Inequality

I have been reading a book, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, by Daron Acemoglu and James Robinson, which I shall no doubt recommend shortly. The authors explore why some nations are prosperous and other poor, examining all the current reasons proposed by various academics for these differences – cultural, geographic, historical. They conclude that in the end it is political differences that account for the diversity – nations with a political elite who rule an extractive economy (think of North Korea, for example, or the old Soviet Union) simply do far worse than nations with a pluralistic political system in which individuals have an incentive to work hard, without fear that some privileged elite will confiscate their profits or prevent their new innovation from being marketed.

So much seems obvious, and our American nation has prospered because of the accidents of history that gave us a government adequately constrained so that no privileged elite could rise to power and then hold power indefinitely.

One has to wonder, though, if that is changing. When it changed in Rome after the fall of the Republic it led to centuries of civil war until an enfeebled state fell to a fairly puny force of barbarians.

The rising inequality in America is due in part to the emergence of a fairly incestuous ruling elite of politicians, lobbyists, CEOs, and others who have enough political power and wealth to gain special favors from the government.  Think of Monsonto’s increasing grip on farming, using their wealth and political influence to force farmers to use their genetically modified seeds. Or think of the massive farm subsidies each year which go almost entirely to a small group of politically powerful megafarmers. Think of the defense industry which contrives, with sweetheart deals for select politicians, to build ever more expensive weapons systems with little obvious purpose. Think of the current Obamacare law, which is a windfall for well-connected insurance companies. Think of the well-connected Wall Street managers who managed, after tanking the economy, not only to avoid any significant consequences, but even to have their losses covered and their bonuses funded by taxpayer money.

Yes, the current Tea Party shenanigans in Congress are stupid.  But the Tea Party itself is in part a sort of disorganized peasant revolt, and it exists in part because of increasing frustration by the majority at the increasing income inequality between most people and a small well-connected elite in the nation who are perceived to be (and may actually be) abusing their power and position. Could we be on a path similar to Rome’s?  It’s worth pondering.