The Great Resignation. ( A Tough One for a Friday.)

The Great Resignation--as journalists, social scientists and economists are calling it--is here. People are leaving their jobs en masse. 

It occurs to me however, that one person's Great Resignation might be another person's Great Awakening.

People aren't leaving the workforce because they don't need to work. They're leaving because they've begun to wake up to the lack of equity--the unfairness--built into the system.

They're Awakening to:

--workers are expected to be loyal but they can expect no loyalty in return.

--workers are expected to work perhaps thousands of hours a year without pay.

--workers are expected to work more than the occasional weekend without additional pay.

--workers are expected to be ok with ending the year with fewer real dollars in their paychecks (after taxes and inflation) than they began the year.

--workers are expected to accept that they have less year after year, rather than more.

--workers are told they must accept factory-like working conditions, chaos and noise because open-plan offices maximize creativity when all they really do is strip away dignity and save the company rent.

--workers no longer regularly receive either raises or cost-of-living increases. They're often lied to about this.

--people with no knowledge of a particular industry--no skin in the game other than money--are running the industry.

--workers are meant to accept compensation inequities where the top of the food-chain makes 200 to 300 times the pay of a median worker.

--workers are tired of working for an industry that disparages the very work the industry is supposed to do. It commoditizes the "unfair advantage," (creativity) and promotes instead that which is a truly a commodity (data.)

--workers never actually see a paycheck or even a pay stub. Everything happens electronically and there is never a handshake or a thank you.

--workers essentially have no interaction with the people and the macro-forces that control their career path and livelihood.

Basically, there are two ways to run any sort of social organization. From a marriage, to a corporation, to a nation-state.

1. WITT. We're in this Together. When people--even those who are nominally unequal--share the risks and the fortunes in equitable proportions.

 

2. YOYO. You're on Your Own. Where powerful forces make the rules, take the money and blame you for your torpor and vassalhood.

I've been working fairly steadily since I was a child-star back in the early 1960s. I started paying into Social Security way back in 1961 when I was already earning a middle-class income because I had platinum blond hair and disarmingly winsome blue eyes and starred in some minor TV commercials.

I've had in that time maybe 50 jobs. From installing aluminum siding, to working as a night-clerk in a downtown Chicago liquor store, to assistant dean of students at Barnard College to about a dozen and a half agencies.

I've observed that most people enjoy work. They enjoy the fruits of their labor. And the sense that they are taking care of their own and building something, somehow.

What's changed isn't the work ethic of workers. I think societally, we might be having a Popeye moment. "That's all I can stands. I can'ts stands no more."

Maybe people are realizing what you realize when you wake up to the realization that you're in a diseased relationship.

You're putting a lot more into it than your getting out of it.

People are resigning because they're not resigned to accept that inequity.

--

BTW, if you want a macro-economic look at what's happening today, you might want to check out The Great Leveler by Princeton professor, Walter Scheidel. There's a lot of pretty heavy economics in it, complete with GINI coefficients that put a mere copywriter's brain into a spin cycle.

Nevertheless, if you can stick with it, you might understand something of my generation. I grew up at a time of economic compression--when the distance between the richest and the poorest was narrowing. When there was more fairness in the world.

It would be safe to say, entire generations (myself included) believed society was generally moving in the direction of more equality. Scheidel believes--and I go along with him--that what my generation regarded as normal was really an anomaly. Wealth begets wealth and poverty begets poverty. That's what's happening in the West today and the Great Resignation is just one result.

FWIW, here's the review of the book, since I can't imagine anyone but my brother and nephew, Ben, slogging through it. Mind you, it's a review from the cheery neo-fascists at the Wall Street Journal. So take it with a spoonful of gruel. Mean-spirited gruel.

The Surest Cure for Inequality

The peak of inequality in world history was 1914. What solved it? Total war —and decades of strife. Gregory Clark reviews “The Great Leveler: Violence and the History of Inequality From the Stone Age to the Twenty-First Century” by Walter Scheidel.

A British tank in World War I.

PHOTO: GETTY IMAGES

By Gregory Clark

Updated Jan. 20, 2017 4:37 pm ET

In academic economics as in electoral politics, inequality has become a topic of pre-eminent importance. Yet economics has no accepted theory of inequality—no scientific understanding of the mechanisms and processes that create it. Until recently, wealth distribution was regarded by many economists as a minor issue compared with growth. Too much focus on distribution was even considered a threat to growth. The economists who have offered theories of inequality tend to be those on the heterodox fringes: David Ricardo, Karl Marx, Henry George and, more recently, Thomas Piketty. Broadly convincing explanations remain elusive.

Into this vacuum steps an outsider, Walter Scheidel, a historian of ancient Rome and an ingénue in the brash world of economic analysis. “The Great Leveler” is an astonishing tour de force, a dense 500-page survey of the known history of inequality in all societies, from hunter-gatherers to hedge-fund profiteers. The author believes that settled, stable societies have an inevitable tendency toward greater inequality. The only substantive countervailing forces are all bad news: mass-mobilization wars, social revolution, plague and state collapse. The cure is worse than the disease. Thus in Mr. Scheidel’s telling Lenin, Hitler and Gavrilo Princip did more than the embrace of social democracy to make the 20th century an era of equality.

THE GREAT LEVELER: VIOLENCE & THE HISTORY OF INEQUALITY

By Walter Scheidel

Princeton, 504 pages, $35

The re-establishment of stronger states in Europe in the later Middle Ages was associated, Mr. Scheidel argues, with rising inequality—though here the evidence is thin. Before the onset of the Black Death in 1348, political stability created conditions that helped markets and towns flourish, generating a highly unequal society. As the population expanded, many independent peasant cultivators in England and France lost their land and were reduced to day labor. In France, for example, the typical plot size of peasants fell from 25 acres to less than 7 acres between the ninth century and the early 14th century. At the top, great lords magnified their possessions.Across the globe and across centuries, the author documents inequality increasing during conditions of peace and security in society after society, starting with Ancient Rome. As the empire expanded, Mr. Scheidel explains, the citizen-soldier state was replaced by the imperium, and the senatorial class magnified its wealth across the far-flung territories of the Pax Romana. Even at the level of provincial society, we can see evidence of increasing wealth concentration: Archaeological evidence from Pompeii shows how, in the period of about 160 years before the town’s destruction after the eruption of Mount Vesuvius, house sizes became steadily more unequal, as upper-class houses expanded their footprint and middle-class housing disappeared. The scholar Robert Stephan has looked at the variation of square footage in dwelling footprints elsewhere in the empire as a systematic measure of inequality. The dispersion in dwelling sizes in England was larger under Roman rule in England than in the preceding Iron Age or the later early Middle Ages. Centralized states become increasingly unequal states.

Then came the bad news (or good news from the point of view of equality): the catastrophic population losses of the Bubonic Plague era. All across Europe, these losses acted as a great equalizer. England’s population, for example, went from around six million people in 1315 to 2.2 million by 1450. The resulting shortage of workers in the deserted countryside meant that the real wages of unskilled laborers in England soared to levels not seen again until the 20th century. As land rents declined and cities contracted, the incomes and wealth of property owners shrank relative to those of workers. This equalizing trend, Mr. Scheidel notes, was particularly evident in the wealth-distribution records of northern Italian cities.

As the plague lost its grip and population again grew across Europe after 1500, however, the march of inequality resumed. England, the Netherlands and Italy all saw rising inequality in a process that industrialization did nothing to counter. In Dutch cities, one technical measure of inequality, the Gini coefficient on wealth, where higher is more unequal, rose from 0.5 in 1500 to 0.65 by 1750. (For comparison, the current number for the U.S. is 0.40.) In northern Italian cities, the rise was even more dramatic, from 0.65 in 1500 to 0.85 in 1750.

Even in the New World, the land of opportunity, the trend was toward inequality. In the territories of what became the United States, inequality grew steadily during the entire period from 1650 to 1914. In Central and Southern America there were similar disparities. The only counters were the social revolutions, which saw colonies break away from their motherlands.

The tale Mr. Scheidel tells is of a 2,000-year process of disequalization that was halted, in his account, only by the violence, misery and disruption unleashed upon the world in the 20th century—by two world wars and the great Communist revolutions in Russia and China. For him, 1914 appears to have been the peak of all inequality in world history, with the top 1% wealth share in the U.S. and Europe averaging 50% of all wealth, compared with only 35% in 1800.

Afterward, as the author shows, there were notable shifts in the economies of many of the participants in World War I and World War II toward greater income and wealth equality. In the U.S., France, Canada and Japan, for example, the income share of the top 1% fell from an average of 17% in 1939 to 9% by 1945. There was also a compression of wage differentials at the bottom. From top to bottom inequality was seemingly vanquished.

As the great wars become distant memories, however, and as revolutionary ardor matures into materialism and self-seeking, the march of inequality has resumed. And the future of mankind, in Mr. Scheidel’s account, is one of ever increasing inequality—or of violence and turmoil none would wish for.

What about more benign attempts to rein in inequality through policy? Can’t we attribute at least some leveling in the 20th century to the extension of the franchise from elite oligarchs to the common citizen? After presenting his historical account, Mr. Scheidel attempts to investigate these and other questions. With the extension of the franchise, there was a huge rise in the appetite of governments for taxation and spending. Yet various studies, he reports, find no association between the extent of the franchise and inequality. Across 184 countries from 1960 to 2010, for example, there was no significant observed effect of democracy itself compressing income distributions. More specific meliorist institutional measures, such as land reform, Mr. Scheidel argues, tended also to have little effect unless carried out in the context of violent, wholescale revolution. Absent war between China and the U.S., or the European Union breaking into warring kingdoms, there seems to be no prospect of ending the march toward disequalization.

Is this a convincing theory of inequality? No. The factors Mr. Scheidel points to are descriptive regularities, not mechanisms—processes that are observed but not understood. Any projection into the future is uncertain. He presents no Piketty-like rule of wealth acceleration, no law that wealth will accumulate faster than output whenever the rate of return on capital exceeds the rate of growth of output. There is no social mechanism underlying the apparent centripetal forces of inequality. It all just kinda happens.

In truth, the historical record is a lot thinner and more speculative than Mr. Scheidel acknowledges. And in terms of the 2,000-year record of increasing inequality before the 20th century, there are factors at play that he does not consider. One is the role of interest rates in determining wealth inequality. Income from assets gets capitalized into wealth through the interest rate. The lower interest rates are, the greater the wealth associated with a given stream of property income will be. An important long-run trend in the world over all of recorded history has been toward ever lower interest rates. Risk-free real returns in medieval Europe, such as on farmland, were 10% (farmland was a very safe investment, its value changing little decade from decade). In ancient Babylonia interest rates were at least double that level, according to most scholarly estimates. Returns on much riskier assets, such as U.S. equities, are now only 4%, and real returns on safe assets like government debt are 1%. A long trend toward increasing values for assets such as land, houses and equity makes it harder for people without wealth to accumulate significant wealth through savings from wage earnings or even from property income. This reinforces existing wealth inequalities. And we have no idea what future returns on capital will be.

Total war is certainly linked with declining inequality, but again Mr. Scheidel offers little insight as to why. There were so many individual elements to declining inequality in each country in the war periods: destruction of physical capital, hyperinflation, progressive war taxes, rent controls, unionization. But the total effects were fairly uniform. Is that because the wars accelerated processes already under way? The period of mass conflict, from 1910 to 1955, also coincided with dramatic social movements driven by ideology. Thus Sweden, which was neutral in World War II, saw as great a decline in the income share of the top 1% as the U.S., a major combatant. And even now the countries of greatest equality are those with the highest tax rates, the greatest social spending and the largest degree of unionization: Denmark, Norway, Sweden.

“The Great Leveler” is an important book, but it is not one for the general reader. Despite his background in history, Mr. Scheidel is as much a quant as the most ardent economist. This is history narrated through the medium of Gini indexes, top 1% income shares and regression coefficients. When the elaborate social structure of Florence in 1450 is reduced to a Gini measure of 0.5, general readers may struggle to feel engaged. To be fair, income and wealth inequality are a much more difficult topic to write about for a general audience than warfare, politics, crime, gender or demography. It does not come with simple narratives: personalities, plots and poison. Inequality is a highly abstract subject and one difficult to translate into narrative history.

Further, Mr. Scheidel tends to focus on inequality at the top. The conventional abstract metrics he uses—Gini coefficients, the top wealth shares—give a lot of weight to the superrich. But most people’s perception of inequality is much more driven by what is happening to the income and wealth distribution among the bottom 90%. We much more care about how the middle class is doing relative to the working class, and here history shows a very different trend. The wage premium of skilled workers like carpenters has tended to steadily fall across the centuries, being much greater in medieval Europe than it is now.

So, still wanted: a theory of inequality. And please make it one that can be relayed in 200 pages, with plenty of stories and images.

—Mr. Clark, a professor of economics at UC Davis, it the author of “The Son Also Rises.”

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Appeared in the January 21, 2017, print edition as '.'