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DYNAMICS OF INEQUALITY
I
nequality is a modern notion. Differences in wealth, power
and statusbetween rich and poor, men and women, young and
oldare ancient, of course. The great salvationist religions
Buddhism, Christianity, Islamadumbrated notions of the
equality of human souls, which could sometimes develop into an egali-
tarianism rooted in this world, rather than the next: the celebrated
defence of Americas native population by the Spanish priest Bartolom
de las Casas, for example, or the anti-slave trade campaign of Anglo-
Saxon abolitionists. It supplied an inspiration for popular uprisings,
from the German Peasant War of the 1520s to the great Taiping and
Tonghak rebellions in nineteenth-century China and Korea. A Biblical
extrapolationWhen Adam delved and Eve span, who was then the
gentleman?was popular in many European languages. But the mod-
ern, secular concept of equality was forged in the course of the struggle
waged by Europes bourgeoisie against the ruling aristocracya struggle
in which the official Church and its high clergy, of whatever variant of
Christianity, opted for the latter, and later paid the price in the unique
secularization of most of Europe.
concrete demands for jobs, fair wages, social security, sexual freedom,
national independence, and so on. Now that several of these concepts
have lost their self-evident character, while inequalities are mutating into
new, more vigorous forms with the crumbling of their old institutional
bulwarks, critiques of inequality and concerns with equalityas a pro-
cess and a horizon, rather than a stateare becoming more central. It
was Amartya Sen who, in this context, posed the question, Inequality
of what? and answered: Of possibilities for human functioning.1 He
thereby provided egalitarianism with a sustainable theoretical basis,
relevant both to social philosophers, lost in the utopian nationalism of
Rawlsthat is, the radical utopianism of his Theory of Justice and the
philosophical nationalism of his Law of Peoplesand to latterday econo-
mists, blissfully ignorant not only of Marx but also of Ricardo.
A pioneer
Over the past twenty years, inequality has again become a majoror at
least, non-negligiblepreoccupation for economists; the 2008 financial
crisis even put it on the agenda of the capitalist World Economic Forum
1
Amartya Sen, Inequality Reexamined, Cambridge, ma 1992.
2
undp, Human Development Report 2015, table 3.
therborn: Inequality 69
But for the lay person with a global perspective, the most interesting
and important of these analysts of inequality is Branko Milanovic.
Born in Yugoslavia in 1953, Milanovic trained as an economist at the
University of Belgrade, where his earliest research centred on workers
self-management. His doctoral dissertation, completed in 1987, exam-
ined economic inequality in Yugoslavia, pioneering the use of micro
data from household surveys there. In the early 90s he moved to the us,
joining the World Banks research department, and from 19962007
taught at jhu. His first major work demonstrated the rise of inequality
in Eastern Europe with the restoration of capitalism there (or, in polite
liberal lingo, the transition from planned to market economy).4 Now at
cuny, Milanovic has made his name as an empirical analyst of the total-
ity of global economic inequalityin contrast, for example, to Piketty,
who concentrates on the national income shares of the richest 10 to 1 per
cent of selected countries populations.
3
The American economist Joseph Stiglitz has become an influential critic of
inequality with his 2011 Vanity Fair article, Of the 1%, by the 1%, for the 1%, but his
main work has been focused elsewhere. The most important research on inequality
by contemporary American economists is being done at Chicago (of all places) by
James Heckman, discussed below.
4
Branko Milanovic, Income, Inequality and Poverty during the Transition from Planned
to Market Economy, World Bank, Washington, dc 1998.
70 nlr 103
and were thus included in the statistics for the first timeand then rose
steeply from 1980 to 1995, thereafter levelling off on a high plateau.5
The second approach weighted the countries by population, giving due
importance to China and India. By this measure, global inequality had
been falling since the time series began in 1952: Chinas growth rate
had been negative between 1913 and 1950, while Indias had been barely
zero; but from 1950 to 1973, they were 4.9 and 3.5 per cent respectively.6
However, Milanovics most original contribution was his analysis of the
primary data in the World Banks growing archive of national household
surveys to produce a third measure of global inequality, this time poten-
tially involving all the worlds household units; it was an approach that
didnt assume that every American or Chinese was receiving the aver-
age national income. Instead, the richest Chinese households might be
ranked in the global top 1 per cent, while the income of working-class
Americans would just allow them into the worlds top 20 per cent. This
approach made it possible to grasp inequalities within countries and
inequalities between countries within the same framework.7
Contrasting futures
5
Branko Milanovic, Worlds Apart: Measuring International and Global Inequality,
Princeton 2005, p. 39.
6
Milanovic, Worlds Apart, p. 86. For Chinese and Indian growth rates, see Angus
Maddison, Contours of the World Economy, 12030 ad, Oxford 2007, p. 380.
7
Needless to say, the methodological problems involved here are gigantic. The
household surveys varied in approachincome measurements predominating in
Europe and the Americas, consumption in Africa and Asiaas well as reliability;
currency equivalents and purchasing-power parity rates are eminently disput-
able; the very rich are likely to be under-represented. Gini coefficients can vary
widely depending on which approach is used: a 2008 Indian survey based on con-
sumption reports a Gini index of 33, while the income-based 2005 India Human
Development Survey found a Gini of 52.
8
Branko Milanovic, Global Inequality: A New Approach for the Age of Globalization,
Cambridge, ma 2016; henceforth, gi. Technical information on the main data pre-
sented in the book is given in Christoph Lakner and Branko Milanovic, Global
Income Distribution: From the Fall of the Berlin Wall to the Great Recession, World
Bank Economic Review, vol. 30, no. 2, 2016.
Figure 1: Relative gain in real per capita income by global income level,
19882008 (2005 international dollars)
100
90
Cumulative gain in real income (%)
80 A
l
70 l
l
C
l
l l
l
60 l l
l
50
l
l
40 l l
30 l l
20
l
l
10
B l
l
0 l
0 10 20 30 40 50 60 70 80 90 100
Ventile/percentile of global income distribution
9
gi, p. 19.
72 nlr 103
most of the rest are from Western Europe, Japan and Oceania. The big
losers, group B, are at the 80th percentile of the global population, richer
than the emerging Asian middle class; they are working-class and lower-
middle-class Americans, Europeans and Japanese.
This was only partly due, Milanovic suggests, to the malign factors
stressed by Pikettyand recently, in overdone form, by Walter Scheidels
10
gi, pp. 5965.
Figure 2: Percentage of absolute gain in real per capita income received,
by global income level, 19882008 (2005 international dollars)
30
Top 25%
Absolute global income gain received (%)
25
Top 1%
20
15
10
0
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 99 100
The Great Levellerthe destruction of assets in the two world wars.11 More
important for the global fall in class-based inequality was the benign
challenge of politically organized labour. Levels of income inequality
are, almost by definition, the result of social and political struggles,
sometimes violent ones, Milanovic writes; but these struggles take place
within a broader economic environment, with parameters set by the
conditions of global trade, labour supply, capital abundance and exploit-
able resources. In the mid-twentieth century, strong trade unions and
workers parties, as well as the example and military might of the Soviet
Union, helped to constrain the power of capital everywhere; the us itself
pushed for radical land reforms in Cold War frontier states like Japan,
South Korea and Taiwan.12 At the same time, the economic gulf between
11
Contra Piketty, Milanovic cites Hobson, Lenin, Luxemburg and (indirectly) Niall
Ferguson to argue that the conflagration of 1914 was not exogenous but caused by
the pressures of competitive imperial expansion, made necessary by insufficient
demand at home: the forces that set the rich worlds inequality on its downward
path for the next seventy years were contained in the unsustainably high domestic
inequality that existed before: gi, pp. 946.
12
gi, pp. 86, 99.
74 nlr 103
rich and poor countries was unprecedented in world history. The income
of many workers in the advanced-capitalist countries was higher than
that of middle and even upper-middle classes in Asia and Africa. In
1970, the peak of inequality between nations, us gdp per capita in inter-
national dollars was 20 times the Chinese level.13
Future trends
As for the future of income inequality, Milanovic sees two major tenden-
cies. One is a continuation of location-based global convergence: even
if Chinas growth rate slows to 5 per cent, its per capita gdp will match
the eu average by the 2040s. He admits, however, that convergence is
largely Asia-driven; growth in other regions has been more uneven. From
a low starting point, African gdp per capita in 2013 was only 1.9 times
greater than its 1970 level; Latin America, though richer to start with,
had not grown sufficiently to begin to converge with Europe and North
Americawhereas Asias gdp per capita had nearly quintupled over
the same period (Table 1). Weighted by population, there are still huge
gaps between national average incomes (Figure 3), and some economies
will fall still further behind, including countries with high population
growth. Global equality is not in sight. It remains the case that ones
country of origin has a greater impact on life chances than the class into
13
gi, pp. 1303. 14
gi, p. 30.
Table 1: Growth record of various regions of the world between 1970 and 2013
(2005 international dollars)
30
India,
Indonesia
China
World population (%)
20
10
Brazil,
Mexico most of Western USA
Europe, Japan Germany,
Russia Canada
15
gi, p. 133.
16
Simon Kuznets (190115): born to a well-off Jewish family in Pinsk, Kuznets
studied at the University of Kharkiv and Kharkiv Institute of Commerce, engaging
with the work of Schumpeter and Kondratieff, before emigrating to the us in 1922,
where he studied with Wesley Clair Mitchell. Joining Mitchell at the nber in the
1930s, he led research into us gnp and helped establish national-income accounts
in allied Cold War countries, from South Korea and Taiwan to Israel. Kuznetss
conjecture on the relationship between economic growth and income inequal-
ity was first presented in his 1955 presidential address to the American Economic
Association. He warned, however, that industrialization in underdeveloped coun-
tries might be even more traumatic and inegalitarian than in the Atlantic world,
due to seemingly more unequal starting points.
therborn: Inequality 77
Limits to extraction
17
gi, p. 113.
78 nlr 103
Catching up
18
Branko Milanovic, The Haves and the Have Nots, New York 2011, p. 199. The
calculus behind these estimates is rather complex, and the extraction ratio actu-
ally refers to the relationship between two Gini coefficients: the estimated one
and the maximum possible level, as defined by subsistence needs, the size of the
economy and the total population. At all stages of the analysis, crucial assump-
tions are made which, while plausible, may not be altogether true. Sometimes the
calculations yielded extraction rates of 200 (Mughal India) or 360 (Congo) per cent
of the maximum possible. The procedure is described in Branko Milanovic, Peter
Lindert and Jeffrey Williamson, Measuring Ancient Inequality, nber Working
Paper no. 13550, October 2007.
therborn: Inequality 79
19
Thomas Piketty, Le Capital au xxi sicle, Paris 2013, p. 317.
20
Jan Luiten van Zanden et al., The Changing Shape of Global Inequality 1820
2000: Exploring a New Dataset, Review of Income and Wealth, vol. 60, no. 2, 2014.
80 nlr 103
However, the main focus of Milanovics work is not the precise measure-
ment of global inequality, but its patterning, future trends and political
implications. Unlike many economists, he is not afraid to stake out
clear-cut political positions. The policies he considers most plausible to
reduce national income inequality in the twenty-first century draw not
on the European welfare state but on the East Asian capitalist model.
If the second-wave Kuznets curves are going to enter a downswing, he
argues, this is unlikely to be driven by the same forces that lowered
income inequality in the twentieth century, whether benigneducation,
social transfers, nationalizationsor malign: the destruction of wealth
through hyperinflation and wars. Instead, he suggests reducing
21
gi, p. 176.
22
The 2008 consumption-based Indian survey used by Milanovic reported a Gini
of 33, while the 2005 Human Development Survey of India found an income-based
Gini of 52. Compare Lakner and Milanovic, Global Income Distribution, p. 212,
and Reeve Vanneman and Amaresh Dubey, Horizontal and Vertical Inequalities
in India, in Janet Gornick and Markus Jntti, eds, Income Inequality: Economic
Disparities and the Middle Class in Affluent Countries, Stanford 2013, pp. 43958.
23
gi, p. 119; Lakner and Milanovic, Global Income Distribution, p. 217.
24
Compare Sudhir Anand and Paul Segal, What Do We Know about Global Income
Inequality?, Journal of Economic Literature, vol. 46, no. 1, March 2008, p. 62, and
un Habitat, State of the Worlds Cities 2016, Box 4.2.
therborn: Inequality 81
Multidimensionality dismissed
25
gi, pp. 21771.
26
gi, pp. 14774.
82 nlr 103
27
Vladimir Shkolnikov and Giovanni Andrea Cornia, Population Crisis and Rising
Mortality in Transitional Russia, in Cornia and Renato Panicci, eds, The Mortality
Crisis in Transitional Economies, Oxford 2000, p. 256; Michael Marmot, The Status
Syndrome: How Social Standing Affects our Health and Longevity, New York 2004,
p. 196. The figures refer to the number of excess deaths in comparison with previ-
ous years, after subtracting the purely demographic effects of ageing.
28
Michael Murphy et al., The Widening Gap in Mortality by Educational Level in
the Russian Federation, 19802001, American Journal of Public Health, vol. 96,
no. 7, July 2006.
29
Stuart Jay Olshansky et al., Difference in Life Expectancy Due to Race and
Educational Differences Are Widening, and Many May Not Catch Up, Health
Affairs, vol. 31, no. 8, 2012; 2015 life expectancy figures from the National Centre
for Health Statistics.
therborn: Inequality 83
Existential inequality has taken some major hits since the 1970s, as
legally institutionalized racism finally fell, from the American South to
apartheid South Africa and White Australia, while legally institutional-
ized patriarchy was also dismantled in many states. But its become clear
that existential inequality can be successfully privatized, deregulated,
left to the initiatives of anti-egalitarian individuals and groups. This has
been dramatically highlighted by the shootings of American blacks by us
police. As Ta-Nehisi Coates has written: Racism is a visceral experience.
It dislodges brains, blocks airways, rips muscle, extracts organs, cracks
bones, breaks teeth.32 As an economist, Milanovic is in plentiful com-
pany in neglecting life-course and existential issues. In a sense he is the
heir of those Marxists who, as Sartre wrote in 1960, are only concerned
about adults: reading them one would think that we are born at the age
when we receive our first wage.33 And for all his respect for Fanon, he
seems to be tone-deaf to existential issues like racism. Fanons Peau
Noire, Masques Blancs opened with a quotation from the Discourse on
Colonialism by his fellow Martiniquais, Aim Csaire, a powerful depic-
tion of racial inequality: I am talking of millions of men who have been
skilfully injected with fear, inferiority complexes, trepidation, servility,
despair, abasement.
30
See Therborn, Life-Curves of Inequality, Korean Journal of Sociology, vol. 49,
no. 6, 2015.
31
For a sample of this work, see Flavio Cunha and James Heckman, The Economics
and Psychology of Inequality and Human Development, Journal of the European
Economic Association, vol. 7, no. 23, AprilMay 2009; and James Heckman and
Stefano Mosso, The Economics of Human Development and Social Mobility,
Annual Review of Economics, vol. 6, 2014.
32
Ta-Nehisi Coates, Between the World and Me, New York 2015, p. 10.
33
Jean-Paul Sartre, Critique de la raison dialectique, Paris 1960, p. 47.
84 nlr 103
34
See The Killing Fields of Inequality, Cambridge 2013.
therborn: Inequality 85
35
Therborn, Killing Fields of Inequality, pp. 5467.