Wealth inequality: the past, and the future
Part IV: "But history has proven Marx wrong!" Nope.
This is the second of a multipart series on the past and future of capitalism. Part I is here. Part II is here. Part III is here.
The second objection to Marx’s law of capitalist accumulation is more compelling: history has not fulfilled his prediction. Even though we periodically see monopolies, capitalism has not become entirely monopolistic. There’s still significant competition everywhere. Economically this is easy to demonstrate because if we reached the stage of so-called “monopoly capitalism” you would expect to see all of the world’s wealth concentrated into a few hands. But that has never happened. Even when wealth inequality was at its most extreme at the turn of the twentieth century, the top 10% only owned 90% of the wealth; in Paris, where inequality was at its worst, the top 1% only owned about 65% of the wealth.
Even worse for Marx: during the first half of the twentieth century the concentration of capital radically reversed. The top decile’s share of the wealth only ever fell to 60% and ever since then it has resumed its growth, but even this temporary drop calls Marx’s prediction into question. If capital is concentrating, this must be a very long term trend rather than continuous rise, and certain developments can arrest or even reverse it. But if the concentration of capital can be reversed temporarily, does this give us reason to believe that it can be reversed permanently?
Contemporary opinion among historians and economists is conflicted. In The Great Leveler, Walter Scheidel grounds all historical inequality – not just that of capitalism – in the emergence of “productive assets that could be defended against encroachment and from which owners could draw a surplus in a predictable manner.” This alone is enough to create a vicious cycle whereby people with more assets leverage them to gain even more assets, either in accordance with social norms and laws or in defiance of the same. In this account, capitalism is just the latest variation on a socioeconomic dynamic that has dominated human societies since the domestication of agriculture.
In Scheidel’s analysis, only four things ever seriously disrupt this dynamic: mass-mobilization warfare, violent revolution, state collapse, and pandemics. This theory provides a potential explanation for both of the major leveling episodes we saw in European history. The first, we have already observed, was the Black Death, which drastically shrunk the pool of available labor and temporarily increased the bargaining power of workers. The second, Scheidel argues, was World War II. Though The Great Depression initiated an economic downturn, “signs of a rebound in elite income and wealth in the late 1930s should make us wonder how long this trend might have continued had it not been snuffed out by renewed world war.” Instead, Scheidel observes, World War II launched an all-out assault on inequality:
Mass mobilisation raised demand for labour and reduced skill premiums, extremely high marginal tax rates cut into elite incomes and fortunes, aggressive government intervention curtailed corporate and investment profits and sought to protect workers, consumers, and renters. Returns of capital fell as international markets suffered interruptions and physical assets risked confiscation or destruction.
Even the emergence of robust welfare states all over the world, Scheidel argues, can be attributed to the great shocks of the early twentieth century. But the effects of these shocks, he concludes, are always temporary; ultimately, the forces of inequality inevitably erode away the regulations, the welfare provisions, the tax hikes, and the various other institutions and norms meant to fetter it. Here, Scheidel’s argument resembles standard Marxist critiques of “reformism”: for example, Lenin, in Marxism and Reformism, argues that “where capitalism continued to exist reforms cannot be…enduring” since it is easy “for the bourgeoisie to nullify reforms by various subterfuges.”
Unlike Marxists, however, Scheidel sees no role for a socialist state in constraining inequality. Even “a combination of several quite radical and historically unprecedented government interventions would reverse the effects of resurgent inequality only partially,” he writes. If this is correct, then barring some violent catastrophe we should expect inequality to simply continue growing for the foreseeable future.
Scheidel’s analysis is not uncontested. In 2025 for example, a team of researchers led by Gary Feinman published a paper Assessing grand narratives of economic inequality across time. In it, the authors test Scheidel’s theory of “declines in inequality as only occurring in the face of cataclysmic conditions” by examining over 10,000 years of data. Specifically, they look at the size of houses, which serves as an effective proxy measure of the prosperity of the residents. And what they find is that as
the potential for greater inequalities emerged…that prospect was not necessarily or inevitably realized and the institutions of governance (and their associated leveling mechanisms and values) were factors that could mute or check the extent to which wealth was concentrated.
Specifically, they find that democratically organized states can achieve greater equality than autocratically organized states, echoing the standard left intuition that democratic states are more likely to govern for the common good. They also find that multileveled hierarchies have a greater potential for inequality than states with fewer levels of hierarchy; evidently stratifying an institution vertically creates more opportunities for the apparatus of the state to be co-opted towards to the benefit of the few. (Notably, there is no evidence here that horizontal bureaucratization has the same effect.) These points have widely been understood as directly at odds with Scheidel’s argument, and it seems that this debate will only be resolved through an even more rigorous and thorough analysis of the archaeological data.
Either way, it seems premature to declare that history has rendered a verdict on this particular tenet of Marxist thought. If we suppose that wealth will continue to concentrate at its historical rate prior to the twentieth century, it may very well be another 300 years until it returns to its historical peak. And this, of course, relies on the dubious assumption that there will be no significant Scheidelian economic shocks between now and then. If disasters like wars and plagues continue to periodically level economic inequalities, the concentration of capitalism may look more like an inevitable tendency to rebound every time a disaster hits – and less like a straight line to revolution.
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