For most of us, myself included, wealth inequality is a bad thing. I have written about this a lot:
- The US Inequality Myth. Sort of.
- The Book That All The Economists Are Reading: Das Kapital in the Twenty First Century
- The War on the 1% #Kristallnacht
- The Hubbub About Global Wealth Inequality
- The US Inequality Culprits: Women, Asia and Insatiability
- Dear Top 1%. It’s Time To Panic.
- South Africa’s Inequality is not racist. Well – not entirely.
- Is Inequality a good thing? Arguments from the other side.
The general idea being: when you focus the wealth in the hands of the very rich, you’re focusing it in the hands of the non-consumers. And unfortunately, we’ve got a global economy that’s been driven by consumption.
So while it’s all good and well to tell people to “live within their means” – the global extrapolation of that means that everyone has to subsist, because my income is your spending, and my spending is your income. So if I reduce my spending, then I reduce your income, which reduces your spending, which reduces my income, which reduces my spending, and so on into the Dark Ages where I have my vegetable plot and my goat and those are my means and I am living within them.
But frankly, I suspect that idea of subsistence might just be a solid argument in favour of wealth inequality. It’s one that you don’t hear often from the other side, mainly because wealth inequality advocates tend also to be climate-change deniers. And you can’t use “Wealth Inequality Is Probably Good For Climate Change” as a call to arms if you’re iffy on the wealth inequality numbers and outright skeptical on global warming.
What I mean is: if you were to write a list of things that are contributing to climate change, topping the charts are:
- Coal-burning Power Plants
But in some ways, almost all of those things are the result of the rise of the middle class.
If you consider a completely unequal world, where you have the upper echelons wining, dining and in-breeding; and the rest of us looking generally dirty and dying of consumption (oh the irony); then what you’d have is a world with:
- Fewer cars (you walk or you car-pool);
- Less beef and less dairy-product (those be luxuries – where gruel be not);
- Less deforesting (because who needs the space?); and
- Less need for electricity (they weren’t called the “Dark Ages” for nothing).
And I think we might just be starting down this road.
Consider the avocado, which was the topic of this article from the New Yorker: Have You Eaten Your Last Avocado?*
*Apparently this article is worthy of a whole segment on Slate’s Culture Gabfest podcast. It’s economics. But it’s also culture. Who knew that the avocado was so versatile?
The summary is:
- Avocados used to be a seasonal thing.
- But now they’re an all-year-round thing. Mostly because the people like guacamole on their Chipotle.
- Interestingly, the masses were up in arms at the thought that Chipotle might take the guacamole off their menu (the uproar came in response to a SEC filing, where Chipotle declared: “[I]n the event of cost increases with respect to one or more of our raw ingredients, we may choose to temporarily suspend serving menu items, such as guacamole or one or more of our salsas, rather than paying the increased cost for the ingredients.”)
- The reason for that SEC statement: avocados cost a lot of water to produce.
- And water shortages could cause the cost of avocado production to rise – well outside the income bracket of your average American.
- Fingers crossed, the rising price will lower the quantity demanded, making for a more climate-friendly world.
The same goes with beef and dairy and all those other food groups that were once special seasonal treats rather than daily necessities.
However, there is a risk that it won’t work out so nicely. Because:
- Well, the rising price of rhino horn didn’t exactly drive down the demand for rhino horn.
- All it did was accelerate the rate of rhino extinction, by attracting all the short-term, speculative, neo-mafioso types into the supply chain, while the quantity demanded remained mostly consistent.
- That is: rather awkwardly, the demand for rhino horn turned out to be a lot less elastic than the supply. At least, in the short term. Long term, sadly, unlikely to be supply at any price.
- So as with the rhino horn, the important question is: will rising prices of beef, avocados and almonds encourage ever more brutal corporate destruction, as firms race to produce more of them (or even the same quantities) from ever-dwindling resources?
Hopefully, if mass consumption has dropped off before then (thanks to all the low inequality), and the avocado ritz and the grass-fed fillet have become culinary status symbols, then we might come out ahead.
Which makes it a race between wealth inequality and climate change.
And I’m kind of hoping that it’s more of a marathon than a 100m sprint.
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.