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Anatomy of an elephant

Source: Branko Milanovic (2012), Barclays Research
Note: GVCs = Global Value Chains

A growing factor in the case against hyperglobalisation, and in what we have elsewhere called the politics of rage, is its effect on the distribution of global wages.

Workers in emerging economies have benefited considerably since 1988, as value-added manufacturing and services have moved to low-wage countries like China, India, and Mexico, as have those at the very top of the income spectrum. But the middle classes in advanced economies have seen very little income growth, and they have made their displeasure all too clear—most notably in the UK’s vote to exit the European Union and the recent presidential election in the US.

The above graph of relative changes in income distribution during the age of hyperglobalisation, as modelled by Branko Milanovic (2012), resembles the outline of an elephant.

  • The tail includes those in the lowest income percentile—workers in emerging economies who have not been integrated into global value chains. Their income gains have been limited.
  • The body comprises the largest group of workers. It is made up primarily of those in emerging markets in Asia, Central and Eastern Europe, and Latin America who have successfully participated in global value chains; their real incomes have risen the most between 1988 and 2008.
  • The trunk includes two groups that have experienced very different outcomes. The lower part represents the middle classes in advanced economies, many of whom have seen no incomes gains as all, while the trunk’s tip is made up of a very small group whose incomes have surged, thanks to their control of global value chains and high returns on invested capital. These are the so-called 1%.

Analyst: Christian Keller - Head of Economics Research, Barclays

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About the analysts

Durukal Gun works as a strategist in Emerging Markets Research. Durukal joined from Barclays' equity research team where he was a banking analyst covering Turkey. Prior to Barclays, Durukal was an equity strategist at UniCredit within the EME Equity Strategy team, based in London. During his five years with UniCredit Group, Durukal also worked as a bank analyst/equity strategist in Istanbul. Durukal completed his BA in Economics at Bilkent University, Turkey, followed by a TEV-British Chevening scholarship for a Masters of Science in Finance and Economics at Manchester Business School.

Christian Keller is a Managing Director and Head of Economics Research at Barclays, leading the coverage of both developed and emerging markets. Mr. Keller is based in London and joined Barclays in 2007 from the International Monetary Fund (IMF) where he had been the Resident Representative in Turkey since 2005. Prior to that, he was based at the IMF headquarters in Washington D.C., working on IMF programs with emerging market economies in Europe, Latin America and Asia. Mr. Keller graduated with a PhD in Economics from University of Köln, Germany, and holds a joint-MA in Economics and Finance from University of Köln and HEC, Paris.

Sree Kochugovindan is a Vice President and Global Asset Allocation Strategist at Barclays, based in London. Global Asset Allocation Research is responsible for developing in-depth views on key macro issues and identifying tactical and strategic investing opportunities across all asset classes and regions. Ms. Kochugovindan is responsible for developing quantitative models for various asset classes. She is also a co-author of Barclays’ Equity Gilt Study. Prior to joining Barclays, Ms. Kochugovindan worked at State Street Bank and Trust in the Foreign Exchange Research department. Ms. Kochugovindan received her Ph.D. in Economics from the University of London. Whilst completing her thesis, she also worked as a lecturer teaching Economics.

Tomasz Wieladek is currently a Senior International Economist at Barclays, covering Poland, Hungary, Germany and wider European issues. Prior to joining Barclays, Tomasz spent seven years at the Bank of England working on financial stability and monetary policy issues. His financial stability work focused on the causes of the 2008-09 global financial crises and the design of macroprudential policy. As an adviser to the Monetary Policy Committee, he examined the economic effects of the unconventional monetary policies adopted by the Bank of England, including Quantitative Easing, Forward Guidance and the Funding for Lending Scheme. He also played a vital part in building the Bank of England’s new research hub. He holds a PhD in International Economics from the Graduate Institute, Geneva and an MPhil from the University of Cambridge, UK. His research has been published in outlets such as The Journal of the European Economic Association, The Journal of Finance, The Journal of Monetary Economics and The Journal of Money, Credit and Banking.


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