This is an astonishingly good read, packed with deep insights and thoughtful perspectives. My main interest at the moment is automation and jobs. Technology like driverless cars and automated fast food preparation and delivery will decimate the lower working classes and AI for medicine and surgery will depreciate higher wage earners; but the current technological effects are hollowing out the middle class. Milanovic explains the link with globalization beautifully: Lenovo and Apple are giving us the technology and globalization both inextricably intertwined. Milanovic hopes that the huge increase in cheap labor as the middle class is pushed lower will create technologies to exploit this labor and more jobs. Aside from Amazon's delivery centers, there doesn't seem to be any evidence for this; so I think it is a pipe dream that extrapolates past economic analysis in an unwarranted way into the future. Similarly his creation of endless Kuznets cycles seems an unwarranted speculation; but his speculations are darned good! and well worth reading. It seems much more likely to me that the plutocrats of the world will unite with no regard to democracy or the poor people around them. LIke the Raj of India, or the Kings of old, they will have no meaningful contact or sympathy for the poor. Only revolutionary power will constrain them or alter the future. Much of what Milanovic describes accords with this future but he seems unwilling to have so negative a view of the dystopia to come.
Global Inequality by Branko Milanovic was a really informative and challenging read. I’ve long thought that international economic equality lay at the heart of our developing dystopia; but never really fleshed my ideas out. I found his ideas challenging and even exciting. Many of his speculations I totally agreed with, and I think I understand his motivations for the things I don’t agree with. Even so his speculations are audacious and worthy.
I particularly agree with his recommendations to equalize endowments of inheritance and education. Inheritance distorts our democracy much too much. We think that who you know is much more important than what you know or do. We create dynasties in presidents as if that is the natural order instead of struggling to find people meriting our leadership. Reason enough for Hillary to be defeated. Education is a disaster. We should have a thousand Harvards and Stanfords, and if we can only create a handful, then they should all be brought down to a level of excellence we can manage. No more of these exclusive clubs. I doubt it would decrease our innovation much. Huge amounts of innovation are going on in secondary universities, but they have no sense of exclusivity or natural superiority. The whole public school system is an underresourced fiasco. How can we let private schools drain so many resources too? Everywhere you turn, there is too little support for the poor. Tax the rich. It is the only answer.
Milanovic has too great a faith in the existing democratic forces for social support and transfer. He thinks that the threat of wars will support population growth up and progressive taxes will continue. This seems very unlikely to me. Only one threat will hold the plutocracy in check, and that is the threat of rebellion. They are outnumbered and know it. The Atlantic has this great article about newly minted centi-millionaires buying fancy condos in abandoned missile silos in Kansas, with pilots to take them there at a moment’s notice. They promise their pilots to bring their own families too. They’re that scared about rebellion. And they use their riches effectively to pass laws in their favor. If we don’t watch out, the vast majority will be powerless before we know it. Democracy is a farce already: soon it my have no bearing on reality at all. The NRA is a total farce. The militia is a paper tiger.
Milanovic recognizes that his hope for a low-skilled technology breakthrough is totally unanticipated, but he cherishes it anyway. Again, he seems to be relying on general rules that capitalism will take advantage of labor wherever it can, but seemingly ignores that robots will be the cheapest labor ever, and humans can go hang. I see no possibility that low paying jobs will be found through technology. Yes, Amazon warehouses may find temporary jobs for people to be the eyes and ears of robots in their warehouses, but that technology is rapidly advancing and those jobs will be gone in no time. The consequence of my expectations is that the roll of unemployed will soon be staggeringly large even in the “advanced” countries. There is clear evidence already that millions have been forced out of the labor market entirely, and millions more have been forced into low paying jobs way below their skills. Driverless cars will destroy another huge set of jobs for poorly educated workers. Automated fast food creation and delivery will destroy the last resort of menial jobs. There will be no place left. Baker relies on history to argue that technology will create as many jobs or more than it destroys, but this is wishful thinking. The past is not a faithful guide to the future. The dystopic changes have already begun for anyone with open eyes to see them.
Milanovic seems to make a similar error to Baker’s in supposing that there are never ending Kuznets cycles where inequality will go up and down. He seems to think that because there was one and the final leg is reversing itself, that another is beginning. His analysis of pre-industrial inequality waves is informative and may even be accurate, but his predictions of where the current wave in the rise of inequality in advanced countries is heading is unconvincing and even he seems unsure of its length or direction. One aspect of his analysis I find troubling is the use of Gini measure. This measures the average differences in income between all pairs of people in an economy. Sadly, when everyone is poor except for a tiny handful of ultra rich, this measure tends to show low inequality; so it is a poor measure of a plutocracy. Gini tends to lead economists to focus on the differences between low paying and high paying jobs, because that is where the numbers are to create large dispersion as measured by the Gini. That’s ok for a functioning democracy, but lousy for a plutocracy with a handful of billionaires calling the shots, which is closer to what we have, and exactly what I expect in the near future. So the Gini may soon go down very far and fast, but inequality here and in the world will be out of control.
I like what he has to say about automation and globalization as inextricably intertwined and his simplification of this link with: Apple and Lenovo produce our technology with underpaid labor in China. His book rightly deals with globalization’s effects on hollowing out our middle class and building up China’s middle class. But his predictions of the future do not take automation’s rampant changes into account. Driverless cars, robots for entry level jobs; AI for finance and medicine; so many jobs will be destroyed at all levels of wages. If we lost 5 M jobs to China in the last decades we will lose 10s of M jobs to automation in the next decades. Anything a human mind can do, AI will be able to do in the next decades; with this notable improvement: the AI will do it at a level of the best human minds, not the average or the worst. If the middle class does not assert its power now, it will be powerless to stop the plutocrats in the next decades. Articles have appeared to suggest that China and the US will dominate AI and create jobs for educated experts, with the ignorant rest of the world subservient to this technology. But this is foolish. Once the AI technology is tested and effective,and proven,w anyone will be able to implement it. It is just simple correlation done on massive data bases. Anyone can do it. IN fact, technology companies are counting on its simplicity. Just take a look at Microsoft’s Azure Studio as an example of the democratization of the technology. However, once released, jobs will disappear. AI weapons will follow, and that is the main threat to the plutocrats: AI weapons of rebellion and democracy. Hacking banks and hidden accounts is our only defense against dystopia.
If history has a lesson for us, it seems to be that high wages lead to faster technological change. This was true in the past, and seems to hold for automation and AI. But any human wages will now promote smart technology. Raising minimum wages will be a real stimulus to its adoption. In a series of papers and a book, Allen (2003, 2005, 2011) argued that it was not British property rights (which were weaker than in France), or low taxation (which was actually higher than in France) that were crucial for the British take-off of industrial technology, but rather the high cost of labor. High wages made it profitable to try to find ways to replace labor with capital. Going further back into the past, the same mechanism was adduced by Aldo Schiavone (2002), following Marx (1965), as an explanation for why capital-intensive production never took place in the ancient world.
Milanovic’s analysis of the forces for increased inequality are superb. The forces pushing for a continuation of the increase in inequality seem overwhelming in the United States. They include not only the existing, and well-studied, forces of technology, openness/globalization, and policy (TOP)., but new ones too. Especially important are the combination of high labor and capital incomes received by the same individuals or households (which increases inequality) and the greater influence of the rich on the political process and thus on rule-setting favorable to themselves.
His most revealing analysis and recommendations, I thought, were about immigration. As Figure 3.3 shows, the location element was almost negligible in 1820: only 20 percent of global inequality was due to difference among countries. Most of global inequality (80 percent) resulted from differences within countries; that is, the fact that there were rich and poor people in England, China, Russia, and so on. It was class that mattered. Being “well-born” in this world (as we also see in the literature of the time) meant being born into a high income group rather than being born in England, or China, or Russia. But as the upwardly rising line in the figure shows, that changed completely over the next century. The proportions reversed: by the mid-twentieth century, 80 percent of global inequality depended on where one was born (or lived, in the case of migration), and only 20 percent on one’s social class. This world is best exemplified by European colonialism in Africa and Asia, where small groups of Europeans disposed of incomes a couple of hundred times greater than those of the native people. The key point is not just to compare the incomes of Europeans in Africa with those of Africans, but to realize that these were typical incomes for such classes of people in western Europe.
I think that we will revert to class societies again with the rise of smart technology. It will not matter where you live: you will be poor if you are not part of the plutocracy.
However, until then, his analysis of immigration is cogent. His recommendation for several classes of citizen, some of whom have to pay more taxes, etc. is rife with danger. Plutocrats could easily arrogate to themselves primary and superior citizenship. I think that is what will happen. In many ways they already have. They don’t have to pay taxes at all already.
His analysis of money in politics is spot on. This plutocratic system is evident in a perhaps unwitting quotation from George W. Bush, when he was speaking to a rich crowd in Washington, DC: “This is an impressive crowd—the haves and the have-mores. Some people call you the elites; I call you my base.” A plutocracy is thus confirmed. The government has become little more than in Marx’s words from the Communist Manifesto, “the committee for managing the common affairs of the bourgeoisie.”
“People’s Capitalism
It has been a standard view in economics that factor shares tend to be constant, with some 70 percent of national income going to labor and some 30 percent to capital. This nostrum has been overturned in the past couple of decades as it has become clear that capital shares are increasing in all advanced economies. A continuation of this trend of machines (such as robots) becoming less expensive would be expected to lead to further declines in the labor share, and thus to the increase in the share of capital.
Rich countries’ workers are squeezed between their own countries’ top earners, who will continue to make money out of globalization, and emerging countries’ workers, whose relatively cheap labor makes them more attractive for hiring. The great middle-class squeeze (which Milanovic discussed in Chapters 1 and 2), driven by the forces of automation and globalization, is not at an end.
This squeeze will in turn further polarize Western societies into two groups: a very successful and rich class at the top, and a much larger group of people whose jobs will entail servicing the rich class in occupations where human labor is cheap. Already, among the top 10 percent of wage-earners, we cannot identify differences in observable characteristics (education, experience) that could explain why salaries between the top 1 percent and the remaining 9 percent differ by a factor of ten or more.
Policies that would work toward this long-term equalization include (1) high inheritance taxes (as Piketty calls for), which would keep parents from being able to transfer large assets to their children, (2) corporate tax policies that would stimulate companies to distribute shares to workers (moving toward a system of limited workers’ capitalism), and (3) tax and administrative policies that would enable the poor and the middle classes to have and hold financial assets. But these policies would not be sufficient. The high volatility of returns from capital and the need for lots of information in order to make wise investment decisions, in addition to the problem of combining the risk of working for a company with the risk of owning shares in the same company, make a “people’s capitalism” very difficult to realize. “ Free AI financial management systems will be necessary to make this work and create a people’s capitalism for all.
Global Inequality by Branko Milanovic was a really informative and challenging read. I’ve long thought that international economic equality lay at the heart of our developing dystopia; but never really fleshed my ideas out. I found his ideas challenging and even exciting. Many of his speculations I totally agreed with, and I think I understand his motivations for the things I don’t agree with. Even so his speculations are audacious and worthy.
I particularly agree with his recommendations to equalize endowments of inheritance and education. Inheritance distorts our democracy much too much. We think that who you know is much more important than what you know or do. We create dynasties in presidents as if that is the natural order instead of struggling to find people meriting our leadership. Reason enough for Hillary to be defeated. Education is a disaster. We should have a thousand Harvards and Stanfords, and if we can only create a handful, then they should all be brought down to a level of excellence we can manage. No more of these exclusive clubs. I doubt it would decrease our innovation much. Huge amounts of innovation are going on in secondary universities, but they have no sense of exclusivity or natural superiority. The whole public school system is an underresourced fiasco. How can we let private schools drain so many resources too? Everywhere you turn, there is too little support for the poor. Tax the rich. It is the only answer.
Milanovic has too great a faith in the existing democratic forces for social support and transfer. He thinks that the threat of wars will support population growth up and progressive taxes will continue. This seems very unlikely to me. Only one threat will hold the plutocracy in check, and that is the threat of rebellion. They are outnumbered and know it. The Atlantic has this great article about newly minted centi-millionaires buying fancy condos in abandoned missile silos in Kansas, with pilots to take them there at a moment’s notice. They promise their pilots to bring their own families too. They’re that scared about rebellion. And they use their riches effectively to pass laws in their favor. If we don’t watch out, the vast majority will be powerless before we know it. Democracy is a farce already: soon it my have no bearing on reality at all. The NRA is a total farce. The militia is a paper tiger.
Milanovic recognizes that his hope for a low-skilled technology breakthrough is totally unanticipated, but he cherishes it anyway. Again, he seems to be relying on general rules that capitalism will take advantage of labor wherever it can, but seemingly ignores that robots will be the cheapest labor ever, and humans can go hang. I see no possibility that low paying jobs will be found through technology. Yes, Amazon warehouses may find temporary jobs for people to be the eyes and ears of robots in their warehouses, but that technology is rapidly advancing and those jobs will be gone in no time. The consequence of my expectations is that the roll of unemployed will soon be staggeringly large even in the “advanced” countries. There is clear evidence already that millions have been forced out of the labor market entirely, and millions more have been forced into low paying jobs way below their skills. Driverless cars will destroy another huge set of jobs for poorly educated workers. Automated fast food creation and delivery will destroy the last resort of menial jobs. There will be no place left. Baker relies on history to argue that technology will create as many jobs or more than it destroys, but this is wishful thinking. The past is not a faithful guide to the future. The dystopic changes have already begun for anyone with open eyes to see them.
Milanovic seems to make a similar error to Baker’s in supposing that there are never ending Kuznets cycles where inequality will go up and down. He seems to think that because there was one and the final leg is reversing itself, that another is beginning. His analysis of pre-industrial inequality waves is informative and may even be accurate, but his predictions of where the current wave in the rise of inequality in advanced countries is heading is unconvincing and even he seems unsure of its length or direction. One aspect of his analysis I find troubling is the use of Gini measure. This measures the average differences in income between all pairs of people in an economy. Sadly, when everyone is poor except for a tiny handful of ultra rich, this measure tends to show low inequality; so it is a poor measure of a plutocracy. Gini tends to lead economists to focus on the differences between low paying and high paying jobs, because that is where the numbers are to create large dispersion as measured by the Gini. That’s ok for a functioning democracy, but lousy for a plutocracy with a handful of billionaires calling the shots, which is closer to what we have, and exactly what I expect in the near future. So the Gini may soon go down very far and fast, but inequality here and in the world will be out of control.
I like what he has to say about automation and globalization as inextricably intertwined and his simplification of this link with: Apple and Lenovo produce our technology with underpaid labor in China. His book rightly deals with globalization’s effects on hollowing out our middle class and building up China’s middle class. But his predictions of the future do not take automation’s rampant changes into account. Driverless cars, robots for entry level jobs; AI for finance and medicine; so many jobs will be destroyed at all levels of wages. If we lost 5 M jobs to China in the last decades we will lose 10s of M jobs to automation in the next decades. Anything a human mind can do, AI will be able to do in the next decades; with this notable improvement: the AI will do it at a level of the best human minds, not the average or the worst. If the middle class does not assert its power now, it will be powerless to stop the plutocrats in the next decades. Articles have appeared to suggest that China and the US will dominate AI and create jobs for educated experts, with the ignorant rest of the world subservient to this technology. But this is foolish. Once the AI technology is tested and effective,and proven,w anyone will be able to implement it. It is just simple correlation done on massive data bases. Anyone can do it. IN fact, technology companies are counting on its simplicity. Just take a look at Microsoft’s Azure Studio as an example of the democratization of the technology. However, once released, jobs will disappear. AI weapons will follow, and that is the main threat to the plutocrats: AI weapons of rebellion and democracy. Hacking banks and hidden accounts is our only defense against dystopia.
If history has a lesson for us, it seems to be that high wages lead to faster technological change. This was true in the past, and seems to hold for automation and AI. But any human wages will now promote smart technology. Raising minimum wages will be a real stimulus to its adoption. In a series of papers and a book, Allen (2003, 2005, 2011) argued that it was not British property rights (which were weaker than in France), or low taxation (which was actually higher than in France) that were crucial for the British take-off of industrial technology, but rather the high cost of labor. High wages made it profitable to try to find ways to replace labor with capital. Going further back into the past, the same mechanism was adduced by Aldo Schiavone (2002), following Marx (1965), as an explanation for why capital-intensive production never took place in the ancient world.
Milanovic’s analysis of the forces for increased inequality are superb. The forces pushing for a continuation of the increase in inequality seem overwhelming in the United States. They include not only the existing, and well-studied, forces of technology, openness/globalization, and policy (TOP)., but new ones too. Especially important are the combination of high labor and capital incomes received by the same individuals or households (which increases inequality) and the greater influence of the rich on the political process and thus on rule-setting favorable to themselves.
His most revealing analysis and recommendations, I thought, were about immigration. As Figure 3.3 shows, the location element was almost negligible in 1820: only 20 percent of global inequality was due to difference among countries. Most of global inequality (80 percent) resulted from differences within countries; that is, the fact that there were rich and poor people in England, China, Russia, and so on. It was class that mattered. Being “well-born” in this world (as we also see in the literature of the time) meant being born into a high income group rather than being born in England, or China, or Russia. But as the upwardly rising line in the figure shows, that changed completely over the next century. The proportions reversed: by the mid-twentieth century, 80 percent of global inequality depended on where one was born (or lived, in the case of migration), and only 20 percent on one’s social class. This world is best exemplified by European colonialism in Africa and Asia, where small groups of Europeans disposed of incomes a couple of hundred times greater than those of the native people. The key point is not just to compare the incomes of Europeans in Africa with those of Africans, but to realize that these were typical incomes for such classes of people in western Europe.
I think that we will revert to class societies again with the rise of smart technology. It will not matter where you live: you will be poor if you are not part of the plutocracy.
However, until then, his analysis of immigration is cogent. His recommendation for several classes of citizen, some of whom have to pay more taxes, etc. is rife with danger. Plutocrats could easily arrogate to themselves primary and superior citizenship. I think that is what will happen. In many ways they already have. They don’t have to pay taxes at all already.
His analysis of money in politics is spot on. This plutocratic system is evident in a perhaps unwitting quotation from George W. Bush, when he was speaking to a rich crowd in Washington, DC: “This is an impressive crowd—the haves and the have-mores. Some people call you the elites; I call you my base.” A plutocracy is thus confirmed. The government has become little more than in Marx’s words from the Communist Manifesto, “the committee for managing the common affairs of the bourgeoisie.”
“People’s Capitalism
It has been a standard view in economics that factor shares tend to be constant, with some 70 percent of national income going to labor and some 30 percent to capital. This nostrum has been overturned in the past couple of decades as it has become clear that capital shares are increasing in all advanced economies. A continuation of this trend of machines (such as robots) becoming less expensive would be expected to lead to further declines in the labor share, and thus to the increase in the share of capital.
Rich countries’ workers are squeezed between their own countries’ top earners, who will continue to make money out of globalization, and emerging countries’ workers, whose relatively cheap labor makes them more attractive for hiring. The great middle-class squeeze (which Milanovic discussed in Chapters 1 and 2), driven by the forces of automation and globalization, is not at an end.
This squeeze will in turn further polarize Western societies into two groups: a very successful and rich class at the top, and a much larger group of people whose jobs will entail servicing the rich class in occupations where human labor is cheap. Already, among the top 10 percent of wage-earners, we cannot identify differences in observable characteristics (education, experience) that could explain why salaries between the top 1 percent and the remaining 9 percent differ by a factor of ten or more.
Policies that would work toward this long-term equalization include (1) high inheritance taxes (as Piketty calls for), which would keep parents from being able to transfer large assets to their children, (2) corporate tax policies that would stimulate companies to distribute shares to workers (moving toward a system of limited workers’ capitalism), and (3) tax and administrative policies that would enable the poor and the middle classes to have and hold financial assets. But these policies would not be sufficient. The high volatility of returns from capital and the need for lots of information in order to make wise investment decisions, in addition to the problem of combining the risk of working for a company with the risk of owning shares in the same company, make a “people’s capitalism” very difficult to realize. “ Free AI financial management systems will be necessary to make this work and create a people’s capitalism for all.
Global Inequality by Branko Milanovic was a really informative and challenging read. I’ve long thought that international economic equality lay at the heart of our developing dystopia; but never really fleshed my ideas out. I found his ideas challenging and even exciting. Many of his speculations I totally agreed with, and I think I understand his motivations for the things I don’t agree with. Even so his speculations are audacious and worthy.
I particularly agree with his recommendations to equalize endowments of inheritance and education. Inheritance distorts our democracy much too much. We think that who you know is much more important than what you know or do. We create dynasties in presidents as if that is the natural order instead of struggling to find people meriting our leadership. Reason enough for Hillary to be defeated. Education is a disaster. We should have a thousand Harvards and Stanfords, and if we can only create a handful, then they should all be brought down to a level of excellence we can manage. No more of these exclusive clubs. I doubt it would decrease our innovation much. Huge amounts of innovation are going on in secondary universities, but they have no sense of exclusivity or natural superiority. The whole public school system is an underresourced fiasco. How can we let private schools drain so many resources too? Everywhere you turn, there is too little support for the poor. Tax the rich. It is the only answer.
Milanovic has too great a faith in the existing democratic forces for social support and transfer. He thinks that the threat of wars will support population growth up and progressive taxes will continue. This seems very unlikely to me. Only one threat will hold the plutocracy in check, and that is the threat of rebellion. They are outnumbered and know it. The Atlantic has this great article about newly minted centi-millionaires buying fancy condos in abandoned missile silos in Kansas, with pilots to take them there at a moment’s notice. They promise their pilots to bring their own families too. They’re that scared about rebellion. And they use their riches effectively to pass laws in their favor. If we don’t watch out, the vast majority will be powerless before we know it. Democracy is a farce already: soon it my have no bearing on reality at all.
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Top reviews from other countries
Cliente Amazon
Nova abordagem para o problema da desigualdade.
Reviewed in Brazil on April 22, 2017Carlo Crispino
Una guida indispensabile per comprendere la globalizzazione
Reviewed in Italy on August 22, 2018SueH
The best and most up-to-date work on data on global inequality
Reviewed in Canada on February 2, 2017