Income inequality is an inescapable topic in American political discourse in 2017. It’s probably more accurate to talk about “wealth inequality,” though, since the most influential elites and corporations derive the bulk of their monies from the passive appreciation of assets (like stocks and bonds), rather than from paychecks. That quibble aside, why is inequality an issue worth talking about? Let’s look back to an event that ended a century ago this year – the First World War.
On the eve of World War I, the top 1% of British residents controlled a staggering 70 percent of its wealth. Similar gaps prevailed in France and Germany. These nations were the pivotal actors of the conflict, with Russia, the U.S., Austria-Hungary and Italy its secondary players. Inequality was an essential feature of all the pre-WWI societies in Europe and North America that had just emerged from the Gilded Age.
At the same time, many of these countries were in fact empires, overseeing vast territorial holdings spanning the globe. The U.K. and France were the preeminent colonial powers, but almost every industrialized country at the time, from the U.S. to Japan, had gotten in on the game starting in the late 1800s (indeed, the Anglo-Russian struggle for contorl of Central Asia was called “the Great Game”).
Inequality and imperialism were interrelated. With so much of all the western world’s wealth controlled by so few, there was an oversupply of money seeking out an inadequate amount of investment opportunities. The surplus of investible assets was driven by poor domestic aggregate demand stemming from inequality; hence, the need to continually look abroad for speculative openings offering high returns.
More specifically, colonial empires and massive militaries were the direct consequences of the disproportionate influence of a tiny, wealthy set of elites driving major policy decisions. Incidents such as the First Moroccan Crisis illustrated the high stakes of holding onto remote territory. Meanwhile, expansionism into Africa and Asia was reinforced by the growing power of corporate monopolies and cartels seeking to broaden their market pentetration to global scale.
We all know how World War I was resolved, with Germany in ruins, Russia converted to the USSR, and the U.S. with a newly assertive role in global politics, at least temporarily. But we don’t know how the next such crisis of inequality and imperialism – namely the one occurring right now – will end.
Since the Asian financial panic of the late 90s, the global economy has been dominated by speculative bubbles that were products of too much capital chasing too few opportunities. After Asia, there was the dotcom bust in 2001, the housing meltdown in 2008, and the current absurdities in crypto currency (e.g., Bitcoin) and Silicon Valley (raw water, anyone)?
Along the way, there has also been considerable consolidation in virtually every industry in the U.S. Mega mergers of hospitals, telecoms, retailers, etc. have concentrated growing amounts of power in fewer hands. Gigantic corporations including Microsoft, Comcast, AT&T, and Amazon, far from being forces for progress and inclusion as their modern PR-tailored images might suggest, have now aligned themselves with the far right-wing of the Republican Party to ensure low corporate tax rates. This is why you can’t separate the business aspects of the GOP from its racism; business supports provides the resources the party needs to exploit disadvantaged groups on other fronts.
Big business was central to the chaos that preceded WWI, primarily through its stake in colonial empires and military spending. Decades later, German companies were pivotal in convincing President Paul Von Hindenburg to appoint Hitler as chancellor, despite the latter’s defeat in the 1932 presidential election and his party’s lack of a governing majority in the Reichstag. It was big business, not the people led by “populism,” that enabled the most destructive warfare of all-time.
I’m not saying we’re heading for another 1914-1945 cataclysm. We should be wary, though, of how inequality is surging at a time when corporations are consolidating and supporting politicians who also favor enormous mlitary spending and possible adventurism in theaters such as Iran and North Korea.