Global Inequality: A New Approach for the Age of Globalization, by Branko Milanovic — Summary
Synopsis
Milanovic’s central argument is that globalization over the past few decades produced two simultaneous and structurally linked movements: a historic rise in incomes among the global middle classes — concentrated in Asia, above all in China — and an extraordinary concentration of wealth at the very top of the world distribution. Inequality between countries has declined modestly since around 2000, but inequality within rich countries has surged. The tension between these two movements is not accidental: it is the internal logic of one and the same global process that compresses national distances while deepening class hierarchies within each society. The book’s most unsettling corollary is that the single greatest determinant of anyone’s life chances in the world is not class or talent, but the accident of birthplace.
The argument rests on three main analytical tools. First, the “elephant curve” — the global growth-incidence curve from 1988 to 2008 — which visually maps who gained and who fell behind during the high-globalization era. Second, the concept of “Kuznets waves”: instead of Kuznets’s single inverted U, Milanovic identifies recurrent cycles of rising and falling domestic inequality, driven by combinations of technology, openness, and policy (his “TOP triad”). Third, a decomposition of global inequality into a “location” component (differences among countries) and a “class” component (differences within countries), showing that the historical dominance of the first over the second may now be reversing. To support this framework, Milanovic draws on household surveys from 118 countries, historical series reaching back to 1820, and a comparative analysis of China and the United States as the two poles of the current moment.
The book bears directly on three central axes of the vault’s work. First, Milanovic’s diagnosis of the erosion of the middle class in rich countries — squeezed from above by national elites and from below by global labor competition — provides the structural foundation for understanding why electorates in countries like Brazil and the United States shifted toward right-wing populism: his framework of “social separatism” and eroding public goods describes in political-economy terms what Fukuyama’s thymos describes in terms of recognition. Second, the “citizenship premium” concept — by which more than two thirds of the variation in income across individuals worldwide can be explained by country of birth alone — is a powerful tool for thinking about immigration, borders, and democratic legitimacy, themes central both to global realignment and to the Nova República project. Third, Milanovic’s “new capitalism” — in which the wealthiest are simultaneously the top earners and the largest owners of capital — structurally describes the same plutocratization that Martin Wolf analyzes normatively, and that in Brazil appears as rent capture and fisiologismo.
Chapter 1 — The Rise of the Global Middle Class and Global Plutocrats
Chapter 1 establishes the central visual and conceptual device of the book: the global growth-incidence curve, the now famous “elephant curve,” which tracks how different parts of the world income distribution fared during the high-globalization era from 1988 to 2008. Milanovic’s argument is direct and unsettling. Globalization produced enormous gains, but those gains were distributed in a highly uneven way. The chapter is not a generic celebration of global growth, nor a simple denunciation of neoliberalism. Instead, it shows that one and the same global process lifted hundreds of millions of people while leaving others behind and enriching a very small elite at the top. From the outset, Milanovic frames globalization as a force that cannot be judged in the aggregate alone; it has to be judged by asking exactly who gained, how much, and relative to whom.
The first major claim is that the biggest relative winners of globalization were not the very richest people in the world, but the broad strata around the middle of the global income distribution. These are the people around the global median, roughly the 40th to 60th percentiles, whose real incomes rose dramatically over the two decades he studies. In practical terms, they were overwhelmingly from emerging Asian economies, especially China, but also India, Indonesia, Thailand, and Vietnam. Milanovic calls them the “emerging global middle class.” The phrase matters, because he wants to register both their ascent and their limits: they became the middle of the global distribution, but they were still much poorer than the middle classes of rich Western countries. Their importance lies not in affluence but in historical movement upward.
Milanovic insists that this was one of the great reversals of modern economic history. In the late twentieth century, many analysts still assumed that populous Asian societies would remain trapped in poverty, overwhelmed by demography and structurally unable to converge with the rich world. Chapter 1 shows how wrong that expectation turned out to be. Median urban incomes in China multiplied several times over; rural Chinese incomes also rose sharply; similar, if less dramatic, gains occurred across parts of Asia. What makes this historically consequential is not only the speed of growth, but the number of people involved. This is not the enrichment of a narrow elite or a few successful city-regions. It is the rise of huge social blocs whose changing fortunes alter the very shape of the global distribution of income.
Against that story of ascent Milanovic places a second, politically explosive one: the stagnation of the lower middle class in the rich world. Around the 80th percentile of the global income distribution—people who are richer than the emerging Asian median but far from the world’s very top—income growth from 1988 to 2008 was close to zero. These people were drawn largely from the lower halves of the income distributions of the advanced OECD economies: workers and lower-middle strata in the United States, Western Europe, Japan, and other old-rich countries. Milanovic’s point is not that these groups became poor in absolute terms. It is that, during the very decades when globalization was sold in the West as a broad prosperity machine, many of these citizens saw little or no meaningful improvement in their real incomes.
This contrast between Asia’s rising middle and the rich world’s stalled lower middle gives the chapter much of its charge. Milanovic argues that, viewed globally, the “winners” and “losers” of globalization cut across national narratives in unexpected ways. The winners were, above all, the poor and middle strata of Asia and, separately, the people at the very top of the world distribution. The losers, or at least the relative non-gainers, were many of the lower-middle groups of the old rich countries. That finding helps explain why globalization could be both defensible in humanitarian terms and destabilizing in political terms. A process that reduced the distance between many Asians and the West could simultaneously deepen resentment inside Western democracies, because it left many of their own citizens with stagnant wages and the sense of historical decline.
Milanovic is careful not to reduce this to a crude moral fable. He repeatedly stresses how hard it is to forecast long-run development and how easy it is to mistake temporary structures for permanent ones. The spectacular rise of Asia is used, in part, to humble deterministic theories. Earlier fears about endless Asian poverty proved wrong; therefore, today’s confident predictions about future global hierarchies may also be wrong. This caution matters because the chapter is not just descriptive. It prepares the reader for later arguments about the next phase of globalization and about future shifts in world power. The empirical lesson is that large-scale global transformations can occur far faster than the experts of one era imagine, especially when technology, trade, state policy, and demography begin to reinforce one another.
The third major group in Chapter 1 is the global top 1 percent. Milanovic shows that these people also gained strongly from globalization, making them co-winners alongside the emerging Asian middle. But unlike the new global middle, the global top 1 percent remained heavily concentrated in the old rich countries. The United States dominates this group: about half of the global top 1 percent were American, and roughly 12 percent of Americans belonged to it. Western Europe, Japan, and Oceania accounted for most of the rest, with only thin representation from countries such as Brazil, Russia, and South Africa. China and India, despite their rapid ascent, had not yet placed more than a tiny share of their populations into this extreme upper tier. This keeps the chapter grounded in asymmetry: convergence was real, but it had limits.
That juxtaposition leads Milanovic to an important within-country implication. If the lower middle class in rich countries stagnated while the upper strata in those same countries prospered, then globalization did not merely rearrange positions between countries; it also widened class distance within rich countries. In other words, the same process that helped narrow some gaps between nations also sharpened social divisions inside them. This is one reason the chapter is more subtle than a simple story of “the West versus the rest.” Milanovic insists that globalization reorganized the world distribution in a way that simultaneously compressed some international gaps and expanded some domestic ones. The political consequences are obvious: citizens vote inside nation-states, not at the level of humanity, and therefore the domestic side of the story becomes electorally decisive even when the global picture looks more progressive.
A methodological section in the chapter explains how these claims can be made at all. Since no worldwide household survey exists, global inequality has to be reconstructed by combining national household surveys and translating local incomes into comparable purchasing-power units. Milanovic emphasizes that this is technically demanding and imperfect. Surveys differ in quality and timing; some countries are missing or only intermittently observed; richer people are often undercounted; and cross-country comparison requires difficult price adjustments. But the purpose of this discussion is not to undermine the argument. It is to make clear that global inequality analysis rests on a serious empirical infrastructure, not a rhetorical abstraction. The global distribution is painstakingly assembled from the bottom up, using surveys, PPP conversions, and benchmark years, so that the world can be treated as a single income space.
Once that global distribution is constructed, Milanovic introduces one of the chapter’s most important distinctions: the difference between relative and absolute gains. In relative terms, the “elephant curve” highlights the spectacular rise of the global middle and the near-stagnation of the rich world’s lower middle. But in absolute terms, the picture becomes much harsher. If the entire increase in global income between 1988 and 2008 is treated as 100, about 44 percent of it accrued to the richest 5 percent of the world’s population, and nearly one-fifth went to the top 1 percent alone. By contrast, the broad emerging global middle received only a modest share of the absolute increment. The reason is simple: percentage gains on a very high initial income generate much larger cash gains than even large percentage increases on low incomes.
This shift from relative to absolute gains is central to Milanovic’s interpretation of globalization. He does not treat it as a technical sidebar. He treats it as the source of globalization’s deep moral and political ambiguity. Look at relative gains, and globalization appears to be a progressive force: poor and middling populations in Asia advance rapidly, and some degree of global convergence occurs. Look at absolute gains, and globalization appears radically skewed toward the top, because the already rich capture disproportionate chunks of the new income created. Both pictures are true. Milanovic’s broader point is that globalization cannot be honestly described from a single metric. It has egalitarian and inegalitarian aspects at the same time, depending on whether one asks about proportionate improvement or about command over newly created resources.
The financial crisis of 2008–2011 modifies but does not overturn this picture. Milanovic argues that the crisis was less a break in the main global trend than an intensification of it. Growth in China and parts of Asia remained strong, which reinforced the rise of the global middle. Meanwhile, growth in the rich Atlantic economies slowed sharply, and this stagnation spread upward through their income distributions, hitting even groups near the global top. As a result, the post-2008 version of the elephant curve still shows robust gains around the global median but weaker gains for the global top 1 percent. The crisis therefore accelerated the redistribution of global economic dynamism away from the traditional Atlantic core and toward Asia. The “global” financial crisis, in Milanovic’s telling, was global mainly in reputation; in its initial economic incidence, it was much more a crisis of the rich world.
The chapter then broadens from growth rates to the shape of the world income distribution itself. Milanovic argues that the world once looked strongly “twin-peaked”: a very large mass of poor people in poor countries, a separate cluster of much richer people in rich countries, and relatively few people in between. By 2011, that empty middle had begun to fill in. The global distribution was still far from resembling that of a single country, but it was moving in that direction. This is one of the chapter’s deepest claims, because it suggests that economic globalization is slowly remaking the world into a more internally continuous social space. That continuity is driven not by uniform development across countries, but by the rise of large numbers of people within populous countries whose incomes now occupy the formerly vacant middle zone.
China is the emblematic case in this transformation. Milanovic highlights how quickly Chinese incomes had approached those of poorer European countries and how dramatically the gap between relatively well-off urban Chinese households and lower-decile Americans had narrowed. In one striking comparison, a part of urban China moved from trailing a lower segment of the US income distribution by more than six to one in 1988 to a gap of roughly 1.3 to one by 2011. The symbolic force of this comparison is enormous. It means that global convergence is no longer a remote macroeconomic abstraction; it has become visible in the overlapping living standards of actual households. At the same time, Milanovic notes that China’s advance was still much more visible in the middle of the distribution than at the very top, where the old rich countries remained dominant.
When Milanovic returns specifically to the global top 1 percent, he adds a further layer of nuance. Their share of global disposable income in 2008 was 15.7 percent, already an extraordinary concentration. Once one adjusts for the fact that household surveys tend to miss the very rich, that share rises sharply, to roughly 28 percent, and with an additional correction for hidden wealth in tax havens it reaches about 29 percent. Yet even these enlarged income estimates remain below the top 1 percent’s share of global wealth, which Milanovic reports at roughly 46 percent. The implication is stark: the concentration of wealth at the global summit is much more extreme than the concentration of annual income. The rise of the global middle may moderate top income shares somewhat, but it does very little to counterbalance the deep stockpiling of assets at the top.
That is why the chapter culminates not with the top 1 percent in general, but with billionaires as the “real global plutocrats.” Using Forbes data and correcting for inflation so that the threshold is constant over time, Milanovic argues that the number of hyper-wealthy individuals increased about fivefold between the late 1980s and 2013. Their total real wealth also increased roughly fivefold, while world GDP increased far less. As a result, the wealth of this microscopic group rose from less than 3 percent of global GDP to more than 6 percent. Milanovic underlines the absurd scale of billionaire wealth because it is otherwise almost impossible to visualize. This is not merely colorful rhetoric. It serves his analytical point that at the far top of the world economy, accumulation has been intense enough to create a genuinely transnational plutocratic stratum.
The chapter ends by defining the high-globalization era through a dual movement that will shape the rest of the book. On one side stands the rise of the emerging global middle class, especially in Asia: historically hopeful, distributionally significant, and evidence that the world is no longer organized as a simple rich-West/poor-rest dichotomy. On the other side stands the rise of global plutocrats: tiny in number, massively powerful in wealth, and increasingly detached from the rest of humanity. For Milanovic, these are not side effects but the two signature products of the same era. Chapter 1 therefore does more than describe recent inequality. It lays down the book’s governing tension: globalization has been both a mechanism of partial leveling across the world and a machine for extraordinary concentration at the top. The rest of the book is, in large measure, an attempt to think through that contradiction.
Chapter 2 — Inequality within Countries: Introducing Kuznets Waves to Explain Long-Term Trends in Inequality
Branko Milanovic’s second chapter is an attempt to repair, rather than discard, Simon Kuznets’s classic theory of inequality. The original Kuznets hypothesis proposed that, as countries develop, inequality first rises and then falls, tracing an inverted U. That story fit much of the experience of industrializing countries from the nineteenth century to the late twentieth. But it broke down once inequality began rising again in rich countries after around 1980. Milanovic’s answer is not to abandon Kuznets, but to expand him. Instead of one curve, he proposes repeated “Kuznets waves”: long cycles in which inequality rises and falls more than once across modern history.
He begins by explaining why the original Kuznets framework became unsatisfactory. The problem was not only that some cross-sectional comparisons between poor and less-poor countries failed to show the predicted rise in inequality. The deeper problem was historical: rich countries that had supposedly reached the downward side of the curve began moving sharply upward again in the late twentieth century. This was a direct contradiction. Once the United States, the United Kingdom, and other advanced economies experienced a renewed surge in inequality, the single-curve Kuznets hypothesis no longer seemed able to account for the facts.
Milanovic then reviews the main alternatives. One explanation focused on the “race” between education and skill-biased technological change: technology increases the pay of skilled workers, and inequality depends on whether education expands fast enough to keep up. He thinks this helps describe part of what happened, but not enough. It describes a mechanism, not a full historical theory. Thomas Piketty, by contrast, offers a larger theory: inequality fell in the twentieth century because wars, taxation, socialist politics, and economic convergence weakened capital, while capitalism’s normal tendency is for wealth concentration to reassert itself. Milanovic respects that framework, but argues that it does not travel well to the preindustrial world.
That gap matters because Chapter 2 is ambitious: it wants one framework that can explain inequality before the Industrial Revolution, during industrialization, during the twentieth-century equalization, and during the recent turn toward renewed concentration. Milanovic’s proposed solution is the concept of recurrent waves. In his account, the last five centuries are not defined by one irreversible journey from agrarian inequality to industrial equality. They are defined by alternating upswings and downswings, each driven by a different mixture of structural change, politics, conflict, demography, and shocks.
A major distinction in the chapter is between preindustrial and industrial societies. Before the Industrial Revolution, average income was broadly stagnant. In that setting, there was no stable link between mean income and inequality, because the economy lacked sustained growth. Inequality moved instead in response to contingent events: plagues, wars, conquests, demographic collapses, trade openings, and discoveries. Wages could rise when labor became scarce, then fall again as population recovered. Elites could capture temporary surpluses when trade boomed or resources flowed in. But there was no durable developmental path tying higher national income to a predictable inequality pattern.
Here Milanovic distinguishes his “Kuznets waves” from simple Malthusian cycles. In a standard Malthusian story, higher wages among the poor increase population, which then pushes wages back down to subsistence. That is a demographic mechanism. His argument is broader. Inequality in preindustrial societies could rise or fall for reasons that were not reducible to population pressure alone. Commercial expansion, bullion inflows, institutional breakdown, military destruction, and epidemics all shifted the balance between landlords, merchants, and workers. The result was oscillation around a roughly fixed income level, not a steady developmental ascent.
One of the chapter’s most important analytical tools is the “inequality possibility frontier.” The idea is simple and sharp: when a society is only barely above subsistence, there is a hard limit to how unequal it can become, because the majority still needs enough income to survive. In poor societies, elites can extract only so much before the system becomes demographically unsustainable. Once average income begins to rise on a sustained basis, however, the feasible room for inequality expands. Growth creates surplus. That surplus can be distributed broadly, but it can also be captured disproportionately at the top. Industrialization therefore does not merely change production; it enlarges the range of possible inequality.
That is why the Industrial Revolution marks a decisive break. Once sustained growth begins, inequality and average income become structurally related in a way they were not before. Urbanization, sectoral shifts, concentration of capital, and movement from agriculture into manufacturing all raise inequality. New economic sectors create new rents. Rural populations moving into cities enter more differentiated labor markets. Returns to capital and skills pull away from subsistence earnings. This is the upward side of the first modern Kuznets wave: inequality rises because the economy becomes more productive, more urban, and more internally stratified.
Milanovic spends considerable time showing that in preindustrial Europe, inequality nevertheless did move in waves, even if those waves were not driven by continuous growth. Spain is a key example. Using the ratio of land rents to wages as a proxy for inequality over several centuries, he shows repeated rises and falls with no stable relation to GDP per capita. The implication is that inequality can fluctuate strongly in a stagnant economy. What pushed it downward were typically disasters: plague, war, destruction of trade networks. What pushed it upward were episodes of commercial expansion or elite gains in land and trade income. In other words, inequality in the preindustrial world was historically volatile, but not developmentally patterned.
The same logic appears in his discussion of Italian cities and the Low Countries. The Black Death reduced inequality because labor scarcity raised wages and because high mortality fragmented large fortunes. Later plagues produced similar compressions. Conversely, the gradual expansion of commerce, urban wealth, and property accumulation in some regions pushed inequality upward over long stretches. Milanovic uses these cases to make an uncomfortable point that returns throughout the chapter: in many historical settings, inequality falls not because societies peacefully reform themselves, but because catastrophe destroys the assets, status hierarchies, or demographic balances on which inequality rests.
His excursus on the fall of the Roman Empire reinforces that claim. Rome’s decline, in his telling, is an example of simultaneous income decline and inequality decline. As imperial structures weakened, elite extraction also weakened. The social order became poorer, but somewhat less unequal. That matters because it shows that lower inequality is not automatically good news. A society can become more equal by lifting the bottom, but it can also become more equal by collapsing. Milanovic wants the reader to hold both possibilities in mind throughout the rest of the book.
When the chapter turns back to industrial and postindustrial societies, it argues that the classic Kuznets curve was real, but only as one phase of a broader pattern. For countries such as the United States, the United Kingdom, Spain, Italy, Germany, the Netherlands, Brazil, Chile, and Japan, historical data show something like an inverted U during the first great industrial transformation. Inequality rises with industrialization, reaches a peak, and then falls during much of the twentieth century. So Kuznets was not wrong. He was incomplete. He mistook one major wave for the whole story.
What drove the downward side of that first wave is where Milanovic most clearly departs from both Kuznets and Piketty. Kuznets emphasized benign economic and demographic mechanisms: wider education, a narrower rural-urban gap, and stronger demand for redistribution in mass democracies. Piketty emphasizes the shocks of the world wars, the destruction of capital, and political changes that weakened inherited wealth. Milanovic accepts both sets of forces, but insists that the twentieth-century equalization was produced by their interaction. Benign forces mattered, yet they were often activated, accelerated, or made politically possible by malign ones.
His boldest move is to “endogenize” World War I. Rather than treating war as an outside accident that later happened to compress inequality, he argues that high inequality and the contradictions of late nineteenth-century capitalism helped generate the imperial rivalries and domestic pressures that culminated in war. Drawing on older critiques of imperialism, he suggests that underconsumption and concentrated wealth at home pushed elites to seek profitable opportunities abroad, intensifying geopolitical competition. In that reading, the war was not external to the inequality process. It was one of its consequences.
This matters because it changes the moral and analytical lesson of the twentieth century. If inequality fell between 1914 and 1980, it did not fall gently or automatically. It fell through a brutal combination of destruction and reform: wars, revolutions, taxation, labor mobilization, social democracy, mass education, welfare states, and the political fear of socialism. Milanovic calls the destructive side “malign” and the reformist side “benign.” Together they produced what is often called the Great Leveling. His warning is clear: very high inequality does not peacefully self-correct. It tends to provoke crises, and those crises may reduce inequality only by destroying much else.
The excursus on socialism extends that argument by examining a more radical equalization path. Socialist regimes compressed wages, abolished or marginalized capital income, nationalized enterprises, reduced the education premium, guaranteed employment, and subsidized basic consumption. In distributive terms, they were highly effective. Income differences narrowed dramatically, and the usual drivers of inequality in market societies—property, entrepreneurship, and labor-market dispersion—were sharply curtailed. For Milanovic, this was another version of the twentieth-century leveling, even if it emerged through a very different institutional route.
But he is equally clear about the cost. Socialist equalization succeeded in reducing inequality, yet it undermined incentives, dulled innovation, and eventually produced stagnation. Extreme compression weakened the rewards for skill acquisition and entrepreneurial initiative. Over time, socialist systems could not keep pace with the increasingly decentralized and innovation-intensive character of modern technological change. The lesson is not that equality is impossible, but that there are limits to how far it can be imposed independently of productive structures. Equality pursued without regard to incentives and technological dynamism becomes self-defeating.
The final part of the chapter turns to the second Kuznets wave, the one that begins around 1980 and continues into the early twenty-first century. Milanovic argues that its upward phase was driven by a new technological revolution centered on information technology, by globalization, and by policy changes favorable to capital and top earners. He treats these not as separate forces but as a mutually reinforcing package: technology, openness, and policy—his TOP triad. Information technology increased returns to skill and scale. Globalization reallocated production across borders and put pressure on lower- and middle-income workers in rich countries. Policy changes, including lower top tax rates and lighter taxation of capital, amplified the distributional tilt.
He adds that the movement from manufacturing to services intensified the rise in inequality because services are far more heterogeneous. Wage gaps are wider, firms are smaller, workers are more dispersed, and common class interests are harder to organize. Union decline is therefore not an incidental political story; it is partly rooted in structural economic change. At the same time, capital’s bargaining power rose, monopoly and patent rents became more important, redistributive institutions proved too weak to fully offset market inequality, and household-level factors such as assortative mating likely added further pressure at the top. Milanovic refuses monocausal explanations here. The process is overdetermined. Technology, globalization, and policy are intertwined so deeply that trying to isolate one as the master cause misses the point.
The chapter ends on a guardedly speculative note: if this is indeed the upward side of a second Kuznets wave, what could eventually turn it downward? Milanovic lists five possible benign counterforces. More progressive taxation could reassert itself politically. Expanded education could narrow skill premiums, though he doubts how much room remains. The extraordinary rents captured by first movers in the digital economy may dissipate over time as imitation spreads. Global wage convergence—especially if countries like China and India continue catching up—could reduce the pressure that hollowed out rich-country middle classes. And, more tentatively, technological change itself might one day become more favorable to lower-skilled workers if high-skill labor becomes the expensive factor worth economizing on. None of this is presented as certain. The real point is more sobering: inequality has a history, not a destiny. It rises and falls in waves, and whether the next downswing comes through reform or rupture remains an open political question.
Chapter 3 — Inequality among Countries: From Karl Marx to Frantz Fanon, and Then Back to Marx?
Chapter 3 shifts the book’s focus from inequality within nations to inequality between nations, and it does so by making a simple but powerful claim: the structure of global inequality has changed historically, and that change alters how we should understand politics, justice, and globalization. Milanovic begins from the finding established earlier in the book that global inequality may have declined somewhat since the late twentieth century. That decline, however, does not mean the world has become equal. It means rather that a very specific configuration of inequality is changing. For most of the modern era, the main force behind global inequality was the enormous income gap between rich countries and poor countries. To understand the present, then, one has to reconstruct how that gap was created, how large it became, and whether it is now beginning to weaken.
The long historical arc starts around 1820. Using older reconstructions of world income distribution and later household-survey data, Milanovic argues that global inequality rose almost continuously from the early nineteenth century until the late twentieth century. The fundamental reason was not initially that some countries became more unequal internally, though that mattered too. The deeper reason was divergence in national mean incomes. Western Europe, North America, and later a few settler societies experienced sustained growth after the Industrial Revolution, while large parts of Asia, especially China and India, stagnated or even regressed in relative terms. A small part of humanity was launched onto a path of rising productivity and income, while most of the world remained stuck. That divergence created the modern global hierarchy.
Milanovic insists that nineteenth-century globalization should not be romanticized as a neutral process of exchange. It was tied to imperial expansion, coercion, and the unequal incorporation of territories into the world economy. In that sense, the widening gap between countries was not merely a statistical curiosity; it was bound up with the formation of a world order in which industrial cores and subordinated peripheries occupied radically different positions. As richer countries kept pulling away, global inequality rose not just because rich countries contained rich people, but because entire national populations became separated by vast income distances. The chapter’s epigraph, taken from a Dutch East India Company official, signals that trade and force were historically intertwined from the beginning.
The increase in global inequality was reinforced by rising inequality inside the leading industrial countries during the nineteenth century. Milanovic’s point is that the two processes worked together. The Industrial Revolution produced both a gap between industrializers and non-industrializers and a sharper stratification inside the countries at the frontier. That is why the rise in global inequality was so dramatic. It was only after the shocks of the first half of the twentieth century—world wars, depression, revolution, decolonization, and the construction of welfare states—that the pace of increase slowed. The global series reaches its broad peak late in the twentieth century. In that sense, the world of the late twentieth century represents not the normal state of capitalism, but the extreme culmination of a much longer historical divergence.
The more recent period looks different. Using much better household-survey data from the late 1980s onward, Milanovic finds that global inequality stopped rising and appears to have fallen modestly. The central drivers of that reversal were China first, and then India, as their growth raised the incomes of very large populations that had previously been far below the global median. He is careful, however, not to oversell the result. The decline is relatively recent; it depends heavily on Asian growth and Western stagnation; and it may be overstated because household surveys tend to miss the true incomes of the global rich. Once top incomes are adjusted upward, the fall in global inequality becomes smaller. Even so, the direction of change matters: for the first time since the Industrial Revolution, the world is no longer moving toward ever greater divergence.
One of the chapter’s most striking moves is to compare the long-run history of global inequality with the long-run history of American inequality. Around the early nineteenth century, the two were not all that far apart. The world as a whole was much more equal than today because country differences were still limited, while the United States itself was more unequal than many people imagine. Over time, global inequality shot upward as the international income gaps exploded, while national inequality in the United States followed a different path, rising and falling in Kuznets-like waves. In the contemporary period, the two trends even move in opposite directions: global inequality edges down while US inequality rises. Milanovic uses this contrast to suggest that the twenty-first century may eventually bring a world in which internal class divisions again matter more than sheer national location.
That possibility leads to the chapter’s core analytical distinction: location versus class. Global inequality can be decomposed into inequality due to differences among countries and inequality due to differences within countries. Milanovic labels the first the “location” component and the second the “class” component. The question is not semantic. It tells us what kind of world we live in. Is the decisive divide between rich and poor individuals inside each society, or between people who happen to be born in different societies? If inequality mostly reflects national location, then citizenship itself becomes one of the largest determinants of life chances. If inequality mostly reflects class, then the central conflicts are internal to societies.
Historically, the answer changed. Around 1820, most global inequality came from differences within countries. In other words, class mattered more than nationality. A poor person and a rich person in the same country were separated by more than ordinary people across countries were separated from one another. Over the next century and a half, that was overturned. By the middle of the twentieth century, and still today to a large degree, the dominant share of global inequality came from differences in average national incomes. By then, being born in a rich country mattered far more than being born into a rich family in a poor country. Milanovic reads this transformation as a major shift in the social grammar of the modern world.
This is where the chapter’s title becomes meaningful. Marx analyzed a world in which class was the primary line of conflict. Fanon wrote about a world divided between colonizer and colonized, core and periphery, white and nonwhite, rich-country citizen and impoverished subject. Milanovic argues that the world moved from something closer to Marx’s universe to something closer to Fanon’s. Engels, writing late in the nineteenth century, already saw signs of this when he described how sections of the British working class benefited from imperial dominance. Later theorists of imperialism made the same point in stronger form: workers in the core could enjoy living standards impossible for the masses in the periphery. The consequence was that location came to outweigh class as the principal structuring force of global inequality.
Yet Milanovic does not end the story there. He suggests that the slight recent decline in the location component may indicate the beginning of another turn—hence the “back to Marx?” in the title. If poor and emerging countries continue to grow faster than rich countries, then national mean incomes may converge. At the same time, if inequality continues to rise within many countries, then class divisions inside countries will again take on greater global importance. The future world could therefore look more like the nineteenth century in one narrow structural sense: class might regain primacy over location. This is not a prediction of socialist politics or proletarian unity. It is a claim about the evolving composition of inequality.
From that broad historical argument Milanovic turns to one of the chapter’s most original concepts: the citizenship premium. Because global inequality is still largely shaped by differences among countries, citizenship in a rich state functions like a valuable asset. To be born in the United States, Sweden, or another affluent country is to receive a large income advantage before any personal effort enters the picture. He treats this advantage as a kind of rent attached to birthplace. Using household-survey data for 118 countries, he estimates how much of a person’s income can be “explained” simply by the country in which that person lives. The answer is stark: more than two-thirds of the variation across country-percentiles can be accounted for by location alone.
The size of the premium is enormous. On Milanovic’s estimates, being born in the United States rather than in Congo multiplies expected income many times over; rich-country citizenship yields gains that no normal individual decision could plausibly replicate. What matters here is not the exact number attached to each country comparison, but the broader implication. In a world where location dominates inequality, national citizenship resembles inherited property. It is an exogenous circumstance, not an achievement. If modern liberal societies criticize inherited privilege within their borders, the citizenship premium forces them to confront a much larger inherited privilege at the global level.
Milanovic then adds an important refinement: the citizenship premium is not uniform across the income distribution. In more egalitarian rich countries, the premium is especially large for people near the bottom because even the poor there are relatively well off by global standards. In more unequal middle-income countries, by contrast, the premium is stronger at the top than at the bottom. This distinction matters because it changes the incentives surrounding migration. A low-skilled migrant who expects to land near the lower end of the destination country’s distribution may prefer a more egalitarian welfare state. A highly skilled migrant who expects to do very well may prefer a more unequal country where the upper tail is richer. In other words, the structure of inequality inside destination countries shapes who wants to go where.
That in turn creates a political problem for egalitarian states. Countries with strong welfare systems may attract lower-skilled migrants, while countries that combine high mean income with high dispersion may attract more highly skilled migrants or wealthier entrants. Unsurprisingly, many affluent states respond by filtering migrants—through education criteria, investment visas, or selective residency schemes. Milanovic recognizes that such policies may be rational from the standpoint of the receiving country. But globally they intensify injustice. They allow the citizenship rent to be accessed mainly by the already advantaged among the citizens of poor countries, while also risking brain drain from places that can least afford to lose educated or wealthy people.
The chapter broadens the discussion by showing how globalization weakens some arguments that were once plausible in a nation-state framework. Milanovic illustrates this through the Coase theorem and the post-communist privatizations, especially in Russia. Reformers once argued that even badly distributed initial ownership might not matter much in the long run, because inefficient owners would sell assets to efficient ones, and new elites would eventually support the rule of law to secure their property. But globalization changes the incentives. If newly enriched oligarchs can move their wealth to London or New York, they do not need to fight for the rule of law at home. They can simply enjoy secure property elsewhere. A theory that might make sense in a closed national economy breaks down in a world of free capital mobility and jurisdiction shopping.
From there Milanovic moves into political philosophy. The citizenship premium implies that global equality of opportunity does not exist, because a huge share of lifetime income depends on birthplace. He contrasts two broad moral positions. On one side stand “statists,” associated above all with Rawls’s The Law of Peoples, who argue that distributive justice applies within societies but not fully across borders. On this view, nations make collective choices and are entitled to bear the consequences; the rich do not owe the poor a share of their income merely because the poor were born elsewhere. On the other side stand cosmopolitan thinkers such as Pogge, Beitz, Singer, and Moellendorf, who argue that in an interconnected world such sharp moral closure is indefensible. If global interactions are dense and mutually constitutive, then inequalities between nations cannot be treated as morally external.
Milanovic is especially sharp in exposing the tension inside Rawls’s position. Within a country, Rawls treats unearned differences in birth and natural endowment as morally arbitrary and therefore subject to correction. Across countries, however, he allows the brute fact of birthplace to do vastly more work. Milanovic does not deny the importance of national self-determination, but he shows that a principled defense of domestic equality of opportunity combined with indifference to global equality of opportunity is unstable. He also dismisses the idea that people in rich countries simply earn more because they work harder. Empirically, workers in poor countries often work at least as many hours, and comparisons of similar occupations across cities still reveal huge real wage gaps. Effort cannot explain away the citizenship rent.
One possible route out of the moral and political impasse would be to weaken the connection between rights and inherited nationality. Milanovic notes proposals, such as Ayelet Shachar’s idea of jus nexi, that would tie citizenship more to social connection than to birth alone. Another route is economic convergence itself. If average incomes across major countries move closer together, the payoff to rich-country citizenship declines automatically. In that sense, globalization contains within it a paradoxical egalitarian potential: by spreading growth more widely, it may reduce the significance of national location. But that prospect depends on sustained convergence and on migration remaining possible enough to matter.
The final part of the chapter turns directly to migration and border control. Here Milanovic identifies a central contradiction of the present order. Globalization praises the movement of capital, goods, technology, and even services, but it sharply restricts the movement of labor. The world permits firms to arbitrage wages across borders through trade and offshoring, yet it denies workers a comparable freedom to move where wages are higher. Border walls, fences, patrol systems, and minefields arise precisely where rich and poor regions are in close proximity: the United States and Mexico, southern Europe and North Africa, Israel and Palestine, Saudi Arabia and Yemen, India and Bangladesh, the Korean peninsula, and other fault lines. The map of barriers is, in effect, a map of income gaps.
Milanovic is careful to say that the politics of migration cannot be reduced to economics. But he insists that economic reasoning exposes the inconsistency of current policies. If economists support free trade on the grounds that aggregate gains can later be redistributed to those who lose, why is labor mobility treated differently? The answer, he suggests, is that most economic thinking remains tacitly trapped inside the nation-state. Yet from a global perspective, migration is one of the most powerful mechanisms for reducing poverty and inequality. Hundreds of millions of people say they would like to move, while the actual migrant stock remains a small share of the world population. The world is thus not facing excessive mobility, but a vast gap between desired and permitted mobility.
His concluding argument is deliberately hard-edged. Full open borders with complete equality of rights would be the first-best solution, but Milanovic regards it as politically unattainable. The status quo is worse: it keeps migration low while tolerating informal discrimination against undocumented or precarious migrants. He therefore explores an uncomfortable middle option—greater migration combined with legally limited, temporary differences in rights between citizens and migrants. Such a regime is normatively messy, but he argues that it could still be superior to the present arrangement both in efficiency and in global equity, because migrants themselves gain enormously from moving and global output rises. The chapter closes, then, on an unresolved but clear provocation: as long as birthplace remains the greatest engine of inequality, any serious discussion of justice in the age of globalization must reckon with citizenship, migration, and the moral meaning of borders.
Chapter 4 — Global Inequality in This Century and the Next
Chapter 4 is Milanović’s attempt to say something serious about the future without pretending that the future can be cleanly predicted. He begins by warning that almost every generation of writers has mistaken the dominant tendencies of its own moment for the durable logic of history. The late 1960s and early 1970s produced books convinced that giant corporations, technocratic management, and some kind of convergence between capitalism and socialism would define the future. The 1970s oil shock then redirected attention toward scarcity, limits to growth, and small-scale flexibility. The 1990s, in turn, imagined an age of neoliberal consolidation, the Washington Consensus, and even an “end of history.” Looking back, Milanović’s point is not just that these forecasts were wrong. It is that they were wrong in a patterned way: they extended the present forward, missed structural discontinuities, and failed to imagine actors that later became decisive, above all China.
From this opening caution he derives three general lessons about forecasting. First, analysts usually over-extrapolate what looks important in the present. Second, they cannot foresee discrete game-changing events—political upheavals, financial crises, wars, or leadership shifts—that reorder the entire field. Third, they focus too heavily on a small set of dominant countries and treat the rest of the world as passive. For Milanović, this does not mean all attempts at projection are useless. It means that any projection worth taking seriously has to be modest, structural, and permanently aware of its own fragility.
Even so, he argues that two large analytical forces can help us think about global inequality in the coming decades. The first is cross-country income convergence: under globalization, poorer countries should, in principle, grow faster than richer ones, because technology, capital, and knowledge diffuse more easily. The second is the movement of inequality within countries through what he elsewhere calls Kuznets waves. Some countries, especially poorer and industrializing ones, may be moving down the far side of the first Kuznets wave after a period of rising inequality; others, especially advanced capitalist societies, may be climbing the second Kuznets wave, in which new technology, political power, and institutional weakness push inequality upward again. The future of global inequality will depend on the interaction between these two forces: convergence between nations and divergence within many of them.
Milanović then turns to the first of those forces and asks whether poor countries are in fact catching up with rich ones. The answer depends on how the question is posed. If countries are treated equally, without regard to population, convergence did not really occur during the high-globalization years from 1980 to 2000. Inequality among countries actually widened, because several middle-income regions, especially Latin America and Eastern Europe, experienced long periods of stagnation or collapse, while Africa underperformed badly. In that conventional sense, globalization did not deliver the tidy convergence that standard theory seemed to promise.
But once countries are weighted by population, the picture changes dramatically. From the late 1970s onward, inequality among countries’ mean incomes declines steadily, chiefly because China begins growing very rapidly and because other populous emerging economies later join the process. This population-weighted convergence is, for Milanović, one of the central empirical facts behind the decline in global interpersonal inequality since around 2000. It explains the rise of what he elsewhere calls the global middle class. Just as important, he argues that convergence is no longer solely a Chinese story: from the 1980s onward, and especially after 2000, large countries such as India, Indonesia, Brazil, Vietnam, and South Africa also grew faster than the rich world, helping sustain the equalizing trend.
Still, Milanović refuses to romanticize convergence. He insists that it is much less general than the population-weighted figures might suggest. The deeper pattern, he argues, is that convergence has been overwhelmingly an Asian phenomenon. When one looks at countries outside Asia, there is little sign that poorer countries systematically grew faster than richer ones over the long run. The neat relationship between initial poverty and later catch-up appears clearly only when Asian countries are set against the advanced West. In other words, the most hopeful story in contemporary global inequality is geographically concentrated. It is not a general law operating smoothly across the globe.
That point matters because it shifts attention toward Africa. Africa is the region where Milanović sees the greatest danger to any optimistic forecast about falling global inequality. The problem is not only that African growth has been slow in comparative terms. It is that African development has been extraordinarily unstable. Many countries experience spurts of growth that are then erased by political violence, state failure, civil war, commodity shocks, or institutional collapse. On average, African countries remain much farther below their own historical peak income levels than countries in other regions. In some extreme cases, like Madagascar and the Democratic Republic of Congo, per capita incomes in the early twenty-first century are below levels reached decades earlier. For Milanović, that means not just slow development but the wasting of entire historical generations.
Africa’s demographic future makes this instability even more important. If the region that contributes the largest future increase in world population remains outside the convergence process, then the equalizing effect produced by Asia may weaken or even reverse. That is why Milanović’s view of the future is guarded rather than triumphant. Global inequality may continue to decline, but the mechanism driving that decline is narrower and more vulnerable than celebratory globalization narratives suggest. A world in which Asia rises while Africa stalls is not a stable or universal convergence story; it is a partial one with obvious limits.
In one of the chapter’s most useful analytical moments, Milanović steps back and asks what this means for global inequality over the next two decades. He discusses projections suggesting that global inequality may continue to fall, but only modestly. Even under relatively favorable assumptions, the reduction is limited, not transformative. He is especially skeptical of mechanical forecasts, yet he accepts their directional value: absent a major geopolitical or systemic shock, mean-income convergence should keep exerting downward pressure on global inequality. But he also adds two qualifications. China’s role as the main engine of equalization cannot last forever, because once China becomes richer than the median person in the world, further Chinese growth begins to increase rather than decrease global inequality. At that point India becomes crucial, because its lower starting point means sustained Indian growth would still compress the global distribution.
The chapter then shifts from inequality between countries to inequality within them, focusing on China and the United States as the two most consequential cases. China matters because it is the biggest success story of catch-up growth and the largest contributor to the decline in global inequality. The United States matters because it is the paradigmatic rich country in which inequality has surged and because its institutional patterns are unusually revealing. Milanović does not claim that these two countries are the whole world. But he treats them as the clearest examples of the two opposite movements that now shape global inequality: broad inter-country convergence on one side, deep intra-country polarization on the other.
His treatment of China is cautious because the data are incomplete and politically filtered. Still, the available evidence suggests that Chinese inequality stopped rising sometime after 2000 and may have flattened or even declined slightly before 2013. If that is true, China may have reached the turning point predicted by Kuznets: after a long phase in which structural transformation, rural-urban migration, and marketization drove inequality up, the country may now be entering the descending side of the first Kuznets wave. Milanović sees several reasons this could happen. Educational expansion should reduce the wage premium for scarce skills. Aging should increase demand for redistribution and social protection. And the exhaustion of surplus rural labor should strengthen low-end wage growth in the Lewis sense, pushing incomes upward from below.
He does not, however, present this as an automatic outcome. China also contains powerful forces pushing in the other direction. Corruption remains systemic. Regional inequality between the coast and the interior is politically explosive. Wealth accumulation is increasing the share of income derived from capital, and capital income is highly concentrated. Those are classic mechanisms for making interpersonal inequality worse. The question, then, is whether the equalizing effects of social maturation and labor-market tightening will outweigh the disequalizing effects of concentrated wealth and political privilege. Milanović’s judgment is cautiously optimistic: China’s inequality has probably peaked, but the conclusion remains provisional.
He is in some ways even more worried about China politically than economically. The country’s centralized yet experimentally flexible political structure has been a major engine of its success, allowing local competition and innovation under a unified party-state. But that same structure has vulnerabilities. Local authorities often abuse workers and peasants, seize land, and generate intense resentment. Hundreds of thousands of localized protests suggest enormous pressure from below. More fundamentally, the regime lacks fully institutionalized rules of succession and durable constraints at the top. If the center weakens or factional struggle intensifies, provincial and local actors could gain autonomy in destabilizing ways. For Milanović, one of the gravest possible global shocks would be a fragmentation of China itself.
The United States presents the opposite case. Where China may be approaching an equalizing turn, the United States exemplifies a system in which inequality is reinforced from multiple directions at once. Milanović calls it a “perfect storm” and identifies five mutually reinforcing tendencies. First, the share of national income going to capital rises as production becomes more capital-intensive and labor’s bargaining power erodes. Second, capital ownership remains highly concentrated, so a larger capital share means larger interpersonal inequality. Third, the same people increasingly receive high incomes from both labor and capital. Fourth, highly educated and highly paid individuals increasingly marry one another, concentrating income at the household level. Fifth, money shapes electoral politics so strongly that policy becomes more responsive to the rich and less able to counteract inequality.
The first two mechanisms are rooted in the structure of contemporary capitalism. If machines, software, and other capital goods become cheaper relative to labor, and if unions and secure employment continue to weaken, then labor’s share of income will keep shrinking. In itself that would not necessarily raise interpersonal inequality if capital were broadly owned. But in the United States it is not. Stocks, business equity, and other financial assets are overwhelmingly concentrated at the top, especially among the top 1 percent and top 10 percent. So the rise of capital share translates directly into a more unequal distribution of total income. The macroeconomic shift becomes a distributive shift because ownership is so concentrated.
The third mechanism is one of Milanović’s most important conceptual claims: the emergence of a “new capitalism” in which top earners are simultaneously top workers and top owners. In the classical capitalism of the nineteenth century, capitalists lived from property and workers from wages. In the contemporary United States, by contrast, the people with the highest labor incomes are increasingly also those with the largest capital incomes. Executives, financiers, and top professionals save large fractions of their income, receive stock-based compensation, and turn labor success into wealth ownership. This matters because it makes inequality more entrenched and more defensible. The elite no longer appears as a purely idle rentier class. It appears industrious, credentialed, and therefore, in the public imagination, deserving.
That transformation is strengthened by family formation. Assortative mating means that highly educated, high-income people increasingly partner with one another rather than pairing high earnings with little or no market income, as was more common in the mid-twentieth century. This new household structure intensifies inequality even though it emerges from a more egalitarian gender order in which women work, earn, and choose partners more freely. Milanović stresses the paradox: social changes that look progressive at the level of gender relations can still magnify class inequality when they bring two high-end earnings streams into the same family. Over time, these households combine strong labor incomes, large savings, asset accumulation, and high investment in children’s education, making status reproduction more durable.
The fifth element closes the circle by moving from economics to politics. For Milanović, money in American politics is not an accidental distortion but part of the mechanism by which inequality reproduces itself. Campaigns are massively expensive, lobbying is pervasive, and elected officials are far more responsive to the preferences of affluent constituents than to those of the poor or even the middle class. Low participation among poorer voters, felon disenfranchisement, gerrymandering, and structural barriers to alternative parties all reinforce the asymmetry. The rich influence policy, policy protects the rich, and the gains thereby produced further increase the rich’s political power. That is why he describes the United States as moving toward plutocracy: formally democratic institutions remain in place, but effective influence becomes increasingly proportional to income and wealth.
When Milanović compares China and the United States through the lens of Kuznets waves, the contrast is stark. China may be reaching the descending portion of the first wave; the United States seems still to be climbing or near the top of the second. That difference is not merely academic. It helps explain why global inequality can fall at the same time that political strain rises inside rich democracies. The gains of Asian catch-up can reduce inequality between the world’s citizens even while the internal social contracts of Western countries deteriorate.
That deterioration is most visible in the decline of the middle class, which Milanović treats as a defining political fact of the contemporary West. Across advanced democracies, but especially in the United States and the United Kingdom, the middle class has become both smaller and weaker relative to the top. Its share of total income and consumption has fallen, while the share going to the top 5 percent has risen. This changes not only distribution but also the structure of production and public policy. Firms increasingly cater to luxury consumption; the affluent can exit public systems for private education and health; support for universal public goods erodes; and resources shift toward security, policing, and what Milanović, borrowing from Marxian vocabulary, calls guard labor. The result is “social separatism”: a society in which classes no longer inhabit the same institutions or even the same social world.
From there the chapter makes its most overtly political move. Milanović argues that capitalism as an economic system is not under immediate ideological threat. No coherent alternative has comparable global weight. But democratic capitalism is another matter. Capitalism and democracy are historically separable, and rising inequality can pry them apart again. The middle class has long functioned as the social base that restrains both oligarchic domination and destabilizing expropriation. As that middle weakens, democracy loses one of its chief supports. What emerges is not necessarily dictatorship in the old sense. It is a drift toward regimes that preserve democratic language while hollowing out democratic substance.
He sees two main versions of that drift. The American version is plutocracy: globalization continues, capitalism remains dynamic, elections persist, but policy is shaped overwhelmingly by wealth. The European version is populism or nativism: because Europe is less easily captured by money but more intensely strained by migration, lower-middle and middle strata react against globalization through nationalist and anti-immigrant politics. Milanović treats migration as part of globalization, not as a separate issue. Europe faces the movement of goods and capital, but also the movement of people from poorer regions into aging welfare states that are uncertain about assimilation and identity. That combination fuels parties that oppose immigration, redefine citizenship more narrowly, and push mainstream politics rightward.
The chapter closes on a bleak but precise diagnosis. Rising inequality does not threaten the immediate survival of capitalism. What it threatens is the compatibility between capitalism, democracy, and globalization. The United States tends to resolve the tension by preserving globalization while emptying democracy from within. Europe tends to resolve it by defending a narrowed democratic community while pushing back against aspects of globalization, especially migration. Neither path is stable in the long run, and neither deserves romantic treatment. For Milanović, the future of global inequality is therefore double-edged: the world may become somewhat less unequal across countries, yet politically more brittle within them. That is the central tension Chapter 4 tries to name.
Chapter 5 — What Next? Ten Short Reflections on the Future of Income Inequality and Globalization
In the book’s final chapter, Milanovic shifts from diagnosis to prognosis. He treats the chapter as a recap of the book’s central arguments, a forecast about the next decades, and a programmatic statement about what kinds of reforms may still be possible in a globalized economy. Rather than building one continuous argument, he organizes the discussion around ten questions, each of them aimed at a major dimension of inequality in the twenty-first century. The result is a chapter that is less technical than some earlier ones, but more synthetic and strategic: it asks what the previous analysis implies for politics, institutions, and the future shape of capitalism.
The first major point is that global inequality in this century will be determined by two broad forces: international convergence and Kuznets waves. Convergence means that poorer countries, especially in Asia, continue catching up with richer Western economies. Milanovic argues that this tendency still looks strong, even if China itself eventually slows, because several other populous Asian countries—such as India, Indonesia, Bangladesh, Thailand, and Vietnam—can continue the work that China began. This matters because the reduction of global inequality has depended heavily on the rise of Asian incomes, and in the future that process may become more resilient precisely because it will no longer depend on a single country.
He links that convergence to a historic eastward shift in the center of world economic gravity. Drawing on Danny Quah’s work, Milanovic notes that the midpoint of global output has moved from the mid-Atlantic toward Asia and is likely to end up, by mid-century, between India and China. That geographical shift has a direct distributive meaning: as large Asian populations move upward, the distance between rich-country incomes and poor-country incomes narrows. But Milanovic adds an important complication: China’s role is no longer unambiguously equalizing. For decades, Chinese growth reduced global inequality because it lifted a gigantic population from very low income levels; later, once China has moved far above poorer countries, its continued growth may widen the gap between China and places that remain stuck, especially in Africa. So future equalization will depend less on China alone and more on whether growth broadens across the rest of Asia and, more uncertainly, beyond it.
The Kuznets part of the story is equally uncertain. Milanovic does not assume that rich countries and China have already turned decisively onto the downward side of their inequality waves. In China, corruption, regional disparities, and the growing importance of private capital may keep inequality high for longer than optimists expect. In the United States, the concentration of capital, the merging of high labor income and high capital income in the same people, and the political influence of the rich may delay or block any equalizing turn. That leads him to a political conclusion: inequality is not just an economic pattern but a force that can reshape regimes. In the United States, it may deepen plutocratic tendencies; in China, it may destabilize the current political order and force either greater authoritarian nationalism or some move toward democratization, both of which could come with severe economic disruption.
The second reflection turns to the fate of the middle classes in rich countries, and here Milanovic is grim. He argues that workers in advanced economies are squeezed from above by their own national elites, who continue to capture the gains of globalization, and from below by workers in poorer countries, whose labor is cheaper and increasingly integrated into global production. Automation intensifies that pressure. The likely result is a sharper polarization between a small, very successful upper stratum and a much larger service class whose work remains necessary precisely because it cannot be fully replaced by machines. This is not a story in which education cleanly rescues the middle class, because many rich societies are already near the practical ceiling of mass educational expansion and because many service workers are already more educated than their jobs require.
For Milanovic, this means that skill differences will explain less and less of the gap between the winners and the rest. Chance, family background, and access to elite networks will matter more. He suggests that in many of the most lucrative occupations the observable difference in talent or schooling between the top 1 percent and the merely comfortable top 10 percent is too small to explain the gigantic income gap. As societies become more uniformly educated, the old faith that schooling alone can justify wage hierarchies loses plausibility. In its place comes a system in which dynasties reproduce themselves through social connections, inherited capital, early advantages, and proximity to hiring gatekeepers.
That is why Milanovic describes the emerging order as a new capitalism in which the contradiction between labor and capital is resolved at the top by fusing both into the same people. The richest are increasingly both top earners and major owners of capital. He compares this order to a casino, but not a fair one: those who start ahead keep receiving better odds. The mechanism begins very early in life. Children of affluent, educated parents are placed on the track to elite schools, elite universities, and elite jobs from the beginning, while poorer children lack the same information, cultural capital, and money. The consequence is not only injustice but instability. Milanovic leaves open the possibility that political organization by the losers, or a technological shift that harms today’s highly paid professions, could change the trajectory; but absent that, the system tends toward entrenched inequality.
The third reflection asks how rich welfare states could reduce inequality again. Milanovic’s answer is that the twentieth century’s main equalizing tools are far less usable under globalization. Heavy taxation of capital is difficult when capital can move across borders with ease; taxing top labor incomes also becomes harder when executives and professionals can relocate internationally. Tax havens, legal arbitrage, and the political power of asset owners further weaken the redistributive capacity of national governments. Meanwhile, the other historical mechanisms that compressed inequality in the past—hyperinflation, large-scale nationalization, and war—are either politically illegitimate, economically destructive, or plainly undesirable. The old path to equalization, in short, is mostly blocked.
Because of that, Milanovic shifts attention from redistribution after the market to predistribution before the market. The key is to reduce inequality in endowments, above all in the ownership of assets and in access to genuinely valuable education. If wealth and skills were more equally distributed at the starting point, then market incomes themselves would be less unequal, and governments would not need such large tax-and-transfer systems to achieve acceptable final outcomes. He uses rich Asian countries such as Taiwan, South Korea, and Japan to show that a society can have relatively low disposable-income inequality not because the state redistributes massively after the fact, but because market-income inequality is already much lower to begin with. This is an important contrast with much of Western Europe and North America, where the standard model has been to tolerate large market inequalities and then partly offset them through redistribution.
Milanovic therefore proposes a different reform agenda: higher inheritance taxes, policies that broaden asset ownership, mechanisms that encourage firms to distribute shares to workers, and legal-administrative reforms that allow poorer people to formalize and leverage the assets they already possess. But he is not naïve about “people’s capitalism.” Since capital returns are volatile and financial decision-making is complex, broader asset ownership by itself will not equalize society. It has to be combined with a deeper equalization of education. And here he makes a demanding distinction: equal years of schooling are not enough. If elite schools continue to deliver far higher returns and remain effectively reserved for children of affluent families, then formal educational equality is largely cosmetic. Real equalization requires state action to improve the quality of schools broadly and to make access to top educational institutions far less dependent on parental income.
The chapter’s fourth reflection explains why winner-take-all dynamics are likely to persist. Milanovic adopts the language of scalability: some kinds of labor can be sold many times over, while others cannot. A pianist, athlete, lecturer, influencer, or digital creator can perform once and reach millions; a pedicure, taxi ride, or plate of spaghetti can only be sold once to one customer at a time. Where labor is scalable, tiny differences in skill, luck, or visibility can generate enormous differences in income. Technology and globalization intensify this effect because they allow the same service to be replicated, transmitted, and monetized on a worldwide scale. The result is not merely high pay for a few stars, but structurally larger wage spreads within occupations that were once more compressed.
Milanovic also insists on an analytical distinction: not every expansion of market reach is true scalability. A surgeon who operates remotely still sells a discrete unit of labor to a single patient; a professor whose lecture is recorded and sold to thousands is doing something different. The second case is closer to pure scalability, because the same labor effort is monetized repeatedly without being exhausted by use. As more services acquire that characteristic, winner-take-all logic spreads outward from a few celebrity occupations into a widening range of professional and semi-professional work. That is one reason why future inequality may rise even if technology also increases productivity and access.
The fifth reflection is a critique of focusing too narrowly on horizontal inequality, meaning average differences in outcomes between socially defined groups such as men and women, racial groups, or sexual minorities. Milanovic recognizes the immense historical importance of legal and civic equalization, and he notes the real progress made in dismantling overt forms of exclusion. But he argues that categorical equality has often advanced more quickly than income and wealth equality, and that this can create a dangerous illusion: once formal discrimination is reduced and gaps between groups narrow somewhat, societies may congratulate themselves while leaving the broader structure of economic inequality largely intact. In his view, a substantial reduction in overall inequality would also reduce many group-based inequalities, whereas the reverse is not necessarily true.
He gives three reasons for distrusting an exclusive focus on horizontal inequality. First, it encourages fragmentation through identity politics, because each group pursues its own recognition and material adjustment rather than building a broad coalition around the general distribution of power and resources. Second, it can misidentify the cause of a problem by treating it as primarily categorical when it is fundamentally economic. His example is prostitution and sex tourism: even if one imagined a world in which men and women earned similar average wages, the practice could persist so long as deep differences in wealth, bargaining power, and opportunity remained. Third, the politics of formal equality can be comparatively easy for elites to accept, because it does not necessarily threaten the underlying balance between labor and capital. Measures that would improve the position of all workers—higher minimum wages, shorter work weeks, broader parental leave, better labor conditions—are much more likely to face determined opposition.
That leads Milanovic to a Rawlsian point. Formal or meritocratic equality, in which everyone is legally allowed to compete for the same positions, is only a very low level of equality when people begin from radically different starting points. To use his imagery, it is not enough to put everyone on the same starting line if some arrive there in Ferraris and others on bicycles. A politics centered only on identities may succeed in opening the race to all participants, but it does not address the far more decisive question of who begins with what resources. For Milanovic, the real egalitarian challenge starts exactly where that thinner politics stops.
The sixth reflection asks whether labor will remain the neglected factor of production in global governance. Milanovic notes that the world has international institutions for development, debt, trade, public health, and monetary coordination, but almost nothing comparably effective for labor mobility. That absence is not accidental: rich countries have had little interest in placing migration under a genuinely multilateral framework. Yet as globalization makes income gaps more visible and transport easier, the pressure for migration grows. Europe, in his view, may be the first region forced to move toward a more systematic policy, but any serious solution would have to include both receiving and sending countries.
His proposal is not open borders but more orderly migration combined with a rethinking of citizenship. One reason citizens in rich countries resist migration is that citizenship itself functions like a valuable asset, conferring a large “rent” in the form of higher wages, legal protections, and access to services. Milanovic therefore imagines intermediate forms of membership—statuses less valuable than full citizenship but more permissive than today’s rigid outsider status. Such arrangements might involve higher taxes, reduced benefits, or required return periods, and they could make cross-border labor mobility more politically acceptable. Even so, he is clear that migration cannot substitute for development: poor countries still need growth at home.
That claim sets up the seventh reflection, where Milanovic defends economic growth against fashionable skepticism. Growth, he argues, remains the most powerful instrument for reducing poverty and global inequality. Calls for slowing growth tend to come from comfortable people in rich countries whose own behavior reveals that they still care intensely about income and material gain. He also argues that environmental debates often misplace responsibility. The world’s richest people are the biggest contributors to carbon emissions, yet they are frequently the ones urging restraint on the growth of poorer countries. If rising living standards among the poor threaten ecological sustainability, the first and largest sacrifices should come from the rich, not from those who have barely begun to escape deprivation. The real balancing act, then, is among three variables: growth in poor countries, migration, and environmental sustainability.
The eighth and ninth reflections broaden the argument from policy to intellectual method. Milanovic believes concern with inequality is not a temporary fashion in economics but a durable shift, because the discipline is moving away from representative agents and averages toward heterogeneity. Once economists begin to analyze variation within populations rather than only average outcomes, inequality becomes unavoidable as an organizing problem. The Great Recession, in his view, discredited the old paradigm strongly enough that this new focus is likely to endure. At the same time, he argues that methodological nationalism—the habit of treating the nation-state as the obvious and self-contained unit of analysis—is becoming less adequate. The euro, dollarization, EU law, multinational transfer pricing, offshore wealth, cross-border pensions, remittances, dual citizenships, and even the possibility of private monies all show that national accounting categories increasingly fail to capture where income is earned, held, taxed, and spent.
The chapter ends by insisting that national analysis still matters, but only as one layer within a larger global framework. Questions such as equality of opportunity, the rule of law, the distributional effect of migration, and even the meaning of GDP and GNP can no longer be understood purely within national borders. In that sense, the whole book is an argument for adding a global level of analysis to the national one. Yet Milanovic closes on a deliberately unsentimental note: globalization will not dissolve inequality by itself. There is no built-in mechanism ensuring that integration spreads gains evenly. On the contrary, globalization creates new winners, new hierarchies, and new forms of concentration. The future may contain less poverty and a shifting world center of gravity, but it will not contain equality unless institutions and politics actively force the issue.
See also
- wolf_crisis_of_democratic_capitalism — Wolf diagnoses the same process of plutocratization and democratic erosion from the failure of democratic capitalism; the two books read as a pair — Milanovic measures the phenomenon, Wolf treats it normatively.
- fukuyama_identity — The stagnation of the middle class in rich countries that Milanovic describes in distributional terms is the same material base that fuels the politics of thymos and recognition that Fukuyama analyzes; the elephant curve is the economic substrate of identitarian populism.
- fukuyama_political_order_decay_resumo — The decline of redistributive institutions in rich countries and the plutocratic capture of politics that Milanovic identifies as the American “perfect storm” is the same phenomenon that Fukuyama treats as repatrimonialization and institutional decay.
- neoliberalism — Milanovic’s TOP triad (technology, openness, policy) as the engine of the second Kuznets wave is the structural history of what the concept of neoliberalism describes politically.
- direita_radical — The reaction of lower-middle European classes to globalization — via nativist and anti-immigration parties — is exactly the scenario Milanovic predicts as the “European version” of the democratic crisis; the book provides the economic foundation for what the concept describes electorally.
- rawls — Chapter 3 confronts Rawls directly: the inconsistency between treating birth as morally arbitrary within societies and ignoring the citizenship premium across them is one of the book’s most carefully worked philosophical tensions.