Perhaps Today We See Not a New Crisis of Liberal Democratic Capitalism, But an Old Condition Recurring

I do not believe that the very sharp Branko Milanovic ever studied George Kennan’s “Long Telegram”: his 8000-word message in 1946 back from Moscow, where he was then U.S. ambassador, to the State Department in Washington.

In Kennan’s view, what was required was containment. And, indeed, containment was the keystone, indeed the whole arch, of U.S. policy from 1946 all the way up to 1989. Remember that really-existing socialism—Soviet communism—is attractive only to those who do not have to live under it. Remember to keep the competition on the economic, personal freedom, and ideological levels, using force only to preserve post-WWII boundaries and limits. Remember that we have the better system—in choosing leaders, in deciding on policies, in guiding economic growth. And if, when the competition is carried out on the economic, personal freedom, and ideological levels, it turns out that we do not have the better system? Then, as Kennan wrote:

The issue of Soviet-American relations is in essence a test of the overall worth of the United States… [which] need only measure up to its own best traditions…. Surely, there was never a fairer test of national quality than this…. The thoughtful observer… will find no cause for complaint in the Kremlin’s challenge to American society…

George Kennan (1946): The Sources of Soviet Conduct: “The main element of any United States policy toward the Soviet Union must be that of long-term, patient but firm and vigilant containment… http://www.historyguide.org/europe/kennan.html

…It is a sine qua non of successful dealing with Russia that the foreign government in question should remain at all times cool and collected and that its demands on Russian policy should be put forward in such a manner as to leave the way open for a compliance not too detrimental to Russian prestige…. Soviet pressure against the free institutions of the western world is something that can be contained by the adroit and vigilant application of counter-force at a series of constantly shifting geographical and political points, corresponding to the shifts and maneuvers of Soviet policy, but which cannot be charmed or talked out of existence. The Russians look forward to a duel of infinite duration, and they see that already they have scored great successes….

But if the ideology convinces the rulers of Russia that truth is on their side and they they can therefore afford to wait, those of us on whom that ideology has no claim are free to examine objectively the validity of that premise…. Suppose that the western world finds the strength and resourcefulness to contain Soviet power…. What does that spell for Russia itself?…

The Kremlin has… proved able to accomplish its purpose of building up Russia… [but] both the maintenance of internal political security and the building of heavy industry has been carried out at a terrible cost in human life and in human hopes and energies… involved the neglect or abuse of… particularly agriculture, consumers’ goods production, housing and transportation…. There are limits to the physical and nervous strength of people themselves. These limits are absolute ones, and are binding even for the cruelest dictatorship…. Soviet economic development, while it can list certain formidable achievements, has been precariously spotty and uneven. Russian Communists who speak of the “uneven development of capitalism” should blush at the contemplation of their own national economy….

It is difficult to see how these deficiencies can be corrected at an early date by a tired and dispirited population working largely under the shadow of fear and compulsion. And as long as they are not overcome, Russia will remain economically as vulnerable, and in a certain sense an impotent, nation, capable of exporting its enthusiasms and of radiating the strange charm of its primitive political vitality but unable to back up those articles of export by the real evidences of material power and prosperity.

Meanwhile, a great uncertainty hangs over the political life of the Soviet Union. That is the uncertainty involved in the transfer of power from one individual or group of individuals to others. This is, of course, outstandingly the problem of the personal position of Stalin…. It is always possible that another transfer of pre-eminent power may take place quietly and inconspicuously, with no repercussions anywhere. But again, it is possible that the questions involved may unleash, to use some of Lenin’s words, one of those “incredibly swift transitions” from “delicate deceit” to “wild violence” which characterize Russian history, and may shake Soviet power to its foundations…. This is not only a question of Stalin himself. There has been, since 1938, a dangerous congealment of political life in the higher circles of Soviet power….

It is curious to note that the ideological power of Soviet authority is strongest today in areas beyond the frontiers of Russia, beyond the reach of its police power. This phenomenon brings to mind a comparison used by Thomas Mann in his great novel Buddenbrooks. Observing that human institutions often show the greatest outward brilliance at a moment when inner decay is in reality farthest advanced, he compared one of those stars whose light shines most brightly on this world when in reality it has long since ceased to exist. And who can say with assurance that the strong light still cast by the Kremlin on the dissatisfied peoples of the western world is not the powerful afterglow of a constellation which is in actuality on the wane? This cannot be proved. And it cannot be disproved. But the possibility remains (and in the opinion of this writer it is a strong one) that Soviet power, like the capitalist world of its conception, bears within it the seeds of its own decay, and that the sprouting of these seeds is well advanced….

The possibilities for American policy are by no means limited to holding the line and hoping for the best…. The United States can create among the peoples of the world generally the impression of a country which knows what it wants, which is coping successfully with the problem of its internal life and with the responsibilities of a World Power, and which has a spiritual vitality capable of holding its own…. The palsied decrepitude of the capitalist world is the keystone of Communist philosophy. Even the failure of the United States to experience the early economic depression which the ravens of the Red Square have been predicting with such complacent confidence since hostilities ceased would have deep and important repercussions throughout the Communist world…. The issue of Soviet-American relations is in essence a test of the overall worth of the United States as a nation among nations. To avoid destruction the United States need only measure up to its own best traditions and prove itself worthy of preservation as a great nation. Surely, there was never a fairer test of national quality than this. In the light of these circumstances, the thoughtful observer of Russian-American relations will find no cause for complaint in the Kremlin’s challenge to American society…

Nikita Sergeyevich Khrushchev took up this gauge ten years later:

Nikita Sergeyevich Khrushchev (1956): “Whether you like it or not, history is on our side. We will bury you.”

Nikita Sergeyevich Khrushchev (1959): “The expression I used was distorted, and on purpose…

…what was meant was not the physical burial of any people but the question of the historical force of development. It is well known that at the present time no one social or economic system is dominant throughout the world, but that there are different systems, social systems in different countries. And those systems change. At one time the most widespread system of society in the world was feudalism. Then capitalism took its place….

We believe that Karl Marx, Engels and Lenin gave scientific proof of the fact that the system, the social system of socialism, would take the place of capitalism.… That is why I said that looking at the matter from the historical point of view, socialism, communism, would take the place of capitalism and capitalism thereby would be, so to speak, buried…

Nikita Sergeyevich Khrushchev (1963): “I once said, ‘We will bury you,’ and I got into trouble with it. Of course we will not bury you with a shovel. Your own working class will bury you…

Thus Branko does not understand how the post-World War II Cold War era looked from the perspective of the United States. From the U.S. perspective the important thing was to keep the (nuclear) piece and make sure that decisions were reached by speeches and majority votes, not by iron and blood. And from the U.S. perspective the U.S.S.R. was another inhumane authoritarian government with two particular characteristics; a more dysfunctional than usual economy, and an alliance with a strange eschatological messianic quasi-religious cult. The cult made it more dangerous to the world. Its economic inefficiency made it less dangerous. Those balanced out.

Yet Branko can write:

Branko Milanovic: The Hidden Dangers of Fukuyama-Like Triumphalism http://glineq.blogspot.com/2017/05/the-hidden-dangers-of-fukuyama-like.html “Deeply divided between the democratic and Communist factions…

…The former eventually prevailed but after having to keep in check, often by very brutal and undemocratic means, one-quarter of the electorate in France and Italy, large organized trade unions linked with communist and socialist parties in most of Continental Europe, all the while supporting capitalist dictatorial regimes in most of the Mediterranean Europe and in places… far away… fighting innumerable colonialist and post-colonialist wars… support[ing] the “bad” guys…. “Liberal democracy” was in a continual crisis, fighting for its mere survival…. It… survived, not because everybody, as the triumphalist narrative would have it, saw that it was a more “natural” system but because it used power and intimidation on the one hand, and superior economic performance for the masses on the other…

For those of us whose Kronstadt was Lenin’s armed thugs dissolving the elected Constituent Assembly in Petrograd at the end of 1917, claims that liberal democratic capitalism’s Cold War victory over communism was in some sense unfair because it used “power and intimidation” leaves us rolling on the floor and laughter. And the last clause “superior economic performance for the masses” gives away the game, no? Any societal system that must point to Josip Broz Tito as its most successful leader is truly in very deep trouble at so many levels.

And I think Branko simply gets it wrong when he writes: “In 1945, the chances of democratic capitalism winning over the Soviet system were 10% (read Schumpeter)…” Schumpeter’s Capitalism, Socialism, and Democracy is an interesting book. But at the core Schumpeter’s argument is the false argument you hear at the American Enterprise Institute: that political majorities will vote for high taxes on job-creators and burdensome regulations on businesses; thus they will strangle entrepreneurship with red tape of bureaucracy, and then socialism will win by pointing out that the entrepreneurial capitalism it has strangled with red tape is not delivering proper growth. That Schumpeter thought that capitalism was creating its own gravediggers—not in the form of an immiserized working class but of a new class of intellectuals hostile to entrepreneurship and an electoral majority of losers, moochers, and takers—does not mean that that was true, even in 1945.

And I think Branko gets it wrong when he write: “In 1965, they were 30% (read Samuelson, Galbraith and Tinbergen)…” Tinbergen and Galbraith saw not victory but rather convergence—communist countries would move toward a role for the price system and toward some form of representative political institutions, while liberal democracies would move toward larger welfare states and more public services. Samuelson saw a future in which the communist countries would be rich because of the suppression of household consumption: high savings rates and thus high capital-output ratios would produce greater GDP per capita even with central-planning inefficiencies. But communist societies would not be good societies.

And when we get to “in 1975, they were 60%…”, I still do not see what Branko sees. Lenin had had his lovers. Stalin had had his stooges. Castro had had his cadres. Mao had had his masses. But who by 1975 living in Russia or China or Cuba thought they lived in a good system? And who outside in 1975 found Leonid Brezhnev or Hua Guofeng or even Fidel Castro an attractive figure.

Branko gets back on track when he write:

When you have in your mind this (I think) much more accurate narrative of the past half-century, the current crisis can only be seen as one of the many crises of capitalism…

That is a much more defensible position. But right now I am playing with the idea that it is not a new crisis, but rather it is in some sense the same old crisis as we saw in the 1930s, the 1920s, or—indeed—with the post-Boer War khaki election and then the strange death of liberal England before WWI. I am playing with the idea that Frank Fukuyama got it wrong when he wrote:

Francis Fukuyama (1989): The End of History? https://ps321.community.uaf.edu/files/2012/10/Fukuyama-End-of-history-article.pdf: “Fascism was destroyed as a living ideology by World War II…

…a defeat… on a very material level… [and] of the idea as well…. Expansionist ultranationalism, with its promise of unending conflict leading to disastrous military defeat, had completely lost its appeal. The ruins of the Reich chancellory as well as the atomic bombs dropped on Hiroshima and Nagasaki killed this ideology on the level of consciousness as well as materially, and all of the proto-fascist movements spawned by the German and Japanese examples like the Peronist movement in Argentina or Subhas Chandra Bose’s Indian National Army withered after the war…

Thinking clearly about this is, I think, greatly hindered by references to “populism” rather than by calling it what it is: “neo-fascism”, if you insist on not using the full F-word. (The real populists of the late nineteenth century were something very different.) But what is really going on is that Frank was wrong when he said that this ideology had been “killed… on the level of consciousness”, wasn’t he?

A Brief History of (In)equality: No Longer So Fresh at Project Syndicate

Elephant graph Google Search

No Longer Fresh at Project Syndicate: A Brief History of (In)equality: Here we have a very nice set of slides http://tinyurl.com/dl20160725a. It comes from a talk in Lisbon given by Barry Eichengreen, my sixth-floor office neighbor here at the Berkeley Economics Department. The slides have one of the great virtues of economic history: We, unlike other economists, are allowed to at least gesture at and even glory at the complexities of a situation. We are not forced, as other economists are, into ruthless oversimplification in pursuit of conceptual clarity—to be followed by the intellectually-faulty imperialism overloading more of an explanation of the world on a simple model then it can rightfully bear. Read MOAR at Project Syndicate

In Barry’s view, with respect to inequality there have been and are now ongoing six important first-order processes at work over the past two and a half centuries:

  1. The 1750-1850 pulling-apart of Britain’s income distribution, as the technologies and institutions of the British Industrial Revolution benefitted the urban bourgeoisie and the rural bourgeois gentry but neither the rural nor the urban proletariat http://amzn.to/2aFJAYz https://www.jstor.org/stable/2600061.

  2. The 1850-1914 great First Age of Globalization convergence of living standards and labor productivity levels in the Global North, as 50 million people left overcrowded agricultural Europe for resource-rich settler colonies and ex-colonies, and brought their institutions, their technologies, and their capital with them. Gaps of roughly 100% in wage levels between European sender and settler recipient economies shrank to 25% or so http://amzn.to/2a6aXz6.

  3. The 1750-1975 enormous pulling-apart of the global income distribution, as some parts of the world were able to take full or nearly full advantage of industrial and post industrial technologies, and others were not. Measured at purchasing power parity, America was twice as well off as China in 1800. By 1975 it was thirty times as well off http://tinyurl.com/dl20160725b.

  4. The 1870-1914 First Gilded Age rise of within-country inequality in the Global North, as entrepreneurship, industrialization, and rent seeking distributed the bulk of increases and productivity to the relatively well off and to the plutocracy http://tinyurl.com/dl20160725a.

  5. The 1930-1980 Social Democratic Age great compression of the earnings distribution in the Global North http://tinyurl.com/dl20160725c.

  6. The post 1980 divergence of outcomes within the Global North, as political economic choices lead to the coming of a Second Gilded Age to the Global North’s English-speaking portions.

I, however, think Barry’s talk is not economic-historiany enough. I would go further. I would start by adding five more first-order important factors and processes:

  1. The extraordinary post-1980 reduction in and yet stubborn persistence of remaining pools of absolute poverty. Inequality is a maldistribution of the opportunities for Isaiah Berlin’s positive liberty. But as my ex-colleague Ananya Roy points out, absolute poverty is a deprivation of Berlin’s negative liberty as well—it matters little when you are in a cage without any money whether you could theoretically buy a key http://amzn.to/2ac721f http://tinyurl.com/dl20160725d.

  2. The extraordinary nineteenth-century global shrinkage of slavery.

  3. The global reduction of other caste barriers—race, ethnicity, gender—which limit people’s opportunities to make use of whatever wealth they have.

  4. The post-1975 global-scale switch from increasing planet-wide divergence in wealth to convergence—although do note that, so far at least, all of the switch from the pre-1975 increasing divergence pattern is the result of two good growth generations in China, and one good growth generation in India.

  5. The dynamic of compound interest backed by political-economic rent-seeking identified by Thomas Piketty—with the caveat that Piketty’s logic applies not very much to our past, even our 1980-2015 past, but may well be an important part of our 2015-2100 future http://amzn.to/2ab4rSI.

Complicated, yes? A matter for careful adjustment of institutions by those with social science expertise directed by elected leaders who share the people’s value, yes?

And, most important, I would finish by adding, underlining, and emphasizing a twelfth process:

Populist mobilizations to try to deal with problems of inequality have had consequences we can call “checkered” only out of politeness. Populist mobilizations have been directed in France toward installing an Emperor, Napoleon III, and toward overthrowing democratic governments of the Third Republic. Populist mobilizations in America have been directed at excluding immigrants from China to California, at excluding immigrants from anywhere save northwest Europe, at enforcing Jim Crow. Populist mobilizations in central Europe were turned toward imperialism as the problem was redefined as that Germany and Italy were “proletarian nations” that needed bigger empires. And only Naziism could surpass in its consequences the populist mobilizations that were turned to entrenching in power Lenin’s “party of a new type” and all of its imitators. The constructive responses were fewer: Extending the franchise. Progressive income taxes. Social insurance. Building society’s physical and, more important, human capital. Opening economies. Prioritizing full employment. Encouraging migration to where ample resources and, more important, good institutions were already established. History teaches us that those have been the reactions to inequality that have made the world a better place.

Of course, history also tells us that we fail to learn what lessons history has to teach us.

Must-Read: Pseudoerasmus: Did Inequality Cause the First World War? Contra Hobson-Lenin-Milanovic

Must-Read: Pseudoerasmus: Did Inequality Cause the First World War? Contra Hobson-Lenin-Milanovic: “In a small section in his new book, Branko Milanovic argues that the First World War…

…was ultimately caused by income & wealth inequality within the belligerent countries… John A. Hobson, Rosa Luxemburg, and Lenin…. High domestic inequality => ‘underconsumption’ by the masses & ‘surplus’ savings by the elites => capital exports, i.e., search for overseas outlets for investment => the ‘scramble for colonies’ & imperialism => (a major cause of the) WAR…. But… Ferguson’s The Pity of War has many problems, but one thing he’s very right about is the war that never broke out in the late 19th century between Britain and France, or between Britain and Russia…. Annoyingly, the Great Powers kept on resolving colonial disputes peacefully… too much European compromise and cooperation….

Furthermore, the ‘financier parasites’ of Hobson and Lenin had simply the wrong interest… feared rivalry… for the very good and rational reason that they had everything to lose from it…. The colonial disputes which Britain took most seriously and was willing to go to war over–Egypt (Fashoda), South Africa (German tensions over Transvaal), Afghanistan (Russian relations)–were all related in some way to monopolising maritime access, and eliminating all traces of threat, to India…. All else… was largely open to negotiation. Except, of course, for the naval rivalry in the North Sea. What actually soured Anglo-German relations was that Germany’s naval programme was perceived as an existential threat…. German dreadnoughts just a ‘few hours from the English coast’ were somewhat more important than Samoa or the Caprivi Strip….

Germany’s rulers believed the country’s political standing and national prestige was incommensurate with its sudden and dramatic rise as an economic superpower…. Imagine the chafing if Taiwan, and not the PRC, still represented China on the UN Security Council…. Who actually took the decision to go to war in Germany[?]… ‘Structural factors’ still require some kind of mechanism exerting pressure on the actual actors…. Mark Harrison…. “No country went to war for commercial advantage. Business interests favoured peace in all countries. Public opinion was considered mainly when the leading actors worried about the legitimacy of actions they had already decided on. If capital and labour had been represented in the Austrian, German, and Russian cabinets, there would have been no war.”

The capitalist bourgeoisie did not have the final power in Germany (let alone Austria or Russia). And the small and specific group of decision-makers is identifiable…. Fritz Fischer… [argued] that Germany had already taken the decision to go to war in 1912, based on a high-level meeting that year which seemed eerily to reflect much of German behaviour in July 1914…. In all three [of] Germany, Austria, and Russia, a feudal-agrarian-military elite governed over an increasingly bourgeois-industrial society (but especially in Germany). Those decision-makers held the unilateral power to go to war. And they took the decision unaccountably. When it came to matters of war, it’s not even clear that the East-Elbian Prussian Junker class really cared about the opinions of the country’s industrial and banking magnates.

I must confess I am considerably more sympathetic to Hobson (if not to Luxemburg and Lenin). As I read Hobson, his argument goes thus: (1) Income inequality leads to underconsumption–which means that investment and government purchases must be high share of national income in order for anything like full employment to be maintained. (2) Governments that do not maintain near-full employment most of the time are likely to fall. (3) Governments that do maintain near-full employment most of the time are likely to persist in office. (4) Imperialist governments that spend public money on overseas wars for vent-for-surplus colonies are likely to have higher shares of exports, investment, and government purchases in national income. (5) Militaristic governments that seek military advantage over other European powers are likely to have even higher shares of government purchases in national income. (6) Thus the political-economic logic of underconsumption puts pressure on the political system to produce more high politicians in office who like to build, play with, and ultimately use their military toys.

This seems to me to be not implausible, in contrast to the Lenin-Luxemburg version of the argument, which I agree is very implausible.

Why No Byzantine Road to Modernity?

Fall of constantinople 22 jpg 400×311 pixels

The extremely-sharp Branko Milanovic asks a very good question that I had never considered before:

Branko Minanovic: Economic Reflections on the Fall of Constantinople: This Sunday, May 29 marks the anniversary of the Fall of Constantinople in 1453…

…Thinking of… what is called (somewhat inaccurately) the Eastern Roman Empire, led me to two, I hope interesting, observations. First, why did the Industrial Revolution not happen in the Eastern Roman Empire?… There are many answers… from… ‘barbarians at the gate’… inability to incorporate lower classes… ‘dead hand’ of a rising military bureaucracy… slavery: cheap labor that provided no incentive for the use of labor-saving machines… [to] those who… thought, like Moses Finley and Karl Polanyi, that Roman institutions did not contain at all the seeds that could have led to capitalist development…. Constantinople become the capital in 330 AD… and that lasted for another 800 to 900 years with no interruption. (That is, if we want to date the end of the Roman Empire in 1204 when Byzantium was conquered by the Crusaders). Wasn’t there enough time to find out if ancient institutions could become capitalistic? Eight or nine centuries seems plenty.

Moreover, what, culturally and institutionally, better place to develop than the Eastern Empire: direct continuator of the larger Roman whole with an educated elite, same institutions, stable currency (solidus, ‘the dollar of the middle ages’), reasonable protection of property rights, people knowledgeable of Greek and Latin and thus able to read everything from Herodotus to Columella’s agricultural treatises without the intermediation of translation, with Roman laws codified and simplified by Justinian. Why did not there develop ‘bourgeois virtue’, ‘inclusive institutions’, Landes’ ‘culture’?  Or does it all have to do with ‘serendipity’ of having coal and expensive labor in one place? Yet despite all of these advantages, no one reading the history of the Eastern Roman Empire would come thinking that there was any chance of it developing in the capitalistic direction. It was as feudalistic as they come…. There is plenty of recent scholarly work on why China failed to become capitalist and start the Industrial Revolution… but it seems to me that equally revealing and rewarding would be to study why the  Eastern Roman Empire, seemingly full of all the necessary prerequisites, failed to do so….

It is a very good question. Why had I never considered it before? I have thought about Hellenistic and classical Greece, medieval India, the long history of China, the Aztecs and the Incas, Rome proper, the Mashriq late in the first millennium, medieval Japan, and the interesting time from 1400-1550 when the Ottoman, Safavid, and Mughal Empires are all on the march with what look like much more effective ways of mobilizing and directing resources than anyone else in the world. But I never thought about Byzantium.

Why not? I think in the back of my mind that I assumed that the Plague of Justinian landed it with a very top-heavy aristocracy that maintained control and was used to exacting much more in the way of resources out of the productive sectors of the economy that they could bear and still grow. And then the empire comes under severe military pressure from both Avars and Sassanids. Tiberius and Maurice hang on–and then with Maurice’s assassination everything goes to hell. From 602 on the empire is always under immense military pressure, and the need to scoop up every possible bezant and to make military mobilization primary precludes any relaxation of taxation or social control that could produce intensive economic growth.

There was a substantial military recovery under the Macedonian Dynasty–perhaps some succession-luck after Basil II the Bulgarian-Killer’s reestablishment of the Danube frontier in the west and conquest of Aleppo in the east could have created breathing-space for economic efflorescence. But, unfortunately, the Normans and the Turks then show up…

So I don’t think you ever get to the second-line question: How to develop governmental institutions that are developmental rather than extractive–to merchants rather than princes, as Andrei Shleifer and I like to put it? The military pressure is overwhelming (and, when it isn’t, inter- and intra-dynasty fratricide is).

And you definitely don’t get to the third line of questions: autocratic rule by emperors under immense land-focused military pressure is enough. And, unlike sea warfare (cf.: Athens, Venice, Genoa, Holland, England), land warfare is inevitably a resource sink rather than a resource source. You never get to the two questions of: How to invent a steam engine with very cheap labor and not-cheap coal? And is there an alternate road to produce enough productivity growth to set a virtuous circle in motion without a steam engine as a non-human power source?

Must-Read: Branko Milanovic: How Unequal Is India?

Must-Read: Branko Milanovic: How unequal is India?: “In the 1990s… the survey numbers began to diverge more and more from National Accounts statistics…

…NSS kept on producing a fairly stable consumption Gini… with only a small increase in inequality after India’s sharp turn toward capitalism in the early 1990s… made India inequality look about the same as in developed countries. But until recently we had no other reliable and nationally-representative survey to confront NSS with. Now… we have… the first income based surveys of Indian population for 2004 and, just released by LIS, another same survey for 2011…. First, Indian Gini is… 51… the level of Latin American countries and is some 15 points… higher than… NSS….

Now, if we replace NSS with the new income survey as I have done for the global inequality calculation for the year 2011 (unpublished), you may expect that the greater inequality revealed by IHDS would push global inequality up, especially since India is such a populous country. Right? Wrong…. Global inequality goes down by approximately 1 Gini point since the higher income levels implied by IHDS push Indians toward the middle of the global income distribution and more than offset the contribution to higher global inequality that comes from the stretched-out Indian distribution…. In conclusion, more unequal but richer India, makes the world more equal.

Must-read: Branko Milanovic: “There is a trade-off between citizenship and migration”

Must-Read: A surprisingly-large (to me) number of people have been trashing the very sharp Branko Milanovic for what seems to any normal economist to be an obvious point: At one pole is (1) restricting immigration far below the economically-rational level for any economic welfare analysis because the political system rejects providing full national-community citizenship rights and powers to every migrant. At the other pole is (2) completely decoupling political voice from geographic location and affective ties to the local community. The best policy has to be somewhere in the middle. Yet many more so-called “leftists” than really ought to or than I expected to see say that (1) is obviously correct, and that Branko is guilty of ThoughtCrime for thinking about where in the middle the proper balance might lie…

Branko Milanovic: There is a trade-off between citizenship and migration: “The rich world believes it has reached the limits of acceptable migration….

…We know that migration does more to reduce global poverty and inequality than any other factor. Calculations done by Alan Winters of the University of Sussex show that even a small increase in migration would be far more beneficial to the world’s poor than any other policy…. So is there a way to make greater migration acceptable to the native populations of the rich countries?… Most of a person’s lifetime income is determined by where he or she lives…. Citizens of rich countries receive a citizenship premium, while citizens of poor countries suffer a citizenship penalty. Migration is the attempt by the global poor to enjoy that premium, or at least a part of it, for themselves….

We [need to find a way to] redefine “citizenship” in such a way that migrants are not allowed to lay claim to the entire premium falling to citizens straight away, if at all… [to] assuage the concerns of the native population, while still ensuring the migrants are better off than they would be had they stayed in their own countries…. Migrants could be allowed to work for a limited number of years, or to work only for a given employer, or else be obliged to return to their country of origin… pay higher taxes since they are the largest net beneficiaries of migration…. This would require significant adjustments to traditional ways of thinking about migration and citizenship….

It is not clear that the old conception of nation-state citizenship as a binary category that in principle confers all the benefits of citizenship to anyone who happens to be physically present within a country’s borders is adequate in a globalised world. In effect, there is a trade-off between such a view of citizenship and the flow of migration…. If graduated categories of citizenship were created… we would be able to reconcile the objective of reducing world poverty with reducing migration to acceptable levels. If we do not do something, we will be stuck in a position in which everyone who makes it to the rich world is given full rights of citizenship, but we do everything in our power to make sure that nobody gets here.

Must-read: Branko Milanovic and Suresh Naidu: Branko Milanovic’s New Approach to Global Inequality

Must-Read: Branko Milanovic and Suresh Naidu: Branko Milanovic’s New Approach to Global Inequality: “Convergence and Divergence Across Nations Reinforced or Damped by Kuznets Waves within Nations…

…Global inequality can be broken down into inequality between countries (btw US & Mexico) & within them (among US citizens). Within-country inequality is driven by “Kuznets waves” & between country by economic growth convergence. Real income growth has been quite strong for the global middle class (Vietnam, China, etc), but weak for 80th-90th percentile (US lower MC)…. Migration is the most powerful tool for the reduction of global poverty and inequality

Must-read: Branko Milanovic: Global Inequality: A New Approach for the Age of Globalization

Must-Read: Branko Milanovic: Global Inequality: A New Approach for the Age of Globalization: “When: 03/29/2016 9:30 am – 11:00 am. Where: 1500 K Street Northwest, Washington, DC, United States…

…Please join the Washington Center for Equitable Growth on Tuesday, March 29 at 9:30a.m. for a presentation by Branko Milanovic on the findings of his new book, ‘Global Inequality: A New Approach for the Age of Globalization.’

‘Global Inequality’ is a comprehensive addition to the growing popular literature on inequality, expanding the scope of existing research in both time and space. Milanovic argues that inequality is historically not just an inverted-U shape, as Simon Kuznets claimed, nor a right-side-up U, as Thomas Piketty contends, but both.

The implications of Milanovic’s research for the current inequality debate pertain to the simultaneous decline of inequality between countries, as average incomes in the developing world grow rapidly, and the rise of inequality within countries, with the emergence of a global plutocracy and the stagnation or even decline of labor incomes for the middle class of developed economies. Milanovic connects all of these trends to the rise in globalization and pro-rich economic policies adopted around the world, and speculates about what sorts of forces might emerge to counteract the global trend, as they have in past periods.

Copies of ‘Global Inequality’ will be available for purchase at the event.

Registration and breakfast: 9:00 a.m. Presentation and discussion: 9:30 a.m. – 11:00 a.m. Welcome: Heather Boushey, Executive Director and Chief Economist, Washington Center for Equitable Growth. Featured author: Branko Milanovic, author, ‘Global Inequality: A New Approach for the Age of Globalization’; Senior Scholar, Luxembourg Income Study Center; Visiting Presidential Professor, Graduate Center, City University of New York. Discussant: Suresh Naidu, Assistant Professor of Economics and Public Affairs, Columbia University. Moderator: Marshall Steinbaum, Research Economist, Washington Center for Equitable Growth.

Must-read: Branko Milanovic: “Global Inequality: A New Approach for the Age of Globalization”

Must-Read: This moves to the very top of the “to-read” pile this morning:

Branko Milanovic (2016): Global Inequality: A New Approach for the Age of Globalization (Cambridge: Belknap Press: 067473713X) http://amzn.to/1PMGNIG: “Global Inequality takes us back hundreds of years…

…and as far around the world as data allow, to show that inequality moves in cycles, fueled by war and disease, technological disruption, access to education, and redistribution. The recent surge of inequality in the West has been driven by the revolution in technology, just as the Industrial Revolution drove inequality 150 years ago. But even as inequality has soared within nations, it has fallen dramatically among nations, as middle-class incomes in China and India have drawn closer to the stagnating incomes of the middle classes in the developed world. A more open migration policy would reduce global inequality even further. Both American and Chinese inequality seems well entrenched and self-reproducing…