Transition economies have an initial condition of high human capital relative to living standards. I explore the possible implications of this key fact by surveying and adapting literature on growth and inequality. I focus especially on the long run and policy options.

In the first global century before 1914, trade and especially migration had profound effects on both low-wage, labour abundant Europe and the high-wage, labour scarce New World. Those global forces contributed to a reduction in unskilled labour scarcity in the New World and to a rise in...