Between 1990 and actually until probably several years ago, China was a sort of nascent but automatic reducer of global inequality because it's a big country. It was still actively poor, and as it grew faster, global inequality went down. And then I say, but that's no longer the case. Today, China's high growth is slightly inequality-increasing at the world level because China then becomes further apart from poor countries like Sudan, Ethiopia, Congo, and so on, and gets closer to the US. But the first element is stronger than the second.
So when I say to them, that was interesting, young people, especially when I say to them, Chinese growth today is globally inequality-increasing, they almost took it like it's an insult. So you're telling us we should not grow? I said, no, guys, this is an arithmetical thing. It is simply that your country is going to 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. But what I don't find interesting is that people are still really, as I was saying before, they have a 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 region.
Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal and I'm Tracy Alloway. Uh, I have a personal question for you. Okay. All right. Do you think of yourself as, like, a member of, like, the global elite? Like, are you, uh, 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. I try to, you know, maintain journalistic, unbiased. And I would say, look, Joe, Tracy, they are clearly among the elite. They have good jobs at a Fortune 500 company. They are among the most well-educated demographic to ever exist in history. You get to work in a nice air-conditioned apartment or air-conditioned office, etc. On the other hand, you know, I could say like, look, that's nice. The real elite are big tech CEOs, etc. 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, we think about the second the rest of our lives or etc. Like three really big things that would like cause me to have sort of like elite status anxiety. Go on. One of them is I because we don't know what it's going to mean for our literal jobs or the companies who work for, etc. That's a really big one. Um, 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, um, are talking about sort of Rust Belt manufacturing. There's like a China shock for like sort of service-level financial services, etc. I don't think like, you know, I don't think I would have as much to contribute in that world.
You don't need to learn Mandarin, Joe. You can just just use AI, you know. Have you seen the I, uh, gadget translator gadgets? I have, yeah. They're cool. Some of them are really good. Yeah, yeah. And like you, they had these things. There's two sides of a screen and you just talk. And then 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 gotta say, I still watch 90 Day Fiancé. You know, I know 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. So anyway, anyway, on this last point, though, I think like we know that probably starting with like the first Trump administration, sort of like US-China tension 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 nationalism to economics nowadays too. Yeah, because of the pandemic. Yeah, 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, yeah, 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 looking 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'm 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. Like that, sir. Okay, so we should talk about what? What the second. What what were these fruits and privileges that we enjoyed and perhaps what could the second, what would a new sort of order in which some of these arrangements from which we benefited if they change? What could some of this, uh, what could some of this look like? All right. Well, I'm very excited to say we really do have the perfect guest. Uh, someone we 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 Branko Milanovic. He is a research professor at the Graduate Center and 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. So, uh, Professor Milanovic, thank you so much for coming on.
Thank you so much for coming on.
Thank you very much for having me. It's a pleasure.
What was the catalyst? What was the goal going into this new book?
I wrote a new book right now. You know, to some extent, when I finished the book, I thought the goal was basically to write an autobiography. That could sound strange, because there is apparently a lot, but I covered the period from 1974. Actually, I started the book in 1974 with the New International Economic Order, and then how it failed, and how the unipolar moment came, and how the United States was not only the most viable 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 they call national market liberalism, which I think, as you were saying before, is the new economic order, where lots of activities would be brought back home and where external economic policies would be essentially mercantile, logistic, and not free trade.
Why do you call it national economic liberalism?
I call it that because I was thinking, actually, if you define liberalism in the most general sense, I take also neoliberalism, which would not be very different. On the domestic side, you have policies which are liberal policies economically. Everybody knows that, you know, free pricing, competition, and so 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, 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 as operationally you can say ideologically it is dead. What is happening now is that we take this entire international part, chop it off, and say 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 a 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.
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 joke, you talk about like, okay, well, the goal was maybe, you know, the sort of like post-World War Two era saved socialism by injecting some market element. And then there's like this, I hate actually using this term because it sounds like I'm doing that thing where like every report about like China has to have like a reference to a dragon or something. But there was 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 that 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 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 the president. I found it in the bookstore. And then he said, okay, you have to write something. And I said to Jeff Sachs, I'm 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, wait, wait. And that's when 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 from the Great Depression, you inject doses of socialism in order to preserve the capitalist framework. So I thought the same would happen in 1989. My big mistake. But I just wanted to mention that because I think it's a nice anecdote that actually we feel the same thing, but I saw them in two different ways.
But arguably that is a characterization of what did happen in China, particularly after Mao. So it's like you have this communist country, still communist, but clearly a country that has embraced, I don't know about capitalism, but markets for sure in a very big way, maybe even better than us.
No, no, I mean, definitely you can actually then translate what I said to say, well, maybe I was right because I really meant China, but I did not say 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 Prizes, you know, prizes for writing that China would never technologically develop 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 anecdote 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 cut everything, etc., 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 that dual way that people tend to think and talk about China in terms of its threat to the West?
Well, 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 started it. We are now exactly in that world of mercantilist international competition. And, you know, it has actually sort of moved into our thinking without us even realizing. I'll give you another anecdote. I was once on a show with a very famous economist. I will not mention the name and, of course, the topic, but you'll Google it. Well, the topic was China. And then, you know, we are talking about the general things about, you know, wages, exports, imports, something like very general where actually general economic principles apply. And then he suddenly says, yeah, no, but for us, the United States, it is bad. And now we're 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 gain absolute gains versus relative gains. But since we are now in this new world, what do I think about China? First of all, I have to tell you that, for example, what you see in China actually happened to me like a week ago. People are very much surprised when you tell them China is now a rich country. I mean, when I say, okay, by the World Bank definition, actually this is the real compensation, you are an upper-middle-income country. And they are kind of surprised. And there is a woman who tells me, you know, I submitted a publication for the EU and US 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 an advanced country, and you have to pay $100 for the submission fee. But, you know, this stuff is still very much present. China, I think Chinese do not see themselves, by and large, as a rich country. They speak of this as, you know, officially a moderately prosperous society. And I think it's a correct denomination, if you will. China is not. France is not. Italy doesn't have the income level. But on the other hand, as you actually implied, technologically, it is at the level which is actually oddly similar to the United States, and that is that duality that we observe. You know, maybe the villages, I have not been there, but I know that actually there are villages who are below $2 per day, you know, absolute poverty line. And on the other hand, we have them as the leaders in artificial intelligence, so hard to reconcile.
I don't know, I think for a long time, people in the West, like, didn't think about China. I mean, maybe like people in the Treasury or whatever. And if 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, is how 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 include like Korea and Japan because you travel around. You were recently in Paris. Has everyone essentially come around on 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 and chapter one, it is structured on two levels. We talked so far about the first level, which is a country's GDP and country's 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 the last two centuries, you have lower parts of Western income distributions sliding down in global order. So if you are a bottom decile in Italy, okay, you're not rich by Italian standards, but you know you're okay at the world level. You're at a 70% level of the world 30 years ago. Well now you're at the 55th percentile. In other words, if Italy had qualified for the World Cup, that Italian would not have the money to come to watch Italy, but if he had money 30 years ago he could come to watch Italy. So, you know, there is this loss of economic position of individuals in Western countries. So, you know, the China thing plays on two levels. It plays at the level of us versus China, or the European Union, which is an abstract level of state where it's a state, but it plays at the level of you against the Chinese guy. And that I think is actually what I try to bring in the book, these two levels. And I think it's important to have them in mind.
I like the idea of measuring wealth in ability to watch World Cup games. I think it's an internationally priced good. You know what I'm saying? Makes sense. 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 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, you know, large parts of capitalism. But 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 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.
Yeah, the great elephant. Oh, great. So I was going to ask if you're annoyed every time anyone mentions the elephant chart.
I'm actually tired of it, but still, I have to use it. You know, the elephant chart shows that the bottom line is: middle classes of the West have not been doing well — a growth rate of 1% per annum per capita, not very well. The top of the Western distributions are doing very well, you know, under Clinton especially, you know, 3% and more. And then of course, China is doing very well.
So you are sitting there, you 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, theory, start of reskilling 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 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 easier. It was easier, but it is more, or should they say, pragmatic or whatever. And I think the Trump 2016 for me is the watershed year, because many of the policies that Trump then imposed regarding China that continued under Biden, they were done in a more maybe intelligent way, but basically they continued. And I think that was the change. And then after that, we really have an acceleration in these policies. But you have a very good question. I guess 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 than to go into this nationalist liberalism.
Yeah, yeah. Because this is something I think about a lot, which is like, let's say we were to rewind the clock to like 1989 or 1992. And I always think to myself, like, I was nine years old in 1980 and I just didn't think about these things, but I always think to myself, like, if I had been, say, in my early career and then in my 20s in those years, I had to be like, oh, it's obvious. Like liberalism or neoliberalism, one of those two, it's just like it's clearly the way of the future. It's clearly superior. It's proven itself. And the decisive test against, like, which was the better model against the Soviet Union. And I 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 like the question is settled, we know what's the better system. And now, of course, we have lots of people questioning all the systems, but it's sort of remarkable to me that in the 90s specifically, you had like one country that not only didn't just sort of embrace, you know, free elections, etc., like it didn't even ever seem to come particularly close.
You know, 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 in some sense, it's like if you were to now argue, okay, this is not what this is actually still — well, we all see that it's not actual. So it was very commonsensical. And you believed that whoever would actually say something against that is like either uneducated or crazy or some mixture of the two, because it has indeed had actually total ideological hegemony, total ideological argument. 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 a long article that was then published, I think, in the Monthly Review, which questioned it. It was very early 1999, but, you know, it was an unusual article, and I think we all took it as common sense that it is an ideology that would be 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 somewhat self-serving, they say, oh, we really did not bother with China because we thought China would evolve the way 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 believed that 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 that.
Yeah, people implicitly believed, I think, or wanted to believe that China would become, quote, a normal capitalist liberal country. I mean, since we're talking about a normal capitalist liberal country, I want to put it 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 macro economist, but I had only a couple of days ago a discussion on Twitter and the Substack on that. First, it affects the fact that actually China's consumption to GDP ratio is very low. It's like about 40, 45%. US is 70%. India is 50%. So clearly it should be at ten percentage points higher. People, of course, argue that there is a 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 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, is space exploration as well. And, you know, this is not like no money at all. And then, of course, I like where it was, and I think the next one would be our era, production of the airplanes, which they already have started, but they have not broken through. 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 in wages if your wages still grow by 3 or 4 or 5% per year. Now if your wages were zero, then it's hard to have a compression. But if you have 5%, fine, or maybe you'll get 8%, but 5% is good enough. So I think there is a political economy reason behind that in China. So I am not quite sure if what they say they really would like to accomplish, they can. Because yes, for example, they could increase social transfers 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-Aligned Movement or the so-called Third World countries, etc. Is it just that it has a history of not getting swept up in or not being particularly interested in the flavors of the month outside of its borders?
I actually think that China is an isolationist country, culturally. And, you know, people talk about the US being isolationist, all that. And of course, there is a strange trend of politics in the US, which was basically meant to control the Western Hemisphere. So it's not really totally isolationist, but at least not get entanglements in Europe. But actually, I think culturally — and I actually recently discussed that with some friends — the fact is that all Chinese economists, all Chinese authors essentially write about China. And my publisher in China says to me — I had several, three books, I think, published in China — and he says to me, look, we are actually very happy with your books. We sold, you know, probably several — I mean, I'm talking about several thousand copies — because he says, you know, Chinese audiences, 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. It's the Middle Kingdom, it's looking at it. And everybody comes to the Middle Kingdom and they just, you know, do kowtow and say, well, your guys are great. And maybe we trade the giraffe for, you know, a little bit of porcelain and then you go home. Yeah. So I think that ideology, I mean, under it there is still presence of that. And I think that limits China's 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 you an example for sure. I read recently, Richard Pipes. He was a famous historian of the Soviet Union. When he went to the Soviet Union in '89, he was not published before, you know, under the Communist regime. He was allowed in by accident. And he became, like, the greatest historian in the history and all of that, because his books were so influential in influencing Russians see their own history. So that's what they meant when you're interested in other countries. So you have to have somebody, you know, not only one person, but you have lots of people who would write about other countries and influence what other countries think about themselves. And so long as China does not have that, its own soft power, I think, would 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 homoploutia?
Yes. That's correct. Homoploutia.
Okay, but there is metal. There we go. Yeah. Okay. 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 homoploutia? And I always think, you know, if you think about someone who's making a lot of money from both labor and capital, you kind of talk about Elon Musk, right? Like, oh, okay.
Yeah, yeah. I mean, because we are talking here, I make sure that the book deals with the top 10% of Americans. So this is not a small group. You know, it's like we're talking about — we take, this is all empirical — 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 people have started exploring whether it existed in the 1930s and 20s. But think of the 19th century capitalism.
You had big guys like JP Morgan or millions of others, you know, made millions, hundreds. But they were not laborers. Technically you're not. 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 probably here all belong to that group. And what is interesting then, that's actually what they use in the book, now, Daniel Markowitz's work on meritocracy. What that class is very specific because on one hand it is rich capitalist, quote unquote. They really defend private property. In the past, when people spoke of the professional and the lower class, they thought this would be people who run state-owned companies or private companies. I use that James Burnham, you know, you were saying that capitalism won't be dead because men are just 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 believe they deserve it. And that means that the meritocracy, protection of private property, large capitalism and hard-working ethos is combined. And I would venture to say this is a new combination in historical capitalism.
Oh, I feel like I'm part of that class. I worked really hard.
Don't you enjoy it? You call it folksy elites, right?
Yeah. They're folksy elites because they love to be folksy. It's actually—it's an interesting thing. I mean, I think socially, sociologically, if you look at the Iliad, that you will seem to Jane Austen and so on. They actually wanted to show that they really wanted to find an American elite. And I spent some time around that elite. If they really want to show that they're not in the league, they are actually—they do give you that they are. Yeah. But they do it in a fairly discreet way. And they like many of the things to actually to be to be very folksy. You know, maybe I do make no mistake. You know, I do it, I say like, oh, I went to a public university at the University of Texas. It's just a state school, which happens to be one of the best schools in the nation and incredibly wealthy. But that is how I do that folksy elite move by reminding me I'm just a product of public education. And then, of course, they like to mention that they work hard, which is actually, if I get a good number of hours of work and 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. Yeah. They have the capital incomes and they transmit all these advantages to their children that they believe that actual children deserve that. But the problem I did with Markowitz says. The problem is that then actually does create in sort of an elite that has the self-perception that it deserves that and that is to some extent really unknown what is known in English, unpredictable elite, because you cannot get rid of them because they have a higher capital income. Since stock market goes down, they would actually have labor income.
Uh, 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.
And it's so I—that's the one is saying that because you want to be folksy late, you know.
No, no, no, no, no. I 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 ideas, all of us. But I still do it because you're not going to work against your kids.
No. Nobody does. So I mean, this is a—I mean, this is a very good lead as the elite. You go. But it is an elite nevertheless.
So okay, there's the—there's this rise of this distinct class, which I like the way you characterize it, um, going back to China, when we people, when people talk about China, they and we're human. So we always do this. We reach for historical analogies, right? Maybe the story is that it's kind of like Japan. Maybe the story is that it's kind of like the US after World War two, and you pull different strands from it, etc. 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 in the numbers, setting aside the qualitative differences. The numbers that you talk about in terms of, uh, you have some distinct metrics, including like, uh, 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't 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 analogy with Japan as well. There is a knowledge of the Soviet Union and algebra US actually. I use the analogy with the, with English, uh, with the industrial revolution, because the growth going back just for a moment on the elites, the growth, we actually did the same thing if I did this way to call it, that's actually Chinese call that we did 5% top of China's urban population. And this is their elite. And what you see in that the elite 1988 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. Wow. Go today to 2018. And now we have a data for 2023 is the reverse. 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 a Chinese official terminology, they are called, uh, individual honours and larger honours, not capitalists, but honored. Okay. Uh, when we look at the data that were done by, 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 other landlords originally was much lower and then start to catch again. So what I call that extensive and intensive increase of capitalists, and that 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.
I mean, there are risks that you point out in the book about or that come with the rise of, uh, the sort of national market liberalism. And you talk about the potential for great power conflicts, for war, basically, um, for more, uh, income inequality, plutocracy, all that stuff. Can you envision—is there any scenario where you get like a relatively good equilibrium from the—yeah. Like, I mean, could—could this type of market liberalism live in peace, uh, with—with itself, I guess.
Well, okay, let me put the other hat now, the optimistic hat, uh, you know, the chapter in the book deals with precisely that question. He says the following. Uh, that was a question that I think is really so relevant. It says, what did economists of political science think about the relationship between openness slash globalization and war and peace? And then you have people from Montesquieu who actually believe that, uh, that, that, uh, 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 at the end, of course, the other extreme is, uh, John Hobson in, uh, with the, um, imperialism in 1902 and then runs the Luxemburg 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, uh, um, need market control of the labor force in—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 for the negative or more belligerent, uh, sort of variant of that, of that view. Uh, but if I want to be optimistic, I think, I mean, let's go concretely to the question of 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 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. Uh, but at least then we could start, I think, uh, a redesigning economic system, having, as people have said, a new Bretton Woods and having a solution where actually China would have greater influence. And not only China, India as well. Uh, Europe, definitely much less, because Europe has the employees in this organization that reflect the 1945, uh, when, you know, obviously, Europe was basically still a colonial power. And, uh, in countries like Indonesia, Brazil and so on. So that would be optimistic scenario. Stop the war and renegotiate international economic relations.
You were in Paris recently. How are Europeans—Leeds. How are they living with themselves? Having come around to Trump's view on China, then what drives 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 words, McCrone, etc. How are they digest?
I don't think it was that hard because Germany definitely has been affected by China in—in more in like electric vehicles.
Yeah, I don't know in the clear though.
I mean they side now with Trump because they do have similar problem.
Uh, I know—I don't know, you know. Well, I don't really know, uh, European elites. But you know what I find strange about Europe? I—I'm not very optimistic on Europe for many reasons. But you know what? This fine strange is that Europe really needed in order to—needs actually in order to prosper. Two elements. It first needs the cheap energy, which was really fuelling European growth in the last 40 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 action USA. Well, that's kind of bizarre, but okay, let's do it then. It's also the continent with the declining population and the only—the only way to stop that declining population is to have immigration. But then they say, and it's increasing now. They don't want immigration at all. You have maybe a Spain that is an outlier that is in favor of immigration, but nobody else does. If you look at Nordic countries, it won't let them. Immigration. They don't like to mean—yeah, I mean no, in Spain they're liberal towards Latin American immigrants.
But they are liberal on immigration in general. And actually Sanchez's government is totally at odds with everybody else.
