Originally published at Quora:
“Solve” wealth inequality? Presumably what is meant is lower it which is making some pretty large assumptions in itself. Why is it a problem that must be reduced?
But assume that we must reduce it for some unknown reason or another. One useful thing would be to reduce it the same way we did last time.
If you look at that Saez and Zucman work on wealth across time you can find an offshoot of their main paper which talks about the UK. And the really marked change over time is how agricultural land – the great aristocratic estates – falls dramatically in value in the late 19th century. This is by far the largest contributor to the reduction in wealth inequality over the past century. Massively greater influence than anything else.
So, what caused this? How did we bankrupt that aristocracy?
The abolition of the Corn Laws made it possible, unilateral free trade. Then technological development. The ocean going steamship opened up the American prairies as grain suppliers in the 1870s. Massive agricultural depression follows in the UK. Then the railways opened up the Ukraine as suppliers in the 1890s. Depression again in UK agricultural prices.
As David Ricardo would point out if he were still around, lower profits from farming will mean lower prices for farmland.
And that really is basically it. Free trade meant that those who had a stranglehold upon an essential input – the land – lost their wealth. So, if we want to make the currently rich lose their wealth we should have free trade. Because that competition from the rest of the world will reduce that privileged position the currently wealth have in our economy.
Rip roaring capitalism and free markets on a global scale – that’s how to deal with wealth inequality. As it is with income inequality as well. After all, global inequality has been falling these past few decades of neoliberalism.
My distinct suspicion is that this will be seen as the wrong answer. For the existence of wealth inequality is, by some to many at least, being used a a reason why we shouldn’t have capitalism and free markets. To thus say that the answer is to have more of them is not the desired response. The aim is to find a problem they don’t solve so that there’s an excuse to get rid of them, nothing else.