Five Things You Might Not Know About Inequality

Ed. note: This is the second post in a TP Ideas symposium on Branko Milanovic’s The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality. The first is here and the third is here.

Branko Milanovic’s book is a treasure trove of information and insight about inequality both within nations and across countries and populations. In the spirit of reducing inequalities of knowledge between readers of the book and those who haven’t yet had time to flip through it, here is a list of some of the more interesting findings and conclusions from his research:

1. John Rockefeller was the richest person ever. Comparing incomes across eras (adjusted as best as possible to a common standard that measures wealth and income in relation to historical and global context), John D. Rockefeller is probably the richest person in history because his wealth at its height in 1937 (about $1.4 billion) allowed him to command the most labor of others (about 116,000 people) in the then richest country in the world. “The people whom he [Rockefeller] could hire would easily fill Pasadena’s Rose Bowl, and even quite a few would have remained outside of the gates.”

This puts Rockefeller’s wealth above that of the rich Roman Marcus Crassus who could command the labor of around 32,000 people; Andrew Carnegie who could command the labor of about 48,000 people; and Bill Gates who could hire about 75,000 people. Mexican billionaire Carlos Slim is probably the richest person locally, with wealth capable of commanding the labor of around 400,000 people (but the low overall wealth of Mexicans make this less commanding than Rockefeller who was at his height of wealth in a comparatively richer country.)


2. Communism improved income inequality, but created new forms of hierarchy in its place. Socialist countries like Russia, Hungary and Poland recorded some of the lowest measures of inequality in the post-war era. How? Basically by reducing the wealth and income of the then richest people in these respective countries and implementing full employment policies, free education, and other transfers to level incomes among people. However, these policies took away nearly all incentives to work harder since “individual education, skill, and the like are immaterial” in societies like these. In turn, economic productivity in communist societies declined and new “status”-based inequalities emerged where well-connected party elites enjoyed riches and leisure and ordinary workers did not.

“The rise and fall of communism may be interpreted in many different ways…First,..[i]t shows that distributions can be altered by different political arrangements. Second, it shows that economic leveling (combined with political coercion) leads to stagnation and ultimately decline. Third, it shows that it is important that the elites’ behavior not be overtly out of step with the ideological justification of their rule. The financial elite on Wall Street may be well advised to ponder the third lesson.”

3. Barack Obama’s family was poorer than you know. President Barack Obama’s paternal grandfather, Hussein Onyango Obama (born in Kenya in 1895), had a household per capita income of 240 shillings per year, making him better off than about 90 percent of the population of Kenya. Despite this advantage relative to his compatriots, the average per capita income of Asian and European colonizers in Kenya was estimated to be about 3,300 shillings per year and 16,000 shillings per year, respectively.

The “current U.S. president’s grandfather was thus working as a manservant or cook in a household of people whose incomes were sixty-six times greater than his own. Onyango would have to work for an entire year to make as much as his British employer would make in less than a week.”

4. Poor people really do carry the weight of the world on their shoulders. It takes 77 percent of the world’s population to make up the first 20 percent of global income. It takes 12 percent of people worldwide to make up the next 20 percent; 5.6 percent the next tranche; 3.6 percent the one after that; and only 1.75 percent (the richest people in the world) to make up the final 20 percent of global income.

5. The global one percent is largely American. Adjusting global incomes based on purchasing power, government transfers, housing costs, etc, there are approximately 60 million people worldwide in the richest top percent of earners. 29 million of these people live in the United States. “There is nobody from Africa, China, India, or from East Europe or Russia (in statistically significant numbers, of course).”

These are just a few of the fantastic bits of information in The Haves and Have-Nots. For a truly global perspective on the subject of inequality, there’s no better book to pick up.