In this compact and lively examination of the nature, history, and causes of inequality, Branko Milanovic discusses a series of issues that continue to puzzle economists. How, for example, can we measure inequality between countries? What is the relationship between inequality and economic growth within a state? Does globalization contribute to—or, alternatively, lessen—absolute world inequality? What of its effect on inequality within societies? Milanovic, the lead economist at the World Bank's research division in Washington, D.C., explains the history of these debates, and the current consensus (or lack thereof) about the questions they seek to answer.
Take, for instance, the relationship between a state's income level and its level of inequality. For about half a century, says Milanovic, one leading theory was Simon Kuznets's hypothesis: preindustrial societies, though very poor, are relatively equal, since the great majority of people are poor. During the period of industrialization inequality increases due to diverging wages between industrial workers and farmers and, moreover, between industrial workers themselves, whose increasing specialization leads to further wage differentiation. Advanced economies, however, give rise to the welfare state, which serves to blunt inequality. Plus, increasing levels of education lessen wage differences. This idea could be represented graphically as an inverted U. But, Milanovic notes, the data does not always—or even generally—support this theory. Indeed, some advanced economies are beginning to see inequality rise again. While contemporary economists focus on a number of variables to explain this phenomenon (government spending, economic openness, ideological opposition to welfare-type policies), no definitive explanation has emerged.
The Haves and the Have-Nots is organized in a somewhat unconventional manner. The book centers around three larger essays, each of which examines a different aspect of inequality: within nations, among nations, and globally. Some of the most engaging parts of the book, however, are sandwiched between these essays. To illustrate and enliven these more academically minded sections of the book, Milanovic turns to vignettes. Some are indeed “idiosyncratic,” as Milanovic himself promises in the title of his book. For instance, he estimates the relative wealth of characters in Anna Karenina in order to examine inequality in Russia during the novel's time, and then compares it to inequality in that country today.
Other vignettes, however, offer distillations of major issues or phenomena within the political economy of inequality. For example, his comparative analysis of inequality within the EU and United States (and how it is distributed among and within their constitutive units) is eye-opening, while his short chapter on the 2007 financial crisis argues that the real root causes of the crisis in the United States were a financial elite with too much investment capital; a middle class with declining purchasing power; and a political elite that, in order to ensure social stability, gave that middle class access to cheap credit it could not, in the long run, afford. Thus, according to Milanovic, the question is not one of mere regulation of financial “instruments,” but of general political economy.
