the poor man’s fortune [in the mass] in England is greater than the rich man’s fortune in more than one kingdom.’” (Ibid., p. 607.) In addition to — and perhaps because of — its broad dispersion of wealth, England had the highest GNP per capita in the world, and by a wide margin. Inversely, “By the end of the (twentieth) century Britain was probably the least egalitarian of the core states — the bottom half of the population owned less than 7 per cent of all the wealth.” (Ponting, The Twentieth Century, p. 151.) Corresponding to this, by 1994 the U.K. had a lower GNP per capita than Austria, Belgium, Denmark, France, Germany, Holland, Italy, Norway, Sweden, or Switzerland. (Maddison, Monitoring the World’s Economy 1820-1992, p. 195, 197.) A large and prosperous middle class has characterized our own era of world economic dominance. Even in the nineteenth century our robust economic growth was accompanied by a chronic shortage of labor. That led to a wage scale higher than Europe’s and insured an increase in real wages every decade. High wages moderated our wealth disparity and contributed to the development of a middle class. (They also increased the incentive for industry to invest in productivity-improving capital equipment.) But our middle class is now under increasing pressure. Gains in the 1980s and 1990s were limited to the wealthiest. To the extent that our middle class has been able to maintain itself, it is because of a large increase in the number of twoincome households. This is unlikely to continue, as 60% of married women are employed. Some of the pressure on our middle class is due to a development that characterized European powers in early stages of their declines: the Italian citystates of the late Renaissance, late sixteenth century Spain, eighteenth century Holland, and late nineteenth century England. These all witnessed the growth of multi-national banking and investment as a service sector producing enormous profits for those with ready access to capital. Funding foreign enterprises that would successfully compete with domestic industry resulted in an increasing concentration of wealth in the hands of a few rich investors at the expense of the working middle class. “If one seeks the causes or the motives for Amsterdam’s decline, in the last analysis one is likely to fall back on those general truths which hold for Genoa at the beginning of the seventeenth century as much as for Amsterdam in the eighteenth, and perhaps for the United States today, which is also handling paper money and credit to a dangerous degree.” (Braudel, The Perspective of the World, p. 267) A similar, contemporary, moral is drawn by Arrighi and Silver in Chaos and Governance in the Modern World. Carried in the wrong direction by our prevailing economic theory, we appear to be sailing the same course. Could it be that our misguided insistence that laissez faire is the only acceptable economic theory will contribute to our secular decline? George Santayana (The Life of Reason) observed: “Those who cannot remember the past are condemned to repeat it.” As a culture, we seem to better reflect the wisdom of Henry Ford: “History is bunk.” If, in contrast to Henry Ford, we take history seriously, there is cause for concern: one that goes beyond our mediocre performance of recent decades. It threatens more than just our relative economic performance. Throughout the past millennium, at least in the West, a broad dispersion of wealth has been accompanied by benign periods of stability and progress. By contrast, a large and increasing disparity in wealth has been a precursor of increasing violence and instability that threatened the very foundations of society. Although it may seem odd, it is not the absolute level of wealth that mattered but rather how broadly the wealth was disseminated. Despite differences between the economic, political and military settings of the ancient world and those of modern countries, this regularity also appeared in the days of classical Greece and Rome. When Solon ruled Athens, he acted to reduce inequality between rich and poor. He abolished certain debts, refused to allow enslavement as a penalty for the inability to pay debts, changed the tax system to benefit the middle class, and modified the electoral process to give the lower economic classes an audible political voice. This political action helped create a broad-based prosperity that fostered the Golden Age of Athens. Several generations later, Aristotle, a most careful observer, wrote in his Politics (Book IV): “Thus, it is manifest that the best political community is formed by citizens of the middle class, and that those states are likely to be well-administered in which the middle class is larger…” In contrast to this, it was a wide disparity in wealth that destabilized the Roman republic. “The widening of the gap between rich and poor in central Italy as peasant farming gave way to large estates bought (and stocked with slaves) with the spoils of empire…proved fatal to the republic in the end.” (Roberts, The Penguin History of the World, p. 231.) Centuries later, the economic gap between the rich and the rest played a role in the decline of the Roman Empire. In the days of Diocletian and Constantine, provincial army revolts and the need to secure army loyalty led to a restructuring of provincial governments, a sharp increase in the size of the bureaucracy, and a concomitant increase in the tax burden, especially the tax on cultivated land. This tax affected the peasants and contributed to a widening income gap between the wealthy landowners and the rest of the populace, who increasingly felt they had no vested interest in Rome. Most of this burden had to be borne by the peasantry. But the peasants had already been paying all they could….The rich were able, through bribery and influence, to have the assessments on their holdings minimized and to avoid paying even the minimum. Therefore the period, especially in the West, saw a growth of great estates…[and] increased taxation led many of the peasants to make over their properties to the rich landlord of the neighborhood in exchange for protection from the city council’s tax collectors and a guarantee of the right to live on and work the land. Thus the peasants were gradually transformed into serfs… The government thus reverted to the Oriental pattern — a despotism resting on control of an army and acting through a royal council composed of executives arbitrarily appointed by the king. The Greek experiment was abandoned…The Roman Empire in the west fell only because most of its subjects would not fight to preserve it. (Garraty and Gay (eds.) The Columbia History of the World, p. 236-240.) Such a relationship has continued to characterize the West. As economic historians have subjected Europe of the Middle Ages to increasing economic scrutiny, they have discovered that a broad dispersion of wealth has consistently been associated with periods of tranquility and progress. Inversely, a large and increasing disparity of wealth has presaged violence and instability, and ultimately a collapse of the economy and society. In the centuries following the disintegration of the Roman Empire technological innovations — the horse collar and heavy wheeled plows, as well as new crops, triennial rotation and the increasing use of water mills — improved agricultural productivity by as much as 50%. Peasants were direct beneficiaries of this greater productivity. In some regions they were able to lease lands from their lords and become, to a degree, their own masters. As a result, the tenth through twelfth centuries was a period of relative income equality. A climate of economic and cultural vigor pervaded Europe. This period witnessed the founding of the first European universities; the development of Gothic architecture; the establishment of the outstanding school at Chartres that reintroduced ancient Greek thought (via the Arab philosophers) into Europe, and even influenced Islamic thought; the spread of the Cluny reform through the Roman Catholic Church; a revival of literature in the romans courtois, chansons de geste, romans d’amor and Arthurian tales; and the rebirth of historical thought and writing. Demography saw the growth of towns, some of which had charters granting freedom to their inhabitants. One can even find traces of sotto voce egalitarianism in these towns. “In the tenth and eleventh centuries, when towns began their rise, they usually contained elements ranging from the martial aristocracy to simple artisans and peasants. Thereafter, the need for community solidarity when fighting a prince or lord normally stimulated ideas of common citizenship and equality before the law.” (Garraty and Gay (eds.) The Columbia Encyclopedia of World History, p. 394.) In economics, as well, “…the eleventh century saw the beginning of what was effectively a period of ‘sustained growth’ on the modern pattern, one which would not recur before the English industrial revolution.” (Braudel, The Perspective of the World, p. 546.) This period was progressive and open, a high tide of civilization that would recede from Europe in the ensuing centuries: In this expanding Europe of the twelfth century there was much curiosity and so great a thirst for knowledge that the intellectual and cultural treasure Islam had to offer... [L]earning was liberal, popular piety took many forms, the Church itself stood open. Learning was becoming more broadly based…. An open aristocracy; and an open clergy, too. Most twelfth century clerics were outward looking, accessible to their people and to their own kindred, at all levels of society... In Italy and southern France in the sixteenth century men were burned for thinking much less dangerous thoughts than a Bernard Sylvestris or William of Conches or an Alain de Lille, all members of the twelfth century circle at Chartres… The fact that toleration can be discussed at all in connection with the Middle Ages is striking enough; it underlines the magnitude of the metamorphosis which transformed the ‘open’ Middle Ages of the expansive twelfth century into the increasingly narrow and constricted later Middle Ages.” (Friedrich Heer, The Medieval World, p. 3-6, 113.). The thirteenth and fourteenth centuries, reversing the pattern of economic equality, were characterized by an accelerating disparity of income. This presaged a decline in the health and stability of society, most visible in religion. During the course of the thirteenth century it became increasingly doctrinaire, severely restricting the range of permissible thought and endangering some whose orthodoxy is now unquestioned. Even St. Francis of Assisi was fortunate to escape the Inquisition. Several of his closest followers were less fortunate. Despite the institution of the Inquisition, the papacy declined in stature. Effects ranged from a papal legate who was forced to take refuge in the Castel Sant’Angelo (where he was bombarded with excrement) to the exile of the papacy to Avignon, from the election of three competing popes at the same time to a succession of anti-popes. By the fourteenth century, Western Christendom, Byzantium and Islam, were now drawing further and further apart… to revert to what is usually considered a typically ‘medieval’ condition — they became closed societies, withdrawn into their separate worlds….The two most powerful estates, the nobility and clergy, cut themselves off from the masses… so did the intelligentsia… The anti-Semitism of the later Middle Ages was part of the same trend… Higher education was becoming narrower and more specialized, and the bureaucratic Church, entrenched behind the Inquisition and Canon Law and intent on theological refinement, was becoming increasingly remote from the laity and the ‘people’… (Ibid., p. 7-8, 89.) This is not to deny the brilliance of thinkers of the late Middle Ages: Thomas Aquinas, Meister Eckhart, Duns Scotus, William of Ockham, Roger Bacon. But society had become closed and hostile. Aquinas’s teachings were condemned by both the Church and the University of Paris. Meister Eckhart was tried, his teachings were condemned by the pope as heretical, and his writings were officially burned. William of Ockham was excommunicated. Roger Bacon died in prison. |
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