Visions of Inequality by Branko Milanovic

Author:Branko Milanovic
Language: eng
Format: epub
Publisher: Harvard University Press

The Kuznets hypothesis represented a very stylized picture of the evolution of income inequality; it was a mix of, as Kuznets said, “perhaps 5 per cent empirical information and 95 per cent speculation, some of it possibly tainted by wishful thinking.” 22 In his original formulation of it, Kuznets cited the supporting experience of only six countries: the UK, the United States, and Germany, with their fragmentary long-term data going back to the nineteenth century, and India, Sri Lanka, and the Philippines, with one observation each from the early 1950s. Yet the appeal of the hypothesis was manifold: it provided an empirically testable story regarding the evolution of income distribution as economies develop; it maintained the “conversation” with classical writers in allowing for a “tendency of the rate of profit to fall”; and it broadly fitted patterns observed in the rising industrial powers. Moreover, it seemed that this pattern might be repeated among the developing countries, including Japan, Turkey, Brazil, and South Korea, as they followed the path charted by more advanced Western countries. It was an explanation of economic history and a forecast of the movement of inequality in the future. Its weakest point was its assumption of relatively equal distribution predating the industrial takeoff. But, as we have seen, in some cases even that assumption could be defended.

The hypothesis did have a precursor, although not from economics. When Alexis de Tocqueville published his Memoir on Pauperism in 1835, 120 years before Kuznets enounced his hypothesis, he made the same point:

If one looks closely at what has happened to the world since the beginning of societies, it is easy to see that equality is prevalent only at the historical poles of civilization. Savages are equal because they are equally weak and ignorant. Very civilized men can all become equal because they all have at their disposal similar means of attaining comfort and happiness. Between these two extremes is found inequality of conditions, wealth, knowledge—the power of the few, the poverty, ignorance, and weakness of all the rest. 23

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