Fragments of Inequality

Social, Spatial and Evolutionary Analyses of Income Distribution

Sanjoy Chakravorty

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317793601
• Edition: 1
• Topic: Social Sciences
• Subtopic: Human Geography
• Index: Social Sciences

Fragments of Inequality merges sociological, geospatial, and economic explanations of global inequality into a grand synthesis of the subject that breaks new ground by stressing the phenomenon's spatial foundations. Concentrating on inequality within and between regions, the book demonstrates that spatial inequality has increased in recent years. It employs modified evolutionary principles (i.e., punctuated equilibrium; not entirely smooth and linear in terms of chronological development) rather than the more abstract ones of rationality and self-interest that economists use, and on a fragmented rather than abstract conception of space. Global in its empirical coverage, it also addresses the current impact of economic globalization.

1

THEORY AND EXPLANATION

Consider the following facts. The richest 20 percent of Brazil's population earns about 30 times more than the poorest 20 percent. This level of inequality has continued virtually unchanged from the 1950s, when analysts began measuring income inequality in Brazil. In the Russian Federation, this ratio (of income shares of the richest and poorest 20 percent of the population) was around 12 in 1998, which is about twice as high as it had been just a decade earlier, before the collapse of the Soviet Union.¹ These are dramatic examples: one of a very high level of inequality that has remained unchanged for decades, the other of a rapid change from a low to a high level of inequality. How do we explain this diversity of experiences? There is no doubt that random events (such as Boris Yeltsin's speech atop a tank during the 1991 coup attempt in Moscow) play a large role, just as there is no doubt that the structure of inequality can be understood in terms of economic, social, and spatial structure, and inequality change can be understood in terms of changes to these underlying structures. I begin from the position that, despite the likelihood of random events that can change distribution patterns, explanation is possible.

However, the search for explanation is stymied by epistemological boundaries. Because distribution is one of the pillars of development² there is a large literature on inequality. Unfortunately, this literature, and therefore our understanding of inequality, is fragmented by academic discipline. The discourse on income distribution is dominated by economists. The discourse on classes, stratification, and power is in the domain of sociologists. And spatial inequality has traditionally been studied by geographers and regional scientists. The theoretical foundations and methodologies of these disciplinary approaches are often so far apart that it has been difficult to create a solid theoretical understanding of inequality as an outcome of economic, social, and spatial processes. This book attempts to fill some of these large gaps in interdisciplinary knowledge about the structure of inequality and processes of distributional change using a new theoretical approach combining elements of economic, sociological, and geographical theory.

This new approach is built on evolutionary foundations. I begin from the recognition that human behavior and action follow evolutionary principles (identified in fields as diverse as evolutionary psychology, sociobiology, and behavioral economics) and not some unproven assumptions about rationality and self interest. This means that individuals and groups are both important elements of social and spatial structure, and, therefore, both are relevant for theorizing structure and change in inequality. Second, we must acknowledge that evolution itself is not linear and continuous. The standard Darwinist-gradualist view of evolution has to be supplemented with the near certainty of discontinuity and nonlinearity, or what is called the punctuated equilibrium model of evolution. These ideas are detailed later in this chapter and permeate the explanatory part of the book (Chapter 4 onward).

These shifts—from linear to punctuated models, from individuals to groups, from abstract and monolithic to fragmented space—purposefully suggest a fundamental shift away from the dominant mode of inequality analysis, which, as is well known, is the economic approach. Because of the limiting assumptions used in mainstream economic theory, assumptions that infer substantially more equality (of knowledge and power) than exists in reality, economic approaches turn out to be limited in their explanatory power. Inequality, I conclude, is too important a subject to be left to economists.³ I retain the important contributions: the theories on human capital, the interaction of demand and supply of different forms of capital, but reject the narrow specifications of the rational, self-interested actor model. The goal is to shift the discourse away from economic to social theories of inequality.

QUESTIONS AND ANSWERS

The analysis focuses on income inequality. The idea of income inequality is easily understood, relatively easily measured, universal in its manifestation, and tangible, at some level, to everyone with social awareness. Data are collected to measure income inequality with increasing frequency and sophistication. Therefore, there is a concrete empirical basis from which one can begin an examination, and to which one can turn for support or falsification. I seek answers to the four fundamental questions on income inequality:

• What explains the level of income inequality in a given nation?

• Why do income inequality levels vary so greatly worldwide?

• What causes the level of income inequality to change?

• What explains the diversity of trends in income inequality change?

I come to the answers using an approach that seems simple and obvious but has never been used. Let me begin with the obvious: the world is fragmented. It is fragmented into geographical or spatial units that differ in terms of the average life chances of their inhabitants. This gives rise to spatial inequality. The spatial units themselves are fragmented into social groups with unequal power and resources; group membership is a significant determinant of an individual's life chances. This gives rise to social inequality. I argue that income inequality in any given nation is a result of its particular combination of social inequality (which arises from social fragmentation or heterogeneity) and spatial inequality (which arises from spatial fragmentation or heterogeneity). Nations vary in their specific combinations of social and spatial fragmentation that are the outcomes of specific histories; hence, they vary in their levels of income inequality. Broadly, the more fragmentation there is, the higher is the level of income inequality. Distributional change takes place as a result of changes to social and spatial inequality. Changes in social inequality can be dramatic when there are distributional transitions, which are possible under conditions of revolution, invasion, and war; in general, though, changes in social inequality are more likely to be gradual. Changes in spatial inequality are always gradual. The diversity of trends in distributional change are explained by the fact that nations differ in the rates and directions of change in social and spatial inequality and in their specific histories, which may or may not include one or more incidents of fundamental distributional change. In general, in the last 50 to 100 years, social inequality levels have declined in most nations (especially in the more developed nations) while spatial inequality levels have increased.

To put it in another way: a nation can be thought of as a combination of a social system and a spatial system. The social system is made up of individuals who compete for scarce resources and for status or recognition. The individuals are also organized into groups that are at least class-based and usually also identity-based (using ascriptive markers of race, ethnicity, religion, or language). Systematic and durable differences exist between group average incomes. Groups with access to more productive resources and power have higher average incomes and superior life chances than groups without. Hence, every society is fragmented to some degree. A social system is historically formed through migrations, invasions, wars, revolutions, expulsions, and trade, all of which have brought people with distinct ascriptive identities into common geographical confines. The variations in these conditions or events are largely responsible for the level of heterogeneity in a social system. A spatial system is made up of urban and rural areas in the first instance, with further delineations between urban areas (big city or small city) and rural areas (valley and hill, coastal and inland). These spatial differentiations are also largely historically constructed as a result of imperialism, colonialism, and trade. The different spaces offer different average incomes and life chances for their residents. Hence, a national territory is also spatially fragmented to some degree. Combinations of these two fragmentations create the conditions of economic inequality in given nations.

The critical questions relate therefore to change—social change and spatial change—and this is where I focus. Specifically, I concentrate on two forms of distributional change: the quick distributional transition as a result of state transition and consequent fundamental social change, and the slow, gradual transformation as a result of spatial transformation. One cannot, however, get to these narratives without a clear understanding of the structures that exist and are changed, and the agents and the processes of change. As a result, the first half of the book is devoted to setting the table. I begin by presenting data on income distribution and distributional change, with next a discussion of economic theories of inequality followed by a discussion on why and how economic theory must be and can be supplemented with social and spatial theory to create a true picture of the structure of inequality. Finally, in the later chapters (5 and 6), I am able to focus on the question of change.

THREE GENERAL PRINCIPLES

The setting would not be complete without a discussion of the principles that are foundational for this work. Some of these will become obvious from the brief arguments outlined in the following section. Nevertheless, it is necessary and useful to have a clear understanding of what it means to try to build theory using basic principles from the economic and social sciences. This distinction is important. At several points in the book, particularly in Chapters 3, 4 and 5, I refer to the idea that there are two fundamentally different ways of understanding human action and interaction: in simple terms, we can call these the economic perspective and the social perspective. I argue that it is not possible to build theories that make sense when these two perspectives are kept in separate boxes, rather, it is necessary to find ways to integrate them. Let us consider (briefly, since these ideas are spelled out in greater detail in other chapters) the principal building blocks of such an integrated theory.

First, we need to resolve a fundamental question in a non-judgmental way: What is the basic unit of a society? In the economic perspective, this is the individual. Individuals compete in a world of scarce resources to attain their primary goals of survival first and growth second, where survival and growth both have intergenerational dimensions. This means that people are primarily self-interested beings. (There are complications about the meaning of self-interest; these are taken up in Chapter 4.) The social perspective does not deny the importance of self-interest, but suggests that it is moderated by the interests of the groups to which the individual belongs. Hence, in the social perspective, the basic unit of a society is the group. Groups compete in a world of scarce resources to attain their primary goals of survival first and growth second, where survival and growth both have intergenerational dimensions. This means that groups are primarily self-interested entities (and basic group interests are established as norms, more on which soon). Virtually every statement we can make about individuals we can also make about groups: they compete, they are self-interested, they seek domination over others, they can engage in violence when threatened, they are interested in intergenerational continuity. It stands to reason, therefore, that individuals are motivated by both individual and group interests, and often the two cannot be identical. What happens when individual interests clash with group interests? Again, it stands to reason that the latter generally prevails, but, and this is a very important idea, it is possible for individuals to persuade groups to change or modify their interests. This, often, is the source of social change.

Therefore, to build sensible theory, we must recognize the coexistence of individual and group interests. In defining groups, however, we run into the problem of plurality, because individuals, more and more, are members of multiple groups. They are members of racial, ethnic, religious, and linguistic groups, and, without exception, they are members of economic groups or classes. This problem of plurality is usually partially resolved because the groups substantially overlap; that is, ethnicity, race, and class intersect. The problem can be tackled even more definitively if we recognize the existence of another type of group, one that is based on geography or location. At small geographical scales, groups are more easily delineated and it is possible to identify paired oppositions.

Individuals are organized into groups and groups are organized into territorial units. Therefore, we have another level of competition. Almost anything we can say about individuals and groups we can repeat about territorial units: they compete for scarce resources, they seek domination over others, etc. The world, I repeat, is fragmented. Individuals compete with other individuals, groups compete with other groups, and territories compete with other territories. Individuals often have to act, not in their individual interest, but in the interest of the group or the territory. On the positive side, it follows that individuals cooperate and have reciprocal relationships with members of their group and their territory. A good understanding of the social world must begin from recognizing this tripartite division of interests and the potential for inter-unit conflict and intra-unit cooperation and competition.

Second, economic and social interactions are characterized by “increasing returns” and “norms.” Increasing returns are also called “cumulative causation” processes (they are not identical phenomena, as the latter includes the problem of vicious cycles) or “positive feedbacks” in which the “payoff to taking an action (increases with) the number of people taking the same action … or the payoff to engaging in a collective action depends on the number of participants” (Bowles 2004, 12). Norms include two overlapping classes of features: ideologies, which are sets of beliefs and desires, and habits, which are routine and standardized responses to a variety of situations. The existence of these features is usually well known by agents when they take decisions; as a result, they often turn into self-fulfilling prophecies or self-reinforcing actions. Let me explain:

Formal economic models of production are based on the assumption of constant returns to scale and diminishing returns to capital. These two assumptions drive (among other things) the preoccupation with convergence and equilibrium that are the mainstays of economic thought. Later we will see, for instance, that income convergence between territorial units is supposed to be the long-term outcome. Yet common sense suggests that many critical aspects of economic and social life are the way they are because of increasing returns, or at least the existence of the general belief that there are increasing returns. Cities, for instance, would not exist without scale economies and increasing returns. If it were equally easy for an entrepreneur to locate a factory or office anywhere, why would she locate it where rents are high? Either there really are benefits to locating where many other similar enterprises exist (that is, there really are increasing returns to the density of interactions), or it is a habit, a decision taken without much conscious thought because one presumes that others who have taken similar decisions must have given it much thought. Hence, increasing returns and habits result in the growth of cities, and consequently, there is spatial heterogeneity. Increasing returns are not limited to geography, but are common in other significant areas. As far as income distribution is concerned, the most important of these are intergenerational increasing returns, which result in the concentration of property ownership and widening disparities in human capital acquisition.

The existence of norms (ideologies and habits) simultaneously constrains and simplifies decision-making. Such norms also seriously damage the “rationality” and “perfect information” assumptions of mainstream economic theory. Individuals, groups, institutions, and states all have ideologies and habits. They constrain decision-making because when the number of options considered is limited, it is possible that better options than the ones chosen are not even considered. At the same time, since fewer options are considered, the cost of making decisions is minimized. One can think of norm-based vs. rational behavior as analogous to the thought processes of chess champion Garry Kasparov vs. the chess computer Deep Blue. From almost any given situation in a chess game there are millions of possible moves and paths. Kasparov ignores almost all of them because he thinks they lead to nowhere good; sometimes he misses the best possible move. Deep Blue, on the other hand, has to compute the outcome of each path, including the obviously pointless ones, before making a move.

This analogy is useful but incomplete because it makes no reference to the relationship between norms and power. Norms are inscribed with the relations of power in a society—among genders, classes, social groups, and between the state and its subjects or citizens. Norms prescribe and proscribe behaviors that uphold the social order. They are the most direct expressions of group interests, and the interesting aspect is that this happens without constant collective action. To understand the structure of income distribution in a society it is vitally important that we know about its norms. To understand the processes of distributional change, it is necessary to know how no...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Preface
• Acknowledgments
• Chapter 1 Theory and Explanation
• Chapter 2 Patterns and Trends
• Chapter 3 Economic Theory and Income Distribution
• Chapter 4 Social Theory and Income Distribution
• Chapter 5 Punctuated Equilibria and Social Inequality
• Chapter 6 Gradualism and Spatial Inequality
• Chapter 7 Where We Stand
• Notes
• References
• Index