by Branko Milanovic
Good! I’ve read this book with much pleasure and excitement. It’s an accessible short book and there is a lot to excite, even if you like me already read a lot of books on the topic of inequality and economics.
The most important thing I learned from the book comes from looking at the picture posted below. It shows the main benefactors of growth ranked according to income group. All the way at the right are the extremely rich, who have benefited greatly of growth. In the middle, there is another group that benefited. This peak reflects the extraordinary rise in living standards and wages of many workers in Asia. The poorest at the left represent those in developing countries and are certainly not among the winners of growth. The middle and lower class in the West, found in the bottom-right of the figure, are also definitely losers in the growth game. Looking at this graph gives a lot of interesting insights about the world and the dynamics of societies: It shows which groups are doing better and better, and which are lagging behind.
Later, Milanovic gives different explanations of the dynamics of inequality found by Simon Kuznets in the 1950s and by Piketty in the 2010s. He notes some crucial differences. Kuznets argued that in the face of technological innovation, wealth inequality within societies usually first goes up and the down, following an inverted ‘U’-shape, that has turned out to not exist in reality. Piketty, on the other hand, argues that postwar inequality has been low due to special circumstances. For instance, Piketty argues, the rate of return on capital has been low compared to the rate of growth of the economy. This is not the normal state of the economy and inequality will naturally rise unless we fight it. In order to bring together the views of Kuznets and Piketty, Milanovic describes the dynamics of wealth distribution using ‘Kuznets waves’, which seem to me a bit artificially constructed in an attempt to create a grand unifying theory of the dynamics of distributions of wealth. I think such a theory is not very necessary.
Milanovic spends time to explain the rise in populism from inequality, which I thought was not very new.
Throughout the books there are interesting facts, figures, and explanations of data that made this book very enjoyable. All in all, I really liked it. If I had to recommend one book on inequality, however, I would still sooner choose Inequality by Antony Atkinson, Capital by Thomas Piketty, or The Price of Inequality by Joseph Stiglitz.