Branko Milanovic’s new book is a welcome companion to Thomas Piketty’s Capital in the Twenty-First Century. It covers similar ground but is less polemical.
Milanovic, a Serbian-American economist, thinks that inequality between countries has been reduced. Since wars destroy assets, the 20th century saw income and wealth shared more equally for most of its duration, as the world rebuilt capital and regained skills. Then came the opening up of China, the re-integration of much of the former Soviet Union, the elimination of capital controls so money could move around more freely and the reduction in tariffs that has facilitated world trade. All this has led to a reduction in poverty and an expansion of the global middle class.
Still, there is much further to go. Economic growth will help reduce the gap. But dealing with inequality within nations is more difficult because of globalisation. Over the last few decades in rich nations, middle and lower-middle-class incomes have stagnated, while a “global plutocracy” of mobile individuals command an increasing share of income and capital. Milanovic advocates “global citizenship” to allow individuals to be tracked more easily.
Being born in the right country and the right family allows one to extract “rents” throughout one’s life. Milanovic’s proposed solution is not to tax income more but to focus on re-distributing this endowment—inheritance, family income, access to education—so the advantages are more widely shared. Perhaps controversially, as we face the refugee crisis, he wants more migration to even out the advantage of being born in a rich country.
