My reading has been somewhat protracted as I got the silly idea of
working at work. Anyhoo, I am on page 105 in "The Haves and the Have
Nots" by Branko Milanovic and wanted to share my impressions. This is
one of those books that are useful but annoying to read. M. is
naturally fond of the subject of inequality but to him inequality is
the major if not the sole source of all his theorizing. This is like
trying figure out why the cars run by listening to the sound of the
engine but not caring to look under the hood. Milanovic's theories and
explanations are shallow and naive at best.

But let us start with the interesting and useful things first. Naah,
what's the fun in that? M. thinks that the reader would not be able to
handle tables and graphs. There are none in the book. It gets
annoying. For example, he discusses the Gini coefficient, yet he
mentions the coefficients of various countries, occasionally multiple
times, across several pages pages without bothering to provide a simple
table. I had to look up the coefficients table on the web.

One of the sidebars (he cutely calls them vignettes) is fun. He
compares the riches of the famously rich people in history. As a basis
for comparison he uses the number of workers (of that country) the
person would be able to afford on the interest of off his
fortune. This is almost Marxian. So, Marcus Crassus (of Spartacus
Fame) - 32K people; Andrew Carnegie - 48K; Rockefeller - 116K, (poor)
Bill Gates - 75,000; Mikhail Khodorkovsky of Russia almost took the
cake with 250K people but was upstaged by Mexican Carlos Slim with
$440K Mexicans. Milanovic surmises that Khodorkovsky is a lot more
dangerous to the powers that be than US moguls and thus he sits in
jail.

Another one of his vignettes talks about inequality of the roman
empire compared to the inequality of the US. M. says that the top to
bottom was about as unequal yet most people in Rome lived at or just
above the subsistence level so there were no "middle class".

The vignette on egalitarianism of the Soviet Union and shadowy income
and privilege distribution is annoying. He might be even right in his
statements, but with his hatchet job of approach to history and society
I still want to kick him in the face.

There was a vignette of comparison of arrondissement (districts) of
Paris and their migration through history. There was no rhyme or
reason to it that I can discern.

There was an interesting discussion of income redistribution through
taxation. There was *gasp* a graph: the bottom decile gains slightly
less than 4% of income in the US and over 6% in Germany. It turns out
that the middle class deciles (5th and 6th) actually lose through the
redistribution yet consistently vote for it. M. is puzzled by it but
says that the middle class gains some security that way (in case of
injury or for retirement).

Then comes the chapter with one of the major theses of the
book. M. compares the breakups of Yugoslavia, USSR and the current
situation in China. It turns out in the USSR the gap between the GDP
between the poorest republic and the richest was 6 to 1 (compared to
US' states 1.5 to 1) and Yugoslavia's was 8 to 1. He claims this
inequality was the major reason for these countries' collapse. He then
talks about China where the per capita GDP difference between
provinces is 10 to 1. On the basis of this M. predicts the breakup and
dissolution of mainland China. No never mind the differences in ethnic
makeup, historical circumstance and whatever not between his examples.

Presently, M. described Pareto's "law" of income distribution (there
is always about the same proportion of rich people, Pareto calls them
aristocracies, regardless of the particular political or economic
system of the society) and Kuznets' curve (primitive societies were
about equal of the subsistence level then became more unequal and
then, as modern democracies developed, became more equal again). It is
amazing as all this (which is essentially glorified listening to the
car's engine without bothering to explain how it works) is taken
seriously as science. Naturally, Marx is roundly dismissed in a couple
of sentences.

Now M. introduced purchasing power dollars (PPP$) which is often used
and always puzzled me (the money is indexed by the basket of goods and
services they can buy). The Japanese earn more money than the
Americans yet, their goods are more expensive so the Americans come
out ahead in PPP$.

Milosevic, I mean Milanovic, improves significantly once he gives up
his meager attempts at trying to provide any kind of serious analysis
of the causes of inequality and just starts to slice and dice the data
to paint a rather grim picture of this unequal world.

And M. is actually decent at it. By using the data he thoroughly
debunks the neoclassical myths that are often stuck in people's heads.
The main thesis of what he calls globalization is that the countries'
incomes would converge since poor countries' income would grow faster
than the rich ones. The reasons are:

- Poor countries would get most direct foreign investments because
  they have lower wages and higher return on investments. It turns out
  the opposite is true. The capital mostly flows from rich countries
  to other rich countries. China does quite well as far as third world
  countries go $138 bls in direct foreign investments (DFI) in
  2007. Meantime, the US got $240 bls. Actually, China gets about the
  same as the Netherlands and worse than France and Great Britain.

  China is, however, an exception. 2007 was a breakout year for India:
  it attracted $23 bls, half as much as Australia. Before it averaged
  $4-6 bls. The capitalists of rich countries tend to lend money to
  each other afraid of the risks associated with investing in the
  third world. What's worse, for the same reason, the investments are
  actually flowing upwards from the poor to the rich countries.

- Poor countries can have access to technologies already developed in
  the first world: it is easier to copy than to design anew. Aha, as
  soon as microsofts and the pharmaceuticals stop charging for
  licensing everything would be peachy.

- The poor countries would "borrow" the ideas as far as governance and
  economic policies that work. Yeah right, every country would just
  adopt the american-style bourgeois democracy as soon as they get rid
  of their dictators.

Then, Milanovic kicks Marx again for a chapter. I just ignored him for
he knows not what he does.

Thankfully, Milanovic started using graphs. He breaks up the
populations of different incomes into ventiles (one-twentieths),
averages their income and compares those. The results are
striking. The poorest ventile in the US is richer than the richest in
India. And that is with US being rather unequal (Gini is in mid-40ies)

Speaking of Gini-s. Milanovic calculates that world's total Gini
coefficient is between 70 and 80. For comparison, Brazil is a very
unequal country where some of the world's poorest and richest people
live. Its Gini is in the 60-ies. M. talks about the dynamics of
inequality. It actually stayed about the same since 1980. However,
that masks the fact that most of the third world countries are getting
comparatively poorer while China and India are getting richer.

You'd think if you save and work hard, you'll make it in the world,
right? It turns out that statistically, 80% of your income is
determined by your citizenship and your strata of birth. The other 20%
goes to for such factors as gender, race, age, luck and, oh, yeah,
work ethics. Naturally, the best way to improve your economic lot is
to immigrate to rich country. Hmm, that sounds familiar, I think
somebody I know has done that. M. talks about the plight of "haraga" -
Africans dying to make it to Europe on makeshift boats.

M. talks about World's "middle class" - people within 25% of the world
median income. In 2005, the median yearly income was PPP $1,225. Also,
turns out the world does not have much of a middle class: only 14% are
within the bracket. For comparison, the figure is about 40% for
developed countries.

M. compares inequality of Europe and the US. The US is a lot more
unequal to any of the european countries. However, the states within
the Union are relatively homogeneous. The ratio between per capita
income in the richest and poorest state is 1.5. The ratio in Europe is
7 to 1. The ventiles of the richest (Luxembourg) and the poorest
(Romania) countries do not overlap. That is, statistically, all
Luxembourgers are richer than all Romanians.

Another interesting chapter is on colonies. The idea is that the
maximum amount that can be extracted from the country is when all the
population is kept at the subsistence level while a tiny
(statistically negligible) elite appropriates all the
surplus. Naturally, the larger the GDP per capita in a country, the
more can be appropriated. They draw a curve call Inequality Possibility
Frontier for countries with different GDP per capita. Colonies such as
India, Nuevo Espana (Mexico), Kenya lie neatly near this curve. The
colonizers sucked these countries dry.