Income Inequality and the Decline of Nations

The recent waves of articles on our growing income inequality have compared the United States of today to the United States of the 1930s. But the comparison we need to be making, and worrying about, is to Ancient Rome.

The city-state of Rome grew to become a rich, powerful empire controlling most of Europe and large parts of the middle-east. In its day, Rome was the greatest nation on earth. And then it wasn’t. Over time the empire crumbled, other more dynamic nations pushed to the fore and the comparative living standard of Romans dropped.

There are different theories on why nations rise and fall, but general agreement that nations rise because their societies are fluid. The success of any nation is defined by the collective actions of its individual citizens. The innate character that allows an individual to succeed – drive, discipline, wisdom, intelligence – isn’t tied to the social standing of the parents. The children of poor parents have as much chance of being born with this character as the children of rich parents. Rising nations tap into the potential that exists throughout society. People at all levels of society believe they can improve their situation, think they can increase their wealth and their power. Aggressive individuals trying to better their situation lift up the nation as a whole.

Meritocracy – people rising or falling on their own merits- allows a society to tap into the whole of its potential, regardless of class or social position. When Ancient Rome was on the way up, a person born to farmers could become a general in the army. Great Britain became a navel power because it promoted sailors to captain based on their skill, not family heritage. All of the great nations in history embraced meritocracy on their way up.

But nations that have succeeded tend to move away from meritocracy. When a nation is growing rapidly, when its economy is expanding, the citizens of the nation believe that there will be enough to go around for everybody. As growth slows things change. The leaders of the country stop thinking about expansion and instead begin worrying about insuring that their children enjoy the same wealth and power that they do. And just like the character necessary to get ahead isn’t defined by birth, neither is the character that tends to lead to economic decline – the children of very successful parents aren’t necessarily born with the same drive and discipline.

Meritocracy is much less appealing if one’s children lack merit. Over time, successful societies start to calcify. The people at the top work to insure their children stay there. As the leaders make it harder for their children to lose wealth and status, they are also making it harder for the poor and middle class to gain wealth and status. At some point the majority of the population lose faith in their society, believing that it no longer works in their best interest. The potential still exists, but instead of driving a society forward it turns into frustration and even bitterness. When this happens – when a nation stops harvesting the potential of all of its citizens – then the nation starts its decline. This is the reality of history; every great nation that rose when its society was dynamic eventually lost its dynamism and fell.

The United States is the one great nation with a chance to break this pattern. In our democracy the power to choose our government lies with the middle class and poor which make up the majority of any population. Instead of a government that makes it harder and harder for the middle class and poor to get ahead, a democratic government has an opportunity to use its institutions to extend equality of opportunity to all of its citizens, to make sure that every person, regardless of their parents’ wealth and status, has an opportunity to rise on his or her own merits. Democracy can create a constantly churning, dynamic society that can continue to tap into the potential of its whole population.

This, really, is what we need to be worried about. Is the growing gap in income and opportunities an anomaly, or a trend? Will the United States go the way of Ancient Rome, or will democracy allow us to create a constantly churning, dynamic society? This is the question we need to answer: are we doing what is necessary for the United States to cheat history?

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