Global Inequality: From Class to Location, from Proletarians to Migrants:By Branko Milanovic, The World Bank policy research working paper 5820
In the mid-19th century, it made sense to talk of the common interests of workers of all countries. The Communist Manifesto’s famous call to workers of all countries to unite, therefore, carried a lot of appeal. A hundred-and-fifty years later, there are precious few shared interests between the workers in the rich West and those in the developing countries. The reason: A huge increase in the living standards of the poorest people in the West. No wonder then that the workers in the West have long ago shed all revolutionary pretensions.
The unity of the international working class is today a pipe dream.
To prove that point, Branko Milanovic gives us some telling statistics. Around 1850, using Angus Maddison’s data, the ratio between the top and bottom of country mean incomes was less than 4 to 1. Consequently, says Milanovic, the better-off workers who earned incomes close to the national mean could not differ from each other by a factor of 4 to 1 in terms of their standard of living. For poorer workers in each country, the differences would be even less. Milanovic cites a study by Broadberry and Gupta (2006) that showed that in the period 1800-1849, the real wage of an unskilled daily labourer in India (among the poorest countries in the world then) was about 30% of the wage of a similar worker in England.
What about inequality between countries today? Using Maddison’s numbers again, the top to bottom ratio, which was 4 to 1 in 1850, has increased to 100 to 1 in 2007. The mean income in the richest country is now 100 times the mean income in the poorest. That’s because while some parts of the world have the same per capita income as they had 150 or more years ago, incomes in the developed countries have grown exponentially. Not that developing countries growing rapidly in recent years fare much better. Consider, for example, the difference in the per capita incomes of the UK and India (adjusted for the differential price levels between the countries). In 1850, Britain’s per capita income was five times India’s. In 2009, it was higher than 10 times. The UK’s real per capita income is five times China’s today, while in the 1850s it was less than four times.
What’s more, the real wage gaps are the highest for unskilled workers. Building workers in New York, for instance, have real income 9.8 times that of their counterparts in Delhi. Skilled industrial workers in New York earn 4.2 times the real incomes of their comrades in Delhi, and engineers earn 2.9 times. In a world where location determines incomes, there’s no such thing as international “class solidarity”.
Milanovic says that in the 21st century, it’s going to be migration that will be key to improving the incomes of the poorest and, indeed, add to global growth.
The problem, though, is that many cultures have a problem adjusting to increased migration. Says the author, “From the facts that (i) most of today’s global income inequality is due to differences in mean incomes between the countries, (ii) in an era of globalization such differences are well-known to people in poor countries, and (iii) the costs of moving from one place to another are not prohibitive, it follows that migration, in the absence of significant acceleration of growth in poor countries, will be a great 21st century mechanism of ‘adjustment’.”
The problem is that while the world may have escaped the spectre of a workers’ revolution, large-scale immigration, too, could be equally unpalatable to many in the rich countries.
Illustration by Jayachandran/Mint
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