00:00:02 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 00:00:18 Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast. 00:00:22 Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway. 00:00:24 Speaker 4: I have a. 00:00:24 Speaker 2: Personal question for you this time. All right, do you think of yourself as like a member of the global elite? 00:00:32 Speaker 3: Like are you? Do you consider yourself elite? 00:00:34 Speaker 5: 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? 00:00:57 Speaker 1: Now? 00:00:58 Speaker 2: I try to, you know that it could maintains journalistic unbiased. And I would say, look, Jared, Tracy, they are clearly among the elite. They have good jobs at a Fortune five hundred company. They are among the most well educated demographic to ever exist in history. We get to work in a nice air condition of 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. 00:01:23 Speaker 5: But I look, I think everything's relative. 00:01:26 Speaker 2: I'm we're an elite, I think objectively speaking, but I also think I've been 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. 00:01:44 Speaker 3: Elite status anxiety go on. 00:01:48 Speaker 2: Well, one of them is AI because we don't 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, domestic 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 Madron, 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 rustbelt manufacturing, there'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. 00:02:37 Speaker 5: You won't need to learn Mandarin, Joe. You can just just use AI. 00:02:41 Speaker 3: You know, have you seen the AI translator gadgets I have? 00:02:45 Speaker 5: Yeah, some of them are really good. 00:02:46 Speaker 2: Yeah yeah, And like you had these things, there's two sides of a screen and you're just talking then for the other person. 00:02:52 Speaker 1: Yeah. 00:02:52 Speaker 2: But setting that aside, I don't know how well that would work on the podcast or video medium. 00:02:57 Speaker 5: I gotta say I still watch ninety Day Fiance now no Go 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. 00:03:11 Speaker 2: So anyway, anyway, on this last point though, I think, like we know that probably start certainly with like the first Trump administration, sort of like US, China attention has been sort of on this linear increase. It probably accelerated during COVID, and it's clearly spread beyond the US. It just gets 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, right, and. 00:03:41 Speaker 5: 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. 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, their 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. 00:04:12 Speaker 2: Yeah, that would be the goal, right, they want to replace these things. 00:04:16 Speaker 3: Anyway, I think, as you know, forty, I'm about to turn forty six. 00:04:21 Speaker 2: So maybe if I'm lucky about halfway through my life, I would say the first half of my life I have benefited a lot from the 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 is going to be as durable in the second half. 00:04:41 Speaker 3: Sure, got sare okay, So. 00:04:44 Speaker 2: 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've benefited, If they change. 00:04:54 Speaker 3: What could some of this look like in the future. All right, well, I'm very. 00:04:57 Speaker 2: Excited to say we really do have the perfect guest, someone we wanted to talk to for a long time, someone whose work is right in. 00:05:06 Speaker 3: The heart of this. 00:05:07 Speaker 2: We're going to be speaking with Franco Milanovitch. He's 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 to the United States, China and Remaking of the World Economic Order. Professor Milanovitch, thank you so much for coming on. 00:05:26 Speaker 4: Thank you very much for having me, it said, it's a pleasure. 00:05:29 Speaker 2: What was the goal going into this new book. Well, I write a new book right now. 00:05:33 Speaker 5: You know. 00:05:33 Speaker 6: In to some extent when I finished the book, I thought the goal was basically to write and to write an autobiography. 00:05:41 Speaker 3: Okay, that could. 00:05:42 Speaker 6: Sound strange because there is very little love that book. But I covered the period from nineteen seventy four. Actually, I started the book in nineteen seventy four with the new international Economic Order and then how it failed and how then jonipolar moment came, and how the United States was not only the most public country economically, politically, militarily, but also ideologically. And how that order, which you might call near liberal 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 they called 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. 00:06:36 Speaker 5: Why do you call it national economic liberalism? 00:06:39 Speaker 6: 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 policy is economically everybody knows that, you know, free pricing, competitions on. You have social 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. 00:07:11 Speaker 4: And so on. 00:07:12 Speaker 6: And 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 amercantilist policy. It's a policy of you know, bagger day lahbor to some extent, but certainly zero sum game or even a negative some game. 00:07:45 Speaker 4: It's entirely different. 00:07:47 Speaker 6: 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 wented this new term. That was the kind of national liberalism. So it's not and do more precise national liberalism on the market side, not necessarily on the social side domestically. 00:08:07 Speaker 2: 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 twentieth century, or maybe in the immediate wake of the Great Depression, to stabilize capitalism, we adopted sort of like the government got involved, we got 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, okay, well the goal was maybe to you know, the sort of like post World War two era saved socialism and various by injecting some market element. And then there's like this in 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. 00:08:55 Speaker 6: Well, that wasn't my idea. Actually I was brounk in that sense because I actually I in the very beginning of the book, as you know, in the introduction, I bring up my first book was published in nineteen eighty nine, and actually in the very first sentence of the book I mentioned it I ran into Jeff Sachs and David Lipton, whom I knew from work on Poland, 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, okay, you have to write something. And I said to Jeff Sechs was trying to save socialism and 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. 00:09:38 Speaker 4: The misunderstanding. 00:09:39 Speaker 6: For me, the introduction of market principles and market measures and privitization to some extent was exactly the same by analogy, what Caines did to save capitalism form Great Depression. You inject thoses of socialism in order to preserve the capitalist framework. So I thought the same would happen nineteen eighty nine. 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 that saw them into different ways. 00:10:09 Speaker 2: But arguably that is a characterization of what did happen in China, particularly after Mile right. So I give 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. 00:10:30 Speaker 4: No, I mean definitely. 00:10:31 Speaker 6: You can actually then translate what they said and said, 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, fifteen years ago, nobody expected what has happened. And if people tell me they did expect, I just go back to what they wrote, and they caught Nobel prize, you know, prizes for writing that China would never technologically developed ten years ago, and then we see now the reality, which is entirely different. 00:11:04 Speaker 5: 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 anecdote. 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, et cetera, and then talk about it as a relatively weak country. In some ways, people still talk about it sometimes as a developing country or even you know, ten or twenty years ago, people would talk about the poor farmers. You hear less about that nowadays. 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. 00:11:52 Speaker 6: 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 merchantilistic into their national competition. And you know, it has actually sort of moved into our thinking without us even realizing. We give you an an anecdotables once on the show with very famous economists. I will not mention the name, and of course the topic was topic was China. And then he you know, we're talking about the general things about you know, wages, exports, import something like very general. We're 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. I understand. I would understand if you were in a treasury. Yes, of course this is your duty to look up to the United States. But you, as a general economist, you have to think about whether it is good for the world or not. 00:12:50 Speaker 4: I think relative. 00:12:53 Speaker 6: 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, okay, by the World Bank definition, Actually this is the real conversation. You are the upper middle class income country. And they are kind of surprised. And there was a woman who tells me, you know, I submitted a publication for the U and US Journal and I paid I think fifty dollars as a developing country. And they right back to me and say, no, you are now classified as advanced country and you have to pay one hundred dollars 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. And I think it's a correct denomination, if you will. China is not France, it's not tally, it doesn't have the 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 they are villages whare below two dollars per day. You know, we are absolute public in line. And on the other hand, we have them as a leader of the artificial intelligence so par You. 00:14:15 Speaker 2: Know, I think for a long time people of the West like didn't think about China. 00:14:19 Speaker 3: I mean maybe like people in the. 00:14:20 Speaker 2: Treasury or whatever, or in a few they didn't think about China very much. It feels to me like one of the remarkable things about the last ten years, and it literally has been ten years, has the whole West and the Western political economic unit. So it's like governments in Europe and obviously the US, 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 in Japan. Has you travel around you were recently in Paris. Has everyone essentially come around in some level to where Trump was in twenty sixteen. 00:14:57 Speaker 6: Yes, I think basically that's the case, you know, and that actually, if I go back to my book chapter one, it is structured on two levels. We talked so far about the level, the first level, which is country's 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 world that I've done for thirty years on global income distribution, I also observe, and 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 decile in Italy, okay, you're not reached by Italian standards, but you know you're okay. In the world level, you're at the seventies percent all of the world thirty years ago. Well now you're at the fifty fifth percent. In other words, if Italy had qualified for the World Cup, that Italian would not have the money to come to watch Italy, but the money thirty 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 that the China thing plays on two levels. It plays at the level us rest of China or European Union, which is an abstract level of state versus state, but it plays at the level you against the Chinese guy. Yeah, and that I think is there. Actually, that's what I tried to bring in the book, these two levels, and I think it's important to have them in mind. 00:16:44 Speaker 5: I like the idea of measuring wealth in ability to watch World Cup games. 00:16:48 Speaker 4: It's internationally priced good, you know. 00:16:50 Speaker 5: Yeah, just going back to the idea of national market liberalism and pressing on the point you just made. I mean, the response to or the back 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, you know, large parts of capitalism. It didn't have to go that way, right, You 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. 00:17:30 Speaker 6: 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. 00:17:40 Speaker 4: The elephant chart. 00:17:41 Speaker 3: Yeah, the great elephant chart. 00:17:43 Speaker 5: I was going to ask if you're annoyed every time anyone mentions the elephant chart. 00:17:48 Speaker 6: I'm actually part of it, but pill I have to use it, you know, the elephant chart with the show. Really the bottom line is okay, middle classes, so the West have not been doing well. Growth three to one percent random per capita not very well. The top of the Western distributions are doing very well, you know under Clinton especially, you know, three percent 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 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 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're 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. And I think that Trump twenty sixteen for me is the watershed here because many of the policies that Trump then imposed and 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 liberalist Yes. 00:19:25 Speaker 2: Yeah, because this is something I think about a lot, which is like, let's say we were like take back rewind the clock toll, like nineteen eighty nine or nineteen ninety two, and I always think to myself, like, I was nine years old nineteen eighty nine, so I didn't think about these things. But I always think to myself, like if I had been to say, like in my early in my career, in my twenties. In those years, I'd be like, oh, it's obvious, like liberalism or neoliberalism, one of those two. It's just like, it's clearly, it's clearly the way of the future. It's clearly supure. It's proof even 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'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 nineties specifically, you had like one country that not only didn't just sort of like embrace you know, re elections, et cetera, Like it didn't even ever seem to be to come particularly close. 00:20:40 Speaker 6: Well, I often think of the nineties. I was older than you and 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 common sensical. So it's like you are now if you were to now argue like, okay, this is not to world. This is actually still well, we all see that it's not actual, so it was very common sensical, and you believe that whoever would actually say something against that, it's like either like uneducated or crazy or some of the mixture of the two, because it has indeed had actually total ideological hegemony, total ideology. 00:21:14 Speaker 4: Hegemeny. 00:21:15 Speaker 6: I was not happy, but I was not happy for other reasons which have to do with my life and other things. 00:21:21 Speaker 4: And actually recently I found an. 00:21:22 Speaker 6: Article, long article that was then published, I think in the Monthly Review, which question into its very early nineteen ninety nine. But you know, it was an unusual article, and I think we all took it as as a common sense that it is an ideology that would be now come to China. 00:21:37 Speaker 4: Very briefly, China played it very low. Then they did not actually they were like a sleeper. 00:21:43 Speaker 6: They were not disturbing things at all. And then of course many people in America now I think, some 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 democrat dies and they will become like like another United States, and it would be everything fine. 00:22:04 Speaker 4: Whether they really believe that. 00:22:05 Speaker 6: Or not, I don't know, but China was not at the center of attention that it actually became over the last ten years. There is no doubt about it. People implicitly believed, I think, or wanted to believe that China would become a quote unquote normal capitalist, liberal country. 00:22:24 Speaker 5: I mean, since we're talking about a normal capitalist, liberal country. 00:22:28 Speaker 3: One of the quotes. 00:22:30 Speaker 5: 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 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. 00:22:53 Speaker 4: You know, that's a very complicated question. 00:22:55 Speaker 6: And I'm not a micro economist, but I had only a couple of days ago the discussion on Twitter and a substace on that. First are the effects. The fact is actually china consumption to GDP ratio is very low. It's like about forty forty five percent. US is seventy percent, India is fifty percent, so clearly it should be a ten percentage points higher. People of course argue that there is compressional 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 for example, railroad construction, or artificial intelligence or actually what people don't mention, but China has really done very well in space exploration as well, and you know this is not like no money at all. And I think the next one would be air production with 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 the polit from the point of view of the government, these large amounts of money. And I think it's easier to have this so called wage compression or actually lack of sufficient growth of wages if your wages still grow by three or four five percent per year. Now, if your wages were zero, then it's harder to have a compression. But if you have five percent, fine. In past maybe you had eight percent, but five percent is good enough. So I think there is a political economy reason behind that in China. 00:24:27 Speaker 4: So I'm not. 00:24:28 Speaker 6: Quite sure if they really what they say, they really would like to accomplish that they cannot because yes, for example, they could increase social transfer significantly and people will spend that money lots of saving. I think it's not untrue is doing China to the fact that actually, particularly in the rural areas, you don't have social protection. 00:24:47 Speaker 2: Just real quickly going back to the question of like how did China not get swept up in the neo liberal consensus that was like so hegemonic in the nineteen nineties. The other thing that you observe in your book is that even earlier in the century it never got particularly interested in like the nonline movement or the so called third world countries, et cetera. Is it just have a history of not being particularly interested in the flavors of the month outside of its ports. 00:25:19 Speaker 6: I actually think the Chinese isolation is country cultural, and you know, people talk about the US being isolations and all that, and of course there is a trend of politics in the US which is basically meant to control of the Western hemisphere. So it's not really totally isolation. It's it, but at least not get entanglements in Europe. But China, I think culturally, and I actually recently discussed that with some friends, like you know, the fact is that they're like all Chinese economies, all Chinese authors essentially riots 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 saw that no, probably several I maybe I'm not't knowing 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. US, yes, because now they see 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 and middle kingdom. 00:26:26 Speaker 4: It's a middle kingdom. 00:26:27 Speaker 6: And everybody comes to the Middle Kingdom and they just you know, do kautao and say, well, you guys are great, and maybe betray the giraffe for a little bit. 00:26:36 Speaker 4: Of porcelain and then you go home. 00:26:38 Speaker 6: So I think that that ideology, I mean under there is still presence of that, and I think that limits China's influence of 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. Maybe you just finally give an example. Sure, I read recently Richard Pipes. He was a famous historian of the Soviet Union. When he went to the Soviet Union in eighty nine, he was not published before in under communist regime. He was agreed to 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. 00:27:22 Speaker 4: So that's what I meant. 00:27:23 Speaker 6: 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. 00:27:39 Speaker 5: You have a chapter in the book about the elites, about Joe and me. In it, you invent a new word. My Greek is not very good, but homo ploutio. 00:27:48 Speaker 4: Yes, that's correct, homo plautio. 00:27:50 Speaker 5: And this is the idea that in America, certainly, like the wealthy happened getting increasingly rich both through actual labor income 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 plutia? 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. 00:28:22 Speaker 6: He's yeah, yeah, I mean, because the book deals with the top ten percent of Americans, so this is not a small group, you know. It's like we're talking about we take this is all empirical. We take like top ten percent, which is you know, thirty million people approximately, And what you find there is that there is an increasing percentage of people who are in that top ten percent, who are also in the top ten percent by income from property cash income from property, and top ten percent by income from labor from your job. 00:28:55 Speaker 4: And that is new and now actually there are more studies. 00:28:58 Speaker 6: This is early on, but now there are people a start and exploring whether it existed in nineteen thirties and twenties soon. But think of the nineteenth century capitalism. You had big guys like JP Morgan or millions of address, you know, 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. And I think it's I mean, you're probably here all belong to that group. And what is interesting then that's actually what they use is that in the book Now I use the Daniel Markowitz's. 00:29:45 Speaker 4: Work on meritocracy a lot. That class is very. 00:29:48 Speaker 6: Specific because in one hand it is rich capitalist quote unquote, they really defend private property. In the past, when people spoke of the professional in Nigilia class, I thought this would be people who run state owned companies or private companies. 00:30:04 Speaker 4: I use James Burnham. 00:30:05 Speaker 6: You know you were saying the capitalists will be dead because managers would run companies regardless, so they would be in charge. And secondly, these people, because they have high labor incomes and they went to fancay schools, they believe they deserve it. And that means that the meritocracy, protection of private property, large capitalists, and hard working ethos is combined. And I would venture to say this is a new combination in history of capitalists have class. 00:30:35 Speaker 5: I were really hurd You call it folksy elites, right. 00:30:39 Speaker 6: I'm sorry, folks eli the fox elites because they love to be foxy. It's actually it's an interesting thing. I mean, I think social sociologically, if you look at the elite that you were seeing, the Jane Austen and so on, they actually wanted to show their earlier. What you find in American elite, and I 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 foxy, you know, may they mistake. 00:31:13 Speaker 3: You know I do it. 00:31:14 Speaker 2: 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, folks. The elite move by reminding I'm just. 00:31:29 Speaker 3: A product of public education. 00:31:31 Speaker 4: So of course they like to mention that they work hard, which is true. 00:31:34 Speaker 6: Actually if you look at the number of hours of work in the US, it's actually increasing with wage per hour. So they do work a lot. So they work a lot. They studied by the 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. But the problem is it was what Marcowitz 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 unpregnably elite because you cannot get rid of them because they have a hard capital income. Since stock market goes down, they would actually have labor income. 00:32:14 Speaker 2: Very they don't deserve it. 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. 00:32:24 Speaker 6: You say that because you want to be foxy elite, you know, you. 00:32:28 Speaker 2: Don't actually like just getting all personal a little bit just like No, it bothers. 00:32:34 Speaker 6: Me a little bit because it's like they have all these but they still do it because you're not going to go to work against your kids, No, nobody does. 00:32:41 Speaker 4: So I mean this is a I mean, this is a very good elite as the elites go, but it is an elite. 00:32:47 Speaker 2: Nevertheless, going back to China, when we people people talk about China, they were humans. 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 Two, and you pull different strands from it, et cetera. But I think more and more people are saying, now, this is a new thing, this extraordinary concentration of so much production in one country. Specifically it is novel and the numbers setting us at the qualitative differences. You have some distinct metrics, including like just the sheer like 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 like talk about like just the scale of what we call the rise of China? 00:33:44 Speaker 6: Well, the scale, I can talk about the scale. I mean, I really, I don't know. I'm wary of analogists. I don't know if there is like analogy with Japan as well. There is a knowledge of the Soviet you know days anology, but the US actually the analogy even with the with English with industrial relation because the growth going back just what I'm moment on the elites, the growth we actually did the same thing. I did this with the Caultors, actually Chinese cults. We did five percent top of Chinese urban population. 00:34:09 Speaker 4: And this is their elite. 00:34:11 Speaker 6: And what you see in that elite nineteen eighty eight were the first eight to 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 to day to twenty eighteen, and now we have data for twenty twenty three. 00:34:31 Speaker 4: Is the reversal. 00:34:32 Speaker 6: 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. 00:34:56 Speaker 4: Owners and larger owners, not capitalists but owners. 00:35:00 Speaker 6: Okay, when we look at the data that we're done, Bob Balen, English Gunmic historian for the growth of the capitalist class in England between sixteen and eighty eight, and I suppose nineteen hundred we see exactly the same thing. But over one hundred and fifty years there is more capitalists. You know, there were a small numbers at the beginning, then they became much larger number and their relative income compared to our landlords originally was much lower and then starts catching up. So what I called that extensive and intensive increase of capitalists. And in China it took forty years for that and in UK took one hundred and fifty. 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. 00:36:08 Speaker 5: 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 harmony from the Yeah, like, I mean, could this type of market liberalism live in peace with itself? 00:36:38 Speaker 1: I guess. 00:36:39 Speaker 6: Okay, let me put the other had now, the optimistic had you know, the chapter two in the book deals with precisely that question. That was question that I think is really so relevant. It says, what did the economies of political sciences 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. I remember that, And of course the other extreme is John Hobson with the imperial is we in nineteen oh two, and then Rosa Luxembourg and Lending who actually and Shuan Pater 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 is 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. But if I want to be optimistic, I think, I mean, let's go concretely to the questions today. If we could top and find cease fire 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 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, as people have said, a new Breton 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 reflect the ninety forty five when you know, obviously Europe was basically still colonial powers and countries like Indonesia, Brazil and so on. So that would be optimistic scenario. Stop the words and renegotiate international economic relations. 00:38:57 Speaker 3: You were in Paris recently. 00:38:59 Speaker 2: How are Europeans leads? How are they living with themselves having come around to Trump's view on China. They 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 mergsmccrown, et cetera. 00:39:19 Speaker 3: How are they digest? 00:39:20 Speaker 6: I don't think it was that hard because Germany definitely has been affected by China in electric vehicles. 00:39:27 Speaker 4: Yeah, no, no, clear, So it was clear. 00:39:29 Speaker 6: I mean they side now with Trump because they do have similar problems than I. No, I don't know, you know the 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 this find strange is that Europe really needed in order to need actually in order to prosper to elements. It first needs cheap energy, which was really fueling European growth in the last forty years fifty 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 art. Just say, well, that's kind of bizarre, but okay, let's do it. Then it's also the continent with the decline in population, and the only way to stop the decline in population is to have immigration. But then they say, and it's an increasing now they don't want immigration at all. You have maybe Spain, it is an outlier. It is in favor of immigration, but nobody else does. If you look at Nordic countries, they. 00:40:29 Speaker 3: Have don't let them immigrations, They don't let them in. 00:40:32 Speaker 4: Yeah. 00:40:32 Speaker 3: No, in Spain they're liberal towards Latin American, yes. 00:40:36 Speaker 4: But they're libertal immigration in general. 00:40:38 Speaker 6: 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 feint 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 placed 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. 00:41:20 Speaker 5: I think i'd say more about your recent trip to China, and I assume you met some Chinese elites over there and talk to them. 00:41:27 Speaker 6: It was really about economic history, and it was super interesting because the conferences that I went to there are in three different Beijing, Shanghai, and then also one in a smaller city, Gangship 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 very popular among historians. Why is that the industry evolution took place in England and not in China. If you look at seventeen fifteen, the two countries are a similar level of development. China is big, has many technological innovations. They have a book of technological innovations over two thousand years and so on. So the story of the conference was about that. But then because of my book is merely now the great convergence of China. Then of course that was interesting because it is to some extent a pounddown 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. 00:42:28 Speaker 4: I was going to ask, do you. 00:42:28 Speaker 5: Get any pushback on the convergence thesis or not? Really? 00:42:32 Speaker 6: 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 nineteen ninety 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 actively 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 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 isn't arithmetical thing. It is simply that your country has become too rich now. Arithmetically, if you grow at eight percent, it's going to increase global inequality. Maybe you should distribute within China, but I'm not talking about that much. But what we find it interesting is that people are still really, as I was saying before, they have little bit of a 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. 00:44:00 Speaker 2: Do you think that this China anxiety that's so prevalent in the US, Europe, maybe Japan and Korea, et cetera. 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 planemaker, they presumably the Komak is going to compete with embra air, et cetera. 00:44:25 Speaker 3: Like could China find. 00:44:27 Speaker 2: Itself in a situation in which there was recently a story Malaysia specifically limiting the number of imports of low. 00:44:36 Speaker 3: End Chinese EV's Like. 00:44:40 Speaker 2: Could what, okay, it started in the US with Trump spread to Europe over the last several years, could have spread further? 00:44:47 Speaker 4: It could? 00:44:47 Speaker 6: But you know, let me just say that's actually what one of my book is good. This is national market liberal. Yeah, it's actually a liberal It's a limit to the national market. So we really now totally think in terms like what are we doing? Is Malaysia 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 culture, mostly from the Indians Indian perspective, but essentially saying, if China is better in high end manufacturing and middle and level manufacturing, then countries that would normally go into middle level manufacturing actually would be also spaced out by China. But then I really have problem with that argument because you're thinking, well, we are all cavetting here because China is too efficient and too good. That doesn't make sense. If China is efficient and too good and producing x y and z, let them be producing x y and z. Why do we complain about this? 00:45:42 Speaker 3: Well, okay, I have a thought why we might want to complain about this? So clearly, we. 00:45:47 Speaker 2: 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, et cetera. 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. Ultimately, right the dual use technologies, you lose the manufacturing muscle, and 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, 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? 00:46:43 Speaker 4: No, no, there is a reason. 00:46:44 Speaker 6: But then you go to chapter two and you say, well, I agree with Hobson, Landing and Rosa Luxembourg. Openness is war. That means basically we cannot have ideologically and openness that is actually open without thinking about golf. And I think it's legitimate stuff because of course conflict has been with us for so long. But that is the question of what we started that with your belief and my own belief, and I think your belief in the nineteen nineties that all these contradictions are gone, that there was neo liberalism but it's 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. 00:47:23 Speaker 5: Joe and I both did international relations degrees in the early two thousands school we are well aware of the society and. 00:47:31 Speaker 6: 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 nineteen ninety was not the real world. That is a fantasy one. Yeah, and that means that that ideology which underpinned 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. 00:47:57 Speaker 4: It doesn't really matter. 00:47:58 Speaker 6: For big powers, it doesn't matter because then if big powers need helicopters and they cannot produce helicopters because they don't have any industrial capacity, yes they're not going to have helicopters, and that would be as we see now with drones and so on. So I agree from the point of view of national security, yes, 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. 00:48:26 Speaker 4: You never know. 00:48:27 Speaker 6: So in that sense, yes, I agree with Alexander Hamilton. But as I said, then we're really in a different world from the world of unimpeded free trade, where basically you don't believe that you know, significant military considerations. I would not say zero, but not significant. 00:48:42 Speaker 5: Most of your work famously focuses on inequality and distributional effects and that sort of thing. When you look at the tools of you know, again this national market liberalism, we think about sanctions or you know, tariffs, obviously industrial policy, things like that. Do you have a preferred tool that would come with some distributional benefits rather than just you know, like shuffling rents between countries. 00:49:14 Speaker 6: When it comes to global income inequality, and I've been working on that, as you know for many years. The irononic 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 particularly the only way at the global level, is high growth rates of poor countries. And that's why Africa in that point of view, and that's what we were selling to Chinese students when they were surprised that Chinese no longer I say to them, the key point now is India's growth, and especially Africa, because Africa, you have five large countries. One hundred million people are actually two hundred and twenties is Nigeria, but other is about one hundred 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 a two percent annually in terms of population. So that really is going to define twenty first century. Are we going to have reduction in global inequality or not? If 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 with the 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 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 Sep Stuck, I called it a pedagogical tax. 00:50:50 Speaker 4: And I tell you why. 00:50:51 Speaker 6: 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 it is a pedagogical tax. That's what zuopoint is actually calling for. That Picqutti is calling for even stronger tax. I don't really have a view where it should be two twenty percent of that, but I think that should be a pedagogical text. 00:51:19 Speaker 3: There's one line in your book I didn't really like or I didn't get it that. 00:51:22 Speaker 4: Maybe more lines didn't I didn't maybe I didn't get it. 00:51:25 Speaker 3: I didn't like it. 00:51:26 Speaker 4: There are many things when. 00:51:28 Speaker 2: Says it is in this context that we should look at the politics of Donald Trump, Jesion ping In, Vladimir Putin. Their policies try to stem or control the rise to complete economic and political dominance of the money elites. 00:51:42 Speaker 3: This strikes me. 00:51:43 Speaker 2: With Trump in particular, is 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 a administration that is very orthodox. 00:52:03 Speaker 3: When it comes to tax cuts on the ridge, I. 00:52:05 Speaker 2: 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? 00:52:21 Speaker 6: It's a very good cutching because it raises also the issue that I address, and by talking about national market liberalism, I actually put Trump in a category of people domestically that pursuisson continues and actually in some sense deepens the policies of near liberalism domestically. But what they wanted to say here, maybe it was not clear, but what they wanted to say is they came to power on the basis of support that was that came from parts of the population that were resentful about the people who the winners of the near liberal globalization for the US. I don't need to expand on all that picture for Trump. It has been studied, you know, in extent, so much more than I know. But the fact is the seventy seven 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. 00:53:20 Speaker 4: Of course, in reality is not. Actually he is not only part of the elite. 00:53:24 Speaker 6: He has, as you said, brought them all in, and he does follow very conservative policies when it comes to taxes. Actually, of course taxing capital less than labor, taxing top less, I mean not less, but actually not increasing the tax rates and so on. 00:53:37 Speaker 4: So I agree. 00:53:38 Speaker 6: 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 neo liberal globalization. And I think in the case interesting case is she Jinpin for me putting as well, but Shijin Pin. But the's interesting is I think he came because and he actually explicitly said that he doesn't want rich people to enter the decision making bodies of the companist part. It's the pedagogical point, you yeah, 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 the hijipin 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 Jackma was told that he's not going to have his IPO, the phone call was made by the mid level official in the Ministry of Finance, and things don't happen by accident in China. 00:54:55 Speaker 4: That was a message. 00:54:57 Speaker 6: You don't treat with the minister of your treat with the mid level official. 00:55:02 Speaker 4: That's your level. 00:55:03 Speaker 2: Bronco Milanovich, thank you so much for coming on the podcast. Very fun conversation. Really appreciate you taking your time. 00:55:10 Speaker 4: Well, thank you very much for inviting me. It was really fun. 00:55:12 Speaker 6: Actually, I'll love these conversations that they're actually unscripted, and. 00:55:15 Speaker 4: Yeah, that's how I'd like to do it. 00:55:16 Speaker 3: Let's just, you know, just a little tour around the world. But no, that was great, Thank you so much. 00:55:33 Speaker 2: Up until prepping for this episode, I'd 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 twenty fifteen and twenty fourteen, et cetera. 00:55:46 Speaker 5: 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 folks see credentials. 00:55:56 Speaker 2: Well, I assume they, you know, fortune to have a little bit leftover that they will get some inheritance. But my daughter recently, like I don't know if it's like from the TV show or a friend, I don't know. She learned the term trust fund recently and she she's like, oh, do I get a trust fund? And I was like, absolutely not, that'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. 00:56:25 Speaker 3: Respects those this is why you don't want money. Yeah, it's like, no, no, no one. 00:56:30 Speaker 2: Respects those people, et cetera. So she is learning about the world of you know, so far, I've told her she'll inherit something. I hope I have a little cash left over, She'll not be getting a trust fund. 00:56:43 Speaker 5: Anyway. That was a fascinating conversation. Yeah, and I do think this is like the big story of our time. The source of like turning away from globalization and bringing everything more inwards. I do think it's 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 terroiffs and things like that, rather than anything focused domestically. So domestically you still get market liberalism. 00:57:21 Speaker 2: Yeah, no, I think that's interesting. You know, I remember, like again going back to the twenty tens, 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, Okay, so some person who's sort of like in the middle of 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, etc. 00:58:01 Speaker 3: I'm like, I don't really see how that hurts them, right. 00:58:04 Speaker 2: It was interes Like the World Cup ticket example, is sort of a symptom of this phenomenon. 00:58:12 Speaker 3: There aren't that many things. 00:58:13 Speaker 2: 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, like the you know, people observe that, like the Disney vacation is not as available to like a median household the way it would have been in the seventies or eighties because they're just like so many more people. 00:58:37 Speaker 5: Who like Right, it's also a competitive is competitive in the same way as the World Cup. 00:58:41 Speaker 2: 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. 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 twenty sixteen was build the wall, right, which is like a very different thing. It'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. 00:59:18 Speaker 5: You're not building a wall to keep out Mexican transformers. 00:59:22 Speaker 2: It was a huge part of the success in twenty sixteen, and I would say twenty twenty four 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 that they look at the elite. No, A big part of Trump's success specifically clearly has to do with immigration, which is a different story and receive cultural change rather than inequities of capitalism or whatever. 00:59:53 Speaker 5: All right, shall we leave it there? 00:59:54 Speaker 3: Sure, let's leave it there. 00:59:55 Speaker 5: This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. 01:00:01 Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart. Follow our producers Carmen Rodriguez at Carmen armand dash Ol Bennett at Dashbot, Kelbrooks at Kelbrooks, and Kevin Lozano at Kevin Lloyd Lozano. And for more Oddlots content, go to Bloomberg dot com slash odd Lots or the daily newsletter and all of our episodes and You can chout about all of these topics twenty four to seven in our discord discord dot gg slash odd Lots. 01:00:24 Speaker 5: 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.