The Future of Capitalism

The last quarter century of globalization has witnessed the largest reshuffle of global incomes since the Industrial Revolution. The main factor behind the "reshuffle" was the rise of China, and to a slightly lesser extent, of all Asia. This drove the global Gini index down by about 2 points over the twenty-year period, 1988-2013, for which we have a new unbalanced panel database of country/deciles from almost 100 countries. By tracking the evolution of individual country-deciles and deriving the global Growth Incidence Curve we are able to show the underlying elements that drove the change. Three changes stand out.

First, China has graduated from the bottom ranks, modifying the overall shape of the global income distribution in the process and creating an important global “middle” class that has transformed a twin-peaked 1988 global distribution into a single-peaked one now. The “winners” were country-deciles that in 1988 were around the median of the global income distribution, 90% of which, in terms of population, are from Asia.

Second, the “losers” were the country-deciles that in 1988 were around the 85th percentile (that is, relatively high) of the global income distribution. Almost 90% of them are from OECD economies.

Third, another “winner “was the global top 1% whose incomes, even if underestimated by household surveys, rose substantially.

These three changes open up the following three political issues: how to manage the rising expectations of meaningful political participations in emerging countries like China, how to "placate" the rich countries' globalization losers so that they do not turn away from globalization and support populist anti-immigrant policies, and how to constrain the rising economic and political power of the global top 1%.

The increasing gap between the Western “top 1 percenters” and the middle classes that is at the origin of many of recent political developments, may not be a temporary glimpse, but may be driven by endogenous forces of rising inequality in systems of liberal capitalism embedded in globalization.

Biography

Branko Milanovic is a Visiting Presidential Professor at the Graduate Center City University of New York and Centennial Professor at the London School of Economics. In 2019 he was appointed the honorary Maddison Chair at the University of Groningen. He obtained his Ph. D. in economics (1987) from the University of Belgrade with a dissertation on income inequality in Yugoslavia. He served as lead economist in the World Bank’s Research Department for almost 20 years, leaving to write his book on global income inequality, Worlds Apart (2005). He was senior associate at the Carnegie Endowment for International Peace in Washington (2003-2005) and has held teaching appointments at the University of Maryland (2007-2013) and at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University (1997-2007). He was a visiting scholar at All Souls College in Oxford, and Universidad Carlos III in Madrid (2010-11).

Branko’s main area of work is income inequality, in individual countries and globally, including in pre-industrial societies. He has published articles in The Economic Journal, Review of Economics and Statistics, Journal of Economic Literature, Economic History Review, and Journal of Political Philosophy, among others. His book, The Haves and the Have-nots (2011) was selected by The Globalist as the 2011 Book of the Year. His book Global Inequality (2016), was awarded the Bruno Kreisky Prize for the best political book of 2016, and Hans Matthöfer Prize in 2018, and was translated into sixteen languages. It addresses economic and political effects of globalization and introduces the concept of successive “Kuznets waves” of inequality. In March 2018, Branko was awarded (jointly with Mariana Mazzucato) the 2018 Leontief Prize for Advancing the Frontiers of Economic Knowledge. His new book Capitalism, Alone was published in September 2019.

He has contributed numberous op-eds and essays to Social Europe, VoxEU, The Guardian, Foreign Affairs, Foreign Policy, Vox, The Financial Times, Le Monde, Le Monde Diplomatique. His blog posts are regularly translated into Spanish (Letras Libres), German (Makronom) and French (Atlanico).