Why Inequality Stings

Hunter-gatherer societies had minimal status distinctions, and that is how most people would want to live. When there are sharp status divisions, we must constantly strive to get up the ladder, or to stay there, which can be stressful.

The History of Status Divisions

One key reason that hunter-gatherers were so egalitarian is that they had little property or wealth that could be passed on from one generation to another. Status differences came from skill at hunting, or from shamanism.

Recent research suggests that status divisions emerged early following the agricultural revolution. Higher-status European farmers who inherited more fertile plots of land were better nourished and healthier.

Early cities that grew up around agricultural techniques of irrigation and drainage produced a great deal of food and built granaries to store the surplus. These societies were highly unequal. Status distinctions ranged from slaves to artisans to a hierarchical system of administrators, including soldiers who kept the underlings in their place. The top spot was held by an absolute monarch who often claimed divine status and built huge monuments, such as the pyramids constructed by Egypt's pharaohs.

Subsequent empires were also highly unequal, and ordinary people experienced varying degrees of tyranny until the dawn of modern democracy. The good news is that the arc of history bends back towards the kind of egalitarian communities enjoyed by our earliest human ancestors.

The bad news is that the arc has some conspicuous wobbles back to inequality. We are in the middle of one today, which is why income inequality is becoming the political buzzword of the new year.

Inequality and Economic Development

The early days of industrialization were very bad for workers, and political leaders recognized that the winner-take-all system of robber barons like Dale Carnegie and J.D. Rockefeller was bad for the society as a whole.

Ideally, workers should be well-treated and properly paid if they are to contribute to general prosperity. Hence Henry Ford's insight that if he paid his workers well, they could afford to buy his cars. Ford made a lot of cars and added a lot of value to the raw materials in the process so that he had the resources to reward workers.

In the service economy that has grew as manufacturing shrank, relatively little value is added to some products, such as fast food. Moreover, there is intense price competition, so hamburger restaurants cannot afford to pay a living wage, hence the proliferation of low-end jobs that keep working people poor.

Of course, matters are very different in professional services where there is little competition and monopoly prices reign, as illustrated by inflation in college education and health care and the bloated compensation packages of corporate officers.

So expansion of the service economy in recent history has divided societies into the haves and the have-nots with the exception of social democracies that bring down the wealthy with heavy taxation and raise the poor with generous welfare state provisions for them and their children.

Sharp Status Differences Are Stressful

Much has been written about how the richest segment of the U.S. population has prospered in recent decades whereas the majority have not seen their circumstances improve despite unprecedented economic growth. Why does that matter?

There are two broad reasons that exaggerated status differences are damaging to a society. The first is psychological. If some individuals are obscenely wealthy when others starve, the social system is perceived as unfair and lacking in equality of opportunity. Ordinary people withdraw from community involvement and are disengaged from the political system. The consequences include increases in crime, drug addiction, and other social problems.

The second reason is that highly unequal societies experience many bodily problems such as chronic illnesses and reduced life expectancy. They may also become politically unstable.

The psychological and somatic consequences of living in an unfair society come together for students of stress. Adam Smith pointed out that economic well-being is largely in the mind. In his society, 18th-century England, people felt second-rate if they couldn't afford a linen shirt, whereas today it might be a fancy car or a smartphone.

Health researchers find that in a society with sharp status differences, even the wealthy may feel like failures relative to others. There is an exaggerated focus on consumption. We eat too much, drink too much, and shop too much, yet we have a nagging suspicion that our friends have it better.

Feeling less than others hurts. It is alienating and stressful. It causes obesity and heart disease and subtracts years from our lives.