Global Inequality: Understanding the Impact of Globalization on Economic Inequality.

Branko Milanovic is a renowned economist who has specialized in the conceptualization and measurement of economic inequality. The main focus in his book Global Inequality is understanding how globalization is slowly contributing to inequality. The book begins by providing a summary into its five-chapter-content in the introduction. The first chapter looks at how global developments including the rise of the middle class, the rise of the high class which is often referred to as the top one percentage as well as a decrease of the middle-class people in individual nations. Both data and intensive analysis support this particular section. The second chapter contains much of the content about global inequality, especially within countries. The third chapter builds on the second one by shedding more light on the issue of inequality while comparing different countries. The fourth chapter by far, one of the most important chapters in the book as it looks at the future of inequality in the modern world. In the final chapter, Milanovic highlights some of the main issues raised in his book while providing some implications based on the analysis made.

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Over the years, there have been questions around the issue of economic inequality that currently exists in the world, and therefore, the book helps shed some light on the issue. The book is also systematic in the manner in which it transits from one chapter or issue to another. For example, it begins by looking at the populist revolt experienced in wealthy countries and compares this situation to inequality and a decline in opportunities in other parts of the world. Although there is a political worldview on the issue of inequality, the book is based on scholarly facts and figures while avoiding any disputatious form of writing while focusing on global inequality. The book's content is not based on wealth but income. Therefore, the facts that support the rising issue of global inequality is identified based on the income earned in the counties reviewed, especially in the high-income nations. One such example is the rise in China's income per person which appears to be on the increase and may eventually lead to large divisions in terms of global equality and therefore, for the world to establish economic balance with countries such as China leading the way, it is up to other large and developing economies such as India.

Some of the analysis is based on another economist by the name Simon Kuznets, who was first to identify the increasing inequality within nations in terms of income. During his work, he was able to come up with the Kuznets curve. Milanovic, however, uses the same principles but instead, he came up with the Kuznets waves which indicate that inequality rises and falls in an endless cycle. Initially, when the Kuznets curve was introduced, it was meant to explain the growth of inequality that was experienced with the introduction of technology. However, as time went by, his model became less relevant. Milanovic was able to transform this model and make it relevant once more as he suggests the possibility for a new technological revolution.

The Kuznets wave is meant to accommodate the idea of having multiple global economic cycles that bring about inequality. Therefore, in the wave, there are new cycles that are mainly contributed by changes in information technology and increased globalization. Another factor that has also contributed to increased inequality among nations involves heterogeneous jobs, especially in the service industry. The book indicates that just like the industrial revolution that took place back in the nineteenth century, the new revolution is also contributing to the widening of income disparities (Milanovic, 2016). The second chapter provides the relevant data to back this particular point by point out several historical time series where inequality was evident in several nations across the world.

The Kuznets waves provide a model that indicates how the economy is influenced by factors such as production as well as how these factors influence economic growth and inequality. The link between such factors and the economy is important in answering questions about the need for inequality. The reality is that inequality might have some adverse effects on the economic status of many countries. The third chapter, on the other hand, builds on the same information but tries to trace the rise of inequality on a global scale especially among citizens of many countries in the world after the early 1800s.

The Gini coefficients are used to identify the level of inequality among countries. In the beginning, the global inequality was low, but since then the Gini value has risen steadily from around 50 in the early 1800s to approximately 70 as a result of the Industrial Revolution which saw a large pull by the Western countries from other less-developed nations. However, in the late 1900s, global inequality began to decline, which might also suggest that there is a need for inequality for the purposes of growth. The book also indicates how specific countries or regions affect how much income individuals can get as compared to the individual's positions in the social class or the countries' income distribution. Milanovic points out this particular issue where he highlights that an individual's location is important in determining the amount of income they earn, something he refers to as "rent" that is independent of the individual's efforts (Milanovic, 2016).

With the help of the Luxembourg Income Studies (LIS), the book presents a 100 percentile for close to 118 countries while providing data from as early as the late 1980s which is the same time when the survey was taken. Using the data presented in the LIS, Milanovic is able to explain close to two-thirds of the variability in income as presented in the percentiles by using a single variable which mainly involves the nation in which people live (Milanovic, 2016). He is able to do so by providing an example like the differences in income between the United States and the Democratic Republic of Congo. In this case, the income in the USA is ninety-three times that of DRC. He is also able to provide data that compared the rich and poor percentiles in different countries. One such example is showing how a poor Swede is better off as compared to a poor individual in Congo. At the same time, a rich Congolese is better relative to a rich Swede as a result of transfers and taxes (Milanovic, 2016).

The line of reasoning might not be conventional, but it is relatively easier to see Milanovic's point of view. However, one section that fails to satisfy my argument is the lack of an implicit production section in the analysis. The book indicates that one of the main reasons why some nations have higher incomes as compared to other is as a result of having more human capital, better infrastructure, more physical capital, better and developed institutions or a combination of all of them. The reason I disagree with this point is that there is more to economic substance and differences in terms of returns to the factors of productions that differentiate the rich and poor people. The book argues that one of the main factors is "rent," which can be unearned. The 'citizenship premium' that completely disregards the theory of production cannot be the main reason behind the inequality been experienced. Therefore, this particular section would have been better if the writer supported his work by using economic theories such as the factors of production to explain the differences in income between different people in different countries.

In the Kuznets wave, there is a better explanation as to why the world has experienced inequality of the years especially because of the different forms of revolutions namely the industrial revolution and the technological revolution that induced economic inequality with increased globalization. Another reason why global inequality is on the rise is based on the demand for skilled labor in various industries, and when the supply is lower than the demand, there is increased inequality at the beginning of any revolution. Nevertheless, the data provided support the fact that the country where an individual is born can vastly influence the amount of income they can make, but I do not believe that that is the main reason behind the inequality although it is a valid factor.

One of the most important sections of the book is the final chapter where the writer focuses his attention on the future of globalization and the likelihood for increased inequality. This section reflects on some of the main issues that are raised in the book as a way of paving the way to determine what next for the global community. I agree with Milanovic when he states that economic growth is important because it is the only tool strong enough to deal with global poverty (Milanovic, 2016). Currently, growth in the gross domestic product is a closest we can get to determine the well-being of citizens in a country and the nation.

Generally, the book is very informative, and it helps shed a lot of light on some of the most important economic issues that affect the modern world especially during a time when globalization is slowly becoming a normal factor with increased information-technology infrastructure. However, I believe that more factors play an important role in the overall economic growth of a country. Milanovic has paid a lot of attention in explaining the existence of economic inequality in the world while providing adequate sources and the most likely consequences if the inequalities are to continue. One particular factor that Milanovic has done well to explain and analyze is the Kuznets waves which was the closest he came to incorporating the factors of productions and the role they play in the overall income rates in the countries of the world.

Reference

Milanovic, B. (2016). Global inequality: A new approach for the age of globalization. Harvard University Press.