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The Haves and the Have-Nots by Branko Milanovic
Berlin Wall, Branko Milanovic, colonial rule, crony capitalism, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, full employment, Gini coefficient, high net worth, illegal immigration, income inequality, income per capita, Joseph Schumpeter, means of production, open borders, Plutocrats, plutocrats, purchasing power parity, Simon Kuznets, very high income, Washington Consensus
In this book of many delights, Branko Milanovic, who has spent twenty-five years studying global inequality, provides us with a veritable Arabian Nights of stories about inequality, drawing from history, literature, and everywhere in the world. A pleasure to read, and an eye-opener for haves and for have-nots alike.” —ANGUS DEATON, Professor of Economics and International Affairs, Princeton University, 2009 President of the American Economic Association, author of The Analysis of Household Surveys: A Microeconometric Approach to Development Policy “Learn about the serious subject of economic inequality while you have plenty of fun traveling around the globe and far back in time! Through fascinating stories and wonderful illustrations, Branko Milanovic explains income and wealth inequality—their concepts, measurement, evolution, and role in human life—without compromising precision or balance.
The discourse of revolution changed, and this change was eventually best reflected in Mao Zedong’s claim that the third world was the new proletariat, while the classes to be overthrown were those from the rich countries, combining implicitly in the latter group pell-mell workers and capitalists of the first world. The ideas of both the universal proletarian brotherhood and the “permanent revolution” were given up.7 FIGURE 2 The level and composition of global inequality in 1870 and 2000 (Gini decomposition) Sources: François Bourguignon and Christian Morrisson, “The Size Distribution of Income Among World Citizens, 1820-1990,” American Economic Review (September 2002): 727-744; Branko Milanovic, Worlds Apart: Measuring International and Global Inequality (Princeton: Princeton University Press, 2005), fig. 11.3. Marx’s world had thus gone topsy-turvy in some 150 years. Why? Because the underlying global income distribution had changed. Around 1870 global inequality between world citizens was less than it is today (see Figure 2). But the most striking thing is not its overall magnitude but how its composition changed: From being predominantly driven by class, it has changed to being almost entirely driven by location (80 percent of global inequality).
Sestercius means “semithird,” indicating its value of two-and-a-half asses (another Roman coin unit). 3 Raymond Goldsmith, in “An Estimate of the Size and Structure of the National Product of the Early Roman Empire,” Review of Income and Wealth 30 (September 1984), estimates Augustus’s annual income at 15 million HS, which, using the conventional interest rate of 6 percent per year, translates into a fortune of 250 million sesterces. 4 Tacitus, Annals (New York: Penguin, 1996), bk. 12, chap. 53. Pallas helped Nero in many of his misdeeds until he too was, Tacitus writes, poisoned on Nero’s orders (bk. 14, chap. 65). 5 Goldsmith, “Estimate of the Size and Structure.” This was estimated by Branko Milanovic, Peter Lindert, and Jeffrey Williamson in “Preindustrial Inequality” (Economic Journal, forthcoming; previous version published as Measuring Ancient Inequality, National Bureau of Economic Research Working Paper 13550 [National Bureau of Economic Research, October 2007]) to have amounted to a GDP per capita in 1990 international prices of $PPP 633 (PPP stands for “purchasing power parity”; see Essay II).
accounting loophole / creative accounting, affirmative action, Asian financial crisis, barriers to entry, borderless world, Branko Milanovic, Bretton Woods, capital controls, corporate governance, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, ending welfare as we know it, feminist movement, full employment, gender pay gap, George Gilder, glass ceiling, Gordon Gekko, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, manufacturing employment, means of production, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, pets.com, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, structural adjustment programs, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, women in the workforce, working poor, Y2K
I'd Hke to thank, among many, Laura Stare-cheski for her excellent research w^ork; my good friend Philippa Dunne for her many forms of collaboration; CoHn Robinson for being the best publisher one could ask for; and Andre Schiffrin and the staff of The New Press for both their professional skills and their role as splendid office-mates. Thanks also to Jared Bernstein, Patrick Bond, Heather Boushey, Tom Frank, Branko Milanovic, Christian Parenti, Michael Perehnan, Kim PhiUips-Fein, Nomi Prins, Max Sawicky, Michal SeHgman, Gregg Wirth, the members of the Ibo-talk Hstserv. And, most of all, thanks to my wife, Liza Featherstone, who not only made this a better book with her comments on the manuscript, but who makes Hfe worth Hving as well. After the New Economy Introduction For a while in the late 1990s we had a New Economy.
Average incomes—which usually mean GNP or GDP divided by population—tell you nothing about distribution; Brazil and Poland are at roughly equal per capita income levels, but Poland's poor get three times the share of national income that Brazil's claim, and its rich a lot less.^^ Estimates of global income distribution that uses people, rather than nations, as the unit of analysis, are preferable, but are extremely difficult to produce. Thankfully, World Bank economist Branko Milanovic has made a first attempt, about which more in a bit. Big picture According to economic theory, the income gaps between rich and poor countries should narrow over time, as laggards "catch up" with leaders. Proponents of such theories assume that technology is the driving force behind economic development; as technology diffuses throughout the world, the advantage enjoyed by the pioneers should fade.
They use an arbitrary poverty Hne, divorced from any cultural or social context. Many of the surveys they rely on are far from exhaustive, and they rely on currency conversions that may understate the real cost of Hving. These points are weU taken, and the World Bank estimates no doubt understate the case, but even their numbers are huge. It's easy for those of us who live in rich countries to forget that most people don't Hve like we do. Thanks to Branko Milanovic, we can put some firm numbers on the observation. Milanovic has made a pioneering effort to combine scores of national household surveys to come up with the first estimate of income distribution from the point of view of individual residents of the earth. His numbers are stunning. Of course, Milanovic couldn't get household survey data—that is, income estimates based on asking people questions about their incomes, as opposed to aggregates Hke national GDP accounts—^for every country.
Life You Can Save: Acting Now to End World Poverty by Peter Singer
accounting loophole / creative accounting, Branko Milanovic, Cass Sunstein, clean water, experimental economics, illegal immigration, Martin Wolf, microcredit, Peter Singer: altruism, pre–internet, purchasing power parity, randomized controlled trial, Richard Thaler, Silicon Valley, Thomas Malthus, ultimatum game, union organizing
Colombia is not an especially poor country; its aid is associated with the attempt to suppress the cocaine cartels. Only about one fifth of U.S. aid goes to countries classified by the OECD as “least developed,” while about half of all U.S. aid goes to “lower-middle-income” nations. Nor is it only the United States that gives aid to serve political aims rather than to help the extremely poor. Branko Milanovic, an economist at the World Bank, has examined the 2001 country-to-country aid disbursed by most OECD countries, and found that bilateral aid from the European Union— that is, the program run by the EU itself, which is separate from the individual aid programs of its member nations—is even more skewed than U.S. aid toward nations with a per capita income above the world average. Bilateral aid from Australia and Canada in that year was also pro-rich in the sense that richer countries received more money in per capita terms than did poorer countries.
On that basis, the task force reached a global estimate—which the task force warns is provisional, but believes is of “the right order of magnitude”— of $121 billion in 2006, rising to $189 billion by 2015.5 When we take account of existing official development aid promises, the additional amount needed each year to meet the goals is only $48 billion for 2006 and $74 billion for 2015. Now we can calculate how much each affluent person would have to contribute for the combined sum to meet these totals and achieve these results. According to Branko Milanovic of the World Bank, if we define the “rich” as those who have an income above the average income of Portugal (the lowest-income nation in the “rich club” of western Europe, North America, Japan, Australia, and New Zealand) then there are 855 million rich people in the world.6 If each of us gave $200 per year, that would total $171 billion, or roughly the amount Sachs’s United Nations task force believes is needed each year to meet the Millennium Development Goals.
See United Nations Human Development Report, 1995, p. 204, table 29, available at http://hdr.undp.org/en/media/hdr _1995_en_indicators2.pdf 3. Organisation for Economic Co-operation and Development (OECD) Donor Aid Charts, www.oecd.org/countrylist/0,2578,en_2649_374l3_1783495_l_l_l_374l3,00.html;see also Oxfam America, “Smart Development: Why U.S. Foreign Aid Demands Major Reform,” February 2008, www.oxfamamerica.org/newsandpublications/publications/briefing_papers/smart-development/smart-development-feb2008.pdf 4. Branko Milanovic, Worlds Apart: Measuring International and Global Inequality (Princeton, N.J.: Princeton University Press, 2005), pp. 152-53, table 12.1; United Nations Human Development Report, 2007-2008, p. 289, Table 17, available at http://hdr.undp.org/en/media/hdr_20072008_en _indicator_tables. p df. 5. Celia Dugger, “Kenyan Farmers’ Fate Caught Up in U.S. Aid Rules,” The New York Times, July 31, 2007; Editorial, “A Surer Way to Feed the Hungry,” The New York Times, August 4, 2007; Celia Dugger, “U.S.
autonomous vehicles, banking crisis, Bartolomé de las Casas, Berlin Wall, Bertrand Russell: In Praise of Idleness, Branko Milanovic, cognitive dissonance, computer age, conceptual framework, credit crunch, David Graeber, Diane Coyle, Erik Brynjolfsson, everywhere but in the productivity statistics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Gilder, happiness index / gross national happiness, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, income inequality, invention of gunpowder, James Watt: steam engine, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, Kodak vs Instagram, labour market flexibility, labour mobility, low skilled workers, means of production, megacity, meta analysis, meta-analysis, microcredit, minimum wage unemployment, Mont Pelerin Society, Nathan Meyer Rothschild: antibiotics, Occupy movement, offshore financial centre, Peter Thiel, post-industrial society, precariat, RAND corporation, randomized controlled trial, Ray Kurzweil, Ronald Reagan, Second Machine Age, Silicon Valley, Simon Kuznets, Skype, stem cell, Steven Pinker, telemarketer, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tyler Cowen: Great Stagnation, universal basic income, wage slave, War on Poverty, We wanted flying cars, instead we got 140 characters, wikimedia commons, women in the workforce, working poor, World Values Survey
For the original version of John’s story, see: Michael Huemer, “Citizenism and open borders.” http://openborders.info/blog/citizenism-and-open-borders 25. Branko Milanovic, “Global Income Inequality by the Numbers: in History and Now,” World Bank Policy Research Working Paper. http://heymancenter.org/files/events/milanovic.pdf 26. Richard Kersley, “Global Wealth Reaches New All-Time High,” Credit Suisse. https://publications.credit-suisse.com/tasks/render/file/?fileID=F2425415-DCA7-80B8-EAD989AF9341D47E 27. United Nations Sustainable Development Knowledge Platform, “A New Global Partnership: Eradicate Poverty and Transform Economies Through Sustainable Development” (2013), p. 4. http://www.un.org/sg/management/pdf/HLP_P2015_Report.pdf 28. I made these calculations using the tool on the website www.givingwhatwecan.org, where you see how your wealth compares to the world population. 29. Branko Milanovic, “Global income inequality: the past two centuries and implications for 21st century” (Fall 2011) http://www.cnpds.it/documenti/milanovic.pdf 30. “62 people own same as half world,” Oxfam (January 20, 2014). http://www.oxfam.org.uk/media-centre/press-releases/2016/01/62-people-own-same-as-half-world-says-oxfam-inequality-report-davos-world-economic-forum 31.
Now compare: American frontline soldiers had a mortality rate of 6.7% in the Civil War, 1.8% in WWII, and 0.5% in the Vietnam War.31 Yet we won’t hesitate to send that Somalian toddler back if it turns out her mother isn’t a “real” refugee. Back to the Somalian child mortality front. In the 19th century, inequality was still a matter of class; nowadays, it’s a matter of location. “Workers of the world, unite!” was the rallying cry back when all the poor everywhere were more or less equally miserable. But now, as the World Bank’s lead economist Branko Milanovic notes, “Proletarian solidarity is then simply dead because there is no longer such a thing as the global proletariat.”32 In the Land of Plenty, the poverty line is 17 times higher than in the wilds beyond Cockaigne.33 Even food stamp recipients in the U.S. live like royalty compared to the poorest people in the world. Still, we mostly reserve our outrage for the injustices that happen inside our own national borders.
Yet, it’s crucial to realize that all this would have seemed like a breath of fresh air to the medieval peasant. Slavery was positively lenient compared to the customary repertoire of hanging, quartering, and burning at the stake. But it’s also worth noting that many commentators didn’t catch on to More’s intended irony because they didn’t read his book in the original Latin. Our tour guide in More’s utopia, for example, is named Hythlodaeus, which translates as “speaker of nonsense.” 34. Branko Milanovic, “Global Inequality: From Class to Location, from Proletarians to Migrants,” World Bank Policy Research Working Paper (September 2011). http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-5820 2 A 15-Hour Workweek 1. John Maynard Keynes, “Economic Possibilities for our Grandchildren” (1930), Essays in Persuasion. http://www.econ.yale.edu/smith/econ116a/keynes1.pdf 2. John Stuart Mill, Principles of Political Economy with some of their Applications to Social Philosophy (1848), Book IV, Chapter VI. http://www.econlib.org/library/Mill/mlP61.html 3.
The Globalization of Inequality by François Bourguignon
Berlin Wall, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Credit Default Swap, deglobalization, deindustrialization, Doha Development Round, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial intermediation, gender pay gap, Gini coefficient, income inequality, income per capita, labor-force participation, minimum wage unemployment, offshore financial centre, open economy, purchasing power parity, race to the bottom, Robert Gordon, Simon Kuznets, structural adjustment programs, The Spirit Level, too big to fail, very high income, Washington Consensus
During the last few years, rising inequality in certain countries, notably the United States, has been the subject of or inspiration for several major books—among which it would be difficult to overstate the importance of two recent books by Joseph Stiglitz and Thomas Piketty, the success of which is a clear sign of the mounting public interest in the issue of inequality.2 While few books address global income inequality directly, with the exception of Branko Milanovic’s Worlds Apart,3 many have analyzed inequalities in development between 2 Joseph Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: Norton, 2012); Thomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press, 2013). 3 Branko Milanovic, Worlds Apart, Measuring International and Global Inequality (Princeton, NJ: Princeton University Press, 2005). Globalization and Inequality5 countries or regions, which are the principal determinants of inequality at the world level.
Journal of Economic Literature 46, no. 1 (2008): 57–94; and “The Global Distribution of Income” in Anthony B. Atkinson and François Bourguignon, Handbook of Income Distribution, volume 2 (Amsterdam: Elsevier, forthcoming). For the GDP per capita approach, see Xavier Sala-i-Martin, “The World Distribution of Income: Falling Poverty and . . . Convergence, Period,” Quarterly Journal of Economics 121, no. 2 (December 2006): 351–97; and for its critique, see Branko Milanovic, “The Ricardian Vice: Why Sala-i-Martin’s Calculations of World Income Inequality Are Wrong” (Washington, DC: World Bank, November 2002). 5 Joseph E. Stiglitz, Amartya Sen, and Jean-Paul Fitoussi (with a preface by Nicolas Sarkozy), Mismeasuring Our Lives: Why GDP Doesn’t Add Up (New York: New Press, 2010). Global Inequality15 from household surveys. The lively debate sparked in India by the divergence between the growth rate of household consumption expenditure per capita as given by the national accounts and by household surveys in the 1990s is proof that there can be a potentially significant divergence between the two approaches.6 This divergence is even more problematic when it comes to establishing the comparative framework necessary for estimating global inequality.
In fact, once we stop normalizing and use the original household survey data, estimates of global distribution show a slightly slower reversal in inequality trends. The acceleration then takes place in the 2000s rather than the mid- 1990s.16 Since this represents a more recent phenomenon, maybe it has not registered for everyone yet. See table 2 in the appendix to this chapter. Using a different database, Christoph Lakner and Branko Milanovic (“Global Income Distribution: From the Fall of the Berlin Wall to the Great Recession,” World Bank Policy Research Working Paper No. 6719, Washington, DC, 2013) found the same drop in inequality in the 2000s, although less pronounced than in table 2. Two recent draft papers reach the same conclusion. The first one, by Miguel Niño-Zarazay, Laurence Roopez, and Finn Tarp, “Global Interpersonal Inequality: Trends and Measurement” (WIDER Working Paper 2014/004) based on GDP per capita normalized data finds that the drop in global inequality may have started around 1980.
Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland
Albert Einstein, algorithmic trading, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, conceptual framework, corporate governance, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy
“hate me—they don’t understand” See Chrystia Freeland, “Tea with the FT: Yulia Tymoshenko,” Financial Times, August 16, 2008. number of billionaires relative to the size Ruchir Sharma.,“The billionaires list,” Washington Post’s Wonkblog, June 24, 2012. economic historians have found that Russia’s oligarchs Steven Nafziger and Peter Lindert, “Russian Inequality on the Eve of the Revolution” (working paper, March 13, 2011). according to calculations by Branko Milanovic Branko Milanovic, The Haves and the Have Nots: A Brief and Idiosyncratic History of Global Inequality (Basic Books, 2011), pp. 41–45. “A person must be rich or poor” Smith, Wealth of Nations, Book I, Chapter V, Section 1. the only place in Mexico Luhnow, “The Secrets of the World’s Richest Man.” Slim was a vocal supporter of his friend’s reform effort Slim continued to advocate privatization in subsequent decades.
In memory of my mother, Halyna Chomiak Freeland CONTENTS Title Page Copyright Dedication Introduction ONE HISTORY AND WHY IT MATTERS TWO CULTURE OF THE PLUTOCRATS THREE SUPERSTARS FOUR RESPONDING TO REVOLUTION FIVE RENT-SEEKING SIX PLUTOCRATS AND THE REST OF US CONCLUSION Acknowledgments Notes Bibliography Index INTRODUCTION The poor enjoy what the rich could not before afford. What were the luxuries have become the necessaries of life. The laborer has now more comforts than the farmer had a few generations ago. The farmer has more luxuries than the landlord had, and is more richly clad and better housed. The landlord has books and pictures rarer and appointments more artistic than the king could then obtain. —Andrew Carnegie Branko Milanovic is an economist at the World Bank. He first became interested in income inequality studying for his PhD in the 1980s in his native Yugoslavia, where he discovered it was officially viewed as a “sensitive” subject—which meant one the ruling regime didn’t want its scholars to look at too closely. That wasn’t a huge surprise; after all, the central ideological promise of socialism was to deliver a classless society.
But the irony of the victory of the liberal economic idea is that putting it into practice delivered the greatest rent-seeking windfall in economic history—the state, after all, was in charge of privatization. Influencing that one-off division of the spoils was one of the surest ways to join today’s global super-elite. WHO WAS THE RICHEST MAN IN HISTORY? In fact, according to calculations by Branko Milanovic, the richest man who ever lived isn’t a Russian oligarch, but he does owe much of his fortune to the great wave of liberalization that swept the world when Soviet communism collapsed. Comparing income across history is hard. The conversion tools we use to make comparisons across geographies today—currency exchange rates or the more subtle measure of purchasing power parity—are ineffective when the goods we consume—horses vs. private jets or personal scribes vs. iPads—are so different.
The Great Surge: The Ascent of the Developing World by Steven Radelet
Admiral Zheng, agricultural Revolution, Asian financial crisis, bank run, Berlin Wall, Branko Milanovic, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, clean water, colonial rule, demographic dividend, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, Erik Brynjolfsson, European colonialism, F. W. de Klerk, failed state, Francis Fukuyama: the end of history, Gini coefficient, global supply chain, income inequality, income per capita, invention of the steam engine, James Watt: steam engine, John Snow's cholera map, Joseph Schumpeter, land reform, low skilled workers, M-Pesa, megacity, Mikhail Gorbachev, oil shock, out of africa, purchasing power parity, race to the bottom, randomized controlled trial, Robert Gordon, Second Machine Age, secular stagnation, Simon Kuznets, South China Sea, special economic zone, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, women in the workforce, working poor
In the first system, China and India count the same as Burundi and Belize; in the second, China and India count for a lot, and Burundi and Belize don’t count much. It matters (or at least it used to) which you choose. Figure 3.5, constructed by economist Branko Milanovic, depicts both stories.23 The bottom line shows intercountry inequality based on unweighted averages (every country counts the same), and the top line represents the weighted average (proportional to population size). Each measures inequality using the Gini coefficient in which 0 means perfect equality and 1 means perfect inequality. The two lines show very different patterns—at least until around 2000. FIGURE 3.5: GLOBAL INEQUALITY—GETTING BETTER Source: Branko Milanovic, “Global Income Inequality by the Numbers: In History and Now—An Overview,” policy research working paper 6259, World Bank, Development Research Group, Poverty and Inequality Team, Washington, DC, November, 2012.
An updated version of the latter paper (written with Tatjana Kleineberg) is “Growth Still Is Good for the Poor,” policy research working paper 6568, World Bank, Development Research Group, Macroeconomics and Growth Team, Washington, DC, August 2013, http://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-6568. 20. Dollar and Kraay, “Growth Is Good for the Poor.” 21. Branko Milanovic, The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality (New York: Basic Books, 2011). 22. De Souza, “Poverty, Inequality, and Social Policies in Brazil.” 23. Branko Milanovic, “Global Income Inequality by the Numbers: In History and Now—An Overview,” policy research working paper 6259, World Bank, Development Research Group, Poverty and Inequality Team, Washington, DC, November 2012, http://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-6259. 24. Ibid., p. 6.
If countries, do we weigh them all the same or count large countries more than small ones? Because of these variables, it is not unusual to hear contrasting claims about income inequality. One person claims it is getting better, while another claims it is getting worse, but the difference comes down to how he or she defines inequality. In the context of development, the two most common notions of inequality are within countries and across countries. Economist Branko Milanovic explores these and other ideas about inequality in developing countries in his terrific book The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality.21 Inequality Within Countries Most people have a strong presumption that inequality within countries worsens as economic growth proceeds, and—possibly—gets better at higher income levels. Much of the early research on development, especially the work of Simon Kuznets and Sir Arthur Lewis in the 1950s, suggested that would be the case.
Planet of Slums by Mike Davis
barriers to entry, Branko Milanovic, Bretton Woods, British Empire, Brownian motion, centre right, clean water, conceptual framework, crony capitalism, declining real wages, deindustrialization, Deng Xiaoping, edge city, European colonialism, failed state, Gini coefficient, Hernando de Soto, housing crisis, illegal immigration, income inequality, informal economy, Internet Archive, jitney, Kibera, labor-force participation, land reform, land tenure, low-wage service sector, mandelbrot fractal, market bubble, megacity, microcredit, New Urbanism, Ponzi scheme, RAND corporation, rent control, structural adjustment programs, surplus humans, upwardly mobile, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor
was coordinated for UN-HABITAT by the Development Planning Unit at University College London.3 Secondly, it utilizes a unique comparative database for 237 cities worldwide created by the UNHABITAT Urban Indicators Programme for the 2001 Istanbul + 5 Urban Summit.4 And thirdly, it incorporates global household surveydata that breaks new ground by including China and the ex-Soviet bloc. The UN authors acknowledge a particular debt to Branko Milanovic, the World Bank economist who pioneered these surveys as a powerful microscope for studying global inequality. (In one of his papers, Milanovic explains: "For the first time in human history, researchers have reasonably accurate data on the distribution of income or welfare [expenditures or consumption] amongst more than 90 percent of the world population."5) If the reports of the Intergovernmental Panel on Climate Change represent an unprecedented scientific consensus on the dangers of global warming, then The Challenge of Slums sounds an equally authoritative warning about the worldwide catastrophe of urban poverty.
Connoisseurs and flaneurs debated where human degradation was most awful: Whitechapel or 3 University College London Development Planning Unit and UN-HABITAT, Understanding Slums: Case Studiesfor the Global Report on Human Settlements 2003, available at www.ucl.ac.uk/dpu-projects/Global_Report. Most of these studies are summarized in an appendix at the back of The Challenge of Slums. Missing, however, is the brilliant survey of Khartoum by Galal Eldin Eltayeb, deleted, one supposes, because of his characterization of the "Islamist, totalitarian regime." 4 See Challenge, p. 245. 5 Branko Milanovic, "True World Income Distribution, 1988 and 1993: First Calculation Based On Household Survey Alone," working paper, World Bank, New York 1999, n.p. 6 Prunty, Dublin Slums, p. 2. 7 J. A. Yelling, Slums and Slum Clearance in Victorian London, London 1986, p. 5. La Chapelle, the Gorbals or the Liberties, Pig Alley or Mulberry Bend. In an 1895 survey of the "poor in the great cities," Scribner's Magazine voted Naples's fondaci as "the most ghastly human dwellings on the face of the earth," but Gorky was certain that Moscow's notorious Khitrov district was actually the "lower depths," while Kipling laughed and took his readers "deeper and deeper still" to Colootollah, the "lowest sink of all" in Calcutta's "city of dreadful night."8 These classic slums were notoriously parochial and picturesquely local places, but reformers generally agreed with Charles Booth — the Dr.
and Yerevan (Armenia).15 Likewise, the concrete-and-steel Soviet-era urban core of Ulaanbaatar is now surrounded by a sea of 500,000 or more impoverished, former pastoralists living in tents called gers, few of whom manage to eat more than once a day.16 The poorest urban populations, however, are probably found in Luanda, Maputo, Kinshasa, and Cochabamba (Bolivia), where twothirds or more of residents earn less than the cost of their minimum required daily nutrition.17 In Luanda, where one quarter of the households have per capita consumptions of less than 75 cents per day, child mortality (under five) was a horrifying 320 per thousand in 1993 — the highest in the world.18 Not all urban poor, to be sure, live in slums, nor are all slumdwellers poor; indeed, The Challenge of Slums underlines that in some cities the majority of the poor actually live outside the slums stricto sensuP Although the two categories obviously overlap in their majority, the number of urban poor is considerably greater: at least one half of the world's urban population as defined by relative national poverty thresholds.20 Approximately one quarter of urbanites (as surveyed in 1988), moreover, live in barely imaginable "absolute" poverty — somehow surviving on one dollar or less per day.21 If UN data are accurate, the household per-capita income differential between a rich 15 Christiaan Grootaert and Jeanine Braithwaite, "The Determinants of Poverty in Eastern Europe and the Former Soviet Union," in Jeanine Braithwaite, Christiaan Grootaert, and Branko Milanovic (eds), Poverty and Social Assistance in Transition Countries, New York 2000, p. 49; UNCHS Global Indicators Database 1993. 16 Office of the Mayor, Ulaanbaatar City, "Urban Poverty Profile," submitted to World Bank, n.d., infocity.org/F2F/poverty/papers2/UB(Mongolia)%20Poverty. pdf. 17 Simon, 'Urbanization, Globalization, and Economic Crisis in Africa," p. 103; Jean-Luc Piermay, "Kinshasa: A Reprieved Mega-City?
Doing Good Better: How Effective Altruism Can Help You Make a Difference by William MacAskill
barriers to entry, Black Swan, Branko Milanovic, Cal Newport, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Brooks, effective altruism, en.wikipedia.org, experimental subject, follow your passion, food miles, immigration reform, income inequality, index fund, Isaac Newton, job automation, job satisfaction, labour mobility, Lean Startup, M-Pesa, meta analysis, meta-analysis, microcredit, Nate Silver, Peter Singer: altruism, purchasing power parity, quantitative trading / quantitative ﬁnance, randomized controlled trial, self-driving car, Skype, Stanislav Petrov, Steve Jobs, Steve Wozniak, Steven Pinker, The Wealth of Nations by Adam Smith, universal basic income, women in the workforce
The French economist Thomas Piketty, who gained international fame for his 2014 book Capital in the Twenty-First Century, has suggested that the level of income inequality in the United States is “probably higher than in any other society at any time in the past, anywhere in the world.” This can lead those of us who aren’t in that 1 percent to feel powerless, but this focus neglects just how much power almost any member of an affluent country has. If people focus exclusively on American inequality, they’re missing an important part of the bigger picture. Consider this graph of global income distribution: Source: Branko Milanovic, PovcalNet This graph lines up everyone in the world, ordered by their income. The space between 0 and 25 percent represents the 25 percent of the world with the smallest incomes; the space between 75 and 100 percent represents the 25 percent of the world with the largest incomes. If everyone had the same income, the line would be flat, forming a neat rectangle under it. But they don’t.
When I ask residents of the United States or the United Kingdom this question, they typically guess they fall into the seventieth or eightieth percentile. They know they’re from an affluent country, but they also know they’re not like those bankers and CEOs who make up the global elite. They therefore guess that they’re at the corner of the curve, peering up at the megarich who sit atop that spike. That’s what I used to think, too. Here’s that graph with the vertical axis labeled. Source: Branko Milanovic, PovcalNet If you earn more than $52,000 per year, then, speaking globally, you are the 1 percent. If you earn at least $28,000—that’s the typical income for working individuals in the United States—you’re in the richest 5 percent of the world’s population. Even someone living below the US poverty line, earning just $11,000 per year, is still richer than 85 percent of people in the world.
“probably higher than in any other society”: Thomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press, 2014), 265. Consider this graph of global income distribution: The data on world income distribution is drawn from several sources. The figures for between the richest 1 percent and the richest 21 percent are based on microdata from national household surveys carried out in 2008, kindly provided by Branko Milanovic. The figures for the poorest 73 percent are based on the 2008 data from PovcalNet (http://iresearch.worldbank.org/PovcalNet/index.htm?1), adjusted based on the approximation that the surveys covered unbiased samples of the poorest 80 percent of the world’s population. The figure of $70,000 for the top 0.1 percent is from Milanovic’s book The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality (New York: Basic Books, 2011).
Affordable Care Act / Obamacare, back-to-the-land, barriers to entry, Bernie Sanders, big-box store, blue-collar work, Branko Milanovic, British Empire, Capital in the Twenty-First Century by Thomas Piketty, clean water, cognitive dissonance, collateralized debt obligation, collective bargaining, Community Supported Agriculture, corporate personhood, crony capitalism, deindustrialization, desegregation, Donald Trump, ending welfare as we know it, Frederick Winslow Taylor, full employment, Gini coefficient, income inequality, interchangeable parts, invisible hand, job automation, John Maynard Keynes: technological unemployment, labor-force participation, land reform, land tenure, low skilled workers, low-wage service sector, minimum wage unemployment, moral hazard, mortgage debt, New Urbanism, non-tariff barriers, obamacare, occupational segregation, Occupy movement, oil shock, Plutocrats, plutocrats, price discrimination, race to the bottom, rent control, road to serfdom, Ronald Reagan, Scientific racism, Simon Kuznets, single-payer health, strikebreaker, too big to fail, trade route, transcontinental railway, Triangle Shirtwaist Factory, trickle-down economics, universal basic income, Upton Sinclair, upwardly mobile, urban renewal, wage slave, War on Poverty, women in the workforce, working poor, Works Progress Administration
While the government had bailed out banks before, it was new and expensive for the government to rescue bank holding companies that had many assets not insured by the FDIC.12 Figure 8.1 Percentage Share of Income by Quintile, 1982–2006. (Computed from Edward Nathan Wolff, “Recent Trends in Household Wealth, 1983–2006: The Irresistible Rise of Household Debt,” Review of Economics and Institutions vol. 2 no. 1 (Winter 2001): 1–31, at 7.) Economist Branko Milanovic argues that the economic crash of 2006 was ultimately precipitated by inequality. Before the crash, the wealthiest Americans needed places to invest vast sums, and this demand called into being a supply of risky financial instruments. Middle- and low-income Americans had stagnant real wages but could maintain or improve their quality of life with easy access to credit, including subprime mortgages.
Leslie McCall, The Undeserving Rich: American Beliefs about Inequality, Opportunity and Redistribution (Cambridge, MA: Cambridge University Press, 2013), 48. 14. Huston, Securing the Fruits of Labor, xi–xxiv, 383. 15. Jason Long and Joseph Ferrie, “Intergenerational Occupational Mobility in Great Britain and the United States since 1850,” American Economic Review vol. 103 no. 4 (2013): 1109–1137. 16. Branko Milanovic, The Haves and Have-Nots: A Brief and Idiosyncratic History of Global Inequality (New York: Basic Books, 2010), 30. 17. Carole Shammas, “A New Look at Long-Term Trends in Wealth Inequality in the United States,” American Historical Review vol. 98 no. 2 (April 1993): 412–431. To be fair, Williamson and Lindert did acknowledge that if slaves were added to the group of wealth-holders while being kept as part of the property of their owners, measurable inequality would have been even worse in the antebellum period than economic historians’ studies suggest.
Barth and Apanard Penny Prabha, “An Analysis of Resolving Too-Big-to-Fail Banks throughout the United States,” The Journal of Regional Analysis and Policy vol. 44 no. 1 (2014): 1–19. 13. Fabian T. Pfeffer, Sheldon Danziger, and Robert F. Schoeni, “Wealth Disparities Before and After the Great Recession,” Annals of the American Academy of Political and Society Science no. 650 (2013): 98–123. 14. Branko Milanovic, Haves and Have-Nots: A Brief and Idiosyncratic History of Global Inequality (New York: Basic Books, 2010). 196; Michael Tavel Clarke, “After the Welfare State: The New Marxism and Other Rough Beasts,” American Quarterly vol. 61 no. 1 (2009): 173–184, at 182; Michael Kumhof, Romain Ranciere, and Pablo Winant, “Inequality, Leverage and Crises,” American Economic Review vol. 105 no. 3 (2015): 1217–1245; Barry Z.
Success and Luck: Good Fortune and the Myth of Meritocracy by Robert H. Frank
2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Amazon Mechanical Turk, American Society of Civil Engineers: Report Card, attribution theory, availability heuristic, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, carried interest, Daniel Kahneman / Amos Tversky, David Brooks, deliberate practice, en.wikipedia.org, endowment effect, experimental subject, framing effect, full employment, hindsight bias, If something cannot go on forever, it will stop, income inequality, invisible hand, labor-force participation, labour mobility, lake wobegon effect, loss aversion, minimum wage unemployment, Network effects, Report Card for America’s Infrastructure, Richard Thaler, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Rory Sutherland, side project, sovereign wealth fund, Steve Jobs, The Wealth of Nations by Adam Smith, Tim Cook: Apple, ultimatum game, Vincenzo Peruggia: Mona Lisa, winner-take-all economy
Though he’d never been taught to read and write, there was almost no practical task in that environment that he couldn’t perform to a high standard. Even so, the meager salary I was able to pay him was almost certainly the high point of his life’s earnings trajectory. If he’d grown up in the United States or some other rich country, he would have been far more prosperous, perhaps even spectacularly successful. As the economist Branko Milanovic has estimated, roughly half of the variance in incomes across persons worldwide is explained by only two factors: country of residence and the income distribution within that country.4 As Napoleon Bonaparte once observed, “Ability is of little account without opportunity.” But if talent and hard work don’t guarantee material success, I hope we can all agree that success is much more likely for people with talents that are highly valued by others, and also for those with the ability and inclination to focus intently and work tirelessly.
Frank, “Before Tea, Thank Your Lucky Stars,” New York Times, April 26, 2009, http://www.nytimes.com/2009/04/26/business/economy/26view.html?_r=0. 2. Fox Business News, “Luck Is the Real Key to Success?,” May 7, 2011, http://video.foxbusiness.com/v/3887675/luck-is-the-real-key-to-success/#sp=show-clips. 3. Terry Gross, “Fresh Air Remembers the Crime Novelist Elmore Leonard,” National Public Radio, August 23, 2013, http://www.npr.org/player/v2/mediaPlayer.html?action=1&t=1&islist=false&id=214831379&m=214836712. 4. Branko Milanovic, “Global Inequality of Opportunity: How Much of Our Income Is Determined by Where We Live?,” Review of Economics and Statistics 97.2 (May 2015): 452–60. 5. See, for example, Gary Marcus, “Mice, Men, and Fate,” New Yorker, May 13, 2013, http://www.newyorker.com/online/blogs/elements/2013/05/of-mice-and-men.html. 6. Alan Krueger, “The Rise and Consequences of Income Inequality in the United States,” remarks prepared for delivery at the Center for American Progress, January 12, 2012, https://milescorak.files.wordpress.com/2012/01/34af5d01.pdf. 7.
Exceptional People: How Migration Shaped Our World and Will Define Our Future by Ian Goldin, Geoffrey Cameron, Meera Balarajan
Admiral Zheng, agricultural Revolution, barriers to entry, Berlin Wall, Branko Milanovic, British Empire, conceptual framework, demographic transition, Deng Xiaoping, failed state, Fall of the Berlin Wall, Gini coefficient, global supply chain, guest worker program, illegal immigration, income inequality, income per capita, job automation, Joseph Schumpeter, knowledge economy, labor-force participation, labour mobility, Lao Tzu, life extension, low skilled workers, low-wage service sector, Malacca Straits, microcredit, Network effects, new economy, New Urbanism, open borders, out of africa, price mechanism, purchasing power parity, Richard Florida, Silicon Valley, Silicon Valley startup, Skype, spice trade, trade route, transaction costs, transatlantic slave trade, transatlantic slave trade, women in the workforce, working-age population
Although incomes in all countries have risen over the long term, economists have found that “virtually all of the observed rise in world inequality has been driven by widening gaps between nations.”23 Figure 7.2. Gini coefficient: unweighted intercountry inequality 1950-1998. Each country is one observation. Branko Milanovic. 2003. “The Two Faces of Globalization: Against Globalization as We Know It,” World Development 31(4): 667-683, p. 675, figure 3. © Elsevier Branko Milanovic, a World Bank economist, illustrates this phenomenon by applying the Gini coefficient measure of inequality to the GDP per capita for 144 countries between 1950 and 1998 (see figure 7.2). Each country is treated as one unit, so China is given equal weighting to Fiji. This approach illustrates how economic conditions and opportunities differ dramatically from one country to another.
“Migration Transnationalism and Modes of Transformation,” International Migration Review 38(3): 970–1001, p. 992. 16. Vertovec, 2004: 992–993. 17. Pritchett, 2006: 32. See also World Bank. 2005. Global Economic Prospects: Economic Implications of Remittances and Migration. Washington, DC: World Bank. 18. Ibid.: 24. 19. Ibid.: 23. 20. Ibid.: 24. 21. Lant Pritchett. 1997. “Divergence, Big Time,” Journal of Economic Perspectives 11(3): 3–17. 22. Branko Milanovic. 2003. “The Two Faces of Globalization: Against Globalization as We Know It,” World Development 31(4): 667–683, p. 670. 23. Peter H. Lindert and Jeffrey G. Williamson. 2003. “Does Globalization Make the World More Unequal?” in Michael D. Bordo, Alan M. Taylor, and Jeffrey G. Williamson (eds.), Globalization in Historical Perspective. Chicago: University of Chicago Press, pp. 227–271, p. 227. 24.
The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton
Admiral Zheng, agricultural Revolution, Branko Milanovic, BRICs, British Empire, call centre, clean water, colonial exploitation, Columbian Exchange, declining real wages, Downton Abbey, financial innovation, germ theory of disease, Gini coefficient, illegal immigration, income inequality, invention of agriculture, invisible hand, John Snow's cholera map, knowledge economy, Louis Pasteur, low skilled workers, new economy, purchasing power parity, randomized controlled trial, rent-seeking, rising living standards, Ronald Reagan, Simon Kuznets, Steve Jobs, Steven Pinker, structural adjustment programs, The Spirit Level, too big to fail, trade route, very high income, War on Poverty
Schneider, 2012, “The colonial origins of the divergence in the Americas: A labor market approach,” Journal of Economic History 72(4): 863–94. 15. Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez, 2011, “Top incomes in the long run of history,” Journal of Economic Literature 49(1): 3–71. 16. Ibid. 17. Maarten Goos, Alan Manning, and Anna Salomons, 2009, “Job polarization in Europe,” American Economic Review 99(2): 58–63. 18. Branko Milanovic, 2007, Worlds apart: Measuring international and global inequality, Princeton University Press. An important update is Branko Milanovic, 2010, “Global income inequality,” http://siteresources.worldbank.org/INTPOVRES/Resources/477227-1173108574667/global_inequality_presentation_milanovic_imf_2010.pdf. 19. Ronald Dworkin, 2000, Sovereign virtue, Harvard University Press, p. 6. Quoted in Thomas Nagel, 2005, “The problem of global justice,” Philosophy and Public Affairs 33(2): 113–47, p. 120.
My friends, colleagues, and students have been extraordinarily generous in reading drafts of all or parts of this book. It is immeasurably better for their thoughtful and insightful reactions. I am especially grateful to those who disagree with me, yet who took the time not only to criticize and persuade but also to praise and agree when they could. I am grateful to Tony Atkinson, Adam Deaton, Jean Drèze, Bill Easterly, Jeff Hammer, John Hammock, David Johnston, Scott Kostyshak, Ilyana Kuziemko, David Lam, Branko Milanovic, Franco Peracchi, Thomas Pogge, Leandro Prados de las Escosura, Sam Preston, Max Roser, Sam Schulhofer-Wohl, Alessandro Tarozzi, Nicolas van de Walle, and Leif Wenar. My editor at Princeton University Press, Seth Ditchik, helped me to get started and provided help and good advice all along the way. Princeton University has provided me with an unequaled academic environment for more than three decades.
autonomous vehicles, blue-collar work, Bonfire of the Vanities, Branko Milanovic, call centre, collective bargaining, computer age, corporate governance, Credit Default Swap, David Ricardo: comparative advantage, Deng Xiaoping, Erik Brynjolfsson, feminist movement, Frank Levy and Richard Murnane: The New Division of Labor, Gini coefficient, income inequality, industrial robot, invisible hand, job automation, Joseph Schumpeter, low skilled workers, lump of labour, manufacturing employment, moral hazard, oil shock, pattern recognition, performance metric, positional goods, post-industrial society, postindustrial economy, purchasing power parity, refrigerator car, rent control, Richard Feynman, Richard Feynman, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, Stephen Hawking, Steve Jobs, The Spirit Level, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, union organizing, upwardly mobile, very high income, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, Yom Kippur War
And identifying precisely which government policies guided the change is something that economists and political scientists are still arguing about. (More on that in chapter 8.) Perhaps we would know more about the Great Divergence, one third of a century after its advent, if the general topic of income distribution inspired less squeamishness. “I was once told by the head of a prestigious think tank in Washington, D.C.,” wrote Branko Milanovic, lead economist at the World Bank’s research division, in his 2011 book The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality, that the think tank’s board was very unlikely to fund any work that had income or wealth inequality in its title. Yes, they would finance anything to do with poverty alleviation, but inequality was an altogether different matter. Why?
Gebhart, the National Economy League, March 24, 1939; and letter to George E. Roberts, Apr. 18, 1940. See also “Biographical Note” in the NWDA online guide to the King Papers (http://nwdadb.wsulibs.wsu.edu/findaid/ark:/80444/xv64995#bioghistID). King called the minimum wage “dangerous” in the Literary Digest profile listed in General Sources. 15. In The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality (New York: Basic Books, 2011), Branko Milanovic points out (pp. 7–8) that Alexis de Tocqueville made a strikingly similar observation in his 1835 Memoir on Pauperism. Equality, Tocqueville wrote, “is prevalent only at the historical poles of civilization. Savages are equal because they are equally weak and ignorant. Very civilized men can all become equal because they all have at their disposal similar means of attaining comfort and happiness.
Postcapitalism: A Guide to Our Future by Paul Mason
Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business process, butterfly effect, call centre, capital controls, Claude Shannon: information theory, collaborative economy, collective bargaining, Corn Laws, corporate social responsibility, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, Downton Abbey, en.wikipedia.org, energy security, eurozone crisis, factory automation, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, full employment, future of work, game design, income inequality, inflation targeting, informal economy, Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kevin Kelly, knowledge economy, knowledge worker, late capitalism, low skilled workers, market clearing, means of production, Metcalfe's law, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, payday loans, post-industrial society, precariat, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, union organizing, universal basic income, urban decay, urban planning, wages for housework, women in the workforce
But for everybody in between the super-rich and the developing world – that is for the workers and lower-middle classes of the West – there is a U-shaped hole indicating little or no real increase. That hole tells the story of the majority of people in America, Japan and Europe – they gained almost nothing from capitalism in the past twenty years. In fact, some of them lost out. That dip below zero is likely to include black America, poor white Britain and much of the workforce of southern Europe. Branko Milanovic, the economist who prepared these figures for the World Bank, called this ‘probably the profoundest global reshuffle of people’s economic positions since the industrial revolution’.45 11. Doubling the world’s workforce The Harvard economist Richard Freeman calculated that between 1980 and 2000, the world’s workforce doubled in absolute numbers, halving the ratio of capital to labour.46 Population growth and foreign investment boosted the workforce of the developing world, urbanization created a 250-million-strong working class in China, while the former Comecon countries’ workforces were suddenly available to the global market.
A stunning half of all the projected population growth between now and 2050 will take place in just eight countries,* six of which are in sub-Saharan Africa.19 To find jobs, people from the population-boom countries will migrate to the cities; the land, as we’ve seen, is already under stress from climate change. In the cities, many will join the world’s slum-dwelling population, which already stands at a billion – and increasing numbers will attempt illegal migration to the rich world.20 The World Bank economist Branko Milanovic, surveying the huge and growing inequality in developing countries, calls this a ‘non-Marxian world’ in which location, not class, is responsible for two-thirds of all inequality.’21 His conclusion: ‘either poor countries will become richer or poor people will migrate to rich countries’. But for poor countries to become richer, they must break out of the so-called ‘middle-income trap’ – where countries typically develop to a certain point and then stall; both because they have to compete with the old imperial powers and because their corrupt elites strangle the emergence of functional modern institutions.
The Great Convergence: Information Technology and the New Globalization by Richard Baldwin
3D printing, additive manufacturing, Admiral Zheng, agricultural Revolution, air freight, Amazon Mechanical Turk, Berlin Wall, bilateral investment treaty, Branko Milanovic, buy low sell high, call centre, Columbian Exchange, Commodity Super-Cycle, David Ricardo: comparative advantage, deindustrialization, domestication of the camel, Edward Glaeser, Erik Brynjolfsson, financial intermediation, George Gilder, global supply chain, global value chain, Henri Poincaré, imperial preference, industrial robot, invention of agriculture, invention of the telegraph, investor state dispute settlement, Isaac Newton, Islamic Golden Age, James Dyson, knowledge economy, knowledge worker, Lao Tzu, low skilled workers, market fragmentation, New Economic Geography, out of africa, paper trading, Pax Mongolica, profit motive, rent-seeking, reshoring, Richard Florida, rising living standards, Second Machine Age, Simon Kuznets, Skype, Snapchat, Stephen Hawking, telepresence, telerobotics, The Wealth of Nations by Adam Smith, trade liberalization, trade route, Washington Consensus
When it comes to the impact that shows up in the developed nation, the vector of transmission is heightened import competition as before. That is, the GVC-fueled rise in the output of low-skill-intensive goods tends to lead to more imports by the developed nations. This plainly harms low-skill workers in the rich nation. Again, this is something that has happened in most advanced nations. There is, however, a more nuanced result from this sort of shift. Brilliant research by Branko Milanovic in his 2016 book Global Inequality: A New Approach for the Age of Globalization shows what this “new winners and losers” means from a planetary perspective. His numbers look at all humans, one by one, and ignore their nationality. He lines them line up, so to speak, from the poorest to the richest. To keep things manageable, the individuals are lumped together into twenty groups. These groups, which ignore nationality, gather people by income class.
People’s ranking in the global income distribution is shown on the horizontal axis. For example, those who were halfway up the income distribution in 1998 would be included in the point labeled “50” (short for the fiftieth percentile). People represented by this point did pretty well. The height of the point, about 70, shows that their incomes rose by about 70 percent between 1988 and 2008. SOURCE: Branko Milanovic, Global Inequality: A New Approach for the Age of Globalization (Cambridge: Harvard University Press, 2016). Figure 1.1. Reproduced with permission of the publisher and the author. More Polarized Workforce Improved information technology changed the way productions tasks are organized into occupations. Specifically, it meant a regrouping of many low-skill tasks into occupations that tended to require higher skills.
Arrival City by Doug Saunders
agricultural Revolution, Ayatollah Khomeini, Berlin Wall, Branko Milanovic, call centre, credit crunch, Deng Xiaoping, desegregation, ghettoisation, Gini coefficient, guest worker program, Hernando de Soto, Honoré de Balzac, illegal immigration, immigration reform, income inequality, informal economy, Jane Jacobs, Kibera, land reform, land tenure, low skilled workers, megacity, microcredit, new economy, pensions crisis, place-making, price mechanism, rent control, Silicon Valley, special economic zone, the built environment, The Chicago School, The Death and Life of Great American Cities, upwardly mobile, urban planning, urban sprawl, white flight, working poor, working-age population
David Rothkopf, a scholar with the Carnegie Endowment for International Peace, described this neglect as a large-scale mistake: “With the notable exceptions of India and China and a few others, which show some heartening middle-class growth, we are doing a very bad job of building the middle classes, which are the foundation of stability and the antidote to the boom-bust cycles that bedevil much of the emerging world.”9 To explain the nature of this challenge, it is important to understand what we mean—and what rural-to-urban migrants mean—by “middle class.” One way to define a middle class is by identifying the middle-income range: you pick out those families that earn between 75 percent and 150 percent of a country’s median income. The economist Branko Milanovic did this for the entire world, dividing all 6.7 billion people into a “lower class”—which turned out to be those whose annual family incomes were below $4,000 annually, the median income of Brazil—and an “upper class,” those families with more than $17,000 a year, the median income of Italy. The lower class made up 78 percent of the world’s population, the upper class 11 percent, and the worldwide middle class, those families living on between $4,000 and $17,000 a year, another 11 percent.10 The middle class can also be identified by their role and self-identification.
For a review of the literature demonstrating the importance of a middle class in maintaining stability and promoting democracy and prosperity, see Steven Pressman, “The Decline of the Middle Class: An International Perspective,” Journal of Economic Issues XLI, no. 1 (2007). 8 Guedes and Oliveira, “Braudel Papers 38.” 9 David Rothkopf, “Pain in the Middle,” Newsweek International, Nov. 21, 2005. 10 Branko Milanovic, “Decomposing World Income Distribution: Does the World Have a Middle Class?” Review of Income and Wealth 48, no. 2 (2002). 11 Rasheeda Bhagat, “A One-Billion Middle-Class Deluge from India, China by 2020,” The Hindu Business Line, Jun. 29, 2006. For a similar analysis using different consumer data, see Diana Farrell, Ulrich A. Gersch, and Elizabeth Stephenson, “The Value of China’s Emerging Middle Class,” The McKinsey Quarterly (2006). 12 Nancy Birdsall, Carol Graham, and Stefano Pettinato, “Stuck in the Tunnel: Is Globalization Muddling the Middle Class?”
Seventeen Contradictions and the End of Capitalism by David Harvey
accounting loophole / creative accounting, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business climate, California gold rush, call centre, central bank independence, clean water, cloud computing, collapse of Lehman Brothers, colonial rule, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, deskilling, falling living standards, fiat currency, first square of the chessboard, first square of the chessboard / second half of the chessboard, Food sovereignty, Frank Gehry, future of work, global reserve currency, Guggenheim Bilbao, income inequality, informal economy, invention of the steam engine, invisible hand, Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Just-in-time delivery, knowledge worker, low skilled workers, Mahatma Gandhi, market clearing, Martin Wolf, means of production, microcredit, new economy, New Urbanism, Occupy movement, peak oil, phenotype, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, rent-seeking, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, short selling, Silicon Valley, special economic zone, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, Tyler Cowen: Great Stagnation, wages for housework, Wall-E, women in the workforce, working poor, working-age population
The crisis of 2007–9 onwards made matters worse: ‘The top 100 billionaires added $240 billion to their wealth in 2012 – enough to end world poverty four times over.’2 Billionaires have erupted all over the place, with large numbers now recorded in Russia, India, China, Brazil and Mexico, as well as in the more traditionally wealthy countries in North America, Europe and Japan. One of the more significant shifts is that the ambitious no longer have to migrate to the affluent countries to become billionaires – they can simply stay at home in India (where the number of billionaires has more than doubled over the last few years), Indonesia or wherever. As Branko Milanovic concludes, we are witnessing the rise of a global plutocracy in which global power ‘is held by a relatively small number of very rich people’.3 The threat to the contradictory unity between production and realisation in the global economy is palpable. Yet by other measures the world is a much more equal place than it once was. Millions of people have escaped from poverty. Much of this has been due to the phenomenal growth of China, along with substantial bursts of growth in the other so-called BRIC countries (Brazil, Russia and India).
Henri Lefebvre, The Production of Space, Oxford, Basil Blackwell, 1989. Contradiction 12: Disparities of Income and Wealth 1. Michael Norton and Dan Ariely, ‘Building a Better America – One Wealth Quintile at a Time’, Perspectives on Psychological Science, Vol. 6, 2011, p. 9. 2. Oxfam, ‘The Cost of Inequality: How Wealth and Income Extremes Hurt Us All’, Oxfam Media Briefing, 18 January 2013. 3. Branko Milanovic, Worlds Apart: Measuring International and Global Inequality, Princeton, Princeton University Press, 2005, p. 149. 4. Craig Calhoun, ‘What Threatens Capitalism Now?’, in Immanuel Wallerstein, Randall Collins, Michael Mann, Georgi Derluguian and Craig Calhoun, Does Capitalism Have a Future?, Oxford, Oxford University Press, 2013. Contradiction 13: Social Reproduction 1. Cited in Samuel Bowles and Herbert Gintis, ‘The Problem with Human Capital Theory: A Marxian Critique’, American Economic Review, Vol. 65, No. 2, 1975, pp. 74–82. 2.
Endless Money: The Moral Hazards of Socialism by William Baker, Addison Wiggin
Andy Kessler, asset allocation, backtesting, bank run, banking crisis, Berlin Wall, Bernie Madoff, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, capital asset pricing model, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, cuban missile crisis, currency manipulation / currency intervention, debt deflation, Elliott wave, en.wikipedia.org, Fall of the Berlin Wall, feminist movement, fiat currency, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, housing crisis, income inequality, index fund, inflation targeting, Joseph Schumpeter, laissez-faire capitalism, land reform, liquidity trap, Long Term Capital Management, McMansion, moral hazard, mortgage tax deduction, naked short selling, offshore financial centre, Ponzi scheme, price stability, pushing on a string, quantitative easing, RAND corporation, rent control, reserve currency, riskless arbitrage, Ronald Reagan, school vouchers, seigniorage, short selling, Silicon Valley, six sigma, statistical arbitrage, statistical model, Steve Jobs, The Great Moderation, the scientific method, time value of money, too big to fail, upwardly mobile, War on Poverty, Yogi Berra, young professional
Moreover, the vast majority of the population within the Roman Empire’s border were not citizens; a Claudian census of 47 ad counted seven million Romans, so it might be safe to assume that on average the balance of noncitizens might have had annual incomes similar to those who lived in the underdeveloped nations decades or centuries ago, before there were any modern inventions, where a living was scratched off the land with primitive implements. (Note that women were not counted as citizens.) Estimates by Branko Milanovic, the lead economist in the World Bank’s research department, peg 85 percent of 268 ENDLESS MONEY the citizen, noncitizen, and slave populations of the Roman Empire at having an income of merely 234 HS annually, with this wage coming from a subsistence farming existence.19 While the absolute number of troops in the U.S. forces are a bit more than double the standing Roman army, the U.S. population that we draw from is five to eight times as large, and these are all citizens.
Cullen Murphy, Are We Rome? The Fall of an Empire and the Fate of America (New York: Houghton Mifflin Company, 2007), 73–4. Murphy credits Edward Luttwak, senior advisor at the Center for Strategic and International Studies, for analysis of Roman military strategy in his book, The Grand Strategy of the Roman Empire: From the First Century A.D. to the Third ( Baltimore: Johns Hopkins Press, 1978). 18. Ibid., 67. 19. Branko Milanovic, Roman Empire 14 CE – A Social Table, November 10, 2007, http://gpih.ucdavis.edu/files/Roman_Empire_14CE.pdf . 20. NATO Handbook, 2006, p. 247, http://www.nato.int/docu/handbook/2006/ hb-en-2006.pdf. 21. Rabbi Daniel Lapin, Genesis Journeys: Tower of Power, Audio CD 2008, rabbidaniellapin.com. 22. “Free Concert by Popular Band Preceded Obama’s Big Rally,” Free Republic, May 20, 2008, http://www.freerepublic.com/focus/f-news/2018898/posts.
The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton
affirmative action, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, collective bargaining, corporate governance, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, immigration reform, income inequality, industrial robot, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, market bubble, market design, neoliberal agenda, new economy, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, winner-take-all economy, working poor
., 8; Abhijit Banerjee and Esther Duﬂo, “What Is Middle Class about the Middle Classes around the World?” Journal of Economic Perspectives, 22, no. 2 (2008): 3–28; Dominic Wilson and Raluca Dragusanu, The Notes to Pages 123–130 181 43. 44. 45. 46. 47. 48. Expanding Middle: The Exploding World Middle Class and Falling Global Inequality, Goldman Sachs, Global Economic Paper No. 170 (2008). This deﬁnition was developed by Branko Milanovic and Shlomo Yitzhaki. “Decomposing World Income Distribution: Does the World Have a Middle Class?” Review of Income and Wealth, 48, no. 2 (2002): 155–178. Italy’s per capita is used as the upper limit because it has the lowest per capita income in the G7, and Brazil represents the lower threshold because its per capital income is close to the ofﬁcial poverty line in the United States and Germany (about $PPP 10 a day).
The Making of Global Capitalism by Leo Panitch, Sam Gindin
accounting loophole / creative accounting, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, land reform, late capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond
By 1998, seven of the nine producers were majority owned by Western car companies. See Rob van Tulder and Winfried Ruigrok, “European Cross-National Production Networks in the Auto Industry: Eastern Europe as the Low End of European Car Complex,” Berkeley Roundtable on the International Economy, Working Paper 121, 1998, p. 3. 116 Michael J. Haynes, “Labour, Exploitation and Capitalism in Russia Before and After 1991,” Critical Sociology 34: 4 (2008), p. 571. See also Branko Milanovic, Income Inequality and Poverty during the Transition from Planned Economy to Market Economy, Washington, DC: World Bank, 1998. 117 Gowan, Global Gamble, pp. 191, 241. 118 See Michael S. Minor, “The Demise of Expropriation as an Instrument of LDC Policy, 1980–1992,” Journal of International Business Studies 25: 1 (1994), Table 1, p. 180. 119 Thomas W. O’Donnell, “The Political Economy of Oil in the US-Iran Crisis: US Globalized Oil Interests vs.
Available at nsf.gov. 6 Martin Hart-Landsberg and Paul Burkett, “China and the Dynamics of International Accumulation: Causes and Consequences of Global Restructuring,” Historical Materialism 14: 3 (2006), p. 4. 7 Asian Development Bank, Emerging Asian Regionalism: A Partnership for Shared Prosperity, Manila: ADB, 2008, pp. 8, 16, 23. 8 Francisco H. G. Ferreira and Martin Ravallion, “Global Poverty and Inequality: A Review of the Evidence,” World Bank, Policy Research Working Paper 4623, May 2008, pp. 10–14. See also Branko Milanovic, “An Even Higher Global Inequality than Previously Thought,” World Bank, Carnegie Endowment for International Peace, MPRA Paper No. 6676, Washington, December 2007. Available at mpra.ub.uni-muenchen.de. 9 Quoted in Baker, Group of Seven, p. 212. 10 This term was initially coined by G7 policymakers in the wake of the Mexican crisis. See especially Kenen, From Halifax to Lyon. 11 “[M]uch of the world’s financial regulatory expertise, though difficult to quantify, is concentrated in the United States and United Kingdom.
The Inequality Puzzle: European and US Leaders Discuss Rising Income Inequality by Roland Berger, David Grusky, Tobias Raffel, Geoffrey Samuels, Chris Wimer
Branko Milanovic, Celtic Tiger, collective bargaining, corporate governance, corporate social responsibility, double entry bookkeeping, equal pay for equal work, fear of failure, financial innovation, full employment, Gini coefficient, hiring and firing, illegal immigration, income inequality, invisible hand, labour market flexibility, labour mobility, Long Term Capital Management, microcredit, offshore financial centre, principal–agent problem, profit maximization, rent-seeking, shareholder value, Silicon Valley, Silicon Valley startup, time value of money, very high income
The decision of the British government to impose a special tax on bankers’ bonuses, despite its potential to convince some financial executives or firms to leave the City, is the most recent indication of how democracies adjust to address inequality. Whether the level of additional taxation is an appropriate governmental 4 Bertelsmann Foundation, Arbeitsmarkt und Beschäftigung in Deutschland 2000-2009, 2009, p. 10. 5 “Does Liberté = Egalité? A Survey of the Empirical Links Between Democracy and Inequality with some Evidence on the Transition Economies,” Mark Gradstein (Ben Gurion University), Branko Milanovic (The World Bank), Journal of Economic Surveys, Vol. 18, No. 4, 2004. 198 R. Berger response is an entirely separate issue from how robust democracies respond to public concerns. Indeed, a sense of fairness and just process is more important than inequality, because when the public believes the system unfairly rewards individuals or opportunities for advancement are blocked, severe social stress can appear.
The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley
banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business process, call centre, capital controls, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, Tyler Cowen: Great Stagnation, Washington Consensus, Winter of Discontent, working-age population
They are a group that have rightly been defined as ‘the deserving rich’, a group ‘who deserve their hard-earned places, those who, through a mix of exceptional skill, effort and risktaking, have contributed to increasing the size of the cake by creating new wealth and in ways which benefit others as well as themselves. Most opinion would regard them as “deserving” of exceptional rewards.’ Yet the evidence is that an increasing proportion of today’s super-rich fall into the category of the ‘undeserving rich’, a group ‘who rig the system to enrich themselves by unfairly grabbing a larger size of the cake at the expense of someone else.’358 The World Bank economist, Branko Milanovic, has used a similar distinction between what he calls ‘good’ and ‘bad inequality’. 359 Personal fortunes that arise from exceptional personal risk-taking, innovation and merit are examples of good inequality. Today, most of the wealth gap is arguably the product of bad inequality. Although there are plenty of individual examples of the modern tycoon taking big personal financial risks to help improve productive potential and spread opportunities, a growing proportion of trading activities, big business deals and accountancy practices of recent times have involved less a process of value creation that would have increased economic strength, and more a diversion and change of ownership of existing value and wealth.
accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, call centre, Cass Sunstein, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, disintermediation, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, Hyman Minsky, If something cannot go on forever, it will stop, illegal immigration, income inequality, income per capita, invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, Silicon Valley, South Sea Bubble, Steven Pinker, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, web application, web of trust, winner-take-all economy, World Values Survey
With their huge populations, the income advances in the two Asian giants carry real weight in the global income distribution. But national averages, which look only at inequality between countries are not fully adequate measures given that there is great inequality within many countries—and especially in the rapidly growing countries of Brazil, Russia, India, and China (called the BRICs), which have made such a big difference in the middle parts of the global income distribution.15 Branko Milanovic reports that about two-thirds of global inequality currently is due to differences in income levels between countries, a big shift from the nineteenth-century pattern, when only 15 percent of measured inequality was due to national differences, and 85 percent due to income inequality within countries.16 Another way of assessing inequality suggested by this pattern is to look at what has happened to individual incomes across the world.17 The incomes of the Forbes Rich List have soared massively ahead of those of people living in the poorest African countries whose economies have been shrinking.
Undoing the Demos: Neoliberalism's Stealth Revolution by Wendy Brown
Affordable Care Act / Obamacare, bitcoin, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, corporate governance, credit crunch, crowdsourcing, David Brooks, Food sovereignty, haute couture, immigration reform, income inequality, invisible hand, labor-force participation, late capitalism, means of production, new economy, obamacare, occupational segregation, Ronald Reagan, shareholder value, sharing economy, The Chicago School, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trickle-down economics, Washington Consensus, Wolfgang Streeck, young professional
New York Times, July 15, 2013, p. a15, http://www.nytimes.com/2013/07/15/ opinion/krugman-hunger-games-usa.html; Krugman, End This Depression Now! (New York: Norton, 2012); Krugman, The Return of Depression Economics and the Crisis of 2008 (New York: Norton, 2009); and Krugman, The Great Unraveling: Losing Our Way in the New Century (New York: Norton, 2003); James Ferguson, Global Shadows: Africa in the Neoliberal World Order (Durham: Duke University Press, 2006); Branko Milanovic, The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality (New York: Basic Books, 2010); Amartya Sen, Development as Freedom (New York: Random House, 1999); Joseph Stiglitz, Amartya Sen, and Jean-Paul Fitoussi, “Report by the Commission on the Measurement of Economic Performance and Social Progress,” September 14, 2009, available at http://www.stiglitz-sen-fitoussi.fr/ documents/rapport_anglais.pdf. 25.
Rogue States by Noam Chomsky
anti-communist, Asian financial crisis, Berlin Wall, Branko Milanovic, Bretton Woods, capital controls, collective bargaining, colonial rule, cuban missile crisis, declining real wages, deskilling, Edward Snowden, experimental subject, Fall of the Berlin Wall, floating exchange rates, labour market flexibility, labour mobility, land reform, Mikhail Gorbachev, Monroe Doctrine, new economy, oil shock, RAND corporation, Silicon Valley, strikebreaker, structural adjustment programs, Tobin tax, union organizing, Washington Consensus
Montreal Meeting (First Extraordinary Meeting of the Conference of Parties to the UN Convention on Biological Diversity to Finalize and Adopt a Protocol on Biosafety—Resumed Session) (2000), Andrew Pollack, “130 Nations Agree on Safety Rules for Biotech Food,” NYT, Jan. 30, 2000; Pollack, “Talks on Biotech Food Turn on a Safety Principle,” NYT, Jan. 28, 2000. 17. Edward Herman, “Corporate Junk Science in the Media,” Z magazine, Jan. and Feb. 1999. 18. World Bank economist Branko Milanovic, cited in Doug Henwood, Left Business Observer 93, Feb. 2000. About the Author © Don Usner Noam Chomsky is widely regarded as one of the foremost critics of US foreign policy in the world. He has published numerous groundbreaking books, articles, and essays on global politics, history, and linguistics. Among his recent books are Masters of Mankind and Hopes and Prospects. This book is part of a collection of twelve new editions from Haymarket Books of Chomsky’s classic works.
Connectography: Mapping the Future of Global Civilization by Parag Khanna
1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, charter city, clean water, cloud computing, collateralized debt obligation, complexity theory, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, forward guidance, global supply chain, global value chain, global village, Google Earth, Hernando de Soto, high net worth, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, labour market flexibility, labour mobility, LNG terminal, low cost carrier, manufacturing employment, mass affluent, megacity, Mercator projection, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Peace of Westphalia, peak oil, Peter Thiel, Plutocrats, plutocrats, post-oil, post-Panamax, private military company, purchasing power parity, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, TaskRabbit, telepresence, the built environment, Tim Cook: Apple, trade route, transaction costs, UNCLOS, uranium enrichment, urban planning, urban sprawl, WikiLeaks, young professional, zero day
The touchstone of morality in a global society is leveraging connectedness for utilitarian ends: achieving the greatest good for the greatest number of people. We must apply John Rawls’s test of societal morality on a global scale, judging ourselves by how we treat those at the bottom and justifying inequality to the extent that it improves the lives of the poorest. There is still potential to turn what the economist Branko Milanovic calls “bad” inequality into “good” inequality, which motivates and enables efforts for achievement. We are, in fact, on the right track: Globalization and connectivity have improved the quality of life for billions of people even if they have also made high inequality inevitable. The time has come for even bolder thinking about how to leverage near-total connectivity to advance large-scale human development.
Second World: Empires and Influence in the New Global Order by Parag Khanna
Admiral Zheng, affirmative action, anti-communist, Asian financial crisis, Bartolomé de las Casas, Branko Milanovic, British Empire, call centre, capital controls, central bank independence, cognitive dissonance, colonial rule, complexity theory, crony capitalism, Deng Xiaoping, Dissolution of the Soviet Union, Donald Trump, Edward Glaeser, energy security, European colonialism, facts on the ground, failed state, flex fuel, Francis Fukuyama: the end of history, friendly fire, Gini coefficient, global reserve currency, global supply chain, haute couture, Hernando de Soto, illegal immigration, income inequality, informal economy, invisible hand, Islamic Golden Age, Khyber Pass, knowledge economy, land reform, low skilled workers, means of production, megacity, Monroe Doctrine, oil shale / tar sands, oil shock, open borders, open economy, Pax Mongolica, pirate software, Plutonomy: Buying Luxury, Explaining Global Imbalances, Potemkin village, price stability, race to the bottom, RAND corporation, reserve currency, rising living standards, Ronald Reagan, Silicon Valley, Skype, South China Sea, special economic zone, stem cell, Stephen Hawking, Thomas L Friedman, trade route, trickle-down economics, uranium enrichment, urban renewal, Washington Consensus, women in the workforce
See Mohammed Ayoob, The Third World Security Predicament: State Making, Regional Conflict, and the International System (Boulder, Colo.: Lynne Rienner, 1995); and Stephen D. Krasner, Structural Conflict: The Third World Against Global Liberalism (Berkeley: University of California Press, 1985). 38. On the bifurcation of the international economic order and upward/downward mobility within it as a result of globalization, see Branko Milanovic, Worlds Apart: Measuring International and Global Inequality (Princeton, N.J.: Princeton University Press, 2005), ch. 7. 39. One measure of progress up the ladder of modernity is “stateness.” Stateness refers to a government’s capacity to enforce its power, ranging from minimal functions (public goods, property rights, defense) to intermediate functions (addressing externalities, education, regulation, social insurance) to more activist roles (industrial policy, wealth redistribution).
Capital in the Twenty-First Century by Thomas Piketty
accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, German hyperinflation, Gini coefficient, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, market bubble, means of production, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, pension reform, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, The Nature of the Firm, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, very high income, We are the 99%
Angus Maddison (1926–2010) was a British economist who specialized in reconstituting national accounts at the global level over a very long run. Note that Maddison’s historical series are concerned solely with the flow of output (GDP, population, and GDP per capita) and say nothing about national income, the capital-labor split, or the stock of capital. On the evolution of the global distribution of output and income, see also the pioneering work of François Bourguignon and Branko Milanovic. See the online technical appendix. 21. The series presented here go back only as far as 1700, but Maddison’s estimates go back all the way to antiquity. His results suggest that Europe began to move ahead of the rest of the world as early as 1500. By contrast, around the year 1000, Asia and Africa (and especially the Arab world) enjoyed a slight advantage. See Supplemental Figures S1.1, S1.2, and S1.3 (available online). 22.