“Inequality, especially deprivation, may intensify the grievances felt by certain groups or can reduce the opportunity costs of initiating and joining a violent conflict.” (Addressing Inequality in South Asia, World Bank, 2014)
“Those who cannot remember the past are condemned to repeat it.” (George Santayana, Reason in Common Sense, 1905)
Do economists need a “peer reviewed report” to realise the obvious? Obvious being that “inequality that propagates and promotes further inequality is bad for social cohesion”? It is a lesson that has been taught many times to humans throughout history. One of the clearest examples of inequality tearing the social fabric apart – The French Revolution.
It was brought about by the inequality that was prevalent at that time between the aristocracy and the rest of society, which itself was divided into two groups – the bourgeoisie and the poor peasants. To finance the state (and also the expenses of the aristocracy) a hugely unpopular tax was imposed, the salt tax, also called the gabelle. Thus the economic inequality and the bitter realities of then had brought about the revolution. It was violent, needles to say.
The same play was acted out in current times. Eg. Spain and Greece after austerity was imposed on the countries due to the loans provided to them by the IMF with the onset of what is being termed as the “Great Recession”. There were a large number of people (economists are people too!) who claimed these were carried out by the “lazy” not getting their “freebies”. Not entirely. Many of them were being paid a wage so low that they had to meet requirements with the freebies. Why were they paid so low? Because neoliberal economics popularized that idea (bigger profit for the business), which carried over to the business arena and got implemented by the managers.
So the chicken comes home to roost, and there is an outpouring of frustration by different people on the mark inequality has left on society.
The effect of inequality was kept hidden by the social programs that the Western governments operate. With the economic downturn, governments were forced to cut down on the social programs and scale back support to the vulnerable groups in their country. Thus effects of inequality were exposed. Many students and observers of history will not be surprised at the events that occurred since austerity was imposed.
Yet, the protests were a surprise and their ferocity was stunning. A careful study of history would have convinced policymakers that they risked social stability by undertaking the policies they had chosen and better prepared governments to deal with the fallout in a more orderly manner.
I guess the study of history does have a point.