Branko Milanovic – Global Inequality

Inequality was a hot topic within political and economic conversations before Piketty wrote Capital in the Twenty-First Century. Yet the publication of this landmark work gave intellectual context to the criticisms of the gaps within wealth and income. Branko Milanovic explores inequality on a wider scale than Piketty. Indeed, he handles the questions Piketty purposely avoided because he did not believe the data was available to answer his questions. Milanovic works through the available data to produce some interesting conclusions, many of which contradict Piketty’s insights.

Both scholars must answer the hypothesis of Samuel Kuznets. He theorized economic growth led to an inevitable reduction in economic inequality. Piketty transposed the hypothesis through an expanded historical context. All economists have the advantage of new data which their predecessors lacked. But Picketty also made use of earlier data as well. Because his data set consisted of a longer data set, he was able to reinterpret the period Kuznets analyzed as an historical anomaly. Economic inequality increases over time. Periods of convergence reflect circumstances and political policies which are out of step with historical norms.

Milanovic challenges Piketty through an analysis of inequality on a global scale. Because globalization has transformed economic realities, national economies have become somewhat artificial constructs. Milanovic acknowledges nations have an influence on their economies yet its influence has diminished over recent decades. He uses currency as an example where national governments have lost economic influence. The Euro is an obvious example where national governments have ceded their right to manage their own currency. Interestingly, East Timor, Zimbabwe, Ecuador and El Salvador use the United States dollar as their nation’s currency. He notes the American dollar is accepted as a common currency within Russia so frequently their economic policies must take these transactions into account.

Politics is the resolution of conflict among a population. Traditionally these conflicts have been contained within the nation. Of course, there have always been international conflicts. International relations did not emerge out of globalization. Indeed, war is an ancient form of conflict resolution. Nonetheless, the types of conflicts have gradually become supranational. Businesses operate across national boundaries making it difficult for any single nation to challenge their behavior. Milanovic encourages the reader to expand the boundaries of their sense of a population. This has enormous implications for our definition of the political because it allows us to reimagine our sense of factions.

Milanovic departs from Piketty in his interpretation of the Kuznets hypothesis. He imagines a series of Kuznets waves where historical factors cause global inequality to expand before new factors cause a subsequent decline. Malignant factors such as wars, famines or disease contribute to declines in inequality. The Black Death and the Fall of the Roman Empire are two examples where tragedy brought about a decline in economic inequality. But the East Asian miracle has brought about a decline in global inequality without any malignant factors. Yet its rise masks an expansion of inequality elsewhere in the world. He notes global inequality has worsened when China is removed from the dataset. As incomes in China converge with the West global inequality is likely to grow again.

This work recognizes globalizations gains have been delivered disproportionately. It begins to construct a theoretical model to explain the distribution. He engages the reader in different ways to consider globalization’s economic consequences. Place of birth plays a disproportionate role in income potential. Americans take for granted their place in the income hierarchy around the world. Its decline in relative economic influence has become a challenge as many have suffered greater consequences of globalization without the economic gains.

This book is more optimistic than Piketty because gradual increases in inequality will be reduced in a reverse wave to produce greater economic equality. Yet there is a pessimism underlying the work. The consequences of globalization are largely inevitable. Moreover, economists have failed to produce an explanation for the underdevelopment of many regions. Capital should gravitate to regions who have low costs of labor. But it seems these nations lack the critical infrastructure necessary for significant economic modernization. Perhaps political scientists can contribute more than economists because the infrastructure of modernization may require more than physical construction. It requires institutions to coordinate social systems.

I must admit this is not necessarily a work of political science. But it contributes to political thought. Globalization emerged out of the traditional social forces of urbanization and cosmopolitanism. These trends have influenced politics throughout history. Like Piketty, Milanovic has written a work of political economy. It is light on formulas while heavy on analysis. It is written for an intellectual reader rather than an academic economist. Yet his ideas will contribute to ideas and concepts which are popular within all fields of social science. The work is available as an audiobook through Audible which makes it remarkably accessible. It is not a long work so it is easy to include within a reading list.

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