Global Headwinds to Kuznets’ Low-Inequality Transformation: Plutocrats, Populism, and More

Kuznets predicts an economy’s return to low inequality once structural transformation has peaked. I explore some headwinds to falling inequality in developing countries given their thorough engagement in the globalized market Kuznets could not have foreseen. Headwinds include plutocrats’ abuse of open capital markets to elude taxation; populism in rich countries that prevents migration of labor from less to more productive economies; and climate damage. On structural transformation: growth and urbanization in some countries, though less dramatic than for the first industrializers, indicate it is occurring. But in countries including India and Nigeria, the services-based transformation today’s global market now requires depends on a dramatic upgrade in the quality of basic education.