Before Piketty
Visions of Inequality: From the French Revolution to the End of the Cold War, Branko Milanovic, 2023.
Reading Thomas Piketty’s Capital in the 21st Century as a teenager was electrifying. As the years have passed, of course, its weaknesses have become harder to ignore, but - as recent chattering prompted by its decennial has indicated - the sheer impact it held, and remains to hold, is undeniable. On a personal level, it was likely responsible for turning my interest in history into an interest in economic history, and into economics in general. I am sure that many my age could say the same. However, for a book which was refreshingly historical upon its release, Capital in the 21st Century does have a glaring, intellectual-history shaped hole. Of course, the book is framed as a retort to Simon Kuznets, and in that sense, does engage with intellectual history. But that aside, Piketty is rather disinterested in the history of inequality studies - a point illustrated by his comment, way back in 2014, that “I never managed really to read [Marx]… Das Capital, I think, is very difficult to read for me and it was not very influential”.
Branko Milanovic, on the other hand, has managed to read Marx. Visions of Inequality: From the French Revolution to the End of the Cold War represents his attempt to draw a coherent intellectual history of inequality studies, beginning with Franćois Quesnay and finishing with Kuznets himself. Like Palen with Pax Economica, Milanovic’s book deserves its self-description as a collection of ‘visions’ - while common threads do tie his economists together, there is no overarching narrative of progress or evolution. The thinkers that feature are Quesnay, Smith, Ricardo, Marx, Pareto and Kuznets, all of whom are framed and understood without a forced imposition of theoretical unity. The questions asked of them are always the same: what they thought about inequality in their time, where they thought it was heading, and how well this tracked what we know today. After these great economists, Milanovic tackles the ‘eclipse’ (as he calls it) in inequality studies during and after the Cold War, the eclipse which - if one knows where to look - presaged the resurgence of interest in inequality over the last decade, a resurgence of which Milanovic has been a vital part.
For an inequality study to be valuable, Milanovic argues, three elements are required: narrative, theory, and empirics. The first is an account of how an income distribution takes form, the second is the why, and the third is, well, data. Although the theoretical toolbox and availability of data varies from Quesnay to Kuznets, all of Milanovic’s key inequality theorists combine all three, he argues. Still, they are not all treated equally - whereas Quesnay is polished off in under twenty pages, Marx is dissected over almost sixty. To keep this review succinct, I will not attempt to cover them all. I will make do with a taster of the two whom I found most captivating - Marx and Pareto - and try to get to grips a little with Milanovic’s ‘eclipse’.
As I mentioned, Marx is the focal point of Visions. He receives the most attention, and Milanovic clearly has a special interest in extracting from him a theory of inequality. Perhaps because of this, I thought Milanovic sometimes lost his otherwise tight focus here. There are many biographical details; and, perhaps unavoidably, much extra-inequality work is covered in the process of building a theory of distribution. Still, Milanovic presents a tight, reasonably contrarian line of argument - positing that Marx’s theory of the evolution of income distribution was fundamentally indeterminate. This runs against the common interpretation which states that Marx, predicting the immiseration of the proletariat and a declining rate of profit, had a determinist outlook. In one of the book’s many brilliant tables, Milanovic outlines the many tendencies identified by Marx which affect the income distribution. Reducing inequality is the tendency of the rate of profit to fall (which lowers capital income), and the rising real wage (which increases labour income). Increasing inequality, there are forces that raise the rate of profit: cyclical crisis (which cheapens capital goods), concentration and monopoly, the geographical expansion of industry, and the wage-checking impact of the famous ‘reserve army of labour’. No particular tendency necessarily dominates the others, and thus, the distribution of income between classes - which, as Milanovic points out, is the only type of inequality that really matters to Marx - is open to fluctuation in both directions. In all honesty, I really liked this reading of Marx - not only does it make him contemporary, it liberates the great man from the more questionable parts of Marxism that can so often weigh him down. That said, perhaps I want Milanovic to be right too much to be a fair judge.
Pareto is interesting because in many ways he represents the polar opposite of Marx. While Marx perceives the distribution of income to be the result of an eminently historical process, Pareto argues that it instead approximates an ‘iron law’. Having studied fiscal records from across Europe, Pareto concluded inequality followed the same pattern everywhere - that if one selected any given population and a certain threshold of income, the same proportion of people would sit above it, a proportion which would remain constant as the income threshold rose. “We find ourselves here in the presence of a natural law”, Milanovic quotes him as saying. Pareto, of course, was wrong - Visions quickly points out as much. Today, there is a wide variation in the distribution of income between countries, much wider than there was between the few nineteenth century European states studied by Pareto. But like with Marx, Milanovic expresses remarkable generosity to his subjects. Pareto worked from tax data which, as was inevitably the case for his era, only captured the small minority of high-income earners. We know today that as one moves up the income distribution, the closer it comes to following Pareto’s law - even if it never reaches a trans-national constant. In this light, Milanovic seems to forgive Pareto for his grand prognostications; enough to acknowledge, at least, the enormous contributions he made to the methodology of inequality studies.
After Pareto, Milanovic discusses Kuznets, the most modern of his theorists. Kuznets argued, like Marx, that the distribution of wealth changes as society develops. But like Pareto, Kuznets argued there was a discernible - if variable - trend. Hence the Kuznets curve - the idea that modern economic growth leads inequality to exhibit parabolic behaviour; increasing in the early stages - as rural labour moves into urban centres -and decreasing once that transfer has taken place. While this made sense from a mid-century perspective, we know today that Kuznets was incorrect - as noted earlier, Piketty set out to demonstrate as much back in 2013. But more importantly, Kuznets published his ideas in the early sixties, half a century before Capital in the 21st Century. Why did it take until the 21st century for inequality to be engaged with again substantively?
This is the final question Milanovic tackles, and he does so in a very different way to the intellectual history I have glimpsed at so far. Explaining the eclipse in inequality studies, Milanovic travels both well and less-trod ground; with familiar critiques of the neoclassical turn in economics, but also uncommon (if important) insights into Soviet inequality studies, and into the contribution of the dependency theorists. The last was my favourite, for the dependency theorists - Arghiri Emmanuel and Samir Amin, in particular - are a vein within intellectual history which I seem to be forever circling without ever engaging with seriously. Milanovic portrays them as flawed pioneers, broadening the scope of inequality studies in what was otherwise a drought of insightful work on the topic. As an aside, I was also intrigued by the dismissal of Keynes as disinterested in inequality, a point which is perhaps a bit under-explored (although Milanovic has commented on this extraneously). His is by far the most striking absence in the book, even if it is a warranted one. In the end, the explanation for the eclipse in multifaceted; more of a survey than a sharp analysis. Explaining the return of inequality to the fore is less complex, and less pluralistic. The combination of exciting new work - a la Piketty - with the circumstances of financial crisis bring us up to speed with the world today.
Visions of Inequality is a hard book to fault. Milanovic does not seek to boldly reinterpret any school or figure, nor launch into a trenchant critique of a particular intellectual movement or tendency. This makes for a small target, which can be seen as both a strength and a weakness, depending on one’s disposition. But I think that Visions has an understated elegance - at his best, Milanovic is a master of synthesis; joining up not just a history of ideas and the economists who had them, but intertwining this with more contemporary knowledge (and data!) without even a whiff of anachronism. Capitalism, Alone is, no doubt, more exciting, original, controversial, even spirited. But Visions of Inequality, I believe, stands a good chance of outliving it; in much the same way that Hirschman’s The Passions and the Interests sits above much of the rest of his oeuvre. Like Hirschman, Milanovic has, with brevity, both reframed and clarified our understanding of the vital organs within economic thought.