Sunday, September 24, 2023

The red bourgeoisie

            June 3, 1968 was a beautiful late Spring day in Belgrade. The school year was just about to end, and, for me the best days were about to begin: until the mid-July when many of my friends who had either relatives in the village or second homes on the seaside would go on vacation and I would not see them for two months. But now, during the beautiful, clear June days with long sweet evenings we could stay out in the streets seemingly forever, play soccer, tell tall stories and talk about the girls.

During that day, June 3rd, just for a few moments, probably to pick another soccer ball, we went to the apartment of one my friends; only his grandmother was there. The phone rang. His mother called. She worked for the federal government whose HQs were across the river. In deep panic she called to tell her son, my friend, not to go out in the streets, but to stay at home because (and I do remember her words well) “the students are out trying to overthrow the government”.

For sure, as soon as we were told by the grandmother that we should stay indoor, we promptly went outside. My friend’s apartment, like mine, was close to one of the main university buildings in Belgrade. When we, kids, got there it was already occupied by students, surrounded by the police that did not let anyone get into the university perimeter (in those days, the old-fashioned rules of the “university autonomy” were still observed, even under communism), and we could just look at the seemingly feverish activity inside and listen to the incendiary speeches carried on loudspeakers.

We were attracted to the “forbidden” things happening there. So I remember when several days later as the insurrectionist students communicated with the city only through large banners, I first saw the words “Down with the Red Bourgeoisie”. It was a new term. The students were protesting against corruption, income inequality, lack of employment opportunities. They renamed the university of Belgrade, “The Red University Karl Marx”. It was very difficult for an officially Marxist-inspired government to deal with them. The days of uncertainty  ensued: the newspapers attacked them for destroying public property and “disorderly conduct”, but rebellious students continued skirmishes with the police, and proudly displayed the name of their new university. I remember vividly a bearded student with a big badge “The Red University Karl Marx” standing in the bus, and everyone around him feeling slightly uncomfortable, not sure whether to congratulate him or curse him.

But the slogan was true. It was a protest against the red bourgeoisie, the new ruling class in Eastern Europe. It was a heterogeneous class: some came, especially so in the underdeveloped countries like Serbia, from very rich families; others from the educated middle class, many from workers’ families. Their background was similar to the background of students who were protesting against them now.. Had the students won in 1968, they would have become the new red bourgeoisie.

The red bourgeoisie itself was the product of huge inequities of underdeveloped capitalist societies. From my mother, who got the story from my father (who came from an impoverished merchant family) I learned that on the last day of his high-school, when he managed to save enough money by giving private math classes to the rich parents’ kids and proudly came to school in his new coat, one of the rich kids took the inkpot and poured it on my father’s jacket: “you will never wear what we wear”. Many years later when I told the story to my North European friend, he said you me: “this is the European class system in a nutshell”.

It is against such a system the students in the 1930s, who would later become the red bourgeoisie, stood up. But by 1968 they were the new ruling class and the new students stood up against them.

This ruling class is insufficiently studied and known. It varied between the countries. I liked  lot a book by Tereza Toranska about the new bourgeoisie in Poland, entitled “Them”; a young Serbian journalist Milomir Maric wrote in the 1980s a popular book called “The children of communism” (in the origin “Deca komunizma”). The story of the red bourgeoisie’s very top is narrated in the Russian novel, “The house of government” by Yuri Slezkine. One can find it in Solzhenitsyn’s “First Circle” too.  Emma Goldman noticed it very early on, just a few years after the October Revolution. I was pleased to re-discover that I discussed some of its empirics (income level, housing ownership) in my 1987 dissertation. But this is all very little. The class is unexplored, neither in literary terms nor in its economics.

Like all ruling classes, its members did not think they were a ruling class. I asked many years later one of my close friends who, thanks to her belonging to the upper echelons of the red bourgeoisie, spent several summer holidays on the three small islands off the Dalmatian coast that Tito took for his exclusive resort, how were social relations among the people there: powerful indeed, but each with their own different agendas, wives, children, preferences, drinking habits, and the like. (Very similar to the US Martha’s Vineyard in the Summer: people who may not suffer each other politically, but are “condemned” to be there together, sharing the same beaches, restaurants, tennis courts, with children fighting each other or falling in love.) She told me nothing: she saw none of the political infighting or personal feuds reflected on the beaches or in the altercations over the umbrellas. She did not think people there were special in any way. It was just another workers’ rest home, with better food and more comfortable rooms.

The Yugoslav red bourgeoisie was perhaps specific because it was self-created (i.e. came to power by itself), and developed among its members a feeling of pride connected with non-alignment policies and the huge role that Yugoslavia, compared to its objective importance, played in the world. Eventually, that bourgeoisie splintered along the republican lines, every one deciding that it would be more powerful if it could break country in smaller pieces and rule that small piece unmolested by others. That’s how democracy was born.

I thought of that recently—as indeed I had for many years—as I read about the background of many among the capitalist rulers of Yeltsin’s Russia and today’s Putinism. Their origins are typically in the affluent upper-middle class of the red bourgeoise. That ensured for them all the privileges of the Soviet system, including (in the Soviet case) the ability to travel to the West, to trade in foreign currencies, to listen to the latest rock albums from England. They were the ones who when Gorbachev came to power most eagerly embraced democracy, adulation of the United States, and gaily participated in the plunder of the country. They bought villas in the Riviera, and then, either disappointed at the treatment they received in their Summer resorts by their new Western neighbors, or having overgrown their infatuation with the things Western and the United States in particular, moved to the other side, championing nationalism not only as a way to stay in power, but to create an ersatz ideology that would justify their continued rule.






Thursday, August 31, 2023

Thinkin’ ‘bout a revolution

             As I suppose many older people do, I was thinking about the most important parts of my life, not only personally, but socially: how did the social forces around me affect me and made me think what I think.

There is little doubt that for most of my generation in the West and the East the Cultural Revolutions of the 1960s-70 were a crucial event. (I have to exclude the Third World from this generalization since I do not know enough about how the Western Cultural Revolution affected ideology and the mores there).

May and June this year was the 55th anniversary of Les événements de mai. Last week was the 55th anniversary of the Warsaw Pact’s invasion of Czechoslovakia that also saw the birth of the modern dissident movement in the USSR when eight persons  unfurled a poster on the Red Square condemning the invasion.

The Revolution caught me in the formative years of high-school. All events that happen at that age, even when not revolutionary, have an impact on people’s later lives. So much more if they are revolutionary. We were lucky that the events that affected us were revolutionary mostly in the cultural sense. At the same time China went through the Cultural Revolution, but it was an altogether different series of events, more serious, more ideological, and far bloodier. But no less significant was the Western Cultural Revolution.

What did it accomplish? It reduced social distance between the rich and the poor, a huge achievement; it liberated sex and improved women’s social position in a way that led to the current acceptance of gender equality and all sexual preferences among the liberal elites; it ensured equal or similar civic rights for the Black population in the United States;  it changed dramatically vestimentary habits, simplified them, and thus added to the apparent social levelling by making it more difficult to recognize social status from one’s dress.  

The revolution was similar in the West and in the Communist East, but it produced very different effects. In the West, politically, it diminished class polarization and class antagonism. I lived through the Revolution in Belgium where I went to high school. There was no doubt in my mind when I arrived there that Belgium was a class-stratified society where only rich parents’ boys could date rich parents’ girls. The rules were clear. The Revolution, incrementally, eroded them however: by the mid-1970s, this was not longer true. It produced a deep social change which, I think, has persisted.

In the East, where class differences were less or were obliterated by the political revolution of the late 1940s, the new Revolution opened the vistas of freedom.  It hinted that a different, much freer and diverse world existed close by and that it was possible—not a Utopia. It stimulated resistance to the authorities, and the feeling of freedom—both things that were anathema to the communist regimes that valued conformism and obedience.

Revolution’s effects were long-term and were seen well among the generation that came to power twenty years later. It may seem strange to unify in the same sentence Bill Clinton and Mikhail Gorbachev, but they do illustrate well what I have in mind. Clinton was the product of breaking class barriers to advancement while Gorbachev was a product of the Ideas of 1968: socialism with the human face. That belief affected Gorbachev in his student years as we know from Zdenĕk Mlynař’s memoirs and Gorbachev’s own “confessions”.

One of the complicating features of the Revolution was that it was leftist not only in the social ways that I described, but also because it brought from oblivion the Young Marx (whose early works, by coincidence, were first published then, more than 100 years after he wrote them), and thus the belief in democratic socialism.

The challenge to the ossified pseudo-Marxist regimes in the East came from the left. And even better—thinking of the Young Marx—from  the very founder of the political system the authorities claimed to represent. It was not a coincidence that almost all leaders of the Revolution in Eastern Europe came from the Communist Youth movement: the entire Praxis group in Yugoslavia, students of Lukacs in Hungary, Jacek Kuroń, Adam Michnik, Leszek Kolakowski (coming from the hard Stalinist left) in Poland, Ota Šik and Alexander Dubček in Czechoslovakia.

The Revolution was similar to the Reformation: it refreshed and re-affirmed the original ideological beliefs, and thus highlighted the gap between them and reality. Later the leaders will, with the rest of the society, move towards the right: either in nationalist or classical liberal directions. But that was only possible because the first opposition came from the left, and was thus ideologically more valid than had it come from the discredited right. My point is that in 1968, East European regimes were well equipped to deal with the challenges from the right; but they were ill-equipped to deal with challenges from the left and with the seemingly apolitical challenges of long hair, loud music and bottom bell trousers.

In the West, however, after breaking up some of social barriers and thus establishing apparent equality, the Revolution ended up, in many ways, like the Revolutions of 1848. In the latter case, formal political equality was proclaimed; in the case of the Revolutions of 1968, formal social equality was proclaimed. But in  both cases economic gaps became wider. Moreover, the post-1968 economic gaps became regarded as more justifiable than before when the revolutionaries argued that they were due to large class differences. Now as the Revolution unfolded the gaps reflected differences in ability and effort—in short, in merit. This is where the two iconic figures of the revolutionary generation and the turn to neoliberalism come: Bill Clinton and Tony Blair. It was the left that validated the traditional positions of the right, made them seem common-sensical and thus more firmly entrenched.

The left-wing attack on the regimes in the West soon morphed into the validation of the positions of the right, now even reinforced because shorn of its usual, and hard to justify, class support. The seemingly anti-capitalist Revolution of the 1968, made the world safe for capitalism. Joschka Fischer became foreign minister of Germany and oversaw the first deployment of German military might since the end of the Second World War; Bob Dylan received the Medal of Freedom;  Mick Jagger was knighted. To more vividly appreciate the change, note that Jeremy Corbyn, perhaps the only significant political figure in the West who continued to hold the 1968-like beliefs, came to be seen in the 2020s like a relic from a distant past.

The political effects of the Revolution East and West were at first different, but over the long-term, almost identical. In the East, as we have seen, the attack on the regime was from the left and that made the regimes clumsy in their response. But socialism with the human face, or any kind of socialism for that matter, was gradually discarded, and in an evolution that mimicked that in the West the end-point was declared to be what Václav Klaus called “capitalism without adjectives”. Liberals, united with strong forces of nationalism that grew independently in the meantime and were rather unimportant in 1968, brought communist regimes down. (I am not denying thereby the importance of American readiness to wage war on Communism in every quarter of the globe; when I say that the regimes were brought down from within, I have in mind the fact that ideologically, by 1989, Communist regimes had very little to offer to their populations.)  

The Revolution–with the important exception of nationalism that I mentioned— fashioned the world in which many of us lived until the Financial Crisis of 2008, or covid in 2019, or the war in Ukraine in 2022—whichever of the three possible markers dividing the eras one wishes to take. But in any case, it is plain that we live in a different ideological world today.



Friday, August 25, 2023

BRICS and non-alignment today

             The expansion of BRICS membership is directly related to the expansion of NATO and NATO-like alliances around the world. When this statement is read superficially without understanding what is meant it seems wrong: the two organizations could not be more dissimilar.  The new globalized NATO is a hierarchical, monolithic, and military alliance. None of the four terms applies to BRICS. BRICS is non-hierarchical; the members are extremely heterogeneous and often in political disagreement with each other; BRICS’  objectives are not military;  and it is not an alliance but a mere organization. While two of the now eleven BRICS members are in open or tacit conflict with the West, the others are not. BRICS is not a counterweight to the West or NATO. But it is growing in reaction to NATO’s globalization. Why? Because it is the only place where nations not interested in participating in the new Cold War, or even in a possible hot war between the superpowers, can “run away” in order not to have to choose sides.

It is a profound misunderstanding of what BRICS is, to search for commonalities amongst the members and not having found them to dismiss the organization. Looking for commonalities at times makes sense—but not always. Let’s go over some historical precedents. We can think of international political organizations in positive terms, that is of countries banding together because they believe in a set of common things (which they might consider values). When the Nazis created the Anti-Comintern Pact (the Tripartite pact), the member-countries, spanning two continents, believed in nationalism and fighting Communism; when NATO was formed in 1949, the member countries believed in democracy and containment of the Soviet Union; when the Warsaw Pact was formed in 1955, the member countries believed in expansion of communism, or at least in defending it over the area it then ruled.

But when the non-alignment movement was formed in the late 1950s and early 1960s (note the dates!), or later the Group 77, the members did not possess a positive agenda similar to the ones I just listed. Their agenda was negative: they did not want to have to choose sides in the Cold War waged between the West and the East. They wanted to stay out of it. Many people failed to understand the logic of non-alignment, precisely because they failed to understand that you can create an organization composed of heterogeneous countries that may disagree on many issues, but find it useful, for geopolitical reasons, to get together in a loose association. Non-alignment was liked neither by the Soviet Union nor by the USA. The Soviets believed that it was superfluous because the USSR was “the natural ally” of the Third World and decolonization and rather than getting together in a new organization, the Third World countries should simply support the Soviet bloc. The United States saw the non-alignment as little better than betrayal: countries who drew the equivalence between democracy and tyranny. John Lewis Gadis, the US historian of the Cold War, barely disguises his contempt for the movement and when he condescends to note it, calls it “the so-called ‘non-alignment’ movement.”

The movement in fact ended with the end of the Cold War. This also shows what its true role was: to be a buffer zone during the global confrontation between the US and the Soviet Union, and to minimize the likelihood of their members becoming the ground on which the proxy wars may be fought. Once that confrontation ended, there was no room for non-alignment. It was not obvious what one is non-aligning with anymore.

But now when the contours of a new Cold War are apparent, the need for an organization grouping countries that do not want to be involved in it (and including, somewhat incongruously, and for historical reasons, countries that are in war or conflict with NATO and the West, namely Russia and China) had naturally re-emerged. Many commentators dismiss the new BRICS because they dislike the idea of the formerly Third World nations, whose economic importance has risen, getting together. They fear the grouping will, in some economic areas like de-dollarization or international infrastructure finance, challenge Western supremacy. Other, as I mentioned, very wrongly believe that any grouping must be based on some shared ideas, values, interests, or on hegemonic pressure. Not finding any of the four among BRICS, they dismiss them. Indeed, if BRICS could have more in common they would be stronger. But they do not, and cannot have---for various historical, political or cultural reasons. Yet, the fact that an increasing number of countries want to join BRICS cannot be ignored, nor taken lightly. BRICS’ refusing to participate in new global trade, proxy or actual wars may make such wars less likely. And BRICS’ economic clout may help reduce some of the glaring economic imbalances between the rich, middle-income, and poor nations across the world.

Monday, August 14, 2023

Why slave-owners never willingly emancipated their slaves?

         When I wrote my chapter on Adam Smith in The Visions of inequality (to be published October 10) I considered including a section discussing Smith’s views on slavery. I eventually decided against it because slavery plays only an incidental role in Smith; most of his analysis in The Wealth of Nations assumes the three standard social classes that are all formally free and the interplay between them generates their incomes and social positions. In that context slaves who no longer existed in countries with which Smith was mostly concerned, namely England, Scotland, France, Netherlands, and the rest of Western Europe, were somewhat outside of the main scope of his interest.

However Smith's views on slavery are, as is well-known, fairly complex. I wrote about his argument that the position of slaves was better in autocratic than in  oligarchic democratic governments. The reason is that in an oligarchic and representative government the power is held by the people who themselves are the largest slave-holders (US comes to mind) and they are very unlikely to emancipate slaves because they would thus deprive themselves and their friends of a large amount of capital. They are wary to treat them well because they are permanently afraid of slaves’ insurrection. In richer societies (Smith explains this at some length), the income and social gap between the master and the slave is much greater. Slave has also much more to covet. Hence, in more democratic and richer societies the treatment of slaves, in order to forestall their insurrection, must be particularly harsh. In one of perhaps most striking passages in The Lectures on Jurisprudence Smith says:

Opulence and freedom, the two greatest blessings the men can possess, tend greatly to the misery of this body of men, which in most countries where slavery is allowed makes by far the greatest part. A humane man would wish therefore, if slavery has to be generally established, that these greatest blessings, being incompatible with the happiness of the greatest part of mankind, were never to take place. LoJ (A), February 16, 1763.

(The passage is, I think, so seldom cited because it questions the two most cherished  beliefs: popular government and opulence. If both can exist only if slaves are terrorized, what good are they? It is a striking statement.)

In more autocratic forms of government, the kings are not necessarily dependent on slaves for their power and, as Adam Smith explains regarding the abolition of serfdom in Western Europe, they might even like to get rid of forced labor if it reduces the power of local lords that could use slave armies to challenge the king.

But the most important part which attracted attention of the economists, and I want to single out a recent paper by Barry Weingast, is the following. Smith very clearly in his Lectures on Jurisprudence states that slavery, as an economic institution is, inefficient. That means that a slave-toiled land would yield to the owner much less than if the same land were leased for a reasonable rent to the tenant. The reason is obvious: the tenant farmer has an incentive to increase production even if he has to give one-third (Smith’s estimate, but we can substitute any number) of the crop to the owner. The owner can easily calculate that over a period of x years, the Net Present Value (NPV) of the rent he gets would exceed the amount of the surplus product that he receives from slaves, to whom he pays only the subsistence wage. We are not talking here about high mathematics. Things are pretty simple. We can introduce different discount rates, and different amounts for rent, different productivity differentials for the land worked by free vs. slave labor etc., as Weingast does, but whatever set of (reasonable) assumptions we choose the final result is the same. The landlord should just dismiss his slaves, offer to some of them to continue working as free tenant-farmers, find new tenant famers if needed, and spend the rest of his time at leisure enjoying the rent.

So why did not slave owners do precisely that? Why we never observe in history endogenous scrapping of slave-holding when it is such an inefficient system and when the owners could actually make more money by hiring free labor than by using slave?

It is a fair question and Weingast solves it by using a game theoretic framework showing that neither side can credibly commit to their part of the bargain. (He does this because he introduces, in my opinion, totally unnecessarily further assumption of slaves buying over time their freedom. Yes, slave owners can try to extract that too, but in a simple model, it is superfluous. For slave owners are better off even if they emancipate slaves for free.)

The reason why this spontaneous emancipation has never happened in the real world is the following. What would be the reaction that our emancipatory landlord would meet from his peers at the news that he has just released all his slaves? How would such an act be viewed by them? Certainly not with pleasure and warmth. As Smith writes, slave-owners like all property owners, the richer they are the more they live in a perpetual fear of expropriation by the poor. Every slave-owner forms part of that implicit compact. Everyone who, as a slave-owner, does not observe the compact is as much of a threat, if not more, to other slave-owners as slaves themselves.    

Smith holds that in richer countries, where the slave-owners are much richer than slaves, they are especially fearful of rebellions. The only way to hold slaves down is to apply brutal control that Smith details, with gory detail: from whipping them on a daily basis, keeping people in chains during most of the day, or even in the most gruesome example crucifying them for trivial offenses, hacking their bodies into pieces and then feeding them to the fish. In such an atmosphere of fear of constant rebellion a landlord who would follow the economic logic described above would find no sympathy from other landlords. Moreover, other landlords would do everything to stop the manumission: they might claim that our economist-landlord has lost his mind, has been bewitched by slave wizards, is mad, a traitor, foreign agent, anything. They would do everything to make his life impossible, to make him change his decision and short of it, to punish him by seizing the land which in their view he is mismanaging. So, in calculating gains and losses from slavery on a piece of paper is a very different proposition from acting on what the calculation reveals.

But let us go further and assume that for some reason the rationality prevails and that his decision to emancipate the slaves gets imitated by many, and enjoys a sufficient momentum so that at certain time a large number of slaves become free, as it were, spontaneously. Make even further a very unrealistic assumption that the powers-that-be which Smith very clearly associate with people who own slaves and who, as he says, “hate them” overcome the hatred because of material interest and agree to the emancipation.

We have to ask the new question then: what will happen next? If the land was originally toiled by 5 slaves and can now be worked equally productively (yielding the same  output) by 1 tenant this means that all the released slaves will not be able to find a job on the land on which they worked before. Perhaps only a fraction would. Others would congregate in the urban areas looking for jobs there.

And that's where the problems begin. There will be a massive surge of brutalized, poor and unskilled people who would get into a cut-throat competition with the urban proletariat, driving the wages down and getting into conflicts, perhaps riots and fights, with the working class. Moreover in the urban areas there would be now two large classes of malcontents with unstable jobs, subsistence wages, deep hatred of each other and even deeper hatred for the rich. This is something the top politicians among slave-owning elite are unlikely to overlook.

This is not a very different situation, just more dramatic, than what many contemporary developing countries have faced: immense inflow of labor from the countryside into the urban areas which has created political instability, violence, crime, and conflict between different parts of the lower classes and then ultimately the conflict between the lower classes and the upper classes.

Only a little dose of reality shows that the Panglossian idea, shared by some economists (but not by Adam Smith) that by proving that slave holding was not profitable for the individual landlord should have led to the spontaneous emancipation of slaves. Such economists make several logical mistakes: they make a composition error by assuming that what is true for one might also be true when it is extended to everybody, and they ignore political externality by assuming that other slave-owners are not affected by the decision of some of them.

Most importantly they make a mistake that Smith did not make: they disregard political forces and political implications of such a big move. After all we have by now sufficient historical evidence that no society has ceased being slave-holding spontaneously through the working of economic factors alone: not the slave-holders of Egypt, nor Persians, nor the Arabic slave-holders, nor the slaveholders of Justinian’s Eastern Roman empire, nor the slave-holders of the Western Roman Empire, nor the slaveholders among the Visigoths and Ostrogoths, not was forced labor abolished spontaneously in France, nor in the Habsburg empire, nor in Russia, and obviously not in the West Indies and the American South. And it is not because slave-owners were not numerate enough to calculate Net Present Value that economists have discovered.

The way slavery was crushed and abolished was almost always through the use of violence: riots, revolution, threats to government, and civil wars. Adam Smith, who believed that anti-slavery forces will never be strong enough to abolish slavery: “Notwithstanding of those superior [economic] advantages it is not likely that slavery should be ever abolished, and it was owing to some peculiar circumstances that has been abolished in the small corner of the world in which it now is” was wrong on that score, but he offers us a cautionary tale showing that looking only at economic advantages without considering them in their political context is insufficient. We can draw game theoretic boxes but they are a paltry substitute for what we observe in reality. They may be a starting, but never an ending, point.  



Monday, July 17, 2023

On global inequality, China's rise, the war in Ukraine: My conversation with "Atlantico"

 What is your take on the riots that are going on in France at the moment?  

To be completely honest, I don't have a full understanding of the situation. However, upon superficially examining the available French data, it doesn't appear that income inequality is increasing in France. This observation holds true not only for the past five years but also for the last three decades. Therefore, I don't believe that there is a straightforward explanation, such as a rise in the Gini coefficient, or the top 1%, that is sufficient to account for the occurrence of riots. It seems that the French perspective on this matter emphasizes local issues. It's worth noting that these riots are not an isolated incident but rather a recurring phenomenon that has persisted for a considerable period, spanning several years ago. There were also other recent protests sparked by events such as the pension reform. Consequently, it is plausible that there exist underlying and deeply rooted problems that extend beyond the scope of simple inequality measurements. 

Doesn’t that raise the question the feeling of inequality in a society, and especially when it is mixed with identity issues and anxieties? 

Yes, I believe so. I have a French friend who, for a period, pursued a political career in a suburb near Paris. He described to me a world that is vastly different from the urban environment of Paris that tourists like myself and others tend to experience. Therefore, it is plausible, as you mentioned, that the perception of exclusion plays a significant role. I have come across discussions on Twitter that suggest a certain "Americanization" of the issues, which, to some extent, I believe holds true. Both situations (the American in 2020 and the current French) involve problems related to identity and exclusion. However, I must emphasize that these insights are purely observational, of an outsider. To be honest, I was genuinely taken aback by the abruptness and the considerable level of violence exhibited during the riots. 

You've republished on Twitter some data you have on the Gini coefficient and inequality measurement in former Yugoslav republics. What do you think it can teach us about the past and the present situation ? 

You know, let me take a moment to explain my background. Many years ago, I worked on my dissertation, which focused on inequality in Yugoslavia. However, that was back in 1987. In hindsight, I made a mistake during that research. The household survey data I used dated back to the 1960s and followed two different principles of organization. They provided data at the republican level, with four social groups within each republic: urban population, rural population, mixed, and pensioners. Being a materialistic historian with Marxist leanings, I completely disregarded the republican levels and focused solely on the Yugoslav overall level for my entire dissertation. But the republican level turned out to be politically much more salient, and even then I did observe some issues. If you looked at a wealthy republic like Slovenia, everyone tended to fall into the top five income brackets (out of 10 given). Conversely, in a very poor province, such as Kosovo, the population was predominantly in the bottom five brackets. These observations stuck with me, and I thought that I should have organized my research differently.  

Recently, I stumbled upon a Twitter discussion about the convergence of Soviet republics, which piqued my interest. I decided to examine GDP data and compare it to the numbers I had from the household surveys. I was surprised to discover significant differences within the Soviet Union, approximately 2 to 1 between the top and bottom republics.  

Can it tell us something about the past trajectories of the countries or the future? 

More about the past rather than the future—a reflection of the challenges involved in sustaining countries with large income differences that stem from geographical differences in income: specific regions being richer and also exhibiting limited geographical mobility. Additionally, historical, cultural, and religious factors also contribute to these disparities. In contrast, when examining Spain, I found the differences between the top and bottom provinces to be around 1.5 to 1. Clearly, sustaining as unified country the one with 5-1 difference as in Yugoslavia in the 1980s is much harder than if the maximum gap is 1.5-1 as in Spain. 

However, I don't believe these observations can provide us with a comprehensive understanding of the present because these former republics have now become independent countries. As a result, they are more homogeneous in terms of ethnicity, religion, and income. This is a crucial distinction—the countries have evolved to become more internally cohesive. 

Do you think that at some extent, the war in Ukraine and Russia has something to do with Inequalities and the evolution of inequalities? 

Not quite. I actually had a blog where I explored four different theories regarding the conflict. The theory that I personally find most plausible, though it doesn't provide a direct explanation for the timing of the war, relates to the long-term effects of the socialist system and its single-party structure. Each republic had its own branch within the single party that governed the republic. Over time, in order to secure legitimacy, the leaders of these republican branches embraced and supported nationalist agendas. This would have been more challenging under a multi-party system, as different parties would represent various political ideologies. However, in this case, the leaders within the single party increasingly adopted nationalist stances. Consequently, even during the breakup of the Soviet Union, you had nationalist parties effectively governing each of the different republics, Ukraine included and even Russia that, under Yeltsin, actively pressed  for the break up of the Union. Therefore, I believe that nationalism was inherently embedded in the system, contrary to the expectations of its creators. Putin has later exacerbated this nationalist or perhaps imperialist tendency. While the theory offers insight into the long-term dynamics, it doesn't directly explain the specific outbreak of war on February 24, 2022. 

Is there any link to be made between an emerging nationalism or feeling of anger, and the inequality level in a country? 

I must admit that it is a challenging question to answer. The available data alone cannot provide a clear understanding, and while researchers have explored the perception of inequality, it remains difficult for me to make a definitive statement. However, if we consider specific examples, we can observe varying trends. For instance, Russia has experienced a decline in inequality over the past decade. On the other hand, Ukraine presents an intriguing case. Despite the perception of high inequality, the household survey data, although possibly imperfect, indicate relatively low levels of inequality in the country. This outcome wouldn't be entirely surprising if the concentration of inequality was primarily at the very top, beyond the 1% threshold, say within the 0.1% or 0.01%. Such disparities may not be adequately captured by synthetic measures. While this response may not directly address your question, it highlights the complexity involved. In essence, it remains a challenging question to answer definitively, and I don't have a conclusive response. 

Your work shows that global inequalities are tending to fall, and that even within countries, the trend is not necessarily upwards. Yet the subject of inequality has become particularly central in developed countries, almost obsessive. How can we explain this paradox? To what extent has this subject been instrumentalized?

I think one has to realize that there is a significant time lag between first, the changes in inequality, second, the knowledge of these changes among the researchers, and third, the spreading of that information among the general pubic. For example, in most Western countries inequalities increased from the 1980s or 1990s until the first decade of the 21st century, but the full realization of this happened only with the financial crisis and middle class income difficulties. Now I think we may be undergoing a reverse evolution. In the United States, Germany, Japan and France, the level of income inequality has been stable (with small annual fluctuations) for at least a decade. In the UK, inequality has declined from its early 2000s peaks. But once people's attention has been turned to inequality, it is, I think, difficult to forget about it even when it is stable. In fact, it could be stable but still found by many to be too high. Or, it could be, as I mentioned before, that significant time has to elapse until people's perceptions change.        

To what extent has it also become an issue between different countries or geopolitical blocs? Is inequality a power issue ?

I am not sure that it is a power issue because I do not see that there are marked differences in inequality between the currently politically competing models. China is actually more unequal (in terms of income distribution) than the United States. It is not credible to claim that political capitalism tends to produce more equal outcome. Or if one takes Russia which now, at least officially, claims to defend different values than the West, lower inequality is certainly not among them since the country is exceedingly unequal in terms of power, income ad wealth distrbutions. The war, as reflected in the origin and background of people who have been conscripted to fight it, must have only deepened income and existential inequalties. 

You recently published a piece in Foreign Affairs about the great convergence. What do you mean by this great convergence?  

Okay, well, that's a more straightforward question since it is based on empirical data! In the past few decades, primarily due to China's economic growth but also due to the progress of other countries, global income levels have risen significantly. China, for instance, achieved an annual per capita growth rate of around 8.5% over a span of 40 years. This growth, coupled with the economic progress in Asia and other countries with large populations, had two noteworthy effects. 

Firstly, it resulted in a substantial decline in global inequality, marking a significant departure from the trends of the past two centuries. This outcome is rather evident if we consider a hypothetical example, using a country like France. In such a scenario, if relatively poorer individuals experienced a 10% income growth while relatively wealthier individuals saw a 2% growth, it would naturally lead to a reduction in inequality. The same is true globally. However, it's worth noting that despite this decline, China itself witnessed a rise in internal inequality, which was also observed in countries like the US, India, Russia, and the UK. Hence, the national increases served as a counterbalance, albeit not strong enough to outweigh the overall global inequality decrease due to high growth rates in Asia. 

The second effect of this decline in global inequality was the reshuffling of positions among individuals. In other words, people from countries such as China or India suddenly found themselves becoming part of the top 10% globally, while middle or lower-middle classes from rich countries were pushed lower in the global pecking order. This shift in relative positions can lead to various political and socio-economic implications, particularly for those in the middle class in wealthier countries. Some individuals in Western affluent nations may experience a decline in their relative global standing, even if their real incomes continue to increase by 1% or 2% annually. These are two distinct but interconnected aspects stemming from the same underlying reasons. 

To conclude, it's important to recognize that when people hear about a decline in global inequality, they often express support for such a trend. However, it becomes more challenging when they realize that it also implies a decline in the global rankings of the middle class in the United States, France, or the UK. Even if their actual incomes continue to rise, this aspect can be politically sensitive. Nonetheless, it's crucial to understand that these two facets cannot be separated from each other. 

How do we manage to deal politically with such a paradox ?  

I believe that politically, this is a complex issue. It's crucial to be cautious with language and emphasize that when we talk about a decline, it's a relative decline. In other words, it means that one's position is decreasing compared to others, even if one's real purchasing power is still improving, But of course at a slower rate than that of others. And eventually they will be overtaken. However, some argue that it doesn't matter because people measure themselves against their immediate surroundings, their friends, and acquaintances. While this may be true, there are certain globally priced goods that middle-class individuals in Western countries may find increasingly challenging to afford and acquire. For example, attending events like the World Cup in Qatar or vacations in Asia, which can be incredibly expensive. These changes can impact the middle class and its ability to access certain experiences. 

I understand your political question, and it is indeed not easy to explain or disregard the concerns of Western middle classes. Striking a balance between, on the one hand, advocating for the reduction of global income inequality and lesser global inequality of opportunity, and on the other, the reshuffling of global income positions that I just explained is indeed politically very challenging.  

Reflecting on your question, Adam Smith's perspective in "The Wealth of Nations" sheds some light on the matter. He compared England and France, noting that France had a larger population than England or Scotland. From a purely humanistic standpoint, one might argue that improving incomes in France is more important because it affects more people. However, Smith observed that an Englishman or Scotsman who prioritizes the well-being of another nation rather than his own would be considered a poor patriot.  This presents a fundamental dilemma, and we don't have a definitive answer to it. We find ourselves caught between a cosmopolitan view that desires prosperity for all and a concern for our own income positions. Resolving this dilemma is far from easy. 

Yet greater equality global equality is not inevitable. Does that mean that  some perhaps may not want that greater global equality? 

That's a valid perspective to take: a national position that prioritize the well-being and position of one's own country and people in the global income distribution. It's important for individuals to clearly express and stand by their beliefs clearly, rather than claiming to be globalist or cosmopolitan while holding a nationalistic stance. It is politically legitimate stance regardless of whether we agree with it or not. 

Regarding the future, we can observe that as China has achieved significant economic growth and development, it no longer serves as the primary engine driving global inequality reduction. In fact, China's growth may contribute to global inequality as it outpaces countries like India, Nigeria, and Sudan. However, this doesn't address the second problem we identified, which is that China will continue to move towards income levels historically associated with European and American populations. 

In terms of global inequality decline, the situation will depend in the future on the trajectory of other regions, particularly Africa. Africa is expected to experience a population increase throughout this century, making it the only continent with a growing population. If Africa does not achieve high growth rates, the decline in global inequality may be hindered. In my extensive article, which is similar to the  Foreign Affairs piece, I highlight the necessity of very high growth rates in Africa. A per capita growth of 5% per year, along with an additional 2-3% due to population growth, would be required to achieve substantial progress. Achieving 8% real growth for several decades is not easy, to say the least, and if we look at the past 50 years of African growth, we cannot be optimistic. 

Do you believe that the fact that China grew that wealthy in such a short amount of years explains at some point its current behaviour and its aggressivity?  

These are indeed complex and challenging questions. Personally, I don't view China as an aggressive power. However, I do recognize that China's growing economic and military strength has given it a sense of increased confidence and influence. Technologically, China has made significant advancements and has a more prominent global presence. It is unrealistic to expect China to retreat to its previous position from the 19th century when it was subjected to colonization by various European powers and Japan. Economic growth tends to enhance a country's self-assurance and may lead to behaviours that others perceive as aggressive or arrogant. This pattern is not unique to China; many countries throughout history, such as the United Kingdom, France, Spain, the United States, and the Soviet Union, have demonstrated different behaviours when they felt strong and influential. However, I must emphasize that my knowledge in this area is limited, and the subject is primarily political in nature. 

Why are you so prudent on how global inequalities could evolve ?  

Indeed, caution and prudence are warranted in assessing the current global situation. Several factors contribute to the uncertainty we face. Firstly, the impact of the COVID-19 pandemic has left a lasting imprint that will take time to fully comprehend. While it may eventually subside, its consequences will linger for a while.  

Additionally, two major crises further complicate the picture. The first is the complex and unpredictable relationship between the United States, the Western world, and China. In the worst-case scenario, this could potentially escalate into a war, while in a less severe scenario, it may lead to a trade war with profound implications for technological development of both sides, China's global relations, and its economic growth. Furthermore, China's investments in Africa could be affected, influencing that region's economic trajectory too. 

The second crisis involves the situation between Russia and Ukraine, which adds another layer of uncertainty. Although the populations of Russia and Ukraine alone may not significantly impact global inequality when considered on a global scale, if the conflict were to spread to Europe and potentially escalate into a nuclear war, the consequences would be catastrophic. In such a scenario, discussions about global inequality becomes irrelevant. 

There is also intensifying climate change whose effects too are complex and difficult to predict. 

Given these intricate and unpredictable circumstances, it is challenging for anyone to accurately forecast the world's state in the next five years. Those who claim to possess such foresight are likely deceiving themselves. The multitude of factors at play and their potential evolution make it impossible to definitively predict the future. 

How do we navigate economically ? 

The challenges faced by individual countries are indeed specific to their economic policies and circumstances. Each country must adapt and adjust to various shocks and disruptions. For instance, the war in Ukraine and the impact of reduction in imports of Russian gas and oil had significant repercussions for Europe. However, Europe managed to navigate through these challenges and make necessary adjustments, as evidenced by the relatively uneventful winter last year. 

Nevertheless, my concern lies in the growing number of shocks that countries are now confronted with. Returning to our earlier discussion, Western Europe, and Europe as a whole, is experiencing multiple shocks simultaneously. These include the consequences of the war, energy-related issues, climate change impact, and the increasing unpredictability of weather patterns. Additionally, social unrest and protests have become more frequent. The cumulative effect of these shocks can place immense strain on a system's ability to effectively manage and address them. 

What did you think of the initiative for a global financing pact?  

If that favors increasing cashflows, I’ll consider it a positive thing. But I have some concerns regarding the increasing role of private individuals, funds, and foundations in shaping agendas and decision-making processes. It is indeed notable that actions that were traditionally undertaken by states and international organizations are now being influenced by wealthy individuals and their foundations.  This situation reflects the plutocratic nature of our world, where a concentration of wealth can lead to significant influence and decision-making power. 

For instance, as someone who has worked at the World Bank, I witnessed firsthand how the Gates Foundation, due to its substantial funding, had a considerable say in determining the research priorities and activities of the institution. While this may be seen as a means to increase the flow of resources, it also raises questions about the concentration of power and the potential impact on impartiality and broader societal interests. 

In summary, while it is desirable to increase the flow of resources for impactful initiatives, we should be cautious about the influence of the wealthy on research agendas and decision-making, and strive for a more balanced and equitable distribution of power and influence in our societies. 

 It would make more sense to me if countries were to tax the rich, take that money and decide how to give it to Africa, rather than letting the rich tell the states how it should be done. I don't dispute their good intentions, but they're certainly not the ones who should have the power to decide whether one should, build stadiums, do vaccination or bring drinkable water. I simply don't think they are the ones who should be making those decisions. 

Link to the Frech version of the interview is here.