Mallie Jane Kim
The World Bank's Branko Milanovic discusses The Haves and the Have-Nots
Innovation during the Industrial Revolution meant food, clothes, and other goods could be produced faster and better, increasing productivity and enriching the world. But some were left behind. The historic economic boom in the 1700s and 1800s also meant a bigger gap between rich and poor.
Milanovic talked recently about worldwide imbalance and its impact on American politics. Excerpts:
How unequal is the world, really?
It is historically now around the peak of inequality ever.
How did it get that way?
It got that way originally with the Industrial Revolution. So, inequality is not necessarily always a bad thing. Before the Industrial Revolution, you had most of the countries of the world bunched around the same income levels;
What determines change in global financial inequality?
Three forces: One is whether the differences between countries -- like U.S. versus
Is the gap growing or shrinking?
I think, actually, so far in the last 15 or 20 years, it has been leveling off with some possible -- and, of course, very optimistic -- tendency toward decline because of the reason that I just mentioned.
Where is the gap biggest and smallest?
The countries that have the biggest gap are generally in
Why is that?
For the countries with the smallest gap, the reason was twofold. First, very widely spread and relatively equal high level of education among people, and secondly, a large role of the state, a redistributive role. When I say redistributive, it does not mean simply the state takes from the rich and gives to the poor. The state merely takes from the middle class in one way and gives back to them in another way, but doing that, it reduces the income gap. Now the countries that are very unequal have, to some extent, the opposite.
Why is it important to talk about inequality?
You can see inequality as being like cholesterol: good and bad. It's good because it does provide incentive for people to work harder and to invest better and to invent things, but then on the other hand, it has a negative impact where you have an entrenched elite that basically maintains its own high position to the detriment of others. You basically run a country without using the talents of these 50 percent of the people who don't have a chance to do something meaningful. And this is bad for your country because there are quite a lot of people who would be smart and hard-working there.
The U.S. falls somewhere in between. The U.S. still has one of the highest average educational attainment [levels] in the world. But that has been sort of stagnant. In terms of government spending, taxation, expenditures, and so on, the U.S. is a little bit behind
How can inequality be reduced?
One, much faster growth for poor countries, which have seen relatively disappointing growth over the last 20 years. And the second mechanism is migration.
Should inequality affect American politics?
It can and it does . . . in several ways. One is migration. Secondly, large inequalities in individual countries tend to spill over, in the sense that if you have a large inequality, then you have possible civil war, you have a possible conflict, and then the situation can escalate.
Who was the richest person ever?
The short answer would be
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