“AN INCREDIBLE EXPLOSION OF INEQUALITY” – with Renowned Economist, Branko Milanovic
By Elizabeth Njambi
We are witnessing a COVID-19 driven explosion in inequality. This week, Oxfam released its annual report, Inequality Kills, showing that the pandemic is killing at least 1 person every 4 seconds, while the ten richest men have doubled their fortunes during this same pandemic. This is the biggest single increase in billionaire wealth in recorded history. Max and Nadia talk to Branko Milanovic, world-renowned authority on inequality, to find out why.
Branko is a Senior Scholar at City University of New York’s Stone Center on Socio-economic Inequality and Centennial Professor at London School of Economic’s International Inequalities Institute (III). He was the Lead Economist in the World Bank’s Research Department for almost 20 years, before leaving to write his book on global income inequality, Worlds Apart (2005). He has since authored three more award-winning books – The Haves and the Have-nots (2011), Global Inequality (2016) and Capitalism, Alone (2019).
[0:13] Nadia: Hello, everyone. Welcome to another episode of EQUALS. This is Nadia. And Max, it's Davos week, right? When the world's richest people on earth typically come together. But this time, I know it's moved online. But it's still a big moment for Oxfam's work on inequality, right?
[0:30] Max: Oh, it's our biggest moment of the year. It's when we release our annual Davos report, looking at the wealth of the world's billionaires (and) the scale of inequality in the world. This year is a particularly special year because the report has a lead author, comrade and co-host, Nabil. So yeah, quite a special moment.
[0:49] Nadia: It is. And he did such a great job. He's a magnificent writer. And I can't believe he managed to get that all done before he went on parental leave a few weeks ago. Amazing.
[0:58] Max: Yeah, no, he did a good job. It's well written. I mean, obviously, I was still the brains behind the whole project. Just in case listeners are in any doubt. …
[1:13] Nadia: I'm sensing some rather explicit professional jealousy here. Is it because Greta Thunberg retweeted him and started following him?
[1:23] Max: Maybe. Maybe just a little bit. I mean I'm green with envy, but I ... think the key moment for me was when he sent me a WhatsApp saying, "Max, it's so bad. I've lost track of my notifications. I've got so many!"
[1:38] Nadia: (Laughs) He knows how to push your buttons.
[1:41] Max: ... I mean, that aside, it is a brilliant report. He's done an amazing job. And so have the many others who contributed. It's such a team effort, the whole Davos moment, inside Oxfam. And it's just a pleasure to work with all these amazing people all over the world. So yeah, it's been a great week.
[2:00] Nadia: ... So, take us through some of the killer facts. … The big one that everyone keeps waiting for every year is, how many more billionaires are there? Or how big has the increase been in billionaire wealth this year? What have we shown?
[2:18] Max: … We’re looking at what's happened to the people at the bottom and the people at the top during COVID-19. And what we saw last year was the richest people in the world had seen their fortunes more or less returned to where they were when the pandemic began, whereas everybody else was still struggling.
And then when we came to look at the billionaire numbers again last summer. I think we were all absolutely astounded at what had happened since then. It looked more like one of those graphs for the Omicron variant. Their fortunes had just shot up in a way that we've never seen before. And that's one of the facts - this is the biggest single increase in billionaire wealth in recorded history. And it's gone up more in the last 20 months since COVID began, than it has in the whole of the 14 years previously put together. So, it's hard to hard to express how much is off the charts this year.
[3:21] Nadia: That is crazy. It's such a big dichotomy between what's happening on the one hand with billionaires and what's happening with the rest of the world. One of the facts that caught my eye was actually - well the title of the report, right? Inequality Kills - that fact that it's killing someone every four seconds. Can you break it down a bit more for me? …
[3:42] Max: … It was a fantastic idea from one of our colleagues, Victoria Harnett. I think we'd all been thinking a lot about the impact of various inequalities on deaths from COVID-19. So, for instance, if you're black in America, you're far more likely to be killed by COVID-19 than if you're white. If you're living in developing countries, you can't access vaccines, you're much more likely to die. …
And then it was Victoria who said, "Could we put a number on that? Could we actually try and make an attempt at least to work out how many people are killed by inequality or putting it more positively, if we were to tackle various inequalities, like access to food or access to health care, how many less people would die on a daily basis?" ...
[4:41] Nadia: It was really powerful to see that come out. And today we're going to talk to someone who is truly one of the most brilliant economists working on inequality, to talk about the scale of this inequality from his perspective. Branko Milanovich is a professor at City University of New York. He also teaches at London School of Economics. He used to be at the World Bank,...
[5:35] Max: Yeah, I was quite intimidated. He's one of my heroes. It was a great interview. And I think it's really interesting. …
An Incredible Explosion of Inequality
[5:50] Nadia: Branko, thank you so much for joining us… In Oxfam's Davos report this year, we really tried hard to highlight how dramatic COVID-19 impact has been on inequality. And there's not much you don't know about the history of inequality. So, in the grand scheme of things, how does this current moment in history compare? How important do you think the pandemic has been to inequality in the world?
[6:28] Branko: You know, I generally tend to be of the sceptic kind of mind. People oftentimes exaggerate the importance of a certain moment. … But I do now, after two years, think that we are really living in a very important moment in history. ...
We know that the GDP of the world and practically of all countries - I think 97 countries - has gone down. (That) leads almost arithmetically to an increase in poverty, even if nothing happens to inequality, because everybody's income would go down. ...
It’s a more difficult story about income inequality. As you know, the World Bank now has this report. It does conclude that, for the first time, maybe in 30 or 35 years, there was either a stop in the decline of inequality or an increase - most likely an increase in income inequality. When you add the distributional data - which are still coming in and are available only for a few countries - then it comes to wealth inequality. And that has, it seems, really got out of bounds with this incredible wealth that has been amassed by the billionaires. And I don't think it was really expected. So, we really do have ... an incredible explosion of inequality. …
I was at first really careful about that. But now I'm really not. ... We have had an explosion of different types of inequalities, of a kind that we have not seen globally in our experience.
Inequality between Countries
[9:04] Nadia: Branko you're most famous for your work on analyzing the way inequality between rich countries and the rest of the world has actually reduced over recent decades. But now it appears that COVID-19 has thrown this into reverse. How worried should we be about this?
[9:21] Branko: That I think it one of my big concerns, in my opinion. … Let's suppose that the rich countries are able to rebound. … They’re rebounding already. And they continue growing. Let's suppose China continues growing. … Well, that leaves us with two large parts of the world - India ... and Africa. Africa did not have catastrophic declines but Africa – and actually, most of the poor countries - (have a) very low rate of vaccination. So, we don't know if maybe they might actually experience really what now the rich countries, like the US, are experiencing with Omicron. And with the increase in the number of cases – which then would mean that essentially, we would not see the end of this epidemic or pandemic very soon – the rate of growth may be low.
So, they're all negative. So then when you put all this together, you can say, well, it could happen that differences between countries continue rising. As I said, it is all hypothetical, because we don't know what will happen. But I think it is certainly a concern. …
[11:01] Nadia: … Beyond the pandemic, what needs to happen to see that inequality between nations start to reduce again? How can we address this once we get past the pandemic even, to make sure it's not a long-term issue?
[11:39] Branko: What was interesting is that the pandemic happened, obviously by accident, at the same point when China is no longer contributing to the reduction in global inequality, and even to the reduction of absolute poverty. ... So that's a very interesting point that we don't have China as the engine of global income reduction. And that means there are two remaining "engines" - (Africa and India). ... But instead of Africa take like 5 or 6 big African countries like Nigeria, Sudan, Ethiopia, South Africa, Congo with large populations. ... If these engines do not work, in other words, if they do not produce sufficient growth, then we would have a situation of an increase in inequality. ... Not directly related to the pandemic, but to the inability of those countries to generate high rate of growth. ... Issues …were there before pandemic. ... So I think, in that sense I've become somewhat pessimistic. But of course, the solution is really increasing the rate of growth of those countries, and obviously, reducing inequality. ...
The Impact of Government Support
[13:36] Max: It is absolutely true that these trends were there ... long before the pandemic. But it's also true that COVID-19 has added fuel to the inequality fire in a huge way. And a very big part of this increase in billionaire wealth that we've seen during the pandemic is itself a byproduct of the huge amount of money that was poured into the economies of rich nations by governments to kind of support the market to support individuals. How do you think that government support has impacted on inequality in rich nations?
[14:16] Branko: The rich countries were able to engage into extremely high amounts of government spending. That's something that we have not seen, actually ever, I think, in history ... except in the case of war, when you had a large increase in government spending. For example, in the UK and the US in the 1940s. But (this) was a different spending. It was not money being paid to people to compensate for the loss of a job. It was money paid to produce things or missiles, or ... airplanes.
But now we had like 20% of GDP in the US - I think it's even more than 20% - being used as income support. That's ... never (been) seen before. And that's why when you look at the US First Data publish for 2020, the US shows a decline of inequality. That's very important actually. The US in 2020, according to the current population survey has a decline of inequality. I've seen in some new data that Conchita D'Ambrosio has shown for Europe, … the first numbers show a decline of inequality. So, in my sense, ...West European rich countries have been able to reduce (income) inequality during that period because of such huge transfers. ... Now, the wealth inequalities, as we see it in the United States has, I think... probably gone up.
But ... let me just say that option of redistribution was not open to countries that are not rich enough. India could not distribute 20% of GDP.
Wealth Inequality in “Liberal Capitalist Democracies”
[16:03] Max: Branko, what do you think is the impact of this growing wealth inequality on what you call liberal capitalist democracies? You know, the Western rich countries? Does it worry you?
[16:15] Branko: I think that the impact is, in my opinion, negative. ... Today's rich people - and exceedingly rich people - are able to exercise more and more of political influence. The US, I think is the best example because of the large expenses that are necessitated during the electoral process. I mentioned that in Capitalism Alone.
There are numbers that have been studied of electoral contributions, … in 2016, ... 1% of the top 1%, contributed 40% of the electoral contributions. When you look at the top 10%, they contribute practically 90%. I don't think there was any expenditure, even expenditure of private jets, that is as heavily concentrated as the expenditure on electoral support.
And then the question that you ask yourself, "Why are these people who are so rich spending that (much) money?" ... Hillary Clinton, who got lots of money would tell you, Well, you know, they're just spending because they like this or that. So, it doesn't influence me. But you know, they would be crazy! People have been fighting for each dollar over their whole life are now taking billions and just wasting. They're not wasting them. They're actually paying for the candidates that they believe are going to protect them, and to make policies in their own interest. And moreover, what I see, and think is very dangerous - and that's again, as the case of Jeff Besos and the Washington Post - is that more and more people are essentially buying ... media. ... The media is very crucial to make people to think one or the other way. So, in that sense, I think this is a very dangerous development. ... It is dangerous because of the political influence. I think Angus Deaton actually rightly emphasizes this political channel, whereby inequality particularly in wealth actually has a huge impact.
[18:43] Nadia: Branko, we've reached the end of our time here. Sorry, Max, did you want to add on that?
[18:49] Max: I'd love to talk all night about it.
[18:54] Nadia: Thank you so much for taking the time to be with us. It is truly a scary time in history. And I'm glad that we can have these conversations with such great minds such as yourself.
[19:06] Branko: Well, thank you very much. It is a pleasure. It was really an excellent conversation. The time went so quickly that I didn't even realize that we came to the end. Thank you very much. Thank you.
[19:26] Nadia: … I am somehow way more fearful after this interview. I know we've been saying it for a while. We've seen the trends. We've seen the data. But somehow when Branko Milanovich says that there's been an explosion in inequality that should be seriously worrying us, I am way more scared now.
[19:45] Max: I think it is really scary. I think we are witnessing an absolutely historic explosion in inequality. And that's so awful for so many people.
But you know what governments do in the next year or two, will either - as your work on the World Bank and the IMF shows - double down and we could see this increase kind of cemented in forever, or they could really do the kinds of things that could turn it around.
[20:18] Max: … I do think our key message this week, in the report, apart from all these scary statistics, was this demand for greater taxation of the richest. And I think that's really cut through. And I think we are seeing a shift in public opinion and much, much more politicians talking about the necessity of taxing wealth more. So, I think that's where my hope is. I think, if we fight hard enough, we will see greater and higher taxes on rich people in the next few years as a result of the impact of this pandemic. And that has to be a good thing.
Please do share the episode on your social media. And follow us on Twitter @EQUALSHope.
If you’re joining us on EQUALS for the first time, tune in to our earlier interviews – from talking with the award-winning journalist Gary Younge on what we can learn from Martin Luther King Jr to fight inequality, to best-selling author Anand Giridharadas on whether we need billionaires, Zambian music artist PilAto on the power of music, thinker Ece Temelkuran on beating fascism, climate activist Hindou Ibrahim on nature, and the Managing Director of the International Monetary Fund Kristalina Georgieva on what comes after the pandemic.
Elizabeth Njambi is the Producer of the EQUALS Podcast. She also manages the EQUALS Blog. She’s a Kenyan Advocate passionate about access to justice: Founder and CEO of Wakili.sha Initiative and Co-host of the Wakili.sha Podcast.