In a recent post I relayed the results of a study of the global inequality of wealth (that’s property and financial assets) recently produced by the top experts in the field, Tony Shorrocks and Jim Davies (https://thenextrecession.wordpress.com/2013/10/10/global-wealth-inequality-10-own-86-1-own-41-half-own-just-1/). The study revealed that the top 1% of wealth holders in the world had 41% of the wealth and the top 10% had 86%. Remember this is wealth across the whole world and so reflects not just inequality of wealth within a country but also inequality between countries. Indeed, most of the top 10% live in the top seven (G7) advanced capitalist economies.
Now, in a new paper (milanovic on world inequality), Branco Milanovic of the World Bank has updated his definitive study of the inequality of incomes (not wealth) globally. I have referred to Milanovic’s work before (see my book, The Great Recession pp 255-6 and https://thenextrecession.wordpress.com/2010/01/10/20). Way back in 2005, Milanovic carefully documented in his book, Worlds Apart (updated in 2007) that the global inequality of income (and wealth), was ’20:80′ (i.e. that 80% of world’s then 6.6bn population could be classed as poor) and the situation was getting worse, not better, even if you take into account the booming so-called BRICs (Brazil, Russia India and China).
The usual measure of inequality is the gini coefficient. This measure of inequality takes its name from the Italian statistician and economist Corrado Gini. The gini index ranges from 0 – when everybody has the same income – to 1, or 100 (expressed as a percentage or an index), when one person gets the entire income of a city (province, nation, world)—whatever is the relevant population over which we calculate inequality. Milanovic uses national household surveys from dozens of countries over time as raw data to work out his gini indexes for each country and the world.
Milanovic concludes:”Take the whole income of the world and divide it into two halves: the richest 8% will take one-half and the other 92% of the population will take another half. So, it is a 92-8 world. In the US, the numbers are 78 and 22. Or using Germany, the numbers are 71 and 29. ” So it’s 92-9 world now – even more unequal than he measured before. Milanovic notes that global inequality is much greater than inequality within any individual country. The global gini is around 70, substantially greater than inequality in Brazil, the highest for a country. And it is almost twice as great as inequality in the United States.
Milankovic finds that the 60m or so people who constitute the world’s top 1% of income ‘earners’ have seen their incomes rise by 60% since 1988. About half of these are the richest 12% of Americans. The rest of the top 1% is made up by the top 3-6% of Britons, Japanese, French and German, and the top 1% of several other countries, including Russia, Brazil and South Africa. These people include the world capitalist class – the owners and controllers of the capitalist system and the strategists and policy makers of imperialism.
But Milanovic finds that those who have gained income even more in the last 20 years are the ones in the ‘global middle’. These people are not capitalists. These are mainly people in India and China, formerly peasants or rural workers have migrated to the cities to work in the sweat shops and factories of globalisation: their real incomes have jumped from a very low base, even if their conditions and rights have not.
The biggest losers are the very poorest (mainly in African rural farmers) who have gained nothing in 20 years. The other losers appear to be some of the ‘better off’ globally. But this is in a global context, remember. These ‘better off’ are in fact mainly working class people in the former ‘Communist’ countries of Eastern Europe whose living standards were slashed with the return of capitalism in the 1990s and the broad working class in the advanced capitalist economies whose real wages have stagnated in the past 20 years.
Milanovic shows that, since the Industrial Revolution that accompanied the rise to dominance of the capitalist mode of production globally, inequality in world income has risen. “There was a period of more than a century of steady increase in global inequality, followed by perhaps fifty years (between the end of the Second World War and the turn of the 21st century) when global inequality remained on a high plateau, changing very little.” However, Milanovic is struck by a decline in his measure of global inequality since 2002, which “may be historically important”. But he explains this by the ‘catching-up’ of poor and large countries (China and India), overcoming upward pressures in inequality within countries. But does this mean that global inequality will decline from now on? Don’t bet on it for long, if growth in the likes of China and India should slow.
Using a Theil coefficient of global inequality in two baseline years: 1870 and 2000, Milanovic shows that overall global inequality today is greater than in 1870 (the bar on the right for the year 2000 is higher).
Level and composition of global inequality in the 19th century and around year 2000
(measured by the Theil index)
However, Milanovic also makes some controversial assertions from his data. Global inequality can be decomposed into two parts (see the figure above). The first part is due to differences in incomes within nations, which means that that part of total inequality is due to income differences between rich and poor Americans, rich and poor Chinese, rich and poor Egyptians and so on for all countries in the world. If one adds up all of these within-national inequalities, you get the aggregate contribution to global inequality. Milanovic calls this the traditional Marxist “class” component of global inequality because it accounts for (the sum) of income inequalities between different “income classes” within countries. The second component, which he calls the “location” component, refers to the differences between mean incomes of all the countries in the world. Around 1870, ‘class’ explained more than 2/3 of global inequality. Now more than 2/3 of total inequality is due to ‘location’. Over the period since 1870, more than 50% of income for an individual has depended on the average income of the country where a person lives or was born.
Milanovic concludes from this that the Marxist class analysis has been proved wrong. “Karl Marx could indeed eloquently write in 1867 in “Das Kapital”, or earlier in “The Manifesto” about proletarians in different parts of the world—peasants in India, workers in England, France or Germany— sharing the same political interests. They were invariably poor and, what is important, they were all about equally poor, eking out a barely above-subsistence existence, regardless of the country in which they lived. There was not much of a difference in their material positions.” But not now.
Yes, maybe imperialist countries have a working class that often is not interested in helping the poor of the world but only in backing the exploitation of the poorest by their imperialist bosses. But as Lenin put it, that was the interest of a ‘labour aristocracy’ and not the whole proletariat in the imperialist countries. The history of solidarity action between the ‘rich ‘ workers of the West and the ‘poor’ people of the ‘Third World is really quite rich.
Milanovic also misunderstands the Lenin-Trotsky view of ‘permanent revolution’. It was precisely the development of imperialism and with it the uneven and combined development of modern global capitalism that led to the theory that a growing proletariat in the neo-colonial economies could move to power even before the advanced capitalist workers. Revolutions in poor neo-colonial countries may not trigger revolutions by ‘rich’ labour aristocrats in imperialist countries, as the experience of the Russian revolution suggests. But the accession to state power by the working-class in one or more of the top G7 imperialist countries would certainly trigger movements in the neo-colonial world.
And Milanovic reduces the impact of his own evidence that inequality of income (and wealth) within the imperialist countries has risen in the last 30 years and is now as high, if not higher, than in 1870. That’s a pretty ‘Marxist’ class component of inequality. As I recounted in a recent post (https://thenextrecession.wordpress.com/2013/05/17/inequality-theres-no-stopping-it/), back in 2011, the OECD did a very comprehensive report on income inequality entitled ironically, Divided we stand. The report concluded that the gap between rich and poor had widened considerably over the three decades to 2008, when it reached an all-time high. The OECD data were confirmed by the IMF in its paper last September (Income inequality and fiscal policy) that found inequality of income has also widened in the same period. And see the recent devastating evidence of Anthony Atkinson (https://thenextrecession.wordpress.com/2013/07/14/the-story-of-inequality/). Using the gini coefficient, Atkinson finds that in the OECD economies there has been a rise of about 3% pts in the coefficient from about 28 to 31 since the 1980s, or a rise of about 10%.
Milanovic outlines the way out of this huge inequality, short of world-wide proletarian revolution – which won’t and cannot happen, according to him. “There are three ways in which global inequality can be reduced. Global inequality may be reduced by high growth rates of poor countries. This requires an acceleration of income growth of poor countries, and of course continued high rates of growth of India, China, Indonesia etc.” Yet, as I have argued above, there is little sign that the ’emerging’ neo-colonial economies under the boot of imperialism have any hope of closing the income gap with the imperialist bloc.
“The second way is to introduce global redistributive schemes although it is very difficult to see how that could happen. Currently, development assistance is a little over 100 billion a year. This is just five times more than the bonus Goldman Sachs paid itself during one crisis year. So we are not really talking about very much money that the rich countries are willing to spend to help poor countries. But the willingness to help poor countries is now, with the ongoing economic crisis in the West, probably reaching its nadir. “ So no prospect of that if the existing capitalist states remain in order.
“The third way in which global inequality and poverty can be reduced is through migration. Migration is likely to become one of the key problems—or solutions, depending on one’s viewpoint— of the 21st century. if you classify countries, by their GDP per capita level, into four “worlds”, going from the rich world of advanced nations, with GDPs per capita of over $20,000 per year, to the poorest, fourth, world with incomes under $1,000 per year, there are 7 points in the world where rich and poor countries are geographically closest to each other, whether it is because they share a border, or because the sea distance between them is minimal. You would not be surprised to find out that all these 7 points have mines, boat patrols, walls and fences to prevent free movement of people. The rich world is fencing itself in, or fencing others out. “
So there we have it. Workers of the world won’t or cannot unite. So the only prospect is mass migration to the rich countries, bringing with it racial and social conflict, growing militarisation and periodic disasters like Lampedusa, but on a bigger scale. Wonderful.
Michael Roberts Blog 
I don’t think the response to the historical development should be to throw our hands up in total despair but to rework the historical narrative Marx developed.
What I find missing from the post above is the point that the world is interconnected, our wealth is based on their poverty etc. They produce the bulk of the goods, we consume the bulk of the goods. To believe this relationship can happily continue is Utopian. And to believe that mass migration will work is to not recognise that our ‘joy’ is their ‘pain’.
The analysis fails to consider the emergence of global governance based on the UN System, which has survived several troublesome decades and managed to improve on its global relevance. Globalization through planning and mutual cooperation instead of competition and conquests has emerged as a definite possibility today. UNO based on the philosophy of peaceful coexistence of diverse nationalities and cultures is post-Marxian development and it is a new historical experience for mankind
Mike, you are politically more explicit than usual here. Thanks for that!
However, irony is really out of place in relation to such a fundamental misinterpretation of class interests and political motivation as Milanovic dishes up. His stance is like a Malthusian NGO-er flapping a condom at world population growth. His solutions are old and discredited (“take off” theory, development aid), or so appallingly blind as to be callous and cynical (free movement of labour to counterbalance free movement of capital).
He swallows all the anti-working-class crap of the globalization ideologists (atomized and self-interest workers crushed by omnipotent imperialist corporations), all the anti-working-class crap of the “third worlders” (no identity of class interests between rich and poor countries, but rather antagonism), and all the anti-working-class crap of the labour aristocracy (that you so rightly emphasize).
This needs more than sarcastic dismissal, as it is so prevalent in the press, media and political debate worldwide. We know better than to swallow this shit, but it’s not enough for us to chuckle among ourselves at his stupidity or inadequacy. We should not only expose how mistaken these ideas are, at the same time as we make better use than they themselves do of the real knowledge they occasionally make available, but should shed as much light as we can on actual international cooperation and mobilization among real workers (not labour aristocrats such as specialists, foremen, union bureaucrats etc) in factories and offices worldwide.
Most important of all in propaganda terms is probably at the moment to clarify why international working class collaboration is so very difficult. This requires looking at the role of the State (one of Marx’s unfulfilled tasks in Capital) as the dialectical opposite of a globalizing force. As workers in one state (or sometimes countries controlled by a hegemonic state) we are trapped in cages surrounded by impenetrable walls – usually just reinforced glass – we can see through them but hear nothing and can’t go through them. As soon as we attempt to breach them (mass migration, direct grassroots economic and political assistance) we discover that they are electrified, razor-wired, floodlit and policed by innumerable heavily armed goons.
A more militant and aggressive perspective on things like this in future would be wonderful!
The working people of the imperialist countries have much less loyalty to “their” capitalists these days than 50 and 100 years ago. They do not see the point of overseas aggression, they see that “their” corporations send production and many services out of the country, and they resent immigration because it is such an obvious wage-busting tactic from construction to health care to computer professionals. The fact that they are on the upper side of the global scissors that are closing in a race to the bottom is irrelevant.
The program for change within imperialist countries: run the economy with the skills and energy of its people at full employment; reward equal work at equal pay, with a ceiling on capitalist income at a small business level; vastly expand public investment in people so everyone can earn a good income. Hence: no need for foreign aggression and its huge cost; no more export of capital and production – instead, trade use values on equal terms; and no more immigration for cheap labor.
Can’t do that under capitalism, so draw your conclusion.
Incidentally, Mr. Milanovic, a change like this in the U.S. in particular would open enormous opportunities for the exploited classes within the poor countries.
Conjugate class interests, not formal ratios.
Humanity has, by now, accumulated substantial experience in the building if socialism in one country an issue of big debates during the Bolshevik revolution. True, USSR has disintegrated and the Socialist camp has disappeared but they have left behind a rich experience of nations working together based on mutual cooperation and economic planned development based on consensus. These experiences are qualitatively and distinctively different from those of the EU and the several free trade zones set up with the support and blessings of IBRD and WTO. Tempo of globalization to be decided by consensus and mutual cooperation and not through competition and conquests is now a definite possibility and the UNO could be fine-tuned towards this objective.
I think your analysis is correct. I think the literary specialists of Marxism will disagree generally but they focus entirely too much on writings from at least 70 years ago. You don’t paint a rosy picture been then again you are not looking at roses.
I haven’t gone through the whole writing as it is practically impossible to go through many such writings which deserve careful reading. But, sorry, I couldn’t. I just gave a cursory look on it. What I’m strongly against is the view that workers of the world cannot unite. I strongly believe that there always exists an OBJECTIVE GROUND for realizing this much desired unity. And that is the fact that all of them – irrespective of countries, nationalities, race, gender, ethnicity, language, culture etc, and in spite of differences in wages and working conditions – are WAGE-SLAVES of CAPITAL. There exists always a natural inclination to get united, even in the world scale, against the power of CAPITAL. The problem lies, as I believe, in the COMMUNIST REVOLUTIONARY MOVEMENT, which still remains miserably fragmented in countless groups and parties with no hope of resolving their differences in an immediate future. It is the SUBJECTIVE PROBLEM: lack of serious attempts to resolve the differences in the BASIC QUESTIONS through relentless IDEOLOGICAL STRUGGLE. Most of the communist groups/parties act in a very SECTARIAN MANNER and lack the courage of engaging in serious ideological struggle. And this itself is also the reason that they still lack any considerable mass base within the working class. The working class is under the grip and influence of opportunist, reformist and even reactionary political forces. It’s time that we, the communist revolutionaries, got united before expecting WORLDWIDE UNITY of the WORKING CLASS.
Another knuckleheaded cheap shot at Marxism, what else is new…:-)
But Charles Andrews touches on the key point that contradicts Milanovic’s thesis: The relative inability of the working class of the “advanced countries” to actually advance their condition as a class. That condition has stalled and even declined over the last generation, declining absolutely in the last 5 years especially. This objectively opens the possibility of the more privileged workers, losing their privileges by slow degrees as they have, of seeing their interests in common with the less privileged workers whose lower standard of living they see themselves in a historical convergence with.
Let alone that the persistent stagnation of the “highest social products of capitalism” stands as a terrible historical verdict on a system as something that could provide a way forward for humanity. Raising a section of the poor in the BRIC countries is something to be expected from capitalism as a historical system; the slow grinding denigration of the most “advanced” working classes is its decisive historical condemnation as a viable way forward for all.
I’m reminded more of Engels remark that as a result of the British pillage of India the workers had become bourgeois. Only with the end of the Empire would there be socialism again. True too today
Dear All,
can you recommend some good blogs, newspapers etc. Sorry on topics like Michael Roberts discus.
I would’ve thought it was pretty obvious by now that the working class (with something to lose) won’t ever risk revolution. That’s what happened in Germany and Italy, isn’t it? The socialists basically lost their bottle.
And if it’s just crass propaganda to say the working class cannot unite, that may be true but irrelevant. It’s propaganda the working class fall for (seemingly) every time. Just look at how Republicans in the US convinced people to support lower taxes by telling them their money was going to lazy, feckless blacks, or how teachers and their ‘gold plated pensions’ were blamed for the problems of capitalism in Wisconsin. Or look at how the Conservatives in Britain have successfully blamed the disabled and the poor for the economic state of the country.
Every time something goes wrong with capitalism the ruling class successfully blame it on some weaker scapegoat group (Jews, blacks, the poor or disabled) and every time things are going right with capitalism the working class are too worried about losing what they have to change it.
I’m not trying to be patronising or defeatist here (and I’d love to hear I’m wrong), just saying that we might need to find some other way than going up against the capitalist propaganda machine.