The View | Don’t blame globalisation for stagnant wages in rich countries

Globalisation, since the collapse of the Berlin Wall, has had both supporters and detractors.

Supporters credit it with bringing unprecedented prosperity to many parts of the world in the last quarter of a century and lifting 650 million people out of poverty. Detractors blame it for the slow income growth afflicting low- and middle-class workers in rich countries.

Within economic policy circles, a graphic illustration nicknamed the “elephant chart” produced by former World Bank economist Branko Milanovic seems to offer dramatic proof of what opponents of globalisation have claimed (see chart).

The chart takes the world’s population, lines it up in percentiles from the poorest to richest, and then examines the income growth each percentile achieved in the 20 years between 1988 and 2008 in the same way Milanovic did. The elephant’s hump-shaped back shows the rise of China, where hundreds of millions have seen huge improvements in living standards.

The tip of the elephant’s trunk, at the far right, shows that the world’s super-rich – mostly from the mature countries – are much wealthier than in the past. The tail at the far left shows that the world’s poorest – mostly from Africa – are only slightly better off than they used to be.

The dip around the base of the trunk is perceived as showing that the incomes of the lower and middle classes in advanced countries, including the United States, have stagnated.