Enlightenment Now: The Case for Reason, Science, Humanism, and Progress

The cliché about globalization is that it creates winners and losers, and the elephant curve displays them as peaks and valleys. It reveals that the winners include most of humanity. The elephant’s bulk (its body and head), which includes about seven-tenths of the world’s population, consists of the “emerging global middle class,” mainly in Asia. Over this period they saw cumulative gains of 40 to 60 percent in their real incomes. The nostrils at the tip of the trunk consist of the world’s richest one percent, who also saw their incomes soar. The rest of the trunk tip, which includes the next 4 percent down, didn’t do badly either. Where the bend of the trunk hovers over the floor around the 85th percentile we see globalization’s “losers”: the lower middle classes of the rich world, who gained less than 10 percent. These are the focus of the new concern about inequality: the “hollowed-out middle class,” the Trump supporters, the people globalization left behind.

I couldn’t resist plotting the most recognizable elephant in Milanović’s herd, because it serves as a vivid mnemonic for the effects of globalization (and it rounds out a nice menagerie with the camel and dromedary in figure 8-3). But the curve makes the world look more unequal than it really is, for two reasons. One is that the financial crisis of 2008, which postdated the graph, had a strangely equalizing effect on the world. The Great Recession, Milanović points out, was really a recession in North Atlantic countries. The incomes of the world’s richest one percent were trimmed, but the incomes of workers elsewhere soared (in China, they doubled). Three years after the crisis we still see an elephant, but it has lowered the tip of its trunk while arching its back twice as high.⁴²

The other elephant-distorter is a conceptual point that bedevils many discussions of inequality. Whom are we talking about when we say “the bottom fifth” or “the top one percent”? Most income distributions use what economists call anonymous data: they track statistical ranges, not actual people.⁴³ Suppose I told you that the age of the median American declined from thirty in 1950 to twenty-eight in 1970. If your first thought is “Wow, how did that guy get two years younger?” then you have confused the two: the “median” is a rank, not a person. Readers commit the same fallacy when they read that “the top one percent in 2008” had incomes that were 50 percent higher than “the top one percent in 1988” and conclude that a bunch of rich people got half again richer. People move in and out of income brackets, shuffling the order, so we’re not necessarily talking about the same individuals. The same is true for “the bottom fifth” and every other statistical bin.

Nonanonymous or longitudinal data, which track people over time, are unavailable in most countries, so Milanović did the next best thing and tracked individual quantiles in particular countries, so that, say, poor Indians in 1988 were no longer being compared with poor Ghanaians in 2008.⁴⁴ He still got an elephantoid, but with a much higher tail and haunches, because the poorer classes of so many countries rose out of extreme poverty. The pattern remains—globalization helped the lower and middle classes of poor countries, and the upper class of rich countries, much more than it helped the lower middle class of rich countries—but the differences are less extreme.

Now that we have run through the history of inequality and seen the forces that push it around, we can evaluate the claim that the growing inequality of the past three decades means that the world is getting worse—that only the rich have prospered, while everyone else is stagnating or suffering. The rich certainly have prospered more than anyone else, perhaps more than they should have, but the claim about everyone else is not accurate, for a number of reasons.

Most obviously, it’s false for the world as a whole: the majority of the human race has become much better off. The two-humped camel has become a one-humped dromedary; the elephant has a body the size of, well, an elephant; extreme poverty has plummeted and may disappear; and both international and global inequality coefficients are in decline. Now, it’s true that the world’s poor have gotten richer in part at the expense of the American lower middle class, and if I were an American politician I would not publicly say that the tradeoff was worth it. But as citizens of the world considering humanity as a whole, we have to say that the tradeoff is worth it.