The Chinese Communist Revolution Showed Inequality Is Impossible To Eradicate Through Redistribution

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Some of the most interesting historical circumstances to read about are cases where the wealthiest families in a nation find themselves in the wake of a revolution or some other seismic social upheaval, with their fates altered entirely for the worst.

Even after they lose everything and a new social order is established, these families tend to end up wealthy again, which flies in the face of how a lot of us think about wealth. A good example are slave owners after the civil war. Here’s an excerpt from a research paper which tracked the economic status of their descendants following one of the largest “wealth compressions” in American history:

The aftermath of the American Civil War led to one of the largest wealth compressions in history. Following the abolition of slavery, former slave owners lost all wealth that had been held in the form of slaves, and civil and political rights were reassigned to the former enslaved population. In addition, Southern land holdings declined substantially in value, especially in areas that had relied heavily on slave labor.

Yet, despite these large wealth losses for white Southern households, we find that pre-Civil War wealth and social status persisted, particularly among the elite. Our evidence is based on newly-digitized complete-count Census samples linked to the 1860 slave schedules and linked forward to sons in 1900 and grandsons in 1940. In particular, we find that despite the fact that likely/known slaveholders experienced substantial wealth losses, their sons had completely recovered relative to similarly-wealthy Southern households by 1900 and their grandsons had surpassed their counterparts in educational and occupation attainment. The combination of wealth losses and productivity declines in Southern agriculture was strong enough to persistently disadvantage wealthy Southerners relative to their northern counterparts, but even this gap had substantially dissipated by 1940.

A similar case can be found in Florence, Italy, where, despite the vicissitudes of history, the wealthiest families in the 15th century are still the wealthiest families in Florence today, 600 years later.

A common notion around wealth is that people who are wealthy now simply had every opportunity afforded to them by their already wealthy parents, but these cases show that something else is going on. And a recent study on wealthy families tracked before and after the communist revolution in China illustrates the point further.

The communist revolution in China was a concerted effort to equalize a society through wealth confiscation and other means, which did work for a time. But the formerly rich found their way back to the top anyway. Here’s an excerpt from a research paper on the topic:

Can efforts to eradicate inequality in wealth and education eliminate intergenerational persistence of socioeconomic status? The Chinese Communist Revolution and Cultural Revolution aimed to do exactly that. Using newly digitized archival records and contemporary census and household survey data, we show that the revolutions were effective in homogenizing the population economically in the short run. However, the pattern of inequality that characterized the pre- revolution generation re-emerges today. Almost half a century after the revolutions, individuals whose grandparents belonged to the pre-revolution elite earn 16 percent more income and have completed more than 11 percent additional years of schooling than those from non-elite households.

This is all interesting considering that the impulse to forcibly remake society to solve the problem of inequality is as potent as ever. There is probably not a single more pressing political issue in the United States today than differences in wealth outcomes between groups.

The sentiment is positive, wealth inequality is a major cause of suffering for millions of people, but history shows us that the current approach and perspectives around these problems need their own revolution. I want wealth to be distributed as evenly as humanly possible, but, if lottery winners tend to end up as poor as they started and the wealthy end up wealthy in whatever time, place, or circumstance they find themselves in, giving money to one class by taking it away from another is not really something I can be interested in.

Conversations around wealth inequality need to change, and soon, especially if we really are as compassionate as we say. The same dead-end approaches aren’t helping anyone.