Inequality is clearly a driving force of economics and politics today: The elections in European and American countries of the last decade saw the rise of populist politicians, who often used inequality developments as a source of dissatisfaction to justify a nationalistic policy agenda. The higher the increase of inequality in the last 40 years, the more successful these populist politicians were across countries. Branko Milanovic has written an excellent and important book on global inequality, and while it addresses a large number of issues, the role of excessive inequality within countries dragging the world towards nationalism and perhaps world war in the future is clearly one of them. In fact, Milanovic refers to early political economists and activists like Rosa Luxemburg, John Hobson, and Vladimir I. Lenin to endogenize WWI: Its underlying reason was the “internal mal-distribution of consumption power” and the imperialist competition for markets. Milanovic warns that high inequality within countries nowadays also bears the risk of stimulating similar conflicts.

While these political and military implications are interesting, the main focus of this book is on “Kuznets waves.” Milanovic expands Simon Kuznets' hypothesis that during modern economic growth inequality first rises due to the entrepreneurial and other skills of a part of the population (among other reasons). Inequality then tends to decline in a second phase due to wider education, egalitarian policies, and other factors. Milanovic conceptualizes this phenomenon as “waves” because inequality rises and falls in long swings that can last half or full centuries. In other words, he emphasizes (in contrast to Kuznets) that there is not only one wave, but that there can be several. Milanovic interprets the recent increases of inequality in the United States and the United Kingdom (and similar milder increases in other countries) as a second round of Kuznets waves, which is caused by similar phenomena as the first set of waves: capital-biased technological developments, globalization, and pro-rich policies. Milanovic mentions that the relative contributions of these factors may vary, and additional ones could be added (such as mating behavior), but he sees them as the most crucial factors.

The author then continues to study the inequality history of ten countries from different world regions more closely. He describes the inequality estimates for the United States, United Kingdom, and Japan as countries with ideal-typical Kuznetsian increase during the nineteenth and early twentieth centuries and decline to the 1960s–1980s. Perhaps Spain can be added here, though the peak inequality was as late as the 1950s. For another set of countries, the downward portion of the Kuznets curve can be shown (Germany, the Netherlands, Italy), whereas Brazil and Chile had a more mixed development. The estimates for Chile by Javier Rodriguez-Weber receive applause by Milanovic for their methodological innovation. Two different estimates for Brazil are shown, one based on social tables, in which for each social group an average income is estimated, which is then converted to a Gini coefficient. The other estimate is based on the ratio between average incomes (GDP per capita) and wages of unskilled workers. Within a period of seven years, the two estimates display one of the maxima of Gini coefficients ever estimated (around 0.60 in 1920), and one value close to minimal inequality (below 0.30 in 1913). Milanovic does not interpret this as a particularly dramatic history of inequality, but agrees with the original authors that income inequality is particularly difficult to estimate. I applaud Milanovic as well as the original authors for presenting these difficulties of estimation publicly. I mention this not only because Brazil is one of the two poorer countries of the early twentieth century that receives a detailed historical treatment in the present book (and hence is important). The main reason is that some readers of this review might feel motivated to work more on long-term inequality developments in poorer countries. For example, even if income inequalities might be difficult to estimate, other methods focusing on health, nutrition, and educational inequalities allow one to perform estimates for comparisons with income inequality. Hence, counter-checking of problematic income Gini coefficients is possible. Adding inequality histories of African, Middle Eastern, and continental Asian countries is also feasible using these methodologies.

Milanovic has been an economist and chief economist at the World Bank for decades, specializing on household budget surveys in developing and developed countries. These are an important source for inequality estimates of the 1990s and thereafter. One of the chapters of this multi-facetted book that fascinated me most was the first one. Milanovic describes the comparative real income gain 1988–2008 of the global top 1 percent, the 80–90 percentiles, and the middle percentiles in comparative perspective. The top 1 percent lives mostly in North America and Western Europe, the 80–90 percent group is mostly the lower middle class in rich countries and the middle percentiles are to a large extent the East Asian populations. The resulting figure is an elephant: a strong increase for the top percent and for the global middle class around the 50^th percentiles, whereas the poorest gained less (especially those below the 10^th percentile) and the lower middle class in the rich countries, which gained almost 0 percent. In absolute gains the top 1 percent gain is even stronger, because the “elephant” figure shows the changes from the initial level—and the initial level was of course much higher for the top 1 percent. This brings us back to the populist policy dilemma—the relatively weak performance of the lower middle class in rich countries and the gains in East Asia are often used by populists as an argument against global trade. It is less often used as an argument against pro-rich taxation policies, as Milanovic argues. In general, Milanovic has written a rich and thought-provoking book that covers many aspects of global inequality history, present and future. Many of these ideas and details cannot be mentioned here. It also becomes clear where World Bank economists like Milanovic see the state of economic historiography and what can be done in the future—and how important it is.