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.