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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Branko Milanovic is best known as one of the world’s leading experts on global inequality. But he is also an unusually wide-ranging and penetrating commentator on subjects across economics and beyond, in politics, history, and culture. This book brings together his most searching, provocative, and entertaining articles of recent years, providing an abundance of vital insights into the evolution and dynamics of the world under capitalism.
The volume features important ideas about the struggle to achieve a more equal and prosperous world against not only the predictable forces of deregulation and distraction but new ideas about shrinking the economy to protect the environment. Further from Milanovic’s speciality, readers will find an extraordinary array of reflections on subjects including migration, globalization, the politics and economics of Russia and China, the crisis of liberal democracy, economic and literary history, and the intellectual giants of economics. The pieces are united by Milanovic’s distinctive voice – humane, wry, and realistic – and by remarkable erudition worn lightly whether the topic is the fall of Constantinople, Jane Austen, or the mores of contemporary soccer.
No one can fail to learn from the book, while the sparkling prose, unexpected observations, and sheer importance of the subjects at hand make it a compelling read from start to finish.
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Veröffentlichungsjahr: 2025
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Table of Contents
Cover
Title Page
Copyright Page
Detailed Contents
Preface
Acknowledgments
Part I The World Under Capitalism
1 Growth and Climate Change
1.1 The illusion of “degrowth” in a poor and unequal world
1.2 Degrowth: Solving the impasse by magical thinking
1.3 Climate change, covid, and global inequality
1.4 Is Norway the new East India Company?
1.5 And does growth in the North by itself make Africa poorer?
1.6 Kate Raworth’s economics of miracles
1.7 Abundance, capitalism, and climate change
2 Migration
2.1 Should some countries cease to exist?
2.2 Migration into Europe: A problem with no solution
2.3 Migration’s economic positives and negatives
2.4 Trade and migration: Substitutes or complements?
2.5 Habermas and pimps: The world of the day and the world of the night
2.6 The simplicity of views regarding civil conflicts
3 Politics
3.1 What is a paleo-left agenda?
3.2 Toward global progressiveness
3.3 Democracy or dictatorship: Which works better?
3.4 How is the world ruled?
Proposition 1. The world is ruled by a cabal
.
Proposition 2. The world is ruled on merit
.
3.5 Multi-party kleptocracies rather than illiberal democracies
3.6 Thinkin’ ’bout a revolution
3.7 There is no exit for dictators
3.8 Trump as the ultimate triumph of neoliberalism
3.9 What we owe to Donald Trump: A different angle
3.10 The comprador intelligentsia
Part II Inequality
4 Inequality Within Nations
4.1 Why inequality matters
4.2 In defence of equality (without welfare economics)
4.3 Why twentieth-century tools cannot be used to address twenty-first-century income inequality
4.4 The welfare state in the age of globalization
4.5 All our needs are social
4.6 Why the focus on horizontal inequality undermines efforts to reduce overall inequality
4.7 Basic difference between wage inequality and income inequality studies
4.8 Distinguishing incomes from capital and labor
4.9 Why “Make America Denmark Again” will not happen
4.10
À la recherche
of the roots of US inequality “exceptionalism”
4.11 What are the limits of Europe?
4.12 The role of economics
5 Global Inequality
5.1 The history of global inequality studies
5.2 Athenian dialogues on global income inequality
5.3 How much of your income is due to your citizenship?
5.4 Is citizenship just a rent?
5.5 Why foreign aid cannot be regressive
5.6 Formal and actual similarities between climate change and global inequality, and suboptimality of the nation-state
6 Wealth Inequality
6.1 What is wealth?
6.2 Historical wealth: How to compare Croesus and Bezos
6.3 My wealth and the lives of others
6.4 Dutiful dirges of Davos
6.5 On luxury
6.6 Absurdity of World Bank wealth accounting
6.7 Repeat after me: Wealth is not income and income is not consumption
6.8 Was everybody under socialism a millionaire?
7 Inequality and Literature
7.1 Literature and inequality
7.2 Was the novel born and did it die with bourgeois society?
7.3 Inheritance, marriage, and swindle: The three ways to the top
Part III Globalization and Multi-Polar World
8 Globalization
8.1 Eleven theses on globalization
8.2 Disarticulation goes North
8.3 Let’s go back to mercantilism and trade blocs!
8.4 The hidden dangers of Fukuyama-like triumphalism
8.5 How to dine alone … in a hyper-competitive world
8.6 No one would be unemployed and no one would hold a job
9 China
9.1 Socialism with Chinese characteristics for the young person: A review of the book of Xi Jinping’s sayings
9.2 The long NEP, China, and Xi
9.3 Hayekian communism
9.4
The World Turned Upside Down
: A critical review
9.5 License to kill:
The World Turned Upside Down
: A laudatory review
9.6 Interpreting or misinterpreting China’s success
10 Russia
10.1 Russia’s circular economic history
10.2 The lessons and implications of seizing Russian oligarchs’ assets
10.3 The novelty of technologically regressive import substitution
10.4 Russia’s economic prospects: The short-run
10.5 Long term: Difficulties of import substitution and delocalization
10.6 What if Putin’s true goals are different?
Part IV History
11 Economic History
11.1 Byzantium: Economic reflections on the Fall of Constantinople
11.2 Global poverty over the long term: Legitimate issues
11.3 On Eurocentrism in economics
11.4 Net economic output in history: Why we work
11.5 Capital as a historical concept
11.6 The plight of late industrializers: What if peasants do not want to move to cities?
11.7 Can Black Death explain the Industrial Revolution?
11.8 Why were the Balkans underdeveloped? A geographical hypothesis
12 Adam Smith
12.1 Through the glass, darkly: Trying to figure out Adam Smith, the person
12.2 America’s Adam Smith: A review of Glory M. Liu’s
Adam Smith’s America
12.3 People, associations, and government policy in Adam Smith
Skepticism toward all associations, including government
Evolution of income distribution and capitalists’ influence on government policies
.
Implications for today
12.4 Is democracy always better for the poor?
12.5 Why slave-owners never willingly emancipated their slaves
12.6 How Adam Smith proposed to have his cake and eat it too
Notes
13 Ricardo and Marx
13.1 Ricardo, Marx, and interpersonal inequality
13.2 Reading David Ricardo’s letters
13.3 The Ricardian windfall: David Ricardo and the absence of the equity-efficiency trade-off
13.4 The influence of Karl Marx—a counterfactual
13.5 Marx for me (and hopefully for others too)
13.6 Marx on income inequality under capitalism
13.7 Transcending capitalism: Three different ways?
13.8 On unproductive labor
13.9 When Tocqueville and Marx agreed
13.10 A short essay on the differences between Marx and Keynes
13.11 Marx in Amerika
14 Communism
14.1 A secular religion that lasted one century
14.2 State capitalism one hundred years ago and today
14.3 Milton Friedman and labor-managed enterprises
14.4 Socialist enterprise power structure and the soft-budget constraint
14.5 Disciplining workers in a workers’ state
14.6 How I lost my past
14.7 The red bourgeoisie
14.8 On charisma and greyness under communism
14.9 Trotsky after Kolakowski
14.10 Notes on Fanon
14.11 The book of the dead: Victor Serge’s
Notebooks 1936–1947
14.12 Did socialism keep capitalism equal?
14.13 Gorbachev: A politician who did not want to rule
14.14 Did post-Marxist theories destroy communist regimes?
15 Transition to Capitalism
15.1 Democracy of convenience, not of choice: Why is Eastern Europe different?
15.2 Secessionism and the collapse of communist federations
15.3 Coase theorem and methodological nationalism
15.4 Trump and Gorbachev
Part V Reflections
16 Reflections
16.1 Non-exemplary lives
16.2 The perverse seductiveness of Fernando Pessoa
16.3 Henry and Kant: Outsourcing morality
16.4 The mistake of using the Kantian criterion in ordinary economic life
Addendum
16.5 Is liberal democracy part of human development?
16.6 Living in own ideology … until it falls apart
16.7 Freedom to be “wrong”: The greatest advantage of democracy
16.8 99 percent Utopia and money
16.9 On the general futility of political discussions with people
16.10 The many in one: A review of Amartya Sen’s
Home in the World: A Memoir
16.11
Du passé faisons table rase
16.12 English language and American solipsism
16.13 The problems of authenticity under capitalism
16.14 The abolition of paper and the pompous rule of the present
16.15 Who are we?
References
Index
End User License Agreement
List of Tables
Chapter 6
Table 6.1 Functions of wealth in different societies
Chapter 7
Table 7.1 Inequality in England in the early nineteenth and early twenty-first century (ba...
Table 7.2 Inequality in the late nineteenth and early twenty-first centuries in Russia (ba...
List of Illustrations
Chapter 1
Figure 1.1 Relationship between the economic impact of historical global warming and temper...
Chapter 3
Figure 3.1 Cumulative growth of real per capita income across income distribution (in perce...
Chapter 4
Figure 4.1 Share of labor employed by top 10 firms and income inequality in the United Stat...
Figure 4.2 Increase in the share of the bottom 40 percent due to social transfers, 1980–...
Figure 4.3 Increase in the share of the bottom 40 percent due to direct taxes, 1980–...
Chapter 5
Figure 5.1 Income levels in the Netherlands and Mali
Figure 5.2 Cumulative distribution of direct taxes paid, Netherlands, 2013
Chapter 6
Figure 6.1 Richest man annual income expressed as number of average incomes in the year and...
Figure 6.2 Regional composition of global wealth distribution 2014
Figure 6.3 Percent of American households with zero or negative net worth, 1962–2013
Chapter 10
Figure 10.1 Growth rate of real GDP per capita, Russian Federation, 1962–2019
Chapter 11
Figure 11.1 Per capita income in the provinces of the Roman Empire in 14AD
Chapter 13
Figure 13.1
Guide
Cover
Table of Contents
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The World Under Capitalism
Observations on Economics, Politics, History, and Culture
Branko Milanovic
polity
Copyright Page
Copyright © Branko Milanovic 2025
The right of Branko Milanovic to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988.
First published in 2025 by Polity Press
Polity Press
65 Bridge Street
Cambridge CB2 1UR, UK
Polity Press
111 River Street
Hoboken, NJ 07030, USA
All rights reserved. Except for the quotation of short passages for the purpose of criticism and review, no part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher.
ISBN-13: 978-1-5095-6776-8
A catalogue record for this book is available from the British Library.
Library of Congress Control Number: 2024944948
by Fakenham Prepress Solutions, Fakenham, Norfolk NR21 8NL
The publisher has used its best endeavors to ensure that the URLs for external websites referred to in this book are correct and active at the time of going to press. However, the publisher has no responsibility for the websites and can make no guarantee that a site will remain live or that the content is or will remain appropriate.
Every effort has been made to trace all copyright holders, but if any have been overlooked the publisher will be pleased to include any necessary credits in any subsequent reprint or edition.
For further information on Polity, visit our website: politybooks.com
DETAILED CONTENTS
Preface
Acknowledgments
Part I The World Under Capitalism
1 Growth and Climate Change
1.1 The illusion of “degrowth” in a poor and unequal world
1.2 Degrowth: Solving the impasse by magical thinking
1.3 Climate change, covid, and global inequality
1.4 Is Norway the new East India Company?
1.5 And does growth in the North by itself make Africa poorer?
1.6 Kate Raworth’s economics of miracles
1.7 Abundance, capitalism, and climate change
2 Migration
2.1 Should some countries cease to exist?
2.2 Migration into Europe: A problem with no solution
2.3 Migration’s economic positives and negatives
2.4 Trade and migration: Substitutes or complements?
2.5 Habermas and pimps: The world of the day and the world of the night
2.6 The simplicity of views regarding civil conflicts
3 Politics
3.1 What is a paleo-left agenda?
3.2 Toward global progressiveness
3.3 Democracy or dictatorship: Which works better?
3.4 How is the world ruled?
3.5 Multi-party kleptocracies rather than illiberal democracies
3.6 Thinkin’ ’bout a revolution
3.7 There is no exit for dictators
3.8 Trump as the ultimate triumph of neoliberalism
3.9 What we owe to Donald Trump: A different angle
3.10 The comprador intelligentsia
Part II Inequality
4 Inequality Within Nations
4.1 Why inequality matters
4.2 In defence of equality (without welfare economics)
4.3 Why twentieth-century tools cannot be used to address twenty-first-century income inequality
4.4 The welfare state in the age of globalization
4.5 All our needs are social
4.6 Why the focus on horizontal inequality undermines efforts to reduce overall inequality
4.7 Basic difference between wage inequality and income inequality studies
4.8 Distinguishing incomes from capital and labor
4.9 Why “Make America Denmark Again” will not happen
4.10
À la recherche
of the roots of US inequality “exceptionalism”
4.11 What are the limits of Europe?
4.12 The role of economics
5 Global Inequality
5.1 The history of global inequality studies
5.2 Athenian dialogues on global income inequality
5.3 How much of your income is due to your citizenship?
5.4 Is citizenship just a rent?
5.5 Why foreign aid cannot be regressive
5.6 Formal and actual similarities between climate change and global inequality, and suboptimality of the nation-state
6 Wealth inequality
6.1 What is wealth?
6.2 Historical wealth: How to compare Croesus and Bezos
6.3 My wealth and the lives of others
6.4 Dutiful dirges of Davos
6.5 On luxury
6.6 Absurdity of World Bank wealth accounting
6.7 Repeat after me: Wealth is not income and income is not consumption
6.8 Was everybody under socialism a millionaire?
7 Inequality and Literature
7.1 Literature and inequality
7.2 Was the novel born and did it die with bourgeois society?
7.3 Inheritance, marriage, and swindle: The three ways to the top
Part III Globalization and Multi-Polar World
8 Globalization
8.1 Eleven theses on globalization
8.2 Disarticulation goes North
8.3 Let’s go back to mercantilism and trade blocs!
8.4 The hidden dangers of Fukuyama-like triumphalism
8.5 How to dine alone … in a hyper-competitive world
8.6 No one would be unemployed and no one would hold a job
9 China
9.1 Socialism with Chinese characteristics for the young person: A review of the book of Xi Jinping’s sayings
9.2 The long NEP, China, and Xi
9.3 Hayekian communism
9.4
The World Turned Upside Down
: A critical review
9.5 License to kill:
The World Turned Upside Down
: A laudatory review
9.6 Interpreting or misinterpreting China’s success
10 Russia
10.1 Russia’s circular economic history
10.2 The lessons and implications of seizing Russian oligarchs’ assets
10.3 The novelty of technologically regressive import substitution
10.4 Russia’s economic prospects: The short-run
10.5 Long term: Difficulties of import substitution and delocalization
10.6 What if Putin’s true goals are different?
Part IV History
11 Economic History
11.1 Byzantium: Economic reflections on the Fall of Constantinople
11.2 Global poverty over the long term: Legitimate issues
11.3 On Eurocentrism in economics
11.4 Net economic output in history: Why we work
11.5 Capital as a historical concept
11.6 The plight of late industrializers: What if peasants do not want to move to cities?
11.7 Can Black Death explain the Industrial Revolution?
11.8 Why were the Balkans underdeveloped? A geographical hypothesis
12 Adam Smith
12.1 Through the glass, darkly: Trying to figure out Adam Smith, the person
12.2 America’s Adam Smith: A review of Glory M. Liu’s
Adam Smith’s America
12.3 People, associations, and government policy in Adam Smith
12.4 Is democracy always better for the poor?
12.5 Why slave-owners never willingly emancipated their slaves
12.6 How Adam Smith proposed to have his cake and eat it too
13 Ricardo and Marx
13.1 Ricardo, Marx, and interpersonal inequality
13.2 Reading David Ricardo’s letters
13.3 The Ricardian windfall: David Ricardo and the absence of the equity-efficiency trade-off
13.4 The influence of Karl Marx—a counterfactual
13.5 Marx for me (and hopefully for others too)
13.6 Marx on income inequality under capitalism
13.7 Transcending capitalism: Three different ways?
13.8 On unproductive labor
13.9 When Tocqueville and Marx agreed
13.10 A short essay on the differences between Marx and Keynes
13.11 Marx in Amerika
14 Communism
14.1 A secular religion that lasted one century
14.2 State capitalism one hundred years ago and today
14.3 Milton Friedman and labor-managed enterprises
14.4 Socialist enterprise power structure and the soft-budget constraint
14.5 Disciplining workers in a workers’ state
14.6 How I lost my past
14.7 The red bourgeoisie
14.8 On charisma and greyness under communism
14.9 Trotsky after Kolakowski
14.10 Notes on Fanon
14.11 The book of the dead: Victor Serge’s
Notebooks 1936–1947
14.12 Did socialism keep capitalism equal?
14.13 Gorbachev: A politician who did not want to rule
14.14 Did post-Marxist theories destroy communist regimes?
15 Transition to Capitalism
15.1 Democracy of convenience, not of choice: Why is Eastern Europe different?
15.2 Secessionism and the collapse of communist federations
15.3 Coase theorem and methodological nationalism
15.4 Trump and Gorbachev
Part V Reflections
16 Reflections
16.1 Non-exemplary lives
16.2 The perverse seductiveness of Fernando Pessoa
16.3 Henry and Kant: Outsourcing morality
16.4 The mistake of using the Kantian criterion in ordinary economic life
16.5 Is liberal democracy part of human development?
16.6 Living in own ideology … until it falls apart
16.7 Freedom to be “wrong”: The greatest advantage of democracy
16.8 99 percent Utopia and money
16.9 On the general futility of political discussions with people
16.10 The many in one: A review of Amartya Sen’s
Home in the World: A Memoir
16.11
Du passé faisons table rase
16.12 English language and American solipsism
16.13 The problems of authenticity under capitalism
16.14 The abolition of paper and the pompous rule of the present
16.15 Who are we?
References
Index
PREFACE
This book contains selected short essays written between 2014 and 2024 and published on my blogs and Substack. Only a couple of them were written for specific occasions (The Adam Smith lecture in Edinburgh) or published as op-eds. The subjects are those that, for most of my life, I was interested in: income and wealth inequality, economic growth, migration, history of economic thought, globalization, Russia, and China. They are relatively short pieces, containing between 1,000 and 1,500 words.
Of all my writings, including academic articles and books, I found the writing of short essays the most pleasurable. They were written on the spur of the moment, on a given topic, and at a single go. I would have an idea, which would come to me while strolling or reading, and I would then be seized by a burst of impatience to write about it and share it with others. Writing a blog would take me between an hour and two, almost never longer. In some cases, I would interrupt my walk, hurry home trying to remember all the clever phrases that seemingly so easily and so naturally came to me when walking, and write them down before I forgot them. I would write quickly, perhaps even impatiently. I would then read the text just once or twice, and publish it on the Web. The pleasure of the exercise came both from writing on something very specific (for the form would not allow addressing numerous topics in one piece), ability to express what was on my mind immediately, and to spread it, equally immediately, to “the rest of the world.” The latter was very important to me. It allowed me to avoid the editing, including self-editing, which often improves the text but leads to the loss of freshness, and of that burning desire – recognized by the readers – to write what is on one’s mind. Now, almost instantly too, the writer gets a response from the readers and can gauge what they are thinking or feeling. Are we on the same wavelength or not?
These advantages have their reverse side too. The topics that interest me today may become indifferent to me after some time. And, more importantly, they can lose all interest for the audience. Thus, the genre of short texts, often journalistic articles, which are published ex post as a collection, is a very specific genre: it gains from the directness and immediacy, but loses with the passage of time. I believe, however, that I do not have to fear too much from the latter. It may not apply with the usual strength to most of the short essays published here. The reason is that, while the essays were often triggered by events, accidents, or thoughts that came suddenly, they address issues that are not affected easily by the passage of time. When I write about what drives global inequality down, what it means to be rich in different societies, or how that wealth may be measured, or what type of citizenship rights migrants should have, or whether one can be a good social scientist while never politically active, or what is the “correct” way to interpret Adam Smith’s Theory of Moral Sentiments, these are not the topics likely to disappear from our purview within any conceivable period of time. So, I please myself to believe that the pieces published here retain the immediacy and freshness with which they were drafted, while suffering relatively little from obsolescence. They can indeed suffer from the difference in interests between the writer and the public. What I find interesting and worth writing about may not be what others may find worth reading. But this is a general problem of the relationship between the writer and their audience, not the problem of the literary genre.
The original blogs or essays have been corrected only for typos or English language mistakes. There are practically no other editing interventions. This was a prior decision, before I even selected the pieces to be published; although, when I reread the texts, even had I not so decided at the outset, I would not have made any changes. Neither my thinking on these topics, nor my way of expressing it have changed in the meantime. They are thus here in the way they were originally written, and, I am delighted, in paper form, which ultimately might prove more durable than the scintillating effervescence of electronic publishing.
New York, July 5, 2024
ACKNOWLEDGMENTS
This book would not have existed were it not for the idea and encouragement that my editor Ian Malcolm, with whom I have, with great pleasure, worked before, gave me to collect my blogs, short essays, and Substacks in one place, select those that I thought worth publishing, and thus have them move from the ephemeral world of electronic self-publishing to the old-fashioned but ultimately more sturdy and durable world of paper print. I always thought that it would be a good idea to see my blogs in a paper edition but without Ian it would have never happened. It was not easy to decide which, from among some 500 posts that I wrote over a decade, would be granted this new life. As mentioned in the Introduction, we decided to drop almost all book reviews. It was not an always easy decision because I really liked some books and some reviews. So we decided to keep a few to the extent that they could be easily “allocated” into different thematic sections.
The decision to leave the writing exactly the same as it was when the articles were originally published meant that the copy-editing job was relatively light. However. English mistakes, typos and only in a few cases unclear sentences had to be corrected. Susan Beer and David Watson did an excellent job in catching all English-language mistakes, wrongly-placed upper case letters or commas, and mixed-up metaphors. I am very grateful to them for that work. Ellen McDonald-Kramer worked on the promotion of the book and translations. The index was expertly done by Elizabeth Ball.
It is hard for me to decide whom else to thank. This is because the pieces that the reader will find in the book were written under the great variety of circumstances: mostly when I was lying on my bed in the apartment in New York, or sitting at my desk at the Graduate Center of City University in New York. But some were written in cafes around the world, a couple in restaurants while discussing finer points with bar-tenders, a couple even on a beach in Puerto Rico, and one in a museum in Shanghai. All these people who were around, helping with coffee, food and often the wine, should be thanked. But they are many and I do not remember their names. Perhaps some of them might, by accident, see this book and then remember … To all of them my heart-felt thanks.
Branko Milanovic
Washington, 26 December 2024
PART I THE WORLD UNDER CAPITALISM
1 GROWTH AND CLIMATE CHANGE
1.1 The illusion of “degrowth” in a poor and unequal world
I recently had Twitter [now X] and email discussions with a couple of people who are strong proponents of “degrowth.” From these exchanges I got the impression that they were unaware of just how unequal and poor (yes, poor) the world is today and what the trade-offs would be if we really were to decide to fix the volume of goods and services produced and consumed in the world at the current level.
This is just an attempt to present some back-of the-envelope calculations, which should be very much improved in a serious attempt to examine the alternatives.
Let us suppose, for the sake of argument, that we interpret “degrowth” as the decision to fix global GDP at its current level (assuming for the time being that the amount of emissions is also fixed at the current level). Then, unless we change the distribution of income, we are condemning to permanent abject poverty some 15 percent of the world’s population, who currently earn less than $1.90 per day, and some quarter of humankind, who earn less than $2.50 per day. (All dollar amounts here are in PPP terms; that is, in dollars of equal purchasing power across the world, based on the 2011 International Comparison Project.)
Keeping so many people in abject poverty so that the rich can continue to enjoy their current standard of living is obviously something that the proponents of degrowth would not agree with. One of my correspondents explicitly rejected that scenario. So, what are we to do then? We can, of course, they say, increase the incomes of the poor and reduce the incomes of the rich, so that we stay within the envelope of the current global GDP. So, let’s suppose that we decide to “allow” everybody to reach the level of median income currently existing in Western countries, and, as people who are below that level move toward the target, we gradually reduce incomes of the rich (for simplicity I shall assume all to be living in the West).
The “problem” is that the median after-tax income in the West (about $14,600 per person per year) is at the 91st percentile of the global income distribution. Clearly, if we let 90 percent of people increase their incomes to that level, this would “burst” our GDP envelope several times over (2.7 times to be exact). We cannot be this “generous.” Let us suppose next that we let everybody reach only the income level that is slightly higher than the Western tenth percentile, exactly that of the thirteenth Western percentile ($5,500 per person per year). Now, by a “lucky accident,” the Western thirteenth percentile coincides with the global mean income, which is at the 73rd global percentile. We could bring up all the bottom 72 percent of the world population to that level, but we should obviously also have to reduce incomes of everybody above so that the entire world lives at the global mean.
How much of a reduction would this imply for the global top 27 percent (those with incomes above the global mean)? Their incomes would have to be cut by almost two-thirds. Most of them, as we have said, live in the West. The immiseration of the West would not take place through transfers to the poor: we have “allowed” them to produce and earn more. The immiseration of the West would take place through gradual and sustained reduction of production and income until everybody who is “rich” loses sufficiently so that they drop to the level of the global mean. On average, as have seen, the drop would be about two-thirds, but the very rich would have to lose more: the global top decile would have to lose 80 percent of their income; the global top ventile (the richest 5%) would have to lose 84 percent: and so on. Factories, trains, airports, schools, should work one-third of their normal time; electricity, heating, and hot water would be available for eight hours a day; cars may be driven one day out of three; we would work only thirteen hours per week (Keynes would be happy to know he had guessed correctly about reduced hours in his Economic Possibilities for our Grandchildren), etc.—all in order to produce only a third as many goods and services that the West is producing now.
Stop for a moment to consider the enormity of what is being proposed here. The global Gini would go to zero, from the current value of 65. The world would have to move from an inequality level that is higher than that of South Africa to a complete equality that has never existed in any recorded society. Countries have difficulties implementing policies that reduce Gini by 2 to 3 points, and we are proposing here to shave off 65 Gini points.
On top of this, the world population is projected to increase by several billion. Our envelope, which is fixed in the absolute amount, will have to sustain more people; in other words, the mean income will have to drop further.
On the positive side, however, such a dramatic squeeze of the income distribution will change consumption patterns. We know that the rich create more emissions per dollar spent than the poor. This is because they consume emission-intensive services and goods, like airplane trips and meat, much more than the poor do. Squeezing everybody to the same level would mean that the total emissions produced by the new GDP (that would remain the same in value but whose composition would change) would be less. There would be thus some “slack” in our envelope, which might allow us either to allow some people be a bit better off than the rest, or to move everybody to a mean income slightly above that of the Western thirteenth percentile.
Say that the increase in population and the decline in average emissions per dollar spent just offset each other: we are then back to the original scenario described before, when everybody will have to live at the point of the current Western thirteenth percentile and the rich world would have to lose about 2/3 of their income.
It does not seem to me that this outcome, however much we may tweak the assumptions, is something that is even vaguely likely to find any political support anywhere, including from the proponents of degrowth themselves, many of whom would have to cut their consumption by perhaps 80 to 90 percent. It would make more sense, if we want to think seriously about how to reduce emissions, not to engage in the illusions of degrowth in a very poor and unequal world but to think how the most emission-intensive goods and services could be taxed in order to reduce their consumption. The increase in their relative prices would cut real income of the rich (who consume them) and would reduce, even if slightly, global inequality. Obviously, we need to think about how new technologies can be harnessed to make the world more environment-friendly. But degrowing is not the way to go.
(Published November 18, 2017)
1.2 Degrowth: Solving the impasse by magical thinking
The difficulty of discussion with degrowers comes from the fact that they, and the rest of us, live in two different ideological worlds. Degrowers live in a world of magic, where merely by listing the names of desirable ends somehow makes them happen. In that world, one does not need to bother with numbers or facts, trade-offs, first or second bests; one merely needs to conjure up what he/she desires and it will be there.
Now, degrowers are not irrational people. The reason why they are pushed into this magical corner is because when they try to “do the numbers” they are led to an impasse. They do not want to allow for a significant increase in world GDP because it will, even if decoupling (of which they are skeptical) happens, drive energy emissions too high. If one wants to keep world GDP more-or-less as it is there are two choices. One can (A) “freeze” today’s global income distributions so that some 10 to 15 percent of the world population continue to live below the absolute poverty line, and one-half of the world population continues to live below $PPP7 dollars per day (which is, by the way, much less than the Western poverty line). But this is unacceptable to the poor people, to the poor countries, and even to degrowers themselves.
Thus, they must try something else: introduce a different distribution (B) where everybody who is above the current mean world income ($PPP16 per day) is driven down to this mean, and the poor countries and people are, at least for a while, allowed to continue growing until they too achieve the level of $PPP16 per day. But, the problem with that approach is that one would have to engage in a massive reduction of incomes for all those who make more than $PPP16, which is practically all of the Western population. Only 14 percent of the population in Western countries live at a level of income lower than the global mean. This is probably the most important statistic that one should keep in mind. Degrowers need to convince 86 percent of the population living in rich countries that their incomes are too high and need to be reduced. They would have to preside over economic depressions for about a decade, and then let the new real income stay at that level indefinitely. (Even that would not quite solve the problem because in the meantime, many poor countries would have reached the level of $PPP16 per day and they too would have to be prevented from growing further.) It is quite obvious that such a proposition is a political suicide. Thus, degrowers do not wish to spell it out.
They are brought to an impasse. They cannot condemn to perpetual poverty people in developing countries who are just seeing the glimpses of a better life, nor can they reasonably argue that incomes of nine out of ten Westerners ought to be reduced.
The way out of the impasse is to engage in semi-magical and then outright magical thinking.
Semi-magical thinking (that is, thinking where the objective—however laudable—is not linked to any tools of achieving it) is to argue that GDP is not a correct measure of welfare, or that better outcomes in certain dimensions can be achieved by countries or peoples with a lower GDP (or lower incomes). Both propositions are correct.
GDP does leave out non-commercialized activities that are welfare-enhancing. It is, like every other measure, imperfect and one-dimensional. But it is imperfect at the edges, while fairly accurate overall. Richer countries are generally better-off in almost all metrics, from education, life expectancy, child mortality to women’s employment, etc. Not only that: richer people are also on average healthier, better educated, and happier. Income indeed buys you health and happiness. (It does not guarantee that you are a better person; but that’s a different topic.) The metric of income or GDP is strongly associated with positive outcomes, whether we compare countries to each other, or people (within a country) to each other. This is something so obvious that it is bizarre that one needs to restate it: people migrate from Morocco to France because France is a richer country and they will be better-off there. American Blacks are worse off than American Whites in all dimensions, not least in terms of their income. This is the background to the Black Lives Matter movement that wants to make Blacks better off and equal in income and health to Whites.
Since this fails, the next approach taken by degrowers consists in pulling out individual cases of countries that have performed exceptionally well on some metrics (like Cuba on health) and those that have performed exceptionally badly (like the US on life expectancy) and to argue that a certain desirable outcome can be achieved with much less money. It is indeed true that some countries or some people, despite their lack of income, have achieved excellent things, while others have used their income inefficiently or wastefully. But, such individual examples do not overturn the regularities described in the previous paragraph. What degrowers do is to first metaphorically run a regression of a desirable outcome on GDP or income, and, when they observe that the two are closely correlated, forget about the regression, pull out an outlier, and claim that the outlier shows that the relationship does not exist.
That is clearly wrong too. So, the next stage in semi-magical thinking consists in trying to convince people that they are wrongly pursing the Golden Calf of wealth and that much more modest lives would be better, or at least are feasible. To that effect they use baskets of goods and services that allow a “modest” standard of living and satisfy all basic needs. But they fail to show us how such “modest needs” are to be implemented: how will people be obliged to consume only so much and not more? In war situations, this is done through rationing. Indeed, one could ration the number of square meters of textile that each household may be able to buy, introduce meat and gasoline coupons, and so forth. It has been done many times. But degrowers know that a wartime economy in peacetime would not be politically acceptable, so they just do the basket calculation, show that it is compatible with “planetary boundaries,” and leave it at that. How we are going to have that basket accepted by people, or implemented against their will, is not something they desire to be disturbed with.
After this comes direct magical or religious thinking. Its first component, in an asceticism reminiscent of early Christendom, is to point out the vanity of all material acquisitions. People indeed can live happy lives with much less “stuff.” That is true for some special people like Christian or Buddhist monks. For example, Simeon the Stylite, an early Christian monk, is reputed to have lived several decades on top of a pillar in a desert. But this is not true for the remaining 99.99 percent of the people, who are not attracted by monastic lives. And it certainly is not true today, when capitalism, and thus both the relentless search for profit and the value system that places wealth on the pedestal, is more dominant than ever. Had degrowers preached material abstinence in thirteenth-century Europe, or tenth-century Byzantium, it might have had more appeal. Commercial society, capitalism, and numerical abilities were less developed than today. But now, the relevance of moral preaching of abstinence is close to zero.
When all arguments and quasi-arguments are exhausted, the magical thinking moves into the realm of rhetoric. Thinking is now replaced by phrase-mongering: “thriving,” “flourishing,” and “self-fulfilling” lives are possible and they are just around the corner. Everybody can be happier with much less. We can just cultivate our own gardens. If you string all the desirable words together, “no exploitation,” “living wage,” “ethical business,” “self-sufficiency,” “fair price,” they will somehow take on a life of their own and the Elysian fields will open up in front of us. For all and forever.
(Published April 28, 2021)
1.3 Climate change, covid, and global inequality
I recently criticized what I regard as “magical” or quasi-religious thinking among degrowers. It was not the first time. I have criticized Kate Raworth’s interesting, but thoroughly “magical,” book (Section 1.6 below) and have had a debate with Jason Hickel (Section 1.1 above). So, the question can rightly be asked: what is non-magical thinking in dealing with climate change?
I am not original in asking this. This is an area that many (hundreds or thousands) have studied and know much better than I. But it is an area where I think that the knowledge of global inequality can be usefully combined to produce some tentative answers.
High global inequality, otherwise a scourge, can here be used to our advantage. We know that the top decile of world population (call them “the rich”) receives about 45–47 percent of global income. We also know that the elasticity of carbon emissions with respect to income is one, which is a fancy way of saying that as real income goes up by 10 percent, we generate 10 percent more emissions. This then implies that the top global decile is responsible for 45–47 percent of all emissions. That percentage can be calculated with even more precision because we have detailed consumption data (by a number of categories, running into hundreds) and we can assign to each consumption category its precise carbon footprint. It is not unlikely that we could find that the carbon emissions of the top decile are even over one-half of the total.
The question thus gets simplified. Suppose that we draw up a list of goods and services that are (a) carbon intensive and (b) consumed predominantly by the rich. We could then in a concerted international action try to curb significantly the consumption of such goods and services, while leaving entirely free other decisions: there would be no limits to growth, no degrowth in either poor or rich countries.
The entire onus of the adjustment falls on the rich. Who are the rich, viz. the global top decile? About 450 million people from the Western countries, or the entire upper half of Western countries’ income distributions; some 30–35 million people from both Eastern Europe and Latin America, that is respectively about 10 percent and 5 percent of their total populations; about 160 million people from Asia or 5 percent of its population; and a very small number of people from Africa.
Curbing consumption can be done either through rationing or draconian taxation. Both are feasible technically, although their political acceptability may be another matter.
If one were to use rationing, one could introduce physical targets: there will be only x liters of gas per car annually and no family will be allowed to have more than two cars; or y kilograms of meat per person per month. Clearly, there may be a black market for gas or meat, but the overall limits will be observed simply because they are given by the total availability of coupons. Some people might think that rationing is extraordinary, and I agree with them. But it has been done in a number of countries under wartime, and at times even during peacetime conditions, and it has worked. If indeed we face an emergency of such “terminal” proportions as the advocates of climate change claim, I do not see any reason why we should not resort to extreme measures.
But another approach (draconian taxation) is possible too. Instead of limiting physical quantities of goods and services that fulfil criteria (a) and (b) we could impose extremely heavy taxes on them. There is always a tax rate that would drive consumption of a good down to the level that we have in mind. It is here that I think we can use—again if we believe that the climate emergency is so dire—the lessons of covid.
Let me illustrate that by using air transport, one of the important sources of emissions. No one in the world could have imagined that air traffic could be cut by 60 percent in one year. This is what happened in 2020. What is our experience? That it is indeed an inconvenience but did the world survive? Yes. Did we reorganize our lives so as not to travel, and especially not to travel far because most countries closed their borders, which further dampened travel? Yes. So, is a permanent decrease of 60 percent in air travel possible to envisage? Yes.
If we were serious, we could, in this case, as in the others, argue for such a tax that would keep air travel at its 2020 level indefinitely. The tax might mean that a ticket between New York and London would not cost $400, but $4,000, that people in rich Western countries might travel to foreign countries once in a decade rather than once per year, but, as we learned from the experience of 2020, we can do it and we can live with it.
Economic dislocations, it is true, would be huge. It is not only the question of the entire upper middle class and the rich in advanced countries (and, as we have seen, elsewhere) losing significant parts of their real income as prices of most “staple” commodities (for them) increase by two, three, or ten times; the dislocation would affect large sectors of the economy. Go back to the example of travel. A permanent 60 percent decrease would more than halve the number of airline employees, would practically leave Boeing and Airbus with no new orders for airplanes for years, and possibly lead to a liquidation of one of them, would decimate hotel industry, close even more restaurants than were closed by the pandemic, and make parts of most touristy cities that currently complain of excess of tourists (Barcelona, Venice, Florence, probably even London and New York) look like ghost towns. The effects would trickle down: unemployment will increase, incomes will plummet, the West will record the largest real income decline since the Great Depression.
However, if such policies were steadfastly pursued for a decade or two, not only would emissions plummet too (as they did in 2020), but our behavior, and ultimately the economy, would adjust. People will find jobs in different activities that will remain untaxed and thus relatively cheaper and the demand for them will go up. Revenues collected from taxing “bad” activities may be used to subsidize “good” activities or retrain people who have lost their jobs. We may not be able to drive to visit friends and family every week, but we shall be able, using our covid experience, to see them on screen. Secondary homes could be taxed in such a confiscatory manner that most people will be eager to sell them. Governments could then buy them, create a kind of Paradores (Spanish state-owned hotel chain that uses vacated monasteries), and people in (say) England, rather than jetting off on vacation to Thailand, would spend their annual holidays nearby in some of the formerly privately owned mansions.
This is not magical thinking. These are policies that, with intergovernmental cooperation, knowledge of economics, data on global inequality, and the experience of covid, could be implemented. Is there appetite for such policies? I do not know. I think that most of the population of rich countries would not be excited if told that a quasi lock-down would have to continue for an indefinite future. But, if conditions become so dire that the public mood shifts, if climate change is but a long-term covid, if we have learned to live with covid and to survive, could we not adjust to this “new normal” too? I do not know—but I think it would be fair and candid of the partisans of radical change to put these questions squarely in front of the public and not to try to hoodwink them with the sweet talk of “thriving” monastic lives.
(Published February 21, 2021)
1.4 Is Norway the new East India Company?
In the eighteenth century, the English-led East India Company gradually came to control most of India. Its rule was a disaster for India, but made many directors and stockholders of the company exceedingly rich. The wealth enabled many of them to play important roles in English political, intellectual, and business life. As Adam Smith, an uncompromising critic of the Company, wrote: “The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever” (Wealth of Nations, bk. IV, ch. 7). Faced with so many depredations, the British government finally took away the monopoly of Indian trade from the company in the midst of the Napoleonic wars.
This led the Company to redouble its efforts elsewhere: to trade with China. The problem with China was that nothing that company could sell to the Chinese was of interest to them. There was a lot that the company wanted to buy from China (porcelain, tea) but nothing to sell. Until it came to the idea of using opium produced in India to sell to China. Despite the ban that the Chinese government had put on opium imports there was domestic demand for it. To overcome the ban, and in order to sell a widely addictive substance that for ethical reasons it could not sell anywhere else, the company decided to engage in a war to open Chinese ports. This was the origin of the infamous Opium War whose final outcome in 1842 was the opening of five Chinese “treaty ports,” the cession of Hong Kong, and extraterritoriality for foreigners living in China. The “century of humiliations” had begun. And the company could finally sell to far-away foreigners a product of whose consumption they themselves disapproved.
The Norwegian government is one of the most active governments in highlighting the threat of climate change. It tries to replace almost entirely the country’s use of gas-fueled cars by electric. It is proud of the decrease of the footprint of its consumption. It funds international activities that are supposed to limit and reverse deforestation in the world. Yet, at the same time, for half a century, Norway has been one of significant world producers, and even more important, exporters, of oil and gas (for gas, the third largest in the world), and some 50 percent of its goods exports consist of gas and oil. Moreover, the government has recently decided to expand the exploration and production of gas and oil in one of the areas that the very same government acknowledges are most sensitive to climate change—the Arctic Circle.
Norway thus increases the production and sales of a commodity that it deems noxious itself, and sells it, like the East India Company did with opium, to faraway foreigners, while staying domestically clean. “Money has no smell.”
Norway’s behavior is not only surprising because it is hypocritical: the virtue-signaling stands in a manifest contrast with what the government does. It is even more striking when so many climate-change activists, in their struggle to reduce emissions, try to convince poorer and middle-income countries of the benefits of lower production and consumption.
The question can then be asked: if they are so clearly unable to convince the population and the government of the richest country in the world of the benefits of climate control, what type of arguments do they plan to use to convince Mexico, Gabon, Nigeria, or Russia to reduce the production of gas and oil? These are countries whose incomes are a fraction of Norway’s: for example, the median-income person in Nigeria has one-twentieth (not a typo: 1/20) of the real income of the median-income person in Norway.
I can fully understand why Mexico or Nigeria would refuse to reduce production of gas and oil. Without it, there would be a significant impoverishment of their population. But there will be no impoverishment of the Norwegian population—by any reasonable metric. Norway, a country with a very high level of income (GDP per capita of 66,000 international dollars, 20 percent higher than that of the United States) and with this income fairly equally distributed among its citizens (Gini coefficient of 26), should be able to give up the production of its “opium-equivalent.” But there is apparently no political support for such a measure. The current government, in its new decision about a more extensive exploration and production, seems fully assured of majority support.
There is here a very important lesson for all climate-change activists. They need, as I have many times insisted, to think much more seriously about the trade-off between economic growth and climate-change control. While in their models, the advantages of controlling climate change are incontrovertible, when they come to policies that need to be implemented, from taxes on airplane fuel, to taxes on gas (which provoked the Gilets Jaunes movement in France), they face popular resistance. The popular resistance is due to the unwillingness of almost anyone in the world to accept lower income. Climate-change activists might talk in their conferences about people “thriving” on lower incomes, but when offered that alternative, even the citizens of the richest country in the world decline it.
If we want really to confront—as opposed to just talking about—climate change we should first be rid of extreme hypocrisy (like this), and second, design policies that would be acceptable to the population. And we should start with rich countries, not only because historically they have been the most important contributors to climate change (through historical accumulation of emissions) but because they should be able to bear costs more easily than the rest.
(Published July 23, 2023)
1.5 And does growth in the North by itself make Africa poorer?
In a recently published paper on the effects of climate change on growth, Noah Diffenbaugh and Marshall Burke argue, using a complex model, that the temperature change driven by CO2
