The Haves and the Have-Nots

A Brief and Idiosyncratic History of Global Inequality


By Branko Milanovic

Formats and Prices




$15.99 CAD



  1. ebook $11.99 $15.99 CAD
  2. Trade Paperback $21.99 $28.99 CAD

This item is a preorder. Your payment method will be charged immediately, and the product is expected to ship on or around December 28, 2010. This date is subject to change due to shipping delays beyond our control.

Who is the richest person in the world, ever? Does where you were born affect how much money you’ll earn over a lifetime? How would we know? Why — beyond the idle curiosity — do these questions even matter? In The Haves and the Have-Nots, Branko Milanovic, one of the world’s leading experts on wealth, poverty, and the gap that separates them, explains these and other mysteries of how wealth is unevenly spread throughout our world, now and through time.Milanovic uses history, literature and stories straight out of today’s newspapers, to discuss one of the major divisions in our social lives: between the haves and the have-nots. He reveals just how rich Elizabeth Bennet’s suitor Mr. Darcy really was; how much Anna Karenina gained by falling in love; how wealthy ancient Romans compare to today’s super-rich; where in Kenyan income distribution was Obama’s grandfather; how we should think about Marxism in a modern world; and how location where one is born determines his wealth. He goes beyond mere entertainment to explain why inequality matters, how it damages our economics prospects, and how it can threaten the foundations of the social order that we take for granted. Bold, engaging, and illuminating, The Haves and the Have-Nots teaches us not only how to think about inequality, but why we should.


Praise for The Haves and the Have-Nots
"Where do you rank in the all-time world distribution of income? How about Jane Austen's Mr. Darcy? Or Anna Karenina? Was Octavian Augustus richer than Bill Gates? Why might China fall apart, like the USSR and Yugoslavia? Why should we care about differences in income and wealth? In this book of many delights, Branko Milanovic, who has spent twenty-five years studying global inequality, provides us with a veritable Arabian Nights of stories about inequality, drawing from history, literature, and everywhere in the world. A pleasure to read, and an eye-opener for haves and for have-nots alike."
Professor of Economics and International Affairs,
Princeton University, 2009 President of the American
Economic Association, author of The Analysis of Household
Surveys: A Microeconometric Approach to Development Policy
"Learn about the serious subject of economic inequality while you have plenty of fun traveling around the globe and far back in time! Through fascinating stories and wonderful illustrations, Branko Milanovic explains income and wealth inequality—their concepts, measurement, evolution, and role in human life—without compromising precision or balance. This is a delightful book, as commendable for vacations as for the classroom."
Professor of Philosophy and International Affairs,
Yale University, author of World Poverty and Human Rights:
Cosmopolitan Responsibilities and Reforms

For N. and G.

"To determine the laws which regulate this distribution [into wages, profits and rent], is the principal problem in Political Economy."
David Ricardo, Principles of
Political Economy (1817)
"Of the tendencies that are harmful to sound economics, the most seductive, and ... the most poisonous, is to focus on questions of distribution."
Robert E. Lucas, "The Industrial Revolution:
Past and Future" (2004)

This book is about income and wealth inequality in history and today. Inequality appeared as soon as human society was born, because distinctions of power and wealth accompany all human societies. 1 Inequality is by definition social, since it is a relational phenomenon (I can be unequal only if there is somebody else). Inequality can thus exist only when there is a society. A Robinson Crusoe cannot have a concept of equality, but Robinson Crusoe and his Man Friday do. Moreover, inequality makes even more sense when society is not a mechanical accumulation of individuals but a group of people who share certain characteristics such as common government, language, religion, or historical memories.
The objective of the stories around which this book is organized is to show, in an unusual and entertaining way, how inequality of income and wealth is present in many facets of our daily lives, in the stories we read or the discussions we have around our kitchen tables or in our schools or offices, and how inequality appears when we look at certain well-known phenomena from a different angle. The objective is to unveil the importance that differences in income and wealth, affluence and poverty, play in our ordinary lives as well as the importance that they have had historically.
The book is organized around three types of inequalities. In the first part, I deal with inequality among individuals within a single community—typically, a nation. This is the type of inequality that most of us will easily recognize because it is the type of inequality that we are likely to think of first when we hear the word inequality. In the second part, I deal with inequality in income among countries or nations—which is also intuitively close to most of us because it is the sort of thing we notice when we travel, or when we watch the international news. In some countries most people appear poor to us, while in others most people seem very affluent. These "between-country" inequalities find their expression also in migration when workers from poor countries move to the rich world in order to earn more and enjoy a higher standard of living. In the third part, I move to the topic whose relevance and importance are of much more recent vintage: global inequality, or inequality among all citizens of the world. This inequality is the sum of the previous two inequalities: that of individuals within nations and that among nations. But it is a new topic because only with globalization have we become used to contrasting and comparing our own fortunes with the fortunes of individual people around the globe. Yet it is probably a type of inequality whose importance will, as the process of globalization unfolds, increase the most.
I've illustrated each type of inequality with short stories (vignettes), some of which take us all the way back to Roman times, while others could be almost taken from the daily newspapers—Barack Obama's family, the global middle class, or Maghrebi migrants to Europe. Each of the vignettes can be read separately, and they do not need to be read in order. In some cases, however, the vignettes are linked by their topic, and reading them in succession might be more appealing. Yet they are all stand-alone pieces.
Each part is introduced by an essay on what economists have to say about that particular type of inequality. The essays, while written to be accessible to all interested readers, are probably a little bit more demanding in terms of attention than the vignettes. They are supposed to provide the reader with a better technical grasp of the issues that are discussed in the vignettes. For those readers who may be perhaps keen to pursue the issues in the book further, the essays offer an introduction to the literature. At the end of the book, in "Further Readings," I also include a list of selected publications, arranged by essay and vignette, that readers may consult if they would like to know more. The books and articles listed are my own choices of what I consider the most interesting and relevant publications for a given topic.
On a personal note, this book was not only a pleasure to write but also a very easy undertaking. After working for more than a quarter of a century on the issue of inequality, I have amassed a huge amount of data, information, and interesting stories, and have it literally at my fingertips. I thought that they would be fun to share with the readers. When I sat down to write the book, I did not have to think much about what to include or how to shape it. It was just a question of writing down all the things on which I had thought quite a lot already, and for quite some time, and for which I had ready-made data. Perhaps most important from a personal perspective, this book has given me the opportunity to combine my two passions: a passion for numbers and distributions and a passion for history.
I had three objectives, and, of course, like every author, I do not know if I was able to achieve any of them. First, I would like for the reader to pass some pleasant time reading the stories and hope that he or she will be able to combine the pleasure of easy reading with the learning of new facts or of a fresh way of looking at things. Second, I thought it important to bring to the attention of the public the issues of inequality in wealth and income that, for many reasons (some "objective" and some perhaps dictated by the interests of the rich), have tended to be swept under the carpet so that they do not "disturb" the public too much. Third, bringing the issues of wealth and poverty to the center of a social debate, particularly at a time of crisis, should stimulate some old-fashioned social activism. In other words, people have the right to start asking questions about the justification of certain incomes and the huge gaps that exist between the rich and poor in most countries, including the United States, and between the rich and poor countries in the world. These are the issues that some dominant segments of public opinion makers have tended to discard, all too easily, I believe, by arguing that all or almost all inequalities are market determined and as such should not be the object of discussion. But neither are many of them market determined, but rather determined by relative political power (as the examples—all too numerous—of the global financial crisis show), nor can the questioning be taken out of the social arena by evoking "the market." The market economy is a social construct, created, or rather discovered, to serve people, and thus raising questions about the way it functions is fully legitimate in every democratic society.
I have to end the Preface with a technical note. The reader will discover as he or she goes through the book that it contains the results of a lot of calculations. All the calculations whose sources are not explicitly given in the footnotes are my own unpublished calculations, based on various data sources, mostly those from the World Bank and World Income Distribution (WYD) databases, which contain a lot of macro data and several hundred household surveys from most countries in the world. I thought that it would be unduly tedious to list such sources for each and every number that I have produced. If the reader is particularly interested in a given fact or calculation, I would be delighted to supply the exact source (since the sources are all on my laptop anyway!). He or she can write to my e-mail address ( or For all other data, which were taken from other authors and their publications, the sources are clearly indicated in the text.
It is a pleasure to acknowledge the assistance and support that I have received from many individuals. Because this book is in some ways the result of more than twenty years of work on this topic, the list of people whom I should acknowledge would have to be huge and include practically everybody whom I have met and from whom I have learned something. I, obviously, cannot do that. So I have to limit it only to the people who were very directly involved in the production of this volume. They are acknowledged at the beginning of each vignette or essay on which I have sought their advice, comments, and suggestions. In addition to them, I am grateful to Tim Sullivan and Melissa Veronesi, my editors, who have shaped the organization of the book; Annette Wenda, who has carefully gone through every sentence; Michele Alacevich and Valentina Kalk, on whose substantive and aesthetic advice I have much depended; Gouthami Padam, who has worked with me for more than seven years; Shaohua Chen, whose assistance on Chinese household surveys was invaluable; Leif Wenar, to whose advice regarding issues of political philosophy and in particular the interpretation of John Rawls's works I have frequently turned and who has given me excellent comments on several parts of the manuscript; and Slaheddine Khenissi, for his vast knowledge of the Arab and Muslim worlds. Of course, the responsibility for the opinions expressed in this book is solely my own.

Unequal People
Inequality Among Individuals Within a Nation
Until about the turn of the twentieth century, income inequality among individuals was subsumed under the topic of the functional distribution of national income—that is, how total income was split between large social classes (workers and capitalists).1 It was considered by many to be the key topic in political economy. Society, under early capitalism of the nineteenth century, seemed normally to divide into several quite distinct social classes: workers, who were selling labor and earning wages, and were relatively poor; capitalists, who owned capital and were earning profits, and were relatively rich; and landlords, who owned land and received rents, and were also rich. The distribution of income among these three classes was considered of crucial importance for determining the future of a society. English economist David Ricardo, one of the founders of the discipline of political economy, believed that the share of landlords would increase as greater population required more food, which would bring ever less fertile land into cultivation and raise rents. Prices of "wage goods" (food) and landlord's rents would skyrocket. He saw the eventual outcome as a stationary state where low profits, squeezed between the rising prices of food and rents, would provide little incentive to save and invest.2 Karl Marx saw greater mechanization, expressed in an increasing value of capital per worker, leading to lower returns to capital and over the long run to a tendency of the profit rate to diminish, eventually tending toward zero and choking off investment.
This way of looking at income distribution through the prism of social classes did not change much with the key turning point in the history of economics, the replacement of classical "political economy" by the "marginalist revolution" that started around 1870 and focused on individual optimization rather than on broad economic evolution of social classes, nor did it change later with the synthesis of the two strands (classical and marginalist) under the title of "neoclassical Marshallian economics" (from the Cambridge economist Alfred Marshall) and its establishment in the mainstream position. It was only in the early 1900s that the distribution of income among individuals (not among classes) attracted the attention of Vilfredo Pareto, a Franco-Italian economist who taught at the University of Lausanne in Switzerland. (His contribution is highlighted in Vignette 1.10.)
It was around the same time that the data on personal income distribution became available for the first time. This went hand in hand with economic development (countries becoming richer) and a broader fiscal role of the state. The early statistical information about income distribution emerged because of nation-states' need to collect direct taxes in a "fairer" way—that is, according to income—and to increase total tax intake, to spend it for public education, workers' invalidity, and, above all, war. The ideological change that saw all individuals as equal before the law, and thus the rich due to contribute more in accordance with their greater wealth and income, was important, too. Taxes had to be more tightly linked to income, and this required better information on incomes and their distribution among households. It is thus not surprising that the data used by Pareto to study income distribution among persons all came from the European late-nineteenth-century fiscal sources. At that point, our topic had been born.
Economists and social scientists are concerned with inequality in three ways. The first type of question they ask is: What determines inequality among individuals within a single nation? Are there certain regularities that make inequality behave in a particular way as societies develop? Does inequality increase as the economy expands—that is, is it pro- or anticyclical? In these types of questions, inequality is something that ought to be explained. It is a dependent variable. In the second type of question, inequality enters as a variable that explains other economic phenomena. Is high or low inequality good for economic growth, for better governance, for attracting foreign investments, for spreading education among the population, and so on? In these instances, we look at inequality in a purely instrumental sense: We are interested in whether it furthers or hampers some particular desirable economic outcome. The third way inequality enters within the social scientists' purview is when they address ethical issues linked with it. In these cases, they are concerned with the justice of social arrangements that exhibit different amounts of inequality. Is increasing inequality acceptable only if it raises the absolute incomes of the poor? Should inequality due to one's better family circumstances be treated differently than inequality due to superior work and effort?
How does inequality change with the income level of a society? Pareto, basing his work on a limited sample of the late-nineteenth-century tax data from European countries and cities, believed in an "iron law of inter-personal inequality," such that differences in social arrangements (whether a society is feudalist, capitalist, or socialist) leave distribution more or less unchanged. The elites could be different; they may control society differently, but the distribution of income—and therefore the level of inequality—will not be much affected. Today, this is popularly called the "80/20 law," expressing the finding that in some phenomena, we observe a regularity such that 20 percent of people are responsible for 80 percent of outcomes and the reverse (the other 80 percent of people generate only 20 percent of outcomes). It has been argued that the 80/20 law is found in quality control (80 percent of problems are due to 20 percent of products) and marketing and business applications, and we shall see something similar to hold even for global income distribution (see Essay III). As for income distribution within nations, Pareto failed to define a theory of change in it, although "failure" is not a wholly appropriate term simply because Pareto thought, and believed to have empirically proved, that income distribution must be more or less fixed and thus that there were no laws of its "change" with development. There was, Pareto argued, only a "law of its fixity."
It wasn't until 1955 that Simon Kuznets, a Russian-American economist and statistician, proposed the first real theory of what propels change in income distribution. (He is profiled, together with Pareto, in Vignette 1.10.) He argued—having had access to not many more data points than Pareto (although the data were of a different kind, household, not fiscal, surveys)—that inequality among people is not the same regardless of the type of society but varies predictably as society develops. Inequality in very poor societies must be low because the income of the vast majority of the population is just around subsistence, and there is little economic distinction among people. Then, as an economy develops and people move from agriculture into industry, Kuznets posited, a gap emerges in average earnings between industrial workers (richer) and farmers (poorer). The industrial sector also sees more differentiation in incomes between individual workers than is the case among farmers simply because tasks required by modern industry are more diversified. Therefore, income inequality increases both because of the growing gap in average earnings between industry and agriculture and because of rising inequality among industrial workers. Finally, in even more advanced societies, the state begins to play a redistributive role (see Vignette 1.7), education becomes more widespread, and inequality goes down (see Vignettes 1.1 and 1.2). Thus was formulated the famous "Kuznets' hypothesis" of an inverted U curve charted by income inequality in the course of economic development: Inequality must first increase before it goes down.
The idea, however, was not entirely novel. It was expressed some 120 years earlier by French social scientist and politician Alexis de Tocqueville and is worth quoting in full:
If one looks closely at what has happened to the world since the beginning of society, 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 condition, wealth, knowledge—the power of the few, the poverty, ignorance, and weakness of all the rest. (Memoir on Pauperism [1835]).
But, of course, Tocqueville, not being an economist like Kuznets, did not say anything beyond this, in particular about the mechanism whereby this inverted U shape would be brought into existence.
Kuznets' hypothesis has been empirically tested and retested by economists ever since it was first published in 1955. The ever-greater availability of national household surveys of income and consumption, the key source of information on income distribution, has greatly advanced the empirical exploration of Kuznets' hypothesis. In principle, the hypothesis should work best when we study the evolution of inequality in a single country, as the country undergoes radical transformation from agricultural to industrial and eventually to service-oriented economy. But in that context, its performance has been mixed: Some countries (and over some time periods) exhibited an inverted U pattern, while others did not.
The dissatisfaction with the performance and predictive capacity of Kuznets' hypothesis led to the addition of new elements that could better explain the behavior of income inequality. The revisions are known as the "augmented" Kuznets' hypothesis. Factors such as the "financial depth" of an economy, extent of government spending or state-sector employment, openness of the economy, and so forth now appear alongside income level as possible additional variables that explain the movement of inequality. Many economists argued that these additional elements could improve our understanding of the movement of inequality. For instance, the rationale was that a more efficient and broader financial sector would allow poor individuals to borrow to finance their own educations, and this would reduce inequality as the doors of educational advancement are thrown open to all and not reserved only for the rich. Government spending (as a share of gross domestic product, or GDP) or government employment (as a share of the total labor force) are supposed to have a dampening effect on inequality, first because it helps the poor, and second because it limits wage inequality. Greater openness to trade should, in poor countries, reduce inequality as it increases the demand for low-skill intensive products (say, textiles) in which these countries specialize; this would tend to raise the wages of unskilled workers compared to the wages of skilled workers or the profits of capitalists. In rich countries, openness to trade should produce the opposite effects since rich countries tend to export high-tech products. Their production requires highly skilled workers (say, computer scientists or engineers), so the earnings of college graduates increase relative to those with only a primary or secondary education. Thus, inequality goes up. Economists would test a typical Kuznets' hypothesis today by including all of these factors, and possibly quite a few others, in addition to income, often in an ad hoc fashion (e.g., adding age composition of the population or distribution of landownership). The results are better than when we use income level alone, but hardly spectacular.
More recently, French economist Thomas Piketty has produced a series of empirical studies, conducted jointly with a number of other economists (Emmanuel Saez, Anthony Atkinson, Abhijit Banerjee) and covering about a dozen countries, which have undermined both the Kuznets' and the augmented Kuznets' hypotheses. Piketty shows that after a long downward swing, inequality in Western nations has decisively increased in the past quarter of a century. Although these facts were well known before, Piketty has provided a "political" explanation, explaining them by governments' decisions to increase or decrease direct taxation of current income and inherited wealth as well as by the effects of wars (i.e., destruction of physical capital and reduced income of capitalists). This is arguably a political theory of income distribution where social attitudes (of what is just or unjust) and economic interests, reflected through voting and stances of political parties, as well as the war needs of economies, determine the path that inequality charts over time.
Piketty's studies, in order to explain what moves inequality over a long time period (the entire twentieth century), resorted to an old and rather discarded source of data: fiscal statistics. The reason fiscal statistics, first used by Pareto, have been replaced by household surveys is that fiscal data cover only a portion—the higher end—of income distribution since in most countries direct taxes are not paid by the poor. Household surveys, on the contrary, include everyone. The problem with the use of fiscal data is that conclusions drawn from them are valid only if the following two assumptions hold: (1) Taxable incomes are reasonable approximations of actual incomes of households (and the highest taxpayers are also the richest people), and (2) the evolution of overall inequality can be well approximated by the change in the share of the top income groups (say, the top 1 percent of taxpayers whom we believe to be also the richest 1 percent of households). Neither assumption is fully defensible. Taxable income used by Piketty and coauthors is called market (or pre-fisc) income, which excludes both taxes paid and government transfers.3 However, we are normally interested in what happens to inequality of disposable income, that is, income that belongs to households and individuals after they have paid taxes and received government transfers. Thus, if either taxes or transfers change, market and disposable income inequality can move in different directions. The problem with the second assumption is that inequality statistics should, in principle, include incomes of all people, not focus only on the rich. It could, for example, happen that the income share of the top increases while the income share of the poor goes up as well and both do so at the expense of the middle-class share. We may then not be able to say that the overall inequality went up, as we would tend to conclude solely from the rising income share of the top. Since Piketty-type studies depend on this particular assumption (which we know does not hold in all places and times), the interpretation of the results becomes problematic. Of course, if we had income or consumption surveys of the population for the periods sufficiently far in the past, the problem would be solved. We would not need to resort to the much less precise and fragmentary fiscal data. Unfortunately (as we shall see below), such surveys are available in rich countries generally only for the period after World War II and for many developing countries only for the past twenty or thirty years.
This is the situation of inequality studies today. It would be unfair or even impossible to summarize which of these different points of view has won the debate. Probably none. But it does lead to the question beyond simply measuring inequality or understanding how it evolves, and gets to the heart of whether inequality is necessary for an economy to grow and, if so, how high it should be.


On Sale
Dec 28, 2010
Page Count
272 pages
Basic Books

Branko Milanovic

About the Author

Branko Milanovic, lead economist at the World Bank’s research division in Washington, DC, and professor at University of Maryland, is author of Worlds Apart.

Learn more about this author