What the History of Income Inequality Has to Do with Christ, Buddha, and Dickens

Within a few centuries, the traditions and teachers that defined the Jewish, Hindu, Confucian and Buddhist faiths emerged. Most contemporary religions evolved from those early thinkers.

Curiously, these religious traditions emerged at a time when innovations like cities were creating unprecedented wealth. In hunter gatherer times, it's tough to accumulate wealth. When you domesticate crops and begin to trade and specialize in cities, it is easier to accumulate wealth. And, of course, wealth accumulates at different rates which means that while the community was getting wealthier, not everyone was getting wealthier. These religious traditions emerged as a way to offset the pure market forces that would have left the poor impoverished and each tradition introduced (or more likely, codified) morals and norms that would show respect for the poor and weak and not just conform to the rich and powerful. Jesus made it clear that we'd be judged by an all-powerful God based on how we treat those with no power.

The Industrial Revolution stimulated another round of social awareness, this time in the form of government programs. There is nothing novel about our time in this respect. We're once again living through an inflection point in the creation of wealth akin to the one that inspired Dickens to write so movingly about the poor and disenfranchised. Dickens helped to stimulate new policies for the poor like the abolition of debtors' prisons.

At each point in history when big economic changes have created new wealth, one outcome is poverty. There are two dimensions to this. One dimension is absolute. People who made a living farming became displaced as factories emerged and agriculture jobs disappeared. Some people can't adjust and as a result they really are worse off by this supposed economic progress. Another dimension is relative. Because there are people now able to buy manufactured goods, you might now feel poor because you can't - even though you never could before either. 

Today's income inequality is partly about poverty resulting from a loss of jobs to overseas and negative consequences from the Great Recession. It's more broadly about another inflection point in history, though, in which it is possible to create new wealth that the median worker is not yet pulled along by.

Entrepreneurship is creating a crazy amount of wealth and income in the US. Nowhere does this seem more apparent than in Silicon Valley where the ten most valuable companies (e.g., Apple, Alphabet (nee Google), Facebook, Oracle, Intel, etc.) are worth more than $2 trillion. A GDP of $2 trillion would put a country in the top ten in the world, ahead of Canada, Russia, and India. The wealth concentrated in Silicon Valley has driven up median home prices to over a million dollars and is unprecedented in history. This doesn't just create wealth; it reveals and creates poverty. In Silicon Valley there are tales of people making $80,000 a year who are homeless. That's a distinct kind of poverty.

But it's worth examining the reality of this new, entrepreneurial economy in which incomes are growing more than ever.  A higher percentage of households are making income over $100,000 than ever in history. 

Meanwhile, there has been a drop in the percentage of households making under $100k. 

Income is going up. Not for everyone but for a growing percentage of Americans. This is not an impossible problem to solve. Policies that would please Dickens and the religious leaders from Confucius to Christ are simple enough. We take some portion of that new wealth and income and use it to mitigate the poverty of those who haven't been brought along by the gains of the new economy.

For some this is offensive, suggesting that we're rewarding those who can't find their own reward in the market. It's naive, though, to believe that we live in the first period in history in which poverty has disappeared. 

Whether this new economy will drive changes as sweeping as those defined by Dickens and Buddha or simply affirm the relevance of their insistence on compassion in the midst of progress has yet to be seen.