Wealth, Freedom and Inequality in the 21st Century

Very often in human history you realise the meaning of events only in hindsight. (Yuval Noah Harari)

Recently I have been at two events which are focused on economics and wealth inequality in the 21^st Century and have provided me with the opportunity to reflect on our work as Intersticia within the broader context.

In this post I will report on the first, a seminar hosted by the Stone Centre at University College London on The Evolution of Wealth Inequality at the British Academy.

The seminar was heavily academic but provided an opportunity to listen to a range of experts muse on the role of wealth (and non-wealth) within the modern world.

Let’s first consider what we mean by the word wealth.  Wealth may be considered as

the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions.

The United Nations definition of inclusive wealth is

• a monetary measure which includes the sum of natural, human, and physical assets. Natural capital includes land, forests, energy resources, and minerals.
• Human capital is the population’s education and skills.
• Physical (or “manufactured”) capital includes such things as machinery, buildings, and infrastructure.

On a national scale this is often measured by The Gini co-efficient, a statistical measure of wealth distribution developed by the Italian statistician Corrado Gini which measures and rates income distribution (also called wealth distribution) on a scale of 0 (perfect equality) to 1 (maximum possible inequality) expressed as a percentage (see here).

According to the 2022 World Inequality Report

Contemporary global inequalities are close to early 20th century levels, at the peak of Western imperialism.

This means that there is an increasing gap between the ‘haves’ and the have-nots’ which both the United Kingdom and Australia are witnessing, and, to exacerbate the situation, over the next 25 years it is estimated that some $100 trillion in “wealth” is being, or will be, transferred from the baby boomer generation to their heirs and charities.  Almost all of these assets will be inherited by people born after 1980. (Financial Times, 23^rd August, 2023).  In Australia alone it is estimated that some $5 trillion will be passed on – around $2.3 trillion to children, $1 trillion to their grandchildren, and $1.7 trillion to charities (Australian Financial Review).  In the US the Boomer Generation holds half of the nation’s wealth (see here) and whilst some are ‘giving while living’ others are squirreling it away for the proverbial rainy day.

In her opening statement at the Stone Symposium Professor Wendy Carlin began by citing the direct relationship between wealth and personality, specifically relating to risk taking.

Because personality shapes goals, attitudes, and behaviour, it is important to understand the personality traits that characterize the rich. …  High wealth was associated with higher Risk tolerance, Emotional Stability, Openness, Extraversion, and Conscientiousness. This “rich” personality profile was more prominent among individuals who had accumulated wealth through their own efforts (“self-mades”) than among individuals who had been born into wealth (“inheritors”). (Leckert et al, 2022).

There are of course two extremes:

• one is that of the ‘rich and famous’ who seem to have a psychological predilection for risk taking (see this article and this one)
• The other is that if you have nothing to lose you might as well risk what you have to get more or at least to survive.

This is hugely important because not only does the behaviour of wealthy people impact capital markets and health care systems but

very wealthy people influence political and societal processes by wielding their economic power through foundations, lobbying groups, media campaigns, as investors and employers.  

One key question that the Symposium sought to answer was where does wealth inequality come from?  And why is it deemed to be undesirable?

One way to approach this is to consider the concept of ‘balance’.

Balance holds a valence so positive that it approaches an unquestioned ideal. The sense we have of its presence or absence in large measure determines our judgment of what is right or wrong, ordered or disordered, beneficial or destructive, safe or dangerous. Its opposite, imbalance, almost invariably signals sickness and malfunction. (Joel Kaye)

It seems that throughout history human societies have achieved this balance, or levelling, often through major crises and Economist Sam Bowles described the link between unusual and unsustainable natural conditions combined with the inheritance of natural advantages and systems that supported the intergenerational inheritance of resources.  The main question he posed is that this may have been the case with physical resources but how will things change as resources become ‘weightless’, intangible and abstract, and what sorts of frameworks will be required to measure them?  This reminded me of conversations that we have in Web Science about the need for public education especially in critical thinking, but also the need to recognise the impact of different psychological types and neurodiversity in both the creation and consumption of digital goods and services.  It also made me think of the Star Trek Economy in which The Federation, Star Trek’s central interstellar civilization, operates on a post-scarcity model where technology has eliminated material want, and individuals strive for self-betterment rather than financial gain.

This then leads to the question of systems of governance which Professor Amy Boggard explored in her description of collective versus non-collective approaches to farming.  Her main argument is that with the rise of cities it wasn’t the technology that was the main agent of change but how it was used, for example the garden plots were more productive than field plots but field plots gave greater yields.

Listening to this made me think of the work of Jean-Jacques Rousseau in his conviction that cities, and civilisation, was a kind of trap because of the inability to escape governance systems that entrenched inequality, and therefore reinforced the relationship between wealth and power.  The speaker who raised this was David Wengrow who introduced the impact of Principle Agent models as they play out in societal dynamics in particular as it relates to Freedom and Slavery.  He very insightfully pointed out that many Slaves throughout history have been wealthy, but they have not been free.

Until surprisingly recent times, spaces of human freedom existed across large parts of our planet. Millions lived in them. We don’t know their names, as they didn’t carve them in stone, but we know that many lived lives in which one could hope to do more than just scratch out an existence, or rehearse someone else’s script of ‘the origin of the state’ – in which one could move away, disobey, experiment with other notions of how to live, even create new forms of social reality.

Sometimes, the unfree did this too, against much harder odds. How many, back then, preferred imperial control to non-imperial freedoms? How many were given a choice? How much choice do we have now?  (Wengrow 2004).

The question of human freedom and it’s inter-relationship with technology was explored by Simon Johnson who described the work of MIT on Shaping the Future of Work in which he particularly linked the ownership of technology and the generation of wealth the introduction of worker surveillance during the Industrial Revolution leading to the obsession with “productivity” which the diffusion of digital information systems has only exacerbated and accelerated.

In the age of Smart Machines Johnson asks “Can we have Pro-Worker AI?” with the recommendation that

Public policy has a central role in encouraging this positive path of technology to complement all workers, elevating the achievable level of skill and expertise for everyone.

He suggests that the purchasers of technologies and their products can combine to create sufficient buying power to influence “Big Tech”.  The challenge of course is that this, just like the Break Up Big Tech movement which argues for the use of Anti-Trust laws, relies on the intervention by government agencies which are as powerless, naïve and useless now as they were 12 years ago when Facebook bought Instagram for $1billion bringing social media brands under one brand and beginning the path to the dominance of the five major technology companies now in 2024.

In my recent post I talked about the ‘race to the bottom’ in terms of technology development with the focus on productivity and profit, and, to me the enslavement of humanity to the machines, something which Samuel Butler foreshadowed in Darwin Among the Machines in 1863, is really what much of this is leading to.

The final speaker of the day was Walter Scheidel who made a couple of fascinating statements:

• Historically State/Empire becomes an engineer for entrenching inequality
• Violence as the ‘great leveller’ and the single most important means of levelling wealth and income inequality in human history. This may be the consequence of pandemics or natural disasters.  Ordinary wars do not necessarily reduce inequality, they often increase it due to more resource extraction and regressive taxation
• There is a relationship between the proximity to war and the commitment to the welfare state

In pre-modern societies there was little or no levelling without shocks.

Scheidel believes that the era of mass social revolutions may be past, but it may be that there are two major shocks on the horizon.

The first that I see is, of course, Climate Change.  In “The Earth Transformed” historian Peter Frankopan argues that natural environmental activities such as droughts, volcanic eruptions, the Little Ice Age, Medieval Warm Period and contemporary climate change impact and coincide with societal change.  Human groups either adapt and benefit from these or they become victim to them.  One advantage we have over our forebears is that we do have technologies and information systems which can help us more fully understand its impact on the natural world, assist in more accurate forecasting, and hopefully help us begin to adapt.  Whilst there may be the current hype-cycle of the economic impact of Artificial Intelligence (see The Economist) I believe that these technologies are far more important in solving human existential problems than enslaving us for the commercial gain of a handful of ‘tech bros’, and this is where somehow the economic models underpinning them have to change.

The second shock that I see is that of the changing power dynamic between the West and the Rest, a new Cold War 2 which historians such as Niall Ferguson believe is already upon us.  This is also where the tech-wars are being played out, not just on the fields of Ukraine but in the duality of thinking about how technology is to be used in the complex kaleidoscope of human societies.  As George Orwell states in You and the Bomb

It is a commonplace that the history of civilisation is largely the history of weapons.

This history is there for us to draw on and consider, but all too often we have dismissed it.  Niall Ferguson believes that the lessons of the Cold War have been forgotten; NASA has forgotten how to get to the Moon; and all too often we see the mistakes of the past being repeated.

This is where there needs to be a much broader approach taken, and where I felt there was a lot of very Eurocentric thinking in the talks at the Stone Seminar.  To be fair David Wengrow remotely challenged this by citing Jack Goodie in defining wealth as not just material goods but suggesting the inherent value of traditional knowledge as wealth in itself.  But this is not enough.

In my next post I will talk about the 2024 Complexity School held at the Universidad de los Andes in Bogota, Colombia, in partnership the Santa Fe Institute (SFI) where I sensed an important emerging narrative.

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