Global distributive justice
Milanovic, “Global inequality and
its implications”
Lectures 10-12
Rodrik’s trilema
Economic integration
National sovereignty
Welfare state
• If sovereignty and welfare state (like now), no
integration
• If integration and sovereignty, reduce spending and
cut welfare state
• If welfare state and integration, global organizations to
decide on policies (thus no national sovereignty)
Rodrik’s view
• The most important thing is not trade but greater
policy autonomy
• Growth = fct (govt quality; appropriateness of
policies)
• If policies (=Washington Consensus) are not
appropriate for the existing institutions, bad
outcomes (example of transition countries)
• Finding appropriate policies is key=>that’s why
policy autonomy is essential
Rodrik’s recommendations
• More labor mobility
• Tobin tax
• International agreement on ending
subsidizing DFI and repelling “odious debt”
• Soften intellectual property rights
protection (to enhgance tewchnology
transfer)
• Reform IFIs (focus on “knowledge”)
Rawls’ Law of Peoples
• Types of peoples (nations)
– Liberal
– Decent (consultative hierarchy)
– “Burdened”
– Outlaw states
– Benevolent absolutism
}
Well} ordered
Transfers only from well-ordered to “burdened”
peoples
• Transfers (1) limited to type of society
(‘burdened’) and (2) limited in time (until it
becomes a ‘decent society’)
• “Peoples have a duty to assist other peoples
living under unfavorable conditions that prevent
their having a just or decent political and social
regime” (LoP, p. 37)
• Explicit rejection of a global difference principle
(among other reasons because it is unlimited in
time)
• No discussion of responsibility toward outlaw or
hierarchical societies
• Limits to immigration
Principles of justice (national level)
• 1) Each person to have equal right to most
extensive liberty compatible with a similar scheme
for others
• 2) Social and economic inequalities to be arranged
so that (a) they are expected to be to everyone’s
advantage and (b) attached to offices open to all.
• Difference princoiple applies not only to income &
wealth but to positions of authority
• Lexicographic ordering: first principle comes before
second
• Definition of injustice: inequality that is not to the
benefit of all
TJ, p.53-55
Lexicographical ordering of
principles
• “Imagine…that people seem willing to
forego certain political rights when the
economic returns are significant. It is this
kind of exchange which the two principles
rule out; being arranged in serial order
they do not permit exchanges between
basic liberties and economic and social
gains…”(TJ, p. 55).
Interpretation of the difference
principle
To everyone’s advantage
Equally open
Careers open
to talents
Equality of
fair
opportunity
1. System of natural
liberty (accepts
inheritance)
Natural aristocracy
(greater natural ability)
(noblesse oblige)
2. Liberal equality
corrects for social
inequality implicit in 1
(fair equality of
opportunity: limits
inheritance + free
education)
3. Democratic equality
Corrects for inequality
of talent and family
implicit in 2
In all cases (except natural aristocracy) everyone has formally the same
rightsa (so the first principle ofr justice is satisfied)
Why no global difference principle
• It would lead to open-ended transfers
• Real income per capita (wealth) is not important
once societies become ‘decent’ (general
proposition re. unimportance of pursuit of
wealth)
• Once a people is ‘decent’ there is no point in
comparing wealth/income of the two peoples:
the differences are the outcome of voluntary
societal decisions on savings vs. consumption
and leisure vs. work
Legitimacy: Why Rawls is not a
cosmopolitan (Wenar)
• Peoples are different from individuals: legitimacy
is the building block on which a pact between
peoples is created
• Different peoples’ legitimate governments are
grounded in different political cultures
• Because cultures are different, the exact shape
of legitimacy in different societies will be different
• Peoples can cooperate only if they view each
other as legitimate
Legitimacy (cont.)
• Since the pact is made between peoples
(not individuals), there cannot be global
difference principle
• The bottom line: (1) difference in political
cultures leads to differences in the ways
legitimacy is defined; (2) people to people
relations are based on legitimacy; (3)
individuals are not involved in this ‘pact’;
(4) there cannot be global difference
principle
Cosmopolitan position (Pogge,
Singer)
• No major difference between Rawlsian original
position within a single nation-state (people) and
the world
• The same principles should apply globally: an
increase in inequality is acceptable only if it
leads to a higher absolute income of the poorest
• “Monism”: all ethically meaningful relationships
are between individuals not mediated by the
state (people)
• Pogge: we are required not to harm others (and
some decisions by IO may have harmful
consequences)
Rejection of cosmopolitanism:
political theory of justice (Nagel)
• Strong statism: Redistribution (and
responsibility for poverty) possible only if there is
shared government
• For concerns of justice to kick in, you need
“associative relation” (shared sovereignty,
common endeavor)
• We redistribute because we have a
contractarian relationship with people with whom
we share the same institutions
• Could be also based on our expectation to be in
need of similar transfers in the future; or affinity
that we feel for co-citizens; shared culture or
historical memories (J.S. Mill)
Statism (cont.)
• Only under world government can we have a
global difference principle
• Accepts humanitarian duties only
• Existence of IO does not introduce new
obligations because these are govt-to-govt
relations (similar to Wenar’s point)
• Pluralism (rather than monism) in our relations
with others: different normative priciples
depending on the position in which we stand
with respect to them; but pluralism may
introduce a sliding scale & an intermediate
position =>
Intermediate position: meaningfully
consequential relationships are
sufficient (Beitz, Cohen & Sabel)
• Responsibility stems from having consequential
relationships with others not only from sharing
the same polity (government)
• This happens not only directly through trade and
communications, but through the role of IO like
World Bank and IMF
• Sliding scale of inter-relationships: from within
the same people, to “proximate” peoples to
peoples with whom there are few relationships
(“density of the relationship”)
Intermediate position (cont.)
• We are required to give more than implied by
humanitarian considerations alone but less than
inmplied by the global difdference principle
• Sliding scale of responsibility
• Critique of statism: why are newer forms of
international governance not norm-generative
and only state is?
• There are forms of connection that do not
involve the state & trigger norms beyond mere
humanitarianism
• Direct rule-making relationship between the
global bodies and citizens of different states
Intermediate position (cont.)
• Aristotle: within each community there is
philia (affection; goodwill) but the philia
spreads (diminishes) as in concentric
circles as we move further from a very
narrow community
• To each philia corresponds adequate
reciprocity (that is, redistribution)
• Thus the sliding scale of philia and
reciprocity
What is a “consequential
relationship”?
• Obviously, a political relationship is
consequential (Nagel)
• Economic relationships reflected in trade,
investment of capital etc (Julian: “economistic”
definition of consequential relationship)
• Beitz: (1) interrelationship must reach a certain
threshold, (2) there are global non-voluntary
institutions in which different peoples belong
▬► institutional conditions under which
considerations of global justice kick in
• Decisions made by international
organizations (even if only states are
signatories) and by global networks =>
imply inclusion of all and duty of wider
assistance (Cohen & Sobel)
• Institutional explanation applies not only to
glaobl institutions but to “institutional
clubs” like Commonwealth, Europrean
Unhion, Communaute Francaise etc.
Sliding scale of responsibility (within
institutional explanation)
Discussion
• Do we do nothing until global government
comes?
• Economistic requirement for global justic is
easier to measure
• But “density “ of economic relations is greater
among rich countries. Should then justice
conditions start selectively (club-like) among the
rich countries first?
• Institutional requirement brings in global justice
considerations already now
• It would embrace even peoples whose density of
relations is small (say, United States and
Mauritania)
Among whom does duty of
assistance exist?
Political
Rawls
Economistic
Among
people
who
share a
polity
Political + Among people
burdended who have
societies
dense
economic
relations
Institutional
Cosmopolitan
Among people Among all
who share
people in the
global
world
governance
institutions
Discussion (cont.)
• This is why we need some rules re. global
redistribution
• Go back to the three rules: Progressivity 1;
global progressivity and reduced inequality
in both donor and beneficiary country
Rawls on Concept 1 and Concept 3
inequality
• Neither of them matters
• Concept 1 (divergence) is irrelevant if countries have
liberal institutions; it may be relevant for liberal vs.
burdened societies
• Irrelevance rooted in two key assumptions: (i) political
institutions of liberalism are what matters; (ii) acquisition
of wealth immaterial
• Concept 3 is similarly irrelevant once the background
conditions of justice exist in all societies
• But Concept 0 (within-national) inequality matters
because the difference principle applies within each
people
• “once we accept the value of collective
self-government, there is no reason to
hope for convergence in living standards—
the absence oif convergence is not a
defect awaiting correction” (Joshua
Cohen)
Go back to our definition of global
inequality
• In Gini terms:
n
n
1
i1 Gi pii   i
Term 1
n
 y  y ) p p  L
j
i
i j
j i
Term 2
Rawls would insist of the minimization of each
individual Gini (Gi) so that Term 1 (within-inequality)
would be minimized. But differences in mean incomes
between the countries can take any value. Term 2
(between inequality) could be very high.
And this is exactly what we observe in real life:
Rawls’ global “original position”
• Assume Rawls’-like veil of ignorance for all
citizens of the world where citizenship and
social class are “allocated” to each
individual
• 60% of one’s income position in the world
will be determined by one’s location
• Major difference from the situation two
centuries ago (Marx would have been
surprised)
Explaining person’s income position in the
world
Circumstan
ce
Circumstan
ce + effort
Ln(GDI per
+22.2***
capita) of his/her
country
Gini of his/her
-0.34***
country
His/her social
class within
country
R2
0.61
+22.2***
-0.33***
+2.78**
0.91
• Citizenship premium. If mean income of
country where you live increases by 10%,
your position in the world goes up by 2.2
percentiles
• Trade-off. If through effort and luck you
jump ahead 5 social classes (e.g. in the
US, going from the median household per
capita income of $14,000 to $22,000) this
is equivalent to a citizenship premium of
about 60% (e.g. being born in Mexico
rather than in China*)
* China is at the median (unweighted) world income
Composition of global inequality changed: from being
mostly due to “class” (within-national), today it is mostly
due to “location” (where people live; between-national)
90
2000
80
1870
70
60
Location
Location
50
40
30
C lass
20
Class
10
0
1870
2000
Source: Bourguignon and Morrisson (2002) and Milanovic (2005)
Global Redistribution of Income
(Bourguignon, Levin & Rosenblatt):
The context
• Much of global inequality is determined by
international inequality rather than within
country.
• How much redistribution takes place via
international flows and implicitly through
international policies?
• Data availability limits accounting exercise:
models required (e.g., trade).
Based on slides provided by D. Rosenblatt.
Forms of international redistribution
• Aid
• Remittances (not covered here).
– Profit
– Worker
• Implicit redistribution due to policy
restrictions: e.g. trade.
Redistribution through aid
• OECD/DAC Database.
• Track donor to recipient flows.
• Accounting of share of donor and recipient
incomes.
• Construct counterfactual of what
international distribution would be without
aid (in pure accounting, not GE sense).
• Measure impact on international
distribution of income.
Some data/measurement
complications
OECD-DAC data
• Treatment of grant element of debt flows.
– Tried various measures.
• Treatment of debt relief (included)
PPP values versus dollars.
-Former implies non-zero sum redistribution.
-Tried various approaches.
Redistribution through aid results
Case (all income inequality
measures population –
weighted---Concept 2)
Gini
Theil
Entropy
Mean Log
Dev.
Atkinson
e=0.5
e=2
e=5
Base (after aid)
0.5380
0.5305
0.5316
0.2378
0.6187
0.8291
“Maximum Scenario” (aid netted out)
-0.8 grant equivalent of imputed multilateral
-All debt relief included
-All technical cooperation included
0.5424
0.5391
0.5507
0.2427
0.6468
0.8805
“Preferred Scenario” (aid netted out)
-0.5 grant equivalent of imputed multilateral
-96 percent of debt relief deducted
-All technical cooperation deducted
0.5404
0.5415
0.2404
0.6319
0.8498
Maximum distributional gain from aid (in
Gini points)
0.44
0.5351
Impact across deciles of Concept 2: Aid
16.00%
14.00%
"Maximum" Scenario
12.00%
10.00%
8.00%
6.00%
4.00%
"Preferred" Scenario
2.00%
0.00%
D1
-2.00%
D2
D3
D4
D5
D6
D7
D8
D9
D10a D10b
“Redistribution” through trade
restrictions
• Unavoidably need a model. Borrowed
results from van der Mensbrugghe’s
simulations using World Bank trade model.
• Measure potential lost income from high
income country protection.
• Simulation of counterfactual from model:
what would 27 country groupings’ incomes
be in the absence of this protection?
“Redistribution” via trade
restrictions: results
Case (all inequality measures are
population weighted—Concept 2)
Gini
Theil
entrpy
Mean log
deviation
Atkinson
e=0.5
e=2
e=5
Base (with existing protection of
merchandise trade by high-income
countries)
0.5426
0.5408
0.5396
0.2418
0.6190
0.8266
With high-income countries
merchandise trade reform
0.5425
0.5402
0.5394
0.2416
0.6189
0.8263
Distributional gain from trade
reform (in Gini points)
0.01
“Redistribution” via trade
protection: impact by decile
High Income Country Protectionism: Percent
Impact on GNI Per Capita by Decile
-0.20%
Average gain
-0.30%
-0.40%
-0.50%
-0.60%
-0.70%
-0.80%
Largest gains
D10b
-0.10%
D10a
D9
D8
D7
D6
D5
D4
D3
D2
D1
0.00%