Inequalities shake up the international order
Editor’s Note: Globalization has suffered major setbacks in the past two years. As the Boao Forum for Asia (AC) 2021 annual conference approaches, we take a look back at what Branko Milanović, senior researcher at the Stone Center on Socio-Economic Inequality at the CUNY Graduate Center, told us about the future of globalization and the inequalities that shake it. The opinions expressed here are its own and do not necessarily reflect those of CGTN.
Adriel Kasonta: The expected similarity of income levels across the Eurasian continent and in North America would reduce global inequalities. What geo-economic and geopolitical repercussions can we expect to associate with this development?
Branko Milanović: Well, there will be many possible political repercussions of that. When you put one on, which is very obvious and can already be seen now, the center of economic activity shifts to the Pacific. And where Asia and also the Pacific side of the United States would become the most important. Even today, when we look at the volume of maritime transport, the Pacific has overtaken the Atlantic. So we have this shift not in the economic power balance, but also in the center of gravity of the world economy.
The second change, which we are also already seeing now, is that more and more people from Asia, not just from China, but I’m talking about countries like China, India, Vietnam, Indonesia, Thailand, more and more people from these countries are now in the top 20%, or 10% or even, in some cases, the top 1% in the world.
It’s a big change because here we are talking about the ordinal, the ranking. When you actually have an increase in income, this is obviously the main good for everyone. But when we have rankings, rankings are given – you have 100 percentiles – it’s given. So if anyone falls into your percentiles, like the Chinese are now entering the top percentiles of the income distribution which were traditionally fully populated by people from Western countries. As they move there, of course, people in western countries who were in those top percentiles obviously have to come down. And I think it’s a potentially significant change because it’s something that has never happened in the last 200 years.
And that would make a difference to the self-perception of many people in the West as to where they belong. It would also make Western income distributions much more diverse than before – what I mean by that is that today, and until recently, even the poor in Western countries were. were placed relatively high in income. distribution of the world.
And what’s more, many consumption patterns are now dominated globally, and if you are not at the top globally, some consumption baskets would not be available to you. I think a good example is for example tourism and travel. Now, of course, during the coronavirus we can’t travel much, but at some point it would be over, we hope. If you actually have people in the West slipping and falling in relative rankings, some things that are expensive like international travel would become really unaffordable for them.
So, your position in the global distribution of income is not fully relevant, even if your income by itself continues to rise, but someone overtakes you. In other words, your income may increase by two percent per year, but someone who has an increase of eight percent per year would be progressively richer than you. If some countries are lagging behind in income compared to China and other Asian countries, real estate, which is now highly valued in Europe, is in fact owned by foreigners. So it’s a different kind of development.
Thus, it poses some problems if it is an ideal situation for a city to become fundamentally void of its local inhabitants. It is a problem. So I can continue with examples like that, but you get the idea that in reality the change in economic power between the continents will have many other political, social and consumer repercussions.
Kasonta: Given the worsening income inequalities in the West, can we expect further setbacks against globalization?
Milanović: Yeah, I think it looks like what was then called disarticulation and disarticulation essentially meant that there was a small percentage of the population in less developed countries that had been fully integrated into the world economy. And then you had a backcountry population that was really not integrated. They continued to really produce in an often non-market way, they were essentially subsistence producers.
Now, of course, the West is not like that because it is much more developed. But the basic idea that you can get out of the disarticulation is that you have a local population group that could be 10, 20, 30 percent and they are doing pretty well and fully integrated into it. ‘Mondial economy. And then you had the middle class in a lot of western countries, the United States in particular, that weren’t integrated, or in fact integration worked against them because they lost their jobs or because they lost their jobs. they got a new job at a lower salary than they had before. So, this is the whole problem of the decline of the middle class in the United States, which has clear political implications, and not only in the United States, it can also be said for the movement of the Yellow Vests in France which represents the same problem. So there will be some kind of dissatisfaction with globalization.
I am not sure that despite COVID-19 and despite all the problems we have now that globalization would be reversed. Quite simply because the incentives produced by globalization are so important. In other words, if you can make a lot more money by employing people in another country than by employing people in your own country, there is very little that can stop you from doing so. So in other words, the incentives are there and they will continue to be there.
Plus, the technology to do it is there, and it’s not going to go away. In fact, you can even argue that we have now seen the possibility of doing a lot more things online and virtually than the technology we already knew existed, but with COVID-19 started to be used much more frequently, would make globalization even more attractive.
Kasonta: Some believe that inequality is at the root of the current hostile views of the United States towards foreign countries, including China. How much do you see inequality contributing to growing nationalist politics in the United States? Is the economy at the heart of the current international crisis?
Milanović: Yes, I actually agree with that. I agree with this because it is inequality and polarization. In other words, what has happened in the United States is that you have had very uneven growth rates across the income distribution. When you have very unequal growth rates – I mean a lower income growth rate among the middle class than among the rich – then obviously the inequalities increase.
But just saying inequality, I think, is not enough. It must be said that it is the polarization between these people at the top who had very specific skills. You know, a lot of them are in the financial industry, a lot of them have a higher education, they have MBAs or they’re very successful CEOs or they’re actually new business founders or they’re very comfortable with new technology, and then there are a lot of people who had typical middle class jobs, what used to be called “blue collar” jobs, and those jobs were usually either less prestigious, they pay less, they are under pressure from Chinese imports and they are under pressure from outsourcing. So, yes, in fact, inequality in the United States has contributed to this rejection by parts of the population of globalization, political polarization, and even culture wars. there is no doubt.
But I just want to say that it is not enough to say inequality. You have to explain how this inequality worked and how it produced this very huge chasm, even in perception, in culture, between people, so much so that when you look at what a group of people say or actually what media are close to them let’s say with the media from the other group, you are basically wondering if you are in the same country because the perceptions of reality are so far apart that they don’t seem to be talking about the same thing at all .
First published on November 14, 2020: Inequalities shake up the international order
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