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The Origin of Financial Inequality

I've spent half a century (yikes) writing for radio and print—mostly print. I hope to be still tapping the keys as I take my last breath.

For more than 99 percent of human existence our ancestors lived in societies where all people had equal shares of resources. It wasn't until we started farming that inequality began to develop. It has accelerated massively over the last 250 years.

Hunter/Gatherer Societies

For hundreds of thousands of years, humans existed by what they found in nature. Foraging societies numbered in tens and had contact with neighbouring bands.

Each group had its territory and, when resources were exhausted in one area, they moved on in what was probably a regular pattern. Anthropologists tell us that the groups likely had elders whose advice was sought, but there were no leaders whose commands had to be obeyed.

There are still a few forager/collector societies in existence today and one characteristic common among them all is the concept of sharing. The anthropologist Colin Turnbull studied the BaMbuti of the Congolese rainforest (also known as pygmies, but this word in now considered somewhat pejorative).

They are a people who have a lifestyle that's at least 100,000 years old, and Turnbull wrote about them in his 1962 book The Forest People. He describes a society in which:

  • Individuals rely on one another;
  • Men and women have flexible roles within the band's hierarchy;
  • The forest sustains them so they honour it in all they do;
  • The people gather only enough to meet their needs for food, drink, and shelter and devote the rest of their time to singing and dancing; and,
  • Above all, they live in a society that is cooperative not competitive.

Farming Changed Everything

Agriculture led to the storage of food and other resources and permanent communities in villages. The most successful farmers or those with the best land started to accumulate wealth. Other members of the community begin to show deference to the wealthier; this marks the beginning of achievement-based societies.

“In achievement based-societies, an individual could achieve the rank of chief, through a number of routes: success in warfare, or religious/ritual means being among them . . . Rank does not pass automatically to off-spring, but chiefs can take steps to try and confer honour on their children and put them in a strong position to achieve rank themselves” (worldsocialism.org). Society had become hierarchical and that led to royal dynasties.

Once monarchies became established they needed some mechanism for staying in charge; enter the coercive power of guards and the willingness to use violence to suppress opposition.

The Development of Feudalism

The system developed into one where the monarch owned everything and bought the loyalty of barons by granting them high positions or the use of land. And, the purchase of loyalty went further down the pecking order; barons granted land use to vassals who passed some of their rights on to peasants.

The peasants worked the land and grew crops and raised animals; some of the produce was for themselves and some had to be given to those higher up the social ladder.

This chain of gifting carried with it obligations. In time of war, the monarch called on the barons to supply knights and foot soldiers. The obligations worked the other way too; serfs and the lower orders could count on their superiors for protection.

This system first appeared in the eighth century of the Common Era and by the 10th century it covered all of Europe.

It was, of course, hideously unequal. Serfs had virtually no rights and lived in a condition that amounted to slavery. Social mobility was nearly impossible. Just as kings and queens handed their privileges on to their children, serfs handed serfdom onto their offspring.

But, feudalism went into decline: “The Black Death rampaged European communities, leaving fewer individuals of lower social classes to be ruled by the upper class. Labor became a scarce commodity, thus having more value and leading to a system of monetary reimbursement for work” (worldatlas.com).

The building of a wage economy and the rise of a middle class were the fatal blows to feudalism, but it was still a long haul for the growth of representative government and civil rights.

And, Here Comes Capitalism

As feudalism was flourishing, a parallel system was evolving as a merchant class developed. By the 14th century, people with money (capital) were trading goods and banking houses were lending money to finance the buying and selling. And soon, the trans-Atlantic slave trade was making some of these merchants and bankers very rich. This was a form of capitalism, but the real deal flourished with the Industrial Revolution that started in the 18th century.

The upper class of people with wealth did not disappear when feudalism went into its slumber; they joined the merchants and put their money to work by building factories in the growing cities.

The people who used to till the soil were now recruited to operate the machines in the mills. The situation for the lower classes didn't change much, they swapped rural poverty for urban poverty. The factory owners lived in grand houses and their workers had to make do with slums.

It was the same inequality as under feudalism; a tiny number of people with all the wealth and power and a huge underclass with nothing.

“While elites are vastly outnumbered, they control the army, the police, the state apparatus. An attempt to seize elite wealth would be met by overwhelming coercive power, and even successful revolutions have a dismal record of largely replacing one elite with another, usually at the expense of many lives, mostly of the poor. So, for those outside the elite world, their least-worst option is to accept subordination . . .”

— Philosophy professor Kim Sterelny

But, early capitalism became rapacious, there were swindles galore, and frightening boom and bust cycles. Capitalism needed to be tamed.

Trade unions emerged and political parties no longer beholden to the demands of the rich elites started winning elections. Laws came into force to stop businesses fixing prices, abusing workers, selling unsafe products, and cheating customers. Of course, companies routinely break those rules:

  • In 2013, Apple agreed to a settlement for fixing the price of e-books;
  • In 2011, Massey Energy was found to have “routinely ignored obvious safety hazards and let conditions develop that allowed a small methane ignition to propagate into a massive coal dust explosion” (US Mine Safety and Health Administration) that killed 29 miners;
  • In 2014, General Motors was fined $35 million for selling Chevrolet Camaros with defective ignitions that caused the deaths of 13 people. The company knew about the fault and did nothing;
  • In 2020, Well Fargo agreed to a $3 billion settlement for cheating its customers into opening unnecessary bank accounts.

And, since free-market capitalism, beloved of all right-wing politicians, has taken hold the gap between the rich and the rest has become a mighty gulf.

Bonus Factoids

  • Percentage of U.S. wealth owned by top one percent of income earners in 2020: 32.1%
  • Percentage of U.S. income earned by top 20 percent in 2019: 51.9%%
  • Percentage of U.S. income earned by bottom 20 percent in 2019: 3.1%
  • Number of times average CEO compensation is greater that average worker in U.S. in 2020: 299
  • in 1980: 42
  • in 1950: 20
  • Net worth of the Walton family, owners of Walmart, in 2020: $247 billion
  • Estimated number of Walmart employees that receive food stamps: 245,000
  • Names of three men whose combined wealth equals that of the bottom half of U.S. population: Bill Gates, Jeff Bezos, Warren Buffet
  • Year in which Republican Party tax cuts lavished “breaks on corporations and the wealthy while taking benefits away from the poor and the middle class” (New York Times): 2017
  • Year in which, for the first time in history, U.S. billionaires paid a lower effective tax rate than the working class: 2018
  • Year in which the U.S. Census Bureau reported that income inequality rose to its widest gap in 50 years: 2019
  • Globally, the percentage world's wealth owned by the richest one percent: 44 percent

The Rise of Inequality

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2021 Rupert Taylor

Comments

Rupert Taylor (author) from Waterloo, Ontario, Canada on August 24, 2021:

Of course, a subject of this complexity really needs a book-length treatment, but this is not the platform for such.

Consistently, over the years labour laws have been gutted, environmental regulations weakened, and corporate malfeasance is often overlooked.

Mr. Happy from Toronto, Canada on August 24, 2021:

For a short beginning in understanding the problem of inequality, this is a good article. Of course, "the truth is rarely pure and never simple" (Oscar Wide) and once we look further into the problem, we get to that inverted pyramid and realize the problem is much bigger than we first thought.

We need better education, more stringent and transparent laws regarding worker's rights and those concerning corporations. We need better environmental oversight and penalties introduced for those who break those laws.

"Well Fargo agreed to a $3 billion settlement" - How does this help in any way, when "Wells Fargo annual gross profit for 2020 was $72.34B"? That fine is a joke and people should be out in the streets because of it. Poor people go to jail, banksters pay a little fine (compared to their revenue) and get to play crook all over again. Out-@#$%ing-rageous!

Anyway ... I'd throw them all in jail for decades these bloody crooks. Sigh ...

Thank You for your article once again. All the very best!

Miebakagh Fiberesima from Port Harcourt, Rivers State, NIGERIA. on August 23, 2021:

Rupert, this system of income inequality is very baffling. Many expect the government to tilt the tide a little in favour of the poor and middle class. But government all over the world has failed to do anything, being under a sort of political control. Thanks for sharing an informative, interesting, and thought provocating article.

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