Abstract
Income inequality has become one of the central concerns of our time. François Bourguignon, the author of The Globalization of Inequality, is one of the world’s foremost experts on income inequality. He has impeccable credentials, having earned major national and international awards, served as Chief Economist of the World Bank, directed the Paris School of Economics, published extensively in leading journals, and co-edited the two-volume Handbook of Income Distribution.
In this book, he has produced a concise and nontechnical masterpiece of exceptional analytical and policy clarity. His professional expertise and policy involvement shine through in every chapter. Although the book is written for concerned global citizens, professional economists and other social scientists can learn much from reading it.
Bourguignon begins by posing some provocative questions. Is globalization responsible for rising inequality in the world? Does this represent the death knell for equality? If it continues, will the quest for social justice be squelched?
His analysis makes a crucial distinction between three types of inequality in standards of living: inequality between countries, inequality within countries, and inequality among the world’s people. It is the last of these—what he terms “global inequality”—that is his primary concern and is at the heart of the book.
The first two chapters are devoted to global inequality and national inequality, respectively. Bourguignon tells us that global inequality is higher than is national inequality in even the highest-inequality countries such as Brazil or apartheid-era South Africa. As he writes, “No matter how you measure it, global inequality is considerable, probably above the level of what a national community could bear without risking a major crisis” (p. 20). The only reason global inequality of such a magnitude is tolerated is that “we have a tendency to look to our surroundings rather than beyond them” (p. 3). Thus, he turns his attention to inequality of income and wealth at the national level, showing that they have been on the rise in the large majority of developed countries and in many but by no means all of the developing countries for which we have data. He warns that such inequalities profoundly threaten social stability, and he is clearly worried about it.
In Chapter 3, he focuses his attention on the forces behind the rise in inequality. Globalization produced more inequality through hurting labor demand in developed countries, through competition and productivity gains, and by increasing capital income everywhere. Three policy “reforms” also contributed to rising inequality: tax reforms (i.e., tax cuts), privatization and deregulation of financial markets and labor markets in developed countries, and structural adjustment policies imposed on developing countries by the “Washington consensus.”
In the next two chapters, Bourguignon turns his attention to policies for a fair globalization: reducing inter-country inequality, making sub-Saharan Africa emerge, lowering inequalities within countries, achieving both equality and economic efficiency, enhancing equality of opportunity, diminishing global poverty through increased and more effectively designed foreign aid, reducing barriers to international trade, correcting national inequalities, and lowering inequality through market regulations. I was particularly struck by a section on “What Do We Do Now?” (p. 180) in which he tells us that the negative consequences of excessive inequality cannot be overemphasized, policies are available that would keep inequality from increasing, that other tools including taxes and transfers are available to us to fight economic inequality on an ex post basis, and that poor countries are the issue at the global level.
In a short concluding chapter, Bourguignon questions whether equality can be globalized. The good news, he says, is that the big emerging economies in Eastern Europe, Asia, and more recently South America and sub-Saharan Africa are catching up with the advanced economies (p. 185). But more can be done within countries, and so he calls for taxation to correct inequalities, noting, however, that the ability to do so is itself constrained by globalization. Will the fight against inequalities be a common undertaking rather than the initiative of isolated countries, he asks? He hopes that it will but doesn’t appear very optimistic about the prospects.
May the hopeful part of his message prevail.