by Peter Franklin
Monday, 20
July 2020

How the elephant lost its trunk

by Peter Franklin

The ‘elephant graph‘ is a contender for the most important economic chart of the age.

Income growth between 1988 and 2008 for every percentile of the world population. Credit: NYT

It’s the work of the economists Branko Milanovic and Christoph Lakner. It shows income growth between 1988 and 2008 for every percentile of the world population — from the poorest 1% on the left-hand side to the richest 1% on the right. Join the dots and the resulting curve looks like an elephant.

Among the lowest income percentiles, there is very little income growth, but then just a bit further up the scale, there’s a steep increase in the growth rate — thus forming the hind quarters of the elephant. The bulk of the world’s population, roughly from the 10th to the 60th percentile, enjoyed the highest and fairly similar rates of income growth — thus forming the elephants back.

Next, the curve slopes up a bit further, but then begins to fall (the head of the elephant). After that, in the part of the chart corresponding to the developed world, the line plunges downwards (the forehead and trunk of the elephant). Finally, for the very richest percentiles, the line goes back up again — as if the end of the elephant’s trunk were curving upwards.

The elephant therefore describes the winners and losers of the global economy. In the developing world, the very poorest people in the world continued to do poorly, but most people in developing countries made real progress. The sudden downward slope corresponds to the working and middle class people in the West whose incomes stagnated. The upward curve at the end shows the richest people in the world getting even richer.

So, in one chart, the story of the neoliberal era: overall, the world got wealthier (and more equal), but there was growing inequality in the West.

The chart covers the twenty years from 1988 to 2008, which culminated in the near collapse of the global banking system and the Great Recession. What, then, happened next?

Branko Milanovic has just published the numbers for the 2008-2013 period. When distilled into a single chart the curve is roughly the same elephantine shape, except that the pachyderm has lost its trunk. Or, at least, it now has a very depressed-looking proboscis — drooping down without  curving up again.

Cumulative percentage growth of per capita income ($) at different points of the global income distribution, 2008-13. Credit: Branko Milanovic

So, with the rate of income growth in developing countries greatly outstripping the developed world, the process of global convergence has continued. However, unlike the 1988-2008 period there was no runaway income growth for the very richest percentiles — i.e. inequality within the West didn’t get much worse.

But though the rich didn’t escape scot-free from the financial crisis, the impact has been cushioned for them. The banker bailouts followed by a decade of QE-fuelled asset inflation has softened the blow. Indeed, I wouldn’t be surprised if the next update of the elephant chart, covering the rest of the 2010s, shows the tip of the trunk perking up again.

Then there’s the question of what Covid-19 does to the elephant. One of the great ironies of the crisis is that China — that greater driver of global income convergence — has come out of it strongly so far. However, Milanovic is worried about the rest of the developing world:

…the virus’s effect on other poor and middle income countries like India, Brazil, Nigeria, Congo, Indonesia etc. is difficult to predict. If growth rates of these countries slow down, and even more so, if they move into the negative growth territory, global convergence may be checked and even overturned.
- Branko Milanovic

Covid could yet break the elephant’s back.


  • July 20, 2020
    As a member of the elephants brow I will no longer beat up on myself as my fortunes dwindle. Good news that the Trump can recognize an elephant, he says, giving himself a very advanced IQ. Furthermore the ex king of Spain won't be shooting any more, so elephants are well protected. Nice chart as... Read more

  • July 20, 2020
    The elephant chart is interesting enough, but all the data here is pretty old. Why not collect the data to 2018 or 2019 and show what has happened in the past 10-12 years? Why not add the whole data series together, showing the 30 year average? I know these changes would mean the death of the... Read more

  • July 20, 2020
    I thought the green elements on the chart by far the most engaging.... Read more

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