Global Inequality: A New Approach for the Age of Globalization

Anthony Annett

Climate Change and Sustainable Development Advisor
The Earth Institute Columbia University

Harvard University Press, Cambridge, Massachusetts, 2016, 320 pp., $29.95 (cloth).

From assessing inequality in the Byzantine Empire to musing over where people fall on the global distribution of income, Branko Milanovic has made a name for himself as an innovative thinker in this field. Even before Thomas Piketty made it cool, he was using Jane Austen vignettes to explore historical patterns of inequality.­

Milanovic’s new book does not disappoint. He starts by identifying the winners from “high globalization”—the middle classes in emerging Asia and the global super-rich. The big loser is the middle class in the developed world. He notes that as inequality rises within countries, it is falling between countries—showing no real evidence of rising global inequality.­

Some have used this point to dismiss inequality concerns. Milanovic does not. He acknowledges that future trends are unclear. If convergence does continue, within-country inequality may well dominate once again, much as it did in the 19th century, making class more important than location. Milanovic is also well aware that the nation state remains the locus of political deliberation.­

The book’s longest chapter is, therefore, devoted to within-country inequality. He seeks to partially rehabilitate Simon Kuznets from Piketty’s critique by proposing a “grand theory” of inequality—what he calls “Kuznets waves” of alternating increases and decreases in inequality. He traces the first Kuznets wave over the century and a half ending in the 1980s, when the second wave began, jump-started by many of the same factors as the first—technology, globalization, and pro-rich economic policies.­

But this explanation might be a little too tidy. For a start, it is not clear that reducing technical change to two technological revolutions is accurate. Others, for example, have emphasized four to six technological waves since the late 18th century.­

And although he gives an extensive account of the benign and malign forces that reduce inequality, Milanovic is a bit murky on the wave’s turning point. He argues that inequality becomes unsustainable, but doesn’t fall on its own—it leads first to wars, social strife, and revolutions. This is the story he tells about World War I—he actually endorses Lenin’s theory that it was driven endogenously by imperialist expansion. But what does this portend for our own times? Milanovic takes us to the precipice, but then pulls back. And strangely enough, he barely even mentions one of the greatest malign economic forces of the 21st century, climate change, which could spell catastrophe for income distribution both within and between countries.­

Milanovic is on stronger ground when he reflects on the current zeitgeist. Especially in the United States, he sees little scope for reversing the “perfect storm of inequality” in an era when capital is highly mobile and the rich dominate the political system. His policy prescription for our predicament—focused on equalizing endowments, especially in terms of ownership of capital and education—warrants serious consideration.­

But what else? Milanovic is a bit too sanguine about the financial sector, which contributes massively to inequality while adding little social value. Curbing the power and scale of this sector would help with both inequality and financial stability. And perhaps the time has come for a Piketty-style tax on global capital, which would of course require significant global coordination.­

Milanovic also includes a timely discussion of migration, even if his suggested proposal in this area leaves questions unanswered. He advocates expanded migration, but with “legally defined relatively mild differences” between domestic workers and migrants. It doesn’t require high deontology to see the red flags raised by this. The problem is that Milanovic’s ethical frame of reference, like that of too many economists, is crimped. For example, he dismisses the mistreatment of guest workers on the grounds that they are still better off than if they had stayed home.­

More generally, the ethical issues raised by inequality are still missing from the debate. This needs to change largely because economists tend to subordinate distributive justice to efficiency. Our conversation about inequality would benefit greatly from reflection on such questions as what constitutes fair allocation of resources, what we owe each other in a globalized world, and what characterizes a good society.­

On the whole, Milanovic’s book is highly recommended. It’s an easy and enjoyable read. And its manageable length proves that serious analyses of inequality need not run to 700 pages!

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