Ex-World Bank Insider on the Declining West & New World Order | Aaron Bastani Meets Branko Milanovic

There is this incredibly important event which takes place, the World War I, which takes place in the midst of the largest globalization that has ever existed in history up to that moment. Why wouldn't you have economistic theory why this event has happened? But no, there is no theory. It just happens. Okay, well, there is a guy who assassinated another guy in SA. That's the theory. Well, that's that's ridiculous.

We believed that with globalization and mutual trade, the interests would be so strong that we would never go to war because we know that the war would be really bad for me and you. And it actually did happen. It was bad for me and you. And we knew that, and we still went to war.

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Here in Nvar Media, we like to talk about some of the biggest trends of the 21st century. The things that are remaking the world and probably remaking your life too. Multipolarity in the demise of an American-led world order, technological change in automation, uh, the rise of China, demographic aging. All of these are so important, and almost all of them will be figuring in our conversation today. All of them are integrated into this fantastic new book by Branco Milanovich, *The Great Global Transformation*. He talks about how the western middle class getting poorer goes hand in hand with the likes of China getting wealthier; one falls, one rises. At the same time, we have the end of the end of history. Talk of moving to a multipolar world isn't for the future. It's happening. It's here and now. Now, we often talk about the demise of neoliberalism as if it's something that's yet to really happen. Again, Branco thinks we should be talking in the past tense, the end of the end of history. But what comes next? Well, that's where things get super fascinating. And just to be clear, Branco has the credentials to have strong opinions on this. After all, he's a former economist at the World Bank. He's a big brain. He reads a hell of a lot. You're going to have a great time watching this over the next hour and a half. Branco Milanovich, welcome to Downstream.

>> Well, thank you very much, Aaron. It's really, it's a [clears throat] pleasure to be here.

>> I am so excited about this conversation. Some of the uh, some of the stuff we love talking about here on Downstream, the rise of China, the collapse of the West, transformations in the global economy, the decline of the Western Middle class. It's all packed into your new book, *The Great Global Transformation*. I'm so excited because I'm a weird guy. Lots, lots of graphs and lots of big observations. Let's start where it really matters. Why did the USSR collapse and yet China doesn't just not collapse but thrives and becomes one of the world's leading economies after the 1990s?

You obviously want to lead with really simple questions, right? Um, I think that the USSR collapsed because it was economically unsuccessful and because there [clears throat] was increasing realization of USSR falling behind in terms of welfare of the population, uh, behind Western Europe and the West. Uh, it was only successful in the military production, but you cannot eat actually, you know, satellites and tanks. And then the re- that realization, I think, percolated through the establishment. And, uh, when Gorbachev came to power, it was not an accidental event. It was an attempt to actually reboot the Soviet Union and to make it more economically successful. However, it just failed for many reasons and it led to the breakup of the Soviet Union. And I think the, exactly the one of the effects of that breakup is the war that we are actually witnessing now for almost four years between Russia and Ukraine. So it was a, a disaster.

On the other hand, China, as you said, was extremely successful, way more successful than anyone could have predicted. And not only anyone in the 1970s, but anyone in 1982 when the reform started, and even in 1990, and when you think of the, of Tiananmen, what happened there, and it was a belief that actually this was the end of reforms in China, that China would kind of slide back into kind of a Maoist morass. Uh, exactly the opposite happened. They actually, the reforms, I mean, the economic activity increased, the GDP per capita grew tremendously, and China, China was a great success case. So, uh, I just told the history, but of course, it's not really, I didn't touch very much on the causes of the two, but, um, maybe we can talk about that later.

I wonder because I start with that question leading to something else, which is, was there a road untraveled by the USSR in Eastern Europe, somewhere like the DDR, East German Republic, where very high levels of human capital, you know, a medium-income country, you know, had they pursued a different path in the mid to late 1970s, could someone like the DDR, Hungary, etc., have been more like the Asian Tigers?

They could have actually. If you look at Poland, Poland has become an Asian Tiger since the transition and since the end of communism. Uh, I think that there, you know, it's always hard to argue something against, into, into against the facts, the facts which have happened. So when one argues that actually USSR, for example, could have actually moved differently, it's very hard because people say, "No, actually, there was only one outcome." I think there were possibilities even after Stalin in the 1950s and '60s. Uh, there were possibilities to, uh, uh, jumpstart economic development and make technologically the country more successful. I think the really the fall of the Soviet Union had to do with an inability to absorb and create new technology in the production, not only of consumer goods, but of the, you know, goods that matter for people's livelihood. And I think that was the key problem. And I think they realized that in the 1960s, you had reforms which introduced much more market than before, but all of that was eventually not successful. And I think that the fact that when Brezhnev came to power, it was a period of stagnation, ideological, economic, and elsewhere, and in practically all domains, artistic as well. And that made life was not bad, but it really was not going, it's not improving. And I think that led to the huge dissatisfaction, or to the belief rather, that things could be different. That's a little bit different, you know, dissatisfaction is active, uh, dislike of something. A belief that something could be better is not an active dislike. It's actually desire to things to make things more palatable, more agreeable, better.

I've heard a line which is that the USSR didn't fail in so much as it was optimized for World War II. Its economic model, its political model, everything about that particular polity was optimized to fight a conflict after 1945. And the point is that just never happened. Do you think that's just a bit of cope and wishful thinking?

Or no, it's possible. I think that actually they overestimated the importance of war because they, uh, they underestimated in some sense, I think, their power. What I want to say is the following. If you look back at the origin of the USSR, you had from the very beginning attempts to actually end this revolution through foreign intervention. So, as you know, in the 1920s, Americans, French, British, all intervened in Russia to actually stop the revolution. And I think they sort of developed a state of mind, and of course, in 1941, when Hitler invaded, they, they developed a state of mind which I think is not alien to Russians even today, that somehow somebody is all the time trying to attack them. And in that state of mind, then you overprepare, you overestimate the importance of the military. And I think in the Soviet Union, they have spent, current estimates are, they're spending about 15% of GDP on the military. Had they spent that money, had they spent 5% on the military and the other 10% on something much more reasonable, I think that the dissatisfaction or unhappiness of the people would have been less.

>> Yeah, I mean, two people I've spoken to in the last couple of weeks, one is, uh, Vali Nasr, Iranian academic from Johns Hopkins, and another is Said, Heykal, at Harvard.

>> Great.

>> And, you know, you look at Iranian foreign policy, its policy of foreign defense, it's rooted in a paranoia that's centuries old. The same with Russia. You can go back to Hitler, you can go back to the Civil War, you can go back to Napoleon, um, you can go back to the Great Northern War. And it's, I think it's something that's really lost on Brits and Americans, that these mindsets about national interest and foreign policy go back a really long time. They're very hard to get rid of.

Um, let's go back to China for a minute. Uh, you, you mentioned the reforms of the early 1980s. How important is, is Deng Xiaoping and Dengism, and what exactly does he do to the Chinese economy?

Uh, before I answer that, let me just go back on the previous question when you mentioned, because China is actually an interesting counterpart to the USSR. You know, China, I mean, has built the military and has atomic bombs and all that, but I think they did not exaggerate military production the same way the Soviet Union did. Actually, once they got, I think, 300 or 400 atomic weapons, they stopped. That's enough. But the Soviet Union went for 10,000. They wanted to have a little bit more than the Americans. And why do you need 10,000 if you know you can destroy anybody with 500? So that was what I meant, really, really, some sense, irrational stuff in my opinion.

Uh, now, how, how important was Deng? Well, Deng, I think, was, I mean, a super important person, actually. He obviously was not designed to be Mao's successor. Hua Guofeng was the successor, but he eventually was selected by the top class. And it was also interesting, we have to, to admit that he was the person who decided to go with the Tiananmen massacre. Uh, but then he was a person also who in 1992 went for this southern tour, which actually, after the retrenchment of Tiananmen and political retrenchment and more left-wing policies, after 1992, actually the situation went back to the very pro-market oriented, pro-rich, pro, uh, pro-rich people, actually, as he said, "Being rich is glorious." So he had, there's no doubt, I think it's incontestable that he had a super important role in China. So if you take it was a Mao time, and then there was a Deng time.

>> Do you think he died a Marxist? You know, when you read the biographies and so on, they say Deng died a committed Marxist. The project was to >> unleash or to liberate the forces of production. Then others say no, he just realized that, you know, state, this state model under Mao failed, and they wanted to more, uh, they wanted to more closely approximate the Western model. Of course, there's a bit of overlap between those two arguments, but where do you stand on where Deng was politically?

>> I think that he, he was, I think he remained Marxist, or he remained Leninist. Let me put it like that, and that's why I actually think the current also regime in China and the current development can be very well understood if you think of China and Deng said that, that being [clears throat] a new economic policy, it's Lenin's policy from the 1920s, where you essentially unleash the, the private sector, but you never give up the political power. So, in other words, you let them be rich, be sort of have a good life, but you keep an eye on them, and on top of that, the political power stays with you, and you insulate the state from the rich people. And I think if I were to, to define it like that and to present it to Deng, I think he would agree.

>> There's that, there's that sort of, um, there's a TED talk by Eric X. Li, and, you know, you always see him popping up on social media, and he makes, he makes this argument, which you kind of formulate in the book as political capitalism.

>> Which is to say, you have a market, or a mixed market economy, but a market economy for profit, with wage labor, with a working class, with an economic elite.

>> But the point is, capital, big C capital, doesn't set the the political objectives of of the ruling party, and therefore determine the national interest. And, you know, Eric X. Li says something quite similar, and I think it's a really good explanation of China. And I think we're going to learn a ton of lessons from China here in the West in regards over the coming years. You, you mentioned the new economic policy, and really this idea that actually China, post-haste, has a new economic policy that might [clears throat] last, you know, a century, who knows?

>> Right.

>> Is that where the USSR starts to get things wrong? Is there another alternative world where the NEP carries on and actually?

>> I actually think if you want really to sort of make the alternatives, one alternative was it was very, how should I say, likely alternative when it happened, 1921-22, is [clears throat] NEP, or NAP, continues. You don't have collectivization of agriculture, uh, as we know, Ukrainian agriculture is extremely rich, and Russian as well, too. They could actually feed themselves, very export. As they continued exporting. The issue was, are we going to go for that type of agricultural development, which then can our industrialization? And I think that was the, the main dividing line between, as we know, actually from the literature at the time, between people who wanted industrialization at every cost, because that was the sign of a successful and powerful economy, and to some extent, they were also afraid, again, of being attacked. And if you have industry, obviously you're going to have the military and stuff like that. But I think that the path of the, of the, of in agricultural development with free trade and sort of so-called NEP men prospering, uh, would have been better for the Soviet Union. And there was a book by, by Bob Allen, uh, the English, British historian, that actually looks at that kind of a counterfactual. And he thinks actually that counterfactual would have been better for the Soviet Union. I forget the name of the book, but it's actually a book about the Soviet Union, and it's actually studying precisely that point. Did collectivization actually improve, um, industrialization? In other words, did your ability to extract so much surplus from the peasants, and on top of that, to kill 3 million of them, did it really help the industrialization in a significant way? And his argument is no.

What were the arguments or what were the debates within within the Politburo and and the people around Lenin at the time? Because presumably, you have a massive surplus from agricultural production which you can sell and you can reinvest the proceeds of that into industrialization, which was kind of the idea of the Five-Year Plans anyway. But of course, they wanted to take it, I mean, really, uh, forcibly. And so they didn't want to let private enterprise or small private enterprise or peasants and so on really, uh, sell the goods on their own side, which was a mistake. Actually, going back to China, if you remember, actually, we mentioned that 1978 was liberalization in China. It was exactly like that. The communes were ended. The fact of private ownership of land is still formally state, it's not individual, but the factories, individual, and individuals started paying taxes in kind. So, in other words, you produce whatever you do, but you know, okay, I'm going to give to the state 20%, but everything else is for my own either consumption or sales. And that was, I think, the model that NAP, a New Economic Policy, promoted. And actually, that model, I think, would have worked quite well in the Soviet Union.

>> I could go down a rabbit hole with you and talk about this for the next hour. I think some people watching and listening would love to to to see that conversation, but really, this book is about the world we're living in >> after 2008, 2016.

>> You say that the era of neoliberal hegemony is ended, or it's coming to an end. We're living in its kind of embers, and that we are seeing the end of the end of history. Unpack that a little.

>> Uh, yes. First of all, the, the first point, I, I think that very few people would disagree that neoliberal globalization, or the globalized neoliberalism, whichever way you want to put it, uh, that we have been used to since probably 1990, and which had probably its peak around 2000, when China joined WTO. Uh, I think that period has ended. And I think it is obvious that it has ended because the economic policies of the large countries, big countries like the United States or China, have changed. They have changed externally because they have become much more mercantilistic in the case of the United States, not only since the last election of Trump, it was actually since 2016 and continued by Biden. So that international part has changed. Ideologically, you know, of course, trade is still going on, and trade to GDP ratio has not changed, and all that, but ideologically, you don't have the same situation that you had 10 years ago, where it was believed, you know, we don't really take into account politics, we have, you know, supply chains, doesn't matter where it is, whoever is cheaper will use that guy. It has really changed.

Now, sorry, can I ask, what do you say ideologically? What does that mean? Because I suppose many people say, well, Trump says something, but actually, like you say, global trade, GDP is broadly unchanged.

>> Broadly unchanged.

>> You say ideology, they would say rhetoric. So what do you mean by ideology?

>> Well, what I mean by the, by the ideology is that actually people nowadays think much more, and they act to some extent upon that, whether, for example, certain goods would be produced in China or would be produced in Vietnam or India, and whether it is better to actually buy them from India because it is safer in the case of conflict with China. It is kind of obvious that China, for example, had all the problems with IPOs in the United States, with TikTok, which we know. It's also obvious that we have now rare earths as a sort of a political issue. It's no longer an economic issue, buy or sell it. So the, the, uh, economic things are now used as political tools. In other words, there is a political coercion to do certain things, economic, I mean, which in the past would be done purely on economic grounds. So I, I think it's not only the rhetoric, it is just that things have changed, and that there is an adjustment on both sides, uh, in where you produce, what type of, as I was saying, supply chains you want to support, what you want, don't want to support it. It is just a different world. And of course, on top of that, we have the war between Russia and Ukraine, which again has changed the situation with with Europe and Russia, exports of gas, which now don't exist anymore. So these are fundamental changes which are driven by politics and war.

>> Yes. Serge Pliy was saying that the, and this is not a particularly outrageous claim, the big winner of the Russia-Ukraine war is China.

>> Um, and, and something you talk about in the book, which I've never really focused on before, is this idea that there's a decoupling of a long-term decoupling of Russia from Europe, which is a geographical coupling. All the major Russian cities are near Europe because it's historically been a European power. And you kind of begin to talk about the possibility of, you know, the center of Russian economic life shifting east. That's a really fascinating idea, isn't it?

>> It is a fascinating idea. It's kind of hard to to happen, but there is a certain logic to it. As I said, it's very hard to imagine that you would have 10 million people from St. Petersburg, Moscow, moving to Vladivostok tomorrow. It's very hard. But, uh, because Russia was centered into Europe. But if you take a longer-term view and say, okay, this break between Russia and Europe is, we cannot say permanent, because nothing is permanent, but it's a long-term break. Uh, it is very unlikely that, uh, that Europe would go back to the, what is perceived, the state of dependence in terms of energy to Russia, because there will be precedents. They would say, "Look, there was a Cold War, then there is no hot war, there is like stuff like that." So they would not go there. That would push Russia, it already is happening, to be much more directed towards trade and exchanges with the South, which means India and China. And then there is another argument, if you could actually just transport people costlessly, you say, "Why shouldn't I develop the Pacific where actually the center of economic activities is? So why shouldn't I be closer to China, which is now growing, and an Asian region, whereas Europe is not growing?" So in some sense, it does, it is reasonable to imagine that Russia would shift east, but as I said, it is very difficult to to achieve. Now, let me just go make a counterargument against that. Think of St. Petersburg. St. Petersburg did not exist until Peter the Great decided to build it. It was marshes and nothing. So he decided to build it as a sort of open port towards Europe. So that was a political project as well. I'm not saying that actually it's as easy to go, I don't know, like 6,000 kilometers or whatever, uh, east. Uh, but one can imagine a political project which would be, or sort of through economic exchanges, that you do have a different distribution of population. M. You put some numbers actually on, just how I mean, enormous Russia is. It's what, 16 million, I think, square kilometers? But to fly from one end to the other is like nine hours, not a train, to fly. That's just incredible. So, I mean, I think that's, it's >> much higher. I mean, that's that's another thing. When you think of the development of the, of the American Pacific coast, it started also from nothing, uh, until 1849. But of course, it's closer. You fly from New York to, to San Francisco, five hours and a half. And I think Moscow to Vladivostok is like nine. >> Difference. Yeah. [snorts]

>> Let's stick with China. Uh, you, again, because there are just tons of numbers on this, and there's one particular graph which um, elucidates how badly Britain has done in the last 15 years. We talk about that more in a few minutes.

>> But you seem to insinuate, if not explicitly say, that the, the rise of China, particularly since the 1980s, is more historically significant than the industrialization of Europe. Now, obviously, Europe catalyzes a global process, the Industrial Revolution, but in terms of just sheer stuff being made and people's lives being transformed, the two are incomparable. So this process, this moment we're living within, the transformation of China as it ascends to the top rank of global economic powers, how should we think of it, and where are we sitting in that, in that sort of period? Are we still at the start? Are we in the middle, or at the end?

>> I, I think we should really realize, maybe actually contemporaries have trouble realizing that, but we should realize that we're really living in a period of dramatic [clears throat] global transformation, to use the title of the book, which is similar, but bigger. It is similar to the Industrial Revolution in the following sense. The Industrial Revolution created what is called the Great Divergence. West European countries, and then North America afterwards, and finally Japan, became much richer. Big countries like India and China stagnated, or even declined in the case of China. It created a huge gap in incomes between these countries and in welfare of the people, and actually enabled also, uh, colonization and the spread of the Western countries around the world. When you look at today's situation with the rise of India and China, Indonesia, and so forth, you clearly had a reversal of that. You can just look at the numbers. I mean, there were some graphs there that that you mentioned. You simply have these countries going back to the position relative to the West which they had in 1750 or 1800, when they were not as far behind. So there is a clear reversal. What was bigger now is that simply there are more people involved in that than they were in 1750 or 1800. So I would say, to summarize, I would say, uh, geopolitically, it is as dramatic a fact as the Industrial Revolution. In terms of the numbers of people, simply because the world has now 8.4 billion people, it involves more people, but it is very, at least totally dramatic as it, as the Industrial Revolution was. M. So I think it's undoing the effects of the Industrial Revolution at the level of individual incomes. It's actually bringing, if you will, the world back to the distribution of economic power in the Eurasian continent to where it was in 1500, where China and India were not different from Italy, or not significantly different from Italy, or England, or the Netherlands.

I love Downstream so much. It's pretty much the most enlightening conversation I have every week. Except, of course, those with my wife and my daughter. My two-year-old daughter. They're very sharp as well. But after that, it's always Downstream. And that's often something I hear from you guys as well. You love it. You love the events. You love the show. You want more. Well, there is more. There's a newsletter. It's brand new. The first one was published last week. We have another one out this week. Get on that train. navara.media/downstream-newsletter. We are talking to some of the most interesting people in the world about some of the biggest issues. We can't cram it all in. It's the video. And there's also some nice little anecdotes and vignettes that you'll find exclusively in that newsletter. If you want to get smarter, if you want to have a smile on your face before the new working week begins, subscribe to the newsletter. Do yourself a favor.

Have you read *Exterminate All the Brutes*? I'm sure you have, by Sven Lindqvist.

>> Yes. And he talks about >> again, for people who aren't, who aren't really big into political economy and, you know, the relationship between technological change and politics and and and military power, the ability to project it. You know, he talks about, you obviously don't get steamships without steam, and you don't get Gatling guns without that stuff. And all of a sudden, over the space of 70 years, British soldiers can just go up these rivers within the interior of Africa and just mow down thousands of people at a time with with weapons.

>> And for somebody in your game, uh, that's just an obvious connection. But I think often we fail to understand how much of a game changer, uh, the Industrial Revolution wasn't, was not just for us, but for the entire planet.

>> Um, so, so, so where are we in that moment for China? It starts, let's say, with Deng. Where are we, where are we with that now?

>> I, I think we are not, I mean, if you take that example, we are not there yet, or maybe we'll never get there. Because, to some extent, China is recapturing the position that it had before. Like, we're talking about, let's say, 1500. It does not necessarily imply, nor may it even be feasible, for the Chinese to do the same thing that, for example, the British did to China. Because when you mention that, of course, the British went with their ships into the inland waters of China, and they went all the way to the, to the, uh, Summer Palace, and of course, opened the ports and all that. I, I don't see this happening now. I don't see China in the next 20 years or 30 or 50 years telling the Brits, actually, that they should import French cognac, like the the Brits asked them to import, uh, opium. You know, I, I just don't see that. So, so that kind of, maybe raw, raw military power may not be exercised, because the other side is also very strong. But some other power may be exercised. Maybe China would exercise it in Africa. Maybe it would exercise it in weaker European countries, or some, actually, South Asia. We don't know that. So, but it is not unreasonable to assume that with a huge economic success and industrialization, and actually nowadays new technologies, you also develop the means of coercion that you might want to use.

>> But it's a guess, obviously.

>> So much of it a guess.

>> You talk about, uh, China's rise in relation to the United States, and I want from a big brain who was at the World Bank, to know, which is the measure to use? Because of course, if people look at nominal GDP, America is still much bigger than China. In terms of PPP, a different measure for GDP, China is now significantly bigger than the US. So,

>> Which one should people trust?

>> Well, I think you can use both. I mean, let me tell you why I have preference for the PPP measure. Uh, first of all, because I work with income distribution, income inequality, and you use, uh, PPP because you want to say, "Okay, what is the welfare of people?" So, if I have, uh, this coffee, and I have this water, it should be counted in terms of price, the same everywhere. So, it is true that in London, this is much more expensive than, let's suppose, in Kolkata, but I, when I talk about the welfare, the guy who is in Kolkata, and he drinks this coffee and drinks this water, should actually get the same utility, if you will, as I do. So, in that sense, I'm in favor of PPP. Uh, PPP simply means China produces, like now, like 15, well, 20, 30% more of stuff than the US. But when you go to the exchange rates, you say, "Okay, they produce all of this stuff, but let's suppose they sell all this stuff at the rate, at the prices that they have now, they would get less than the US." So, it is true that actually, at some level, exchange rate, PPP exchange rate, GDP makes sense. So I'm for using both, but I really see the advantages of, of the PPP rather than the, at market exchange rates. Plus of that, you can take the following thing. If China were to, to actually appreciate, uh, uh, Yuan, it would, it would eliminate, you know, half of the gap. The current gap is about 30% in favor of the US. Let's suppose China appreciates by 10%, half of the gap will be gone. So it is nothing has happened, it's simply that there was a change in the exchange rate, and then half of the gap is gone.

>> So for people watching, basically, China could muck about this economy, and by nominal GDP, it could be the largest economy in the world, but that doesn't advantage its exports, it's actually a disadvantage.

>> Exactly. It would make actually Chinese exports more expensive, Chinese growth rate lower. So you can become bigger, but then you pay the cost in terms of the, exactly, of the exports and the, the growth of the economy. China actually, when you read Chinese papers and stuff in English, I unfortunately cannot read Chinese, but they very often insist on second largest economy. They never mention the largest economy. It's insistent, and it's not accidental. It's always the second largest, the second largest.

>> Is that from the whole, you know, "hide your strength by your time" kind of?

>> It looks like that, because they could actually say the largest economy. It's the polar opposite of, of British politics, where, you know, our politicians still say everything's world-leading, and we're still, you know, world number one in terms of, uh, aviation engines. You know, they clutch at straws where we're still number one. The Chinese are saying, "No, we're number two. We're not, you know."

>> Maybe, maybe there is something to that. That's what Deng said, you know. Uh, of course, most people like to be, to be number one. I'm sure they like too, but I've noticed that in the, well, China Daily, for example, which is the fact, official publication, and elsewhere, even in the political documents, uh, there is always this mention of the second largest in a positive way, like we are strong, we are big, but we're second.

Often when we talk about, um, Russia and Ukraine, you know, you get, and this really winds me up, analysts on X and they'll say, "How on earth are we taking Russia seriously? Their GDP is the size of Italy." And of course, you look at PPP, which is the measure you're talking about, it's the fourth largest economy in the world.

>> I mean, when we're looking at Russia and its military-industrial complex, surely we should be looking at PPP, not nominal GDP.

>> No, I agree. I agree. You know, and I think Russia is, in terms of PPP, actually, I don't know, fifth or sixth, actually. It's a large economy, so it's not actually true to, to say it is the same as, as Italy.

>> Yeah. Well, I think it overtook Japan recently on, like, CIA Factbook or something. So, you know, it's, cuz you look at the nominal GDP, US is number one. You know, Russia's barely in the top 10, not even in the top 10, I think. And you look at PPP, China's number one, and Russia's, you know, you know, above the likes of the UK and France, and it's a whole different geopolitical reality.

>> True.

>> And I, I do get really worried when I look at, uh, or I see rather, sort of powerful people in this country looking at the nominal GDP. But, you know, you, in the first chapter of my book, actually, which is called "The Rise of Asia," you have, I think, this kind of cool graphs where actually I show what were kind of a challenges of the West when the new international economic order happened in the in the '74-'75. If you look at the distribution by different political parts of the world, the West was, uh, you know, 50% of global GDP or thereby. And of course, lots of population. China was only 2% of, of, of global GDP, 20% of the population. So when you look at this number, you say, "Well, you know, it is not a power in terms of economic terms, but it could become a power simply because there are so many people." When you look at Russia today, which is also solitary in the same way that China was solitary then, because it was not part of some kind of an association or or group, uh, uh, Russia produces 3% of GDP, global GDP, but it has only 2% of population. So it is clearly not in the same league that China was in 1974. And it is, I think, some kind of a, you know, difference there. And, well, China nowadays is like 10 times as, as big as Russia in terms of both population and, uh, GDP. M. And I think you have in the book that at its peak, the USSR comprised about 12% of global GDP.

>> Right.

>> Which is just, you know, again, it's incomparable to the rise of China now.

>> Incomparable. It's like 22 versus 12, actually. And the USSR was for a long time the second largest economy. These are the World Bank data, which are done retroactively. And then it was overtaken by Japan, then Japan was overtaken by China, and then eventually China overtook the United States. But it is interesting also that the China and US now represent almost 40% of global GDP. This is a lot, like for two countries really to have like almost, well, 40% of global GDP is a lot.

>> That's proper bipolarity, right?

>> Yeah. It's kind of a bipolarity. Exactly. Yeah.

>> Yeah.

>> Is social mobility dead in the West today?

>> No. Is it dying? I think it's slower than it used to be, and that's actually what I was discussing in part in the chapter three about the elites in the West. Uh, the elites in the West are what I call homopolitic, which means that they are at the same time among the richest capitalists and the richest wage earners, and on top of that, of course, they are people with credentials and so-called, me, quote unquote, meritocratic view of the world. And in such a world, obviously your kids, if they come from such a family with all these advantages, are very likely to succeed, and social mobility would be less. So it is factually true that social mobility, if you look at the US since the 1980s, has declined, and actually it has consistent decline. So you have consistent increase in inequality, consistent decline in social mobility. But it doesn't mean that social mobility has stopped.

Well, it's, I suppose it's still alive, but it's mostly downwards. I, if we're talking about real social mobility, the proletarianization of the middle class is the real, is the real story.

>> That could be. Yeah, it could be. But yeah, I was actually thinking of the, of the, uh, sort of numbers that look at social mobility, regardless whether it is up or down. It simply measures the change in the position of the children compared to the parents. So that could be both of them, you know, but it's also true, you know, if there is social mobility down, you know, social mobility is an ordinal number. So if somebody goes from the 60th percentile to the 45th, which is downward mobility, well, somebody has to fill the 60th percentile. So somebody has to come there as well.

>> Yeah.

>> You know, so I, I, I'm not quite sure one can say definitely that social mobility has declined, but I would not go too far to say that we don't have it anymore.

>> Yeah. I mean, you have this great chart where you talk about, um, earners. So it includes, um, as I understand it, capital gains from assets as well as incomes.

>> Um, the top 5% of earners globally, and of course, the United States is, you know, runaway number one, right?

>> The UK was number two in 2008, it's really fallen, which I find fascinating.

>> And then of course, China has done really well. Um, most of the, well, I think all the European countries have actually fallen a little bit, right?

>> And, and that, to me, was a really interesting story, and it kind of visualized the extent of Britain's problems in recent years. There was a great podcast recently with Eliza Philby, who, who, um, is a professor over here, and she said the meme on social media is, you know, "I need to marry a guy in finance." What they're actually doing is they're marrying somebody whose dad was in finance. That's the reality, rather than like the TikTok meme, even if it sounds less sexy. Is that, is that a threat to our political model?

I think actually what is a threat to the political model is that what they said before, and actually what you also said, is the, the rise of, is what they call the homopolitic elite. Homopolitic simply means, I invented this term because we, the term didn't, I mean, you had to make up some some Greek word, you know. Homopolitic means technically, uh, uh, same wealth. What I meant by that is that there is a rise of people who are at the same time having very large capital incomes from property and very large high incomes from labor. This is an unprecedented situation. Think of the 19th century Britain, or even early 20th century, or mid-20th century. You had the top guys, and the top guys generally had income from capital. I'm not saying they didn't have any income from labor. But what this homopolitic means is not only that you are in the top decile income, which means you're really rich capitalist. You're in a top decile by labor income, which means that you really work hard, you're very high level, and you are paid for your labor. And this is what I believe is a new elite. And that elite, of course, transmits all these advantages to their kids. And that's actually what your interlocutor, I think, also meant. And I, I am, what I think what I find worrisome is that that elite, because it is meritocratic, quote unquote, elite, believes that they totally deserve that position, and they are hardworking elite. We have actually the data that show that people with higher, um, uh, wage per hour tend to work many more hours. So combine all of that, combine all of that, that I am rich capitalist, I am rich worker, I work very much, I feel that I deserve this position, I feel that I should give all these advantages to my children. The children actually go to best schools, they get high incomes themselves, and inherit high incomes. So you really have an elite which is very hard to, to sort of break.

When does that change, by the way, amongst amongst the elite, this idea that the, the wealthiest, most high-performing, or most economically, culturally successful people, politically successful people are the ones that work hardest? So, you know, you'll be following some billionaire on Instagram and he'll be sharing a picture of his alarm clock getting up at 5:00 a.m.

But the point was, for almost all of human history, was to amass wealth in order in order to join the leisure class. When, when does that shift happen?

It, I don't know. It's really an excellent question. But I think that shift happened probably over the last 50 years or so. But there, there was a certainly a cultural shift. There was a cultural shift that you accept for some small groups, but you believe, first, you tend to underplay your wealth.

>> Yeah.

>> Many of them don't want to actually to accept that they're wealthy. And secondly, you want to create the impression that that wealth is the result of your intelligence and hard work. And Daniel Markovits, whom I quote in the book, calls says such a new elite has the old-fashioned virtues and the old-fashioned virtues and dislikes. The old-fashioned virtues is actually hard work, you know, almost Calvinist type, you know, stuff, although they consume a lot, but they hide that. But part of that is also contempt from those who did not succeed. Because if you believe that the entire success is based on measurable criteria like intelligence, hard work, or I don't know, abstinence, or whatever you want to call it, and those who don't have it, then consequently have either to be lazy, or not to be, you know, smart, or to be too driven by passions, or whatever. So you create that, uh, that moral judgment, which in my opinion was driving quite a lot of dissatisfaction with, with, uh, either Hillary or with people who oppose Trump.

So this idea that the, the highest of high, when it comes to, um, income, are also increasingly the highest of high when it comes to, um, capital gains. People are doing really well from not working. I wonder, is that, that's clearly a global phenomenon, but is that more of a phenomenon in the United States, where you have obviously big tech, and people are joining companies when they're small and they're getting equity and stocks in the company rather than being paid? Because I look at the UK, we have a different increment model. We have a, we're a sub-imperial state. Or I look at France, which has a much larger state, and, you know, the public servants are still paid pretty well. It doesn't have a new economy like the US. Are you describing, in terms of elite and these new characteristics of it, is that more prevalent in the US, or is it just leading and will eventually follow?

>> I think it's leading, actually. I think I have a graph there. Uh, uh, the US, if you take the 10% of the richest people in the US and the UK and France and and Mexico, let's say, what you find is that one-third of that 10%, which means like 3% plus in the US, are this homopolitic elite. In West European countries, that percentage is 20% of that elite, so we're talking about 2% of the population in, in the UK. So it's less. But if you look at, uh, old-fashioned capitalist countries like Mexico and Brazil, very few people are that elite, because people who are rich capitalists are rich capitalists, they are not really lawyers, or they are not software developers. So I think it is something that the US has, in many cases, leading, but it's not something that is unknown elsewhere, and I think it will become the same. And so somebody like Gary Stevenson, who's become this big voice in this country when it comes to inequality, Gary Stevenson would say, you've had this massive divergence in incomes. The wealthiest of the wealthy now have so much money, they have a lower marginal propensity to spend. What do they do with it? They buy assets which will generate returns for them. Is that what's driving this?

>> Well, this is a theory. It is actually interesting that you mentioned that, because this is the issue which was raised even during the the Great Recession. It kind of, it's kind of simple, but it may be true. It's essentially, you have high inequality. That means that there are quite a few people who are wealthy, and they have excess savings simply because the marginal propensity to consume is low. You don't know what to do with that. So they are in

In search of alternative ways to invest that money, and that was a story, of course, before World War I as well. It's essentially a search for that. Uh, there was a paper, and there were actually some studies by, by two guys, I think Sufi and Amin, arguing that the subprime crisis was the result of that. Essentially, you had to offer to them something you didn't know what to offer. So either you invest in China or elsewhere, or you invest in something which turned out to be extremely risky, and that was camouflaged by not being risky. But it is important there to realize that, um, and I think people did realize, not maybe immediately after the crisis, that inequality was, uh, generating what became the bubble. And it was doing that because simply the people on the top had surplus money, and they have to do something with that money.

But that is a really, if you try and explain that to people in this country, if you make the argument, for instance, for, um, a wealth tax, not just to fund better public services or to reduce the deficit, but to change this pattern. I mean, that's that's actually what Gary says, you know, it's not just to fund the state, but we need to stop this recursive feedback loop of the ultra-rich buying more assets, exacerbating rent-seeking, and you know, going over and over and over again. Do you think the political class, the Western political class, understand the nature of that feedback loop?

Or, I think they understand, but they probably don't want to do that because, well, like we saw, the, the, what the French tax that failed. Now, that the idea to actually to to tax people with with high wealth. Uh, I don't know. They may be afraid that actually these high-wealth people would leave the country, or they would invest money elsewhere, that the money would not stay. I don't know. But I think the logic seems to me rather clear, and it is an old logic. You know, we're going even to actually, it was a British economist, John Hobson, who originally defined it. It was underconsumptionist, and many economists didn't like this idea of underconsumptionist. But it is true that, I mean, that was after, for all Keynes who used it, that the marginal propensity to consume decreases with income. So at some point, when you have huge income and you have huge wealth, you cannot all consume it, you know, and people don't consume it, and that's the issue.

So when Liz Truss was giving tax cuts to the ultra-rich, that was just in terms of trying to help with final demand? That was just the stupidest thing you can do. Well, it seems to me it's actually, I mean, that going back to the elementary Keynesianism, if you want to increase aggregate demand, you do have to redistribute from rich people to poor people, not because you necessarily like poor people, but because they are going to spend that money, and the rich people will not spend that money. So there will not be the multiplier effect. And it's actually interesting that Keynes, but that's another topic. Keynes did not use that particular sort of way to increase aggregate demand. He mentioned that of course, MPC is playing a prominent role there, but he preferred actually to go with the state spending directly rather than through redistribution. And I think it was a political decision, but maybe that's a different topic.

Well, he, he's living through World War I, Great Depression. He's on the front lines of all of that stuff. So it kind of adds up, right? It adds up, but it actually raises the question, why wouldn't he actually, uh, put the onus or put the emphasis rather on redistribution rather than government, uh, government spending? Because you can achieve the same objective by taking money from the rich, giving to the poor, you increase aggregate demand, or you can achieve the same objective by increasing government spending. So, in my opinion, he decided to go for the second alternative. Now, that's more for people who study Keynesianism. I will stop there. But I think there was an, there was clearly an alternative which implied redistribution.

So should we be taxing wealth more and work less? Uh, I think we should be definitely taxing wealth more. Uh, work less. Well, that's a big question. You know, if you again look at the objectives that many economists had, they thought, what is the ultimate objective of wealth? Is actually to have a nice life where you do whatever you want, which doesn't mean that you don't necessarily work, because many people like to work, but you don't work simply because you need money. I mean, imagine a society of full abundance, then you could still work because, I mean, maybe you like to write, or to interview another guy who likes to go and, I don't know, fish, fish, and then sell fish. But this would not be the same type of work that we do now, where people, you know, people who work at, I don't think to work at warehouses in, in Amazon. I don't think that's that they are like enjoying it.

Because this is a debate now we're having in this country. We've got our budget at the end of November, and you know, lots of people like in France, like with Mandani, we'll talk about him in a minute, um, in the US talking about a wealth tax. And I think a wealth tax, I'm on the left, I'm a socialist, but a wealth tax is necessarily coded as a left-wing thing. And I don't really understand why more people on the populist right, and I don't mean MAGA, I mean, you know, more in Europe, really, these sort of the political representation of the petty bourgeoisie, why there aren't more people who advance the interests of small business, saying we need to tax wealth so that the dude on Main Street has more money to go into your shop. You know, you're owned by your family, and actually that's going to help you. And it seems really strange to me that nobody in the center-right seems to understand this argument. Nobody. They're still very much addicted to, you know, um, corporate plutocracy, Thatcherism, Reaganism. And it's very strange that they don't entertain these arguments.

But, you know, it seems to me, maybe I'm wrong on that, but it seems to me that many of the such people are afraid of two things. First of all, they're not sure to whom the tax apply would apply, and they may be afraid or somehow maybe it will come to me. Maybe although I'm not rich, but maybe it will just go down and I will have to pay it. And secondly, the argument which I've heard very often, I think in Germany in particular and Austria, and I think even in Italy, is that, um, people are afraid that it would actually cover small businesses that are being, you know, sort of inherited from one generation to another. I do believe that there must be, I don't know, but there must be ways to formulate that. And, you know, recently there was a referendum, for example, in Switzerland, that there was a tax rate of 50% on wealth above 50 million euro. Well, this is a pretty high wealth, you know, and probably it would not include, um, include small businesses. It would probably, I'm not sure actually, but it might include only the wealth that you have, financial wealth that you have. That doesn't seem to me would affect too many people. Uh, so that seems reasonable. On the other hand, the counterargument that people say, well, if it doesn't affect too many people, then the intake of the tax would be small. So what will you achieve?

So in this country, last year, I'm sure you know this, we had the increase to, um, employees' national insurance contributions. Now, I kind of buy the argument, for the most part, that just means that the following year, the employer gives a lower pay rise to staff, and they probably bump their prices up a little bit. And they do that rather than increasing capital gains tax. So right now, for, um, somebody in the higher threshold taxpayer, even for them, capital gains, we have two rates of capital gains tax in this country. It's still lower than what they pay on incomes. And bizarrely, and maybe you can explain this to me, we tax dividends and capital gains at different rates. So dividends is higher than capital gains. And I don't understand why Rachel Reeves, the Labour Party, don't just standardize dividends tax, capital gains, and income tax.

I don't know. I don't know either. But I know in the US too, actually, the capital gains are really taxed at a lower rate. I think that the idea that, I think that the idea that I have is the capital gains would be reinvested, and actually they would be used to employ people, and, uh, I think there was this is the only rationale because you may want to tax capital income slower because you believe that capital incomes would then be used to actually employ more people and to do more business. That was always the argument for having a higher rate of corporation tax because again, people on the right, they say, oh, it's about getting money. No, it's also about creating incentives to maximize reinvestment in productive capacity because you don't want to pay in tax anyway. No, no, but the ultimate sort of extreme solution would be to have a zero tax because if you were to assume that all capital incomes would be reinvested, you could have the zero tax. The problem with that is that over time, you would actually create an incredibly rich minority who will be keeping reinvesting, reinvesting, reinvesting. So the end, the result of that, you will be an unsustainable inequality.

Infinite berlettes and, yeah, infinite. It would be an infinite. That would be an infinite actually situation where you would have a really a huge polarization and huge centered, uh, uh, concentration of capital. In the book, you talk about going back to geopolitics. You move away from this idea of the global north or the first world, and you talk about the political West. And the only person I've really heard talk about the political West is Sergey Lavrov. And I'm not suggesting, Oh, did he? Was okay. Well, that's, I have to, I often hear it from the, I hear the formulation often from the Russians. I mean, I agree with it, it makes perfect sense to me. Yeah, yeah, it does. Yeah. But just explain to me, what do you mean by the political West? Who, who are the political West?

You know, I was, you know, impressed by a book. You mentioned sub-imperial power, but it was a book by Fernandez, uh, about Australia as a sub-imperial power. Uh, Australia is not a member of NATO. Okay. So, but it clearly works the same. And actually, with the detentions in China, it became very clear that as what, what it was, a quad was formed, that you have, uh, Korea, the Philippines, Indonesia, uh, uh, and New Zealand, uh, that were part of the political West. And if you ask me, okay, what is the political West? Just go to the Heathrow airport. Who are the people who actually go through the, uh, through the electronic passport controls? It's the political West. So what you go, and it is, uh, EU, of course, UK, obviously, EU, and plus, uh, uh, Norway and Switzerland, then US, Canada, Australia, New Zealand, South Korea, Japan, and I think that was all. So I would call the political West the countries that enter the UK through electronic passport control.

And is that, is that effectively the US empire? How should we understand it? I think it's the fact, US empire. You had actually other people who at given points in time, for example, Colombia at one point, wanted to join NATO. Was, but now the government has changed. But of course, Malay also wanted to join NATO. So, I do think that the, the term political West has a sense because it's no longer the West alone. I mean, you cannot, I mean, you can call Japan the West, as it was called a long time ago. But if you now, [clears throat] have more countries in the Pacific region that they have aligned themselves with the US and the West. I think we have to find a new term for that, and that's why I use the political West. And you talk in relation to China being the new USSR. And you say, look, it was very, very hard to integrate Russia into that configuration of effectively US states, vassal states, um, sub-imperial states, etc. Even harder to do that with China. Somewhere like India, where does that fit in? Because even if it's politically amenable, it's obviously 1.4, 4, 5 billion people. Is that part of the political West? Or could they be part? India is not part of the political West. I don't think that India, we can actually consider India as part of the political West. India, of course, has its own policy. It's not particularly friendly to China. Uh, but India is not part of the political West simply because it doesn't follow, and I think that was very clear even under Biden. India follows its own interests and does not, uh, how should I say, does not play the role that was, I think, very nicely described by Fernandez of the sub-imperial power. Sub-imperial power has a certain role over this area, but this role is essentially given to it through, I mean, by the imperial power. So the imperial power doesn't have the means to control everything. So it actually delegates one part of that role to a sub-imperial power. I don't see that we can say that the US delegates anything to India, or that India accepts. India does certain things which it finds its own interest, but I think it does it because it finds it, you know, likes to do it, but not because the US does it.

I really like that idea of the sub-imperial power because we think of, or I think of the UK now as a vassal state, um, particularly with regards to big tech, and its dependence on, you know, US infrastructure. Even our security services use Amazon Web Services, you know, but I like this idea that economically we're vassal states, but on the, on the, in the sphere of geopolitics and military affairs, we're, we're something different. And that, that then all of a sudden makes sense that, you know, JD Vance would say to the Europeans, you should be paying more on defense spending. Because on the one hand, you think, well, these are vassal states, you want them to be vassal states, you don't want them to be a, a strident presence in global affairs with powerful militaries. But on the other hand, actually, no, you want to socialize the cost of these, you know, True. These subordinate powers that do your. Is that, is that how we should understand? But I would not use the word vassal because it sounds, it is sort of pejorative. But sub-imperial, I think it's actually defines the relationship. And if you look, and actually they have a section on that on on China, why China can, can never, in my opinion, become integrated in that system, simply because it's too big. You know, the imperial structure is a hierarchical structure. You have somebody at the top, and then you have large, I mean, big powers like the UK, France, Japan, Germany, that are in the second range or second rail, and then you go further down, and you have actually very small countries that are part of that system. And I think actually it is that system is quite good for small countries because it, [clears throat] especially in the past, let them not invest too much in the military and enjoy the protection. So I think for the small countries, that system is very good. The problem of that system, it cannot incorporate a big country like China, because then the question becomes, who is the hegemon? So China is not going to play a role of sub-imperial power. Yeah. And that's the problem. US empire has definitely been very good for Ireland, Malta. Yeah. Iceland. They've never had it better. No, even even countries like the Netherlands, for example, you know, it is very good actually, because you have many advantages. This, you know, public goods are basically provided by the US. You don't have to worry about that. You know that nobody's will dare to attack you. You just concentrate what you're doing, and you are small enough. You don't expect to have a big role internationally, and the role that you have, you have some role at the World Bank. You go and give talks and all of that, and you have some role also in, in aid of, of the, you know, poor countries. It makes you feel good. It's a phenomenal arrangement for the small countries. Yeah. You just focus on your schaffel and your coffee and, and you have a great time. Yeah. The B-52s flying over. Yeah. And it's like you say, well, that's excellent. But you know, with larger countries and bigger countries and historically more important countries, it becomes more difficult. You know, I was recently reading, uh, Ramone's memoirs from the 1940s all the way to 1980s, and he describes difficulties, especially that the goal and the French had with the US, the difficulties. It's actually interesting in his book is that they are part of that political West, but they are a large country, and historically they have been an important country. So their relationship with the US was always difficult and fraught because they would not just accept what the US tells them, without sort of, you know, questioning that. So it was a difficult relationship, and as you know, the goal actually got out of the military part of NATO command, and then France got back later, but it is a difficult, more difficult relationship than for a small country.

There's a great quote from when he's asked what's the, what's the main achievement of the Islamic Revolution? And of course, you know, if you looked at people on X, they would say it's hijab or whatever. Obviously, he says the major accomplishment is that Iran, for the first time in centuries, has ruled from Tehran. It's sovereignty. It's a sovereigntist argument. And I [snorts] think this is an argument for these, for these middle powers that aren't in the political West. I think people don't realize like how significant that idea is. Um, and of course, some people would portray that as anti-imperialist. I think that's that's probably accurate. Um, are we moving to a more multipolar world, and is that a good or bad thing? Well, the subtitle actually says, National Market Liberalism in a Multipolar World. So, national market liberalism is my sort of renaming of the system that would replace, or it is in the process of replacing, neoliberal globalization. And to make it very simple, it is a system where neoliberalism remains domestically dominant, and maybe gets even deeper, but eliminates all the international part, like for example, uh, [clears throat] part which has to do with low tariffs, free flow of labor, capital, and so on. But go back to the multipolar world. Yes, I think we are actually entering a multipolar world, especially because of China, because it is, you can say it's bipolarity between the US and China, but it's more complicated than that, because, uh, powers of the, they're way above the mid-size powers, like India, do start now to play an autonomous role. Russia is playing an autonomous role. It's clearly Russia's policies are totally autonomous. You know, they can, I'm not saying they can do whatever they want, but they are not being controlled by anybody. And I think other countries like South Africa, Brazil, are actually becoming much more assertive and vocal than they used to be. And in that sense, I do think that we are entering a multipolar world.

And is that good or bad? From a European perspective, is that a good or bad thing? Uh, for the European perspective, it probably is bad, because I think it actually downgrades Europe to the position of a middle power, and, uh, uh, makes, of course, other countries like India, which has 1.4 billion people, more important. So I would not say it's a good, very good thing. It's worth for you. So in a multipolar world, India is more important than the European Union? Well, the European Union is half a billion. Of course, it's much richer, but it grows more slowly than than India. I'm not saying that it's currently. Obviously, the European Union is very important economically, and then also intellectually. It is really the ideas are still really mostly generated by the West. You know, the reason why I'm actually writing this book in English is because of the ideas travel. Uh, but of course, India is actually, in terms of language, it's English, uh, speaking. But I do think that that if you look at the sort of project, the evolution, yes, the large countries that are growing fast, and they are actually getting the new technology quite well, will play more and more of a role. And in that sense, the world will become multipolar. Um, and as I mentioned, it's not only India, China, Russia, the United States, Europe. It's also countries like South Africa and Brazil, that I think are now really emerging. You know, for me, what was an interesting move that when South Africa went for, uh, uh, the International Criminal Court in, in The Hague, that was, I thought, interesting, because it requires quite a lot of, um, how should I say, uh, political ability to politically do that. And they have done it. And no other, I mean, that that seems that actually you have an infrastructure that is sufficiently powerful, and that, you know, who to hire, who lawyers, where to go, and not small countries wouldn't know how to do that.

Yeah. I think, I think, I mean, other examples for me, Indonesia, you know, enormous economy, huge population, um, I think the world's most populous Muslim country, you know, is a huge one. The size of Pakistan, if they ever get their act together, or somewhere like Taiwan, 30 million people, you've got, you know, a trillion-dollar-plus company with TSMC. And I [snorts] think again, the sort of, in this country, I know you're based in New York, but in this country, just the level of political debate about what's going on in these, Vietnam, this exporting superpower. Now, nobody in Britain's talking about what Vietnam gets right. Nobody in Europe's talking about what Vietnam gets right, broadly speaking. And I think that just really signifies how, how kind of screwed we are in this new world we're moving into. I, I'm actually very, very happy that you mentioned Indonesia, because I forgot to mention Indonesia, but Indonesia is really one of these. It's a huge country in terms of population, I think 240 million, and a country which is growing. And as somebody mentioned to me, I had this slide which actually graph which shows, uh, the position of India, China, uh, and Indonesia compared to their position during the industrial revolution. And you have a U-shaped curve. So they actually declined very much, if you can compare them to Britain. They declined very much down to the 1970s, 1980s, and since then they have what a friend of mine called a remontada. And they, and actually I had Indonesia in a graph, but I actually focused on India and China, but Indonesia too had really a remarkable remontada. Even Turkey, actually, had a remontada compared to its position. Yeah. Well, Turkey now, you look, I know Turkey's got more people than the UK, but you look at its economy, PPP, it's kind of, it's catching up with the UK. But again, nobody in Britain says that. No, people actually forget, they don't look at things. Actually, it is also a fact that Turkey is now in terms of GDP per capita, for the first time probably in, I cannot, I don't know, in how many centuries, caught up, caught with Greece. So it's, it's a big change, uh, that, I mean, if you look at 1910 Greece, or 1950 Greece, was always much richer than than Turkey. Uh, Turkey now has a GDP per capita which is close. I think the difference is like $1,000 or something.

You know, one of the, one of the more fun bits of the book was where you look at theories of capitalist development, imperialism, and conflict. You have John Hobson in there. You have, Rosa Luxemburg, Lenin. Yeah. And and and Schumpeter, which I find is super interesting. So this relationship between monopoly capital and and imperialism. Just, just explain that to me. What is the connection between capitalism and imperialism? You know, should I go through Schumpeter because he's super interesting and very few people know. Uh, Schumpeter wrote an enormous book, uh, uh, I think 1915 or thereabouts, about, it's called Sociology of Imperialisms, plural. And then more or less the argument, not fully, but then more or less the argument was, look, imperialism is really an old-fashioned idea. It is an idea which is really alien to real capitalist societies because what capitalists want, they want trade, they want money, they want to sell you something, buy something from you. They're not interested in controlling your territory because they will be able to do that anyway through trade. So he says, why we have still that in capitalist countries is because there's a remnant, remains of all the aristocratic sort of desire to control people and territories. It's actually sort of, uh, um, anachronistic. That's what he said. But and then actually he said, very interesting sentence. He says, the least imperialistic countries are the most capitalist countries, UK and the USA. So then, later, he develops, and I think to some extent unaware, he develops in, in Capitalism, Socialism and Democracy, a view of the world where the monopolistic and large companies, oligopoly, monopolistic companies are re, are very efficient. They're more efficient than small companies because they use economies of scale. But in their way of dealing with the economic world, they actually use all kinds of means. Coercion, conquest, uh, you know, undercutting, collusion, everything. But that makes them more efficient. But then he forgot, I think, that he said the only part of capitalist that are really sort of imperialistic are the comp, precisely monopoly capital, monopoly capitalism. So when you put Schumpeter, the whole work of Schumpeter, and you say, okay, he accepts that monopoly capitalism uses imperialistic methods to conquer markets, and he says that monopoly capitalism will become dominant capitalism because they are more efficient than small-scale capitalism. Argo, what is the conclusion? Monopoly capitalism is a normal type of capitalism, and that normal type of capitalism is imperialistic. So I actually think that when you put Schumpeter all together, you basically have this sort of imperialist competition theory, which is very similar to Hobson, Rosa Luxemburg, and Lenin. So that was my argument.

Yeah, I love it. It's a very original argument. And just to go over Hobson, Lenin, and Luxembourg, this idea that you have high inequality within a capitalist society, which leads to underconsumption. Therefore, you have high incentives for capitalist elites to go elsewhere to find cheap labor, cheap resources, and to get new markets. And of course, these, these capitalist states are, are, you know, in conflict with one another to access all of these things. And that is the explanation for the First World War. That's what actually says too. He says, you know, you have the waves of capital coming from each individual country, and actually Pani says also as well, waves of capital, and they go there, and they need government protection because they are not sure that the money would be repaid, that actually that people would observe the contracts and all that. But he says that one way for country X meets exactly the same way for country Y. So immediately that gets conveyed back to the capitals, and you have the conflict. And that was the same in, in Polia. He actually has, I, I quoted, I think, in the book, he says precisely that sentence, is actually, trade follows the flag, and then different flags basically fight it out.

And you make a really great point in the book, which is, look, people watching or listening might disagree with that. But what's really critical is that neoclassical economics has no account for why something like the First World War happens. It's just bad people do stupid things. And the Hobson, Lenin, Luxembourg theory, and Schumpeter and Pani makes much more sense. You know, for me, it is absolutely striking that economics, which is accused generally rightly of being, uh, intellectually, uh, imperialist. In other words, economics explains everything. How many kids you have, you know, what you like to eat, whether you exercise, like everything, like your preferences, it explains everything. So because it has this imperialistic tendency to go into sociology, to go into any social science, and there is this incredibly important event which takes place, the World War I, which takes place in the midst of the largest globalization that has ever existed in history up to that moment, and which has not been recaptured until about year 2000. So this event happens. So why wouldn't you have an economistic theory why this event has happened? But no, there is no theory. It just happens. Okay, well, there is a guy who assassinated another guy in Sarajevo, that's the theory. Well, that's that's ridiculous. And, and the reason why they don't have a theory, because the only reasonable theory is precisely the one that we just mentioned. It's very hard to explain why, in the peak of globalization, you would have, uh, the, the, the countries that were clearly politically opposed to each other, where we believed that with globalization and mutual trade, the interests would be so strong, as was actually, uh, Norman Angell's argument, that the interests would be so strong that we would never go to war, because we know that the war would be really bad for me and you. And it actually did happen. It was bad for me and you, and we knew that, and we still went to war. It was Europe, Europe committing suicide, effect. It was a suicide. And actually, they all knew that this would happen. Of course, they were like sort of telling people, we'll be back by Christmas, but that was like nonsense. They knew that would be a disastrous event, and it still happens. So you have to have a theory why an explanation why it happened. If your only explanation is that there are like accidental events left and right, this is not sufficient, because any accidental event has to be built upon something real, so that the big powers go and fight it out.

You said Norman Angell, but obviously that's also there in Adam Smith and David Ricardo. This idea that the more trade, the greater the, as we, as a leftist, you say, the greater dependence, the development of the forces of production would mean a less violent world, not a more violent world. No, no, it is true. But I would say with Adam Smith, I was, uh, I have this, how should I say? I think Adam Smith was much more nuanced, uh, uh, writer, and there is a beautiful paragraph that I think I quote, where Adam Smith says the following, and I will paraphrase it because he says it much better than I, but he says, yes, trade would actually, what trade will do, it would, I'm paraphrasing, it would develop to an equal measure all the trading nations, and the trading nations then would essentially have the same technological development and same power, and be they would be each afraid, they would be afraid of each other militarily, and that's what would keep the peace. So he has in that paragraph a view about trade being good for convergence, but he has a theory of balance of power, because he says it is the mutual, I think there is a quote, there is a mutual fear which would keep peace. Yeah, he says, inspiring mutual fear. So he's talking about, trade developing the, this, you know, the, the, the means of production, and that then leading to this kind of parity of military forces, which is kind of, you know, you're not just insinuating this, you're saying this, you know, the idea, I mean, Adam Smith, we like to think that Marx is smart, or Isaac Newton is smart. This guy was basically talking about mutually assured destruction in the, the 1770s or whatever it was. Yeah. Look, he, he was very nuanced. He was very smart. And actually, you can take this paragraph and apply to the US-China. You say, okay, what has happened? China has become technologically very sophisticated. It is actually leading in many areas, and it militarily is kind of matching the US. So you say, you know, it's the balance of power would keep peace. You know, okay, you know, I think actually it's quite reasonable to believe that that both sides would be afraid of each other, as Adam Smith says, and that would keep peace. Because he's very critical on Europe, in that same paragraph, he says that that the fact that Europeans develop so much ahead, faster than the others, allow them to, as he says, to commit, uh, multiple injustices against other people, because they were simply superior in terms of military force, and then superiority of military force came from much greater technological development. Yeah. He says the impunity of every sort of injustice in these remote countries. Yes. This is what's frustrating about Adam Smith. He's a very smart man. He says some things which we would consider socially progressive. Yeah. Uh, and yet he's been just co-opted by some of the worst people around. Oh, but you know, we should have talked about my visions of inequality, because many of the things come from the visions of inequality was studied of how inequality was was seen and studied by Smith, Ricardo, Marx, all the way to Kuznets. And I think actually Smith, and when you read Wealth of Nations, I think Smith is totally hijacked, because Smith is very critical about all organizations, including church. He's critical of government, but he's as much or more critical of associations of employers. He doesn't call them capitalists, of employers or masters, because they say they never, as you know, famous quote, they never meet together except to plot against the public interest. They should never be allowed to rule the government. They are people who actually get money through plunder. So he is very negative on that. But that part of Adam Smith has been taken out by Chicago, and they just focus on his critiques, right? Critiques of the government. So I think it has been, honestly, I think there has been a hijacking of Adam Smith.

Yeah, you can draw a straight line between what he's saying about cartels of employers and how and how they, you know, shaft workers. You can draw a straight line between that and then the points you're talking about with regards to China and political authority, and the idea that you should be able to insulate political decisions from the interests of, of, of, of economic elites. No, Smith is so clear. And actually, because I actually started really restudying Smith from the point of view of income distribution. No, he says the following also. He says, the only class whose incomes with development would go down are capitalists, are employers, because the rate of return on a more plentiful stock, which means more capital, would go down. And he says, consequently, this is the not the class whom, uh, uh, politicians should listen to, because their interest is not social interest. So you can absolutely draw the straight line, uh, in, uh, Smith's view, that government policy should be insulated from the bureaucratic interest, to use today's, uh, terminology. I, I just don't see how one can. I mean, one reads that, it's like sentence after sentence of a ducks. Mmm. I mean, even I think if you read the first page of Wealth of Nations, it talks about how innovation in the industrial process is often led by workers because they want to work less, and it's not actually led on by by technologists or by by capital. And I think that's just again, they kind of lost it.

My last question, because we're talking about capitalism, imperialism, China is now a much more assertive, powerful player than the USSR ever was. Are we now in the sort of foothills of of a geopolitical, political, and potentially even military conflict between the political West and China? Well, of course, when nobody knows. And I think actually China, let me just disagree on something. I think actually the USSR was more politically assertive than China, because the USSR had an ideology that was that you can pack together and sell it to Tanzania, to Algeria, to Vietnam, to many countries, uh, Angola, and so on. Uh, the problem, or maybe it's a good side, I'm not sure, but with China, China does not have a sort of a package. You know, the West, the political West has or had the Washington Consensus. It's a very simple package. You, you just go with this, like 10, 10 rules. You just go to any country, and you know, they are not meaningless rules. Some of them make sense, and you just have the rules. China doesn't have it. And I think, uh, the, why doesn't have it is because its own development was the result of many trials and errors and attempts, and actually very pragmatic in some sense. I've actually talked to people in, in Beijing about that. Said, you know, it, it seems to me, if you want to have an international influence, you have to create something that a guy with a suitcase from Beijing goes to Dar es Salaam and says, "Okay, this is what you should do." And they don't have it. So I think their international sort of, what the French call rayon d'influence, is limited. But inability to out of the China story to create a story like what should be done, because if you just go to countries and say, use your, there was like a story of that, use comparative advantage. Well, I am not sure what it means. So I, I think that they are, maybe they will try to do that. Maybe that's very difficult to do that. Maybe it's also possible that they are not interested, because China had, as you know, history where it was not particularly interested in sort of telling other countries what to do, but you know, they had a tributary system, and you could do whatever you want. I don't care. Uh, so I don't know what will happen. But I think that they have, they don't have a sort of 10 principles of economics that that they're like something that you can sell.

But do you think there's the possibility of conflict? Because, you know, both the United States and China want to be a world leader in AI, they want to capture global markets with regards to consumers for that stuff, they want to be able to get, you know, guarantee supplies of various critical materials. Or do you think that, you know, I'm, what I'm going to say is is very sort of, not how should I say, popular, but I think that the likelihood of conflict between the US and China is less with Trump than with other administrations. And I think for the following reason. I think that Trump is transactional. And I think that Trump's objective is essentially control of the Western Hemisphere. And I think that he would be quite willing to have China play a sort of hegemonic role in Asia. Uh, with, uh, people who are more, uh, focused on human rights and democracy and so on. Uh, the problem with China is that they see the regime as illegitimate. Uh, Trump doesn't see it as illegitimate because he doesn't care. But I think people who are actually for human rights and democracy see it, maybe self-servingly, because they want to annoy China. But they see it as an illegitimate regime. If you see somebody as illegitimate, then your relationship with with him is a little bit different. So those are the people that scare you the most in American public life. The people that talk about, you know, an autocratic international and, Oh, that's I think nonsense. Yeah. Are those the people that scare? They scare you more than Trump? Yeah. Yeah. I think actually, because they actually are people who lead you towards the war between so-called democracies and so-called autocracies by creating something which doesn't exist. This autocracy in, doesn't exist. You know, China and Russia currently have some interests, but they are like independent players. They are not players within sort of one sort of hegemonic or whatever centralized area. So they are actually, and, and they don't have, and actually if you look at India, obviously India is not autocratic, but India, well, does have some autocratic tendencies with Modi, but India has its own interests. And even Iran has no, so it's not really that I think that actually they are pushing in that direction for people to believe that there is some fundamental, uh, uh, sort of similarity of geopolitical strategy among these countries, and I don't think that that's.

We're going to leave it there, Branco. Okay. It's a fabulous book. Okay. Thank you very much. It, I think it's readable, isn't it? It's very fun to read, Branco. It's very fun to read. You should buy it now. Uh, thanks again for joining us. Thank you very much. Thanks a lot.