Intellectual pin-ups are a bad idea. I’ve lost track of the number of razor-sharp thinkers whose opinions turn to mush when they’re surrounded by worshipful students and flattering policymakers, keen to brush themselves with their hero’s stardust. So it’s with a heavy heart that I say that Branko Milanovic is becoming a hero of mine…
The reason? The charts on global inequality below,1 which are at the heart of his latest book, ‘The Haves and the Have Nots’ that he’s been touring around London (at the LSE and the RSA). I first saw these last summer, and they’re a dazzling display of analysis and visualization that will change the way you think about global inequality.
(His hero status is also because he tells stories that link inequality with Pride & Prejudice, Obama and Anna Karenina, which clearly I’ll have to come back to…)
Chart #1: Inequality within- and between-countries
Researchers have two default settings for talking about inequality. The first is to talk about between-person inequality in a single country, usually using the Gini coefficient, which lies between 0 (completely equal) and 1 (completely unequal, i.e. one person gets everything). The second is to talk about inequalities between countries, comparing the average income in e.g. the USA versus India.
But how do the poor people in rich countries (e.g. the US) compare to the rich people in poor countries (e.g. India)?
Branko uses a lovely but simple graph to show this. This shows each 1% of the income distribution in each of the US, Russia, Brazil and India,and places them in a percentile of the world income distribution. So for example, the bottom 1% of Americans (at the left of the graph) are at the 63rd percentile of world income (the scale on the left axis) – or put more simply, the poorest Americans are in the top 40% of global earners.
Where this gets really interesting is where we compare the different countries. So the bottom 1% of Americans earn more than all but the top few % of Indians. And Brazil spans virtually the entire global income distribution, from the very poorest to the very richest – demonstrating it’s extraordinarily high levels of inequality.
(I’m not the only one that loves this: it’s drawn attention from the blogs at Marginal Revolution and the New York Times’ Economix among others. The NYT blog also explains about purchasing power parities in a clearer way that I’m likely to manage).
Chart 2: ‘A non-Marxist world’
If you’re anything like me, you’re now starting to think that national inequality isn’t that big a deal comapred to global inequality. The second graph really hammers this home.
Branko calls this a ‘non-Marxist world’, because when Marx was writing, the major problem of world inequality was within countries (what we could loosely – very loosely – call ‘class’). And this is no longer true. Far more of the income differences between global citizens are now due to nationality/location than they are to class.
We shouldn’t jump to the wrong conclusion here. Within-country inequality matters no less just because global inequality is greater. If national inequality is inequitable or inefficient, then this is true whatever the wider world looks like. But it does remind us to get beyond our ‘methodological nationalism’, as Ulrich Beck puts it. And given that academic incentives and personal laziness push us towards researching our own country, we should all be reminded of this from time to time.
And if you love this stuff enough for a 3rd chart…
Chart #3: Recent trends in global inequality
If you’re based on a high-income country, you probably assume that global income inequality has risen sharply in recent years – at least in the UK and US, we’ve seen sharp rises since the late 70s. But if you thought this, then you’d be wrong.
The chart below shows different measures of global inequality. The first two inequality measures aren’t that important2. It’s the green dots marked ‘concept 3′ show the key trend – the Gini coefficient if we look across every citizen of the world.
This shows that global inequality hasn’t really changed much since the late 1980s – and that Branko’s best guess is that it’s fallen a bit over the past few years. [It's interesting to see that a recent Economist article used different figures that show a decline in global inequality over this period - if anyone knows why these figures are different, then let me know].
If you get a chance to see Branko Milanovic speak, then take it. (He’s even quite funny). If you don’t, then buy the book. Or do both – in fact, my next click after posting this will be to order a copy for myself…
1. These charts are taken from his lecture at LSE last week.
2.’Concept 1′ on chart #3 is the inequality between countries, treating each country as one unit; ‘concept 2′ is the same except it weights each country by population size.