One of the most important books published in recent years is “Capital in the Twenty-First Century” by the French economist Thomas Piketty. This book, which is based upon an enormous amount of carefully analyzed data, portrays the history of economic inequality in capitalist societies, focusing mainly on Europe and the United States.
The central message of Piketty’s 685-page treatise is that all capitalist societies have a strong tendency to generate economic inequality, which can become so extreme as to eviscerate political democracy.
But this is not the only important message contained in “Capital in the Twenty-First Century.” A dramatic and unexpected relationship revealed therein concerns economic inequality and warfare. Rather surprisingly, the two world wars — especially World War I — produced a huge decrease in economic inequality. For example, the value of national capital in Britain, France and Germany stood at about 6.5 times the value of national income in 1910, but contracted to only 3.5 times national income in 1920, according to Piketty. This 46-percent contraction in the value of capital induced a huge reduction in the economic inequality between the 10 percent of the population (or much less) that own most capital and the 90 percent of the population (or more) that own little or no capital.
With regard to France, Piketty writes:
“To a large extent, it was the chaos of war, with its attendant economic and political shocks, that reduced inequality in the twentieth century. There was no gradual, consensual, conflict-free evolution toward greater equality. In the twentieth century it was war, and not harmonious democratic or economic rationality, that erased the past and enabled society to begin anew with a clean slate.”
Much the same could be said about Britain, Germany and (to a lesser extent) the United States.
Why did the two world wars reduce economic inequality in advanced capitalist societies? Physical destruction of capital, though very extensive, was not the main cause. More significant factors were taxation of the wealthy to finance war, inflation that reduced the real value of rent incomes, loss of foreign assets, rent control, expanded social welfare and nationalization of industry (where it occurred). Of course, it is by no means certain that future wars would have the same inequality-reducing effect.
Reducing economic inequality in a capitalist society is surely a good thing, because it enhances social solidarity and protects political democracy. However, warfare is an extraordinarily terrible thing even if it sometimes cures the disease of extreme economic inequality. Such a cure, in my opinion, is even worse than the disease. Fortunately, there are practical policies that can reduce both capitalist economic inequality and the likelihood of warfare. These policies include taxation of capital, expanded provision of social services, transfer of wealth from rich to poor societies and international cooperation to protect our environment.
The Rocky Mountain Peace and Justice Center’s “Peace Train” column runs every Friday in the Colorado Daily.