By: Branko Milanovic
Rating: 4.3 out of 5 stars
One of the world’s leading economists of inequality, Branko Milanovic presents a bold new account of the dynamics that drive inequality on a global scale. Drawing on vast data sets and cutting-edge research, he explains the benign and malign forces that make inequality rise and fall within and among nations. He also reveals who has been helped the most by globalization, who has been held back, and what policies might tilt the balance toward economic justice.
Global Inequality takes us back hundreds of years, and as far around the world as data allow, to show that inequality moves in cycles, fueled by war and disease, technological disruption, access to education, and redistribution. The recent surge of inequality in the West has been driven by the revolution in technology, just as the Industrial Revolution drove inequality 150 years ago. But even as inequality has soared within nations, it has fallen dramatically among nations, as middle-class incomes in China and India have drawn closer to the stagnating incomes of the middle classes in the developed world. A more open migration policy would reduce global inequality even further.
Both American and Chinese inequality seems well entrenched and self-reproducing, though it is difficult to predict if current trends will be derailed by emerging plutocracy, populism, or war. For those who want to understand how we got where we are, where we may be heading, and what policies might help reverse that course, Milanovic’s compelling explanation is the ideal place to start.
“Milanovic has analyzed an immense amount of data in support of three propositions. First, the past few decades has witnessed the rise of a “global middle class,” mostly in a “resurgent Asia” (although Africa and Latin American should not be ignored). Second, the globally relatively affluent by middle-income classes in the richest countries has seen their incomes stagnate. Finally, a “global plutocracy” has emerged, including the rich in the advanced countries who have captured all of their countries’ productivity gains in the past few decades. The quality of the research in documenting these changes is highly admirable, even dazzling. For this reason, this book is a must read for those interested in economic and social policy, as well as political dynamics.” Reviewer ~ Herbert Gintis
“Branko Milanovic focuses his thesis on the evolution of global inequality, especially during the past twenty-five years, within the framework of Kuznets waves. Simon Kuznets was thinking that inequality would decline and stay at that lower level after income became sufficiently high. The Kuznets wave has been going up again in the advanced economies since around 1980. Some emerging economies like China are at the peak of the original Kuznets wave. Therefore, Mr. Milanovic states that it is more appropriate to speak of Kuznets waves or cycles.
The first Kuznets wave refers to the transfer from agriculture and rural areas to manufacturing and urban areas. The second Kuznets wave refers to the transfer from manufacturing to services. Technological innovation, the substitution of labor by capital, and the transfer of labor from one sector to another drive each Kuznets wave.
Mr. Milanovic clearly reviews the benign and malign forces that drive Kuznets waves. The malign forces, which accentuate global inequality within and across countries, are technology, globalization, the combination of high labor and capital incomes received by the same individuals and households, as well as the greater influence of the rich on the political process. The benign forces that drive down Kuznets waves are political changes, declining skills premium, dissipation of rents, income convergence at the global level, and low-skill-biased technological progress. The United States symbolizes the evolution of the second Kuznets wave in its most extreme form among advanced economies. The hollowing out of the middle class and the rising political importance of the rich mirror the trajectory of the second Kuznets wave in this country.
The author does not expect that the peak of the second Kuznets wave will be as steep as that of the first Kuznets wave due to the existence of automatic inequality “reducers” in the form of extensive social programs and state-funded free health and education. To his credit, the author doubts that the benign forces will get the upper hand over the malign forces in the United States anytime soon.
Mr. Milanovic also brings to light that the problems with cross-border migration compound those of globalization in the advanced economies. Most European countries have been bad at integrating immigrants into their respective societies compared to the United States. Unsurprisingly, the far right is thriving in many European countries. The author notes correctly that the U.S. presidential contest in 2016 brings to light a widespread dissatisfaction with the growing inequality as well as a backlash against illegal immigrants in the United States.
In conclusion, Mr. Milanovic offers a new, useful take on the evolving global inequality by examining it in the context of the Kuznets waves or cycles.” Reviewer ~ Serge J Van.