Odd Lots - Branko Milanovic on What Comes After Globalization

Episode Date: July 27, 2026

It's pretty obvious by now that globalization has fallen out of favor. And while many pundits have deemed economic globalism dead, we are still figuring out what to call this new era. Branko Milanovic's chosen phrase is "national market liberalism," a term that sums up how a world once defined by the free movement of capital has begun to contract as the most powerful governments have come to favor mercantilism and nationalism. In his new book, The Great Global Transformation: The United States, China, and the Remaking of the World Economic Order, the famed economist explains what comes after globalization. He talks to us about China's economic evolution, the pressure it has put on elites in the West, and much more.See omnystudio.com/listener for privacy information.

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Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. I have a personal question for you this time. Okay. All right. Do you think of yourself as like a member of like the global elite? Like are you, do you consider yourself elite? I probably should in some ways because I think a lot of people would say someone who grew up in different countries, went to international schools, went to, I guess a high profile university, now works in the liberal media as people would say. would be like a classic elite. But does anyone ever actually think of themselves as the elite?

No. Well, I try to, you know, maintain journalistic unbiased. I would say, look, Jared Tracy, they are clearly among the elite. They have good jobs at a Fortune 500 company. They are among the most well-educated demographic to ever exist in history. We get to work in a nice air condition of office, et cetera. On the other hand, you know, I could say, like, look, that's nice. the real elite or big tech CEOs, et cetera.

But I, look, I think... Everything's relative. I mean, we're an elite. I think objectively speaking. But I also think, I've been thinking about this, there's really three big things that I think are like, if we think about the second, the rest of our lives or et cetera, like three really big things that would like cause me to have sort of like elite status

anxiety. Go on. 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 Mandarin. And if all of the interesting markets, finance news, if that becomes

like the center of economic activity in like some really big way. People talk about the China shock that they mostly are talking about sort of Rust Belt manufacturing. 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. You won't need to learn Mandarin, Joe. You can just use AI. You know, have you seen the AI translator gadgets? I have. Yeah. Some of them are really good. Yeah, and like you had these things, there's two sides of a screen and you're just talking them for the other person. Yeah.

But setting that aside, I don't know how well that would work on the podcast or video medium. I got to say, I still watch 90-day fiancé. Do you know that show? No, go on. Americans dating and marrying foreigners from abroad. And there are a lot of translation apps on that show, many of which go very, very wrong. So anyway. Anyway, on this last point, though, I think, like, we know that.

that probably started certainly with like the first Trump administration, sort of like U.S.-China attention has been sort of on this linear increase. It probably accelerated during COVID. And it's clearly spread beyond the U.S. It just seems to get more intense by the week, including in Europe where I think China anxiety, the loss of like industrial competitiveness is now really become top of mind. Right. And it's even broader than China. I mean, we've spoken about it on the show, but it seems like there's a real national. 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. Yeah, that would be the goal, right? They want to, like, replace these things. Anyway, I think as, you know, 40, I'm about to turn 46, 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 a certain order of things. And when I look around the landscape, I would say, I am not so sure that the order from which I've enjoyed many fruits and privileges is going to be as durable in the second half. Sure. I think that's fair. Okay, so we should talk about what were these fruits and privileges that we enjoyed and perhaps what would a new sort of order in which some of these arrangements from which we've benefited if they change? What could some of this look like in the future?

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

Well, thank you very much for having me. It's a pleasure. What was the goal going into this new book? Well, I write a new book right now. You know, in some extent, when I finished the book, I thought the goal was basically to write and write an autobiography. Okay. That could sound strange because there is very little of me in that book.

But I covered the period from 1974. Actually, I started a book in 1974 with the new international economic order. And then how it failed and how then unipolar moment came and how the United States was not only the most powerful country economically, politically, militarily, but also ideologically. and how that order, which you might call neoliberal globalization, is now expiring. And when I think, actually, my entire life, I remember each of these four orders. And I'm now present at the birth of what I call national market liberalism, which I think, as you were saying before, is a new economic order where lots of activities would be brought back home and where external economic policies would be essentially mercantilism.

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

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 mercantilist policy. It's a policy of, you know, beggar, thy neighbor to some extent, but certainly zero-sum game or even a negative sum game. It's entirely different. But domestically, I really see the administrations like Trump, Macron, and others, I see them as essentially

continuing with neoliberal policies domestically. So that's what I think actually, that's why I invented this new term that was the kind of national liberalism. So it's not, and to be more precise. national liberalism on the market side, not necessarily on the social side, domestically. It's interesting. You say something interesting in the beginning of your book where you talk about, you know, going back to the middle of the 20th century, or maybe in the immediate wake of the Great Depression, to stabilize capitalism, we adopted sort of like the government got involved.

We took in a little dose of socialism and that saved capitalism. And then you sort of kind of a You talk about, like, okay, well, the goal was maybe to, you know, the sort of like post-World World War II era, save socialism and various, by injecting some market element. And then there's like this yin-yang effect that you sort of see where it's like two different systems adopt some element of each other in theory or that could have gone the way as a way of like bringing about stability. Well, that was my idea. Actually, I was wrong in that sense because I actually, in the very beginning of the book,

as you know, in the introduction, I bring up, my first book was published in 1989. And actually in the very first sentence of the book, I mentioned that I ran into Jeff Sax and David Lipton, whom I knew from work on Poland, you know. And so I told them, well, I've got this book. And actually I gave the book to Jeff Sachs as a present. I found it in the bookstore. And then he said, okay, you have to write something. And I said to Jeff Sachs, who is 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 the misunderstanding. For me, the introduction of market principles and market measures and privatization to some extent

was exactly the same by analogy what Keynes did, to save capitalism form Great Depression. You inject doses of socialism in order to preserve the capitalist framework. So I thought the same would happen in 188. My big mistake, but I just wanted to mention that because I think it's a nice anecdote that actually we saw the same thing, but saw them into different ways. But arguably, that is a characterization of what did happen in China, particularly after Mao, right? So it's like you have this communist country, still communist, but clearly a country that has embraced, I don't know about capitalism, but markets for sure in a very big way, maybe even better than not. No, I mean, definitely. You can actually then translate what they said and say, well, maybe I was right because I really meant China, but I did not.

In those days, I really meant Eastern Europe and the Soviet Union. China is, of course, a very special case. And of course, I'm sure we'll talk more about China. But it is an example that, again, 15 years ago, nobody expected what has happened. And if people tell me they did expect, I could just go back to what they wrote. And they got Nobel Prize, you know, prizes for writing that China would never technologically developed, like 15 years. ago. And then we see now the reality which is entirely different. By the way, I'm going to get you to sign my copy of the book in the hopes that it makes

it into the preface of your next piece of work. I'll put some very neutral. Yeah. 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,

10 or 20 years ago people would talk about the poor farmers. You hear less about that nowadays. But how would you explain like that the dual way that people tend to think and talk about China in terms of its threat to the West? Let me start first by rephrasing your question because once you start speaking of the threat to somebody, then we are really no longer in economics as we studied it. We are now exactly in that world of mercantilistic international competition. And you know, it has actually sort of moved into our thinking without us even realizing.

To give you another anecdote, I was once on the show with very famous economists, I will not mention the name. And of course, the topic was China. Topic was China. And then we're talking about the general things, about, you know, wages, exports, import, something like very general, where actually general economic principles should apply. And then he suddenly says, no, no, but for us, the United States, it is bad. And I was thinking, wait, you're not in the government. I understand. I would understand if you were in the Treasury, yes, of course,

this is your duty to look after the United States. But you, as a general economist, you have to think about whether it is good for the world or not. Right. I think you have to have to have cosmopolitics. Absolutely. 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 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.S.

Journal, and I paid, I think, $50 as a developing country. And they write back to me and say, no, you are now classified as advanced country and you have to pay $100. for the submission fee. But, you know, this stuff is still very much present in China. I think Chinese do not see themselves by and large as a rich country. They speak of this, as you know, officially, moderately prosperous society. And I think it's a correct denomination, if you will. China is not France, it's not Italy, it doesn't have that income level.

But on the other hand, as you actually implied, technologically, it is at the level, which is actually only similar to the United States. And that is that duality that we observe, you know, maybe the villages, I have not been there, but I know there actually are villages who are below $2 per day. You know, we are absolute poverty line. And on the other hand, we have them as a leader's artificial intelligence. So hard to reconcile. You know, I think for a long time people at West didn't think about China.

I mean, maybe like people in the Treasury or whatever. They didn't think about China very much. it feels to me like one of the remarkable things about the last 10 years and it literally has been 10 years has the whole West, the Western political economic unit. So it's like governments in Europe and obviously the U.S. And then as you say in your book, you might also as part of this Western political bloc might even inclined to include like Korea and Japan. Has you travel around? You were recently in Paris. Has everyone essentially come around in some level to where Trump was in 2016?

Yes, I think basically that's the case. You know, and that actually, if I go back to my book in chapter one, it is structured on two levels. We talked so far about the level, the first level, which is countries' GDPs and countries' importance. And of course, China then suddenly starts playing a very important role there. But there is another level, which of course, thanks to the work that I've done for like 30 years on global income distribution, I also observe.

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're bottom-designed Italy, okay, you're not rich by Italian standards, but you're okay. In the world level, you're at the 70th percent of the world 30 years ago. Well, now you're at the 55th percent of it. In other words, if Italy had qualified for the World Cup, that Italian would not have the money

to come to watch Italy. But he had money 30 years ago to come to watch Italy. So, you know, there is this loss of economic position of individuals in Western countries. So you know, the China thing placed on two levels. It plays at the level US versus China or the European Union, which is an abstract level of state versus state. But it plays the label you against the Chinese guy. And that I think is, actually

that's what I try to bring in the book, these two levels. And I think it's important to have them in mind. You've heard the chaos. Now you can see it. Hello. My gosh. Watch all your favorite podcasts from start to finish. Right inside the free IHare Radio app.

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And what she's looking for in her next football club. I just want a challenge. And that's what excites me. Listen and watch leaders with me, Francine Lacquan on Bloomberg Television, or wherever you get your podcasts. I like the idea of measuring wealth in ability to watch World Cup games. It's internationally priced good, you know? Yeah, absolutely.

It makes sense. Just going back to the idea of national market liberalism and pressing on the point you just made, the response to or the backlash against globalization in your description has been, I guess, tearing down the liberal aspect of the international economy and international trade and not domestically. So domestically, you still preserve large parts of capitalism. It didn't have to go that way, right? 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? You know, I don't know, but let me try to answer. I also that question, you know, I'm very often asked, probably you would have asked if I don't bring it up first. That was the elephant chart. The elephant chart. Yeah, the great elephant chart. No one's 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 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. top of the Western distributions are doing very well, you know, under Clinton especially, you know, 3% and more. And then, of course, China is doing very well. So you are sitting there, you are a government of the United States, let's say. You have two possible options.

You have, okay, we go for policies that would actually tax the rich, that would transfer the 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 they're being bankrupt by billionaires and do a serious effort. Or you say, oh, look, China is like scoring 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. And I think that Trump, 2016, for me, is the watershed year. Because many of the policies that Trump then imposed regarding China that continue 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 this 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 to have gone into more social democratic capitalism rather to go into this nationalist

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

free elections, et cetera, like it didn't even ever seem to be, to come particularly close. Well, I often think of the 90s. I was older than you then and I was then in Washington and working for the World Bank. You know, the neoliberal ideology was so omnipresent and it was actually commonsensical. So it's like you're now, if you were to now argue like, okay, this is not wood, this is actually still. 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, it's like either uneducated or crazy or some of the mixture of the two,

because it has indeed had actually total ideological hegemony, total ideological hygiene. 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, long article that was then published, I think, in the monthly review, which called it. question, it was very early, 1999. But, you know, it was an unusual article, and I think we all took it as a common sense that it is an ideology that would mean. Now, come to China very briefly. China played it very low that. 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 some are self-servingly say, oh, we really did not bother with China because we thought China would evolve the way the 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. Whether they really believe that or not, I don't know, but China was not at the center of attention that it actually became over the last 10 years. There is no doubt about it. People implicitly believed, I think, or wanted to believe that China would become a, quote, quote, normal capitalist liberal country. Since we're talking about a normal capitalist liberal country, in quotes, 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. You know, that's a very complicated question, and I'm not a macroeconomist, but I had only a couple of days ago the discussion on Twitter and a substack on that. First, the effects.

The fact is actually China consumption to GDP ratio is very low. It's like about 40, 45%, U.S. is 70%, India is 50%. So clearly, it should be at 10 percentage points higher. People, of course, argue that there is compression of wages, and of course, that state-owned enterprises then have large retained profits. Now, the good use of these retained profits by the state, essentially, is they can actually use enormous amounts of money to direct to certain activities in, for example, railroad construction or artificial intelligence or actually what people don't mention, but China has really done very well in space exploration as well. And this is not like no money at all. And I think the next one would be 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, 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 three or four or five percent per year. Now, if your wages were zero, then it's harder to have a compression. But if you have 5%, fine. In past, maybe you had 8%, but 5% is good enough. So I think there is a political economy reason behind that in China. So I'm not quite sure if they really what they say, they really would like to accomplish that and they cannot.

Because, yes, for example, they could increase social transfer significantly, and people would spend that money. Lots of saving, I think it's not untrue. It's due in China to the fact that actually, particularly in the rural areas, you don't have social protection. Just real quickly going back to the question of like, how did China not get swept up in the neoliberal consensus that was like so hegemonic in the 1990s? The other thing that you observe in your book is that even earlier in the century, it never got particularly interested in like the non-line

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 borders. I actually think that China is an isolationist country, cultural. And, you know, people talk about the U.S. being isolation and all that. And, of course, there is a trend of politics in the U.S., which is basically meant to control of the Western Hemisphere. So it's not really totally isolation, is it? 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 economies, 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 were actually very happy with your books. We sold, I don't know, probably several, I mean, I don't think 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. The US, yes, because now 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, you know, do kowtow and say, well, you guys are great. And maybe we trade the giraffe for, you know, a little bit of porcelain. And then you go home. 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. Let me just finally give an example. I read recently Richard Pipes. He was a famous historian of the Soviet Union. When he went to the Soviet Union in 1989, he was not published before 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. So 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, so how much they're being paid to do their jobs, as well as capital income, so dividends or whatever. And this is something new, according to you.

So I'm really curious, like, how do you explain the rise of homo 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, he's sort of the standard bearer. Oh, okay, yeah. 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 the, this is all empirical. We take like the top 10%, which is, you know, 30 million people approximately.

And what you find there is that there is an increasing percentage of people who are in that top 10% who are also in the top 10% by income from property, cash income from property, and top 10% by income from labor, from your job. And that is new. And now actually there are more studies. This is early on, but now there are people starting exploring whether it existed in 1930s and 20s and so on. But think of the 19th century capitalism. You had big guys like J.P. Morgan or millions of others, you know, 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, 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, and I use Daniel Markowitz's work on meritocracy a lot. That class is very specific because, in one hand, it is rich capitalists, quote, and quote. They really defend private property.

In the past, when people spoke of the professional manager class, they thought this would be people who run state-owned companies or private companies, I use a James Burnham, you know. He was saying capitalism 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 fancy schools, they believed they deserve it. And that means that the meritocracy, protection of private property, large capitalism,

and hardworking ethos is combined. And I would venture to say this is a new combination in history of capitalism. I feel like I'm part of that class. I worked really hard. I went to an elite school. You call it folksy elites, right? I'm sorry? Foxy elites.

Yeah, they're foxy elites because they love to be foxy. Actually, it's an interesting thing. I mean, I think sociologically, if you look at the elite that you were seeing, Jane Austen and so on, they actually wanted to show their elite. What you find in the American elite, and I've spent some time around that elite, is that they really want to show that they're not an elite. They do give you signals that they are. But they do it in a fairly discreet way, and they like many of the things to actually be very foxy, you know. Make no mistake. 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 foxy 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 studied 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. But the problem is that that was what Markovit says. The problem 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 unpragnable elite because you cannot get rid of them because they have a hard capital income. Right. They would actually have labor income.

I love my children. They don't deserve it. They're very spoiled. They didn't do anything to deserve the lifestyle that they have. So I, that's the one area. But can you say that because you want to be foxy elite, you know? 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. 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. Going back to China, when people talk about China, they, and we're 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 European. U.S. after World War II, and you pull different strands from it, et cetera. But I think more and more people are saying, no, this is a new thing, this extraordinary concentration of so much production in one country specifically, it 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? 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 with the U.S. There's an analogy with the U.S. Actually, I use the analogy even with English, with industrial revolution because the growth, going back just for a moment on the elites, the growth, we actually did the same thing. I did this with the quarters, actually Chinese quarters. We did 5% top of Chinese urban population. And this is their elite. And what you see in that elite, 1988, where the first data begin, is that two-thirds broadly, two-thirds of the

income of the elite comes from state-owned enterprises, government jobs, and jobs in the Communist Party. Okay? Well, go to date 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.

When we look at the data that were done by Bob Allen, English economic historian, for the growth of the capitalist class in England between 1688 and I suppose 1900, we see exactly the same thing, but over 150 years. There is more capitalists. You know, there were small number in the beginning, then they became much larger number, and their relative income compared to landlords originally was much lower and then starts catching up. So what I call that extensive and intensive increase of capital.

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. 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. Bekar, the host of the podcast, Encore. Check out our brand new episodes featuring music from the show that everyone is reheating as we speak. Heated rivalry.

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Plus Silicon Valley Power Players and the latest tech trends. Catch up on the conversations you miss during the day. Subscribe to the Bloomberg Business Week Daily podcast on Apple, Spotify, or anywhere you listen. 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. Yeah, like, I mean, could could this type of market liberalism live in peace with itself, I guess? Okay, let me put the other hat now, the optimistic had. 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, the 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, other extreme is John Hobson, with imperialism in 1902 and then Rosal Luxembourg and Lenin, who actually and Schumpeter, who believe that when you have a 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. But if I want to be optimistic, I think, I mean, let's go concretely to the questions today. If we could stop and find a ceasefire and a solution of the war in Ukraine and Russia, in the Middle East, Iran and the United States and Israel, I think that we would then at least, 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, having, 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 reflected in 1945, when, you know, obviously Europe was basically still colonial powers and countries like Indonesia, Brazil, and so on. So that would be the optimistic scenario. Stop the words and renegotiate international economic relations. 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 Merz, Macron, et cetera. How are they digested this? 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.

Yeah. No, I don't know, you know, well, I don't really know European elites, But, you know, what I find strange about Europe, I'm not very optimistic on Europe for many reasons, but, you know, what I find strange is that Europe really needed in order to, needs, actually, in order to prosper two elements. It first needs cheap energy, which was really fueling European growth 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 the decline in population. And the only way to stop that decline in population is to have immigration. But then they say, and it's increasing now, they don't want immigration at all. You have maybe Spain that is an outlier that is in favor of immigration, but nobody else does. If you look at Nordic countries, they have- They want Latin-Am immigration.

They don't let them in, yeah. I mean, in Spain, they're liberal towards Latin American immigration. Yes, but they're liberal to 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 feigned sympathy as well, because they treat, I think, actually, many people treat Trump like a tiger in a cage. you're with the tiger there and you just want to survive until the tiger is gone, you know. So you just please the tiger and say, okay, you know, you big tiger, you are great, but you don't really believe that. So there is that part as well, I think. 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. We talked about the great divergence, and that was a topic which is very popular among historians. Why is that the 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. 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 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. For example, what I did get is that when I was given that presentation for a while in China, I talk about global inequality. And I say between 1990 and actually probably until several years ago, China was a sort of a automatic reducer to global inequality because it's a big country, it was still relatively poor, and they grow faster and global inequality goes down. And then I say, but that's no longer the case. Today, Chinese high growth is slightly inequality increasing at the world level because China

then becomes further apart from poor countries like Sudan, Ethiopia, Congo, and so on, gets closer to the U.S., 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. If you grow at 8%, it's going to increase global inequality.

Maybe you should redistribute within China, but I'm not talking about that part. But what I find it interesting is that people are still real, as I was saying before, they have a little bit of problem getting adjusted to the fact that they are now not a very rich country, but they have joined the club around the club of the rich countries. Do you think that this China anxiety that's so prevalent in the U.S., 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 Komek is going to compete with Embra-Air. etc. Like, could China find itself in a situation in which it was recently a story, Malaysia, specifically limiting the number of imports of low-end Chinese EVs? Like, could what, okay, it started in the U.S. with Trump, spread to Europe over the last several years. Could it spread further? It could, but, you know, let me just say that's actually what my book is good. This is national market liberal. Yeah.

It's actually liberalism limit to the national market. So we really now totally think in terms like, what are we doing, do? Is Malaysia going to stop these goods? Is Brazil going to stop other goods? There was recent in an article, I think in foreign affairs by Subramanian and another cult are 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.

But then I really have problem with the target because I'm thinking, well, we are all cavetching here because China is too efficient and too good. I mean, that doesn't make sense. If China is efficient too good in producing X, Y, and Z, let them be producing X, Y, and Z. Why do we complain about this? Well, okay, I have a thought why we might want to complain about this. So clearly, we all enjoy every day the benefits. of efficient Chinese production, and we have affordable computers and affordable phones and lots of

other things and inexpensive toys, et cetera. One reason we might not love that is that if you can't build a car, if you can't build, 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. 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, Lennon, and Rosa Luxembourg.

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. But that

poses a 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. That was a fantasy world. And that means 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. Yes, one has to be not concerned about China because I hate China bashing, but to be. be concerned by 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. 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, like, would come with some distributional benefits rather than just, you? you know, like 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 a global level, is high growth rates of poor countries. And 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 are 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 growing a 2% annually in terms of population. So that's really going to define 21st 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 within nation-state, then, of course, the situation is different. You have a host of policies that are quite well-known.

Education, I think, is crucially important, in my opinion. And, you know, I'm not a huge fan of not slapping attacks 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 have called it in my substack. I called it a pedagogical tax. 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 Zupman is actually calling for that. Pickett is calling for even stronger tax. I don't really have a view where 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. There may be more lines. I didn't. I didn't. Maybe I didn't get 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 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 when it comes to tax. cuts on the ridge. 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 in actually in some sense deepens the policies of neoliberalism 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 came from parts of the population that were resentful about the people who, the winners of the neoliberal globalization.

For the US, I don't need to expand on all that. People who voted for Trump, it has been studied, you know, in extensive. much more than I know. But the fact is the 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. actually, of course, taxing capital less than labor, taxing top less, I mean, not less,

but actually not increase into 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 company's part. It's the pedagogical point you made.

Yeah, pedagogical. He says to the rich people, as China historically had a 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. 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'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. That was a message. You don't treat with the minister finance. You treat with the mid-level official. That's your level. Bronco 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.

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 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'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, et cetera. So she is learning about the world of, you know, but so far I've told her, and she'll inherit some.

I hope I have a little cash left over. She'll not be getting a trust fund. Anyway, that was a fascinating conversation. Yeah. And I do think this is like the big story of our time. Yeah, 100%. 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. So domestically, you still get market liberalism. Yeah. No, I think that's interesting. You know, I remember, like, 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, okay, 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, 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. Like, 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 70. these are 80s because there are just like so many more people who like are. Right. It's also a competitive thing. It's competitive.

Right. 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. There is like the sort of like, of course there's this anti-elite, maybe an 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. No, a big part of Trump's success specifically, clearly has to do with immigration, which

is a different story and perceive 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 All Thoughts podcast. I'm Tracy Alloway.

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