The elephant in the income distribution room


Branko Milanovic's "elephant in the income distribution room" Data taken from "Get Ready to See This Globalization 'Elephant Chart' Over and Over Again", Bloomberg, 27 June 2016.

To "leave no one behind", we must measure inequalities - but with what conceptual frameworks?

The "elephant" chart above, prepared by Branko Milanovic, shows real incomes received during 1988-2008 (vertical axis) by various shares of the global population (horizontal axis).

Moving from left to right, you can see how a line tracing the relationship between income growth and global income shares trends sharply upward (up the elephant's back) before cresting at the elephant's head. It then dives down before rising again--showing the elephant with its trunk raised.

Not a specialist in either income distribution or elephants? Don't worry.

The main message of this figure is that members of nine out of ten global income deciles--ranging from the world's poorest (group 1) to the richest (group 10)--experienced significant real income growth during 1988-2008.

For six of these groups, this growth was 60% (or above); for eight of these groups, this growth was 35% or more. The strong income growth registered by the lower (poorer) income deciles is a reflection of the significant poverty reduction recorded during this time, as the vast majority of the members of the poorer income groups live in developing countries.

What stands out is not the elephant's back, legs, or head--it's the position of its trunk.

Source: Vladimer Vaishvili/UNDP

That is, the deciles with the slowest income growth were the eighth and ninth. The real incomes only grew by 10% by the ninth decile--less than one half of a percentage point. Moreover, real incomes actually fell by about 5% for the eighth decile.

Who are these people at the bottom of the elephant's trunk?

They are generally the middle classes in developed economies--people with incomes well above global averages, but below the world's upper 10%.

The trunk of Milanovic's elephant therefore shows that it was the middle classes in developed countries who missed out on the global economic growth during the two decades leading up to the global financial crisis of 2008.

Milanovic's elephant does not mean that incomes within developing countries became more equally distributed during 1988-2008. (In fact, as UNDP's Humanitary Divided study shows, the opposite is quite often the case.)

It does explain, however, why claims about the "hollowing out of the middle class" figure so prominently in political narratives in the US, UK, and other developed countries. Milanovic's elephant may also explain why so many middle class voters seem to be voting for anti-establishment politicians and initiatives like Donald Trump and Brexit.


Perhaps most intriguingly, Milanovic's elephant suggests that members of the middle class in developed countries may also be in particular danger of being "left behind".

Maybe not in terms of absolute deprivation or overall living standards. However, in terms of where they are today compared to they were 20 years ago, or in terms of the progress made by others, the middle classes in developed countries may not be at all happy about sitting on the bottom of the elephant's trunk.

In a year when anti-establishment politics are rewriting the political rules of the game within the EU and the US, the repercussions of this dissatisfaction could be significant.

These questions come to the fore this week, with the launches in Brussels and Belgrade of UNDP's report on Progress at Risk: Inequalities and Human Development in Eastern Europe, Turkey, and Central Asia.

Professor Branko Milanovic, a leading global expert on income inequalities, will be delivering Kapuściński Development Lectures this week in Brussels and Belgrade. Join us for the webcast at www.kapuscinskilectures.eu and via #KAPTalks on Twitter!