Why Economists Should Care About Inequality, with Branko Milanovic

I've become rather skeptical about the ability to do big changes. The reason is that we have been talking about inequality for 15 years, but when you look actually what has happened, not much has happened at the level of policies. I'm Bethany McLean. Did you ever have a moment of doubt about capitalism and whether greed's a good idea? And I'm Luigi Zingales. We have socialism for the very rich, rugged individualism for the poor. And Mrs. Capital isn't a podcast about what is working in capitalism. First of all, tell me, is there some society you know that doesn't run on greed? And most importantly, what isn't? We ought to do better by the people that get left behind. I don't think we should have killed the capital system in the process. This week's episode comes to you from a live taping at the Aspen Ideas Economy Festival, where we were invited to join in order to wrestle with a question that has always animated our podcast. Can capitalism still deliver for people in the 21st century? Or have we reached a breaking point? Inequality is rising, political anger is bubbling over, and the middle class in many countries feels like it's disappearing. So this seemed like the perfect moment to bring in someone who has spent decades studying the global evolution of inequality. Our guest for this event was Bronco Milanovic, one of the world's leading experts on inequality. He was a former lead economist at the World Bank, and he's the author of The World Under Capitalism. Bronco has a provocative view. Capitalism isn't going away, but it's changing. And the pressure points we see today, from populist politics to geopolitical tensions to the debate over generative AI and who benefit from it, may signal very different futures for capitalists, depending on our society's response. So today, live from Aspen ideas, we dig into where capitalism is going and whether we can build an economic system that is not just prosperous. But actually fair. So I wanted to start with a quote that you've used, actually, from Adam Smith. He wrote, No society can surely be flourishing and happy, of which the far greater part of its members are poor and miserable. You study inequality. Why does it matter? Inequality for the country is important, in my opinion, because without a reasonable level of equality and ability to do well in one's life, I think that growth is affected. So actually, I don't believe, like many people do, that the two things are mutually exclusive, or that the more of equality you have, the less is growth. I think at some point, yes. But within the normal scope of the numbers that we have, I think lower inequality means higher growth. But for a long time, economies forgot to study inequality. In one of your books, you talk about an eclipse, that is basically from the 20s to your work in science and picketing work. Can you explain why there's been this disappears of the study of inequality and why all of a sudden has come back as a big, big topic? I think there are three reasons. I will not sort of lay a blame in percentage terms to each. One of them, there was endogenous evolution in economics, which is really very much into looking at general equilibrium and prices. Now, the problem with that is that if you have that point of view, the endowments, which means how much capital you have, what type of labor you have, and so on, really come into the play only when you actually pay them. You have rate of return, so much capital, that's the total amount that you get. But in the classical literature in Adam Smith or Marx or Ricardo, the question is actually how did you acquire that capital? But that question is not asked by general equilibrium. So I think one reason. Pricing is at the center of the study. The second reason is that there was political pressure not to really emphasize capital incomes and capitalists as such, because the US said, okay, you in the Soviet Union have said you have eliminated classes. Well, we have eliminated too, because everybody can become rich. So essentially, there was this American dream, which ignores class because it's really immaterial. And the third one, I think there was lots of funding of think tanks and others by the rich people, and they are allergic. I have to tell you that maybe later from my own experience, they don't like the word inequality. They just don't like it. They like word poverty. They say, okay, that's great, because I'm a really nice guy helping the poor people. But when you put the word inequality, that kind of little bit irritates them. Perhaps because inequality implies that maybe there's something to be done about it. But does that get to the point, can you separate then the study of economics from the political environment in which it's happening or the social time in which it's happening, or all of these things constructs of the moment in time as well? I would rather say the latter is. I know that this is not maybe necessarily popular because we would like that what we've worked somehow lasts for eternity. But in reality, I think that that book actually was not original. I didn't really have this in mind originally. I was reading these authors. I mentioned others, Mark, Ricardo, Pareto and Kuznetz. But I didn't realize until I started, actually I was advanced in writing, how much their view of inequality is really influenced, fashioned by the times and the place where they are. And so is ours. And there are topics which none of them has really studied. When you look at issues of slavery, colonialism, gender inequality, racial inequality, they're just not there. They appear a little bit here and there. But these are the issues that we feel much more strongly now than they felt 200 years ago, or 200 years ago were actually these issues maybe were more acute than now. So I do think that actually sometimes what we do reflects what is the sort of the prevalent mores of the time. And so inequality today, I think it's a little bit different than inequality, study of inequality than 100 years ago. But you're famous to study inequality at the global level. And many people are more interested in the study of inequality at the state level, the country level. So why at the international level, and you say you're interested about the relation between equality and growth, but we see very often, at least historically, moment of enormous inequality and very high growth. So how do you reconcile them too? It is true. There is a difference between global inequality or country level and nation level inequality, because in the latter case, you do have a political organization that in theory can't take care of inequality or organization to which you can appeal, so to speak, to actually redress or change inequality. And this global level, such a thing simply does not exist. And so there is a difference. However, what is actually interesting about global inequality, particularly now with globalization, is that we have witnessed a period of dramatic changes in relative position and the ranking of different people in different countries. And when I say countries, I don't mean countries such. I mean people from the countries. So that really meant that certain classes, certain groups of people have done extremely well and the others have not done well. And I think that actually those who have not done well, comparing themselves to those within their country who have done well and comparing themselves to people from other countries who have done well, have also been one of the reasons behind the political issues and the turbulence that we have now. Uh-oh, I have a two-part question. First of all, can you explain to the audience this concept that made you famous, the elephant curve and how it got its name, because I love that story that you told. And then secondly, to pick up on what you just said, then what matters more? Does global inequality matter more or does inequality on a global level matter more or does inequality within a nation matter more for the sake of social and political stability? Can I ask the second one? Because first, I do think if you were to ask me which one is more important, I would say definitely national inequality, because national inequality is something that every seat is in here, in principle. Deal, in other words. In principle, you have the right to political action, you have the right to choose a political party or the candidate, you have the right to express your opinion. At the global level, it's much more diffused, as I was saying before, because you don't even know what is happening, you have no political organization, it is much more difficult to do then at the national level. However, there is this interdependency of which I was talking that what happens at global level might have significantly impact locally or nationally. Now, going to the first question, the Elephant Chart, many people might know, but that's a chart that shows who basically gained, in terms of real income the most during the high globalization period, which probably ended, like you know, you can say 2018 approximately, or 2016, and where they were in the global income distribution. So why the chart became quite well known was that it shows clearly that towards the middle, excuse me, of the global income distribution, where you have Asian countries, and to simplify, where you have lots of people from the urban China, they have done very well, growing at 8 to 10% per annum, okay? So that's a lot, big number. And then when you go to the top 1%, where actually you have really very strong domination of the Americans, really US citizens are 40% of the top 5%, so they're really big there. They have done also very well during high globalization. And then you see one group, well these guys have not done very well, their growth was likely quite close between 0% and 1% annually, and when you look at who are these people, they're around the 70th, 80th percent of global income distribution, but they're mostly from lower middle class or middle class of the rich countries, not only US, also France, Italy, Germany, Japan, so forth, so forth. And you see here the interaction between global inequality and domestic. And it looked like an elephant, I'm having trouble visualizing it, that was the... Well that was as I was saying to Bethany before, I didn't name it, I still don't remember who it was, I think there was a guy on social media, you see it goes like this, okay? So the guy just looked at this and then drew an elephant there, and this was the trunk of the elephant, that was the global top 1%, there was like a sort of middle of whatever, it's the back of the elephant, and he called it, I think that he called it the elephant chart, and then he became famous. So maybe he should have a trademark for that. Maybe social media is not something. But since we're interested in capitalist inequality, so first of all, can you praise capitalism for the success of China or not? Number two, the fact that capital is China was so successful and reduced inequality at the international level is something that is good for us in the United States, because a lot of people in the States are angry about the fact that they don't see being better than their parents, and you know the consolation that Chinese are much richer today is not going to cut it. Well, these are really excellent questions, I have to say now we didn't plan this, but these are really the two big themes of my forthcoming book, it comes in three weeks in the UK and here would be in March, it's called the Great Global Transformation. And the theme is exactly, as Luigi said, is the following, is if you ask any audience, and I've tried it on many audiences, I'm sure I would get also the same answer from you guys, if you ask them abstract, two abstract questions, are you guys generally in favor of mean country incomes becoming more similar? And they will say, okay, like, you know, Mexico becomes more similar to the US, you know, Algeria, more similar to France, so everybody says yes, why not, this is really nice, it would be nice if the world was more equal. Then you say to them, okay, second question, are you in favor of reduction of global inequality, where actually defined inequality between citizens, actually between individuals, so it's no longer countries, it's actually not mean income, it's individuals, and people say yes, we are all very much in favor of that. But then you say, okay, the first equality that is happening means that China, as you were saying, is getting richer. The whole economy of China by 2015 has overtaken the US in PPP terms. It's only 30% below US in terms of market exchange rates. That creates the political problem. There is one hegemon, there is one would be hegemon. So suddenly this good development becomes a source of international friction. But the second development at the individual level, we get richer and so on, that's nice, but let's suppose you're from a rich country, I am from a poor country. And then at some point, and that's what happened with the Chinese and others, who overtake western middle classes. So you might not necessarily like that idea of being overtaken, and maybe at first you would not even see that overtaking you. But over the years, you would realize that you cannot go to big sporting events because international price, there will be Chinese and Indonesians there and not you, and there will be other things like new iPhone or new pair of some fancy tennis shoes or whatever. You would realize that even if you at first say, well, it doesn't matter that the Chinese have become richer than I, you would see. And I was saying actually for you, I was saying, well, you notice that in Venice, obviously. Like, eventually the nice views of Venice would not be seen by Italians. Italians will be somewhere else and other people would have the primary view. So at that point, you don't like that idea and I think that was at the origin. I'm not saying that's the only reason, but it's only one of the reasons of political backlash. So that's why I was talking indirectly about interaction, interdependency of the two before. So if inequality is a flaw of current capitalism, is it fixable under capitalism as practiced in a western democracy? Are the mechanisms there for it to be self-correcting or does there need to be an intervention by the state? And if so, what kind of intervention? You know, I think there is, there is, there has to be an interaction by the state, but I have to say that I'm, how should I say, I've become rather skeptical about the ability to do big changes. The reason is that we have been talking about inequality for 15 years, but when you look actually what has happened, not much has happened at the level of policies. But there are certain things that have happened and people don't write about that. For me, the interesting thing is that the UK inequality has now been on a decline for about six, seven years. So it was not, we are not talking about some bizarre event. We are really talking of one of the major countries with a decline in inequality. Chinese has been on a plateau. US too has been actually income inequality with the Gini coefficient, or you look at the share of the top 1% or 5% has been sort of stable. The interesting detail about the US, and I have to show you that because it shows the power of the government or the state during COVID, what happened during COVID? The market income inequality before government intervention went up by one and a half Gini point. Now, it doesn't mean much to many of you, but it is significant number given to the whole inequality in the US is 40. So one and a half went up. Okay, what happened at the level of income that you receive after government transfers and taxes? It went down in equality, went down by one and a half point. Why? Because the US through the CARES Act and other acts distributed like, I know, 15% or 18% of GDP. And if you look actually who received that the gains when I mean from the government transfers went all the way up to the 70th percentile of the US income distribution. The richest people didn't get it, but everybody and even they got something probably, but that shows you the power of the state. Now, is it feasible to do year after year? I kind of doubt. And that's why my to end the question that they answer. That's that I become a little bit skeptical and I don't like the approach that every problem that appears seemingly is fixable through greater taxation. I think it becomes really somewhat boring at the end that any problem that you see is the OK, I want to touch this, I want to touch that and so people actually don't want an excessive taxation. But you are kind of some level lucky because you are in the right time at the right place when things happen. So you were in the socialist block at the time the socialist basically collapsed. You could see the collapse. Then you want to the World Bank at the peak of the neoliberal thinking. And now you're seeing that neoliberal consensus collapse. So two questions. Number one, what is collapsing next? Well, you're going next and we know. You should not come with me. And second, how do you interpret these changes and what is left now of the neoliberal consensus? You know, I actually think that when I think back on my life, I do actually believe now that within my lifetime, I have seen two universalist ideologies collapse. The first is socialism and the second was neoliberalism. I don't think that anybody could argue that today, ideologically, we are at the same position that we were in 1995, I say. Things have changed and I don't need to convince you. We all know that. Now, how it would look that of course nobody knows. But I mean, we can have some guesses. My guess in the global, great global transformation is that there will be something for the Western countries, for the rich countries, which I called, well, that's difficult word, but the term national market liberalism. So let me explain. There would be liberal or neoliberal policies, but they would be circumscribed. They would be limited to the market sphere, where actually there will be greater deregulation as we seem to today, lower taxation and all the typical stuff. But they would not be applied to the international arena where we would have mercantilist policies. So I think it is a sort of an interesting combination because you would think normally mercantilist policies would go with the largest state role in the economy domestically. But I think that that link is not entirely but would be broken. So I'm not sure what this new ideology would be, but let me put it like that very simple way. I would expect economic space domestically to remain neoliberal, but I would expect the space externally, internationally to become mercantilistic. So we have had people on our podcast, including Martin Wolf, who have argued that capitalism and democracy are inextricably linked. And I wanted to read you something that you've written. And you wrote, if Chinese and Singaporean meritocracies continue to consistently outperform societies where the social sphere is organized in a democratic fashion, there is, I think, little doubt that their appeal will be such that in 100 years, it may seem to those who are around so very quaint that people thought in a complex society social decision should be taken by democratic vote. So I think you're a little bit more skeptical about the idea that capitalism and democracy are linked. You know, I'm very much in some sense quite an economist of the role. And for me, I have to say, since I was really a kid, actually, when you alluded to that, I remember reading, for example, newspapers and reading that was always small letters. What was the industrial rate of growth of Yugoslavia over this month? And I would be in those days, that was early 70s, I would be very disappointed if it would not be double digit. And it was not. It was like 7, 8%, which nowadays looks high. Why did I mention that? Because I think really economic growth is fundamental. And I think that there is a trade-off that people are directly or indirectly willing to make between so-called political liberties and economic growth. And if you sort of think, as I think some people in China do, or maybe even Singapore, as I mentioned there, is that the organization of society is essentially such as an organization of a company. In a company, in capitalism, you don't have democracy. The company is run hierarchically. So you can say, okay, the society is also run like that. And let's see what is the outcome. Is the outcome good or is bad? And if the majority of people say, okay, it is run hierarchically, but the right people are there on top and they are running us. And I actually am not interested how they have come there, maybe through some sort of, you know, mutual sort of decision-making as in the Communist Party. It's okay with me. So in that sense, I think that there is no, that there is acceptance of a trade-off between democratic rights and economic growth. Many people don't, including John Rawls, who actually believe that really they cannot be a trade-off. He explicitly says no, no trade-off. But he also said that really greater wealth is not an objective that normal people in normal societies should have. He said it was a businessmen objective, but not really normal people. And that's why he believed that actually economic wealth is not so important. But for an economy that comes like a heresy, economic wealth is really crucial for us. So then I would, to conclude, I think I would not agree that there is no trade-off. And secondly, I would also argue that if you look historically, there are many cases of successful capitalism without democracy. I'm not talking now about Pinochet and Chile. I would tell you like, Aluina Pauline III in France with economic sort of takeoff of France, with Bismarck in Germany, with Spain and Portugal, with Greece, with Turkey, with Brazil. So, you know, if you take all of these countries historically and including the United States, it was, of course, originally, and, you know, and a slave-warning oligarchy. So it's not democratic. So I would question that even empirically the link between the two is strong. Actually, first of all, I come from a country that really blossomed with democracy because Italy took off. The Italian miracle is a miracle of democracy. So, and I'm a little bit scared that you sounds like you're in Curtis that say that countries should be run like corporations. There is a fundamental difference between the two because you can choose among corporations, at least at least there is a little bit of competition. But most people cannot choose across countries. So they don't have the exit option that we have in corporations. So that's pretty scary. No, I'm just saying that actually that many people might think that the rules which are at the corporate level, which are hierarchical rules, because you can also say, and there was, of course, as you know, the whole literature about transforming the workplace to become a democratic workplace. Well, it seems not to work. It seems that we want to have hierarchical organizations in order for the companies to work better. What happens if we also turn, it turns out that hierarchically organized societies outperform economically known hierarchical organizations. And just if I may, I think the countries that have gone through dictatorship into democracy and had economic growth continue and had an increased international importance, our countries very happy with democracy. And I'll give you a few Italy, as you mentioned, Spain, definitely liberalization in the domestic life, much greater importance of Spain as such. Poland, currently, a country which has actually grown in importance tremendously both economically and politically, and Chile, I would say as well. So the countries where this transition has been linked with social democratization, liberalization, and with the greater importance of the country and consequently pride, I think they're very stable. They may not be in the future, but currently countries where democracy is very highly praised or valued. If you take Russia, well, democracy was a failure. And that's why we have the situation now. So if, if America's capitalists care about preserving democracy, what should they do? What should we do? Well, that was a difficult question. Sorry. Well, I think in order to preserve democracy, one has to have a variety of voices being heard. And the variety of voices has to be expressed also through the political arena. That, in my opinion, means a much lower role for private money. Unfortunately, this is of course something that is not very realistic because both parties depend very much on money. And of course, as you know, studies that show that actually there was very nice book that the book about recent, the Brookings, which goes into very huge detail. So, you know, I'm actually, I would ask them if they would all decide not to contribute and to use money to run the political system. But you know, that is a double commitment. Maybe I would agree with that, but you might not agree with that. And of course, in that case, I'm not going to do it either myself. But I believe that diversity is absolutely crucial. Let's put it like that. And I think if there is a need to maintain something, it's diversity of opinion. But I know that you have criticized sort of redistribution as a way to reduce inequality because it's very limited. But let's talk about what is currently known as predistribution. So impacting the market system so that the distribution of the outcomes are not so too extreme. How do you see that? And do you see that as a new line of thinking in a new consensus? Or do you think that this is a lost cause? No, I really believe that it's not entirely new because it existed before, but it is a new line of thinking. Let me put it, let's try to put it like this. Let's suppose that we would really, okay taxation is very good and subsidies for some activities or whatever for government transfers are good. But it seems that in many rich countries, we have reached the limit of public acceptance. You know, when tax rates become very high, when the overall tax state becomes high, and when your doubts about the efficiency with which government uses that money become slow, as it happened to me coming here by Uber, I had the same discussion with the Uber driver. And you know, he just doesn't believe in government. He says they are here to steal. And why am I paying every time toll road coming here? I said because you're using the road. He said no, the tax fair should be paying and they pay for this. I'm paying that for the politicians to steal the money. He says to me, do you know a single politician who is not rich? I said, well, hard to find, but maybe there is somebody. But so what I think actually, if we have reached that point, then the alternative, which is pre-redistribution, means technically, I'm not saying it's easy to do, but I think means technically making more people having capital assets, which means that they would have a broader distribution of wealth and capital, having more people receive shares in the companies where they work, which also would be an introduction of wealth into lives of many people. And I'll give you a number for the U.S. in a minute, which was surprising. And it means also opening up educational system, getting education much more cheaply for the people who are not afforded and so on. So this is a pre-redistribution because you actually make endowments or assets more widely spread. But I said assets also means human capital. And just to give an example, when you look at actually what percentage of Americans receive income from capital, like cash income from interest dividends and rents. I'm not talking about imputed income that you get from your housing, your car. So only cash income. What you find is that 60% receive zero or trivial amount. 60% are zero. Yeah, excluding 401Ks, right? No, including 401Ks. Including because you receive it, you have, but you're only a segmental population. That's a big chunk of the population where there's a pension fund. There's a pension fund. And it makes a difference of four or five percentage points in the U.K. and Norway and the U.S. probably three or four. But we are talking about majority, the mean, believe it or not. If you look at the, this is CPS, current population census. And the median, sorry, the median income, cash income from financial assets is $22 per year per person. Wow. You buy, as I wrote about, you buy one in Manhattan. It gives you one glass of rose or white wine. That's what the median is. Now, of course, when you move towards the richer, it's obviously much, much higher. But what I'm saying is that you really have a hockey stick distribution when it comes to capital. And if artificial intelligence means that the share of capital in total national GDP goes up, the hockey stick would really hit you very hard because inequality would be higher. So we have time for one last quick question. You've, in your forthcoming book, you write about a new concept called homo-plutia. Am I pronouncing it correctly? Yes. So can you quickly explain why that is and why that has a potential moral tone to it that may also be dangerous? You know, homo-plutia is by definition, I define it by looking at all these numbers. And if you look at the following thing, you say, okay, let me take 10% of the richest Americans. How much, I mean, where do they get their income? Let's divide it labor and capital. What you find out that more and more in rich countries, it's not only the American phenomenon, but all rich countries, among these 10% of the richest, there are also one-third of them are among the richest workers in terms of high earnings, among the richest capitalist in terms of high capital income. And that's what I call homo-plutia. And that is an interesting phenomenon because we all know in a classical capitalism, you would have 10% richest guys, but they have lots of capital. They're not going to work. And if you look at Brazil, Peru, and Mexico, indeed, they don't work. They are the richest 10%. They're the richest in capital, but they are not richest in labor income. So that's a new concept. And why there is maybe a certain ethical and moral issue there is that these people do like actually to work. And we know from statistics that they work even more hours than other people, but they tend also to expose what is called old-fashioned virtues, which include virtues behavior, but also believe that others who have not been as successful have failed because of some moral or intellectual failure in them. And those people don't like if you think about them that way. So it ends up in the same place we began our discussion, which is with inequality and what people want to talk about and what they don't want to talk about. Thank you all. If you're enjoying the discussions Luigi and I are having on this show, there's another University of Chicago podcast network show you should also check out. It's called Big Brains. Big Brains brings you the stories behind the pivotal breakthroughs that are reshaping our world. Change how you see the world and keep up with the latest academic thinking with Big Brains, part of the University of Chicago podcast network. We've had guests on the podcast before, I think most notably Martin Wolf with his most recent book, who really tried to link democracy and capitalism together. And in my math major brain, it has always felt a little bit less than stable. In other words, it is not felt like a QED proof. It's felt like, oh, okay, I can see how these things go together. But I think Bronco is the first person who has said they don't necessarily have to go together. And that models of capitalism that deliver for more people may not be democratic and may be the ones that thrive in the end. And I found that both, it both made sense to me, but it also obviously worried me. What did you think? So I think it depends very much on what is the definition of capitalism. Clearly we can have capitalism without democracy. The Chilean, the Pinochet was an excellent example of that. The question is whether we can have a capitalist that works for everyone without democracy. To me, that's impossible. And I don't think necessarily Bronco disagree with that. And I think there is a growing number of people. I'm not sure Bronco is among those, but certainly there are a lot of people thinking that at the end of the day, China was very good to deliver without democracy. Why don't we do it like China? I think it's a real challenge for democratic systems. And if you do believe that inequality is one of the animating forces in our world today, or rather maybe one of the destabilizing forces, then systems that appear to deliver less inequality may thrive more than those that don't. And you would think that a democracy, at least in its ideal form, would deliver less inequality than a more autocratic system. But I fear that somehow what we're seeing is that a democracy delivers more inequality, and that actually gets to an interesting conundrum. Why would that possibly be the case? Because you would think that a system that allows more people to have a voice would automatically deliver more for everybody, but that's not really the way it's going right now. You've got the China created an enormous amount of inequality. I think that inequality is ignored, partly because the average rise was so large that people don't perceive the inequality as a first order, but certainly is not a very equal system. Number two, again, I think is the definition of democracy. If democracy is just free and fair elections, I'm with you, democracy does not deliver. I think democracy is more substantive. The Western countries have turned into plutocracies, and this has exacerbated the inequality. And I think the United States, by and large, is an example of this. I always like to tell my friends, in order to have a Latin American president, you need a Latin American economy. Many of them were kind of dismissive in the past. Maybe it's the Constitution, maybe it's the culture, maybe other people. But actually, when the United States has the same level of inequality of Latin American countries, they live at the same level of political outcomes as the Latin American countries. Yeah, that's an interesting point. Thinking as this discussion is running, one of my favorite quotes is from Alice in Wonderland. Do you know what Humpty Dumpty says in the score full-tone to Alice? When I use a word, it means exactly what I want it to mean, no more and no less. And Alice says something along the lines, I tell them, what does it all mean then? And Humpty Dumpty says, well, who is to be mastered? That's all. Anyway, so whenever I'm having a discussion about what a word actually means, I always think back to that. There are a lot of lessons from Alice in Wonderland. So I love your quote of Alice in Wonderland, and I think it's very appropriate in this case. There is a former political science student at Chicago now. She's an assistant professor at UCLA in Natasha Piano, who has this very interesting book in which she claims, I don't know if you are familiar, but there are some Italian thinker of the early part of the 20th century, Pareto, who is the economist, but he's also a sociologist, and Mosca, who is just a sociologist, who criticized democracy as was practiced in Europe back then as a form of plutocracy and not really democratic. After World War II, American political scientists labeled these two guys proto-fascists and said that their critique was a critique of democracy because democracy is what is practiced in America, which is free and fair elections. Natasha is saying, no, what these guys were saying is democracy was not a ruling of the people, as the world is suggesting, was a ruling of the rich people, and that's the reason why it's plutocracy, and that's the reason why they were criticizing, but they were criticizing not because they were trying to regain a fascist regime. They were criticizing because the current representative of democracy is not working very well. The American political scientists were very clever and said, no, no, we represent democracy. We are the master. We chose the term of the meaning of the word, and the meaning of the word is free and fair election. That if these free and fair elections are bought and paid for by a few plutocrats, it doesn't matter because this is democracy as we define it. That is fascinating. But I think the subtext, well, I wasn't really the subtext, it was the text of the conversation with Bronco, too, is how much does this concept of inequality matter? And it's been everywhere. It's been a buzzword since, of course, Tomas Piketty's book, maybe, who we had on this podcast, maybe even before that. But is that the defining way to measure whether an economic system is succeeding or not? Is there a different way to measure it? And does global well-being matter more than individual country well-being? I find it interesting the position that Bronco has because he's only focusing on the international inequality. Well, of course, is an interesting viable from a political point of view. It's kind of irrelevant. If I am a known college educated person living in the Midwest and my standard of living are not rising or even worse, they're dripping, they're slowly going down. The fact that a lot of Chinese are doing better is not really a great consolation. In fact, it might even be a source of anger, right? The question that opens up then is if you care about the human species as a whole, is that better even if it makes certain people miserable? Right? It might be worse for individual society's stability and it might be worse for individual people's happiness. But is that still a worthy goal if you're an Uber human who's able to separate your own well-being and the well-being of your country from the well-being of the humanity as a whole? But I think that there is an intellectual class that includes most economists, I'm sorry to say, that professes this universalism. In part, it's an excuse not to care about what's happening in their backyard. So they're closer to the people who die of hunger in India than they are to the people who starve in the ghettos near us. And I think that is a very convenient thing. But you know, you pick your place in Pakistan, in Ethiopia, people are worse off. But is this a reason why we shouldn't care about the people who are part of our society? And I think even worse, it's because the people who are making that excuse are very comfortable themselves. And so it's actually a defense of their own level of comfort while still having the sanctimoniousness or the morality of caring about other people. Of course, I care about other people, just not the ones for whom I would have to actually give something up in order to care about them. So I think that that operates on two levels and neither speaks all that well of people. Yeah, because either you are like Piketty. I think Piketty is a true universalist who believed that everybody in the world should have a vote and we should rule from the point of view of the entire world. I don't think many people are ready to jump to this conclusion. And if you're not willing to jump to this conclusion, then you need to reconcile the fact are we a nation or we're not a nation? If we are a nation, we should care first about people in the nation and then about other people. Invert in that order, I think is ignoring the political reality of nation states. And maybe you want to get rid of nation states, but the nation states are important. Yeah. What do you think if you could write the rules on how we handle inequality or how we think about our own nation state? How would you handle it? I think that I would care first about inequality in America and then I will also care about poverty in other countries. But the two things as Branko explained are different. There are political reason to dislike inequality that might not be purely economical. And so they apply strongly to a nation state in the world as long as we can protect. And this is if there are gigantic Russian oligarchs, but we have the rules in place to keep them at bay as an American. I don't care that much. But if they are American and they subvert the rules of our democracy, I do care deeply. Yeah. I think that's I think that's fair. I think that's fair. I still get tied up in the whole equality of opportunity versus equality of outcome. And I still philosophically do believe in that. The problem is that that also speaking of words, not meaning what they seem to mean, that often is a smoke screen for for not caring about how about how things about how things turn out or for absolving yourself of responsibility of how things turn out while not actually providing equality of opportunity. But I wonder if there is a study on this in the U.S. because it does seem to me and I this is obviously not scientific. It's more anecdotal, but it does seem to me that equality of opportunity has gone down dramatically in the U.S. And so that even if you wanted to think of the world through that through that lens, that that opportunity is less available to everybody than it was then it was before Wednesday in this mythic world of the past, which wasn't really so mythic. Public schools across the country were good and functional and a kid going to one of those schools could rise to the top of the top of society. And so that that also can become a smoke screen of sorts as appealing as it is for me to believe in that everybody gets a fair shot, then let the chips fall as they may. I don't know how well that works for a stable society, but it's certainly better than everyone not getting a fair shot. That's for sure. But I think that we need to strive toward a collective opportunities. And I think that as you said, a good public school education is the first pillar to build in that direction. But even with the quality of opportunities, we know that there is there is lack. There are a lot of other things that get in the way. And so that is not an excuse to ignore some form of distribution, especially for the people who are particularly left behind. Yeah. What do you think of the whole pre-distribution versus redistribution argument? When you say ex post, how do you mean distribution for the people left behind? And how do you think of this whole concept overall? I think that it's a very interesting twist that now economists are considering because since the early 90s, there was a universal consensus that the right thing to do was to let the market work its magic and then intervene, Ex post to redistribute income. And the only difference between left and right at some limit, or at least between left and right economists is how much redistribution, Ex post, you want to do it. In reality, the system did not work so well. Number one, because the distribution did not go up, the distribution of Ex post, but if anything went down, the second is because the opportunity even to intervene in having a more fair economist think about the antitrust was massively impeded by the wealth distribution. And so people are now thinking about we should make sure to create the conditions where the rewards are less extreme than in a complete less affair economy because once the return to extreme is very difficult to fix the problem, Ex post. And so I think the idea is a very good idea. Now, as they often the case, the devil is the detail is what you can do to make this happen. Capitalism is a podcast from the University of Chicago podcast network and the Stiegler Center in collaboration with the Chicago booth review. The show is produced by me, Matt Haudab and Leah C. Zerien with production assistance from Utsoth Gandhi, Matt Lucky, Sebastian Berke, Andy Shea and Brooke Fox. Don't forget to subscribe and leave a review wherever you get your podcasts. And if you'd like to take our conversation further, also check out pro market.org, a publication of the Stiegler Center and subscribe to our newsletter. Sign up at Chicago booth.edu slash Stiegler to discover exciting new content, events and.