The Great Global Transformation: The U.S., China, and the Remaking of the World Economic Order

ELI5 / TLDR

Economist Branko Milanovic launches his new book and argues that the era of open-borders, free-trade globalization is quietly ending. Here is his twist: it is dying because it worked. Letting trade and money flow freely lifted Asia (especially China) so high that it scared the rich countries, who are now slamming the doors shut abroad while keeping the same low-tax, deregulated rules at home. He calls the result “national market liberalism” — capitalism for me, walls for thee. A panel of heavyweights (Adam Tooze, Daniel Markovits, Qin Gao) then pokes at the elites this new world has produced on both sides.

The Full Story

Globalization succeeded, and that is the problem

Milanovic starts with two things almost everyone says they want. First, poor countries catching up to rich ones — more equal incomes between nations. Second, less inequality between individuals across the whole planet. Both have happened over the last 40 years. And both, he says, were driven almost entirely by Asia — China above all, but also India, Indonesia, Vietnam, Bangladesh.

So why is the world tense rather than celebrating? Because these two good things came with a sting.

“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… But the first sort of reduction of inequality between the countries has, in some sense, produced a conflict between China and the United States.”

When a country of 1.4 billion people catches up, it does not just get richer — it gets powerful, and that rattles the incumbent superpower. That is point one. Point two is subtler. When hundreds of millions of Chinese and Indians climb the global income ladder, somebody else slides down the rankings. The people who slid were the lower-middle classes of the rich West. They did not necessarily get poorer in absolute terms, but in global standing they dropped. An ordinary Italian who used to sit at the 70th percentile of world income now sits around the 55th — overtaken by Chinese workers. Imagine a stadium where everyone keeps their seat but a huge crowd walks in front of you; you have not moved, yet your view is worse. That quiet demotion, Milanovic argues, is the resentment fuelling Western politics today.

A 200-year U-turn

Zoom out two centuries. Before the Industrial Revolution, Asian economies ran at roughly half the income level of Britain. By 1950, after the West industrialized and Asia stagnated, that had collapsed to 5%. The gap was enormous. What we are living through now, Milanovic says, is the reversal — Asia clawing back the position it held before 1800, when the rich parts of China matched the Italian city-states or the trading towns of Flanders.

Adam Tooze seized on Milanovic’s tool for measuring the sheer scale of this. Take China’s population, multiply by its growth rate, multiply by 40 years of duration. You get something no prior boom comes close to.

“We never had more than a billion people growing for 40 years at 9%. It just did not happen.”

Japan’s miracle? Maybe one-twentieth the size. America’s Gilded Age? Smaller still. Tooze added that the worry has now mutated from “cheap Chinese labor” to “Chinese tech leadership” — a shift from quantity to quality, most visible in green energy, where China now sets the terms of the supply chains the West originally built. Daniel Markovits piled on a third point: this is the first time two civilizations that each genuinely see themselves as the center of the world — and the other as a province — are colliding head-on. The misunderstandings run deep.

Two new elites

The middle chapters are about who sits at the top in each country — and the surprise is that the answer is new in both.

In the US, Milanovic coined a word: homoploutia (Greek for “same wealth”). Classically, the rich were rich from property — they owned things. Today’s American super-rich increasingly earn huge labor income and huge capital income at once. Markovits drove the point home with a number:

“Before 1900 or so, nobody had high labor incomes… in this city today, there are thousands of people whose non-entrepreneurial labor income — these are people who work in finance and law predominantly — is 1,000 times the median income.”

A Harvard Law degree, used purely to make money, is worth roughly $100 million in lifetime earnings. And here is the political poison: these people believe they fully earned it. They work brutal hours, so they feel their wealth is merited — and that passing it to their kids is fair, and that those who fell behind have only themselves to blame. That is the meritocracy trap Markovits wrote a book about.

China’s elite has its own twist. The people at the very top are simultaneously capitalists (in a nominally socialist state) and Communist Party members — and being a Party member pays a measurable bonus on top of the business income. The composition flipped within 40 years from state-sector income to private-sector income, a “capitalization” that took Britain over a century. Milanovic half-jokingly framed Party membership as China’s version of a Harvard credential — the stamp that admits you to the elite.

The corruption data nobody expected to exist

A genuinely fascinating tangent: China publishes detailed records of convicted corruption cases through its Central Committee Disciplinary Commission — name, age, education, exact position, Party status. Milanovic and his coauthors took ~900 cases, dropped each person into household income surveys to estimate their legitimate income, then compared that to the amounts they had embezzled.

“The accusation, which carries… over 15 years of stealing, is enormous. The median number is, I think, 12. So it is actually… 12 times higher than my estimated income.”

These “tigers” sat in the top 5% legitimately; their stolen money vaulted them deep into the top 1%. So much wealth was involved that pulling 3.2 million convicted people out of the economy actually moved the national inequality numbers. Qin Gao added the uncomfortable nuance: the truly connected elites likely never show up in these cases at all, and in a system without lobbying or legal campaign donations, “corruption” sometimes functioned as the only on-ramp for outsiders to access economic opportunity. Markovits generalized it: every system attacks narrow (illegal) corruption loudly partly to distract from broad corruption — like US college admissions cracking down on bribery while shrugging at legacy and donor preferences, or healthcare distributed by ability to pay rather than need.

National market liberalism

The punchline. Milanovic dislikes the lazy term “post-neoliberalism” (“post and neo are very strange… it just says something took place after something ended”). His own label: neoliberalism stripped of its international half.

“There is neoliberalistic domestic policy and mercantilist policy internationally, so that’s where the idea comes from.”

Abroad: tariffs, sanctions as casual everyday tools, walls against migration, a return to mercantilism — and not just from Trump’s America, but China and others too. At home: the old neoliberal playbook continues — deregulation (Trump and Macron), low taxes on capital. Just as “socialism” becomes something darker when you bolt “national” in front of it, so does liberalism.

Tooze offered a partial pushback: the book’s elegance slightly overforces a parallel between the US, China, and Russia. He found the separate accounts more convincing than the unified schema — particularly Milanovic’s contrast between a degenerating American elite and Xi Jinping’s insistence on “historical nihilism,” Xi’s belief that the USSR collapsed the moment Khrushchev denied the Stalinist past and let the project consume itself in self-criticism. Illiberal and unpalatable, Tooze said — but the key to understanding what Xi is actually trying to do.

Key Takeaways

Global inequality fell over 40 years almost entirely because of Asia’s rise; the same process triggered US–China rivalry and Western middle-class resentment.
People can drop in global income rank without losing absolute income — a typical Italian fell from the 70th to the 55th world percentile as Asia rose.
China’s growth is unprecedented in scale: ~1 billion+ people growing ~9% for 40 years dwarfs Japan’s or America’s historic booms by an order of magnitude or more.
The economic worry has shifted from cheap Chinese labor to Chinese tech and green-energy leadership — quantity tipping into quality.
Homoploutia: the new US elite combines very high labor income and very high capital income, breaking the old rule that the rich were rich only from property.
Top US labor incomes now reach 1,000× the median (finance/law); a Harvard Law degree is worth ~$100M in lifetime earnings — and its holders feel fully deserving.
China’s top elite are simultaneously private capitalists and Communist Party members; Party membership functions like an elite credential and pays an income premium.
China’s elite “capitalized” (shifted from state to private income) in ~40 years — a transition that took Britain over a century.
Convicted Chinese officials had embezzled roughly 12× their legitimate income; removing 3.2M convicts measurably shifted national inequality.
“Narrow” (illegal) corruption crackdowns often mask or distract from “broad” corruption — legacy admissions, ability-to-pay healthcare.
National market liberalism = neoliberalism at home (deregulation, low capital taxes) + mercantilism abroad (tariffs, sanctions, closed borders).
Sanctions and economic coercion have become so routine that, in Milanovic’s words, “nobody even pays attention anymore.”

Claude’s Take

This is a book launch, so the format is one economist’s 10-minute pitch followed by three smart people taking turns admiring and gently denting it. The admiration is real and mostly earned — Milanovic’s gift is turning continuous data series into vivid claims, and the “globalization died of its own success” thesis is a clean, memorable frame for a messy moment.

The strongest material is empirical and almost incidental: the convicted-corruption dataset and the homoploutia finding are the kind of concrete, checkable observations that survive whether or not you buy the grand theory. The grand theory itself is where I’d apply the BS filter, and helpfully Tooze does it for us — the US/China/Russia parallelism is forced, and the unified “national market liberalism” label is doing a lot of rhetorical lifting. Calling industrial policy a footnote while insisting domestic policy is “unchanged neoliberalism” feels like a thumb on the scale; large-scale state direction of the economy is arguably the biggest domestic shift of the decade. The panelists are generous to a fault — lots of “this is an excellent book, everybody should read it” — which is normal for a friendly launch but means you’re getting advocacy, not adversarial review.

Eight out of ten. Not because every claim lands, but because the density of genuinely new, well-sourced observations is high, the speakers are first-rate, and the central reframing will change how you read the headlines. Docked from higher because it’s promotional in tone and the unifying thesis is the weakest part of an otherwise sharp argument.