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The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality Paperback – Aug 7 2012
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"if you have the slightest interest in politics and macro-economics, you should be (in possession of the book). When Milanovic gets serious, he becomes indispensable." (Spectator) "Branko Milanovic...had a triumphantly simple idea for a popular book which will surely also become a staple of social science department reading lists..." (Times Literary Supplement)"
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Professor Milanovic accomplishes this task by introducing the reader to several tools that professional economists use to describe and quantify inequality; "Kuznets' Hypothesis," the "Gini coefficient," and "Purchasing Power Parity (PPP) dollars," to name a few. The book is, on the whole, very engaging and easy to grasp. Each of the three chapters begins with an essay which is followed by several vignettes, or short stories, that give concrete examples of ideas outlined in the essay. There are more than a few spots in this book where Milanovic does a great job of dispelling some widely held myths. For example, "A lesson from the collapse of the communist federations is that an important part of the reason for the breakup lies in the inability of communist authorities - despite their successful policy to contain and reduce interpersonal inequality - to reduce huge, historically inherited income differences among the constituent members." Which bears a remarkable resemblance to today's China; "The single most serious threat to Chinese unity is increasing inequality."
In closing, I really enjoyed this book, both from a historical and an economic angle. It may deserve five stars, but I gave it only four because I disagreed with Professor Milanovic's stance on immigration; I tend to agree with the view that John Rawls advocates ("Increasing obstacles to migration raised by rich countries would be, one is led to believe, viewed as fully justified by Rawls."), whereas Milanovic states that, "Whether it is under the pressure of domestic labor or out of fear of cultural heterogeneity, the rich world has begun a process of walling itself in, creating de facto gated communities at the world level." I garnered my view having read The Central Liberal Truth: How Politics Can Change a Culture and Save It from Itself and Culture Matters: How Values Shape Human Progress. Regardless however, I believe there will probably be no major change from this perspective, because as Professor Milanovic rightly points out, "Inequality studies are not particularly appreciated by the rich."
The author is an economist and an academic. He does not appear, however, to be a great humanist. But he knows his history, pointing out that gaps in earnings primarily occur when "people move from agriculture into industry." He points out that folks around the world were relatively equal prior to the industrial revolution in England, and that most folks in most nations at that time were barely at a subsistence level.
Oh, sure, there were rich Kings and Nobles and such along the way, but they were nothing compared to the wealthy industrialists that were to emerge with industrialization. And as far as regions of the world, it is in the first half of the 18th century that Western Europe and North America really begin to separate from the rest of the world in terms of wealth. Prior to that, the comparative wealth of countries in the world was far more even.
In this line of thinking, the author feels that this is the factor that really defeated Karl Marx and his theories: Instead of the differences in inequality between classes around the world leading to change, it was the differences developed between countries and/or regions of the world that would lead to inequalities. But "Workers of the World, Unite," became more and more irrelevant under this scenario. Workers in some parts of the world saw great improvements in their lives, while workers in other parts of the world did not, essentially, through no fault of their own.
The author points out that for most of recent history inequality was not seen as all that bad. After all, a guy like Henry Ford created a ton of jobs in the process of getting filthy rich. And the author spends time discussing relative extreme wealth in the history of the world, with Mexican Carlos Slim coming out the winner there. He also talks about socialism vs. capitalism, and he tries to make the point that redistribution of wealth may not be the way to go. But I don't think any of this stuff is what makes this a great book. No, I think, again, the main value of the book is in the numbers he eventually gives us concerning inequality.
And in that light, he makes an interesting point about the Soviet Union, before its breakup, having a ratio of about 6:1 between the wealthiest republic, Russia, and the poorest, Tajikistan. In contrast, he tells us that the ratio of inequality between regions in France is now about 1.6:1, between U.S. states about 1.5:1, and in Germany 1.4:1. Back to extremes, he tells us that in the former country of Yugoslavia, the range in wealth between the highest and lowest republics was about 8:1.
To begin to measure inequality within countries and around the world, we need household income numbers from around the world. We need the ability to compare GDPs per capita in one country vs. another. And while he tells us that there are ways to do comparisons back before solid data was available, he does not spend a lot of time with this. What he wants to get to is to the comparisons between countries, based on their recent GDPs per person, and to the comparisons between the rich and the poor within the countries, themselves, in the world today.
Unfortunately, the ratio between the richest and the poorest country in the world today is more than 100:1. In some cases, essentially everyone in one of the richest countries is better off than everyone in one of the poorest countries. And this inequality can occur within one country, as well. For example, in Kenya in the time of Barack Obama's grandfather, everyone who was white was better off than anyone who was Black. Said another way, today, the poorest Americans are better off than more than two-thirds of the rest of the world, with half of the world having a per capita income of no more than $2 per day. And said yet another way, fully 80% of one's standing in life is simply due to the geography of one's birth.
Of interest, per the author, this inequality would have been the likely basis of President Obama's mother sending her son back to the U.S., rather than to have him continue to live in Indonesia: The projection that one educated and living in the U.S., even in a family of a government worker and a shoe salesman, would be better off than just about anyone under any situation in Indonesia.
Per the author, until recently, the collection of income distribution was more of a national thing than international. But once enough national data was available, this is where the Gini Coefficient comes in. It compares the income of each person with the incomes of all other people, individually. A Gini number of zero means that all persons have the same income, while a number of 100 would mean that only one person has all the money. This number can be used to compare countries of the world, countries within a region, or people within a single country. For humanists, the lower the number, the better. A reasonable number is about 35. Some examples:
In the late 70s, the U.S. had a Gini Coefficient of about 35. In contrast, Latin American countries are seldom below 50. On a global level, the Gini is about 70, which means that 30% of the world has more wealth than the other 70%. But within this, we know that the wealthiest 10% in the world receive about 56% of the world's income. The top 5% gets about 37%; thus, the ratio between the top and the bottom, in this comparison, reaches 200:1. Global inequality is probably the highest it ever has been in the history of the world.
And who are those at the top? The top 1% in the world number about 60 million, with nearly 50 million of these living in Western Europe or North America.
But, says the author, the impact of all this is probably shown most by immigration numbers, which involves less than 1/10th of one percent of the world's population per year. He seems to say that this matters, however, only if emigration gets worse and/or if one country is so poor that it does really bad things that have an impact on the rest of the world. For example, if a bird flu or some other pandemic starts in an area of the world with extreme poverty, this can spread to other parts of the world. Otherwise, the author seems to say that the conditions of wealth or poverty are relative within a single country.
But back to numbers: In an interesting contrast between the European Union and the United States, the author points out that the EU has more inequality among countries than the U.S. has between states. In each state in the U.S., there are rich and poor. But, overall, the GDP per capita in a comparison between U.S. states is not significant. It is about 1.5:1. But in the EU, where Luxembourg is the wealthiest country and Romania the poorest, the ratio is about 7:1. In effect, this means that virtually all those in Luxembourg are richer than those in Romania. This cannot be said about those in American states, New Hampshire having the highest per capita income vs. Arkansas with the lowest. But within some states, the ratio can be extreme. Within Texas and Tennessee, the Gini Coefficient is around 45!
And in world regions comparisons, Latin American countries are more like the United States, with the high levels of inequality being amongst members of the same country, rather than the per capita income of the various countries. In Asia, the opposite is true, with the differences being greatest in the relative per capita incomes between countries. But here is where it gets crazy: The overall Gini numbers for Latin America and for Asia are about the same: 56 vs. 60.
To conclude this lengthy review, the author says "the main drivers of global inequality today are differences in between-country incomes." He also says that things have gotten more unequal over the past 40 years. Since 1975, excess money has been available to the wealthiest countries. It simply got into the hands of the bankers and investment types, who did what people like them do best: They created ways that the excess money could generate even more excess money. Of course, the recent world-wide economic slowdown slowed the excess-money stuff a bit.
And then we have China and India. They would appear to be wild cards in all of this. China, of course, has made huge strides in improving its per capita income of its people, of late. India, too, has made great strides. And Brazil is in play here, as well.
So, we near the end of the book, where the author has this to say: "The key challenges of the 21st Century may be summarized as follows: how to bring Africa up, how to peacefully bring China in, and how to wean Latin America off of its self-obsession and bring it into the real world."
Hmmmmm. This is the first time we've heard about Africa, I think. And the stuff about Latin America needs to be better explained. So, the truth is that the author has not written the book to project or predict the outcome of this story. He's just trying to get more folks up to date and on board.
If you've gotten this far, welcome. You know more than you did before you read the book...assuming you now go out and buy and read it.
There are excellent discussions of economic efficiency and economic justice measurement of inequality by the Gini index. Milakovic shows bias arguing against the use of consumption rather than income as a measure of inequality philosophy of John Rawles inequality is justified as more attention should be given to the condition of the poor. (How about income as a measure for the rich, above the median, and consumption as a measure for the poor?)
The real median wage has been stagnant across the globe. In studying global inequality Milakovic points out that, in contrast to rest of world, there are no poor and rich states.
Of note is the replacement of the USA by the Netherlands as the world's richest country in 1938. Globalization is not creating equality. Milakovic again cites Rawles to suggest that it doesn't matter. Milakovic points out Marx went astray as workers got richer and the proletariat is disappearing. Discussion of colonial exploitation doesn't extend to the USA. Independence has not solved Africa's problems.
Milakovic enters the political arena claiming that Bush promised every American family a home. In my memory it was Clinton who flooded the real estate market with easy money via Fanny Mae and Freddy Mac in the name of the great American dream of home ownership.
He celebrated the repeal of Glass-Steagal legislation and declined to regulate the SWAPS insurance market.
This is a very informative study in spite of the occasional lapse where the author can't resist showing a liberal bias.
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