Global Wealth Inequality Is Falling. No, Really

Milanovic trumps Zucman

As we all know, because we’re all told it so often, global wealth inequality is rising. Therefore something must be done! Punitive taxation and the bureaucrats get to spend everything, obviously.

The one little problem with this is that the aim, intention, is always punitive taxation and the bureaucrats get to spend everything and damn the actual evidence used to support the proposal. It’s all sub-Marxoid ever increasing concentrations of summat and therefore the kulaks need to be shot. The aim always being to shoot the kulaks and who cares about the reasoning?

30 years back - and yes, I am old enough to recall this - it was all about how income was becoming more unequal in its distribution. Therefore punitive taxes, the bureaucrats get to allocate everything and hey, look, we can shoot the kulaks! This all rather fell apart when it was pointed out that the actual effect of global neoliberalism was that income inequality was declining. For which we can thank the work of Branko Milanovic*. Who did prove that income inequality was declining under global neoliberalism.

Thus, to my mind, the move to squeeing about wealth inequality. For we need that reason to shoot the kulaks and damn the intellectual perversions required to find it.

And, well, Branko and his numbers again, eh?

New paper on the capitalization of the world with @BrankoMilan just out!

Capital income remains very unequally distributed worldwide, but inequality has slightly declined.

Oh. Global neoliberalism is reducing the inequality of capital income, is it? Why yes yes it is:

Global capital income inequality has declined in the 21st century, with the Gini coefficient falling from 97% to 94%. Over the same period, the share of the world population with annual capital income above $100 increased from 12% to 27%. This implies more than a doubling of the number of individuals earning positive income from interest, dividends, rents, and privately-funded pensions.

That’s alarmingly high, yes. We’d all like it to be lower too. I certainly would. I’d like us all to be living in that bourgeois American upper middle class in fact. $100k a year family incomes, $500k (later in life, obviously) in the 401(k) and all that. You know, bring it on.

We even have a mapped out plan about how we get from here to there. It’s in the SRES, which is the foundation of all that IPCC work about climate change. If we have globalised neoliberalism for the rest of this century then we’ll all be approaching that - in current $ - American upper middle class income. If we power that by going fracking, developing out solar and so on then climate change won’t be a problem either. If we power it by not going fracking and turn back to the use of coal then Bangladesh gets it. But the base idea that all will rise up into those bourgeois pleasures of three squares, a warm crib and choices in life really is in there. And, yes, it’s globalised neoliberalism that will take us there**.

So, while it is alarmingly high, that inequality, we’re already solving it as we did income inequality - global neoliberalism. Pity no one gets to shoot the kulaks but there we are, reality doesn’t always accord with desires.

At which point some will say, but, well, falling inequality of capital income doesn’t mean falling inequality of wealth. Ah, but it does, d’ye see? It’s actually definitional.

Think on that Saez and Zucman paper about wealth inequality in the US (and varieties of the Parisian economists have repeated it for other countries). How do they work out what is wealth? It’s a multiple of the capital income from it. That’s how they do it, here’s an income stream, capitalise it and we’ve got wealth. Ta Da!

Which means that if the income stream from capital is becoming more equally distributed then and therefore - by definition - capital is becoming more equally distributed. Hoist, petard, comes to mind.

Which, I think at least, is excellent, no? We’ve got our plan to triply make everyone richer, beat climate change and also reduce that gross inequity in income and or wealth between humans, that global neoliberalism. Without having to shoot any kulaks.

The only people who could object to this, who could possibly, are those whose desire is the shooting of the kulaks as the actual goal rather than that unfortunate necessity to reach it, eh?

Of course, there’s a much easier way of making this point. The Paris School of Economics - the Piketty, Zucman, Saez axis - is wrong because they’re French, d’ye see? Infallible marker that is as all sensible people know. God Save Horatio, Arthur etc.

*That the man is a gentleman as well as scholar can be proven by this. Imagine, an actually competent economist being polite about a scribbler like me.

** A1 family of scenarios