The Elephant Graph

Branko Milanovic is a Serbian-American economist who specializes in the problems of inequality.

According to Wikipedia, “Milanovic is currently a visiting Professor at the City University of New York Graduate Center.  He was formerly the lead economist in the World Bank’s research department, visiting professor at University of Maryland and Johns Hopkins University.  Between 2003 and 2005 he was senior associate at Carnegie Endowment for International Peace in Washington. “

I know Milanovic mostly from his terrific books on the problems of  inequality.   The one thing that jumps immediately into my mind when I read or hear his name is The Elephant Graph.   This graph, which was created by Milanovic, is probably the hottest graph in global economics right now.  The Elephant Graph makes several of the most important facts of the contemporary world crystal clear.  You can read the whole story of this graph in Milanovic’s book Global Inequality: A new approach for the age of Globalization.  The book was written in 2016.

Below is Milanovic’s Elephant Graph

freund20161130_figure1.jpeg

Here is what this graph means.  The horizontal scale from 0 to 100 at the bottom represents the wealth of everyone in the world.  On the left end of this scale are the world’s poorest people and on the far right are the world’s richest people.

The vertical scale on the left side of the graph is how much everyone’s income has grown.

So if you look at, for instance, 80 on the bottom scale, you see the people who are in the 80th percentile of world wealth.  This turns out to be the working classes of the first world.  The fact that the graph is on the zero mark tells us that the income of the working classes in America and Britten and Europe haven’t gone up at all in the 20 years covered by the graph.

The time scale of the graph is between 1988 and 2008. This twenty-year period represents the main years of globalism which coincide almost exactly with the years from the fall of the Berlin Wall to the global financial crisis.  So the graph is telling you the effects of globalism on very poor people all the way up to the effects it had on the worlds richest people.

So here is how to read this graph.

The income of the worlds poorest, the low point on the left, has risen only about 12 percent between 1988 and 2008.  Pretty much nothing.

The high point above the elephants head represents the huge income growth experienced by people of the third world, people who live in places like China and India.  These are people like the Chinese peasants whose incomes rose from modest levels to a level that allowed them to lead prosperous lives in the New China and New India.  Many of these people went from being dirt poor peasants barely able to grow enough food to survive to urban factory workers living almost comfortable lives.  These people’s income, as can be seen in the graph, has risen about 70%.  The people are the winners of globalism

The low point of the graph at the number 80 represents the lower middle class of the first world.  These people are the working classes of America and Britain and Europe.  The incomes of these people has risen not at all, 0%, in the years measured by the graph.  These people are the forgotten losers of globalism.

The high point of the graph on the right represents how much the incomes of the very richest people in the world have risen, about 60%.  These are the very small numbers of people who made out like bandits during the peak years of globalism.

This one graph shows the information necessary to understand many of the most pressing problems of the world right now.

Globalism has helped the former peasants of Asia and other third world places enormously.  These are the people who experienced the huge economic gains you sometimes read about.  Here is where hunger and poverty have been almost banished.  Here is where medicine and modern heath services have made their most impressive gains.  Hunger has disappeared, death rates have plunged, longevity has sky rocketed and infant death rates are very low.

At the same time incomes of the Western working classes have completely stagnated.  And of course these people are very angry.  They see their jobs as being taken by the new Asian middle classes or perhaps by the poor people of Mexico and South America.    And they see their own health, hopes, jobs  and future becoming less and less secure. These are the populists who, all over the western world, have begun to vote for anyone who promises to bring back the good times.  And the hopelessness of these people has been exploited by the new autocrats who are cropping up all over the world.

And then there are the 1% on the far right of the graph who have sucked up all the money from the poorer classes.  These are mainly financiers, and industrialists and energy tycoons who feed off the rest of us.

Pretty good graph, huh?

The image at the top of this page is of colorful mudstone rocks
in McDonald Lake in Glacier National Park
in Montana.  

 

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