The dawn of inequality

Non Technical Summary

Inequality is on the rise across the world, but what are its origins? Social scientists have asked this question for a long time. Voltaire for instance, viewed men as having lived in complete equality and harmony until one invented private property. Relatedly, the Marxist school saw institutions as the vehicle for the growth of inequality and posits that institutions themselves were designed by elites seeking to reinforce their privileged economic status. To the other end of the spectrum, more mainstream economic theory links economic growth and gains from trade to increases in income and wealth inequality. Kuznets (1955), for instance, famously associated the initial rise in inequality to lifting out of poverty and subsistence. While both extractive and growth-related mechanisms were at play simultaneously throughout history, little empirical evidence exists on what led to the initial increase in inequality.

In this paper, we shed new light on this question by focusing on ancient Iraq, and particularly on its Southern part. This alluvial plain, defined by the presence of the two large rivers Tigris and Euphrates, saw the emergence of the Sumerian civilisation. This was allegedly the first area to develop all cultural and economic traits associated with a complex society, featuring cities, writing, trade, and some of the first documented states. The archaeological record suggests that inequality was very limited in the area before this transition took place. Grave goods in cemeteries, for instance, reflected an essentially egalitarian society and culture. This changed decisively by the end of the 4th and especially throughout the 3rd millennium, when conspicuous consumption in graves became widespread. The most famous example of this was the so called “Royal cemetery” of the city of Ur, where elite members of society were buried in lavish tombs that featured human sacrifices and golden artefacts.

To explore the drivers of early growth in inequality, we created a novel archaeological dataset covering Southern Iraq between the 4th and 3rd millennium BCE, which importantly contains information on the presence of socio-economic inequality, trade activity, and state institutions. We collected this information from an array of sources, which can be broadly split between archaeological architectural records and text-analysis of the large cuneiform body of texts that record detailed information on economic and social activities in the area.

Consistent with inequality being a by-product of institutions, we find that early economic inequality followed states across space and time. Rather than being associated with extractive institutions, this initial rise was linked to economic growth and specialisation. Initially, in fact, locations where new states formed display a marked jump in both, as measured by labour specialisation and a stronger presence of a professional merchant class. As the various professions were associated with a wide range of incomes, this is also indicative of growing income inequality. Most strikingly, we find that early states developed a stronger presence of slavery within 300 years of their first appearance.

These findings show that early economic inequality grew due to a combination of some people gaining more from growth and specialisation than others, and those in power progressively facilitating the appropriation of resources by the elite. State institutions played a role in fostering initial growth and specialisation, in a “natural” fashion, similar to Kuznets’ view. Trade, both across long and short distances, was certainly important in starting and supporting the process which led to income differentiation. With time, however, states also developed institutionalised forms of socio-economic inequality, most notably slavery. This second finding suggests that institutions played a role in fostering inequality directly, either through direct surplus extraction or by providing an institutional setting conducive to the extraction by an elite. The combination of these two processes appears as the driving force behind the high levels of inequality that Southern Iraq communities had reached by the end of the 3rd millennium BCE.

In sum, inequality has not always existed. In fact, for most of human history, inequality was severely constrained. Studying ancient Southern Iraq reveals a process of institutional and economic development between the 4th and 3rd millennium BCE that, due to growing trade and specialisation, led to initially higher income inequality. This initial phase was followed by a longer one where early income inequality crystallised into enduring forms of socio-economic differences, most notably slavery. While from the distant past, these novel findings on the emergence of inequality reveal a tension between equality and efficiency at the “dawn of inequality”, thus indirectly emphasising the importance of policy to manage the “natural” growth in inequality that trade and specialisation may trigger.

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