The Three Eras Of Global Inequality 1820-2020 PDF

STONE CENTER ON SOCIO-ECONOMIC INEQUALITY WORKING PAPER SERIES No. 5 The three eras of global inequality, 1820-2020 with the focus on the past thirty years Branko Milanovic November 202 Full text: https://osf.io/preprints/socarxiv/yg2h9/ (PDF Studying global inequality in incomes over the past two c...

STONE CENTER ON SOCIO-ECONOMIC INEQUALITY WORKING PAPER SERIES No. 5 The three eras of global inequality, 1820-2020 with the focus on the past thirty years Branko Milanovic November 202 Full text: https://osf.io/preprints/socarxiv/yg2h9/ (PDF Studying global inequality in incomes over the past two centuries is in effect studying global economic, and to some extent, political and military, history of the world. The numbers are dry— but behind these numbers, and determining these numbers, are big historical changes: the rise and decline of different parts of the world. Before the Industrial Revolution global income inequality, as far as we know, was relatively low. There were poor and rich people in various countries and empires, but there was no systematic differences in income levels between different parts of the world. This is, of course, what we believe today, based on the empirical data that begin with 1820. But this is known only by extension, not through direct estimation of inequality of the world in say, 1700. Thus while this conclusion seems reasonable much more remains to be done in studying inequality between and within countries in the decades and centuries before the Industrial Revolution The Industrial Revolution represented a fundamental break: it launched some countries, principally Western Europe and North America, to a much higher growth path, and left others more or less at the same level at which they were before. Thus the gap between nations widened, and together with it also the gap between the “haves” and the “have-nots” within nations. Throughout the nineteenth century and up to the World War I global inequality increased, driven by both of these forces. After World War II, it stabilized, albeit at an unprecedently high level. Within-national inequalities then decreased, but this was insuf cient to make much of a difference to the dominant force of unequal world development. The tripartite world of the second half of the twentieth century began to crumble in the last two decades of the century however. The rise of China, and around the same time or a bit later of India, Indonesia, Bangladesh etc., was indeed a mirror image of the Industrial Revolution. But, like in a mirror-image, while the Industrial Revolution increased between country gaps, the rise of Asia reduced them The period from around 1980 to 2020 thus witnessed the largest reshuf e of individual income positions since the Industrial Revolution. Global middle and high-middle income positions that were “populated” almost exclusively by upper parts of income distributions of Western countries and Japan, began to be taken over by the populations from the “rising Asia”. The reshuf e has not yet affected, to a signi cant extent, the very top of the global income distribution (the top 5 percent), but if the differential in real income growth between Asia and the West persists, the reshuf e will be felt there too. The positional reshuf e is, by historical standards, dramatic because of the numbers of people involved in these upward movements. If the numbers of people going up were smaller, the extent of the reshuf e would be obviously less. But when millions of people with similar incomes overtake a person, he or she falls down, positionally, very fast. The positional decline does not imply, of course, a real income decline. Very often it goes together with an absolute improvement in real income. But not with an absolute improvement that is equal to that of other people with similar incomes from other countries fl fl ) fl. fl 9. fi fi 2. fl Does positional decline matter? In many ways, not. We often do not know our national income positions, much less so global. But in other ways, it matters. Lots of consumption is “globalized”: there are international goods and services that are affordable only to the select segments of the globally af uent or of the global middle class. One does not need to know exactly where he or she falls in the global income ladder; yet inability to easily purchase certain “global” goods and services (foreign travel, latest smart phone, subscription to the popular show, attendance of a sporting event) will soon, even if indirectly, convey that message The current period is therefore one of dramatic developments where the progression of incomes in China without doubt plays the key role. In fact, never in history have so many people’s incomes increased so much so fast. Whatever happens in the future will not erase the magnitude of this historical success. China’s role in the reshuf ing of global incomes is not over, but its role in reducing global inequality is at, or is soon coming to, an end. The parts of the world whose income convergence now becomes of key importance are India and half a dozen of populous African countries, which are also the only part of the world likely to register massive population growth— which indeed makes them even more important for the matters of global inequality. Will Africa in the twenty- rst century replicate Asia of the latter part of the twentieth? This is the critical question for the continued income convergence—which is not merely a numerical objective, but a means towards the creation of a more equal world eloquently envisaged two and a half centuries ago by Adam Smith At the particular time when these discoveries [of the Americas] were made, the superiority of force happened to be so great on the side of the Europeans that they were enabled to commit with impunity every sort of injustice in those remote countries. Hereafter, perhaps, the natives of those countries may grow stronger, or those of Europe may grow weaker, and the inhabitants of all the different quarters of the world may arrive at that equality of courage and force which, by inspiring mutual fear, can alone overawe the injustice of independent nations into some sort of respect for the rights of one another (Wealth of Nations, Chapter 7). QUESTIONS 1. How was global income inequality before the Industrial Revolution 2. In which ways did the Industrial Revolution affect inequality among nations? And within countries 3. Did global inequality increase or decrease between 1820 and 1950 4. What happened in inequality between 1950 and 1980 5. What happened in global inequality between 1980 and 2020? Why 6. How has "rising Asia" affected global inequality 7. To what extent has the Top 5% suffered in the new situation 8. To what extent does positional decline matter 9. Which are the main dramatic developments in the current period ? ? ? ? ? ? ? ?. ? fl : : fl fi ? 10. According to the author, will income convergence continue in the future