Inequality…and ISIS?

Wonkblog reports on what it concedes may be “the most controversial theory” about the rise of ISIS: inequality.

A year after his 700-page opus “Capital in the Twenty-First Century” stormed to the top of America’s best-seller lists, Thomas Piketty is out with a new argument about income inequality. It may prove more controversial than his book, which continues to generate debate in political and economic circles.

The new argument, which Piketty spelled out recently in the French newspaper Le Monde, is this: Inequality is a major driver of Middle Eastern terrorism, including the Islamic State attacks on Paris earlier this month — and Western nations have themselves largely to blame for that inequality.

The theory is relatively straightforward: wealth in the Middle East is concentrated in countries having a relatively small a share of the population, making the region the most unequal on the planet.

Within the fabulously rich monarchies, a very few people control most of the wealth. Others, especially women and refugees, are kept in what he describes as “a state of semi-slavery.” Picketty says that it is those economic conditions that have provided justification for the region’s  jihadists–although he concedes that the casualties inflicted by the West’s wars have been a contributing factor.

The clear implication is that economic deprivation and the horrors of wars that benefited only a select few of the region’s residents have, mixed together, become what he calls a “powder keg” for terrorism across the region.

Piketty is particularly scathing when he blames the inequality of the region, and the persistence of oil monarchies that perpetuate it, on the West: “These are the regimes that are militarily and politically supported by Western powers, all too happy to get some crumbs to fund their [soccer] clubs or sell some weapons. No wonder our lessons in social justice and democracy find little welcome among Middle Eastern youth.”

If we take Piketty’s argument seriously, we can add terrorism to the list of deleterious consequences generated by inequality. If the West did accept the analysis, it would also suggest that economic measures, not tanks, are the armaments most likely to be effective in the fight against ISIS.  (Considering everything from entrenched worldviews, the political clout and interests of arms dealers, and–in the U.S.– a political system that routinely categorizes countries unwilling to dance to our tune as “evil-doers,” I don’t see America accepting Piketty’s premise any time soon. If ever.)

Even if we were able to forge a consensus on the need to ameliorate economic inequality–not just in the Middle East, but here at home–we would still have to confront thorny issues. It’s one thing to identify inequality as a central problem of our age; it is another to determine the precise point at which unequal distribution of life’s goods becomes inequitable and counterproductive. It is one thing to say “We need to fix this,” and quite another to figure out how.  (If communism taught us anything, it was how not to redistribute wealth.)

The challenge for our age is to figure out how to be fair without being stupid.

I think I’m going to reread John Rawls’ A Theory of Justice….

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It’s Going to Hurt

A rising tide lifts all yachts.

So says Nicholas Kristof, in a recent NYTimes column discussing the best-selling albeit not-so-well-read book on Inequality by Thomas Piketty. In recognition of the fact that few of those who’ve purchased Piketty’s tome have had the time or background to wade through 685 pages of graphs and charts, Kristof proposes to boil the subject down to five main points( a “Cliff Notes” version which should allow you to sound very erudite the next time you discuss economics at a cocktail party). They include the following four:

  • Inequality has significantly increased in the U.S.
  • The disparity is mostly not due to the hidden hand of the market, but to its corruption–to game-playing, manipulation, successful lobbying for “special” treatment and the like.
  • The rich aren’t necessarily happy, despite their greater wealth, because so many of them are caught up in a never-ending cycle of “can you top this?”
  • Progressives need to talk more about restoring genuine opportunity and less about plutocracy.

Hard to argue with any of these, but it is Kristof’s final point that is–at least in my view–the most important: inequality of this magnitude is profoundly socially destabilizing. As Kristof explains:

 Some inequality is essential to create incentives, but we seem to have reached the point where inequality actually becomes an impediment to economic growth.

Certainly, the nation grew more quickly in periods when we were more equal, including in the golden decades after World War II when growth was strong and inequality actually diminished. Likewise, a major research paper from the International Monetary Fund in April found that more equitable societies tend to enjoy more rapid economic growth.

Indeed, even Lloyd Blankfein, the chief executive of Goldman Sachs, warns that “too much … has gone to too few” and that inequality in America is now “very destabilizing.”

Inequality causes problems by creating fissures in societies, leaving those at the bottom feeling marginalized or disenfranchised. That has been a classic problem in “banana republic” countries in Latin America, and the United States now has a Gini coefficient (a standard measure of inequality) approaching some traditionally poor and dysfunctional Latin countries.

We are on our way to destroying the most beloved American myth: the belief that with grit and talent, anyone can be successful, can “make it.” That promise, more than any other, has brought immigrants to our shores, given poor parents fortitude because “the kids will be better off than we are,” and encouraged millions of poor and middle-class workers to submerge envy of the “haves” and substitute a belief that with just a bit more effort, they too can join the privileged class.

When that myth explodes, when that promise is no longer plausible, look out. It will get ugly.

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