French economist Thomas Piketty rose to global prominence last year when he proposed a progressive global tax on wealth. After analyzing figures from archives dating back 250 years, he argued that economic inequality has risen to socially unacceptable levels, and that the problem can be corrected only with the redistribution of the world's wealth. Unsurprisingly, reactions to Piketty's proposal and foreboding predictions have been many and varied. But, more important, his idea has raised a critical question: How should we correct the growing imbalance within society, and does it even need to be corrected at all?
Ian Morris added depth with a 15,000-year perspective on this question, noting that the economic systems of mankind's various eras have homed in on a balance at different levels of inequality, "creating selective pressures that reward groups moving toward the most effective level and punish those moving away from it." Though it is still too early to predict what level of inequality our modern economic system will settle on, we may be able to predict who will profit and who will be left behind this time around.
Picking on Piketty
Using historical figures to make predictions about today's rapidly evolving economic system can be tricky. A recent study by Morgan Stanley, for instance, pointed out that modern inequality stems from unprecedented population growth and increasing globalization. While the global population did indeed double during the 1970s and 1980s, giving rise to greater economic inequality, this trend has been subsiding since the 1990s. In many developed countries, labor forces are actually shrinking — something immigration patterns will likely be insufficient to reverse. Perhaps the present system, then, is already beginning to stabilize itself without the help of a new tax on the wealthy.
But Marc de Vos, the director of the Brussels-based think tank Itinera and a professor at Ghent University, disagrees. While he supports Piketty's theory that global inequality is worsening and trouble lies ahead, he adds another dimension to the argument: All of the disparity between socio-economic classes seen today can be traced back to the nature of humanity.
According to de Vos, economies begin to reward individual performance over standardized production as they shift their focus from manufacturing to services. Thus, rewards are allocated on an individual basis. Meanwhile, globalization is expanding the available labor pool and enabling companies to access markets across national borders, allowing one individual to compete with another on the other side of the world. Combined with the right technology, this wide-ranging labor pool can extend a company's reach to the corners of the global market — or, in the hands of a more savvy competitor, block access. The modern trend of the global economy's transfer, en masse, onto the Internet has opened up an international bazaar to anyone behind a computer screen with a simple web hookup. And the steady integration of more of the world's women into the workforce, along with waves of migration, has diversified the choices and opportunities within society even further.
The expansion of economies, coupled with growing diversity, automatically breeds economic inequality. But de Vos argues that not all inequality is necessarily bad. We must first distinguish between acceptable and intolerable differences among people's conditions of existence if we hope to come up with a workable solution.
Unequal but Fair
The emerging economy, de Vos says, rewards those who have the talent and know-how to make use of technology and globalization in their pursuits, leaving behind those who do not. In his book Unequal but Fair, de Vos brings effort, merit and responsibility back into the discussion. It is not, de Vos argues, that the accumulated wealth of the past will determine the inequalities of the future, as Piketty says; rather, the disparities in individuals' aptitudes and attitudes will. De Vos proposes that we are transitioning into a new capitalist system that marries human capital with financial capital, in which the former will rapidly become the more important of the two, but more of the latter will be needed to succeed.
The modern trend of the global economy's transfer, en masse, onto the Internet has opened up an international bazaar to anyone behind a computer screen with a simple web hookup.
If correct, this new diagnosis requires a new form of therapy. As personal and cultural diversity inexorably translate into economic inequality, it is understandably tempting to counter the trend by taking from the rich and giving to the poor. And indeed, the concentration of too much capital — whether in the form of wealth or talents that allow the few to overexploit openings in the market — can impinge on the chances of others. Regulation and legislation will therefore always be needed to keep matters in check and better align financial profit with economic merit.
But de Vos also pleads for a fundamental shift in our perspective. Instead of focusing primarily on taxing wealth, he says, the bulk of our attention should be dedicated to expanding opportunities for those still left behind, but without dragging down those who are already ahead. Though he admits that as an economist he is strong in analysis and short on concrete solutions, de Vos argues that the most effective use of resources is to improve the environments our children are reared in during their formative stages. For example, a program that funnels investment toward poor neighborhoods and families that often seem caught in a cycle of inequality would yield the highest returns, both for the individuals in question and for society as a whole.
Unequal but Sufficient
I am not an economist, but an economic theory based on the nature of man and the formative stages of the mind certainly does get my attention. Of course, no matter how much effort is made to reduce inequality, there will always be significant segments of the population that are unable or unwilling to reach for opportunities to improve their economic status. Perfect equality is unattainable, and it may not even be a goal we are morally obliged to strive for. Princeton philosopher Harry Frankfurt's doctrine of sufficiency says that "the moral imperative should be that everyone have enough." That is very different from saying everyone should have the same.
But what is "enough"? According to Frankfurt, it is not about setting a limit, like the line of poverty; it is about meeting a standard of being content with what one has, and that no amount of money would make an appreciable difference in that contentment. True, it seems fairly unrealistic to try to build an economic system upon standards that differ from person to person and that, to succeed, would require every participant to have the wisdom and insight to refrain from asking for the impossible or superfluous. But if we simplify the target and create a system based on a single standard that all humans share, we might stand a chance.
Contentment Is Encoded in Our DNA
Every person is different. However, despite the wide range of colors, shapes and sizes people display, we differ from each other much less than we think. The Homo sapiens genome is remarkably homogenous compared with nearly all other mammals. Over the past few million years, DNA has evolved to program mankind's pleasure and pain centers to best prepare our species to survive in its surrounding environment. Hunger becomes uncomfortable enough to urge man to hunt, while the pleasure of another human's company drives man to form bands just large enough to keep him safe from predators. Because DNA does not vary much from one person to another, these conditions of contentment should also be rather consistent. The problem is we have lined up the individual characters of our genetic code, but we cannot read the sentences of expression that they form. The more we try to unravel the Gordian knot of our DNA, the more complicated we discover it is.
There is an alternative answer, though. Though we cannot break the code from the bottom up, we can study its effects on everyday life. Anthropological studies of existing and extinct hunter-gatherer societies already give us valuable insight into the conditions of existence to which our genome has become attuned. Teeth markings, for example, indicate the ideal proportions of food and nutrients that guide our current food pyramids. I am not proposing that we return to the proverbial caves; the modern world is very different from that of our ancestors, and in many ways better for our survival. However, we do have a range of technologies at our disposal that we can use to mold our current environment to better fit the conditions we need to feel content.
Defining a level of contentment based on the standards ingrained in our biology may not be readily possible today, at least not to the level of detail and certainty that we can be comfortable with. That said, the biggest advantage of this goal is that it does not aim at a moving target set by the decision-makers of the day. Instead, it builds upon a concrete foundation that is common to everyone and identifies the living conditions that are not only sufficient but also, in the end, the most healthy, even for those with the ways and means to live extravagantly outside them. By factoring the nature of mankind back into the equations underpinning our economic systems, we stand a better chance of keeping those systems firmly grounded in reality.