Gavin Kennedy at Adam Smiths Lost Legacy sends us over to Fred Bauer at New Majority.com who writes:
Theories of the free market have long concerned themselves with the role of inequality. In The Wealth of Nations, Adam Smith famously argues that the development of advanced modes of production and commerce undermined the stark inequalities of the feudal world. The thirst of the rich for luxuries such as diamond buckles led to a breakdown of the system of feudal-agricultural dependence, in which wealthy landholders held not merely economic but also political domination of those below them.
Smith's argument has two salient implications for the current political right/classical liberals/conservatives: (1) certain forms of radical economic inequality can result in significant political inequalities (witness the petty tyrannies of medieval nobles), and (2) the functioning of the free market can serve as a way of mitigating these inequalities, of leading to a turnover of wealth, of making differences in levels of income less poisonous for civil liberties. The free market and inequality thus have a quarrelsome relationship: the market helps create inequalities, but it also undercuts the financial inequality of any given moment, allowing the rich to fall and the poor to rise. Inequality in results is a key characteristic of a market economy, and the very operations of a free exchange can prevent these inequalities from hardening into radical caste differences.
However -- and this is a crucial "however" -- the market itself, particularly in the wake of modern industrialization and certain forms of government intervention, can result in inequalities so vast that they begin to undermine a faith in free markets. And the growth of these radical inequalities can lead to a creeping sense of the hardening of financial differences. If one of the promises of the free market as a vehicle for an authentically liberal-democratic politics is in its ability to allow for social and economic mobility, increasing doubts about the existence of these mobilities also increases doubts about the efficacy of the market and its contribution to political equality. Radical inequalities and a sense of economic stagnation can in turn lead to a widespread rejection of the instruments of the free market and, more broadly, the free society.
Gavin then notes:
Markets only continue what the consequences of the origination of property did way back in pre-history: create wealth (the 'annual output of the necessaries, conveniences, and amusements of life' and, inevitably, inequality. The great agricultural societies, growing from a long history of hunter-gatherer subsistence economies from 11,000 years ago in a small segment of the earth’s surface, were noticeable by their inequality, which extended way beyond economic inequality to political and religious inequality. Tribal property in territory preceded family and private property.
The great empires of Egypt, Babylon, India and China, were dominated by ruling elites that managed the hydraulic mysteries and seasonal timings of everything about everyday life for the vast majority of their peoples. The stone detritus of these former stone-built civilisations are spread across the Eurasian continents, north Africa, and in parts of central and south America.
Their predecessor stone-age tool detritus is spread all round the world, into modern times too, which was the subsistence mode of every human society that did not grow into shepherding and farming. Those, few, modern, aimlessly discontented, people who have notions of going back to what they call, the ‘simpler’ life of pre-history, seem to have no idea what that would involve, including the mass extermination of about 6 billion people.
For tens of millennia, the inequality of the world’s population remained constant, with a small elite monopolising the power, and almost everybody else living on subsistence and almost static per capita levels. That is until, again in parts of Europe, commercial society from the 14th century began, slowly, to revive after a thousand years of stagnation, Black Death, endless wars, and social strife, since roughly it was after the fall of the Western Roman empire.
And within four centuries, in Britain, economics, technological and social change, and the unprecedented steady, cinpound interest of the albeit minute rise in per capita incomes finally broke through the petty cycles of the 'Malthusian Trap', ironically almost coterminous with its identification by Thomas Malthus.
These events created social inequalities of a new kind – that between societies that developed institutions capable of ensuring the necessary conditions for continuous, though small, growth rates and those societies – the majority – not capable for various reasons of breaking out of their subsistence economies. The unequal poor in the commercial societies were incomparably better off than those in the unequal traditional societies, claimed Smith in Wealth Of Nations.
It is that comparative inequality that is the distinction brought about by the social evolution of early commercial societies into what became known as capitalism from the mid-19th century. It is a phenomenon that the Left do not acknowledge and the conservatives do not yet accept. There is nothing ordained about the existing arrangements of Big State capitalism or Big Welfare States that will ensure their continuation in their present forms.
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