The Gini out of the bottle. An interview with Branko Milanovic

I tried to accomplish two things: to enjoy myself while writing the vignettes, and to show to the readers that many of the dry concepts of economics are not about “economic agents’ (as people are called in economics) or “rational expectations’, or “efficient markets’ etc. but about people like themselves, or famous people, or fictional characters. And that they, the readers, have seldom made this transition, that is, realized that economics, and income distribution, is truly about people, about how they make and lose money, how the rich influence political process, about who pays taxes, why countries rise and fall, why always the same football teams win, even about how high inequality might have triggered the current crisis. All of these are, I think, topics that concern us all, frequently on a daily basis, and economists obfuscate them by using an impenetrable jargon.

S.P. – In France, writers like Victor Hugo and Emile Zola produced an impressive work on the social conditions and inequalities of their era. And one of the most famous vignettes of your book is based on Tolstoy’s novel Anna Karenina. You also referred to Jane Austen’s Pride and Prejudice... Is literature a tool as efficient as economics to understand, observe and explain inequalities? And if so, is literature still a potent force to sensitize people about inequalities in today’s world, or is economics better at doing it?

B.M. – The European literature of the 19th century, and French in particular, are a real treasure trove of information on European societies at the time and thus on income distribution. The great novels of that time were concerned to describe societies as they were, to look at individual fates within the overall pattern of social evolution, and since money played such an important role, the books are full of detailed data on incomes, wages, cost of living, prices of things etc. This is true of Victor Hugo (whose books I know less), and of course of Zola and Balzac, or Dickens. I believe that Balzac’s Comédie Humaine could be easily converted into an empirical study of income inequality and income mobility of the French society of the time. Balzac indeed saw it as the portrait of a whole society. Pride and Prejudice and Anna Karenina are more limited in their scope (particularly the former), but they focus on something that I found interesting: incomes at the top of the wealth pyramid, huge income differences between the well off and those extremely rich, and on the position of women whose often only path to comfortable or wealthy living was through marriage. This is why marriages and money, ‘alliances’ or “misalliances’ had such an importance in the literature of the time.

I do not know well today’s literature. A clear change seems to me to have occurred in the last century. The objective is less to present a tapestry of a society and rather to focus on individuals, their internal life. I think that in principle such a literature is much less critical of social arrangements, mostly because it takes them for given, or, if critical, regards them as reflecting basic human malaise, an immutable human condition. To take an example, I liked and have read almost all of Sartre and Camus but you will not find hardly any numbers in their books about how much money somebody makes or how much things cost. This, despite Sartre’s ostensible political leftism. By that measure indeed Balzac was much more leftist than Sartre. Similarly, you will not find anything like that in the seven volumes of Proust despite the fact that his work is largely about society and change in fortunes (often, literally, change in wealth) among the top income class. But do we know how much Mme. de Guermantes makes per year? How richer is she than Swann? Or for that matter, what is the income of the narrator’s father?

I do not see today’s literature as a very potent force for change. I think that it has lost the importance which it had in the 19th century Europe, Russia, and the United States. Today, you have hysterias about this or that book, and no sooner had the book been read, or rather semi-read, it is consigned to oblivion.

S.P. – In today’s landscape, where do you see the Tolstoys and the Austens of the world -- authors and artists offering detailed views about inequalities?

B.M. – I think that this role has been “specialized’ like many other roles in modern societies. It belongs now to the economists and to political philosophers. I see these two groups (combined perhaps with sociologists to the extent that they are willing to study serious social phenomena rather than the minutiae of human behavior), as the people, pushed by their professional interests perhaps, who can say something about inequalities in the societies in which we live. And say something that is not merely “guesses’, or “feelings’ but is based on empirical evidence or (in the case of political philosophers) on serious study and analysis of the way societies can or should be organized.

To be clear I want to give one example. Consider the current movement of the indignados, the movement of (as the slogan says) “99 percent vs. 1 percent’. But if we ask where, in the global income distribution, are many of these “99 percent’ who demonstrate in rich countries, we find that they are in the upper portion of the global income distribution, say around the 80th percentile. In other words, they are richer than 4/5th of the people living in the world. Now, it is not an argument why they should not demonstrate, but this empirical fact immediately opens up the next question, the one addressed by political philosophers.

Suppose, not wholly unrealistically, that globalization works in such a way as to increase incomes of some of these “other’ 4/5th of mankind, those living in China, India, Africa, and reduces incomes of those who demonstrate in the streets of the rich countries. What should be our answer to that? Should we look at what is better for the world, and say to these “99 percent’: you guys are already rich by world standards, let now some others, who are ready to do the same job for a fraction of the money you want, get it, and improve their own lot a bit, acquire hot water, or give