Does inequality lead to revolution?

Earlier this month the OECD released a report outlining the global trends in inequality.  Given the change in the global pattern of civil unrest witnessed this year – the London riots, the ‘Arab Spring’, the Occupy Wall Street movement, and even the current Russian protests – it is worth considering the role of inequality as an underlying cause of civil unrest and conflict.

Economists typically see civil unrest, rebellion and civil war as “large-scale predation of productive economic activities.” As many have noted in a variety of contexts, institutionalized redistribution of wealth is the price the wealthy pay to insure against having their wealth taken by force.

However, the research into the topic of inequality and civil unrest finds that the ingredients for conflict are not so clear-cut.  The long history of study reveals the following key factors as important in determining the likelihood of civil conflict.

  1. High proportion of GDP from primary commodities (which could be partially related to African colonial history).Partly one could argue this is the result of rents available to a select few producers of the export goods, which the people believe are not being appropriately shared.  I think Australians can see parallels there between our own government and African rebels.  Of course, having a government to undertake these social objectives is the peaceful way to go about it.
  2. Geography and history, especially cultural, religious, and colonial legacies, matter a great deal.
  3. Low education levels
  4. Low rates of economic growth

Surprisingly, there is quite a deal of evidence that income inequality and lack of democratic rights have no significant effect on the likelihood of civil war.  I have my reservations about the strength of such findings, for a number of reasons.  The below map of income inequality, measured by the Gini Coefficient, shows a pretty clear ‘eyeball’ trend to me.

My first concern is that data on inequality is often poor and incomplete, particularly in areas where conflict is common or ongoing.

Second, recent research shows that income inequality alone is not a sophisticated enough measure to predict civil unrest.  There needs to be group structures in place, and inequality between groups – be they racial, geographical, religious, or otherwise – to catalyse civil conflict.  I am sure there are many people looking for explanations of this type of group behavior in evolutionary psychology, which may prove to be fruitful.

In a study of the variation between inequality and conflict in Indian states, researchers have shown that redistributive policies are an effective means to reduce civil unrest… Policing is at best a short-term strategy.

Third, and this is where the OECD report adds value, inequality is often related to other factors used to explain civil conflict – corruption for example.  Their report shows that a high degree of income inequality is associated with low rates of economic growth, which is a known contributing factor to civil unrest.

But the OECD report goes a little further and divides countries into ‘developed’ and ‘emerging’ economies, and finds that in developed economies, income inequality has less impact in economic growth than in emerging economies.  Intuitively, this makes sense.

A country with high levels of education, where the income divide is between the wealthy and extremely wealthy, is unlikely to see the complete set of ingredients for civil unrest.  Yet that does not eliminate the development of a critical factor – a group identity, or structure that can almost institutionalise inequality.

This group dynamic was certainly one contributing factor in the London riots.  A 7.30 report at the time had a great interview with a former UK police advisor who pinpointed a growing pool of disengaged citizens, perhaps from families with generational unemployment and council housing – a pool of people with nothing to lose who can associate as a group, and are attracted to the excitement of the riots as an opportunity to be part of something.

When I wrote about the Occupy Wall Street movement some months back I noted that that inequality is creeping up in much of the developed world. Coupled with the elevated risks associated with low economy growth, governments need to pay close attention to potential triggers of civil unrest, especially after some years of relative calm.

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25 Responses to “ “Does inequality lead to revolution?”

  1. Sidelined says:

    “there is quiet [sic] a deal of evidence that income inequality and lack of democratic rights have no significant effect on the likelihood of civil war.”

    Yes that’s right. Most people understand that inequality is a fact of life, and can live with it. You need to look elsewhere to explain causes of civil unrest.

    • littleguy says:

      That’s a bit of a leap. I suspect that if people feel that the inequality is the result of cheating that will cause problems. It probably depends a lot on the effectiveness of the propaganda used to keep people in the dark.

      • Jono says:

        True, but only if inequality arises from cheating and corruption.

        Its quite a stretch to compare African and middle-east dictatorships with parts of the U.S where spoilt college students are out protesting because they can’t find a job and they want the taxpayer to pay for their huge student loans.

      • Al says:

        Student loans are huge because education is too expensive. Should only wealthy kids have access to education in what used to be the wealthiest nation on the planet?

    • myne says:

      Ideally, inequality should be a tight bell curve. The very poor should ideally be a small percentage of the population, the meat of the bell should contain the majority of the population, wealth and income; and the top end should contain the truly excellent.

      That’s my take on it. Does anyone think the Richard Bransons, Bill Gates’, or Gina Rienharts of the world would not have done what they did if the incentives were just a bit lower?

  2. RTD says:

    Yes, I used to fall for this line too.

    One of the things I love about NZ is its tradition of relative equality. As an ordinary kiwi I get to ask questions of government ministers when they are in town. That is unthinkable in Britain where I grew up.

    Growing up in Britain in the seventies means I have a preference for a certain world view. The place and time of one’s formative years are very influential. I have learned to mistrust this effect in others and now find I mistrust it in myself.

    So, the reason I fall for “inequality is bad and causes economies to collapse and wars and other bad stuff” could be because it fits with the delusional place and time of my formative years. Oh dear.

    Are you sure that rising inequality isn’t primarily a consequence of a declining economy? Those with less savings are hurt first, those with more savings get hurt later. Does that not fit the facts better?

    • Rumplestatskin says:

      “Are you sure that rising inequality isn’t primarily a consequence of a declining economy? Those with less savings are hurt first, those with more savings get hurt later. Does that not fit the facts better?”

      Interesting idea, but actually I think the reverse is true. The trend of growing inequality has been seen in OECD countries for at lead 25 years.

      If you look back at the classic graph used by Occupy demonstrators, the incomes of the top 1% dropped significantly after the tech crash. And I would expect it to have dropped since 2008 as well.

      http://www.macrobusiness.com.au/2011/10/occupying-struggle-street/

      Because the rich derive income and wealth from assets, their financial position can take a pretty swift fall.

      A declining economy with high unemployment can enable the unemployed and disillusioned to form groups, which then reenforce each other’s beliefs that they are being hard done by – being treated differently or oppressed. Groups with a common sense of helplessness or detachment need to be able to form for proper civil unrest (which is why religious and cultural history matters).

      The basic result, from my reading of the research, is that these group dynamics matter more than inequality alone, and inequality matters even less if the ‘poor’ are relatively well off, or if their incomes are growing (solid economic growth).

      Which is why the answer to the headline question is – it depends.

      • RTD says:

        Yes, but. Those that are better off have more options, better networks, more choices. They will tend to be better educated and brighter and better connected too.

        I’ve just got very cautious about following my first impulse in thes things. Social decline is part of economic decline, surely they are just the same phenenemon seen through a different lens.

      • RTD says:

        Forgot to add they can go elsewhere more easily. Witness the English diaspora of the wealthy to the rest of the world.

      • Rumplestatskin says:

        You are right. The rich have more choices, better networks etc. These types of factors appear far more important that the ratio of incomes between the rich and poor. But I don’t discount that income inequality is a reasonable proxy measure of these types of differences in many cases. Which is why the evidence is so incomplete.

      • RTD says:

        As you say “The trend of growing inequality has been seen in OECD countries for at lead 25 years”

        How does one distinguish between a symptom and a cause in this case? The decline of the OECD as a % of world GDP presumably follows the same track.

        Argentina might be a case in point, certainly a country with everything going for it but gets nowhere consistently. Is it not the stagnation there that is the cause of the inequality which leads to more stagnation? It is all so circular.

      • Jackson says:

        Done a fair bit of work in South America, and the killer in Argentina is simply corruption. They do it better than anywhere else on the continent.

      • Mr X says:

        Excellent points. Could Australia could go down that path in the future? The use of the Interwebnet and social media mean that well-organised civil unrest can creep up on governments unnoticed. Respect and honour for the human condition have faded from business, then government, and now from the MSM. “Poor” is a relative term, and I would suggest those who have had their comforts eroded over time, are more volatile than those who have a culture/history of poverty.

      • RTD says:

        It is certainly harder to adjust to reduced circumstances than improved ones.

      • Ronin8317 says:

        Relative income inequality didn’t change by much after the dot-com bust or the GFC in the US.

        http://www.census.gov/hhes/www/income/data/historical/inequality/

        Given the massive bailout of the bankers after GFC, I would expect the wealth inequality to have gotten worse. The data seems to be unavailable to confirm or deny this from simple Google searches though.

      • Rumplestatskin says:

        The top 5% slumped a little from 22.4 to 21.4% share of aggregate income. and have also slumped since 2006. The top 1% would have a more severe change.

        See here
        http://www.macrobusiness.com.au/2011/10/occupying-struggle-street/

  3. Alex Heyworth says:

    Best analysis I’ve read of the UK riots is by Theodore Dalrymple http://www.city-journal.org/2011/21_4_otbie-british-riots.html. He suggests that inequality per se has little to do with the causes.

  4. Phroneo says:

    Inequality is not as powerful unless it is combined with rising food prices. It is the threat of unaffordable food that pushed countries into these revolutions.

    In that sense, QE1&2 was the most effective policy for toppling leaders of some of these poor nations. Unfortunately, the groups rising to power now seem to be worse than their predecessors.

  5. deweyite says:

    The French sociologist Pierre Bourdieu developed a concept he referred to as ‘hysteresis’.

    Put simply, it’s a social state that arises when social circumstances shift rapidly, and in doing so ‘pull the rug out’ from under a persons reasonable life expectations.

    A simple example is one of those “spoiled” graduates a poster above referred to. People who have, quite reasonably, believed that if they studied hard and applied themselves through College there would be a job, and the associated lifestyle, at the end of the tunnel. For many in the U.S. this has not the been case, and the ‘Occupy’ movement are part of a venting of frustration.

    It’s been said that it wasn’t poor people who caused the French revolution, it was poor Lawyers. I think that uncertainty about ones future is a greater risk to the stability of a society than inequality per say.

    • RTD says:

      Sheesh, those darn lawyers again. So they are the troublemakers after all. Down with lawyers then. Will that help?

    • RTD says:

      Oh no, I just realised its probably the descendants of those same rebellious French lawyers that run the EU…. Is that a good thing? I’m confused.

  6. danna says:

    people will put up with inequality as long as they are looked after and are ok – i.e. roof over their head, food in their bellies and can see a future for themselves and their children. When the SHTF and they look around and see it not effecting the rich, that’s when they rebel. No one ever rebelled against the poor.

  7. microtrader says:

    I think I posted this link on another MB thread, but here is an excellent TED video discussing inequality:

    http://microtrader.com.au/post/12964983755/inequality-or-national-income-which-is-more

    It doesn’t compare inequality to revolution, but it does to almost every other social metric and the results speak for themselves.