Chateaubriand and inequality: two centuries later

I decided that my Summer reading of 2015 would be Chateaubriand’s memoirs (Memoires d’outre-tombe or in English Memoirs Beyond the Grave).  I wanted to read them ever since I bought the books in the mid-1970. In the edition I have, the memoirs are published in three volumes (they are enormous). I read parts of volumes 1 or 2, but never touched volume 3. But now as my eyesight worsens, volume 3, conveniently printed in large font, beckoned. So I took it. It is a book of some 700 pages. It could have been organized much better (but I will not discuss that) and it covers years 1828-1838.

For these who do not know who Chateaubriand was I would suggest checking it on Wikipedia. A one sentence description would be that he was famous in politics as a “loyalist”, somebody who defended the French monarchy, went into exile because of it, then returned under Napoleon when amnesty was declared for the exiles, and under the Restoration became French Minister of Foreign Affairs;  in literature, he is known for his “romanticism”. Thus, we have the usual combination of conservatism and romanticism.  

But it is not that simple: while Chateaubriand was in favor of the Bourbons, he was quite aware that the revolution and afterwards Napoleon  broke the back of hereditary monarchy and destroyed that mythical link between people and its monarch. Republic was henceforth inevitable. Ideally, Chateaubriand might have liked the English solution, a monarchy that maintains the appearance of legitimacy and appeals to the ancient beliefs but does not rule. Interestingly, he never mentions the English solution explicitly although he was of course well acquainted with the British system, not the least from having lived there during the exile and being briefly the French ambassador to the UK.

Like every great book—and let me say, it is a great book despite its many shortcomings—Chateaubriand’s makes the reader think not only about the issues of the time he describes, but more generally, about the issues that concern us today. I selected three although I could have found more.

The role of true believers in politics.  It is not an exaggeration to say that Chateaubriand was infatuated with the idea of “legitimate monarchy” which, in the French case, goes back to the House of Capets, some 800  years ago before Louis XVI was guillotined. But that infatuation like every infatuation has some silly features. Chateaubriand endowed monarchy with a glow, imagined rather than real,  that he thought, it must have had under the most famous rulers like Louis IX and Louis XIV. Everything short of that—and contemporary people, including kings and would-be kings, invariably fell short of that high, imagined, standard—was unacceptable. By having such high ideals, he managed to alienate those whom he was supporting. They found Chateaubriand troublesome (one figures that reading between the lines), perhaps even insufferable, silently critical whenever he found the kings not up to his own highly raised bar.  Thus, he was mostly kept aside (à l’ecart) by the practitioners of “real” politics during the Restoration despite his short glories as the Minister of Foreign Affairs and Ambassador to the Pope.

In all of this, Chateaubriand reminded me of the true believers in socialism who were also found an annoyance and embarrassment by those who were involved in “real” politics. It is no surprise that gradually such true believers were eased out and while those whom they ostensibly and grandiloquently supported could not exactly get rid of them (although Stalin did), they were kept at a safe distance.

Why is it relevant today? Because a similar play is being cast in Greece today. To many on the left, who believed in Oxi, Tsipras’s turnaround is incomprehensible, almost treasonous. But to the people who have to make real decisions, these true believers are a bother: they are good to bring you to power, but useless for ruling.  Moreover, the rulers (say, Tsipras today) may not know whether the true believers are merely naïve or living in their dreams or are clever schemers who, under the cover of an ideal, want to get more power for themselves. Many people may ask that question of Varoufakis: is he supportive of Tsipras, is he fighting for an idea, or is he in it for himself only? Varoufakis’s position with respect to Tsipras is the same as Chateaubriand’s was with respect to “legitimate” French kings: somebody to have around, but not too closely since, be it because of his dedication to the high principles, or Machiavellism, he may at any point become a loose cannon, or even a foe.

What are the circumstances, giving right to higher income, that we find acceptable?  Since Chateaubriand, was a believer in hereditary monarchy, he understandably believed that the heir to the throne, in virtue of his birth, had special and unique rights. He thus laments the horrible fate that deprived of this right not only Louis XVI (who, one could say, lost it himself), but also the young son of Charles X, who indeed was too young to have done anything wrong. What we would today consider a pure circumstance (birth which should give no special rights to a  person who, arbitrarily, benefited from it) for Chateaubriand becomes precisely the opposite: the circumstance that gives the right to a high position and wealth.

Chateaubriand however was not blind to the unfair role of circumstances in general. Both with respect to himself, and even more strongly with respect to Talleyrand (whom he despised) he writes of the advantages conferred by noble birth. So he  knew of unfairness when he saw it; but in the special case of an heir to the throne, he thought that the advantage it conferred was fine.

We are not different today in our rather arbitrary inclusion or exclusion of circumstances (i.e. separate from effort) that we believe give the beneficiary special rights. Obviously inheritance is one such case: how much inherited wealth is okay, and from whom should that wealth come. But similarly to Chateaubriand, in today’s existing monarchies, the rights of the monarch and his/her family--the rights which come with enormous emoluments, freedom from taxes etc.—are  seldom questioned whereas equality of opportunity is openly proclaimed. Why does equality of opportunity so blatantly stop there—indeed as it stopped in Chateaubriand’s own thinking?

Or why does the desire for equality of opportunity stop at national borders: higher income received thanks to being born in a rich country is also held to be beyond reproach and often even beyond discussion.   

Religion and economic inequality. Chateaubriand, a strongly religious man, in awe, as we have seen, to royal legitimacy, has of the use of religion the same opinion as Marx.  It is the opium of the people; even if Chateaubriand would not give it as wholly negative connotation as Marx does. Here are two quotes from Chateaubriand (my translation):

“A political  state of things where some make millions while others die from hunger, can it continue when religion is not there with its other-worldly hopes to explain the sacrifice?”

“Great inequality in conditions and wealth was bearable as long as it was hidden. But as soon as that inequality was generally noticed, it received a fatal blow. Start anew, if you can, telling aristocratic fictions; try to convince a poor man who can read and no longer believes in God, and who has the same education as you, yes, try to convince him that he needs to accept these privations while his neighbor indulges in superfluities.”

Thus, so long as either (1) large disproportions in income and wealth are not seen, or (2) religion  is there to “explain” them away, the very unequal order to things can continue. (A thought not foreign to Keynes who in the first chapter of his  Economic Consequences of the Peace thought that income inequality is acceptable so long as the rich do not consume but invest their higher incomes.)  But Chateaubriand was also a pessimist. He thought that with the fall of the long-established monarchies and the weakening of religious feelings, inequality will naturally lead to revolutions.

He was not against some redistribution of wealth, although, I think, equality in the formal sense (e.g. peasants having the same formal rights as the nobles) would have probably been too much for him. But mostly he was afraid that the revolutionary pendulum, once set in motion by  inequality no longer hidden from view and in a society without a God to “justify” it, might swing too far. The love for what he calls “absolute equality” may spread further than to equality in economic conditions. It might go on to imposing equality in moral and physical domains and produce the vilest servitude of the “soul”.  He was quite prescient in that: the excesses of the French revolutions were only amplified by the Russian and Chinese revolutions, and attempts to create “absolute equality” led to tyrannies.

Welfare economics and the Greek crisis

Suppose that you have just graduated from college and somebody presents you with two options for your future jobs and earnings.  In job A you will earn about as much as in B during the early stages of your career (see Figure 1  below); then with A, you will sharply increase your income while with B the increase will be much more moderate. You will reach the peak earnings at around the same age with both (but obviously with A giving you a higher level of earnings) and then toward the end of your career, A earnings will sharply go down ending at the same point as B. What would you choose? A single glance at the graph would, I think, suffice to make you choose A.

Perhaps, if common sense is not enough, you may wish to consult economics. Economics too would give you an unambiguous answer. Whatever rate of discount you use for your future earnings, the net present value  of earnings from A will exceed the net present value of earnings from B. You may want to consult welfare economics too. There, so long as welfare is positively related to income (that is, higher income increases your welfare however small at the margin that effect may be), your total welfare if choosing A will be greater that your total welfare if choosing B. So, it seems a no-brainer:  A dominates B.

But the graph I showed here is really coming from an entirely different source (see Figure 2). It shows GDPs capita, in international dollars, of Greece and Portugal over the period 1992-2013. Portugal and Greece both started the 1990s with about the same GDP per capita.  But from around 2000, Greece had a steep increase in income, growing by almost 4% per capita annually until the crisis struck. Portugal’s average growth rate was only 1% per capita. But then, as is all too well-known, after 2007, Greece’s economy plunged losing by 2013, a quarter of its peak-level  GDP. Meanwhile, Portugal’s economy too suffered a recession but it was much less sharp and the income loss was only 10 percent, Thus, as of 2013 the two countries ended up with the same income.

Economic and political problems of Greece are way greater than those of Portugal. Perhaps the underlying reasons for the crisis are different, but there is no doubt that one of the key reasons fueling dissatisfaction in Greece is the fact that the country has gone (and is still going) through an  equivalent of the Great Depression with sharp drops in real income.  The decline in Portugal, as we have just seen, was much smaller.

So it would seem that if you were in the beginning shown Figure 2 with the correct labeling (Greece and Portugal rather than jobs A and B), you might have chosen to be Portugal rather than Greece, But this is clearly inconsistent with your original choice, which, as we have seen, is based on common sense and fundamental economic principles.

How can we reconcile the two different choices? One possibility is to redefine our welfare function, by including in it, not only income but income changes. For example, we could argue that experiencing an income drop, regardless of what income level one has, exercises an independent negative effect on one’s welfare.  We could say that a person whose annual income goes from $2 million to $1 million will, of course have a lower welfare in the second period, but also that his welfare will be additionally decreased because he suffered an income loss. In other words, if he got to $1 million from previously having only $500,00, his welfare would have been greater than when he goes down from $2 million to $1 million.

          

   Although this seems at first a reasonable adjustment, and reflecting pretty well what seems to be the feeling of an average Greek (that he or she is particularly unhappy with their income now because they originally had a much higher income), we are soon facing significant problems. We have then to accept that, in welfare terms, a rich person who used to be even richer yesterday, could have a lower welfare today than a much poorer person, whose income was historically stable or increasing.

This then leads us to assess the positions taken by Latvia, Lithuania and Slovakia in the current crisis. Their hard-line position on Greek debt is motivated by the reluctance to have their own taxpayers pay for a part of the debt incurred by a richer country. They, like most economists, look at the income levels and conclude from a higher Greek GDP per capita that the Greeks must be, on average, better off  and happier than themselves, and rightly from the welfare economics  point of view, refuse to accept a regressive income transfer (transfer of income from a poorer to a richer member). But if we allow for unhappiness that a richer member might experience on the account of having lost some of its income, then such an income-regressive transfer could be argued to be actually a welfare-progressive transfers. This was implicitly what Greeks are saying: “we are really so unhappy now, and you need to transfer some of your income to us even if you are, if we look at income alone, poorer”.

But clearly this logic leads to absurd conclusion if we imagine that the same point could be made by a still very rich Wall Street banker who lost millions in the stock market, and who, on account of his unhappiness, could appeal to a high-school teacher with a more stable (and always lower)  income to transfer some of teacher’s income to him. 

The very foundation of welfare economics  and income redistribution would be entirely messed up if we were to allow that today’s welfare depends not only on today’s income but also on the previous rate of change in income. But we are still unable to account for the incontestable fact that much of Greek unhappiness stems from the difficulty of downward income adjustment. It is said that there is a curse that “may you be rich today and poor tomorrow”. This effect, it seems, does refer to something real that individuals and peoples experience. A single 1 percentage loss in real income among Americans, who still remain  by far the richest people in the world, has produced more writing than stable incomes among some of the poorest people in the world, in Congo or Afghanistan.

I do not know how these two feelings can be reconciled while still allowing us to remain on a rather strong ground where we can distinguish between progressive and regressive transfers based on the income levels of the participants. It seems that economics is missing something of importance but that trying to account for it  just throws the fundamentals of economics into disarray.