Branko Milanović

GPCR-internal

Interview by Gilad Tanay

Interviewee

Branko Milanović is a Lead economist in the World Bank’s research department in the unit dealing with poverty and inequality and visiting professor at the School of Public Policy, University of Maryland. Milanović received a Ph.D in economics from the University of Belgrade in 1987. His research focuses on the issues of globalization, income distribution, and democracy.

What would you see as strengths or weaknesses of the MDG framework, in terms of overall design, conception of development, goals, targets and indicators? 

Branko Milanović: From my own very narrow perspective and, of course, this is Goal 1 which I [am referring to]…the issue of global inequality does not even get a mention here. [The goal] refers to global poverty, but these are two different things, and I believe that this is an amazing issue.Now, global poverty is really easier to quantify as we know. There was the objective as to reduce it in half and, just in terms of language, there were no numbers from an absolute number of people or even percentage of people who are in poverty, and so on. You know, global inequality is not itself such an easy target. We cannot say we want to have such and such a number and all that, but we could, of course, say it’s not impossible to do.You could actually look at income ratios between the poorest countries and the richest countries. You can say like, the ten poorest countries and the relationship in terms of per capita income to the ten richest or some such number, and I think you could introduce that. But then again, there is no mechanism that would actually make these poor countries become richer, because there is nothing behind that. But I think, just to produce a little bit of awareness of the [inequality], you could actually do the same thing with people. You can say that the objective would be the [to increase] the share of [those on] the bottom, [and to change] the relationship between the bottom and the top. You could do the same thing that we did with poverty. You could do it with inequality.

What were the benefits brought about by the MDG framework? 

Branko MilanovićI think the main benefit is awareness. Many issues in the world and in countries really start with the ability to apply concrete numbers, figures, estimates, because you are moving in some kind of grey area, where you don’t know if things are really going up or down, or whatever.So, I think it does help. Maybe some people don’t like it because it seems like they’re planning on the global [scale]. It’s not really planning, because there is no mechanism to enforce them. But I think the great advantage, I mean, the advantage of the goals is an ability to focus on what is happening in the world, because without them, we would be as we were before. And I’m not sort of overemphasizing the importance of the goals, but at least we have some kind of scorebook. Without them, we don’t. Were there ways in which the MDGs were detrimental to poverty alleviation? 

Branko MilanovićHonestly, I cannot say that they were detrimental. I can say that they may not have made any difference because … there is no instrument. There is no connection between a goal and really the vision of the goal. But I don’t see that [they were detrimental to poverty alleviation].

How would you assess the degree to which the MDGs have been achieved?  

Branko MilanovićAgain, they really talk more about poverty, a little bit about education and health. And I take the numbers for granted, I mean I don’t dispute the numbers. So, in terms of poverty, they have been successful. However, the issue there, you can argue, is that of course it was predominately due to China, and, much less and more recently, to India, and much less so to the development in Africa. I’m not sure to what in extent it was a shared growth or growth like, for example in Angola, which was very high income inequality, and where most of growth where collected by very few people. But, I would, I just say, technically or numerically or whatever you want to call it—arithmetically–the success in a restricted sense was there.

Should the MDG successors be an extension of the current goals, an expansion/revision of the current goals, or something different altogether? 

Branko MilanovićI would actually put it, in your classification, as an extension, so that they could be an area where the Millennium Development Goals could be extended. Then, of course, another one, which I already mentioned, was inequality, so I will not go back to that. But an area where it’s difficult to see how the international community could do it, but more sensitive topics like democracy, participation, gender equality-[that is an area where] I would also see as an extension. I would not look at is as an overhaul. Again, to answer your question, I would say between the three sort of options that you gave at the beginning, I would say that an extension would be the one that I would like the most. That, again, with the caveat that we cannot really extend it to cover everything in the world, because then we cannot have fifty Millennium Development Goals, so maybe some of the goals can be cut out, and other introduced, but in order to keep this awareness that I believe is the main sort of contribution of MDGs, they have to be relatively few in number. We cannot have a hundred of them.I gave two or three additional goals in discussion. Of course, self-servingly, I would say global inequality, because it is a very quantifiable goal. I think if we sit together, we can in an hour decide what would be one criterion that would be a [good measure]. So it’s really not difficult. The database is already in existence. It’s the same database, more or less, that is used for global poverty, so it’s very easy to do. The other goals which I mentioned, I think, are important also—these are the more political goals which I mentioned. It’s really participation, openness of political systems, meaningful elections, lower ability of the rich [to exert undue influence]-and that actually pertains also to the rich countries like the United States. lower ability of the rich to influence the election process-these are other things that are [important]. If I were to prioritise these, I would put inequality as number one, and [political goals] as number two. That might not reflect their real importance. That might just reflect what they like.

The first question is about the areas in which there is already a broad consensus in academia about global poverty and its alleviation. What we would like you to talk about is what are the most important areas, topics, and fields concerning global poverty alleviation. Where you think there is now already a broad consensus among informed people. And here perhaps you can differential between consensus about normative, explanatory, descriptive, and reform recommendations. 

Branko Milanović: It is a difficult question because I am used to speaking about what I think, you know, much more than what, I think the consensus is. You know it seems to me from an economic point of view… I cannot say the consensus, but there is a strong view that for poverty alleviation is in separately linked with high-income growth. So, in some extent it is mechanical, because if you have high-income growth then you are going to have people that are going to go over the poverty threshold and then no longer be poor. And of course, one of the examples, which I think, is historically crucial in that respect is the example of China. Because from 1978 to today which has been, you know 39 years, China has had incredibly high rate of growth which has never been achieved by any other country with such, you know a number of people, in history and has reduced poverty tremendously. We might see something similar to that in India. Now, I think it is very clear, and somewhat a mechanical relationship. The next question we have to ask in which there is much less consensus, is what kind of policies are the best for poverty reduction. And there I cannot say there is a consensus but there are people whom actually ague policies of globalization, openness, market incentives and so on are the best. And of course, you use so often China because of China’s openness and, you know, globalization. But then there are also people who believe, I don’t think this is necessarily excluding each other, but there are people who believe that acknowledging local conditions and local, I mean the environment in which you work. They will use China as well to show that China’s policies are not the Washington Consensus policies in many respects. The openness wasn’t complete openness, as you know the capital account was never open. A property relation is very complex, it’s not all private sectors, it’s really a mixture of state sector, collective sector, a sector that is a collective township and they name prices. So also, I could argue that it is really a combination of globalization and openness with attention to local conditions that has led to that.So this seems to me the economy’s perspective of a some kind of a, I cannot say consensus, but their views on that. Do you agree with that view? 

Branko Milanović: I tend often times to be in the middle of the road. So, I do tend to agree with the view that I explained where I see the success of China. You know, China as an example, as a combination of both policies which are very capitalists and probably globalization and policies that are unique to conditions of individual countries. I tend to agree with you, I think that it’s also a little bit of a problem with the assertive ability of China’s experience to be exported or to be used elsewhere. In other words, when you look at the experience of China precisely for the reasons that I mentioned, you don’t have very well defined or clear set of defined conditions, which you can say, apply elsewhere. Because if everything is really a combination of as I said globalization, plus local conditions, then it is very difficult if you are a different country to decide exactly what the local conditions you should build up on or use. So that actually to my view limits somewhat the applicability of China’s experience.  

So we talked about areas of broad consensus, now I want to move to area of disagreement in which there is remaining informed people. Keep in mind what we are looking for here; I know there are many disagreements, are those key disagreements that because precisely they are so salient are an impediment to say, this is what academics recommend to do and a report like the global poverty consensus report on trying to find overlapping consensus.

Branko Milanović: Ok I would actually select two areas where I believe there is disagreement. And it’s a psychological disagreement more than anything else. The first area is the question whether poverty alleviation, which in theory is a global issue because we really want to global poverty. To that primary concern regardless, theoretically of nations states and borders, if this your then there is actually every individual in the world is equally important, and I mean is technically important to you, and poverty whether it be in country A or country B measured by income indicators or other indicators can be objectively measured and you can basically rank people regardless of country. In which case you need to reach poverty alleviation in which we find a global optimum as a result of treating everybody else the same and achieving the optimum at the global scale. A different view is that the global optimum if you will, would be achieved as a summation of country/ state optimum. This is I think actually, how one can interpret roles in the law of peoples where the individual countries are in some sense in charge, albeit reduction and poverty alleviation and the best wall to wall is a combination of this local optima, so there is no really no global optimum. Global optimum is a summation of national optimum. So I think this is the methodological difference, do we take a more global policy view of the world or do we take a more statist view of the world.The second difference is between those who believe, and to some extent, I am among those as I made clear when I talked about China who believe that growth is very important, and when I say growth, I mean economic growth, things that which are measured with in terms of income, real income, how many things you have, whether you have Skype or you don’t have Skype or you can drink coffee, wine, and so on. And people who believe that that model of growth is either sort of wasteful or cannot be maintained. So they believe there should be a different model of growth, which should be much more parsimonious, we should pay greater attention to the environment where actually it is not really material growth per se, which would be sort of sought. But, more the ability of individuals to flourish to pleasure themselves and so on. So that is really the happiness story, so I think these would be two, I would say methodological disagreements just to repeat one of them would be the disagreement whether there is a global optimum or simply a summation of the local optimum and the second one is whether growth and income really matters or it is really something else.

So far, we discussed disagreement, which is informed. Now I want to move to what we call false ideas or disagreement in public debate, which is not informed. So what are some of the false or only partially true ideas concerning global poverty and it’s alleviation that are widely used in public and political debate to justify doing less than should be done to alleviate global poverty. The though here is that there might actually be things that would be; you know from an expert perspective are demonstrably false, and yet they still have purchase in the public debate and that purchase is detrimental and creates a hindrance for efforts to be more ambitious poverty alleviation goals. Some people would point to aid, and say that we know aid doesn’t work and we know that categorically, those would be the kind of things.  

Branko Milanović: It is sort of difficult to say because generally we have taught each other. People who won some disagreements are also quite informed people, so it’s not quite that one side having call the right answers and effects and the others having none. If I think of two different false ideas, one is not even maybe even a direct idea maybe much more of a negation of an idea is kind of indifference. It’s basically lack of interest in what happens whether poverty is present or, you know it’s just sort of a narrow view. And I don’t want to disqualify that view because it is easy to say that we ought to have a broader view but most people of course are very worried about their own lives and when I say ‘narrow view’, it is not in any sense a sort of negative. It is just that people don’t have time or interest to worry about how other people live, so to some extent uninterested. And the second false view is a belief that if people are poor, particularly people in poor countries is because they are lazy. So I think this is a view maybe a little bit cultural when I say lazy but it is a view even the rich world found quite a lot of currency recently in the Greek world because very quickly the stereotypes have been revived, you know even within the rich world. And there is like no stereotype in which is 100 percent wrong. Because if it were 100 percent wrong it really would not be successful. In order to be able to have a successful stereotype it has to be right in some extent. The problem is with people who are not very well informed or who do not want to think is they take, you know 20 percent of the stereotype and make it into 100 percent. Because even if you use the crises, let take that great example of right now, if the crisis happened the other way around and affected Germany or France, we would have used different stereotypes to explain what happened. We would have said these guys have, you know 7 weeks vacation. They have sort of agreements and negotiations between the trade unions and employers. That they don’t work hard, that the have corporatism. So all of that maybe true, but clearly since the crisis did not happen there we don’t use these stereotypes. So I think the second point about stereotyping and believing that people are lazy is an important one.

The next question has to do with the international order and its connection to global poverty. Are there in your opinion features of the international institutional, political, economic order that are attributing to the persistence of severe global poverty, and if so what are they? 

Branko Milanović: Oh, that’s also a difficult question; it looks like you only have difficult questions it seems. You know it’s good that you used the word international, because the international order is indeed international. When I was writing something earlier and then I gave up on that, I started writing in English, inter dash “(-)” national, just to indicate the fact that it is not global. Something global today is whatever nation agreed should be global. So, it should really be international. So, that international order is of course represented or in the large international institutions like the UN or the different UN agencies and different institutions, and of course including the World Bank and the IMF. So I believe, and it is not sort of a novel view that since it is the international order, it is the large countries that determine how that order would look like. And if you look historically, and of course, the UN was created after World War 2, that was the organization and of course there were other organizations like the IMF and the World Bank have been created of five, six, or seven countries. And it is not impossible to imagine that these countries to the extent that they were effected by that because, gradually they became less effected by it directly, gradually. The World Bank or the IMF and of course have changed recently with the European crisis. But they really had the dominant influence about how intellectually they would be shaped and what would be the policies be pursued in the rest of the world. And they particularly from the 1980’s with the structural adjustment and the IMF landing, these are policies that are essentially capital friendly, which look essentially at the ability of countries to repay the loans. But are not particularly interested in internal equilibrium, equality, poverty and all that. So I think there is no doubt that, you know. Some people have characterized them as collection agencies, which would be maybe a little to bit harsh. But the collection agencies with the western banks in Indonesia for example could not be paid and then the IMF comes in. But there is again, some truth in that as well. I think this however changing, it is changing to the advantage of new economies, new market economies, so called emerging economies. Somewhat of a misnomer because these economies were there, around you know, they were not submerged and suddenly remerged. But they certainly became more important but you think in that sense it is changing very slowly, but it is changing according to international organizations because it is really a time where they are glacial. But as I said with the G20 with the breaks, with the larger countries, again the World Bank and the IMF the world order is changing. Now let me just complete that or conclude that of course I am in favor of that, we will have something for example a somewhat competitive example, somewhat competitive, you know Putins election was somewhat competitive you know election for the World Bank president. But we also have to totally not forget even if G20 has greater influence today, this is not the end of the road. Because G20 is representative of a large chunk of mankind but there are lots of people who are left out. Look at Africa, there is only one country in Africa that is par of G20. So you know it is a step forward, but we should just not I think imagine or believe that this is the end of the road.

So some people argue in addition to the question, to what extend there is a global inclusive partnership for global issues. There are also particular ways in which argue that the current institutional, or international… inter dash national that we have can be shown to directly contribute to perpetuating poverty. So here are some things that other interviewees said. So people mentioned things like the existence of the legitimacy of trade barriers and tariffs. People mentioned the degree to which illicit financial flows are monitored and allowed. So course you know the work of Thomas Pogge on international property laws. So what is your opinion that these claims are direct harms.  

Branko Milanović: You know I don’t know much about that, so I don’t have a strong opinion on that one way or another. But casually or simply as an observer and I was a little bit involved with, you know the work on illicit money transfers. I was involved in the sense that there was a sort of an idea that I think is very difficult to put into numbers, is to not only have an estimate of the overall amount of illicit money transfers but I also I to try to see what implications on equality and global inequality. I think that is very difficult because by the nature of best, these are illicit money transfers. So, it is very difficult to get numbers for something that is illicit. Even the global aggregate number, to a large extent is guesswork, you know to be able to allocate that money to who benefits is quasi-impossible. But I believe in that respect, it is a good point I guess is certainly, how should I say international order of the prevalent rules of the game are such to benefit the rich countries because even if it were not to benefit they could easily, there is no doubt about that, crack down on that. So now, also it is to that part that it is in particular with the crisis and ability of rich individuals and rich companies to evade taxation and to use tax cadences and use all that. It is not a game that very again a one-way street. It is very actually they benefited from that the rich countries, but they also have opened the doors for people, from the own countries to be paying taxes to them to evade them or to participate in these flaws. Again, I don’t really think it is necessarily countries, rich world countries; it is really rich individuals who are maybe creating a sort of global rich constituency who are the major beneficiaries.  Now these of course may be the people who actually have the agenda and so on. So, it is also countries but also I think behind that we have people.

So, beyond the international institutional factors, what would you say are the main impediments today to poverty eradication? 

Branko Milanović: When I sort of think about global poverty and global inequality, you know my work is much more global than global poverty. But I see three ways in which both can be reduced and they are well known ways. The first one is greater aid, so this is the way that has been discussed a lot. I think of course under the current conditions of the recession or very slow growth in the western countries, we have probably reached for several future some kind of limit in transfer of resources. Now, the second way, which I think, is very important and it is a sort of classical economic way, is acceleration of growth in poorer countries. I don’t need to speak about that, of course there are different views as we talked before about China. What is best for poor countries to grow fast but there is no doubt in my mind that it would reduce global poverty and reduce global inequality. The third way I think is the most contentious, and I think my current work, I am putting greater emphasis on that, and that is the question of migration.  Because migration is a big way in which you can reduce global inequality and global poverty. I am quite cognoscente, and we won’t talk about that now, and that is not because I don’t realize that there are huge problems with that: political, economic, and social problems and others. But even if you take a moment with global perspective then you can redefine development as being increased income for people who are currently poor, or middle class, or whatever you want to call it. So these increased incomes, nowhere does it say increased incomes have to be increased in the place where they are. We actually won’t increase incomes, now if increased incomes can be in a place where they are now, that is very good. But, if they cannot then we really have migration as a tool towards reducing global poverty and inequality. Now the problem and I will stop with that is that it raises a whole Pandora’s box of innumerable issues, political, economy issues, issues of you know of winners and losers. Because you can actually argue, and I think there are good arguments in favor of that people who move might actually make people who stayed back or people working were soft. So, while no doubt, I think from the economic perspective that global output would go up. Individual groups of people would be badly affected. So, you really have the situation where you have winners and losers, and it’s quasi-impossible to compensate the losses. I’ll just give you one example, if there is a guy from a poor country who comes, and suppose you have a totally open border, and he comes and says, ‘hey, I’ll do the job, the same job that you are doing instead of 50 dollars, I’ll do it for 10 dollars.’ Then you can say, this is actually the guy who has been directly affected so theoretically, say we can compensate him. I say ok fine, this guy is really going to contribute much more, and your global output is going to be up, I will compensate you. But you cannot of course; this is not how economics work. You have massive groups of people, you have actually massive groups of people who are displaced who lose and you cannot go into one by one compensation. So if you cannot compensate it is theoretically nice that you can compensate them, but if you cannot compensate them, then of course these people are gong to be against it.

Now, let’s move to more concrete policy recommendations so taking in to account the constraints of political and economic feasibility, what are the top three policies that you think should be advocated for with the most momentum towards eradicating global poverty? 

Branko Milanović: Taking into account the constraints, or…?

Taking into account the constraints of political and economic feasibility.  

Branko Milanović: Well, I’ll have to think a little about that you know, because that would be the policies that would be implemented by what? Global institutions, international institutions or individual countries or anything?

Well, it is an open question, the only restriction is these are policies that are contributing toward eradicating global poverty. But they don’t necessarily have to be international policies.  

Branko Milanović: Ok, I really have to think, I have to find three of them. But the first one is going back to our conversation about, I think the illicit flows of money is an important one. And I also would like to make here one, how should I say, a sort of further extension of that. It is a very tricky issue to raise, but it is the issue of what are the illegal activities and what are not. If you look at for example, the antidrug policies, they are always directed at the producers. And the producers are whether they be in Afghanistan or Bolivia or Columbia are of course now, because they are illegal products, they have been criminalized because they have been taken over by the gangs. But in reality if you were to decriminalize them, they would be produced just like any other output is produced. No really difference between Coca and Corn production, so I think actually this would go someway towards sort of normalizing political and economic situations in those countries. Because those countries are to some extent, necessarily criminalized because the main activity in which they have comparative advantage has been judged to be criminal. And the attention as I said before, has really been directed to the source rather than to the users. And in that sense, you can see maybe, the way the international order works, because the relationship between relative power were inverted, you would probably pay much greater attention to actually people who are consuming Cocaine in the U.S. rather than, you know people who are producing Coca in Bolivia. So that I think, would be one area in which things could be sort of changed. It is not totally feasible but it is somewhat feasible, you know to pay greater attention to the illegal flows. The second part, I think is already happening with the crisis, and it is much of an implicit weakening of one model fit all school of thought, which very much dominated the international organizations and it was propagated, you know under the Washington Consensus and so on in the last twenty years. Of course, you know it started with the crisis in Latin America and course got the really huge added impotence with the fall of communism in Eastern Europe and of course was spread into Africa and elsewhere. And I think these policies now with the global financial crisis have been, I’m not saying forgotten but definitely weakened. So, in that sense I think there is a greater acceptance of experimentation. Going back again to our conversation about China, I think that there is much greater acceptance now that countries can use their own institutions in order to sort of shape their own policies. Now, as we know, I just want to make a comment about that, we know that this is no panacea either because, if you use your institution in order to enrich a minority in your country, this is not an outcome that we would welcome. But, it is also true that in some cases, many cases maybe, that you can actually by experimentation, you can find policies that combine this openness with local conditions which maybe best for growth.So I would like basically to summarize two, I would have to think about the third one, two feasible policies. One is the illicit transfers and the criminalization of production. And the second one I think is much greater ability of countries to experiment with their own institutions.

Now a fun question, abstracting any feasibility constraints, if you are dictator of the world, what are the first three policies on the global level that you would like to implement to eradicate global poverty? 

Branko Milanović: I thought the previous question was difficult but, I think it is more difficult when you have no constraints because you can then become absolutely wild you know. And I think it is good that there should be constraints because we could go really…But, if there were no constraints…

Perhaps, we should say no political constraints.  

Branko Milanović: If there were no huge political constraints I think that my choice that I would only come up with one and my choice would be very clearly different migration policies. Now, if there were really no constraints, again with everything that I say, I see also the negative side of that, you know. As I said, I am very much in favor of that, I would, with no political constraints, sign up for that. But I do see other than the economic problem, I do see certain social and cultural issues, so we can also not be oblivious of those. I don’t think that we should as many countries do, they actually reg them or into their insufferable difficulties which limit totally migration. But I think actually that they do exist, differences in sort of norms, in cultural norms, and these differences have gradually, if you sort of open up the doors to migration and there are different peoples around the world that mix up, of course create new norms. But I think that they actually in some sense sort of naturally tend to coalesce around some normative pattern. Maybe I could be also possible, and that is why I am really sort of difficult for me to think without constraints, it is possible for you, if you were to really be dictator of the world, say, tomorrow we don’t have any sort of constraints on movement. Then we would have a situation, which is really socially unsustainable. That you would actually have, rather than have some kind of a utopia, you might really end up with World War against all. So, I have to say one policy that I do is much greater openness to borders, and much greater ability for people to migrate but I am not saying that we should really take place over night, without be aware ourselves of any of the other issues.