Branko Milanovic on What Comes After Globalization

Introduction to Globalization

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Odd Lots Podcast Introduction

1:39Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. I have a personal question for you this time. Do you think of yourself as a member of the global elite?

2:12Do you consider yourself elite? I probably should in some ways because I think a lot of people would say someone who grew up in different countries, went to international schools, went to, I guess, a high-profile university, now works in the liberal media, as people would say, would be like a classic elite. But does anyone ever actually think of themselves as the elite?

Elite Status

2:37No.

Elite Status

2:38Well, I try to, you know, maintain journalistic, unbiased. I would say, look, Joe Tracy, they are clearly among the elite. They have good jobs at a Fortune 500 company. They are among the most well-educated demographic to ever exist in history. We get to work in a nice air-conditioned office, et cetera. On the other hand, you know, I could say, like, look, that's nice. The real elite are big tech CEOs, et cetera. But I, look, I think— Everything's relative. We're an elite.

Anxiety about the Future

3:07I think objectively speaking. But I also think, I was thinking about this, there's really three big things that I think are, like, if we think about the second, the rest of our lives, or et cetera, like three really big things that would, like, cause me to have sort of, like, elite status anxiety. Go on. Well, one of them is AI, because we don't really know what it's going to mean for our literal jobs or the companies we work for, et cetera. That's a really big one. Domestic politics, I think, like, you know, I think we're living in the United States.

3:39Domestic politics feel like they continue to go off the rails in various ways that could impact a lot of things. And then I think, unfortunately, maybe I'll change this one day. I don't speak Mandarin. And if all of the interesting markets, finance news, if that becomes, like, the center of economic activity in, like, some really big way, people talk about the China shock that they mostly are talking about, sort of, rust belt manufacturing.

China Shock

4:06There's, like, a China shock for, like, sort of service level, financial services, et cetera. I don't think, like, you know, I don't think I would have as much to contribute in that world. You won't need to learn Mandarin, Joe. You can just use AI. You know, have you seen the AI translator gadgets? I have, yeah. They're cool. Some of them are really good, yeah. Yeah, and, like, you had these things. There's two sides of a screen, and you're just talking them for the other person. Yeah. But setting that aside, I don't know how well that would work on the podcast or video medium.

4:37I got to say, I still watch 90 Day Fiance. Do you know that show? No, no, go on. Americans dating and marrying foreigners from abroad, and there are a lot of translation apps on that show, many of which go very, very wrong. So, anyway. Anyway, on this last point, though, I think, like, we know that probably started, certainly with, like, the first Trump administration, sort of, like, U.S.-China attention has been sort of on this linear increase. It probably accelerated during COVID, and it's clearly spread beyond the U.S.

5:08It just seems to get more intense by the week, including in Europe, where I think China anxiety, the loss of, like, industrial competitiveness has now really become top of mind for them. Right, and it's even broader than China. I mean, we've spoken about it on the show, but it seems like there's a real nationalism to economics nowadays. Yeah, too, yeah. Because of the pandemic, because of the war in Iran now and various other disruptions that we've seen, governments are really focused on building up their own supply chains, building up their own manufacturing bases,

5:41their own critical resources and all of that. So, everyone seems to be trying to bring things in-house, which at the moment largely means taking things away from Asia. Yeah, that would be the goal, right? They want to, like, replace these things. Anyway, I think as, you know, I'm 40, I'm about to turn 46, so maybe if I'm lucky, I'm about halfway through my life. I would say the first half of my life, I have benefited a lot from a certain order of things. And when I look around the landscape, I would say I am not so sure that the order from which I've enjoyed many fruits and privileges

6:17is going to be as durable in the second half. Sure, I think that's fair. Okay, so we should talk about what were these fruits and privileges that we enjoyed, and perhaps what would a new sort of order in which some of these arrangements from which we benefited, if they change, what could some of this look like in the future?

Guest Introduction

6:36All right, well, I'm very excited to say we really do have the perfect guest, someone we've wanted to talk to for a long time, someone whose work is right in the heart of this. We're going to be speaking with Bronco Milinovich. He is a research professor at the Graduate Center at CUNY, the City University of New York. And he is also the author of a new book, came out this year, The Great Global Transformation, The United States, China, and Remaking of the World Economic Order. Professor Milinovich, thank you so much for coming on. Well, thank you very much for having me. It's a pleasure.

7:09What was the goal going into this new book? Why write a new book right now? You know, to some extent, when I finished the book, I thought the goal was basically to write an autobiography. Okay. That could sound strange because there is very little of me in that book. But I covered the period from 1974. Actually, I started the book in 1974 with the new international economic order and then how it failed and how then unipolar moment came and how the United States was not only the most powerful country economically, politically, militarily, but also ideologically.

7:44And how that order, which you might call neoliberal globalization, is now expiring. And when I think actually my entire life, I remember each of these four orders and I'm now present at the birth of what I call national market liberalism, which I think, as you were saying before, is a new economic order where lots of activities would be brought back home and where external economic policies would be essentially mercantilistic and not free trade.

8:15Why do you call it national economic liberalism? I call it because I was thinking, actually, if you define liberalism in the most general sense, or take also neoliberalism, which would not be very different. You have on domestic side, you have policies which are liberal policies economically. Everybody knows that, you know, free pricing, competition, so on. One, you have socially policies which are about affirmative action, egalitarianism in terms of personal identity. And then internationally, you have policies on free trade, low tariffs, movement of capital labor and goods and so on.

8:52And finally, you have an aspirational policy about the movement of the other factor of production, labor. That has never really happened, but aspirationally, you can say, ideologically, it is there. What is happening now is that we take this entire international part, chop it off, and say, wait, these rules do not apply anymore. What applies now is essentially national sort of mercantilist policy. It's a policy of, you know, beggar thy neighbor to some extent, but certainly zero-sum game or even a negative-sum game.

9:25It's entirely different. But domestically, I really see the administrations like Trump, Macron, and others, I see them as essentially continuing with neoliberal policies domestically. So that's what I think, actually, that's why I invented this new term that was the kind of national liberalism. So it's not, and to be more precise, national liberalism on the market side, not necessarily on the social side, domestically. So it's interesting. You say something interesting in the beginning of your book where you talk about, you know, going back to the middle of the 20th century or maybe in the immediate wake of the Great Depression to stabilize capitalism.

10:00We adopted sort of like the government got involved. We took in a little dose of socialism, and that saved capitalism. And then you sort of kind of a joke, you talk about like, OK, well, the goal was maybe to, you know, sort of like post-World War II era, save socialism and various by injecting some market element. And then there's like this yin-yang effect that you sort of see where it's like two different systems adopt some element of each other in theory or that could have gone the way as a way of like bringing about stability.

10:35Well, that was my idea, actually. I was wrong in that sense because I actually, in the very beginning of the book, as you know, in the introduction, I bring up, my first book was published in 1989. And actually, in the very first sentence of the book, I mentioned that I ran into Jeff Sachs and David Lipton, whom I knew from work on Poland, you know. And so I told them, well, I've got this book. And actually, I gave the book to Jeff Sachs as a present. I found it in the bookstore. And then he said, OK, you have to write something. And I said to Jeff Sachs, who is trying to save socialism.

11:07And Jeff kind of looks at me. He says, what are you talking about? And I remember these words exactly. He says, I'm trying to bury socialism. And I said, oh, why? Wait. And that's what I actually understood the misunderstanding. For me, the introduction of market principles and market measures and privatization to some extent was exactly the same by analogy what Keynes did to save capitalism for Great Depression. You inject doses of socialism in order to preserve the capitalist framework.

11:38So I thought the same would happen in 1989. My big mistake. But I just wanted to mention that because I think it's a nice anecdote that actually we saw the same thing, but saw them in two different ways. But arguably, that is a characterization of what did happen in China, particularly after Mao, right? So it's like you have this communist country, still communist, but clearly a country that has embraced, I don't know about capitalism, but markets for sure in a very big way, maybe even better than us.

12:10No, I mean, definitely. You can actually then translate what they said and say, well, maybe I was right because I really meant China. But I did not. In those days, I really meant Eastern Europe and the Soviet Union. China is, of course, a very special case. And of course, I'm sure we'll talk more about China. But it is an example that, again, 15 years ago, nobody expected what has happened. And if people tell me they did expect, I could just go back to what they wrote. And they got Nobel Prize, you know, prizes for writing that China would never technologically develop like 15 years ago.

12:40And then we see now the reality, which is entirely different. By the way, I'm going to get you to sign my copy of the book in the hopes that it makes it into the preface of your next piece of work. I'll put some very new job. Yeah. Okay. With a place like China, I'm glad you brought this up because there's this weird tension in the way people talk about it as both an economic and security threat. You know, China is going to compete with us and it's going to get everything, etc. And then talk about it as a relatively weak country in some ways.

13:13People still talk about it sometimes as a developing country or even, you know, 10 or 20 years ago, people would talk about the poor farmers. You hear less about that nowadays. But how how would you explain like that the dual way that people tend to think and talk about China in terms of its threat to the West? Let me start first by rephrasing your question, because once you start speaking of the threat to somebody, then we are really no longer in economics as we studied it. We are now exactly in that world of mercantilistic international competition.

13:48And, you know, it has actually sort of moved into our thinking without us even realizing. Yeah. To give you another anecdote, I was once on the show with very famous economists. I will not mention the name. And of course, the topic was China. We'll Google it. The topic was China. And then, you know, we're talking about the general things about, you know, wages, exports, imports, something like very general, where actually general economic principles should apply. And then he suddenly says, no, no. But for us, the United States, it is bad. And I was thinking, wait, you're not in the government.

14:18I understand. I would understand if you were in the Treasury. Yes, of course, this is your duty to look after the United States. But you, as a general economist, you have to think about whether it is good for the world or not. Right. Absolute gains versus relative gains. But since we are now in this new world, what do I think about China? First of all, I have to tell you that, for example, what you see in China, actually, it happened to me like a week ago. People are very much surprised when you tell them you're now a rich country. I mean, when I say, OK, by the World Bank definition, actually, this is the real conversation. You are the upper middle class income country.

14:50And they are kind of surprised. And there was a woman who tells me, you know, I submitted a publication for the U.S. Journal. And I paid, I think, $50 as a developing country. And they write back to me and say, no, you are now classified as advanced country and you have to pay $100 for the submission fee. But, you know, this stuff is still very much present in China. I think Chinese do not see themselves, by and large, as a rich country. They speak of this, as you know, officially moderately prosperous society.

15:20And I think it's a correct denomination, if you will. China is not France. It's not Italy. It doesn't have that income level. But on the other hand, as you actually implied, technologically, it is at the level which is actually only similar to the United States. And that is that duality that we observe. You know, maybe the villages, I have not been there, but I know that actually there are villages who are below $2 per day. You know, we are absolute poverty line. And on the other hand, we have them as a leader of the artificial intelligence.

15:52So hard to reconcile. You know, I think for a long time, people in the West, like, didn't think about China. I mean, maybe like people in the Treasury or whatever. They didn't think about China very much. It feels to me like one of the remarkable things about the last 10 years, and it literally has been 10 years, has the whole West, the Western political economic unit. So it's like governments in Europe and obviously the U.S. And then, as you say in your book, you might also, as part of this Western political bloc, might even incline to include, like, Korea and Japan.

16:27Has you traveled around? You were recently in Paris. Has everyone essentially come around in some level to where Trump was in 2016? Yes, I think basically that's the case. You know, and that actually, if I go back to my book in Chapter 1, it is structured on two levels. We talked so far about the level, the first level, which is countries' GDPs and countries' importances. And, of course, China then suddenly starts playing a very important role there. But there is another level, which, of course, thanks to the work that I've done for, like, 30 years on global income distribution, I also observe.

17:01And that second level is personal income level. What happens with the rise of Asia and China in particular is for the first time in two last centuries, you have lower parts of Western income distributions sliding down in global order. So if you are bottom-decied in Italy, okay, you're not rich by Italian standards, but, you know, you're okay. In the world level, you're at the 70th percentile of the world 30 years ago. Well, now you're at the 55th percentile.

17:31In other words, if Italy had qualified for the World Cup, that Italian would not have the money to come to watch Italy. But he had money 30 years ago to come to watch Italy. So, you know, there is this loss of economic position of individuals in Western countries. So, you know, the China thing plays on two levels. It plays at the level U.S. versus China or the European Union, which is an abstract level of state versus state. But it plays at the level U against the Chinese guy.

18:02And that, I think, is actually what I try to bring in the book, these two levels. And I think it's important to have them in mind. What if you could use AI to research your investment portfolio and ask, how would a 10% decline in the S&P 500 affect my portfolio? Or show me option strategies to help protect the gains in my largest positions.

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20:55making smarter decisions, and strengthening their ability to grow and secure critical capital. It's practical advice that cuts through complexity for leaders who need to know what's coming next. Subscribe at truist.com slash beyondpodcast. That's T-R-U-I-S-T dot com slash beyondpodcast. Copyright Truist Securities Incorporated, member FINRA and SIPC. I like the idea of measuring wealth in ability to watch World Cup games.

21:26It's internationally priced good, you know. Yeah, absolutely. Makes sense. Just going back to the idea of national market liberalism and pressing on the point you just made, the response to or the backlash against globalization in your description has been, I guess, tearing down the liberal aspect of the international economy and international trade and not domestically. So domestically, you still preserve large parts of capitalism. It didn't have to go that way, right?

21:56You could have had domestic changes in terms of income redistribution and things like that. Why do you think so much of it was just focused on the international order rather than domestically? You know, I don't know, but let me try to answer that question. You know, I'm very often asked, probably you would have asked if I don't bring it up first. That was the elephant chart. The elephant chart. Yeah, the great elephant chart. That went so viral. I was going to ask if you're annoyed every time anyone mentions the elephant chart. I'm actually tired of it, but still I have to use it.

22:28You know, the elephant chart, what it showed, really the bottom line is, okay, middle classes of the West have not been doing well. Growth rate of 1% per annum per capita, not very well. The top of the Western distributions are doing very well, you know, under Clinton especially, you know, 3% and more. And then, of course, China is doing very well. So you are sitting there, you are a government of the United States, let's say. You have two possible options. You have, okay, we go for policies that would actually tax the rich, that would transfer the

22:59money, that would do, I don't know, serious start of risk killing of labor, public education, because I come from public education. Public education rather than private, get rid of all these fancy schools that are being bankrolled by billionaires and do a serious effort. Or you say, oh, look, China is like screwing us. So let's go after China. China is really benefiting because they are stealing property rights and they are doing this or that. And eventually the decision was made, why it was made like that, but maybe politically it was more pragmatic or whatever.

23:30And I think the Trump 2016 for me is the watershed year. Because many of the policies that Trump then imposed regarding China, that continued under Biden. They were done in a more maybe intelligent way, but basically they continued. And I think that was the change. And then after that, we really have an acceleration in these policies. But you have a very good question, maybe for political scientists. I don't know. It could have gone the other way. I totally agree. It could have gone into more social democratic capitalism rather to go into this nationalist

24:01liberalism. Yeah, because this is something I think about a lot, which is like, let's say we were to like take back, rewind the clock to like 1989 or 1992. And I always think to myself, like I was nine years old in 1989, so I didn't think about these things. But I always think to myself, like if I had been, say, like in my early in my career, in my 20s in those years, I'd be like, oh, it's obvious. Like liberalism or neoliberalism, one of those two is just like, it's clearly, it's clearly

24:34the way of the future. It's clearly superior. It's proven itself in the decisive test against like, which was the better model against the Soviet Union. Even to this day, I actually find it pretty remarkable the degree to which China held the line in that decade when everything was pointing to it. It's like the question is settled. We know what's the better system. And now, of course, we have lots of people questioning all the systems, but it's sort

25:04of remarkable to me that in the 90s specifically, you had like one country that not only didn't just sort of like embrace, you know, free elections, et cetera, like it didn't even ever seem to be to come particularly close. Well, I often think of the 90s, I was older than you then, and I was then in Washington and working for the World Bank. You know, the neoliberal ideology was so omnipresent and it was actually commonsensical. So it's like you're now, if you were to now argue like, okay, this is not wood, this is actually steel.

25:35Well, we all see that it's not actually. So it was very commonsensical and you believe that whoever would actually say something against that is like either like uneducated or crazy or some mixture of the two because it has indeed had actually total ideological hegemony, total ideological hegemony. I was not happy, but I was not happy for other reasons which have to do with my life and other things. And actually recently I found an article, a long article that was then published, I think, in the monthly review, which question, it was very early, 1999.

26:08But, you know, it was an unusual article and I think we all took it as a common sense that it is an ideology that it would win. Now, come to China very briefly. China played it very low then. They did not actually, they were like a sleeper. They were not disturbing things at all. And then, of course, many people in America now, I think somewhat self-serving, they say, oh, we really did not bother with China because we thought China would evolve the way that South Korea did and Taiwan, it would become richer, it would become our partner, then they would democratize and they would become like another United States and it would be everything

26:41fine. Whether they really believe that or not, I don't know. But China was not at the center of attention that it actually became over the last 10 years. There is no doubt about it. People implicitly believed, I think, or wanted to believe that China would become a, quote to quote, normal capitalist liberal country. I mean, since we're talking about a normal capitalist liberal country, one of the, in quotes, one of the things about China is you always hear that the government is trying to boost consumption,

27:12right? Reduce savings, boost consumption. And they seem to struggle with it. And so, I'm curious how you square, you know, the growth of the middle class in China and the idea that actually, you know, by certain standards, they're pretty wealthy now with that reluctance to spend. You know, that's a very complicated question and I'm not a macroeconomist, but I had only a couple of days ago the discussion on Twitter and the sub-stock on that. First, there are the effects. The fact is actually China consumption to GDP ratio is very low.

27:44It's like about 40%, 45%. U.S. is 70%. India is 50%. So, clearly, it should be at 10 percentage points higher. People, of course, argue that there is compression of wages and, of course, that state-owned enterprises then have large retained profits. Now, the good use of these retained profits by the state, essentially, is they can actually use enormous amounts of money to direct to certain activities in, for example, railroad construction or artificial intelligence or actually what people don't mention, but China has really

28:17done very well in space exploration as well. Oh, yeah. And, you know, this is not like no money at all. And I think the next one would be air production of the airplanes, which they already have started, but they have not broken. So, and you can use that money also to have political economic influence in Africa and elsewhere. So, I think there is a political economy reason why China needs to have, from the point of view of the government, these large amounts of money. And I think it's easier to have the so-called wage compression or actually lack of sufficient growth of wages if your wages still grow by 3% or 4% or 5% per year.

28:51Now, if your wages were at zero, then it's harder to have a compression. But if you have 5%, fine. In the past, maybe you had 8%, but 5% is good enough. So, I think there is a political economy reason behind that in China. So, I'm not quite sure if they really, what they say, they really would like to accomplish that and they cannot. Because, yes, for example, they could increase social transfer significantly and people would spend that money. Lots of saving, I think it's not untrue. It's due in China to the fact that actually, particularly in rural areas, you don't have

29:24social protection. Just real quickly going back to the question of like, how did China not get swept up in the neoliberal consensus that was like so hegemonic in the 1990s? The other thing that you observe in your book is that even earlier in the century, it never got particularly interested in like the non-aligned movement or the so-called third world countries, et cetera. Does it just have a history of not being particularly interested in the flavors of the month outside

29:56of its borders? I actually think that China is an isolationist country, cultural. And, you know, people talk about the U.S. being isolationist and all that. And of course, there is a trend of politics in the U.S., which is basically meant to control of the Western Hemisphere. So, it's not really totally isolationist, but at least not get entanglements in Europe. But China, I think, culturally, and I actually recently discussed that with some friends, you know, the fact is that all Chinese economists, all Chinese authors essentially writes about

30:27China. And my publisher in China says to me, I had several books, three books, I think, published in China. And he says to me, look, we are actually very happy with your books. We sold, I don't know, probably several, I mean, I don't care about much, several thousand copies, because he says, you know, Chinese audience, they don't want to read anything which is not about China. So, it's hard to sell things that are not talking about China. U.S., yes, because now there's this competition. But the rest of the world, not that much. So, I think there is a certain ideological thing which might go really back centuries that,

30:59you know, China thought itself the center of the universe. It's the Middle Kingdom. It's the Middle Kingdom, and everybody comes to the Middle Kingdom, and they just, you know, do kowtow and say, well, you guys are great, and maybe we trade the giraffe for a little bit of porcelain, and then you go home. So, I think that that ideology, I mean, there is still a presence of that, and I think that limits China's influence in terms of soft power. Because if you don't want to study others, and to write books about them, and to actually

31:30try to fashion what they think about themselves, you're not going to have soft power. Let me just finally give an example. Sure, please. I read recently Richard Pipes. He was a famous historian of the Soviet Union. When he went to the Soviet Union in 89, he was not published before, you know, under communist regime. He was greeted there, by accident read that somewhere, like a greatest historian in the history and all that. Because his books were so influential in influencing Russians see their own history. So, that's what I meant when you're interested in other countries.

32:03So, you have to have somebody, and not only one person, but you have lots of people who would write about other countries and influence what other countries think about themselves. And so long as China does not have that, its own soft power, I think, will be limited. You have a chapter in the book about the elites, so about Joe and me. Yeah. In it, you invent a new word. My Greek is not very good, but homo plautia. Yes, that's correct. Homo plautia. And this is the idea that in America, certainly, like the wealthy have been getting increasingly

32:34rich, both through actual labor income, so how much they're being paid to do their jobs, as well as capital income, so dividends or whatever. And this is something new, according to you. So, I'm really curious, like, how do you explain the rise of homo plautia? And I always think, you know, if you think about someone who's making a lot of money from both labor and capitalism, you've got to talk about Elon Musk, right? Like, he's sort of the standard bearer. Well, I can talk about you also, or me. Oh, okay, yeah. Yeah. I mean, because the book deals with the top 10% of Americans.

33:07So, this is not a small group, you know? It's like we're talking about, we take, this is all empirical. We take, like, the top 10%, which is, you know, 30 million people, approximately. And what you find there is that there is an increasing percentage of people who are in that top 10%, who are also in the top 10% by income from property, cash income from property, and top 10% by income from labor, from your job. And that is new. And now, actually, there are more studies. This is early on, but now there are people who are starting exploring whether it existed

33:39in 1930s and 20s and so on. But think of the 19th century capitalism. You had big guys like J.P. Morgan or millions of others, you know, not millions, hundreds. But they were not laborers, technically. You know, they made money through entrepreneurship and sort of corporate management of the company. Their income was income from corporations, income from capital. But here now we have a significant upper middle class that is rich in both ways.

34:12And I think it's, I mean, we are probably here, all belong to that group. And what is interesting, then, that's actually what I use, is that in the book, I use Daniel Markowitz's work on meritocracy a lot. That class is very specific because, in one hand, it is rich capitalists, quote unquote. They really defend private property. In the past, when people spoke of the professional managerial class, they thought these would be people who run state-owned companies or private companies. I use James Burnham, you know, he was saying that capitalism will be dead because managers would run

34:46companies regardless, so they would be in charge. And secondly, these people, because they have high labor incomes and they went to fancy schools, they believe they deserve it. And that means that the meritocracy, protection of private property, large capitalism, and hardworking ethos is combined. And I would venture to say this is a new combination in history of capitalism. I feel like I'm part of that class. I worked really hard. Don't you call it, you call it folksy elites, right?

35:17I'm sorry? Folksy elites. Yeah, they're folksy elites because they love to be folksy. It's actually, it's an interesting thing. I mean, I think sociologically, if you look at the elite that you were seeing, the Jane Austen and so on, they actually wanted to show their elite. What you find in the American elite, and I've spent some time around that elite, is that they really want to show that they're not an elite. They do give you signals that they are, but they do it in a fairly discreet way. And they like many of the things to actually, to be very folksy, you know, make no mistake.

35:51No, no, I do it. I say like, oh, I went to a public university, the University of Texas. It's just a state school, which happens to be one of the best schools of the nation and incredibly wealthy. But that is how I do that folksy elite move, by reminding, I'm just a product of public education. And then, of course, they like to mention that they work hard, which is true. Actually, if you look at the number of hours of work in the U.S., it's actually increasing with wage per hour. So they do work a lot. So they work a lot. They study quite a lot.

36:22They feel they deserve it. They have the capital incomes, and they transmit all these advantages to their children that they believe actually children deserve that. But the problem, and that was what Markowitz says, the problem is that then actually does create in sort of an elite that has a self-perception that it deserves that, and that is to some extent really unpregnable elite, because you cannot get rid of them because they have a hard capital income. Since the stock market goes down, they would actually have labor income. It's a very interesting element.

36:53And they don't deserve it. They're very spoiled. They didn't do anything to deserve the lifestyle that they have. And so that's the one area. But can you say that because you want to be Foxy elite, you know? No, no, no, no, no. Actually, like, just getting all personal a little bit, just like, no, it bothers me a little bit, because it's like they have all these privileges. No, no, it bothers all of us, but actually we still do it, because you're not going to work against your kids. No, nobody does. So, I mean, this is a very good elite as the elites go, but it is an elite nevertheless.

37:26Going back to China, when people talk about China, they, and we're human, so we always do this. We reach for historical analogies, right? Maybe the story is that it's kind of like Japan. Maybe the story is that it's kind of like the U.S. after World War II, and you pull different strands from it, et cetera. But I think more and more people are saying, no, this is a new thing. This extraordinary concentration of so much production in one country specifically, it

37:59is novel. And the numbers, setting aside the qualitative differences, you have some distinct metrics, including just the sheer population level, like wealth compounding gains over the last several decades. Is it really just a sort of like a new phenomenon that we don't have good analogies for? And can you talk about just the scale of what we call the rise of China? Well, the scale, I can talk about the scale. I mean, I really, I don't know. I'm wary of analogies. I don't know if there is like an analogy with Japan as well. There is analogy of the Soviet Union.

38:30There is analogy with the U.S. Actually, I use the analogy even with English, with Industrial Revolution, because the growth, going back just for a moment on the elites, the growth, we actually did the same thing. I did this with the co-authors, actually, Chinese co-authors. We did 5% top of Chinese urban population. And this is their elite. And what you see in that elite, 1988, where the first data begin, is that two-thirds, broadly, two-thirds of the income of the elite comes from state-owned enterprises, government jobs,

39:01and jobs in the Communist Party. Okay? Well, go today to 2018, and now we have a data for 2023. It's the reversal. Two-thirds of total income from the elite, in the elite, for the elite, comes from private sector jobs, professional jobs in private companies, and one-third from state-owned enterprises, Communist Party, and government. So, that was why I made the comparison with the U.K., because the number of so-called, you can call it capitalists, and they are called, actually, in Chinese official terminology,

39:33they are called individual owners and larger owners, not capitalists, but owners. Okay? When we look at the data that were done by Bob Allen, English economic historian, for the growth of the capitalist class in England between 1688 and, I suppose, 1900, we see exactly the same thing, but over 150 years. There is more capitalists. You know, there were a small number in the beginning. Then, they became a much larger number. And their relative income compared to landlords originally was much lower,

40:04and then starts catching up. So, what I call that extensive and intensive increase of capitalists. And in China, it took 40 years for that, and the U.K. took 150. So, the change in China is just at the level that we have not historically seen. So, in that sense, I totally agree with you. It is something that, in terms of size of the population and the speed, we do not have an equivalent case. This is the Bloomberg Tech Minute, brought to you by ChachiPT.

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43:38and you talk about the potential for great power conflicts, for war, basically, for more income inequality, plutocracy, all that stuff. Can you envision, is there any scenario where you get, like, a relatively good equilibrium? Harmony. Yeah. Like, I mean, could this type of market liberalism live in peace with itself, I guess? Okay, let me put the other hat now, the optimistic hat. You know, the chapter two in the book deals with precisely that question.

44:09That was a question which I think is really so relevant. It says, what did economists and political scientists think about the relationship between openness, slash globalization, and war on peace? And then you have people from Montesquieu who actually believe that trade leads to immediately to peace, because we are both trying to actually sell our goods, we have to be nice to each other, and stuff like that. Yeah, I remember that. And, of course, the other extreme is John Hobson with the imperialism in 1902, and then Russell Luxembourg and Lenin,

44:40who actually, and Schumpeter, who believe that when you have large powers, they fight for markets, companies fight for markets, but because they need markets, control of the labor force in foreign countries and elsewhere, they basically take the state to play that military role that they need, which is actually what we see today. It's basically large-scale companies need the support of the state if they want really to do jobs elsewhere.

45:10And that was really sort of a negative, more belligerent sort of variant of that view. But if I want to be optimistic, I think, I mean, let's go concretely to the questions today. If we could stop and find a ceasefire and a solution of the war in Ukraine and Russia, in the Middle East, Iran and the United States and Israel, I think that we would then at least eliminate the possibility of a huge war,

45:40which then, of course, if you have a huge war, all the chips are off, you know, you have no idea what will happen. But at least then we could start, I think, redesigning economic system, having, as people have said, a new Bretton Woods and having a solution where actually China would have greater influence, and not only China, India as well, Europe definitely much less, because Europe has the influence in these organizations that reflected 1945, when, you know, obviously, Europe was basically still colonial powers,

46:11and countries like Indonesia, Brazil, and so on. So that would be the optimistic scenario. Stop the wars and renegotiate international economic relations.

Conclusion and Final Thoughts

46:20You were in Paris recently. How are Europeans' elites, how are they living with themselves having come around to Trump's view on China? That must drive them crazy, right? They must create this terrible psychic toll on them to have to agree with Donald Trump on something. But you hear it all the time from Mertz, Macron, et cetera. How are they digesting this? I don't think it was that hard, because Germany definitely has been affected by China in electric vehicles.

46:51Yeah, no, no, for the clear, the math is clear. So it was clear. I mean, they side now with Trump because they do have similar problems. Yeah. No, I don't know, you know, well, I don't really know European elites, but, you know, what I find strange about Europe, I'm not very optimistic on Europe for many reasons, but, you know, what I find strange is that Europe really needed, in order to, needs actually, in order to prosper two elements. It first needs cheap energy, which was really fueling European growth

47:21in the last 40 years or 50 years. But then they decided, because of the war with Russia and Ukraine, to just cut off Russian energy and to buy much more expensive American energy. You'll say, well, that's kind of bizarre, but okay, let's do it. Then, it's also the continent with a decline in population. And the only way to stop that decline in population is to have immigration. But then they say, and it's increasing now, they don't want immigration at all. You have maybe Spain that is an outlier, that is in favor of immigration, but nobody else does.

47:52If you look at Nordic countries, they have- They won't let them in, yeah. They don't let them in, yeah. I mean, no, in Spain, they're liberal towards Latin American immigration. Yes, but they're liberal towards immigration in general. And actually, Sanchez's government is totally at odds with everybody else on that, on immigration. And so they need people, but they don't want people. They need cheap energy, but they decided to cut off the energy. And then China shock comes, especially to Germany. So they are in, I think, different situation. And in such a situation, they have found some sympathy for Trump.

48:24But there may be some feigned sympathy as well, because they treat, I think, actually, many people treat Trump like a tiger in a cage. You're with the tiger there, and you just want to survive until the tiger is gone, you know? So you just please the tiger and say, okay, you know, you big tiger, you are great, but you don't really believe that. So there is that part as well, I think. But say more about your recent trip to China, and I assume you met some Chinese elites over there and talked to them. It was really about economic history, and it was super interesting

48:55because the conferences that I went to, they were in three from Beijing, Shanghai, and then also one in a smaller city, Guangzhou province, which is in the south, very sort of tropical. We talked about the great divergence, and that was why, that was a topic which is very popular among historians. Why is that an industrial revolution took place in England and not in China? If you look at 1750, the two countries are at similar level of development. China is big, has many technological innovations. You know, they have a book of technological innovations

49:26over 2,000 years and so on. So the story, the conference was about that. But then because of my book is really now the great convergence of China, then of course that was interesting because it is to some extent a pound down of what happened before. And it is interesting to speak obviously to many people. These are people at universities and so on. As I was saying before, many people have a little bit of a disbelief that they are the rich country. I was going to ask, do you get any pushback on the convergence thesis or not really?

49:56Not really. But for example, what I did get is that when I was given that presentation for a while in China, I talked about global inequality. And I say between 1990 and actually until probably until several years ago, China was a sort of automatic reducer to global inequality because it's a big country. It was still relatively poor and they grow faster and global inequality goes down. And then I say, but that's no longer the case. Today, Chinese high growth is slightly inequality increasing

50:27at the world level because China then becomes further apart from poor countries like Sudan, Ethiopia, Congo, and so on. It gets closer to the US but the first element is stronger than the second. So when I say to them, that was interesting, young people especially. When I say to them, Chinese growth today is globally inequality increasing. They almost took it like it's an insult. So you're telling us we should not grow. I said, no guys, this is an arithmetical thing. It is simply that your country

50:57has become too rich now. Arithmetically, if you grow at 8%, it's going to increase global inequality. Maybe you should redistribute within China, but I'm not talking about that part. But what I find it interesting is that people are still real, as I was saying before, they have a little bit of problem getting adjusted to the fact that they are now not a very rich country, but they have joined the club, around the club of the rich countries. Do you think that this China anxiety that's so prevalent in the US,

51:28Europe, Japan and Korea, etc., do you think it will spread further and become a thing in the actual poorer parts of the world who presumably have industrial ambitions of their own? I mean, Brazil has a plane maker. They presumably, the COMEC is going to compete with Embraer, etc. Like, could China find itself in a situation in which, there was recently a story, Malaysia, specifically limiting the number of imports

52:00of low-end Chinese EVs. Like, could what, okay, it started in the US with Trump, spread to Europe over the last several years. Could it spread further? It could, but you know, let me just say, that's actually what my book is good. This is national market liberal. It's actually liberalism limited to the national market. So we really now totally think in terms like, what are we doing to do? Is Malaysia going to stop these goods? Is Brazil going to stop other goods? There was recently an article, I think, in Foreign Affairs by Subramanian

52:30and another author, mostly from the Indian perspective, but essentially saying, if China is better in high-end manufacturing and middle-level manufacturing, then countries that would normally go into middle-level manufacturing actually would be also squeezed out by China. But then I really have problem with that argument because I'm thinking, well, we are all kvetching here because China is too efficient and too good. I mean, that doesn't make sense. If China is efficient and too good in producing X, Y, and Z,

53:01let them be producing X, Y, and Z. Why do we complain about this? Well, okay, I have a thought why we might want to complain about this. So clearly we all enjoy every day the benefits of efficient Chinese production and we have affordable computers and affordable phones and lots of other things and inexpensive toys, etc. One reason we might not love that is that if you can't build a car, if you can't build, like, you can't build a tank

53:32ultimately, right? Dual-use technologies, you lose that manufacturing muscle. You lose that manufacturing muscle for commercial goods and then you no longer have the muscle for military. And if you can't do that, as Alexander Hamilton said, you don't have sovereignty as a nation. This is, like, you know, great. We all love these benefits. I love cheap things as much as anyone. But, like, this one, I think about the world order. If no country can, like, actually protect itself militarily

54:03because they've lost, that has become totally hollowed out, isn't that a reason to be anxious? No, no, there is a reason.