LSE Events | Professor Branko Milanovic | The Evolution of Global Inequalities

my name is Mike savage I'm professor of special here at the NSC and I'm one of the directors a co-director of the international inequalities Institute which is hosting this lecture tonight it's a huge pleasure and privilege to welcome Wanko Malevich many of you will be familiar with them he's one of the clutch of world leading economists who really put the issue of inequality at the center of public debates and he's probably of all in if you think about his peers who also focused on inequality people like Joe Stiglitz and Thomas Piketty I think Blanco is famous for treating inequality seriously in a global way so he's actually trying to go beyond Sydney comparing nations and is trying to think about inequality of the global phenomenon enormous ly ambitious work that in terms of data and measurement and analysis and he also has an extremely rich intellectual hinterland in exploring these topics so formally he's senior scholar at the Luxembourg income Center and visiting presidential professor the Graduate Center to the University of New York I should say right at the beginning that there will be a chance for him to sign the book if any of you want to buy the book it should be available outside after lecture and he will be available to sign it so with no more ado are welcome Blanco to the stage well thank you very much Mike thank you very much for this introduction thanks a lot for the invitation of course I have to thank everybody for having come on a very beautiful day in the evening where you can actually spend that evening very sort of nicely and profitable outside sitting in a restaurant and you would be four instead of that were subjected to a lecture for about 34 35 to 40 minutes and then we will open do for the Q&A so once again thank you very much so I do hope that actually it does that provide you with some insights and interesting things that you might actually want to first learn and secondly maybe to use in your work so let me then start if I first have to start to sing how am I going to move to the next slide which it is it there if somebody knows how did you do this oh actually okay good okay very high-tech yeah so Andy well let me just go the topic is inequality in the age of globalization as Mike said actually before my entire lecture and actually most of my work is dealing with global inequality so I'd have to start I know that it's kind of boring but I have to start actually with a few definitions first so that we know what we are talking about global obviously means that it covers the entire world inequality is inequality of income so I don't deal with actually other types of inequalities which are extremely important like for example inequality of wealth which has really become a bigger and bigger topic and there are other you know gender inequality racial inequality there are many other inequalities that I will not deal with so I would deal simply with income that income is defined essentially through how good service and its household income divided by the number of people living in a household so it is what is called in a somewhat kind of a counterintuitive way called house call per capita income so it's actually income of the cow skull divided by the number of people in the palace country so this would be really the unit and the data for that of course are available in house called surveys and the challenge there was it was actually there was a double challenge first historically we did not have that many countries that conducted regular surveys so we could I will show you in a minute we actually have some guesswork about like how global inequality look even two centuries ago but in reality we can really start having fairly fairly good data not ideal data but okay data by mid-1980s and this is because three things happened like mid 1980s and late 1980s first many more countries in Africa started actually producing household service and of course I was lucky in those days that I was in the World Bank in the unit which actually dealt with household service secondly that's the unit which produces this famous $1 which now is 1.9 dollars per person per day poverty line so thank you so first Africa became much better covered although still insufficiently well secondly the Soviet Union started producing actually not producing but releasing the data which they had and then the country this integrated not because of the data but for other reasons and then we had of course data from 15 additional countries and they actually who are doing annual service now and thirdly China which had a hiatus during the Cultural Revolution and until 1984 also came on board what Chinese data if there were questions towards the end I would be very happy to answer because China is obviously in terms of population and what's happening you will hear the story tonight is the most important country for me but it's also the country with least good data of all the countries that they have in the sample so I have always to point this out I hope they're always and so they would get you know shamed with this and eventually would would actually release the data but they have been very very sort of economic with as they say economic with truth but they did face economic with the data so these are the things which happened in in 90 ladies and that's why we actually could have a better data from that period onwards so let me then sort of well of you know obviously I have to make a little bit of a publicity for my book you know a lot of that is based here but there is much more even so the brief structure of the talk is that I start with global inequality which I define now and then I would mention a couple of technical problems and I will do that because many of them they seem technical but in reality there's something that you can relate everybody can relate very well and I will tell you immediately what is the biggest technical problem is inclusion of the top 1% or people who are very rich who are less and less likely and more relaxing to participate in surveys and to actually reveal their income although you know when you're being interviewed in the survey they don't ask you anything about they know that's your name it's anonymous but you know there is still great reluctance greater reluctance than in the past to do that and then I would talk about what has now become quite the well-known the the elephant graph I have always to finish with the elephant graph people feel unhappy if I don't explain it although there is nothing new because most people have seen it already and no but and then there are issues which I will not cover and which I think are important which are political issues with that in my opinion is they are derived essentially from the global inequality or the topic of inequality as I sort of see so let me then start with sort of some key developments now this is quite a striking graph because it shows you don't regard now don't look at the green line for a minute look at the blue line first what it does it's over time the horizontal axis is time the vertical axis is the Gini coefficient now the Gini coefficient is a measure of inequality and many of you know that it ranges from zero which means that everybody theoretically has the same income to a number 100 where one person has the entire income now in real world in the countries it's ranges from about twenty-eight approximately that would be the lowest level to something sixty plus so that's kind of a range you know countries at sixty are you know countries like Colombia which now is probably the probably the most unequal country in the world with Honduras and few other Central American countries Namibia and so on and countries that are very equal like Central European countries in the Nordics at 28 approximately so that's the normal range I like to present that always in Europe because I I tell people think of this like a Celsius degrees temperature and today I think it comes although it's not an ideal today because everybody is complaining that was too hot and it's only like about 30-plus degrees and 30 30 Gini points is relatively low inequality but it is imagine colleges if you sort of take this as a comparator comparison think how it is when you're 50 or 55 so it's really unbearable and that would be inequality levels in Latin America now the blue line shows you the same that Gini coefficient for the world which is calculated exactly the same way that you would have calculated the Gini coefficient for the UK essentially the idea every individual in the world count is it is one you as I explained before you take their household income you divided by number of people and you assign to each individual member of household debt income and then you calculate an overall inequality now what is important to notice in this blue line first it starts in the first here is 1820 it's based on the work by bourguignon in Marisol and starts at 19 1820 after the Napoleonic Wars and as you can see it actually starts going up and up and up and up so this is an important thing because by the latter part of the 20th century as you can see it kind of plateaus now the other two lines which are above are the lines based on my work and most recently papers still unpublished paper by La Cote Jayadev and ready who find exactly the same result set as Christoph lagna and I so there are really two sort of lines there which are very similar to basically overlap and there you can see also that two annoying now don't be confused by the shift factor that was due to the different use of different purchasing power parity which I will explain in a minute but just don't think of this think of the of the curve so you would notice that the shape of the curve is up and up and up then there was a plateau around the latter part of the 20th century and then there is a decline so that essentially gives you in a very rough way the story of global inequality the global inequality started rising essentially at to the extent that we know after the Industrial Ocean it is a product of in that revolution and it is the project product of the inductive evolution because some countries which then also had large increases in population became richer and richer and if you sort of think of only three parts of the world Western Europe and North America is one China is the second and India is the third that because they was included in those days actually included 2/3 well more than 50% of the world population today and about that probably more in those days you essentially had the developments in the first part Western Europe in North America which actually gradually sort of pull together the entire distribution so it was not only development and growth which actually only benefited the top 1% but became also spread down the income distribution whereas these other two parts of the world Asia essentially and meaning China and India in particular remained at the same level of income or actually even declined so it was the product of the dust revolution and it continued growing as the differences between the countries increased now I am NOT going to put only the emphasis on these differences between the countries because what was also happening is inequality within countries did change and as we know for example in the case of the UK it kept on rising probably until 1860 or 1870 of the you know the end of the 19th century and then started its long decline which kind of ended in 1970s so there was also within national change but in the broad sort of a picture that I'm drawing here that with the national change was relatively small element of the overall change and why I want to emphasize that it is relatively small elements because we would be are now witnessing of the decline is essentially sort of a new technological revolution that is rebalancing the world and that is actually making the countries that started in 1978 is being very poor converging with incomes of the rich world and this is why we have this really very substantial decline particularly now in the first part of the first decade and a half of the 21st century so I'm not saying that the entire story but it's the most of the story and it's actually easy to understand that why we have the decline in global inequality is because we have really high growth rates among populous and relatively poor countries so densa story now why do that story is important also because it makes you I believe sort of reflect about the present moment not only within the present like plus five years ten years or from the crisis to today but makes you reflect that within the longer-term of two centuries essentially you have to you know technological revolutions that have taken place they have rebalanced the economic power of the Eurasian continent including of course America of um in North America in that and they have a predictable effect on the distribution of income among individuals so I think it is actually that kind of brings out the most recent period in its historical context now - I forgot one thing which I wanted to say is that actually in order to do all these calculations you have to convert incomes between the countries you have to use some numeraire which would allow you to convert incomes from India into some general world incres what it's done is of course is use so-called PPP purchasing power parity which means it's a large empirical exercise actually it's the largest empirical exercise done by economics ever which measures price level in different countries so if in India the price level is one third of the price level of the of the United States then obviously you have to actually take Indian incomes convert rupees into dollars and then both the thinkers buy three times in order to get to the actual purchasing power or welfare of India's so in other words don't go into all this I will not go into these details but just I want to give you an idea that we are actually adjusting for the lower price level in poor countries moreover for China India Indonesia what we do we divide country into rural and urban areas and of course apply different PPP's because urban areas have of course higher price level then then rural area ideally you would like to do that for actually for many more units because it's very clear that income income that you need to have in London to be at a given level of welfare it's not the same as income that you would have to have in some you know less region let's reach or less than equal or a part of the UK so ideally that should be done like that but currently what we are doing is actually doing by country I mean country by country so that's the adjustment that we do so these adjustments are then taking account once again the first adjustment is its per capita house or per capita income which is then assigned to every individual and the second adjustment is adjustment for the differences in price levels between the countries so then we have the picture like that and then the reason why the blue line differs from my line there is that that was based on somewhat old-fashioned 1990 ppp's and that we now need to recalculate that into 2011 whereas the new lines are already recalculated but what will happen is simple there will be a shift element so basically maybe one time when maybe next time when I come I would have done that and then basically you would have that one line but the shape of the line would be as I explained it now just for comparative purposes I have also the u.s. here so as you can see the u.s. is blowing up following very similar pattern that many rich countries have you have had in the 19th century increase inequality then a decline there was a very long decline all the way to the 1997 - actually in the u.s. I think the lowest point was 1979 and then the increase of inequality so what is interesting there that actually in that graph you see the world how the world inequality has changed but you see also called inequalities in the rich countries have followed a very different pattern so you have within national inequality in the most recent period that have generally gone up in the US UK Russia China India almost everywhere but global inequality for the reasons that I mentioned before has gone down now the very fact that has gone down is driven by as explained by the diminishing differences in mean country incomes when I say diminishing is very important to be very clear that what I mean is that these differences are getting smaller it does not mean that these differences are small the differences are still extremely large and when we come to discuss or maybe doing Q&A when we discuss question of migration it is these differences that would play in my opinion crucial role in explaining migration today but these differences are now getting smaller now there you know the locational differences so what this graph shows is tastes like snapshot of total global inequality in three periods of time like 1853 points in time age in 15 2011 and then projection which is not based on my numbers projection up to 2050 and maybe you could even extend it further and what it shows you that originally in the nineteenth century you had location which is total in equality due to the differences in mean country incomes think of the fact that Poland is word and UK that make that the Mexico is word in the u.s. Morocco is bored and then Spain this between country difference is very important but they were about they were accounting for about fifty to fifty-five percent of total inequality almost as much as within national inequality so the great part is so-called class just to make it simple that the summation of all inequalities within nations so think in those case of rich land holders poor peasants rich capitalists poor workers so would be all in the gray area and differences between the countries they would be in the purple area so what happened with the you know evolution during the next century and a half was the location element for the reasons that I explained in the previous graph actually sort of exploded so it became extremely important and then to give you an idea it became more important globally speaking what country you're born in then whether you were born to the rich or the poor parents let's call you should think of that in other words you should ask yourself how much it would be for me words like suppose I'm a median income person in an African country or a median income person in the UK how much would I gain from being born as a median income person or median income parents from median parents in the UK versus Mali for example is it more important for me than being born to actually a rich parents into you in the UK versus the mid median income parents in the UK then in reality what happened is that the global is speaking this purple part actually expanded very significantly and why youth Frantz Fanon in the title because I needed somebody who actually seemed very well at that moment because if you think of the eighteen fifty and obviously Marx did not have these numbers but if you thought that of you were presenting if you were to present him his numbers and if you thought actually of his essential idea of proletarian solidarity it had a meaning within the world of 1850 because poor people in most countries were about equally for rich people maybe they were poor obviously richer in richer countries but the difference is between poor people were relatively small between the countries and that's reflected in the importance of the class element but by the end of the 20th century or by beginning of the 21st century that situation which has changed and I think somebody who called that element very well were actually the gap between the west and the rest was probably at this peak was France panel and people who study you know the Marxist theory you know changes which have happened and you know Imperial is ridiculous Asian all that know that in the 60s and the 70s what was a very popular view even much the tongue actually proposed to perform that is that the West was essentially global bourgeoisie and the third world was the global ploy criteria and that was the moment which actually correspond it to the data that we have where really the bulk of inequality was due to your location now it's still the case that it is that it is the bulk of inequality is due to the location but because of phenomenal growth in Asia over the last forty years that element has significantly shrank and it is the shrinkage of that element that explains the decline of global inequality so it's very important to realize that global inequality which is going down is going down because of the shrinkage of that purple element whereas the other element which is class is increasing because inequality as I said before in China US UK and elsewhere is gone up so if we have the shrinkage we it comes entirely from the convergence from the convergence meaning increase a higher grade of growth on per capita basis of relatively poor in populous countries and if you were to project that for the next century then you would actually have further if you believed that poor and populous countries like white suppose in the future is European Indonesia Sudan Burma is the one will really catch up as well then you would have further shrinkage of that element but we don't know what will happen to the class element so if we don't have within nation-states a plateauing of inequality but an increase of inequality we might have the increase in the grave component while the the purple component goes down so we might be then at the end of the maybe this century we may be back to the situation in terms of the distribution of inequality between between the part due to differences in country incomes and part due to inequality within nation states the situation is existed in 1820 or 1850 so this is the sort of a long-run view of the changes in equality now I have to say there are two elements there that I cannot expel go into greater detail but there are worth keeping in mind first of all the role of China the role of China was absolutely crucial as you all know for the reduction of global poverty I think up to year 2000 I think 92 percent of global reduction of poverty was due entirely to China it is also true that actually 2000 the relative stability of global inequality was entirely due to China in other words if you were to try to take China out global inequality would have gone up so China was absolutely crucial after that we now have like two big as they call it big 2 sumo wrestlers fighting global inequality and this is India and China which changes now the story vary significantly because you don't have all eggs in one basket for the reduction of love and equality you don't have now not only India but of course other Asian countries drawing very fast and that means that even if something were to happen in China we would still have a momentum from the other Asian countries now I'm not going to discuss what will happen might not happen in China I'm just saying that it's obviously better to have more large countries growing very fast with the reduction of global inequality and poverty then everything depending on one country moreover the issue of China is very interesting because China has grown so fast that now the media the person with the median income in China is above the median income in the world so at some point and that point is around now China would be a beginning to contribute to global inequality so in other words while China was a sort of a deductr of global inequality eating up local inequalities it was going up the global income distribution it's now will start actually very small in a small dosage but it will self start adding to global inequality so that's the first point which really one needs to keep in mind when you think about projections the second point is that we really cannot have any I believe sort of a reasonable view about what will happen to large countries in Africa like Nigeria Sudan Congo South Africa Ethiopia and so forth their experiences so far have been extremely heterogeneous and as Africa is the continent with the largest increase in population in the next 50 or 100 years the role of Africa will become much greater in the calculations that I've shown you so that's really and I think in my opinion a big unknown and the first one is the reversal of the role of China which will come if China continues with the growth that it has been actually experiencing in in the recent period so this is essentially I will go very quickly over that because there already said whatever is written on this slide is that essentially if you want to think about the long run you should really think of what happens to the within country distributions because they would determine your gray area you should think whether there is a generally country income convergence because the convergence would reduce the purple area and in particular you should think what will what is happening with incomes of the really large countries because clearly if China grows by 8% is not the same as the flexible growth by a percent or two taken like you know chador poor country which is much smaller so this is what so the same story and I will go quickly over this drug because I don't want to take too much time but the same story is also sort of reflected here you know the the blue line you can ignore it for the moment because it simply shows in the same inequalities on the vertical axis end time is on the horizontal axis the blue line shows the convergence or divergence between country incomes where you don't have population waiting so basically each country calls the same as you can see essentially there have been a divergence of country income but the red line goes exactly in the opposite direction and it goes very strongly in the opposite direction from mid 70s basically from 1978 when China starts growing so it is that the red line which shows the convergence of country incomes when they are weighted by population which in turn is driving the dots that you can see on the top and these dots are the same does that you have seen in the previous graph there about global inequality so again this is just a different way of showing that it was really the convergence of the populace in relatively poor countries that has been the key force for the reduction of global inequality so let me just end so before I go too and move to the because I know my time is kind of running well really very very fast but before I actually go and show the the elephant graph I want to show one interest in development which is sort of not obvious until you sort of do the calculations and look at that that the red line is the decline in the in the Gini coefficient global inequality so we have already seen the global inequality is on the decline in the last in the last 15 or approximately 15 years and I will put a caveat on that when I talk about the lack of coverage of the top 1% because we have to be a little bit careful in state messages going down because we're simply missing more and more of very topical but what was also interesting the median income which is essentially driven by Asian countries is rising very fast but when you have the rise of the median income that's actually very good news for the world because the world not only is getting richer at the mean but it's getting richer at the median which as you know is the 50th percentile of the world the the unusual sort of not such a good thing is that if you're below the median and you're actually not growing as fast as Asia you are actually falling behind at median more and more so what the blue line shows is if you were to calculate world poverty rate as wind calculate for example frog for the European Union by taking as poor everybody whose income is below 1/2 of the median because think of the medium being driven by China so that median goes really up very quickly which is actually very good news for the world but if you are below the median and if you are not China you're actually sort of sort of being left more and more behind so the poverty rate or rather the relative poverty rate is going up and that's an interesting for no because it shows you how you actually can have I will show that in a minute you can you can have a development of very high sort of inequality driven increase of incomes at the very top which generally you can say it's not not the development that maybe you're extremely happy about it you know you have sort of developed them gluto currency at the top you have very hopeful and good development of about one and a half billion people around the middle of the income distribution who have become richer and richer but you also have an increased relative poverty of poor people who are not catching up with the world median so you have a very the problem with inequality and with distributions is that we tend and we have in the Gini coefficient and other measures to you to explain them by using one synthetic indicator which really represents the entire distribution and as you can see it is really not sufficient it's actually it's a good measure I use the Gini coefficient a lot but it means it's lots of points because the movements that the different parts of the distribution can be very different in particularly when you look at the world as a whole they indeed are so you can have a game you can have increase at the top huge rises towards the middle of the distribution and increase in relative poverty at the same time and on top of that in most of the countries of the world you have increases in their own national inequalities so this is a I will not discuss this graph which is actually cool graph because it shows you the global income distribution is the curve somewhat smooth it is true but for the first time maybe in a long time maybe in century we actually have this global distribution that looks more or less like distributions look within individual countries you know in the past Zdenek virtually who was here at LSE famously talked of the world of twin peaks and the distribution then in the past load the doctor there was a very huge peak at very low level of income lots of poor people essentially and then there was really an emptiness in the middle and then you had a small pink which essentially composed of the rich countries well that emptiness in the middle and I'll show you in another slide afterwards has now really been I'm not saying that has been with sort of totally eliminated but there is much Lambie there is more substance there more mass if you will in the middle than it used to be and that's essentially what has happened over the last twenty five years or thirty years and just one more point on that anything we maybe have become blood vein and not we may not think very much about that but that that much greater mass in the middle is a very very unique and quite extraordinary phenomenon because in the twenty five or thirty years it has really changed entirely the shape of the distribution and it has produced something which I call the greatest reshuffle of relative income probably after the industrial ocean because what has happened is that you had groups of people I take often times as an example the third this urban diesel of China which in nineteen eighty eight was better off than only about 700 or 800 million people in the world well by the end of this period 2011-2013 actually that to the most recent period that I have they are better off than 2.3 billion people so it was a huge racial you have actually people leap frogging some of them leap frogging and normally and you think of this as a deck of cards so your position was somewhere relatively low in the deck of cards you might have been at you know something like the 15th percentile of the world and then you went up and became the 50th percentile of the world so that's an incredible change in a relatively short period of time now that also implies because we're talking about the relative positions that also implies that somebody who might have been at a 70 or 75 percent out actually went down and became 72nd percentile so it is something that actually I will show you in the probably the last slide which would be the well I have to sort of skip this one or maybe I will just show you this one too because that's a kind of a cool slide which illustrates the differences between country incomes but also locates people within their income distribution so let me just show you for let me start with United States what you have here on the horizontal axis you have position of people in their countries distribution so if you're for example at the 50th percentile in the u.s. you will be on the horizontal axis there between 40 and 15 in the middle and then on the vertical axis you have their positions in the global income distribution obviously until we had Micro data for global income distribution we could not have the vertical axis we just didn't know the vertical axis and then if you are actually in the UK or the US and let's suppose that your income is exactly at the median if I were to ask you where would you guess where would you be in the global income distribution of course when you think about that you should tell me that you have to be higher than the median because UK being a rich country of the United States being a rich country it's very sort of unlikely that or maybe impossible even all those possibly things technically that you would be Adam Dedham median in the US and not being above the median globally because obviously you are in rich country and the world is much more than your own country so you have to be higher and that's exactly what the graph shows you so when you start with the on the on the left on the bottom around number one or two you're the poorest percentile or the second poorest percentile in United States but you're better off than about fifty percent of the people in the world and then if you go up and up obviously within the US income distribution you become clearly richer and richer within your country but you also become richer in richer worldwide so at the very end you have about 12 percent of richest Americans who are part of the global top 1% so you at the very end you can see that line for the United States is kind of flat so everybody who is in the 88 and 89 and above percentile is part of the global top 1% and the story for many rich countries is similar but the striking fact is that actually when you contrast that with poor countries like India and although this slide itself I'll show another slide with it is really underestimate Indian income Stuart to some extent the striking fact is not the poorest people in India are among the poorest people in the world that's actually something that everybody would expect but what is interesting is it that you would have to go up to the 85th percentile in India in order to reach the income level of the poorest Americans so that shows you still how large are these inter country differences despite the fact that mobile is saying before they are feeding a decline of global inequality and there of course the major engine of reduction of inequality so then of course I do the China those days for 2008 we had Micro data so China obviously dominates India you can see actually even Chinese income distributions towards the top being reaching towards the really the global top 1% remember that as potential in China or India is 12 to 13 million people so that's the average income of that group if I were to break them down into smaller groups like for example in the u.s. that one percentile is about 3 million people then of course that very top would actually reach higher than on this particular slide but what this slide does is also shows you Russia's as you can see above China but what is interesting is if instead of Russia I took of urban China urban China dominates now Russia so it's actually urban China would actually go along the way the same way more like like Russia and or a rural China would be somewhere between the China that you see here in India and finally the country that I often used as a kind of a country that mimics the world is a country that obvious like like South Africa have used the Brazil in this case but that country that country has people who are poorest in that country and for the level of income of the poorest in the world but then you have people who are in the middle class were actually quite well-off globally speaking than people at the 80th percentile 90th percentile and also people in the global top 1% so in that sense the the world would be like a 45-degree line and very unequal country with people who are very poor and people who are rich well as they used to call it the Bell India or Brazil actually all coexisting in in one country more recent data for 2011 I just want to show that because position of India is now better than the previous graph it is using income data is using more recent data than the one before but what what is missing here and the reason why I didn't show you that graph in the first place was China for which as I mentioned before we're having more and more problems with with access to the micro data because you cannot do that unless you have Micro data because if you have data for only a couple of fractals and unless you want them to impose distributions on top of that and make other assumptions you just cannot derive the numbers and then of course what are the striking part and when you do make graphs like that is that you end up with with country with situations where you have fairly a Calot area and very rich European countries like the Netherlands of Denmark where the bottom of their income distribution is at the 62nd or whatever percentile of the world and when they are when you compare them with poor countries in Africa you almost have no overlap of the two distributions in other words that doesn't mean that nobody from that poor country has an income that is hard somebody in the Netherlands it simply means there is not sufficient number of people that they would represent one percent of that country that would have an income higher than the bottom of the Netherlands so you could actually then draw the distribution of for example of what is the Molly here going like this and where it ends you would actually have the beginning of the Dutch income distribution so that was an illustration of it so finally two important actually three important technical issues which I will not discuss but I have to mention them the first problem is the PPP which I explained before and as you have seen in the first graph the 1990 PP pins and more recent 2011 ppp's are different currently there is a new exercise 2017 exercise but we can't problems in the past with large changes in relative prices and you can imagine what it does when you have like 40 percent change in relative prices in China it means simply that everybody think goes up or down depending if the relative prices are shown to be higher or lower and that obviously has a huge impact on global poverty and gets huge impact on global inequality I'm told actually from reliable sources that actually 2017 numbers would come fairly close to 2011 so I hope that we will not have this variation that is simply due to the changes in the estimates of the price level a second point is that it was something which has been mentioned before not in my talk but it's been studied a lot is that we had cases in this case the cause the celebra is India where you had significant differences between the growth rate of national consumption for national counts and consumption or income nowadays from household surveys and that was in my opinion connected with the third point in the paper that they did we create stuff like net we link these two points and the third point as you can see here is the inadequate coverage of the top 1% so I believe that these two points are linked in other words what we are observing in national accounts we are observing higher increase in mean income than what we get from household service but the bulk of that difference comes from our sort of lower coverage or inadequate coverage of the top 1% so I would just simply like to mention that this is the problem that we have been grappling a lot the intro to bution of Piketty and Doni Adkinson has been very crucial in that respect because they have focused our attention to the top 1% there used fiscal data so physical data the definition of physical income is different from the disposable income data used here but nevertheless it really shows that there was a very large increase in the top 1% which not in all cases were able to actually see in-house of survey data and just to give you a this is not the slide that is in my current work but I've actually done it you know this is the usual sort of a pattern that we see this is that I did household survey data in red and similar in definition to the fiscal income used by Piketty and Saez in their work on the United States and as you can see here there was always a difference between the red line and the blue line and this is the share of the top the top 1% in the United States but as you cannot note it towards the latter period after like approximately 2000 the gap becomes larger and this is the issue of the underestimation of the top 1% so basically even if we make the two data sources as close to each other as possible because the definitions of income and the finishes the recipient units are different but if we make them very close as close as possible in definitions we still have that significant gap and probably an underestimation of income in a household service but that's not always the case for example I've done it for a number of countries but I'll show for example Norway here were actually the to move together so this is nevertheless the thing to keep in mind in the paper that they did which piece of Wagner we actually linked these two problems of the of the lower rate of growth of income from classical service than in national account to the underestimation of the top 1% did some kind what is called Pareto adjustment and then in that case and that's the important point the decline in global inequality which have shown you before which is very unambiguous becomes much more ambiguous in other words rather than having this very significant dip of about 3 Gini points which is very big number you have a dip which may be about one Gini point so last caveat we do have a decline in global inequality after about approximately year 2000 and I think there is fairly inconvertible and comfortable evidence that it did actually happen but we have to keep in mind that we are probably overestimating the decline because of inadequate coverage of the top 1% so it could be the decline is less than what we observed without any adjustment but of course the difference is is that the difficulty is that you do have to make judgment of an a variable or a quantity that is unknown to you and that problem is compounded even by another problem which is fiscal evasion and fiscal fraud which which have become much more aware of things to the work of of Gabrielle document and others where we actually know that something probably equal to almost one percent of the global GDP in terms of income is being received from monies that are being kept in fiscal havens and which are not obviously included in fiscal data because obviously these people would not be keeping them in you know jurisdictions where they hide them and keep them there precisely not to pay taxes at home and of course they are not included in service so we have that third layer which I think we should study so when I say third layer is the first layer I see the cause of survey data which cover the entire distribution but probably do not cover the top 1% or top 2% very well in the bottom probably several percentage points then the second layer is much better effort by using fiscal enemies to give data of covering the top one percent and the third layer in the case is actually our ability hopefully in the future to actually assign even income that is hidden in tax haven probably to the top 1% by each country because I think it's unlikely that that income belongs to people who are below that level I think well should I finish I just want to just show this last slide I will be very brief on disconnect the sky between one two minutes because many people have seen it it is the the evolution of inequality between 1988 and 2008 I will show you on the slide 2008 I'll show you in a minute also 2011 there are not huge differences between the two the basic idea here is on the horizontal axis you have people along the global income distribution again from the poorest to the richest on the vertical axis you calculate their PPP adjusted they explained before change in real income and what of course you're not is here and why this kind of particular graph became so popular is that towards the middle of the income distribution between like for example 40s percentile and 60 percent of you had really dramatic increases in real income and what you see here is the mean increase at that point because of course there are many more like for example Chinese percent out and Indonesian percentiles and others have not had eighty percent increase that was which is shown on the vertical axis they had three hundred percent four hundred percent increases so there is much more of the underlying increases this is the mean and when you look at people who are there you find that about ninety percent of people are there from what Angus Madison called the resurgent Asia and then that was this would be like my point a but then of course there was a point B where you actually see people who are richer worried about ages percentile in the global income distribution but where the growth of income was minimal and as you can see the average of that group is almost zero and that's I mean when you kind of break down to the country leaves out or Ventus who are behind that you find that seventy percent of people there are from the old that oacd countries from the lower parts of income distributions of US Japan and Germany in particular because this is a very large countries and the if you include also the new ICD members mostly transition countries then you come to almost 90 percent of people at that point and then the last point is that very huge growth in percentage terms of the top 1% income now this is in percentage terms but of course you would realize that because these people at the top 1% are many times richer than the middle of the income distribution or the median the gains in in absolute terms were absolutely are totally dwarfing the gains in the in the middle of the income distribution in other words you had if you were to take the pie and say okay I've got an increase in the pie what percentage of the increase went into the chance of the top 5% you find it about 50 percent of the I think 45 with the exact number 45 of the increase went into the hands of the top 1% so of the top 5% sorry so in that sense the percentage gains here somewhat underestimates the inequity of the distribution of the gains during the era of globalization so I think I've actually probably exhausted you and to some extent exhausted myself so I would actually stop here and I would be very happy to have a discussion now thank you very much thank you Banco Gianna sit down or some stand because I might be actually then switching between the slides I would stand then okay so we have about say behalf now for questions I suggest we try to get groups of two three questions to give you the chance to ask so at the microphones around so UFO stuff I saw yeah yes thank you my name is sickroom david pisarra man Atlantic journalist and given that your work has obviously caught a lot of attention as we can see here tonight and the topic of inequality is loans large in the political debate I would like to hear some of your thoughts on the political debate about inequality and I know this is our analysis of our subject but you know just if you had some comments or not well well this is a huge I would be briefing in answers because I would like of course two people to me as many people to ask questions as possible I think that there are three direct implications of this work and I will not go into derivation or logic of each of them but I just simply want to point them out the first one is derived directly from what I just said is the rising income of the top that mean perfectly that we are unable fully to account for and that has become an issue within nation-states that has become an issue politically because of their control of the political process and the is linked with photography on one hand or populism on the other hand is a reaction against that so I think this is something which I think very clearly comes out of this and even further you can actually then ask questions if there is this global top 1% are they now creating a class on their own if they're sort of which has been argued before that maybe there is much more in common between people who are the global top 1% and they have in common with their own citizens and so on so I think this is one political issue the second one is the political philosophy issue and which I only indirectly mentioned here and this is a global inequality of opportunity because what large differences in means in country income means is that the same person born in a relatively poor country has an entirely different life stream of income than a person born in a rich country fundamentally speaking when you talk of the world is from the cosmopolitan perspective it's not different than if you had a person who is actually of different sex or race having automatically much higher income than an equivalent person of a different sector or or or gender so of course the problem is more difficult because for example rolls address the problem indirectly 99 in his load a lot of the people and the issue of course is that maybe as he believed that if you really were to because Napolitan in terms of global inequality believing the global inequality opportunity is not desirable or is something to be fought against then in that case you are actually undermining national self-determination so there are issues there of the political philosophy front that might actually lead you but I think the important question on that second point is simply that one we have to ask ourselves ourselves does equality of opportunity and at the National border because that's really the fundamental question and the third point is the point of migration which I like to believe should be considered as the manifestation of the process of globalization no different then of course movement of capital labor is just a factor production but taking place under the conditions of very uneven mean of very uneven meaning comes between the countries and of course a knowledge of these differences so we do have I think that we do need to think of migration not as something which suddenly happen out of the blue but that's something which is really sort of embedded in the type of globalization that we have and a last point there it's very obvious to me that when you move from EU 15 where you had very homogeneous incomes and for example if you look at E or 15 the Genii of these 15 countries is not very different from the Genii of each individual country when you move to 28 you have system element systemic migration pressures due to the fact that mean income and income to the people are very different and if you were to actually look at the world as a whole obviously the difference would be magnified many times so these are the three events in political issues and I'm sorry I but I would probably need to take another a couple of days to go into and I'm sure many people here have opinions in there okay we got a question there hi Robert Wade thank you for a fascinating lecture you had talked about income distribution do you think that trends in the distribution of what of wealth rather than income would make any qualifications to the argument that you've made here and other questions okay let's try get come all the back anyhow to the back I saw some questions secure thank you so you talked a lot about sort of the different timings of industrial revolutions and different levels of technologists or being the biggest driver in terms of differences between countries how much of an impact you think there's been of major international economic institutions like the World Bank International Monetary Fund various trade organizations being established in the u.s. after Second World War and then being run exclusively by Europeans and Americans since then how much of an impact you think that's had between countries in the green shirt there my question is doing the big works on popular works on inequalities also butter tidal storing the Stanford he you know argues that we had some great levelers throughout history that inequality is always sort of on the rise and it's all some big catastrophe some big war happens and acts as a great leveler is that do you take this this pessimistic view or can we do more about inequality also within countries can we sort of tame the beast with redistributive policies can I now take this thing okay on the first question I would Robert I actually use obviously other people's work I have not done work on well my understanding is it actually that the kind of optimistic picture on the global level or whether to get from income is sort of how should they say falsified by well it's actually in my understanding of the wealth results in the reports of Credit Suisse and others is that actually wealth inequality has increased and I actually would not be I don't find that surprising because what I think actually what is happening what is driving wealth inequality is that very top that we are that we are not capturing well in income and I also believe what is also happening is that for you know you don't have most of the people in the world as not being you cannot even have a zero income because they would not survive but you can have lots of people in the world at $2 a day at $4 a day and six dollars a day and actually they're improving going from six to nine or ten and that's actually a big improvement but their wealth is tiny whether they're at four percent is $4 $6 to $15 their wealth is kind of non-existent so what I think is actually happening and I'm actually may be out of my depth there I think that basically that large increase in an equal of income which reduces income inequality has very little sort of percolating or trickle-down power on the wealth side whereas this large increase in equality at the top or income has very strong effect on the wealth so that would be my everything as it saying my sort of reading of the of the wealth literature but I'm not somebody who knows that well on on the question about the the role of the role of the international organizations and Technology so on let me just put it like that in my book actually I discussed they're essentially not I discuss but basically economies have divided into three camps and obviously some people are with one you know put in one camp another but I think basically three camps are either you explain that change by technical changes that I discussed by technology or by openness or globalization or by policy and I like to put them as key OMB because it's easy to remember all the students remember top later there are three four nations and clearly they're I think actually and of the school that believes that all played a crucial role the globalization and the globalization limited the policy space that countries could actually play with it does not mean the de Poissy state space was non-existent but I think it was limited by the forces of globalization a different people have different views some people believe that T played a key role in which case basically you can say well they see T as kind of a manna from heaven on which really policy cannot have an impact which I believe is not true I mean we have works that show that actually policy had an impact on technology and I think that we can also show that globalization technology in other words you could implement some technology for example Rachel Baldwin nice we argued in his book because you had globalization and so that leads me to the point of being as it said before police in my opinion policy space of the countries with limited but what was the role of the international organizations I think it's more difficult to say the IMF had policies that were actually by IMF own description contributing to the rising inequality in poor countries where the IMF was involved it also contributed to the rise of inequality on our sustainability in Greece and as you know now particularly the research department the funder has come round to that position and basically has produced some of the you know groundbreaking papers in in that area but I am not quite sure what is the connection between these papers and the work in the research department in the fund and the operational side of the fund so it remains to be seen you know optimistically you can say that the policies might change and they have learned from the previous mistakes very cynically you can say that it is the public relations exercise so I don't know I think the future will tell us now on Seidel point of shadows book I like the book I was actually read it even before it was published Walter is a friend I and he is of course a great historian if it's historical knowledge is really unparalleled as you know he discusses Rome qincha China artex and everybody else in between and before but I think is unduly pessimistic I think that actually if you take the Western countries and I have that in my chapter 2 about the Kuznets waves this is an incredible development that we have had in in rich countries over the last over the century before inequality started going up a real income increase I had like about eight nine countries Italy nine times UK 4 times you guys to think about five times and in the same time the Gini coefficient was on average reduced by 50 percent so it's an incredible development which actually has never happened in history because we when we have a China today which is growing at rate which are even higher it is a component but large increases inequality so we said really in Western countries huge declines in inequality with large increases in mean income now Walter would tend to explain that by world war 1 over 2 which Piketty also does which appear in Piketty is exogenous forces but I believe that first I actually have a paper now talking about so-called endogeneity over 1 linking it to inequality prior to World War 1 but more on that onshore oil in particular I think that we cannot neglect things like development trade unions socialist movements increase the education levels which reduce skill premium changing bargaining power between capital and labor which reduce capital share in national income which are not malign forces they were all forces of I mean what they could be nine forces so I think in that sense I think that the Trudel is too pessimistic and then he's reading and I'll stop there can be both the reading of his book maybe both right-wing and lastly the general right-wing reading is then look we can do absolutely nothing because the only way that we can reduce inequality is to create a war or have a huge revolution like you know Khmer Rouge and like take London in two pieces and send everybody in the countryside so that's the right-wing reading so that actually means we can do nothing the paradoxical left ring waging is something that Walter I hope you will not mind me repeating the story told me that when he was presenting his book in China of course there was a you know large chapter has to do with Cultural Revolution and with a particularly great lead forward but there was an older gentleman who said in the audience who was then very sort of you know affirmatively shaking his head and sort of confirming Walters point and then he said you see that only revolution can bring inequality down so that was the last wing okay some more questions the woman their hand up middle thank you very much for a really interesting talk and my question relates to alternative measurements of income inequality and please excuse me if I understood you incorrectly but I think towards the beginning of your talk you said that the differences between the difference that the differences were falling even though the differences remained very large between countries and that that was what motivated migration but this would be using the relative Gini coefficient rather than absolute inequality and I've read a few chapters of your book and I found very little on the absolute Gini which according to an and and Siegel and their 2015 paper has actually soared since 1970 so my question is what your thoughts are on the absolute Gini and the importance of considering it as recently pointed out by rebellion and also by Atkinson okay couple more questions over here yes thank you for your presentation very briefly how do you see these changes planning out with regard to climate change and the rise of a global middle class thank you one more over here somewhere definitely chef and it's global inequality a problem you see one the government should be tackling and if so what can they best use tackle it okay okay okay oh okay I would be briefer hopefully enough absolute I yeah I do mention it in my book there is one even box even on that I of course I'm aware of that you know it is I'm against absolute measurement and I'm against absolute measurements because it's a no brainer that when actually you have a large increase in the pie the difference is the Lingam are going up when you measure them absolute they are going to increase so it is I think we have to be conservative in measurement of inequality if we measure it absolutely we are conflating two things we are conflating the growth of differences which comes simply from the pie getting larger from really increases which are in in relative terms and to give an example is essentially it's like you're having a balloon with and your face like sort of points on that balloon and then I blowed the first it small balloon and then you blow it so the relatives the relative distance is therefore the same but the absolute increase and the problem with absolute is that you would actually find these absolute increases always when the economy is getting richer and if I were to actually to say that u.s. inequality went up between 1950 and 1970 which it did in absolute sense and it went up also now under you know claims on an first Reagan and Clinton I think I will be really having a narrative which which is how should they say self constraining now I'm not saying that we should not an actually I discussed large absolute increases and I when I mentioned even today when I said if you were to take only the the new newly created value added in the world and to divide it between who I mean who got what part then you find overwhelmingly that it went into the hand to the top 1% or top 5% so I'm in favor of that but I think using absolute as the key measure in my opinion is sort of could be misleading and I think that actually it would it would seem at first that is actually good because we are showing that large distances are becoming larger but in reality would be to some extent I think or should I say not disreputable but would actually make our case weaker because our case on a rising inequality is stronger if it's based on a very conservative measure that is relative so that's not that on climate change today is an excellent question I have not done the work I know there is actually now work being done on that location sailin and double spaghetti and I think actually other people have done that clearly if the and again this is something that you've certainly known better than I but clearly if you have large increases in the global middle class which then uses the patterns of consumption of people who are maybe today globally upper-middle class then the question becomes whether it is sustainable and what it implies for the world is a fall but I would actually like to put here an interesting sort of a reflection on this because this may be on prima-facie a bad thing because actually how do you actually how are you going to have sustainable development on the other hand the growth of the global middle class is prima facie good thing although we are not quite sure in what sense it is a good thing because we actually for the nation-state we have some logic going back to Lipsett and modernization theory so on why middle class is good but for the world is something new so that global middle class has no political power is such because there is no governor structure at the world level so I think these are two interesting issues but I think we have to take them more seriously because precisely because of the growth of the global so-called global middle class because they are still very poor by Western standards government how it should tackle now that of course it's a very difficult question but I have I believe that I will put it in briefest possible way I believe that the standard twentieth-century measures that reduced inequality which was taxation trade unions social transfers education have all come to a position where actually we cannot expect big bang for a buck in the future and I will not go why each of these four I believe has kind of reached its limit so I think an alternative approach which is maybe more difficult or it's over the long term is an attempt to equalize endowments but not to equalize but to make them more or less unequal so what they called equalization of endowment now these endowments come under two forms one is human capital which is of course means that access to education has to be broader in the usual story about education but with a little bit a twist because I think that that particular equalization with dominant would imply much bigger role for public sector education than for private where we actually have now in some extent reproduction of income and wealth differences because of extremely high cost of private education but second part is reducing inequality in assets you know it has been has been generally little noticed that the Gini coefficient of the distribution of income from capital or distribution or wealth for that matter has remained extremely high we're with you when you look at household survey data look at the income from wealth which is actually underestimated at the top you still find the Gini of about 90 so all countries basically have Jeanne's between 85 and 95 and that number has not changed so I think I'm not saying that would be easily done I think that there are possibilities it's only acting so mention for example the grants which will be given to people at 21 years of age there is a possibility also of employee stock ownership plans there you know possibilities of much of much broader ownership of stocks for example giving tax advantages to small investors rather than giving them as we currently have them to the giving loopholes to the rich people so in other words I think there's there are ways to do that but whether my suggestions are good or bad doesn't really matter what I think important part is equalization of human and financial assets because in the last point of that if you have more equal distribution of assets then you don't need a huge machinery of state to redistribute current income in order to compensate those who actually start with very low income so in other words technically you could actually if you have fairly equal distribution of human capital and financial assets you might not have you might not need to have succession that is extremely high so that the at the point on the on the recommendations there we go about ten moments left you've been trying to warrior back in the place it seems I've convinced everybody Phil there is nothing else so I'm Patrick Gallagher and you said that the u.s. because of the sheer size of its economy had a massive effect on global inequality and so my questioning say where are you I cannot actually I kept the seal first I'm here okay and so so my question is and do you think that some of Donald Trump's policies for instance you know eat he recently pulled the u.s. out the Paris climate deal you know to kind of revive the u.s. industry a little bit so do you think his policies would have any effect on inequality in the US or indeed globally and that fronted Jane hi could you speak about the availability of sex disaggregated data to give us a truer picture of the gender implications of what's happening globally thank you yeah Green thank Patrick Williams Australian National University just a question about the distribution of human human capital so Richard Reeves Brookings Institution recently published a book on opportunity opportunity hoarding particularly that the sort of top top parts of society not only accumulate wealth but but also educational opportunities and things like that to the exclusion of others and just just wanted your your thoughts about that now how we might deal with that okay on I always have been surprised if Trump had not come up with a topic show I when I did my book and actually if you look at the chapter for actually I saw the two sort of not originally because other people have seen the same thing two reactions to that one is photographic reaction and other is a populist reaction put Socratic in my view meant basically there will be sufficient power of money to essentially steamroll over whatever popular opinion is to select politicians to elektra the politicians who to follow the policies and just to ignore everybody else in the populace is quite well known so I don't need to define it what I find interesting in in strength is that actually he to some extent has combined these two strengths and he has if you look at what he proposes to do he is proposing to do of course protectionist measures negotiation of the NAFTA agreement and all that anti-china policies all this which seems to be the populist wing and then he proposes to do a reduction of Taxation deregulation of the oil oil drilling and all that which is really very much draw top 1% I believe first to be quite honest I really believe this administration in my opinion it really hand-to-mouth administration so I don't think that actually they know even what will happen next Tuesday so I know it's shall we discuss it in some kind of a grand as if it was some huge ideologically well-thought-out thing and I think it's not I think it's really basically whoever decides on what the evening to do what so that's what I think about that realization but I think that if they do something I think it would be more likely to be the latter which means it will be policies that would actually exacerbate inequality in the u.s. so I would not be surprised that actually inequality goes up because I think in the first point into the first layer policies that the populace they think they're much more difficult to implement and as some of them not only if you were to reverse them they would actually affect some of the people who were from the top who were his supporters and this diffuse support which was existed at the bottom is much more difficult politically to be expressed when the president is in the in the office so I think you would have inequality in Christ increasing impact on the gender of fortunately the data that I have does not they don't allow the decomposition by gender because by their own construction because inequality within the household is assumed zero for me household is like an atom that there is nothing sort of inside of it the only way that I can see it is for the cases where you have a single single-parent households and things like that but other than that inequality really is not I cannot give it out which doesn't mean it doesn't exist but I'm saying it is by construction hidden as it were inside the house home and of course as you know there are studies that show of course inequality but they are much more detailed and I'm really working here with one variable across all the countries so it's very narrow because I don't even have I think that we would actually probably will be able soon to have a joint distribution of income and and education but still now it's very narrow because basically one variable on human capital intergenerational I'm totally in agreement with what you said and actually the quote that you mentioned because I think what is happening again it has been written quite a lot in the u.s. I think us is a more extreme example what's happening in your when elsewhere is that you had a people who have been able to whether they came from maybe upper-middle class or whatever family but they have been able to actually increase the advantage they had by of course going to very good schools getting very good jobs saving money becoming investors getting their part of their income in shares so we now have as actually we have seen in the results and actually I'm quoting here a paper unpublished paper by Christophe Lochner and on the Atkinson which shows that actually if you look at the US income distribution the NA and if you look at the top 10% by Labour their their participation in top 10% by capital has been rising in other words we see more and more of people who are capital rich and leverage so it's a very interesting phenomenon actually I mentioned it a little bit in the paper that they did in a book which called after Piketty is that we are rarely seeing a sort of a different capitalism than before I mean this sort of prototypical capitalism of the Marx sort of variety if workers have only income from labor capitalists have only income from capital all the capitalists are richer they're all the workers and the story is very simple and I think there was some validity to that simplification but nowadays we have rich people who are both Capital Region's said in labour äj-- and I think what's happening now is that they're sort of conveying that advantage in both capital and labour to their children and I think in that sense it will become more entrenched and I think more difficult to deal because there is so-called meritocratic element to it and when you actually see people who are actually having large incomes you don't know if maybe 80 percent comes from shares that are being distributed or bonuses or maybe only 20 percent so I think it is fundamentally more difficult to deal with that politically and I think that there would be a greater transmission of that wealth over to G over generations okay I think we got time for one last round of questions and I think they're related thank you for a fantastic lecture you talked early about how in the future the population of sub-saharan Africa is going to vastly increase and that connected to drag on global medium income and do you think there's any way that we can still harness the growth potential of these economies or that the divergence has been too great and do you think Western economies have responsibilities to assist in the process just one okay moreover I think it's the last one thank you very much for your lecture my name is Dilip Reno I work for finance watch in Brussels yogurt peak of the pyramid I cannot hear ah I see sorry so you mentioned before the equal distribution of financial assets as an important things to be tackled and I'm guessing if you have any thoughts about how to achieve it with the current financial logic also considering the capital flows that we are having now thank you okay on on Africa okay actually I'm very how should we say I'm very glad and not like that you had this question I am glad because I think Africa gets under represented and under studied in income distribution studies there are many reasons lack of debt actually ironically it's the most difficult part of the world to study big I actually worked on harmonization many years ago when I was much younger harmonization of the data from for African countries over to time periods and it was a nightmare because of the large component of a home consumption which needs to be imputed so you have to actually impute values to that if you have a fully monetized economy that's an economy's dream because actually all transactions are monetized everything is recorded you have really no worries it's actually a fully commodified economy is the phenomenal to study but the economies where you have a large segment that is not commodified or commercialized are much more difficult i think it's part of the reason why Africa is much less studied and other parties that are pure also service now what will happen in the future is also something that for me as I said I'm glad to drop this question because also in my own knowledge I am actually definitely suffering from lack of knowledge in Africa and I think we talked about Africa as it was a homogeneous entity which it did not and we have very different you know countries we have no it the Opia which is having growth rates which are paralleling China's growth rate and we have countries that they're like Congo for example which is not in war now but actually or that's now income which is lower than the 1960 so we have really all different countries but really what will happen in Africa as I said before we determine quite a lot what will happen to the income distribution global income distribution data now do the rich countries have a responsibility that kind of a complicated issue but I think they have how should they say well understood self-interest and I believe the European Union has well understood self-interest in doing or helping Africa simply because of the migration issue because I think that's the issue that is going to be with us for a hundred years I'm not I think exaggerating and I always like to point out to people that the gap relative and forget about the absolute between the northern and the southern shore of Mediterranean has never been larger than now in history we never said a difference of like 8 to 1 or so between the northern and southern shores of Mediterranean so if you believe migration is responding to economic incentives then Europe I think has self-interest to help Africa and now how would financial equalization of financial assets be feasible of course it's a difficult issue no no less of a person the Margaret Thatcher talked about people's capitalism but you know and I remember in those days that I used to read when I used to read the economics they actually talked about that for a while and then the whole term disappeared and was never mentioned again because really nothing much happened and I think it is a difficult issue and people who have managed many times that you know people with modest means do not have first the knowledge or interest room to be investors because they are forced afraid also that they are going to lose all the money they have and they have no incentives and so on but I believe that if you had I will not go into details that I don't know well enough but if you had a guaranteed for example minimal returns so in that sense that you would never lose your capital if you're a small investor you might not actually make money but at least you are not going you have a floor that you're not going to lose I think there will be greater sort of incentive for people of modest means to save and to your credit to already redistribute or reduce the inequality in the distribution of income but also sorry of capital but I don't think it's it's easy to do but although over the medium term which means like half a generation or one generation I think it is something that is technically feasible after all you know just what point that the rich people who actually have implemented particularly in the u.s. all these panoply of different tax schemes for themselves took a long time and billions of dollars in lobbying to implement it so you know to actually it took them off to 20 years to move from the situation when Reagan was saying how it is unfair that capital is more tax than labor to a situation now when labor in the US is taxed at 40% of capital taxed at 12% you know so it took them 25 years to 30 years to do that okay well I think it's that you have all the LSE lectures are bent originators won the prize in terms of to sync questions in succinct answers so thanks to all of you or guys remind you that says every book signing if any of you want to put I could be a Broncos book it will be outside in the lobby and I think the idea is he'll stay on the stage I need to bring it back no it's better we can punt [Applause]

Channel: LSE

Views: 7,018

Rating: 4.826087 out of 5

Keywords: LSE, London School of Economics and Political Science, London School of Economics, Branko Milanovic, Professor Branko Milanovic, Evolution of Global Inequalities, evolution of inequality, impact of inequality on politics, impact of inequality on the economy, how inequality affects politics, how inequality affects the economy, evolution in global inequality, evolution of global inequality, changes in the global distribution of income, political implications of global inequality

Id: HUuaSaYF9UQ

Length: 89min 7sec (5347 seconds)

Published: Thu Jul 13 2017