Branko Milanovic on What Comes After Globalization

22:11Tracy Alloway:Yeah, the great elephant chart. It 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 I still have to use it. You 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.

22:44You have two possible options. You have, okay, we go for policies that would actually tax the rich, that would transfer the money, 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 bankrupt 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.

23:22And I think that 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 would have gone into more social democratic capitalism rather to go into this nationalist liberalism. Yes.

23:54Tracy Alloway: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 the 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.

24:36Tracy Alloway: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 of 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 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.

25:16You know, the neoliberal ideology was so omnipresent and it was actually commonsensical. So it's like if you were to now argue like, okay, this is not wood, this is actually steel. Well, 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 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 questioned, it was very early, 1999.

26:00But, 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 fine.

26:34Whether 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 that. People implicitly believed, I think, or wanted to believe that China would become a, quote, unquote, normal capitalist liberal country. I mean, since we're talking about a normal capitalist liberal country, one of the things about China is you always hear that the government is trying to boost consumption, right? Reduce savings, boost consumption. And they seem to struggle with it. And so I'm curious how you square the growth of the middle class in China and the idea that actually, by certain standards, they're pretty wealthy now with that reluctance to spend.

27:24That'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 a sub-stock on that. First, there are the effects. The effect is actually China consumption to GDP ratio is very low. It's like about 40%, 45%. US 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 China has really done very well in space exploration as well.

28:12And 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. 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. Now, if your wages were at zero, then it's harder to have a compression.

28:47But 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, is doing China to the fact that actually, particularly in rural areas, you don't have social protection.

29:17Tracy Alloway: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, etc. Is it just have a history of not being particularly interested in the flavors of the month outside of 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.

29:57And 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 China. 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'm talking about much, several thousand copies because he says, you know, Chinese audience, they don't want to read anything which is not about China.

30:38So it's hard to sell things that are not talking about China. US, yes, because nowadays 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, you know, China thought itself the center of the universe, It's the Middle Kingdom. It's literally the Middle Kingdom. And everybody comes to the Middle Kingdom and they just 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.

31:13And 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 try 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 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.

31:52So that's what I meant when you're interested in other countries. So 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 self-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 rich both through actual labor income.

32:29So 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 plutea? 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. I mean, because the book deals with the top 10 % of Americans. So this is not a small group, you know. It's like we're talking about, we take, this is all empirical.

33:04We 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 starting exploring whether it existed in 1930s and 20s and so on. But think of the 19th century capitalism. You had big guys like JP Morgan or millions of others, you know, not millions, hundreds, but they were not laborers technically.

33:46You 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. And 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 companies regardless, so they would be in charge.

34:42And 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.

35:05Tracy Alloway:I worked really hard. Don't you call it folksy elites, right? I'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 Austin 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 be very folksy.

35:42Make no mistake.

35:43Tracy Alloway:No, 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. They 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.

36:23But 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 they don't deserve it

36:46Tracy Alloway:they're very spoiled they didn't do anything to deserve the lifestyle that they have and it's so I that's the one you say that because you want to be Foxy elite, you know? No, no, no, no. Just give them every advantage you can. 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.

37:18Tracy Alloway:Going 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 US 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 is 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.

38:04Tracy Alloway: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 an analogy of the Soviet Union. There's an analogy with the US. 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.

38:36We 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, and 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 UK, because the number of so-called, you can call it capitalists, and they are called actually in Chinese official terminology, they are called individual owners and larger owners, not capitalists, but owners.

39:31When 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. There were a small number in the beginning. Then they became a much larger number. Their relative income compared to landlords originally was much lower and then starts catching up. I call that extensive and intensive increase of capitalists. And in China, it took 40 years for that, and the UK took 150. So the change in China is just at the level that we have not historically seen.

40:13So 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.

40:37Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or if my cash balance goes above$20 ,000, move the excess into my direct index. You approve the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined.

41:16An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., Member FINRA, and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. If your best finance people are doing expense reports, chasing receipts, or spending time on month-end close, it's time to get Brex AF, a Gentic finance that eliminates that work before it starts.

41:59Learn more at brecks.com slash AF.

42:29That's where your story starts. I mean, there are risks that come with the rise of the sort of national market liberalism. And 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?

42:56Tracy Alloway: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. That 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 and 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.

43:32I remember that. And, of course, another extreme is John Hobson with imperialism in 1902 and then Russell Luxembourg and Lenin, who 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. And that was really sort of a negative, more belligerent sort of variant of that view.

44:18But 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, which then, of course, if you have a have a huge war, all the chips are off. 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.

45:01Europe definitely much less, because Europe has the influence in these organizations that reflected 1945, when obviously Europe was basically still colonial powers. and countries like Indonesia, Brazil, and so on. So that would be the optimistic scenario. Stop the wars and renegotiate international economic relations.

45:21Tracy Alloway:You 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 MERS, Macron, et cetera. How are they digested? I don't think it was that hard because Germany definitely has been affected by China in electric vehicles. Yeah, no, no. So it was clear. I mean, they side now with Trump because they do have similar problems. I don't know. You know, well, I don't really know European elites.

46:04But, you know, what I find strange about Europe, I'm not very optimistic on Europe for many reasons. But what I find strange is that Europe really needed, in order to prosper, two elements. It first needs cheap energy, which was really fueling European growth in 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 the decline in population is to have immigration.

46:44But 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. If you look at Nordic countries, they have -

46:55Tracy Alloway:They won't let them in immigration. They don't let them in, yeah. I mean, no, in Spain, they're liberal towards Latin American immigration. Yes, but they're liberal 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. But there may be some faint sympathy as well, because they treat, I think, actually, many people treat Trump like a tiger in a cage.

47:33You'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. 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 because 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.

48:07We 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 a similar level of development. China is big, has many technological innovations. You know, they have a book of technological innovations over 2 ,000 years and so on. So the story of 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.

48:42And 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? Not 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.

49:20And then I say, but that's no longer the case. Today, China's high growth is slightly inequality increasing at the world level because China then becomes further apart from poor countries like Sudan, Ethiopia, Congo, and so on, 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 has become too rich now, arithmetically.

50:01If 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 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.

50:23Tracy Alloway:Do you think that this China anxiety that's so prevalent in the US, Europe, maybe 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 of 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?

51:12It could, but you know, let me just say that's actually what my book is good. This is national market liberal. Yeah. 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 and 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 spaced out by China.

51:49But then I really have a problem with that argument because I'm thinking, well, we are all kvetching here because China is too efficient and too good. That doesn't make sense. If China is efficient and too good in producing X, Y, and Z, let them be producing X, Y, and Z. Why do we complain about this?

52:07Tracy Alloway:Well, OK, 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 a tank ultimately, right? Dual-use technologies, you lose that manufacturing muscle. I understand it. 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.

52:50Tracy Alloway:This is like, you know, great. We all love these benefits. I love cheap things as much as anyone. But like this, when I think about the world order, if no country can like actually protect itself militarily because they've lost, that has become totally hollowed out. Isn't that a reason to be anxious? No, no, there is a reason. But then you go to chapter two and you say, well, I agree with Hobson, Lenin and Rosa Luxemburg. Openness is war. That means basically we cannot have ideologically an openness that is actually open without thinking about conflict. And I think it's legitimate stuff because, of course, conflict has been with us for so long.

53:29But that poses the question of what we started at with your belief and my own belief, and I think your belief in the 1990s, that all these contradictions are gone, that there was neoliberalism that is ruling everything. There will be no conflict, that we don't have to think about that. And if somebody produces X, Y, and Z, that's excellent and so on. Joe and I both did international relations degrees in the early 2000s. We are well aware of this environment. And that actually, I agree with the real world is such as you described it. But that simply means that the world that we believed in 1990 was not the real world.

54:07That was a fantasy world. And that means that that ideology which underpinned that fantasy world was a fantasy ideology. So I understand from the point of view of military technology and all of that, that, of course, countries cannot simply, particularly large, big powers. Small countries, it doesn't really matter. For big powers, it does matter, because then if big powers need helicopters and they cannot produce helicopters because they don't have any industrial capacity, yes, they are not going to have helicopters. And that would be it, as we see now with drones and so on. So I agree from the point of view of national security.

54:38Yes, one has to be not concerned about China because I hate China bashing, but to be concerned about other countries in general. You know, because everybody who is your ally might not become your ally tomorrow. You never know. So in that sense, yes, I agree with Alexander Hamilton. But as I said, then we are really in a different world from the world of unimpeded free trade, where basically you don't believe that there are, you know, significant military considerations. I would not say zero, but not significant. Most of your work famously focuses on inequality and distributional effects and that sort of thing.

55:14When you look at the tools of, you know, again, this national market liberalism, we think about sanctions or tariffs, obviously, industrial policy, things like that. Do you have a preferred tool that would come with some distributional benefits rather than just shuffling rents between countries? When it comes to global income inequality, and I've been working on that, as you know, for many years, the ironic stuff about that is when if you want to reduce global income inequality between individuals, you really have to worry about growth. Because the best way to reduce, and practically the only way at the global level, is high growth rates of poor countries.

56:00And that's why Africa, in that point of view, and that's what I was telling the Chinese students when they were surprised that China is no longer, I say to them, the key point now is India's growth and especially Africa. Because Africa, you have five large countries, around 100 million people, actually 220 is Nigeria, but others about 100 million. So we are talking there about these five or six countries with the one billion people and growing the only part of the world which is going at 2 % annually in terms of population. So that really is going to define 21st century. Are we going to have a reduction in global inequality or not?

56:39If Africa doesn't catch up, we will have another increase in global inequality. So when it comes to global inequality, you really have to worry about growth. When it comes to inequality within nation-state, then, of course, the situation is different. You have a host of policies that are quite well known. You know, education, I think, is crucially important, in my opinion. And, you know, I'm not a huge fan of not slapping a tax on anything. You know, some people immediately just want to tax everything. But I do actually believe that there is a case for taxing extraordinary wealth. And I've called it in my sub-stack, I called it a pedagogical tax.

57:15tax. And I tell you why it is pedagogical, because you have to tell people with extraordinary wealth, you are not going to rule us. I don't care how many billions you have, you're not going to rule us. And in order for you not to be able to rule us, I'm going to have an extortionary tax on you every year. And this is pedagogical tax. That's what Zupan is actually calling for that. Piketty is calling for even stronger tax. I don't really have a view whether it should be 2%, 20 % of that, but I think that should be a pedagogical tax. There's one line in your book I didn't really like, or I didn't get it.

57:47There may be more lines. I didn't. I didn't.

57:49Tracy Alloway:Maybe I didn't get it. I didn't like it. There are many things. So page 141 says, it is in this context that we should look at the politics of Donald Trump, Xi Jinping, and Vladimir Putin. Their policies try to stem or control the rise to complete economic and political dominance of the money elites. This strikes me with Trump in particular as a thing I'd see post-liberals like to say on Twitter and they fantasize that he's sort of like secretly – I don't know – secretly heterodox economics or something like that. When I look at the actual administration, I see an administration that is very orthodox when it comes to tax cuts on the rich.

58:30Tracy Alloway:I see an administration that has invited big business leaders into the operations of government at a degree that's sort of unparalleled. In what sense is it defensible to put Trump in this category? It's a very good question because it raises also the issue that I address by talking about national market liberalism. I actually put Trump in a category of people domestically that pursues and continues and actually in some sense deepens the policies of neoliberalism domestically. But what I wanted to say here, maybe it was not clear, but what I wanted to say is they came to power on the basis of support that came from parts of the population that were resentful about the people who, the winners of the neoliberal globalization.

59:22For the US, I don't need to expand on all that. People who voted for Trump, it has been studied in extents so much more than I know. But the fact is that 77 million people actually voted for him, and I think essentially voted because they were unhappy with what they have seen. They were expecting much more. They got much less. So I think in that sense, he fashioned himself as somebody who is fighting the elites. Of course, in reality, he's not. Actually, he is not only part of the elite. He has, as you said, brought them all in, and he does follow very conservative policies when it comes to taxes.

59:55Actually, of course, taxing capital less than labor, taxing top less, I mean, not less, but actually not increasing the tax rates and so on. So I agree. So what I wanted to say there, maybe it was not clear, the reasons for them coming to power was that the significant section of the population was unhappy with neoliberal globalization. And I think in the case, interesting case is Xi Jinping for me, Putin as well. But Xi Jinping, what is interesting is I think he came, and he actually explicitly said that, he doesn't want rich people to enter the decision-making bodies of the Communist Party. It's the pedagogical point you made.

1:00:34Yeah, pedagogical. He says to the rich people, as China historically had the case, merchants, yes, you get rich, do extremely well, but don't come here and tell us what we should be doing. We decide, and you get rich. And I think actually under Jiang Zemin He had this policy of the three represents Which ideologically justified The influence of the rich people In the communist party And I think it's very clear that with Xi Jinping There is a purge of such people out So they can be still rich I heard the story, maybe it's apocryphal You guys must know that Probably much better than I But I was told when Jack Ma was told That he is not going to have his IPO The phone call was made by the mid-level official in the Ministry of Finance.

1:01:18And things don't happen by accident in China. That was the message. You don't treat with the Ministry of Finance. You treat with the mid-level official. That's your level.

1:01:29Tracy Alloway:Bronko Milanovic, thank you so much for coming on the podcast. Very fun conversation. Really appreciate you taking your time. Well, thank you very much for inviting me. It was really fun. Actually, I love these conversations that are unscripted. Yeah, that's how we like to do it. Let's just, you know, just a little tour around the world. But no, that was great. Thank you so much.

1:01:58Tracy Alloway:up until prepping for this episode i just like totally forgotten about the elephant chart and how that was like man that must have been in a million slide presentations in like 2015 and 2014, et cetera. Joe? Yes? Can I be in the room when you tell your children that they're not getting an inheritance because you need to prove your folksy credentials? Well, I assume they, you know, if I'm fortunate enough to have a little bit left over, that they'll get some inheritance. But my daughter recently, like, I don't know if it was like from a TV show or a friend. I don't know. she learned the term trust fund recently and she has she's like oh do i get a trust fund and i was like absolutely not that it's not something in your future and then she was like disappointed and i was like no no like you have to understand no even if no one respects those people this is why you don't want money yeah it's like no no no one respects those people etc so she is learning about the world of you know like so far i've told her and she'll inherit something i hope i hope i have a little cash left over.

1:03:06Tracy Alloway:She'll not be getting a trust fund. Anyway, that was a fascinating conversation. And I do think this is like the big story of our time. It's the sort of like turning away from globalization and bringing everything more inwards. I do think it's very interesting and perhaps telling that so much of the policy, you know, we're talking about people who are upset because they're not getting as wealthy as they once could have been basically. And I think it's interesting and telling that the policy solutions to that are all very much focused outward, things like tariffs and things like that, rather than anything focused domestically.

1:03:44So domestically, you still get market liberalism.

1:03:47Tracy Alloway:Yeah. No, I think that's interesting. You know, I remember, again, going back to the 2010s and I was, you know, you see that elephant chart. What the elephant chart showed was that, like, on a global scale, the new middle class was coming from Asia. Right. China, Asia in general, more broadly, which he talks about in the book. But on the flip side, it's like, OK, so some person who's sort of like in the middle in Italy. Right. Like they're pretty wealthy by global standards. If their status in the globe goes down because suddenly a lot more people are wealthy in China and Korea, Vietnam, et cetera.

1:04:26Tracy Alloway:I'm like, I don't really see how that hurts them. Right. It was interesting. Like the World Cup ticket example is sort of a symptom of this phenomenon. There aren't that many things that are like the World Cup where the existence of wealthy people elsewhere actually diminishes your relative. You know, you do see a few things like this. People observe that the Disney vacation is not as available to a median household the way it would have been in the 70s or 80s because there are just so many more people who are— Right. It's also a competitive thing in the same way as the World Cup. I am also a little bit skeptical of the sort of basic economics claim that, say, the rise of Donald Trump or the success, I would say, electorally of Donald Trump is about this like aggrieved.

1:05:22Tracy Alloway:There is like this sort of like, of course, there's this anti-elite, maybe anti-liberal elite tinge to it. But another big part of it, his success in 2016 was build the wall. Right. Which is like a very different thing. That's about keeping other people out. There's very little to do with sort of like, you know, the sort of like success of wealthy people in the United States. You're not building a wall to keep out Mexican transformers. It was a huge part of the success in 2016. and I would say 2024 with sort of the perception or the sort of liberal border policies of the Biden administration. So I think like it's very, people like to say, oh, it's like there's this middle class and they look at the elite.

1:06:05Tracy Alloway:No, a big part of Trump's success specifically clearly has to do with immigration, which is a different story and perceived cultural change rather than inequities of capitalism or whatever. All right. Shall we leave it there? Sure. Let's leave it there. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our producers, Carmen Rodriguez at CarmenArmond, Dash O 'Bennett at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content, go to Bloomberg.com slash Odd Lots where we have a daily newsletter and all of our episodes.

1:06:43Tracy Alloway:And you can chat about all of these topics 24-7 in our Discord, discord.gg slash Odd Lots. And if you enjoy Odd Lots, if you like when we talk about the global elites, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

1:07:19Thank you.

1:07:49multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation. policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. Ask yourself, what are your best people spending their time on right now?

1:08:27Expense reports, receipt chasing, month-end close that takes weeks. You become what you spend on, and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically, so your team can spend their time on what actually compounds. It's time to get Brex AF. Learn more at brex.com slash AF. Apple Vacations, where your story starts. The July Savings Event from Apple Vacations is here. Book by July 23rd and save up to$400 off your flight and hotel package to Mexico, the Caribbean, Central America, Hawaii, or Europe.

1:09:07From all-inclusive escapes to bucket list adventures, Apple Vacations makes it easy to create memories with the people who matter most. Start today at AppleVacations.com or contact your trusted travel advisor. Apple Vacations, where your story starts.