Transcript: The Great Global Transformation The Us China And The Remaking Of The World Economic Order

TITLE: The Great Global Transformation: The U.S., China, and the Remaking of the World Economic Order CHANNEL: CUNY Graduate Center DATE: 2026-05-28 ---TRANSCRIPT---

Hello, everybody, welcome. I’m Janet Gornick, I’m director of the Stone Center and professor of political science and sociology here at the Graduate Center at the City University of New York. I’m delighted that the Stone Center is a co-host of this evening’s event with the Graduate Center’s public programs. And I am introducing and welcome you on their behalf and on ours, and I’m very pleased to be introducing and also I’ll be moderating. So welcome to those of you here in the Elebash Recital Hall, and welcome to the large livestream audience as well. So, as most of you know, I hope all of you, tonight’s event is focused on a new book published in March by the University of Chicago Press, titled “The Great Global Transformation: The United States, China, and the Remaking of the World Order” by Branko Milanovic. So let me just tell you what’s gonna happen this evening. So, in just a few moments, Branko will come here, and he’s going to present the arc of the book in about 10 minutes, and then after that, our panelists are gonna come up on stage, and we’re going to have a conversation for about 40 minutes. So let me just say just a few words. We’re very pleased again to have the opportunity to feature this book, which many of us think is quite remarkable. The book presents an original argument, much of which you’re gonna hear about as the evening goes on. The main argument is that decades of neoliberalism have given conditions, have given rise to conditions that, in the end, catalyzed its demise. And Branko argues in essence that what’s happening in the world today is that the international component of neoliberalism is being abandoned. We see the rise of tariffs, increased barriers to movement of labor, and tightened borders. At the same time, he argues, domestically, neoliberal principles remain very much alive, as witnessed by increased within-country deregulation, reduced taxes on the rich, persistent preferential tax treatment of capital income over labor, and so forth. I think it’s a familiar story for many of you. But the interesting twist in his argument is that what we’re seeing now is we’re ending up with a version of neoliberalism that’s stripped of its international component. So, without further ado, it’s my pleasure to introduce our guests this evening. So tonight, we welcome to our stage, back to our stage, Qin Gao, professor of social policy and social work at Columbia University. She’s the founding director of Columbia’s China Center for Social Policy and a member of the National Committee on United States-China Relations. She’s a leading authority on poverty, inequality, and social policy in China, and among her work in this area is her 2017 book, “Welfare, Work, and Poverty: Social Assistance in China.” We’re also delighted to welcome Daniel Markovits, the Guido Calabresi Professor of Law at Yale Law School, and founding director of the Center for the Study of Private Law. He publishes widely and in a range of disciplines, including law, philosophy, and economics. His 2019 book, “The Meritocracy Trap,” places meritocracy at the center of rising economic inequality and social and political dysfunction. We’re also joined this evening by Adam Tooze. He’s the Kathryn and Shelby Cullom Davis Professor of History at Columbia University. He teaches and researches widely in the fields of 20th-century and contemporary history, with a special focus on economic history, spanning both sides of the Atlantic. And his most recent book, published in 2021, is “Shutdown: How Covid Shook the World Economy.” Last but not least, our headliner this evening is Branko Milanovic, who’s well known to many of you here. Following a long career as an economist at the World Bank, Branko came to the Graduate Center 13 years ago. He’s now a research professor at the Graduate Center and a senior scholar in the Stone Center, and his earlier books, three of which at least have been launched on this stage, include “The Haves and Have-Nots,” “Capitalism, Alone,” and “Visions of Inequality.” So, Branko, I turn the podium over to you.
Thank you very much, Janet. Of course it is, well, it is a pleasure to be here. I mean, I’m here anyway, you know, almost on all days, but just six floors higher than now. And I have a very easy duty of presenting you a book of about 300 pages, which covers the world history of the last 60 years in 10 minutes. So it will be done very quickly. And Janet has promised to keep me on track because last time, she told me I spoke for 16 minutes instead of 10. So I want to start with, of course, this is the way that the book looks. It actually has two editions, and the subtitle is a little bit different from the British edition. The British edition subtitle is “National Market Liberalism,” that’s more or less was what Janet already explained, what was the idea there, “In a Multipolar World.” The US title, you can read it here, is slightly different because it has explicitly China and the US in the subtitle. Now, very briefly, just to give to everybody here the idea of what is the structure of the book, the structure of the book is as follows. In the first chapter, which is entirely empirical, I look at two developments that are priority, in an abstract sense, may be seen as desirable developments. One is the level of nation-states, where you actually have greater similarities of mean incomes between the countries, and the other one is at the level of individual incomes, where you also have a decline of global inequality. Now, it so happens that both of them are driven by the change in Asia, where China, of course, plays the key role, but we should not forget other countries, like India, Indonesia, Vietnam, Bangladesh even more recently, that have had very strong rates of growth, and consequently, inequality if you measure it by the differences in average income between the countries or by GDP per capita and also if you measure it by looking at individual incomes has gone down. Now, these two things, and I often actually ask my students, are you in favor of countries having more similar GDP per capita? And of course, they all say yes. If you ask them are you in favor of lower global inequality? Likewise, they all agree. But the first sort of reduction of inequality between the countries has, in some sense, produced a conflict between China and the United States simply because another very large country, in this case, actually, in terms of population, almost four times as large, has now become much more powerful, and then has led to the geopolitical tensions and potential conflict. On the other hand, another desirable development, which with greater equality of incomes between individuals, has made the middle classes of the Western world, globally speaking, sort of less rich, and their position has declined in terms of ranking. So, in other words, I will show you a graph there, the many people from the rich countries who are not at the top of the income distributions in their own countries have actually seen their global position go down, and that’s something also which may not be welcomed by the people who actually are affected by that. So what they wanted to say, there is a contradiction between, on the one hand, in an abstract sense, good development and political repercussions of that development. And chapter two, I will say very quickly, is a theoretical chapter that looks at the fundamental issue whether trade and openness would generally tend to lead to peace or to war. And as you can imagine, there are different opinions there. There are people who actually believe that it would necessarily lead to peace because of interaction and mutual interdependence, and there are people who believe that it would lead to war because of imperial competition. As obviously you can see, that can be applied quite well. Either theory can be applied into some parts of the China-American relations between 1972 and today. The third chapter, and we will talk about that more today, is an empirical chapter that looks at the characteristics of the new elites both in China and the United States, and it is a chapter that draws on my previous work with several coauthors. And finally, chapter four defines what already Janet has mentioned, national market liberalism, and looks at people who do represent. They are mentioned. They are people whose name starts with T, X, and P, and T, X, and P are mentioned there, but really, the book is not about T, X, and P. The book is really about the topics that I just outlined, and to some extent, they are derivative from that. The first point that I want to make, which I already implied, is that essentially, when you look at the last 200 years, you can see that today’s moment as a sort of undoing of the what happened during the Industrial Revolution. What Industrial Revolution did was to launch first Britain, then later Western Europe, and finally, US and Japan on a path of high growth, whereas India and China stagnated. Now, that has been the case for a very long time, and this graph shows you the relative incomes of Indonesia, China, and India with respect to the UK. So at the time of before the Industrial Revolution, Asian countries had about a GDP per capita which was about 50% of the UK GDP per capita. As you see on this graph, by 1950, these three large Asian countries had a GDP per capita which was 5% of the British GDP per capita. So there was a significant gap in relative incomes, and that gap was driven, of course, by the success of Western countries. Now, after that period, and I’m starting from 1960s, and certainly with China, starting with 1980s, as you can see that there is a reversal now. So, in some sense, the distribution of economic activities within the Eurasian continent is returning to the relativities which existed prior to the Industrial Revolution, where, for example, the developed parts of China were at equal level of income as developed parts of Europe, like Italian city-states or cities in the Flanders and the Low Countries. So this is the graph which actually basically shows you this sort of U-turn. In other words, the recapture of the past position by large Asian countries. Now, that, of course, has had an impact also on individual incomes. And in this graph, on your left side is the position of the Chinese urban deciles, 10 deciles, in global income distribution. What it shows on the horizontal axis is the position domestically from one to 10, from the poorest decile to the richest, vertically, it shows your deposition in the global income distribution. Now, obviously, in 1988, which is actually the blue line, these deciles were, if you take the middle of decile, was at about the global median, so the global 50th percentile. And because China grew faster than the world, and then the rest of the world, then, of course, everybody went up, and then you notice that the line, the red line is above the blue line. So it is no surprise, everybody, if you ask this question, everybody will say yes, obviously, people in China are now better off compared to the world than they were in 1988. The line here, the other line, the current line is 2018, but actually, since the book was published, I have the line for 2023, which is even more dramatic. But what happens then to the people who were ahead of China when the Chinese and Indian population and Indonesian goes up? Then what happens is that the parts of the income distributions of these countries, the lower parts really go down because they’re being overtaken by people from China. And this is very nicely illustrated in the case of Italy here, because Italy did not grow in the last 30 years, and of course, the lower parts of the distribution really felt the China effect. They used to be at the 70th global percentile. Well, now, at the 55th percentile. And you find the same result, less dramatic result, for other countries like the US or Germany, or actually, even middle-income countries where that impact, like in Brazil, where the impact of China is not felt at the bottom of the income distribution of Brazil but in the middle, because the bottom of the Brazilian income distribution and the top are relatively unaffected by China. The poorest people in Brazil remain poorest whether China is growing or not, and the richest people in Brazil also remained among the richest whether China is growing or not, but the middle actually went down in the global income ranking. On the third chapter that I mentioned, where it talks about the elites, I will very briefly show you. This is a little bit complicated, but it looks at the US top decile, and actually, an empirical finding there which is quite new, is that the top US decile is increasingly composed of people who are among the richest capitalists and richest workers, and this is a new phenomenon because classical capitalism had actually among the richest people only capital owners, property owners, but now has people who are working as well, and who are also among the richest capitalists. And we will talk more about that later because I think this is a development that we see in other advanced countries as well, and to some extent, it represents a new capitalism, sort of a structure of capitalism that we have not seen previously. And then, we look at the new elite in China, and I would actually just like to point to two colors here. And this is the top decile, top 5% in China, and this is their composition of income. What part of that income comes from the state sector, and what part comes from the private sector? The blue color is the private sector, the red color is the state sector. What you notice there is a remarkable change that the very top, the elite of China, is now much more dependent on private sector incomes from the private companies and much less on state-owned companies or government officials or Communist Party officials. So there was really a dramatic change that took in China about 40 years, what I called here, so this is the intensive capitalization of China, and a similar development in the UK took more than 100 years because also, in the UK too, you had an increase in the share of capitalists both in terms of their numbers and in terms of their incomes. So this is sort of the new elite that we can sort of say exists in China. And finally, I end the book with this discussion that Janet has already mentioned of the national market liberalism and ideology that I proposed to call national market liberalism. That is, neoliberal but shorn or stripped of its international aspect. And I have to say, finishing this talk, that I was really in search of a good term for that, because I was very unhappy with really an increasing usage of post-neoliberalism. I mean, putting two words, post and neo, are very strange. On top of that, saying that something is post something else does not define that phenomenon. It just simply says that it took place after something ended. So I would urge you not to use that term, and if you don’t like my term, of course, you’re most welcome to find a better one. So thank you very much.
Great, thank you. Thank you, Branko, for getting us started. I’m just gonna say a few words, and then I’m gonna start to toss out some questions to the panel here. So, as I noted already, and Branko has mentioned just to sum it up, the book is framed around a set of consequential political and economic changes that have unfolded in recent decades, the economic and technological rise of Asia with a focus on China, the intensification of geopolitical competition, and the dramatic reshuffling of global income, and then Branko goes on to argue, as you’ve now already heard a couple of times, that these changes catalyzed this other larger set of changes, the decline of neoliberalism internationally, and certainly it’s with staying power, though, domestically, and this is what he terms the twinning of those two shifts as national market liberalism. The arguments has several components. For those of you who’ve read the book “The Rise of Asia,” very, I think, interesting discussion with a lot of interesting data on the development of new elites, of one particular type of elite in China, another in the US in particular, and then, of course, ending with this description of the new world order. So I’m hoping that we’re gonna get to spend some time talking about each of these. Let me start with a question about Asia, drawing heavily on what Branko has written, and I’ll, of course, focus on China. So he has argued, with a great deal of data in the book, that China’s economy has grown dramatically. He focuses on one particular, of course, important metric, GDP per capita, and explains that the gap in GDP per capita between the US and China has declined dramatically from 20-to-one 40 years ago to three-to-one today. But it’s also the case it will take a long time for that gap to close. At the same time, he argues that, despite falling fertility, China’s population is larger, and we expect it will continue to be larger for a long time, so the point is, his argument is, as a result, well, before China and the US, the GDP per capita gap reaches zero, China will be much more powerful than the US, nevertheless due to the big differential in size. So that’s the premise. My question is what is most important about China’s rise and about the rebalancing of China and the West, especially with the US? And I think I’m gonna toss this to you, Adam, to get started.
Thank you, yeah, it’s a real pleasure to be here.
Thank you very much.
Thank you, Branko, for giving us the opportunity to come together around this fascinating book. I mean, one of the things I love about Branko’s work is that he has an incredible knack for spotting, in fact, you know, in technical terms, relatively straightforward and simple ways of describing absolutely radical historical change. And he’s a real magician of what you might call kind of continuous quantitative series. You know, the father of the elephant curve, we saw them earlier on. And one of my absolutely favorite moments in the book goes directly to your question, which is where you develop that, you could call it like a throw weight measure of the impetus, the momentum of Chinese economic growth compared to all previous growth episodes ‘cause that’s one of the things that we struggle to convey when we use per capita numbers, for instance, or relative GDP levels. And instead, Branko devises what I think is the first time I’ve ever seen it, you multiply the population of China by the growth rate sustained over 40 years, and you end up with this, well, it’s like 40 billion human years of growthy something or other, and then you compare that with all previous episodes of growth, say Japan, which China is commonly compared to. And often, people dismiss China’s exceptionality by saying, well, Japan grew fast too. And the obvious point is when you multiply Japan’s population by its somewhat shorter period of boom and its slightly slower rate of growth is they end up, is it 1/20 as large as China? And if you look at America’s Gilded Age growth, it’s another step down. And so, you know, in this combination that you’re pointing us to of population growth rate and duration, we see something utterly unprecedented in human history, and that’s what we’re dealing with. And the fact that the West and the United States, in particular, with its own highly exceptionalist discourse about its place in modern history, has a problem when it’s confronted with a shock like that, I think, is, when you give us quantitative tools, you more than anyone else, far more than, say, Piketty does, your work on global inequality has really given us the map of how that has impacted. One of the things that I think is almost by necessity underplayed given this methodology, and it only goes in your direction, so it’s not a criticism, it would just be to underline the force of this, are the less the dimensions of change which are not continuous, which are not easily quantified, and these, I think, amplify the sense in which America is freaked out in the current moment. Because what I think has sort of, we’ve been through phases of China concern, some is true growth orientated, some is to do with the China shock in American labor markets, then we have the classic Pentagon missile gap, military spending type numbers. But I think over the last, I wonder whether you would agree, over the last five to six years, the discourse has shifted to this even more ineffable kind of domain, which is tech leadership. And tech leadership is not a continuous variable. It’s not easily measured in the sort of metrics, which Branko is such a genius of, but it’s a sort of quantity into quality type argument, right? At some point, this Chinese massive momentum tips into some qualitative differences which really mark the moment where China shifts from being a massive, huge force of labor inserted into global supply chains the West built and which China upheaves and dynamizes to the world that we’re currently in, quite short, I think, it’s really the last five years in which China is, in fact, redefining those supply chains on its own terms. And green energy is the most standout one of those, but tech is another. And that, to my mind, is as it were what your book offers as a kind of frame for understanding, but constitutes, I think, a further step, to answer your question, of why this threat is so spectacular, ‘cause it is quantity into quality at this point.
Qin or Daniel, wanna respond?
I can add a point. Congratulations on the amazing book, really fascinating. So I want to echo Adam’s point, the qualitative change of this major shift. So I lived through this China’s transformation period. I think, fundamentally, the Chinese people had a taste of what it means to play on the world stage. They have whetted their appetite, so it’s the eagerness to innovate, to claim their voice in the global stage. I think that would be the engine that will push forward this leading position in economics, in other tech innovation, other areas. I think that’s a force we have to look at and really pay attention to.
Thanks, let me just also say thanks. Thank you for having me here. Thanks, Branko. A lotta people write books that have something good in them. This is just an absolutely excellent book, and everybody should read it. Really, everybody should read it. I think the thing that I’m inclined to add, it follows actually from what you’ve just said, so Adam began by pointing out that there’s this one unprecedented thing happening in the rise of China, which is that it is just a quantitative mass of economic production that is unprecedented in the history of human civilization. Another thing that’s going on that I think is highly relevant to particularly US-China relations over the present and the foreseeable future is another way in which this is unprecedented is in the US or, broadly speaking, the North Atlantic world and China, we have two cultures, each of which can credibly claim to be the metropole in millennium-scale human civilization and to view the other as provincial. And I can’t actually think of another instance of geopolitical competition between two cultures which are in their long genealogical structures as separate from each other and which can each credibly claim to be the metropole, and that produces, I think, misunderstandings on both sides, apart from the material forces that are properly described here. And I’m just curious, Branko, how you think about interacting these kinds of cultural and historical and genealogical forces with just the bulk of the numbers that you’re laying out?
Well, I will be very brief, actually. I really appreciate very much the comments. As Adam said, I am, of course, more at ease with quantitative parts, you know? When it comes to, but it’s true, as Daniel said, essentially, we are dealing, and I think it was not appreciated very much by our Eurocentric education, including my own, we’re dealing with two fundamental historical lineages, which, in the Western case, go to Greece and actually go to Egypt, and in the Chinese case, go equally long into a different lineage of which we knew. Well, we knew something, but we knew very little. So, in that sense, it is I think true that we have never had in history of the world because the world was not unified. We did not have this issue. The world was segmented. And secondly, just to repeat actually what you guys were saying before, we really have to be aware, and I think that’s where the numbers are useful, to be aware that what we are now witnessing, that we’re actually participating in, is a historical change with no precedent because we never had more than a billion people growing for 40 years at 9%. It just did not happen. And so, that was something which I think is extraordinarily important, and that other episodes which are very dramatic and, indeed, extraordinarily important, like Japan, like Germany after World War II, like Italy after World War II, like the United States, of course, like British Industrial Revolution are, by scale, smaller. So that was, of course, one of the points.
Thank you, thank you very much. I wanna second that I think this is a really excellent book and very readable. And just to underscore Adam’s point, you know, we hear this every day that China’s growing rapidly, but the magnitude of the growth is hard to grasp, and I think that Branko has really shed a light on that. And I would agree, Adam, with your point, though, that there are also, I guess, inflection points where the qualitative relationships have just, or just completely have shifted. Okay, let me move on. There’s a chapter in the book on the new elites with a section on the new elites in the United States and the new elites or different face of elites in China. So I wanna focus on the China elite for now. We’ll come back to the US in just a moment. Both China and the US in recent decades, especially, say, in the last 40 years, have seen sharply rising inequality, something that we’ve certainly talked about many times in the Stone Center and from this stage. In China, we’ve seen one part of the increasing inequality is a rise at the top. We’ve seen a proliferation of billionaires, but what Branko writes about is the face of the elite, and I think it’s quite surprising that the new elite, those at the top of the income distribution, combine two characteristics. They’re capitalists in this nominally socialist country. You can say more about that in a moment. And they’re Communist Party members, and it’s the intersection of the two that’s very interesting, and there’s also a payoff, a dividend to being a Communist Party member specifically for these capitalists at the top. This portrait of change and of the rising top and with a new face in China has also been extended, or something else that’s been happening is a high-profile anti-corruption campaign, which Branko has also written about quite a bit, both academic and popular media. So this is a question I wanna ask, as we hear a great deal, of course, in the US and in the West about disenchantment with the elites and the well-to-do, and it’s sort of understood to be true in the US without question. So, my question, I wanna start with you, Qin, is do we see the same in China, this disenchantment, you know, from the middle class and the working class there, as we say, at least households further down in the income distribution. Do we see the same resentment at the top? And then hand in hand with that, let me ask, and Branko makes, I think, a compelling argument that Xi Jinping’s anti-corruption campaign is or may be seen as a sort of preemptive response to that disenchantment as a way to stave off the political turbulence that we might expect from the rising top.
Thank you for the question. Corruption is bad everywhere, but it’s so intertwined in the Chinese context between economic and the political forces, as you documented in the book. So, in China, I think the new elite was created by the education force, so the gaokao reforms, higher education reforms, the economic forces, economic reforms, and opening up, but also the political elites using their power to channel resources and gain economically to get ahead. So it’s the combination of those forces that created these elites. We observed the rapidly rising income inequality in China, and hidden there is the profile of the group you described. It’s actually more than that. The Chinese inequality, there are groups who are the hidden top incomes, which we don’t get to capture in the household income surveys. So the actual inequality, or the actual elites are actually more elite than we know, and they probably have party connections. So I think for a long period during China’s sustained rapid economic development, a lot of people were okay because everybody was getting ahead. Their incomes were being increased, both at their local level and globally they were faring better, from your analysis too. But then, when the inequality became too severe, when people saw how extreme some elites are living in terms of the living standard and the way they deal with situations, they had access, I think people started to feel this is unfair. So now, post-COVID, it’s a new era because the economic growth has slowed down, which you didn’t get to capture in the book yet. So a lot of people are now saying that, well, everybody, including some of the elites, are now suffering somewhat, so it’s the system that may not be doing well, not be serving this engine for people to get ahead anymore. Interestingly, for corruption, I think there’s the petty corruption in Chinese anti-corruption campaigns called the flies. There’s also the major corruptions, the tigers. I think there’s also the even bigger ones, maybe lions or some other big animals. So you capture some of those corruption cases, but there are some that don’t get captured, those are the real elites with party connections. So I heard anecdotes that some of the corruption actually facilitated economic opportunities or activities for people to get ahead. For people who don’t have those kind of closed party ties or personal connections, corruption or paying can get them ahead. Otherwise, now, they don’t have those opportunities. So it’s an absurd way of looking at corruption in this way. In the US, we have lobbyists, we have political campaign contributions. That’s not referred to as corruption. But in the Chinese case, you need some kind of channel to engage in some economic opportunities that way. So I will stop here and see what others have to say, yeah.
I wanted to say that that too is one of the bits I really love about this book. I know it builds on earlier research, but what Branko and his collaborators did was to evaluate systematically the evidence produced by anti-corruption cases.
Yeah.
And so the historian in me is really touched by this because this is the sorta thing that historians love to do, and you suddenly get this, of course, we never know whether it’s a representative cross section, but at least it gives us some insights into the multiples. And one of the reasons I like it also is that you turn, if you like, to methodological or even epistemological advantage, you know, these moments of contest and struggle within the elite. And I really like the place that you ended up because I do think, as external observers to the Chinese scene, there is a real pitfall, there’s a real potential trap in applying, you know, simply taking whatever category the CPC is using, they’re calling it corruption, then sort of transplanting that into our preconceptions and prejudices about how authoritarian regimes work, all the better, of course, to contrast our own immaculate system, which is, you know, perish the thought, you know, it doesn’t operate and doesn’t ask the key question, which is what does this do, what does this actually do? And what function does it perform? What consequences does it have for growth? There’s an amazing episode in the early 20th century where Max Weber and his brother Alfred go to the Verein fur Socialpolitik, I think it’s in like meeting of 1908 or 1909, and scandalize their German colleagues by asking the question, what’s wrong with corruption? Can we actually like stand back and actually explain to ourself what’s wrong? Now, there are, of course, answers to that. You know, the person that has to pay a teacher to get a decent, you know, education, that has to bribe their way into hospital, this is where function in hospital, it’s profoundly dysfunctional. But at the big picture level you’re looking at, one has to ask, right, what damage does this do or what effects does it produce?
Corruption’s an incredibly complicated concept, and this came out in what you were saying, it has a narrow meaning, which is something that is criminally illegal, a violation of some criminal set of prohibitions on how you manipulate others and get ahead. And then, it has a broader meaning, which is activity that undermines the underlying true purpose of some sort of sphere of life. And one of the things that happens is that systems that focus on corruption in the narrow sense can use that focus to disguise corruption in the broader sense. So, you know, in the Varsity Blues scandal in US university admissions, people got all aghast ‘cause somebody was bribing their way in, but are totally indifferent to alumni preferences or donors or the fact that private tuition gets people in, right? In the sense, Adam, you’re talking about, you know, one of the great corruptions of US American life right now is that you have to pay for healthcare. There’s a sense in which, fundamentally, the principle of distribution of healthcare is, as the philosopher Bernard Williams once said, ill health, and yet we have a system in which the fundamental principle of distribution is the ability to pay, right? And so, you focus on the narrow corruption to disguise or distract attention from the broader corruption. And one of the things that I heard you saying is that there is something of that may be going on in China now too, that, as an outsider, I can’t see in the clear way in which you laid it out.
Thank you, I’m gonna just actually take a moment and digress, Branko, to ask you to say a thing or two. Something I realize we haven’t told the audience is where these corruption data came from, which is really fascinating. So first of all, there are publicly accessible data from China on the corruption cases. I realize we’re speaking as if everyone might know that, and I learned that, of course, from you, Branko. The data include those convicted, only those convicted. So just to close on this, say a little bit about the data. The production in these data is a political act in and of itself, it seems. And I would also add, just to tie this back, and I think it relates a little bit, Qin, to your comment, in work that Branko has published earlier, he also shows that this is always the astonishing face of the magnitude of everything in China, the 3.2 million convictions for corruption are people who then presumably were removed from the economy had so much money that it affected the level of inequality.
Yeah, it did, actually. But let me say a few words about the data. Many people actually are unhappy with the Chinese data, and we can spend, actually, Janet and I can spend hours talking about that. But there are certain advantages, there are two advantages that you might have even sort of guessed looking at one slide from, you know, about the elite in China, that the Chinese data, I think, driven by essentially Marxist approach, would give you for individuals, any individual in the data set, they would give you their social position. So you had small-scale capitalist, large-scale capitalist, workers, bureaucrat, members of the bureaucratic apparatus within CPC, members of the bureaucratic apparatus within government. So you actually have more information than you would have it in an equivalent American or Western survey, so we have used that. Now, on the corruption data, that was quite interesting. It was with two Chinese coauthors. We have actually basically used what Central Committee Disciplinary Commission has published on their website. It’s about 900, 950 cases of, of course, the people who have been accused and found guilty because it’s 100% of corruption. And then one of the quarters also got from the provincial data something about 100 other cases that we could put together. Now, what was interesting is not only the amounts of corruption, which are huge, but we also work with household surveys. So the information about each corrupt person is very detailed, including age, gender, number of years of education, the position that he, actually, it’s almost all men, that they had in whatever they were found guilty, and CPC membership. Because, mind you, this is only members of the Communist Party that are being actually investigated by the Central Committee Disciplinary Commission. So then, we took these guys and put them in the household surveys of China and said what will be the estimated income? And that was the interesting part. So I get for your estimated income, for my estimated income 100, and the accusation, which carries, let’s suppose over 15 years of stealing, is enormous, it’s actually the median number is I think 12. So it is actually my sort of embezzled or illegal money is 12 times higher than my estimated income, so that was really a striking number. And then, of course, what happens is there’s these people who are there, they’re mostly tigers, they’re in the top 5%, but when you add that money, they all become top 1%, way top 1%. So I think that was the part of the work that we did, and I think it was interesting. And I have to say, when I went to China last September, I had a meeting at the state council, and they knew about this paper because we used their data, and they said somewhat jokingly, they said to me, “We have got the new data for 2022 and 2024, so do you want to use it?” (panelists and audience laughing)
Surprised, okay, I’m gonna turn our attention to the US, and Dan, you’ve already sort of tipped us towards this discussion. So the US, of course, has also seen a period of rising inequality, which I think we’ve all heard about, and Branko writes a lot here and earlier about a new kind of elite, which he refers to as the homoploutic elite, a word, I think, Branko, if I’m correct, that you invented. My Word spellchecker didn’t like it today when I was writing some notes. (audience laughing) So who are the homoploutic? You’ve heard this already, but these are people who combine high levels of capital income with high levels of labor income, and what, Branko, you’ve argued here and earlier, of course, that this is somewhat new and different from classical capitalism, where we understood the rich to be primarily receiving income from property. Okay, so today, we have this homoploutic group. So we think about, say, doctors or lawyers who become rich from their work. In the old days, they would rarely have accumulated enough wealth to end up at the very top. But now, this is changing, and we see people with very high levels of both of these types of income. Okay, so coming to the punchline here, these capital-rich and skill-rich elites, Branko argues, see their positions as fully merited, partly because they work very hard, they work long hours, and therefore also feel that it’s fair to pass their resources on to their children. So, and they often feel those who aren’t as successful as they, it’s some fault of their own. So does this portrayal of the US elite sound reasonable to you, and do you think it might have, of course, in turn, intensified the dissatisfaction and resentment among the others? And I wanna turn this to you, Daniel, since you’ve written and thought so much about the meritocracy.
Yeah, sure, thanks. Just three quick thoughts, and some of them are questions for you, Branko. So, so the homoploutia idea, which is Branko’s, is fantastic and brilliant, and it’s an extremely striking development. It’s worth pointing out, the most striking development in it is the rise of high labor incomes. So it’s remarkable that some of these people also have high capital incomes, but strikingly, before 1900 or so, nobody had high labor incomes. You know, in 1900, the highest paid non-entrepreneurial job in the world was an English or Scandinavian elite civil servant who made roughly 10 times the median income in their countries, whereas in this city today, there are thousands of people whose non-entrepreneurial labor income, these are people who work in finance and law predominantly, but some also in management, is 1,000 times the median income. And there are tens of thousands of people whose non-entrepreneurial labor income is 100 times the median income. And just to be sort of crisp about this, the present discounted value of a Harvard Law School degree in the hands of somebody who just wants to use it to make money is probably about $100 million. And so, the question part for you about this, Branko, is, for the Chinese version of this, is it non-entrepreneurial labor income, or is it more likely entrepreneurial labor income? And the reason why that’s extremely important is that one of the mechanisms of resentment that the rest of society, particularly in the rich countries of the West, feels against this elite is not just that they’re rich, not just that they have labor income and feel that they deserve it, but that it’s non-entrepreneurial labor income, and that’s partly because there’s a broad ideology that entrepreneurs do well by doing good, and that there are positive externalities to entrepreneurial effort. It’s also because it’s the non-entrepreneurial laboring elite that, you know, has the annoyingness of having degrees and being seated inside of administrative structures that lord it over others. And so, so one large question for you, Branko, is how that looks in China. And there are other things I wanna say, but let me just stop there and just pose the question.
Since you directly posed it to me, I would actually, well, answer it directly. I don’t know. Because when we did, actually, China doesn’t play that much of a role in this because first of all, we don’t have the data that we have in the United States, where we have actually data from 1960s. And what is remarkable in this data is that you have among the top an increasing percentage of people who, as Daniel said, are both rich in terms of capital income, which means they are big property owners, and they are also very rich in terms of their labor income. And this what they called it is real, I mean, called it homoploutia from the Greek, actually. And I checked with my Greek friends, they said, well, it does seem, it makes sense. Call it whatever you want. But it means like same wealth. In other words, they are wealthy both in skills that they have, which means education, as you, Daniel, wrote actually in “Meritocracy Trap,” actually, when you said that the investment in kids’ education comes out to like, you know, $10 million, essentially. So they are skill-rich, and they are also property-rich, and we see them in China as well. But our emphasis actually in a different paper was on China’s capital incomes alone, which is very interesting because these capital incomes have really increased very significantly.
Are those capital incomes entrepreneurial capital incomes?
Well, you know,-
‘Cause some of them are labor incomes in some sense.
in household surveys, we basically treat them, it’s called business income, so it’s obviously the two of them, but we treat it as capital income.
Do you think there’s a kind of interesting effect here on the elephant curve, the famous curve which shows the impact on the American lower middle class, of the emergence of the Asian middle class? Is there a reverse flow at the very top end of the income distribution? When we’re asking whether New York-style elites exist in China, this is not an abstract question. Just go to Shanghai and ask what elite investment bankers and lawyers in Shanghai index their incomes against, and it isn’t local wages, it’s incomes here, right? Because it’s a single labor market for lawyers and investment bankers, and New York sets the standard at the very top end. I remember us actually discussing this years ago in Yale that the entire salary structure of the globally mobile, not 1%, it’s much smaller than that, the globally mobile top 200,000, shall we say, uber highly paid professionals is set by the bonkers salaries paid in the United States, and in finance and in law, that’s in this city, and in tech, it’s in San Francisco, and that sets the benchmark for everything else. And one of the horrifying things that Xi Jinping has done is to set a cap at like a measly, I think it’s like $300,000 that investment bankers in Shanghai are allowed to earn. And this is devastating, obviously, to people who were basically on the mark of its kind of, you know, fully following through on your logic, which requires escalation to seven figures.
We’re talking on the Chinese elite, a lot about the capital income, but we haven’t focused that much on the Communist Party membership, which is one of the fascinating components of your story, especially the new form of intersectionality. The intersection of the two of them, can you just say a little bit about that? And coming back to some of Daniel’s points, as I mentioned to you earlier, Branko, you seem to be making an analogy between Communist Party membership with a credentialing function and going to Harvard or Yale, or, you know, in other words, that there was a sort of analogy you were making between the elite education in the US and the Communist Party membership in China, if I’m correct.
I think that I draw on Daniel’s beautiful book, “The Meritocracy Trap,” a lot. Basically, that chapter is a empirical chapter. But in order for that chapter to have a value, you have to put it in a social context, and what Daniel calls these new elites, to some extent, have old values, and the old values come from their feeling that they actually deserve the place where they are, and they try actually to ignore very much the background that they had, the, of course, inheritance and other things, and capital incomes. So it’s really work, work, work. So to repose to Qin a question, this is not actually a decadent elite, this is a hardworking elite. How would you define the Chinese elite, is it a decadent elite or a hardworking elite? (audience laughing)
Well, my specialty is poverty. Now you’re making me, (audience laughing) I have to do more field studies with the elite elite. It’s very fascinating. I think in China’s rapid growth period, everybody was looking to get ahead, so people look up to the elites and try to mimic their lifestyles. So now it’s different. I think everyone wants to claim they deserve what they’ve got and want to kind of follow this middle-class, hardworking culture. So I think that’s probably a return in more recent years. There’s also the information world we’re in, everything. In China, it’s hard to have privacy, especially for the elites. They probably should be very careful. But I think if somebody’s information gets exposed, people would have a lot of resentment. So I think people want to really showcase how much they work for it, they deserve it. So that’s another kind of context, both culturally and politically in that society. Yeah, I think more research.
Qin, let me ask you a question now that you just reminded me. So one thing I’ve learned, many of us have learned, from your work is the extraordinary reduction in poverty in China, the near eradication of poverty, which we don’t really have time to talk about too much here, but I’m assuming that this is part of the story, that it also is part of the tamping down on the resentment of the very wealthy with this extraordinary rise of the floor in China, which is also not seen in any other, is certainly not seen in India and in other comparable countries. So there’s a political component, of course, to the rising floor as well, which has been as dramatic as the rising top, I would say.
Janet, can I take over for a second your role?
You can take over.
Because I think we have discussed really the elite, the new American elite or Chinese elite. Now, let me turn to Adam because of his historical background. How would you think in those terms of, let’s suppose the European elites before World War I?
No, I was sitting here and thinking, I mean, I think the real problem, and I’m gonna agree with you, we need more research, ‘cause the risks of romanticization are just so extreme here, and the risks of falling prey to various types of self-presentation. I mean, what’s clearly true is that the extremely rich in China live in a fishbowl of intense public attention, social media attention, gossip, and party CPC supervision, surveillance, and due to capital controls, you can’t get your wealth out.
I think there are two places we can do this elite research to study the Chinese elite. One is New York. A lot of them come here or have homes here. The other is the elite US universities.
I know now we’ve all heard this several times, but there’s a really just remarkably sort of elegant thesis underlying the book, which is about the decline of global neoliberalism. And, you know, we’ve all were watching that. I think even more intensified, Branko’s, than when the book went to press with all, you know, the requisite components of sort of breaking down all the openness that we associate with neoliberal globalism and then the reverse in countries. So I wanna ask the three of you, are you persuaded by this rather, I guess, sort of, Adam, the way you sort of describe Branko’s work, which is extraordinarily complex and ending up with a really simple and elegant story. So are you persuaded, is it overstated? Do you believe that this is a new phenomenon, the decline of global neoliberalism and the rise of intensified? And I’m gonna ask you all to give it a minute each.
I get stuck to tell Branko whether I’m convinced by his final punchline. Let me put it this way, I think that, I mean, one of the things I really love about Branko’s work is he’s looking for the possibility of generalization, and it’s very compelling, and I find that impulse highly sympathetic, and I think he somewhat overforces that argument at the end. And then, in fact, in the delivery of the three, because it’s really one chapter which claims to establish parallelism, and in fact, gives you three separate accounts, one of the US, one of China, and then a kind of more impressionistic account of Russia, and that rescues it for me, because in your separate accounts of the US and China, you don’t actually force them into a parallel schema. And the single thing that really stood out for me was the way in which, and, you know, Branko and I have a fascination, shall we say, with the European left and communism and its legacies in common, you because of your background from Serbia and Yugoslavia, and mine because of mine in Western Europe. And what I find really compelling was the contrast between what could only after all be described as the degeneration of the American elite system in its current moment, and it goes beyond the corruption to new levels under Trump. And this very powerful way in which you single out Xi Jinping’s preoccupation with what he calls historical nihilism, which is a weapon against anyone who deviates from the party line. But you also give it a substance in the sense that, for you, the CPC project and the Xi Jinping project has at least, and you don’t force the substance, but inform the effort by the leadership of the party to impose a project, a meaning, a sense of purpose on Chinese politics makes it different from that of the United States, and I think you also would say different from Putin’s Russia.
[Branko Milanovic] Right.
And that, I think, that’s where you go to the qualitative difference, you know, which I think is crucial to understand. And I think that is the key term, that is the term I would single out as well, that I would single out the same passage from the famous secret speech he gave, where he says if you want to understand the collapse of the Soviet Union, it goes all the way back to Khrushchev. It goes back to the moment where they denied the Stalinist legacy, where they denied their own history and began to consume themselves in a form of self-criticism that, in the end, voided the whole project. And it’s an incredibly strong assertion, for an illiberal, wholly unpalatable, but I think it’s key to understanding what Xi Jinping is about.
Actually, Janet, your question is my question to Branko. So when do you think the nations will abandon neoliberalism? Because you’re saying it’s still staying, and we see different movements, different players, but do you see it turn at some point?
Well, first, I think that actually we would all agree that the situation today is different from the situation 10 years ago. I think there is like no doubt about that. So my argument was that, essentially, we have now entered a new world. This new world, I tried to define it. I was thinking, how do we define this new world? As I said before, I really hate this post-neoliberalism for many reasons. And I thought, actually, what we definitely see, we see a return to mercantilist policies, and not only the US. We see it actually also China using it, and we see other countries. You know, so the use of economic coercion has become such an everyday event that nobody even pays attention anymore. You put sanctions that the US started in a big way, but everybody’s now doing it. So whoever you don’t like, you just put a sanction, two people, five people, this company, that company, secondary sanction, tertiary sanctions, everything, and this was really unthinkable even like 10 or 15 years ago. And then, of course, you have to rephrase, but this is kind of a blase to, I mean, sort of try to mention because everybody knows it. And then, on top of that, you have real impediments to migration, which are much more severe than they used to be. So there is a clear change there. So I thought, okay, so let’s forget about the international aspect. We are going back to mercantilist policies, but domestically, we do not see, I mean, a huge change. And there, of course, I can be challenged by people telling me, okay, you have industrial policies, that’s new. But in the other aspects, like deregulation, what Trump is doing, what Macron is doing, is deregulation. It’s like really neoliberalism of the bygone era. So when I combine these two things, I say, okay, there is neoliberalistic domestic policy and mercantilist policy internationally, so that’s where the idea comes from. And when some people tell me, and actually, I write about it, liberalism is a cosmopolitan ideology, but then I said, look, there is another ideology which was socialism. But if you put the prefix national before, well, you get something else, and here, we get also something.
It is my sad duty to bring us to a close. Branko, thank you. Adam, Qin, Daniel, thank you so much. (audience applauding)