The tectonic plates of Western societies are moving and are giving rise to far-reaching changes. Guido Alfani (1976), professor of economic history at Bocconi University in Milan, has just published As Gods Among Men: A History of the Rich in the West (Princeton University Press). West) in which he analyzes the trajectory of the wealthiest from the Middle Ages to the present day. And it detects profound changes in the role of these economic elites that lead to the fact that, unlike what had happened for centuries, the wealthiest now contribute less than ever to their societies and, instead, have free access to political power. as the cases of Trump or Berlusconi show. Meanwhile, inequalities continue to grow.
Are there more rich people now than before?
In absolute terms obviously yes. In relative terms the problem is that paradoxically we have less information about the global distribution of wealth. As a general trend, my impression is that we are still a society in which the percentage of rich people is quite high, which could be considered good, but this also means that we are a quite unequal society.
Even so, in this aspect in the West we are not in the worst conditions from a historical point of view, which, on the other hand, occurred at the beginning of the 20th century, before the First World War. The exception is the United States, which today is more unequal than ever and which constitutes a special case, because in the 19th century it was quite egalitarian unlike the European states for which we have information. The United States is the most unequal large country in the West.
Is inequality inevitable?
Probably yes. We know of no human society in which, in practice, there has not been at least some level of inequality. A certain level that has a probably positive function at the social level because it serves as an incentive to try to improve one's own conditions. In a society, if this desire to improve is shared with many people, it can lead to progress in the collective standard of living. The problem is that no one knows exactly how much inequality is needed to have this positive effect. What we are sure of is that today we have much more inequality than we would need to promote this process, and hence the problem, excessive inequality.
So the inequality is not strictly negative.
As I said, a certain level of inequality has a useful function, since it can constitute an incentive. The problem is that the level needed is probably much lower than all the inequality that exists today. Is there anything positive about further increasing inequality? Probably not. The problem, however, is how to reduce this inequality without possibly also having unwanted side effects.
What are those side effects?
The question is whether inequality can be reduced in a way that is not traumatic, because in general in history the great phases in which inequality is corrected coincide with great catastrophes, such as the plague of the 14th century or world wars. But historically there have also been moments in which it has been possible to contain or reduce inequality without harming society and without a catastrophe accompanying the process.
This occurred in the decades after the Second World War, when in the context of the creation of the Welfare State, inequality was continuously reduced until the 1970s, although the process was then reversed starting in the 1980s. In that period there was no disagreement between the left and the right about the idea that taxation should be very progressive and that inheritances, for example, should also be taxed to a certain extent. All agreed. It was a different context, in which capital could not circulate with the freedom of today, so it was more difficult, for example, for a super-rich person to move his residence to a tax haven and escape taxes.
I'm not saying that we can go back exactly to that system, but from a historical point of view, this period tells us that it is possible to reduce inequality without having negative effects and perhaps instead have positive effects, which in the case commented were the expansion and improvement of certain political rights, the improvement of women's rights and access to better services for all.
But now the trend seems to be the opposite, that is, the dominant political forces tend to dismantle the welfare state. This does not seem to be the way to control inequality.
In practice it is not. There are certain paradoxes in this, such as when a political platform is not in line with making the rich pay more, it presents it as the opposite, as something compatible with the idea of fiscal progressivity. It's a bit absurd, but as we know in politics, coherence is not necessarily a requirement.
What we can say is that in practice in very few places in the West we have seen in recent years a tendency to increase taxes on the wealthiest, even if only in an extraordinary and temporary way, for example during crises, so I think that there is no will to do it. And in my opinion there is no will to do so because the majority of the center-right parties in the West have embraced the idea that Reagan and Thatcher introduced starting in the 1980s, which goes in the direction of simplifying the tax system and reducing rates. moving towards a simpler system. Meanwhile, the center-left avoids talking about taxation when it can because it fears that this will upset voters and focuses on other things. It is a somewhat complicated situation because it seems to me that from the population's point of view there is still a demand, especially in times of crisis, to make the rich contribute more.
At the beginning I talked about inequality in the United States versus inequality in Europe. Does that explain phenomena like Trump's?
In part, but it is not enough. Because? Because if we look at the wealth inequality that exists today, it is less than what existed in some Western countries at the beginning of the 20th century, when it reached its maximum in Europe. However, in none of the Western countries at the beginning of the 20th century would it have been possible for a super-rich person as we understand it today - that is, a wealthy person who did not belong to the ruling family or who did not come from a certain social background - would have become prime minister, because the voters' preferences went in another direction.
The idea was, and this was very clear in the United States, that those who had control of wealth, particularly industrial and financial wealth, should not have any control over politics. There was a shared fear on the right and the left that a group of super-rich who already controlled American finance and the economy could also control politics. And it was also against this perceived risk that the United States introduced its antitrust legislation.
Between the beginning of the 20th century and today, one of the things that has changed is that it is currently much easier to accept that a super rich person enters politics. In Italy we saw it with Silvio Berlusconi, who was a precursor from this point of view in the 90s and who, despite all the controversy that existed at the time over the fact that a great businessman could run to lead the Government, he was voted in and legitimately became prime minister. Trump, who by the way has never been as rich as Berlusconi, is a comparable case. His rise corresponds to a context in which voters much more readily accept that individuals who have very privileged access to economic resources can also run for president of the country.
In the book he talks about times in history when being very rich was not a morally good thing. Now society has changed to the point where a super rich person is admired and chosen to lead a country. Can you explain this evolution?
In the Middle Ages, the wealth of the nobility had a recognized function, which was to provide the public good. The problem was with the new non-noble classes that were getting rich, who were considered sinners for their greed. The Gospel is very clear in this sense: “it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of heaven.” Saint Thomas, for example, suggested to the ruling classes of the cities that they prevent their citizens from actively participating in international trade on the Mediterranean sea routes because, otherwise, they would become too rich and, therefore, the perfect Christian society would be destroyed. would look disturbed.
But in the 15th century the perception of the rich began to change. A social role is identified for them, and the rich themselves also begin to develop an interpretation of their activities that is not that of knowing they are sinners and, therefore, perhaps before dying, making donations, but also recognizing some of their own characteristics as virtuous. . And this only becomes stronger in the course of the modern age within Protestant Europe.
In this context, enrichment corresponds to an almost religious vocation and is something that is found throughout the Reformation. Even in the case of Calvinists, getting rich is proof of being predestined to salvation. It is part of a process that continues throughout the 19th century when there is also a strengthening of the bourgeoisie with respect to what remains of the nobility and continues to this day. Today the rich and particularly the super-rich are often admired and followed as if they were stars, role models. This is new. Obviously the condemnation of great wealth has not completely disappeared because it remains a cultural trait in the West, but nevertheless the vision of the super-rich as role models has never been so widespread and the fact that wealth can condition politics Much more than in the past is also linked to this change in the perception of the rich.
The rich have always had a responsibility, to contribute something to society, but now this has changed, there is a rupture.
Exactly. There has been a change in the social role of the rich. In the 15th century, the rich basically saved for the community, accumulating reserves of private economic resources. If the community needed them, they could use them because they could borrow money or because they could force them to pay taxes, especially in times of crisis. We see this role very clearly throughout the centuries, in moments such as the world wars and the period between those two conflicts. We see forced loans in time of war, tax increases in the 1930s during the Great Depression, Roosevelt's New Deal, which also had the express objective of making the wealthiest foot the bill for these anti-crisis policies.
But we don't see this today. In the 21st century, starting with the Great Recession of 2008, we have had the sovereign debt crisis in many European countries, Covid which was very costly for public finances, and now there is a war in Europe. There is a sequence of crises and in virtually none of them have the rich been asked to contribute more. Yes, there have been demands from citizens, but the governments have not done anything about it and I think it has been a political decision.
Because?
I'm not sure, but I suspect that overall this situation reflects that the rich have a greater ability to influence policy-making. For this it is not necessary to have an explicit alliance, as long as some who make up a group with great access to resources try to exert pressure in a social and cultural context in which this is relatively acceptable. And then obviously all initiatives aimed at collecting more taxes come to a standstill.
That causes a double problem. The first is that there is a lack of crisis management resources that could otherwise have been used. From the Middle Ages to the present day, in times of crisis, people are asked to contribute more in wars, for example, or to confront epidemics. Now, in addition, states take care of many more things than in the Middle Ages. These are times when a lot has to be spent and resources are lacking. Therefore, in the case of Covid, public debt has had to increase, which is a difficulty especially in countries that already had very high debt. Who will pay for it? If taxation becomes less and less progressive, it is unlikely that they will be the richest.
There is a second problem. From the Western cultural point of view, the demand for the rich to help society in times of crisis, which began to become explicit in some way since the Middle Ages, has not disappeared. The social function of the rich is basically maintained, and that is why many have demanded this type of measures, especially during crises. So if the rich stop complying it is because they try not to or because they are not forced or asked to do so. And if so, what purpose do they serve society?
If they have no positive social function to fulfill, then all that remains are the potential problems they cause, which could even be political. Now, not only have they stopped contributing to society, but they have gained access to more political power. It is a paradox, because the moment they become directly involved in policy-making they should give something more in return than in the past, but exactly the opposite seems to be happening. I think this is a problem that will only get worse in the future, because inequality is likely to continue to increase, since it cannot decrease on its own.
We've talked about the differences between today's rich and yesteryear's rich, but what are the similarities?
The rich are human beings like everyone else. Even if we take today's super rich, like Elon Musk, they are no different from us. The only difference is that they have a lot more money. What does this mean? That their personal motivations are generally similar to those of others, such as the fact that they are not particularly happy to pay taxes. This is a feeling shared by almost everyone, what happens is that in their case they have the ability to evade them. The rich of today have all the virtues and vices of the rich of the Middle Ages, but in a context in which they can do things without certain controls and with much less social condemnation.
A super-rich today who spends a lot of money on totally obscene things, like going on a trip to orbit (alluding to the founder of Amazon, Jeff Bezos), receives a certain social condemnation for it, because that means wasting money. But in the Middle Ages perhaps there would have been a law that simply prohibited him from doing so, although later in reality perhaps this simply meant that he did it by paying a fine. In any case, the social condemnation was stronger.
A super rich person today is much richer in relative terms than in the Middle Ages and that is another difference. So, if in the Middle Ages the problem of disproportion even between the possible political power of a super-rich person and an ordinary person was perceived, today the problem is the same, but it has expanded, because the opportunities to accumulate wealth in the context of a globalized economy they are much greater.
The problems are the same, the context is different, so some things are easier. The political role of the rich is much less criticized today than at any time in the past.
