The Elephant Graph and the Rise of Populism

Richard Stanley

Well-Known Member
The following excerpt is from an article about the impact of globalization upon the rise of populism in the Western countries. The so-called Elephant Graph
Chart reveals the relative aggregate lack of growth amongst the middle classes compared to the global poor and the already extremely wealthy.

The Elephant Graph:

Note that the above graph, from the article below, shows the line always positive growth. Compare this with the second one below.

That the graph line only reveals the mean average of outcomes for people along the line means that there are many whose outcomes fell under the line. This would be such as people, across all education levels, but more concentrated amongst the less educated, who lost their employment and were unable find the equivalent or any subsequent employment.

I have excerpted the conclusion of the article so as to highlight the irony that a focus on inequality is knee-jerkily seen as an attack upon Capitalism (and Traditionalist Christian values based on such as Jesus stating that the (lazy) 'poor would always be with us'). Instead, what it really means is that the political and financial wizards that fueled the most recent decades of globalization seemingly gave little or no thought to the social impact upon those actual losers amongst the otherwise aggregate stagnant 'middle'.

Of course, if such populist political instability was desired, then ...

From :
PAUL SOLMAN: But don’t you think that for every population that experiences something like this, it comes out of left field? Because it isn’t something you’ve experienced before. You haven’t read economic history; you haven’t looked at the enclosure movement in England and said, “Oh, what the hell. This is old news.”

BRANKO MILANOVIC: I agree. The reaction of the people is totally understandable. I’m just saying that the economists who are somewhat surprised by the effects of globalization/technological progress have not paid enough attention to economic history. But for individual people, obviously, they are in shock. One thing was promised to them. Essentially with globalization, they would all get better off and then gradually they see that their wages are stagnant, and they’ve been stagnant for 20 years.

PAUL SOLMAN: Do you think that the economics establishment sold people a false bill of goods?

BRANKO MILANOVIC: Well I think there are two areas where the economics establishment didn’t pay much attention, and they recognize that now. One is economic history, and the other is equality. If you look at the last 25 years, economic history was relegated to the very lowest rank of anything that was done in economics.

PAUL SOLMAN: A lot of academic economic history departments shut down.

BRANKO MILANOVIC: They were shut down. And also, in terms of resources and respect, inequality and income distribution were left even further behind. Today, really important issues have come to the fore because of globalization and Brexit and Trump and all of that which have really been totally unstudied or understudied in economics.

I was at the World Bank and a commission reviewed our work on inequality for the U.S. Congress or somebody, and the head of the commission said to us: “You are spending taxpayer money to study issues like inequality? Which goes directly against capitalism and growth.” That was the perception, that it should not be studied.

In the U.S. when people like me started writing things about inequality, the economic journals had no classification for inequality. I couldn’t find where to submit my inequality papers because there was no such topic. There was welfare, there was health issues, there was trade obviously. Finance had hundreds of sub groups.

PAUL SOLMAN: But now, one of Donald Trump’s top economic advisors, Peter Navarro, whom we’ve talked to, does talk about the effects of globalization on inequality.

So, in the end, what is your interpretation of the elephant chart?

BRANKO MILANOVIC: My interpretation is that it reflects a period of high globalization, which is rebalancing economic power between Asia and Europe and leading to the relative decline of the middle class of the Western countries.

PAUL SOLMAN: Is that a bad thing or a good thing?

BRANKO MILANOVIC: It’s a bad thing for those people who have actually declined. But it could be a good thing for the rest of the world because their incomes went up.
The second graph (from the article further below) actually goes negative:

From that article:

One possible way to read this chart: Globalization has benefited almost everybody, except for the middle- and working class in wealthy countries. They had previously received a subsidy of sorts: being born in the U.S. Globalization opened up the U.S. working class to competition from the global middle class. This has benefited the global middle class and hurt the U.S. working class.

If this is accurate, an economist might say that almost everyone in the world has benefited except for some people — the low skilled in a rich country — from a more efficient global labor market. In the U.S., leaders say free trade helped the whole world and makes the economy stronger, and the working-class guy looks and sees the U.S. elites are getting richer from globalization, and they say, "screw you."

And they vote for Trump.

The extra irony here is that Trump is an exemplar of the elite that have most crassly advantaged themselves at the expense of such as his base, and he mocks them while enacting policies that, so far, only seem destined to worsen the situation. But bluster trumps all.
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