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The Future of Global Capitalism: Branko Milanovic in Conversation


– Good evening. Good evening, I’m Jim Muyskens, I’m interim president here
at the Graduate Center. And it’s my pleasure to welcome you to this fascinating program. Tonight, we examine the new book, “Capitalism, Alone: The
Future of the System That Rules the World” by renowned economist, Branko Milanovic. Guided by this important study, we’ll look at the relationship between capitalism and democracy, and we’ll consider inequality
in a world where capitalism is the only game in town. Now the Graduate Center is the place to be for these conversations,
conversations like the one tonight. Our public programs explore
the most critical issues of our time, and bring leading thinkers from the Graduate Center,
from CUNY and beyond to our stage. And we hope all of you
will come back many times in the future as more of
these programs are offered. Our co-sponsor for tonight’s program is the Graduate Center’s distinguished Stone Center on Socio-Economic Inequality. Addressing pressing issues is a hallmark of the Stone Center. It is a leader in
analyzing the disparities of income across countries and regions, and of public policies and institutions that shape those disparities. Tonight’s program is also
part of our two-year deep dive into understanding the promises
and the peril of democracy. Last year, we presented events
that examine the foundations of democracy such as freedom of the press or the role of the judiciary. This fall, we take up some
of the significant challenges to democracy, including
what we might call tonight, the promise and perils of capitalism. We’re grateful for the support of the Carnegie Corporation of New York for underwriting this timely
and significant project. And now I’m honored to introduce
our extraordinary panel of scholars whose research
is bringing fresh insights into our understanding of capitalism, and what it means for
inequality and for democracy. Branko Milanovic is one of the
leading experts in the world on income inequality. The chart he developed, the elephant chart has been dubbed the
hottest chart in economics because of its effectiveness in depicting rising global inequality. He’s currently visiting
presidential professor here at the Graduate Center,
and a senior fellow at the Stone Center. Starting next year, he
will also will be commuting to London where he becomes
a centennial professor at the London School of Economics and Political Sciences
International Equities Institute. Before coming here, he
was the lead economist in the World Bank research department for two decades and Senior Associate at the Carnegie Endowment
for International Peace. He is the co-recipient of
the 2018 Leontief Prize for advancing frontiers
in economic thought. He’s published widely on the methodology of income distribution,
and writes about inequality on his site, global inequality. His books are not only highly influential, they have a worldwide readership. Reviewing capitalism alone, the book will be focused on tonight. The New Yorker said that Milanovic is among the small cohort
of leading economists who and I, quote, have
been able to hold a mirror so that we Americans can
better see ourselves. James K. Gilbraith is the
Lloyd M. Benson Junior Chair of Government Business Relations at the LBJ School of Public Affairs and professor of government at the University of Texas in Austin. He’s advised both China’s
Planning Commission on Macro Economic Reform and
the presidential campaign of Senator Sanders,
Senator Bernie Sanders, the author of many books on
economics and inequality. He was the co-winner of
the 2014 Leontief Prize. Marshall Steinbaum is assistant
professor of economics at the University of Utah
and co-editor of the book, “After Piketty: The Agenda
for Economics and Inequality”. An antitrust scholar, he formerly served as research director at
the Roosevelt Institute in Washington DC. And our moderator
tonight is Janet Gornick, professor of political
science and sociology here at the Graduate Center, and founding director of the Stone Center on Social Economic Inequality. She is the co-author, or co-editor of a number of books, “Families at Work”, “Policies for Reconciling
Parenthood and Employment”, “Gender Equality; Transforming
Family Divisions of Labor”, and “Income Inequality,
Economic Disparities and The Middle Class
in Affluent Countries”. So we’ll begin tonight with a presentation by Branko presenting some
highlights from his book. The panel discussion will follow. This wide ranging book covers
vast sweeps of history, and is truly brilliant in its
intersecting of storytelling, erudite thought and skillful use of data and empirical research. Our panel will focus on a few themes, and I encourage all of you to
go out, buy and read the book. Now, please join me in
welcoming Branko Milanovic to the stage. (audience applauds) – Well thank you very much, James, for this really great introduction. Thanks to everybody for
coming on a rainy day. We normally of course,
look at when there is a day of a presentation or discussion, we always look at the sky because we know that actually it’s much
harder for people to show up when it’s raining. So doubly appreciate your presence here. I have just to let you
know so that we know what we are sort of facing
is I’ve got 15 minutes. I will stay within this allotted time and then we will have quite a
lot of time for the discussion and for afterwards for your questions. Now, let me start with the title because many of you might find the title a little bit puzzling. Some people might guess right, some people might actually
wonder what is in the title. The title is not random obviously. The title is, as you can
see Capitalism, Alone. The comma there is not random
either, it has some meaning. But the point is that Capitalism,
Alone essentially wants to convey the picture, the image, that capitalism is the
only mode of production in the world today, and
that was something new. It is new, not only in the
obvious sense that since 1990, the end of communism
actually left capitalism as the only sort of way
to organize production. But if you go even further into the past and think of the first
globalization which happened in the latter part of the 19th century, and all the way to 1914, of course, we know that that was kind of a globalized capitalism,
which very much resembles what we have today, but
people very often forget that at that time, you
still have in large parts of the world, forced labor. Not least obviously in the
United States until 1865, in Russia until 1861, Central Europe actually
forced labor until 1848. And Brazil, slavery until 1888. So essentially they were, served or, small producers also or
slavery which existed, coexisted with capitalism. Well, nowadays of course,
I would argue in a book and of course, that’s why China plays such an important role. I would argue that capitalism
is the only game in town that China is a capitalist country. I will not talk only about that because there are many
other topics in the book, but I just wanted to make this
very clear in the beginning. The comma has also a
role because in a sense, being alone is actually quite good because you don’t have competitors. But as we all know in economics,
not having competitors might not always be ideal because it might let you sort of play or use some of the features or exacerbate some of the features
which may not be the best. So being alone is I think, and
that’s what the comma I think to some extent tries to convey has positive sides and negative sides. Now the negative sides of
course, in terms of capitalism are obviously inequality
and which of course I work but also Jamie and Marshall
and Janet for many years. So the book focuses on
inequalities in the two systems of the liberal slash meritocratic system, where actually use us
data more than other, from other countries, and in the system of political capitalism, aka China where also I talk about the inequality, corruption and so forth. In both cases, the objective
is to actually look at the forces, which lead these systems to become more inegalitarian. How these forces should
be arrested or curbed, and how if they’re not curbed might lead to plutocratic
systems in both cases. So I’m not coming, maybe
it’ll come up in a discussion, I’m not coming in one or the other way that the Chinese system
would necessarily evolved over democratic system
of the Western countries. I’m not even saying that
the Western countries might become like China. There is a third possibility
that the two systems would converge to a position where you have very strong combination of political and economic
power at the top. But all these things, of
course, are quite open. But the discussion of the
forces that push inequality into both system do present
really the core of the chapters two and three. Now the chapter two as you can see, it’s about liberal slash
meritocratic capitalism but the terminology comes from John Rawls. I will not explain it but
meritocratic does not mean in this context is something
which is necessarily good. Meritocratic in the context
in which Rawls uses it simply means that there
are no legal impediments, which exists like in a caste system to you achieving certain
positions in society. Political capitalism as a
term comes from Max Weber. And of course, indicates capitalists where you use political
power for economic gain. Now, chapter four deals with interaction between globalization and capitalism and it looks at four
different types of interaction between globalization,
a movement of capital, between globalization
and movement of labor including migration. Between globalization and what it means for the welfare state. And finally, between
migration and corruption. I think actually, corruption
needs to be really reintegrated into economics because it
has become so pervasive. And I think there are very strong links between globalization and corruption. Finally, the last chapter is a chapter which really addresses the ordinary life on the hyper commercialized capitalism, hyper commercialized globalization rather, where we may have commodification
of many activities, which in the past had
never been commodified including obviously now
using our homes or our cars. Not as personal property,
which we have been doing until recently, but really
using it as capital. That’s something which Max
would have recognized very well, so it’s essentially our personal
property becomes capital. For example, I recently
read there is a new company in London, which is actually renting out different like clothing. You can not only take
some very fancy clothing, but any type of maybe shoes, whatever. So basically really we’re
moving further and further into this commodification of
ordinary life and leisure time. So that’s chapter five and I will not talk much about that today. Now, let me start with chapter two which deals essentially with the US. These are the four sense,
I will not read them all. The forces which I think are systemic and which push towards higher inequality in societies of labor or
meritocratic capitalism. It starts with the rising share
of capital in total income as you can see. And that alone, and that’s
actually a very important point. That alone would not have been a problem, were it not for the fact that there is a very high
concentration of capital income. In other words, I know that
it’s kind of difficult at once to kind of think of this, but suppose that the share
of capital in total GDP or total income of the country goes up. But the capital income
from capital or wealth is more or less equally distributed. However hard it is to
first to think of this, because historically we
know that the owners, property owners of capital have been rich, but if the ownership of
capital is equally distributed, the rising share of capital would actually reduce income inequality. Now, why it is not reducing
it, is because capital income and wealth are extremely
heavily concentrated, and they are not
concentrated among the poor but they are concentrated among the rich. So, that’s why you have
the rising capital share quasi automatically getting translated into the rising interpersonal inequality. Then I discuss higher rate of return on the assets of the rich which is I think a very interesting topic which
you have to ask yourself, if I have assets of $1,000, or $1 million, is the likelihood of me having the same rate of return the same? And of course, very often
that’s not the case. People who have higher assets also have higher rate of return, which of course exacerbates inequality. Then I will speak about,
so I will skip that about the association. I mean, I’ll show you a graph,
so I’ll skip it right now, association between high
capital and labor incomes which are called, because
I was kind of first to invent this, homoploutia. Comes from Greek, and
obviously, how are you going when you invent a new
word, you go back to Greek and you put two words, which
you’ll look into Google, and then later check
with your Greek friends does it makes sense? Well at first, of course,
they don’t understand. They say, well, it doesn’t make any sense. But they say okay, give
me another better word, but they’re short of words, they say, okay fine, take this
neologism and run with it. So that’s what I did with homoploutia. I’ll explain that in a minute. And then homogamy, which
is an interesting topic. It’s increasing a sort of
the mating of rich people marrying each other. And then finally, it leads to really which I think is crucial,
last two crucial points. I will not really talk
much about them today, but they are absolutely crucial is the political control of the rich. Because if you don’t
have political control, I call that tying the knot on power, then basically that power
can actually evaporate. But if you have the political control, from political power, then you make sure that that economic power stays with you and moreover gets
transmitted to your children. And that’s the last and sixth point. So let me then simply give you
some empirical illustrations. Obviously, all of that
is quite empirically sort of demonstrated in the book, but let me just give two of them. This is the graph that shows
you the Gini coefficient, which is the measure of inequality. So the high the Gini coefficient,
the higher inequality of capital incomes and labor income. Labor incomes are red,
capital incomes are blue. So what is striking there is
huge gap between inequality with which capital incomes are distributed versus labor income. We’re talking about the Gini coefficient of the blue line of 0.9 which
is like really extremely high. It’s like if you have the temperature, it would be the temperature which is among the highest temperatures
that you can imagine. And the red line which
of course is increasing, also because labor income is becoming more unequally distributed. Look at the case of the UK in the 1990s and the Margaret Thatcher
debt goes significantly up, always remains wherever less
unequal than the blue line. So the very fact that the
blue line always dominates, if you will, the red
line essentially means what they were saying
before that the rising share of capital in total income
quasi automatically pushes you over the rising inequality
between individuals. And I’ve taken here four countries, I actually have dozens of countries. Most of that comes from
Luxembourg income study, and of course all of them show
basically the same results. Now the homoplouti as I already mentioned is the presence among same
people or both high labor and capital income. Here this is based on the US data. You can see actually
the percentage of people who are in the top decile by labor and by capital increasing constantly. Think of the following fact. If that number was zero,
then you will be really in the world of classical capitalism where the capitalists don’t really work as they don’t double as wage workers. And if this number were to become 100, that’s an interesting sort
of thought experiment, how would a society be where everybody, the top people are both
rich, all of them are rich in terms of labor income, so they really make a
very high labor income and they have a capital income. It raises many issues, some
of that we might discuss, some of them you can
read about in the book, how to tax such a society,
whether it is easier or harder, how it differs from classical capitalism. So then let me move very briefly on the case of political
capitalism of China. Each of my chapter has a
very nice introductory, I think epigraph this one is
from Aristotle, as you can see, and I think it’s very appropriate
for a society like China. The political capitalism,
I define it here again very quickly as the
three essential features. First one, the efficient bureaucracy or efficient administration. The second, absence of the rule of law. And third, the state autonomy. The state autonomy means
that you actually are not, the state is not captured by interest whether you know capitalist
or other interests but it has the autonomy of acting and doing whatever it wants. Now, the contrast between
or the contradiction between the first and the second principle means that essentially you
have to have bureaucracy which is sort of a baryon
type of bureaucracy. But then bureaucracy cannot
follow the rule of law all the time, because you need
to have discretionary power to actually punish somebody or to give privileges to somebody else. And that leads to what they
argue to the very fact, to the fact that corruption
is endemic or imminent through such a system. So in other words,
corruption is not an anomaly in such a system but its really
integral part of the system. I’ll show you a few graphs of that. So this is one of the many
ways that you can, of course, look at the corruption in China. These are the official data. This is the amount of
income or actually bribery that has been received at different levels of administration; county,
prefecture, and provincial level. What you’ll notice here is
that actually as you go towards the higher levels from left to right, the amount of corruption
rises, which is not surprising because obviously you
can give greater bribery or you’re selling the jobs
or posts for more money if there are more powerful
jobs, and that goes up. Also the red line, the
red bar rather shows you the level of corruptions within the Communist Party apparatus. These are official data. They have actually
thousands of names of people and how much money they
made in over what years, or whether they are part
of an organized group or they were just doing it by themselves. And secondly, that you see
that actually in most cases, in this case, two out of
three in a different slide that I could show you also,
it’s actually in all cases, the red bar is higher than the blue bar. So basically, that’s
obviously where the power is and where the corruption is. I’m being asked very
energetically to stop, and I will stop in one second. But I want to show you
another graph from China which shows here, the
Chinese elite, the top 5%. And again, focuses in
this case on the CCP, Chinese Communist Party membership. And what you notice in this graph is that I mean, if you look very
carefully in that graph, is that the members at
the level of the top 10% and top 5%, these are
the first two slides, they actually have the same
income as the other people in the top 10% and top 5%. At the top 1%, they have
significantly higher incomes. And what is also interesting, that gain is particularly
strong among people who are actually private entrepreneurs. So that’s where you have this combination of political and economic power of which I was speaking before. And unnecessary to say, you
have that same of course, combination of political economic power in the United States. This is I already mentioned,
so I will skip this graph. This is the chapter four,
that’s kind of a cool chapter, but I will not have to say anything else. And I would also simply highlight the fact that in this case, I deal with migration. And I’m arguing that there
is an inverse relationship, that this is a controversial point, that if you give migrants fewer rights, domestic population will be more likely to accept greater migration. I wrote that particularly with the view of what is happening today in Europe where there is basically
really rejection of migration, despite the fact that the
continent is actually aging and in need of migrants, but for political and cultural reasons they are rejecting them. And then finally, it is my last slide that actually I think
illustrates quite well what I discussed in the last chapter and where I discussed actually
the role of capitalism in our ordinary life, and
in terms of the value system that we have more or less all accepted, and contribute to the
further sort of growing power of capitalism, and not only
geographically in China, but also within ourselves
and in our private life. So after exhausting my
time more than that, I would like to invite
the people who are going to criticize my work,
and maybe some of them will praise it as well. And then I hope we’ll
have a nice discussion. Thank you very much. (audience applauds) – Am I on? I seem to be on. Welcome everybody, welcome. Thank you very much, President Muyskens for starting us off this evening. Thank you Branko for the whirlwind peek at this extraordinarily complicated book. I’m old-fashioned, I’m not with the technological
revolution here yet. So on behalf of those of us on stage, let me say welcome to
everyone here in the audience at the Graduate Center,
and welcome to those of you joining us by livestream. We’re very excited to
be here this evening. Let me just say a few words, a few more words of
introduction about the book and then I’m gonna tell you
what, give a quick roadmap of the conversation this evening. I’m gonna keep my comrades
disciplined and on time here. The book here, many of you know Branko. Those of you who are in the
Graduate Center community, we were here on this very
same stage not long ago launching “Global Inequality”,
the book that indeed, is known of course,
for the signature chart of the elephant graph, the elephant chart. And this book is in many
ways a sequel, I would say. You’ll see the footprints of that book certainly in this one. So for those of you who kind of know the story of global inequality,
I definitely encourage you to jump into this one. Also excited to say as
President Muysken noted, the book is getting a
huge amount of attention on Twitter, online, The New
Yorker and The Economist, Foreign Affairs, many places. So all of us at (mumbles)
we’re basking in the praise, and we’re hiding from the criticisms, but we are really following it. And just in the last couple
of days, the book was named one of the five best
economics books of the year by The Economist and today a
very long excerpt is published in Foreign Affairs. So I hope you’ll get a chance
to follow the book as well. Okay, without too much further ado, this is what I’m gonna do this evening. I know you can see this already. It’s an extremely wide ranging
book and very complicated. We’re gonna focus on four questions. First, we’re gonna talk about these two models of capitalism. Second, we’re gonna talk about prospects for reducing the rising inequality, specifically in the US case. Branko put up a slide showing
six sort of systemic forces behind rising inequality in the US. And he’s put forth a very
specific policy proposal, which I’m going to ask Jamie
and Marshall to comment on. Third, he showed you
a graph which proposes something quite controversial, the idea of trading off immigrants’ rights against the receptiveness
of host countries. And we’re gonna talk about that. Then we’re gonna close on the
questions of democracy, okay. Branko, would you do one thing
for us just to get started? I’ve been sort of pushing
my colleagues here to make sure we don’t use too much jargon and too much technical talk that’s not going to be
transparent to most of us, including us on stage. Take a moment and define
capitalism for us and also capital. – Well, capitalism is
defined, I think very clearly and it’s definition that is used by Max, it is definition it is used by Max Weber. I really did not want to stray from those very simple definitions. Capitalism is defined as
having three features. One feature is that most of production is conducted on privately
owned means of production. Secondly, that labor is hard labor, which means that capital hires labor not the other way around. And the third one is that the
production is decentralized. And just think for a minute, when I spoke of few dollar slavery or
systems which existed before, still might exist in
some parts of the world, that you essentially in that case, you don’t obviously have free labor because free labor is part of capitalism. Or imagine the situation of cooperatives or imagine the situation of self employed. The cooperatives actually are
not being hired by capital. It’s actually individuals who are both capital owners and producers, so that’s not capitalism either. Or imagine the situation
where you have state ownership of the means of production. Well, that’s not capitalism either. So that definition is very
succinct, very economical and yet, I think very powerful. And that’s why I’m actually using it. And I’m not a great fan of restarting now inventing the definitions for something which has existed for two centuries. – Okay, let me move on to the panel. So I think you will know that
a very large part of this book is laying out these these
two models of capitalism; the liberal meritocratic capitalist model of which the United
States is the exemplar, not the only case, obviously. And then this political capitalism, of which China is the exemplar. And that binary is a really
important part of the book. So let me turn to you, Marshall, first. Let’s think about meritocracy. In the liberal meritocratic model, Branko talked a little bit about this sort of technical
meaning of meritocracy. A lot of people, especially progressives argue that the United States
is in fact, not a meritocracy. And it’s come up in popular
conversation recently around the college admissions scandals, around the question of elite high schools in New York and so forth. Is it accurate to describe
the US as a meritocracy? Why or why not? And are there some
processes that do in fact, take meritocratic form? – Yeah, so first of all,
thank you, Janet and Branko for having me to come discuss
this book, it’s a great honor. Branko has been a inspiration to me as a fellow tweeting economist
and a wonderful scholar. And I aspire to his level of prolificness. So on the question of meritocracy, I think this is getting a
lot of pushback, I would say among economics research that’s
currently being conducted. So this idea that essentially
the labor market is free in the sense that people have, there’s no legal
restrictions on their ability to attain any particular
status in the labor market. And I think that what
we’re increasingly finding is that no labor market
really has that quality to it. That is to say the range of options that are available to any
worker entering the labor market are not infinite and are
not under their control. So this idea that, for example,
access to higher education would determine access to a
particular labor market status, as we can tell from segregation in the higher education system from the extent to which
certain institutions will lead from what will protect
and prolong privilege across generations, these
are monuments or ornaments of social status that aren’t
really available to anyone notwithstanding the
sort of stated policies of a particular institutions or the idea that we’re not barring higher education on the basis of class or
particularly requiring a formal caste system where
one generation inherits the set of occupations
available to their parents. That is more or less what our
higher education system does and what our labor market does. And I think when we’re kind of wondering, to what degree the sort
of observed correspondence of, say elite status in the economy with elite educational
background and homogamy, and investments in early
childhood skills development, these are the things that economists have, at least in the past
focused on as sort of causes of social disparities and outcomes among people later in life. And I think the sense of the research is that things like going
to an elite university or being escorted to museums or to special enrichment
activities for children on the part of their parents, these are things that
are kind of the trappings of meritocracy, but they’re
not the causes of outcomes among different generations. That’s really due to
privilege and inheritance and social status, that is not free and equally available to all. – Jamie, let me ask you almost I guess it’s sort of the mirror
question to train your lens on political capitalism
as Branko calls it. You recently quoted a Chinese physicist in something you wrote,
a long time US resident as questioning the claim
that China is authoritarian or that it’s only authoritarian. Can you elaborate on that? And does this physicist or
your understanding of China challenge Brankos’ portrait of China as politically capitalist? Does it does it challenge
this whole binary between liberal and political? – Okay, well Let me first of all begin by saying that Branko and I are
longtime friends and allies, in many, many matters,
have pursued parallel lines of research that are very complimentary. And so I assume that in
inviting me here tonight, he knew he was getting the
skunk at the garden party. And I want to begin
with a colossal quibble about the whole structure
of the nomenclature here. And I would argue that capitalism
began in the 15th century, not the 19th. And that capitalism and globalization occurred simultaneously at that point with the creation of the slave
economies of the Caribbean, with the colonization of the Americas. And globalization, you
know that 90% of the silver that was mined in Bolivia, went to China through the Philippines. it was not something that
was strictly connected just to the Americas and Europe. So it was an entire
global economy was created for the first time at that time. I would argue further that
capitalism in that form collapsed in the 1930s,
and was now reconstructed successfully anywhere in the world. In the United States, what
we got was the New Deal and ultimately the Great
Society and a mixed economy, whose, let’s say, senior
descriptor, apostle of the time was a fella by the name of Galbraith, some relation of mine actually. And that in China, what
developed out of the Revolution and the aftermath of
the cultural revolution, that period of reforms is something which is only loosely
described as capitalist. It’s an economy which
continues to be state directed and continues to have its major direction set by public policy. And we see this for
example, in the reaction to the great crisis,
with the construction, major construction projects and ultimately the creation most recently
of high speed rail system, which in a decade has gone from nothing, 15 years from nothing to
the largest in the world. This is not something which could be done by decentralized private capitalists. If it could be done by
decentralized private capitalists, you would have seen a better subway system in the city of New York than you’ve got. Now to get to your
point about the question of the nomenclature,
political versus meritocratic, I would again raise a quibble here. Do we have political capitalism
in the United States? I give you Michael Bloomberg, for example. I mean if you have a billion
dollars, you can participate in American politics at the highest level, or you can pretend to
have a billion dollars or you can have a
billionaire backing you up. Those are the three major criteria. That strikes me as a marriage
of politics and capitalism, which is very hard to dispute. Whereas in China, well your number up here was that the top 1% had 20% more income than the others in that party. But what is the Communist Party in China? It’s basically a professional association. I’m not gonna defend it, but I can tell you one thing it’s not, it’s not Marxist Leninist,
and it’s not maliced. 25 years ago, long before
the current evolution of political discussion in China. I was in Beijing on and
off over a period of years as an advisor to the Planning Commission. And my Chinese friends would joke to me that I was the only
communist in the place. This is a place where there was actually to be honest with you a
greater inside, not in public, but inside the official
boundaries of discourse, a greater diversity of views. You had Chicago monetarists and hayekians. Only thing you didn’t have were Marxists. Greater diversity than you’ll find at the Council on Foreign Relations or the Brookings Institution, both of which I have
affiliations with mind you, so I know what I’m speaking at. So again I would say, I would question all of the labeling here as
whether it is truly evocative. I mean, I know Branko’s given
very precise definitions and can defend them, but the
labels have broader meaning and I would question whether
they’re accurately evocative of either system. – Okay, on that note,
I’m gonna push this back to the United States. We’re gonna give Branko
a chance to respond when we talk about democracy shortly. Let me shift gears to the second question. Branko put up a slide showing,
or enumerating several causes of rising inequality in
the liberal case of the US. His main example as you
know, rising capital, raising capital shares,
several things, you saw them, increasing transmission of income and wealth across generations. In the book, he lays
out a policy platform. This is a rather long question but then I’m gonna just turn
it loose on my panel here. And the first remark that Branko makes is that just taxing and transferring, removing market generator
and equality through taxes and transfers, that’s
yesterday’s social policy. Those tools have reached their limits, they’re swimming upstream
against rising market inequality. And he calls for a different approach, which is increasing endowments, which are resources
that lead to prosperity. Specifically, increasing
capital endowments to deconcentrate capital ownership and that would be through tax policies. We’ve been talking
about this a lot lately. Tax policies that would
increase asset holding among the middle class, implementing effective inheritance tax, capital endowments, et cetera. And the second big focus on endowments is about investing in public
education at all levels, and reducing subsidies for elite schools. So that’s a long way to say
the focuses on public policies that increase the endowments
of capital and education, what do you think of this policy platform? Let me start with you Marshall. Is it bold? Is it inspired? Is it timid? Is it too narrow? – It’s a good set of
questions to put to me because honestly, I’m undecided
about those two things. So first of all, I think
Branko is not right to reject progressive taxation off the bat and I think that comes from
a somewhat narrow conception of what the point of
progressive taxation is. You said taxes and transfers
are yesterday’s solution to the problem of high market
inequality, and for example, they can be avoided
through offshoring assets and offshoring capital income, and so it’s very hard for
national based tax authorities to go after increasing
concentrations of capital. I think that a lot of the work that people like Gabriel Zucman and
Emmanuel Saez have put out really creates a strong argument for saying progressive
taxation is affecting the market distribution of resources. So a world in which the tax, marginal tax rate for
high earners is 90% or 91% is a world in which the
economies leading corporations are run in a very different way. There’s really no point
in paying out dividends or otherwise transferring resources from profitable companies to shareholders if 90% of what comes
out is going to be given to the government. Instead, companies are
run so as to reinvest retained earnings in future earnings. So R&D, that sort of thing,
or shared with workers. And I think that mechanism
is under appreciated within the economics of taxation. I mean there’s almost no
role for that mechanism in the sort of formal public
finance modeling of taxation. And the sort of, what might be
seen as the technical problem of actually making it work in
a world of globalized capital I think is solvable basically. I mean the owners of capital themselves know where their money is,
and so I think it means it’s possible for tax
authorities to know where it is. And to date, tax authorities
had been relatively unwilling for political reasons to go there. So what has been presented
as a technical problem is in fact a problem of
politics, which is quite real. How about Branko’s positive suggestion, so equalizing endowments
of capital, I think is, in some ways an inspiring program. My view is that capital ownership has not really been
successfully decentralized in capitalist societies other
than when the government owns a significant share
of the productive capital. So it’s not that there could be no role for sort of individually
owned capitalist endowments to deconcentrate the ownership of capital. But if we’re talking about feasibility as being the reason why we
can’t do progressive taxation to influence the market
distribution of income, then I think we should be
talking about what has worked to deconcentrate the ownership
of capital in the past, which is public ownership of resources. And just a word on higher education or education all together
I think, public education, public higher education
are crucial public goods. What worries me about that suggestion as a solution to inequality
is that in some ways, that is sort of what economists at least have been pointing toward for a long time. And what we have learned in studying how the education system actually works is there’s at least a strong an argument that it has the operation of preserving and prolonging inequality
and social position than it does to mitigate them. And so absolutely, we need to turn to a robust public sector and education. But that can’t, it’s not
something you can wave a wand at. That would require very
significant policy changes in the way that higher education is run. – Thank you, Marshall. Before I turn to you Jamie, I realized a bit of housekeeping, I think, is it time, Jimmy? The staff is going to be
collecting index cards which are gonna come to
me so that we can gather some of your questions. I think that should be happening
in the next moment or two. So Jamie, basically,
equalizing endownments versus redistribution. – Well, first of all, I’m a
great fan of the estate tax, not inheritance, but on estates, why? It’s the tax we’ve had for a century, and it has built a great
many important private, public private institutions
in this country. I know not what happens here in New York but in Texas, every
building at the university is named after some donor who’s attempting to escape the estate tax. It is a way of expressing their
love, while at the same time avoiding having the
government come and collect it when the Grim Reaper
comes to collect them. This is a very good thing. It’s a socially integrating project and it mobilizes accumulations
which are inevitable in a capitalist system
in advance of the death of the receiver, this is a good thing. Great many American institutions
which don’t exist in Europe don’t exist in Asia,
are due to the existence in part of that tax. It should be tightened up,
there should be a higher rate, there should be I think reform of the way foundations are run. But this is a very good way of assuring that you avoid dynasties
which are the major risk to a political system,
in which accumulations in one generation are passed on to the far less worthy
incompetent children of the accumulator. This is something which is
not unknown in American life and something that we should
be rigorously reforming the system to eliminate. As far as endowments, including
the education endowment, as an educator,I’m not against education, I think it’s a good thing. But let’s not kid ourselves,
education does not change the structure of pay and
incomes or capital endowments. It does not make the, it does
not level the playing field or make it so that some
educational institutions are equal to others,
it’s simply not the case. What you need to do for
the vast working population of this country is to
strengthen social insurance. That’s how you assure that people are protected against penury and old age, against medical bankruptcy. This is why Medicare
for All is a good idea. It makes, you protect people against, we protect people against
loss of their savings with deposit insurance. We can protect their homes and we should have better
protection against foreclosures, and the kind of thing that
happened to millions of people in the aftermath of the
great crash of 2007. So we ought to be thinking
in terms of things which are not necessarily
cash in your pocket, not necessarily something
you can borrow against or gamble away or lose, but
which gives the broad population enough security that they feel that they have a certain
amount of economic and political independence,
can organize themselves and take some risks that
they would not otherwise do. That’s not a new idea,
that’s the basic foundation of the American system as it developed in the New Deal and the Great Society. And that’s what I think
is the right way to pursue a society that is decently
equal for the whole population. – Branko, do you want to respond? Or briefly may I set in
and then we’re gonna move on to migration? – Yes, I would of course love to respond. First of all, it was actually great to have Marshall and Jamie and of course, we’ve been of course, in
touch by email and otherwise, tweets and so on. So I knew and I know both
of them for a long time. And I’m actually very
appreciative of the comments and of the great criticisms. Now let me try very quickly to go over, not all of them, only some selected ones. First, let me start with the
issue of the book of China versus the US and so on. First of all, I have to
say this is going maybe despite sort of, how should I say, monetary value of my book, maybe some people will
not even buy the book. But it’s not the book which
deals with Trump and Xi Jinping. It’s not the book which
deals with the trade war. I actually, after finishing the book, I went through a search
and I saw that Trump is mentioned once,
populism is mentioned once. So if you’re interested in
that topic, don’t bother. It’s not a book about it. It’s a book, which I think
is taking much longer view. Jamie, of course really
I mean mentioned that, of course I mean going to
some extent, he went to 1500, and a triangle or trade
and remonetization of China which was the reason why
silver went to China. So it’s a book which actually
takes much longer perspective. And the definition of the two models is not really done for today or tomorrow. It’s done, I think,
actually to serve longer. And China is not the only
case of political capitalism. My list like about 15 countries. Obviously Vietnam is the one which closes, comes the closest to China, but many other countries
like Algeria, Rwanda, Ethiopia and so on. And they’re actually not simply listed, because I kind of find
it cool to list them. But the whole first part of chapter three od which I didn’t talk, because it’s a very
specifically Marxist part is the part which goes into
the origins or the genesis of the political capitalism
and the role of communism in global history. So that’s not something that
I can discuss in five minutes. But just want to say,
the objective is to give a much wider and broader
view of the two systems rather than what is happening
in the last 40 years or might happen in another 40 years. Now, similarly, on the
issue of public policies, my objective was not
nor do I know actually the American system sufficiently
nor is my objective reality to deal with American system per se, but to deal more broadly. Why I was rejecting, not
rejecting but I was saying that the policies that are being used are really reaching the limit
because I think we only need or what we had in 1930s
when there was design, the vision of welfare state, we need now a different version. And I think a different
version is a society where the distribution of
capital will be much more equal across income groups or social classes and a society where the
access to high level of high quality education
will be much more equal. And what we have now not only in the US, but most of meritocratic or
liberal capitalist countries, we have extremely concentrated
ownership of assets. And we have a rising
importance of private education coming from the US and
now spreading to Europe, which actually because of their costs, the factor monopolizes the
access to the top schools which then will lead to the best jobs, highly paid jobs for the people. So it was much broader. Now when it comes to individual policies, actually that means there
is hardly any difference between what I say what other people say. The difference is I think are very small. And of course, I agree with
both with the critiques that actually that Marshall and Jamie did. But I think that the
differences are very small. It’s the objective which is different, though we continue with them simply because we have been
using them for a long time and we want just to sort of
increase them a little bit, or do we really apply them with a vision to fundamentally change
the nature of society? – Let me move us on to a topic. I hope there’ll be a thread
from where we just came to where I’m going to go. For those of you who have
followed Branko’s work on global and equality,
he’s raised the issue, has raised some very provocative claims and policy suggestions regarding transnational migration of people. He talks a lot about,
talk about the movement across borders of capital, but now we’re talking about
people, workers, immigration. So one of the arguments that
came up in his last book and again here is that
if we’re We’re thinking about global inequality, we
think about the global community and equality across all people regardless of national borders. One way to reduce global
inequality is to open borders, essentially, and let
workers from poor countries move to richer receiving countries. So there are two parts of that. And I want to ask one
question to Marshall, and then one to Jamie, keeping us mindful of
questions about democracy. So the first question is,
it seems intuitively right that if you open borders, and
people from poorer countries move to richer countries, that global inequality will be reduced. But of course, there are
many components of that. The people are exiting countries,
there’s a brain drain out, there are remittances in and then that could increase inequality
in the receiving country. So is this claim even correct,
that essentially open borders is gonna reduce global inequality? – Yeah, so that’s a great question. I also would have thought it was intuitive and I should say the
treatment that Branko gives it at the basic level
is more or less orthodox than both capital labor but
in particular labor here, or factors of production. And equalizing the return to
different factors of production across geographic areas will in general be an egalitarianism policy,
and the way one would do that is allowing those factors of production to move wherever they want to
go, which will be the place that they have the highest return. On the question of
transnational labor migration, I think it’s a bit more complicated. So as you were alluding to, so we think about migrants themselves who leave poor countries
and go to richer countries, which is I think the model of migration that Branko is referring to, they tend to be positively selected from their home countries
and they tend to enter the income distribution
in destination countries lower down relatively, in
terms of their relative status in the destination country, it is lower than where it
was in the sending country. And then it is only over generations that you get convergence
between immigrant populations in destination countries that is children, first generation and second generation. They converge and even sometimes
exceed income distributions in the destination country. So I think, the migrants
themselves are truly enjoying an absolute increase in
income from migration. The question is, they’re
leaving the the source countries and in general, the people
who leave are the people who are earning the most in highest and social stratification that can create this brain drain effect
that you were referring to where countries effectively
have no means of conducting their own domestic economies,
they become kind of, their production is
people who are migrating into destination countries. That’s counteracted by the remittances that flow from destination
countries from the migrants to the source countries that they came in. I think it’s unclear exactly which of those two effects predominates. And then when you think about
the destination countries, I think now it’s, I mean my
reading of the literature is that migration does
not have a negative effect on the incomes of natives
in destination countries. In fact, if anything, it
may have a positive effect because migrants
themselves are both workers who may be complimentary or
competing with domestic labor. And they’re also consumers. And so in some ways, they
increase the income levels in the destination country. So you have ambiguous effect
on the average incomes of poor countries, positive
effect on the average incomes in rich countries, and for the migrants, they’re enjoying an
absolute increase in income. But the sum total of all of
those things is not necessarily a reduction in the global inequality. It’s not to say we shouldn’t do migration, that’s not the only reason to allow it. But I think it’s a little
bit simplistic to view it just as this equalization of factor returns across geography. – Thank you, let me
turn to the second part of this question, Jamie,
for you, if I may. There’s another part of this argument so that what Marshall
was just talking about is really an empirical question
is, what will be the effect on the global income distribution where we’d have this
widespread migration of labor? But there’s a second issue
which I suppose one would say is more normative or
political, which was previewed in the graph that Branko put up. You mentioned that this is very relevant in Western Europe today,
but it’s also very relevant in the United States. Is the question about the
acceptance in destination or receiving countries of
migrant labor, of immigrants. And so Branko shows in this
rather provocative graph, that the acceptance, if
I’m saying this right, the acceptance in destination
countries would go up if we had policies and
institutions in place that were granting these
incoming migrants limited rights. So I guess my question for you, Jamie, is what do you think of that? Does it give you concerns moral, economic, legal or otherwise? And I wonder if what I’m
sure you know a lot about, within China migration which
is enormous gives us a window into this question about
the treatment of migrants. – China has a major internal migration and regulation system, which is called the household registration system, hukou. That’s a whole set of issues there, but let’s bring it to the
case of the United States. See, I would want to reverse
the causality on this. I don’t think it’s the case
so much that migrants come in, because they want to, they’re
attracted by higher wages. They are brought in, in many
cases by labor contractors, in order to take advantage
of their weak legal status so that employers can
employ them at low wages and without the protections that workers who have legal rights would have. And the way to deal with
that problem is to enforce adequate labor standards,
a high minimum wage and labor protections which
eliminate the incentive to bring in, let’s say, janitors
to Ivy League universities from El Salvador. That’s what you want to do
in order to make the system less exploitative than it is. Secondly, with respect to
borders, there’s an old parable. It’s about King Canute,
you may have heard of it, tried to stop the tides. They’re not gonna be able
to stop them in Europe when you look at what the
demographic forces are that are coming out of North
Africa, Sub Saharan Africa, out of the Middle East. I mean it’s just not gonna happen. And with respect to what
we’re doing, I live in Texas. What we’re doing on the
border is we’re creating a vast slum, a militarized
slum, that is of no benefit to the people who live in the valley and no particular benefit for the people who don’t live in the valley. But it certainly diminishes
the quality of life that people live in this area,
going to be there, are there by the hundreds of thousands or millions are constantly at risk. Now what we have in the
United States is a provision of the Constitution enacted
at the end of the Civil War which says if you’re born in this country, no matter what your parents are, you are a citizen of the United States. So our only question really
legally and politically is, do we extend at some point,
the same general ability to become an active member
with full political rights in this country, to the people who come in because their children are
gonna be voting citizens in 18 years, folks. There’s nothing that
anybody can do about it and it’s happening all the time. And my view would be if you
come into the United States, and you work, then by and large, there should be periodically
ways in which people should be allowed to
achieve the basic rights which enable them to participate
alongside everybody else. If we don’t do that, you look
at the way the demography of the country’s going, we won’t have the demographic advantage
that we presently enjoy, by comparison with
countries which don’t have a good flow of immigration
which are becoming much older societies and are suffering from certain difficulties
that are associated with that. We’re not so much, why? Because among other things,
we’re constantly replenishing our population with hard working people. Doesn’t bother me at all. – So Branko, I’d like you
to respond a little bit. And let me ask you a
two-part, ask you to respond in two ways. I’ve seen this graph
of course, in the book and in your slideshow, you often
describe it as provocative. So I guess the question is, is this a serious policy proposal? Or is it a thought experiment? How do you really see this
in terms of implementation? – Well, it is a serious policy proposal because it is being done in
the Gulf countries as we speak, and Singapore as well. So it’s not something which
really doesn’t exist anywhere. But it deals with I think a deeper issue, means that our country’s willing to start to abolish this binary distinction between being citizen
and not being citizen. Because essentially what I
argued there is that you would have people who would come to a country, they would work there for
a limited period of time, their truly stay there would be limited or linked to the job and
then they would return. So they would actually have
the rights, all the rights, including of course,
rights of equal treatment and jobs and so on, which of course, in the Gulf countries they don’t. But that would be treated
as Class A citizen, but they would never have
the path to citizenship. Now, why am I doing that? Because they went like sort
of I don’t like migrants and I don’t like them to come here, no. The reason is the following,
is that I’m afraid and I think it’s particularly
with respect to Europe, less to the US, maybe that’s
a different discussion, but that the resistance to
higher immigration is so strong. I mean it is such a strong political, emotional and cultural
issue that we’re facing quite likely possibility
of fortress Europe. It’s actually already there. So that position would
not be good for migrants, would not be good also for the countries that are going to go
through really rapid aging and would end up like Japan. And that would actually,
the solution to that would be this kind of sort of
having a citizenship right. In other words, having
some rights of citizenship, but not others. In that case, you would not
have this binary distinction between citizen and not citizen, but you would have something in between that would also be, that
some people could have. Let me put like another
way, in a very stark way. We have for example, trade
union organization and others that are very concerned
about, for example, everybody regardless of whether
they come from and so on, having exactly the same status. But at the same time they
are utterly unconcerned about incomes and positions of people, people who are actually not
able to come to a given country. So you have really binary thing. So either you’re, I
mean when I say here, US it could be Western
Europe, could be Japan. Either you’re in a rich country
and then you get everything, or you’re not here and we
really don’t care about you. So from a global point of view, a position where you would actually have some rights including the right to work
here and return to your country would be better from the point of view of global income inequality
and reduction of poverty, despite the fact that I agree
with all the three points that Marshall made,
which are very difficult because it could be that the brain drain actually has a negative impact
on the emitting countries overall per capita income. Or it could be that actually,
there are some possibilities that actually even
inequality within the country that is receiving migrants becomes higher because of the migrants. So I agree with all of that, but I think David is definitely
reduction in global poverty and I believe there is strong presumption of reduction in global
inequality with a system which is fundamentally
discriminatory, so I totally agree. So we have to keep these
two things together. It could be a discriminatory system but it might have good effects on global poverty and global inequality. – Let me ask a question from the audience, which is really a follow up
exactly to this conversation. Essentially it’s a
question about domestic, it’s a question about
progressive politics. On the migration question,
the labor-based left was for long protectionist
and restrictionist. But now on the basis of
global justice concerns and other matters, the left is searching for a more open successor strategy. What should it be? Marshall? – Yes, well I mean,
that’s a pretty open ended and inviting question. So it’s certainly true that
the labor oriented movement in the United States is more
friendly towards immigrants and other non-citizen workers now than it has been in the past. I’m not sure about the
protectionist aspect of the change in time. But I think it’s absolutely right to think that the inclination
should be more in favor of an internationalist orientation. And I think Branko, when
we say that the orientation of the US based left has
become less xenophobic, you might say it’s really
with respect to immigrants who are already in the United States, but not with respect to the
rest of the world’s population. And so I think if we’re
gonna talk about an agenda that embraces global inequality and international living standards, that has to amount to the
United States using its power to obtain that, where the
US has a great deal of power in country to country negotiations or multilateral negotiations, it has used that to really
create greater disparities across borders because that is what US domestic interest want. They want to sharpen the
threat of outsourcing globally. And I think that where
that power exists, it can and should be used
rather to raise the floor to reduce the power of outsourcing. That that is what would be egalitarian. And I think to just kind
of get back to what Branko was talking about a
diminishing citizenship rights in the United States,
to me, that’s the thing that really threatens to make
global migration inegalitarian and more like a race to the bottom. Because if it’s greater, if the extent to which United States citizens are placed into competition with people
who enjoy fewer rights, that is the thing that will
cause greater xenophobia, greater objection to opening
borders in the United States. And I think rather than placing
US workers into competition by reducing the standards
for incoming immigrants, you should raise the standards
basically for people abroad. – And Jamie. – A couple of points, I don’t
have a global strategy here. It’s over my pay grade, but I can speak to the American strategy. And I think that it’s fair
to say, at least in my view that American labor is on the
right track on this issue. What has happened, if you’re
just thinking about it in terms of a political strategy and that’s the thrust of
the question for the left, where is the left the strongest
in the United States today? It’s in California, why? Because that’s where the labor
union movement is strongest. And why is that? Because that’s where some years ago, there was a turning point
in building coalitions across population groups, which has become very, very strong. The left broadly has a million pluralities of millions of votes in
that state right now. Where is the transition occurring? It occurred in 2018 in
Arizona by the election of Krysten Sinema. A senior labor strategist
said to me at that time, we own that state. Where is it happening next? Georgia, where my student
Stacey Abrams would be governor, if the votes have been counted correctly. Where is it going to happen after that? Well, I can tell you because I live there. Eventually it’s going to
happen in the state of Texas, where in Harris County, an
exceedingly diverse population is now, does not have a single
republican office holder. And that movement, which
is a demographic movement and a coalition is going to be eventually make that state competitive. And when that happens, the entire country will have a different political complexion than it does now. I can tell you that the
republican party in Texas is exceedingly aware of
this and very nervous, which is something that gives
me a great deal of pleasure. Because I’ve lived under
them for several decades now, which is quite long enough. So that seems to me, when
you think about this, thinking about building
coalitions, you build coalitions with the people who are there, and with the populations whose
influence is certain to grow no matter what anybody
tries to do about it. – Just simply for the
sake of, I think accuracy, correct a I think maybe
a misunderstanding, in what Marshall said. The people who would come,
they would not be able to undercut domestic labor by
for example, working for less. They would simply be
here or in any country they wish to emigrate for
a limited period of time, and they would not have
the right to citizenship and they would have to go
back to their own country after that time had expired. But while they are here, they
would have in terms of work, the same rights that actually
any other American does. So it’s not really the system
for sort of undermining the domestic labor, but it’s the system for actually reducing
poverty in the third world. So that’s basically the difference. – It’s a guest worker system in a sense. – It’s a guest worker system
with compulsory return. – Okay, so that is not well
captured by simply describing it as reduced rights. Let me ask, there are several
interesting questions here, thank you to the audience. This would probably one
for you Branko for sure. Someone in the audience has asked, what about capitalism in Europe? In the post-socialist
countries, a part of the world you know well, is that
the same or different as these two models that you’ve described? – It leads us back to
maybe also the question that Jamie asked. No, I could not, it is
a book of 270 pages. I mean obviously each
capitalist country is different. It’s like, what does it (mumbles) each marriage is different. But we still have a marriage. So likewise, I think the
essential features of capitalism are the same in countries which are not, which I think are not countries
of political capitalism. Now, obviously Sweden is
not the United States, the Netherlands is not exactly
the same like Argentina. So clearly, there are many differences. There is lots of work on comparative, comparative capitalisms and actually, this was not something that
I actually could address. It’s first limited book,
and I think actually it takes it sort of fairly abstract view. And I’m using the US examples first because I know them better. And secondly, because there is
much more work on the US done than maybe in other countries. – I think this question is focusing on Eastern Europe though,
on the post-socialist– – I mean there is no difference
between Czech Republic in my opinion of Austria
and Austria from France, it’s the same – Yes, Jamie. – I’ll say that in 2015,
when I was attempting to help the finance ministry of Greece in its dealings with Europe, the most difficult finance ministers were from Eastern Europe. They were the most ideologically committed to far right Milton Friedmanism
Hayekian austerity policies as a matter of political ideology. The others kind of apologized for it but these guys were really
in the soup on that. At the same time though,
I have to say that, just as an example of how convoluted these relationships are,
the Greek government sold off the shipping elements
of the port of Piraeus, to a Chinese Corporation, Costco, which I described as
the situation in which the left wing government
in a capitalist country was dictating labor standards
to a right wing corporation from a communist country. The post modernism of these labels was really quite, quite,
quite a lot of fun. – So one of our audience members asks, and this is going to be our last question and I’m gonna elaborate
slightly from one that I had that we didn’t have time for. What is the future of capitalism, which is indeed addressed quite
a bit Branko, in your book. A couple of things. You write about the US in particular, the liberal meritocratic capitalism, that its advantage resides in the political system of democracy. And you note democracy
as advantageous per se, but also there’s an instrumental story because the consultation
with the population is a corrective. And on the other hand, you
argue that in China essentially, the Chinese, this is put a bit crudely, but are really bribing the Chinese people to accept the lack of democracy in exchange for this very
high economic growth. So these are sort of two
pictures of democracy and the two models of capitalism. What does the future hold? Is this grand bargain in
China, assuming it exists, is it sustainable? What is China gonna look like in 20 years? And what about the liberal model? – Well of course, nobody knows
what China would look like. But I wanted to go back to, nobody knows what the US would
look like in 20 years either. But what I want to say is that actually, I’m too much of an economic determinist. And I do believe that the system which is economically more
successful would eventually, I’m not saying prevail,
because I don’t think that one system will
prevail all over the world. But that would become
gradually a dominant system. And I think what was actually
interesting with China is there is no doubt that
in the last 50 years, if you were to choose one country which was more successful, that’s China. Then you go back into
the past and you say, what was the country
that was most successful in the previous like, suppose 70 years? Well, that was the United States. Well, the United States came to become really predominant power not only militarily and economically, but also power that was
imitated and emulated by others precisely because
it was so successful. You go further back, then
of course, you have the UK and the same story. So it doesn’t seem to me
unlikely that the country which is more successful economically with the system that it does have, would tend to actually be
imitated, or second point, that’s of course, the big point whether historically China
is predisposed to do that, whether that country would
be actually willing to export its system elsewhere. So we have I think, here in the future, two questions to be asked. First, is China going to be willing to start exporting the
system that it does have? And secondly, are other
countries going to be willing to say well look, China is doing so well, we’re going to imitate. And of course, like Jamie, I
also have anecdotal things. For example, I was told recently, the discussions with
the Egyptian ministers, they are all together with ICD people and I talk and all that. As soon as the ICD
people turn and go away, they said look the Chinese are going to actually invest here,
they’re going to bring billions. So we are going to do the road,
we are going to have trains, forget about all these
conferences and meetings about transparency and governance, we are not interested in that. But of course, while ICD is there, they of course talk
about being interested. So the question is actually
whether this would come to pass, we don’t know that. But I think these two elements, willingness of others to imitate and willingness of China to export are really what will determine the role of China in the future. – Jamie, and then Marshall, the last word. – Yeah, I think the issue
in China has never been and is not now whether it will become a formally democratic society and anything like the western mode. I think Chinese opinions, I
mean one doesn’t know really what Chinese opinion is, but so far as, our contact with it, has
looked upon the western form and it decided first of all,
it’s not really democracy. And secondly, it doesn’t deliver. Whereas policy a system that they do have has been delivering for quite a long time, and delivering under political conditions which have been relatively
relaxed by Chinese standards. Because people of my generation
remember what it was like before under the Cultural
Revolution for example. And they have not had to go back to that and so long as they don’t, well, that’s the kind of bottom line which creates conditions
which are tolerable. So there’s a very general view. Now, how does the Chinese
respond to challenges? The answer is reform,
the all-purpose solvent of the Chinese system. They’ve been reforming since
1976, the age of reforms, and when a reform generates
problems, as they all do, the solution to those problems
is always more reform. So one thing you can be fairly
sure of in the Chinese system is that it will continue to be oriented toward this notion of reform. What that means in concrete terms depends on what problems will show up. But if the system continues to function, that is to say address problems and now environmental issues
are a very major problem, to address these problems
as they come along, it got that, continue to
be reasonably successful. Can it be exported? That’s an open question, China’s China. I think that’s a lot of countries would like to be like China
but they’re not as big and they’re not as stable. – [Man] What about Hong Kong? – Say again. – What about Hong Kong? – What about Hong Kong? Well Hong Kong is a problem now for China, but it’s a small problem. Hong Kong is a city. It was once 70% of China’s
exports passed through Hong Kong. Now, I think it’s the
seventh or so largest port. As a financial center, it’s
lost ground to Shanghai. The major development, the major I think, I can’t read the Chinese government, I don’t have any connections there. But my sense is that
the Chinese government approaches these problems with a considerable amount of patience. It may now have a situation
in which with the elections, you have interlocutors who
actually represent people of Hong Kong, and so you might then have some possibility
of negotiations, which were not there before
and that would be a good thing. But if it doesn’t happen,
Hong Kong does not have the central importance
to China that it had 25 or 30 years ago. And so that’s something which
unfortunately for people who live there is a
reality that they’re going to have to just be conscious of, I’m sure they are conscious of. It’s a major reason
for the demonstrations, so that’s the case. – Marshall, what is the
future of capitalism? You have one minute. – Yeah, I mean I can’t speak
to the ability of China to export its model, but
I do fear that the forces that are empowered by the
capitalist system that we have have figured out increasingly
how to operate that system unchecked by democracy. And I don’t mean that just in
the formal sense of elections and how they’re conducted
and whether candidates need to appeal to major funders
in order to win elections and run advertisements on TV to do so. But also in the economy overall, I think we have structures
that made capitalism work insofar as it ever did,
by democratizing power in corporations by making sure that there was multiple stakeholders who had to be appealed to and satisfied within the structure of the
American capitalist system. And I fear that increasingly,
the economy lacks those things and it’s not, one, the
course of one election cycle is not going to be, one
presidential election is not going to reestablish that kind of democratization
of economic power. – Before I bring this to a close, let me just tell the
audience that as we do close in the next moment, there
was a bookseller selling “Capitalism, Alone” and
Branko will be signing and the others of us will
come out and chat as well. So it’s my sad duty to
bring this to a close. Thank you very much,
Branko and to the panel. (audience applauds) – Notwithstanding my captious
remarks, do buy the book.

Stephen Childs

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