good evening good evening to all the people here in the hall and to all the people connected with us my name is fracasso and i teach labor law at the university of trenton this evening we are as lucky as to have with us branco milanovic who is a visiting professor at the graduate center city university of new york and senior scholar at the stone center on socioeconomic inequality also taught in other universities and for almost 20 years he was a chief economist in the world bank's research department and in 2018 given the intensive activity of research he received the leon award his research activity is a very wide ranging but is very much focused on inequalities within the countries and also between the countries and he's had an influence on public debate and on the activities of policy makers apart from many publications in journals professor milanovic also wrote many books some of them have been translated in italian and they've been very successful because professor milanovich combines a technical analytical analysis on these issues with a wider perspective including a history and history of the economic thinking and his latest book is no exception he was translated by le terza in italian it is capitalism control capitalism and the original title is a capitalism alone starting from the observation that capitalism is the dominating system which is present in the western countries and also in other countries such as china the book describes the issues the evolution of these two types of capitalism and many aspects are highlighted and i really recommend you to read the book and there is also a strong connection between these types of capitalism and globalization well in the italian introduction and the book was published in 2020 in a full pandemic so in the italian introduction there is a comment about the impact that kovit 19 may have had on the perception the functioning and the future of these forms of capitalism and globalization and this informs also this evening debate well i will take no other time i thank professor milanovic once again for accepting our invitation and i give him the floor and then we will have some questions at the end well thank you very much for really very kind introduction i am of course very happy to be however virtually in in trento i was there twice before and i have to say i enjoyed it very much every time it was you know beautiful weather and beautiful food and i remember beautiful ice creams and excellent discussions and questions so i'm sure that it will be the same today except that i will not be able to be physically there but i hope to be there sometime soon the book is called uh capitalism alone in italian capitalism control capitalism and the reason why the italian title is capitalism of country capitalism is because the book really contrasts as you can see on that slide two types of capitalism one is liberal meritocratic capitalism of the west you used i used the united states mostly in the discussion but it really applies to many western countries it's the capitalism of debt combines democracy in the political sphere and the second is what they call political capitalism where i use mostly china now i will not speak uh today of political capitalism simply because the book actually i think has quite a lot of themes and i cannot cover them all so i've decided to cover the chapter two which is about liberal and political capitalism i'm sorry liberal and meritocratic capitalism but to leave the political capitalism out although for some people who have read the book maybe they can of course discuss that part uh that part is fairly ambitious i would say because it really starts with an interpretation of what was the global historical role coming of communism in the 20th century so it has much greater ambition than simply to describe today's china now china is obviously the key exemplar of that but it's not the only one and then the last two chapters deal with interaction and of of capitalism and globalization and they address uh four things uh first the relationship between labor and capitalism and there i talk about mostly about immigration so it is really a big topic and i think for maybe a different presentation i would also like to talk about that as well the second part in that chapter is about capitalism and movement of capital where actually i talk mostly about global value chains which as you know now in the pandemic have had quite a big role and they were discussed a lot then i discussed uh globalization and uh the future of the welfare state and finally and i think a topic that needs to be discussed more and more is the relationship between globalization of the world and simultaneous corruption of the world which is not present only in some countries but actually has really spread i think basically in different forms to the entire world and then finally in the last chapter i talked about the future of global capitalism about commodification of our ordinary life about the fact that actually our objectives of money acquisition and wealth acquisition very much reflect the objectives of like capitalist enterprises in terms of maximization of profits so in other words i argue that our personal objectives and the objectives of the enterprises companies have been fully aligned and that explains to some extent well actually maybe largely why capitalism has become the only or the dominant mode of production um and of course i i also show in chapter three that by using uh marx and marx's definition of capitalism really more china is definitely a capitalist country because most of the production is done for profit it's done using uh privately owned means of production it's done with hard labor and it's done under decentralized coordination so having said like a little bit about the the structure of the book let me move into the the really talk proper where i would really discuss the six systemic inequalities in meritocratic or liberal capitalism i may not cover everything else you know the outcome which many people know is the shrinking middle class and i would also say a few things about policy changes which in my opinion are necessary so let me start first with simply defining what i have in mind so that things can become a little bit clearer i would ask you to just think of capitalism of the 19th century that we see in works of david ricardo or karl marx or actually that we know from you know novels or from you know from stories that we have heard from our you know grandparents or great grandparents and so on it was the world which was quite divided in terms of ownership of property worth between those who own property which you can call capitalists there could be landlords because they would own land and those who really did not own anything but their labor uh so that world uh had really two i think key characteristics which interests us now and which we are going to contrast with today's world of capitalism first of all uh people tended to actually get most of their income from one or the other in other words if you were a capitalist you would get most of your income from property if you were a worker you would get 100 probably of your income from labor so there was a very sharp distinction that you would either get income from property or you would get income from selling your labor power second distinction was that essentially people who owned property were rich and people who owned labor were let's call it middle class or poor or whatever else but they're not rich so this is actually shown on this very simple graph you have income on the horizontal axis you have some distribution on the vertical axis and what you notice here that there is distribution and some differentiation in incoming among capitalists and among workers but every capitalist is richer than every worker so this is what i would call you know in kind of a the very an ideal ideal typical model i would call it classical capitalism so it has these two features that i explained differently i can see that because i can describe the same classical capitalism by ranking people by their income level so you start with people who are poor who almost have no income income is on the vertical axis and people are ranked from the poorest to the richest on the horizontal axis and as you noticed actually in the beginning people there are some very poor people then actually incomes go up little by little but they are all labor incomes so there is a differentiation among labor income certainly you know more skilled workers or members of liberal professions who did not have access to capital had much higher incomes than ordinary worker or ordinary peasant but only at the very top of the income distribution do we have capital owners with capital income so you know you can draw the income distribution by essentially appending at the top people who receive most of their income from capital that was in the past so how does it look now and that's actually my main point to give you a very simplified idea of how today's capitalism has changed compared to the past let's suppose that labor incomes are very similar you know again you have people who have low labor income those who are middle labor income and those with high labor income but the question then becomes do they have capital income in the past we said we assumed that actually people with labor income had zero in terms of property well this was the case now but only for people who are very poor about like 30 to you know 35 percent of people in rich countries have only labor income they have really no property income at all but after that point the property information called capital income here does it does appear so that capital income could be in most cases is actually income from your ownership of housing because that's an implicit capital income in the sense that if you own an apartment you don't have to pay the rent you are basically paying the rent to yourself because you're owning that property but for the really rich people and they come really at the top there what you notice is that capital income becomes more important than labor income this line the blue line becomes higher than the red line so capital income becomes much more important and most of that capital income is in a form of financial assets or income front of nationalists so what you now can see here is the change compared to classical capitalism first of all the the class structure is not as cut off as so divided between owners and workers as it was because in the past because some workers now are actually having capital income and and then on the top you notice that capital income still remains the major type of income for the people who are rich but more of them have also now significant labor income so this is something that i'll show you in the term in the uh sort of current data from a number of countries but let me then show you a sort of a another possibility of what i call people's capitalism that you can say may exist in the future well that capitalism would be such that everybody more or less would have labor and capital income it doesn't mean that that capitalism would actually mean equality of incomes but it could mean equality in the composition of your income so if you have twice as much of labor income as i you might also have twice as much of capital income as i so there will be no equality of income but the types of income that we would have capital and labor in and their shares in our overall income would be the same so in other words you would have in that situation you would have capitalization of a society where the the the capital or property income would go pretty deeply down even into the uh sort of lower middle classes and even maybe among the poor although it is really difficult to imagine now so in other words the the split between capital and labor would disappear in the sense that there would be differences in income but there would not be differences in the types of incomes that we are receiving so let me then go for this uh like listing these six systemic inequalities in liberal or meritocratic capitalism i'm not going to read everything here uh each of these points because they will be discussed in turn one by one so you can just sort of look very quickly what is written here i'm not going to spend time rereading it but even if you have not read it it would just come one after another the first uh uh systemic inequality is something that we have observed now since the 1980s essentially is that the level of national accounts in a macro sense uh capital has become more important compared to labor in other words in the past we thought that labor and capital were actually having constant proportions more or less you know labor was receiving between 65 and 70 percent of the uh national income capital was receiving between 30 you know 25 to 30 percent of national income well what you notice here is that there was an increase and significant increase of about five percentage points in the g7 countries after 1980s now the reasons for that could be globalization which actually made the number of people working under capitalist conditions much greater and that does change the relative scarcity and relative power of capital labor so if you suddenly have as you did with inc with the inclusion of china india the i mean former soviet union in the capitalist framework you suddenly had several billion people who actually were included in the capitalist framework that of course weakened the power of labor you can also say that the power of labor was weakened by policy decisions you can say that trade union density decline in most of the rich countries which also led to an increase in the share of capital or the decline in the share of labor uh or you can also say that maybe it was driven in part by technological change that replaced some of the people by essentially machines or by capital so this is a little bit like what mars called the increased organic composition of capital where actually you moved over substituting labor by capital which of course also increases the the capital share so whatever it is we have empirically this fact now this fact is very important for the following reason and that's what is actually what i was trying to explain in that small example before it is important because when the capital share is increasing it quasi-automatically leads to an increase in interpersonal inequality and the reason why it does so is because capital income is still predominantly received by the rich people so we are not in the situation that we were in the 19th century where it was entirely received with rich people but we are still in a situation where it's predominantly received by the rich people so what you have then and i think it's kind of very simple if you think of this too to see if the source of income which is capital which is unequally distributed and mostly received by the people at the top if that particular source is increasing in importance then interpersonal inequality has to go up let me give you a counterfactual let's suppose that a source which is also concentrated but is concentrated on the poor becomes larger and larger let's suppose unemployment benefits become bigger and bigger what is your sort of intuitive feeling what will happen well if an unemployment benefits double very likely we are going to have a decline of inequality because who is receiving unemployment benefits people who are at the bottom of the income distribution but if or in the middle but if capital goes up then who is going to receive that income from financial capital people who are at the top so that's why we have i think this fundamental issue which links what is called the economics functional income distribution which means distribution between capital and labor to interpersonal income distribution and now to sort of give a little bit of a preview for my next book this is actually exactly the point that in my next book i would look at how writers like adam smith or kenny before him adam smith ricardo and marx thought of income inequality because for them income inequality was really fundamentally functional income inequality between labor and capital and how then that inequality would spill over into individual incomes actually the first person who really thought of individual incomes as many of you know is of course an italian economy so wilfredo pareto so that was a big change in thinking between uh functional inequality before and personal inequality afterwards so now uh just to illustrate the fact that capital is much more unequally distributed here is the gini coefficient which is a measure of inequality of distribution of a given source for capital which is in blue and labor income which is in you know in orange now as you know from the 1980s in many countries inequality increased and also inequality in labor income which means essentially in earnings went up so you see that in the case of uk and the united states very clearly that orange line going up but to note is that always distribution of capital is more unequal so that's what we were saying before if you have an increase in the source of income which is intrinsically unequal because n is received by the rich people as you can see here with very high genie then you would have an increase in uh in interpersonal income inequality i would also like to mention here that if you think of this you can also see uh in pkt's book the capital in the 21st century why he was so much insistent about uh taxation of wealth because if you have an increasing share of capital year of the year the only way to actually stop that sort of uh influence on interpersonal income inequality is that you should tax capital and uh i i'm in favor as you will see towards the end more in favor of taxing inheritance which actually would serve the same purpose but you can either do one or the other or you can do both but the logic i think should be understood it is not that you're simply taxing wealth just because you like the tax wealth it is because you actually want to sort of stop that overflow from increase the importance of of property income into higher and higher income inequality so the second feature of you know modern capitalism is that as i implied before it is actually complicated graphs i will not i'll not try to explain very much of that but simply to show you as you can see read there that eighty percent of the financial assets are owned by by uh by the rich so in other words what is actually happening when you look at the assets uh about the third as i said before of people when you start putting them in by rankings about the bottom third does not have any assets then you have and actually many developed countries like the united states their assets are negative because they're able to borrow and to live reasonably well but they permanently have negative assets so in other words they are owning more than they have actually that they have in terms of their growth assets then you have people who are from the 35th percentile to the 95th percentile they have all their assets practically in housing and only at the top five percent you have people whose assets are financial assets predominantly so what ed wolf in this book did actually he looked at the rates of return and whenever the rate of return of financial assets was higher than the rate of return which essentially the the appreciation of housing then of course the rich people gain even more and the inequality went up so this is a basic story is is that the financial assets as you can see for example on this graph is that the top u.s 10 of the top u.s wealth holders own 93 percent of stocks and mutual funds so when you really take the financial assets of a country like the united states um it is owned practically by 10 of the people uh because as i said before you know the housing zone of course much more broadly but the the financial assets really are owned essentially by by the rich so then the question is are the rates of return on these financial assets exacerbating inequality making inequality worse by making the rate of return to higher assets higher in other words if you have 1 million for assets and you invest that is your rate to return going to be higher than if you have 10 000 euro for example and invest that and this is a very new part of the work and actually people now find as you see on this graph actually as you move towards the higher wealth percentile the rate of return goes up and the rate of return we think goes up because there are certain costs of accessing uh good advice or you know there are some economies with scale you can say in investment in the sense that if you have very little uh of wealth that you would like to like to invest you are unlikely to get good advice and you are unlikely to be able to invest in type of assets that would yield high returns even adjusting for it risk but if you have a million two or ten you would of course have uh people who would help you quite a lot i mean we know that from practical ordinary life when you read about all these uh billionaires who have been actually able to invest at 10 per year for a long time or people who actually had access to the best advice or the fact that that the endowments of american colleges the higher the level of the endowment the the more financial wealth does the college have the higher is the rate of return on that so we do have here really and another intrinsic feature which pushes towards higher inequalities that actually rich people make more money per unit of money so on each individual dollar each individual dollar is not equal in other words if i'm a rich guy and i invest that dollar i'm going to make more money than than on that same dollar as somebody from the middle class would be now the the third one is uh what i call homoplutia in my book this is the first time that this term had been invented and the phenomenon so when you have a new phenomenon of course you have to go back to some greek neologism that you tried to create as i did and checked it with my greek friends and they didn't understand exactly at first what they meant but you know when i explained to them they said they couldn't come up with a better greek biologist so they said okay use that one uh so this is homoplutia what they call homoplutia homo means of course the same as you know plutia means wealth so the idea here is that we observe empirically and you see this on that graph increasing proportion of people who are rich in the top decile by total income but who are at the same time at the top they sell by their labor income and by their capital income i think this is something which is extremely important i would repeat it again because it is something which is entirely new and i think it is the phenomenon of homoplutia will be something that we would probably research and it would probably have political implications in other words what you have now is that people are at the very top and you can actually argue they represent a certain elite are now rich both because they're very well educated and they have high paying jobs where they receive earnings or wages and they have either inherited or saved sufficient amounts of money so they become also among the top capitalists so they may not be your usual capitalist in the form that daniel is a capitalist but they could be capitalist in the sense that they have sufficient amounts to invest and to receive return from that and as you notice that in the case of the united states that number has gone up from 15 of the people at the top to 30 percent of the people at the top i'll show you now numbers for a number for several countries including italy for example which in this graph is like number one in the world with 27 of people at the very top of the income distribution who are also at the top of in the top decile by labor earnings and in the top they sell by capital income so what you have there which is i think it's a very interesting phenomenon because it makes that group of people to a large extent independent or very robust or very resilient to whatever happens to um to their labor incomes or capital interests for example if they happen there is an unemployment it's unlikely that they would get unemployed because they have really very you know secure jobs but let's suppose that some of them do because some of them may be working in the you know i.t industries they could be restructuring so they they lost their jobs well they will have still significant capital income to go back to or let's suppose that there is suddenly uh collapse of the stock market so their capital income goes down well they have jobs that are very well paying so they are really very resilient to the cycles or economic cycles and they are to some extent represent that new class which is very different from the classical capitalist class that you know i was mentioning or talking about in the beginning of the presentation now you notice that countries that are less advanced uh like mexico and brazil are closer to classical capitalism zero available very small number because really people who are capitalists are not going to double as sort of workers and workers would not have the opportunity to have enough capital income to become significant capitalism capitalist but in more advanced economies as you can see here italy netherlands finland ireland usa you have more than a quarter at the top who are actually both capital and labor rich and that's why homophobia comes so now why is that why is homophobia also important first because it actually can answer the question to what an extent is homoplutia driving the increase in income inequality and we have done it i've done it in a paper with jonathan berman on the case of the united states we can also ask can homophobia help us classify and understand various capitalisms this is already implied in the previous graph and i did additional work with marco renault on that which is quite really very interesting work i will not have time enough to to talk about that but i want to say the third point which is more speculative does homoplutia make social mobility less and fight against inequality more difficult or is it a dramatic improvement upon classical capitalism so in some sense it's a dramatic improvement because you don't have the class structure which is so rigid as it was in the past on the other hand it does actually make social mobility less because people are able to have both capital labor income as i will show you in a minute they would actually have other forms to preserve their position and as i was saying before they're much more resilient to economic change so we might actually if i want to summarize this we might have sort of reduced the importance of classical class labor versus capital but we might have created an elite so this is i think a kind of a movement from like class based or class-based divisions into the elite versus the rest division when it comes to homophobia we have actually done additional work but this was worked with with berman that they did and you actually notice here the same story did in the u.s like that the original graph homoplutia went up and then let me show you here for example we find that about uh one-fifth of the increase of u.s inequality between 1985 and 2020 is due to homophobia so it did have an impact which is actually higher than even the impact of the increase in the capital share so that combination is really producing an effect now i have to say that we don't know because this is the new area and we don't have the data yet we don't know and i don't know if this was due homophobia is due to the fact that people who have had rich parents have inherited quite a lot of money they went to very good schools acquired education and got high wages or is it that you were actually able to save over your lifetime because you had high wages and then maybe a certain age maybe 40 or 50 whatever you became rich enough to be also a rich capitalist i think both of these things happened but we would actually in the future we're trying to i hope to find out which one of them was more important this graph is from the work with with marco reynaldi the dimension where we actually look at countries and compare them and put them in different categories whether they're closer to classical capitalism or liberal capitalism i will not explain all of these details there are too many dots and too many countries but notice at the very top there are latin american countries in india which are close to classical capitalism then then countries of western europe which is this is a big circle where actually the the uh they're further apart from that classical capitalism as i have shown you because there is much greater uh homoplutia in those countries then in the countries of classical capitalism and then there is a very special role played which i will not have the time to explain here by the nordic countries where actually there is a strong capital income but most of the time the strong capital income comes only out of pensions which are received from the savings for savings that you have had to make during your lifetime so a working time actually so let me then uh go to the next issue which i think many of you have already seen it has been studied for many countries including italy for example there is a very nice study on italy about assortative mating they asserted the meeting or again to use the greek word homogamy uh means essentially that more much more now than in the past men marry women rich men marry rich women or highly educated men married highly educated women so that also arithmetically increases inequality notice this is a good phenomenon in the sense that in very often it's the result of greater participation of women in educational system and labor force but the arithmetically what it does it exacerbates inequality and this is important to realize that even certain phenomena which are good socially might have consequences on interpersonal inequality that we might have to address so this is the numbers for the from the united states it looks as you can see here at the cohort of young men who are in the top uh wage distribution in the 1970s these men were equally likely to marry rich women or poor women you know the rich women are actually women from the also top of the decile by by earning amongst women that's the the orange line and the the the poor women were women from the bottom this style by their earnings as you notice here the ratio went from one to one which is equal likelihood of marrying rich or poor to three to one which is three times more likely that you would marry a woman who is in a richer category than in the rich category than in the poor same story for women when you know sort of turn around and look at the cohorts of young women who are at the top you'll find them now five times as likely to marry rich men than to marry poor man all of that by ernie so these are not rich men who are actually some large capitalists or billionaires these are rich men who are in the top decile of wage earners and they are marrying women who are in the top decile or wage earners so it's really if you want to see it it's really sort of an upper middle class phenomenon we are not really talking here about billionaires marrying billionaires we are talking about a substantial number of people highly educated with good incomes good wages marrying women or reverse women marrying men of that same level or you know with homosexual marriages also we don't have enough of them to be in the sample but that's probably happening the same um so i will now wrap up the presentation because i think my time is is up just by pointing to the fifth sort of uh systemic inequality which comes from the work of political scientists which shows this is also a graph that is not easy to interpret but let me just mention this upward sloping line simply indicates that the issues social economic or political issues that matter to the rich are much more likely to be debated to be taken into account by the political system so that was based on on surveys when you were asked asking people at different income levels what are the main issues that you have and of course then you look at whether these issues are being represented in the policy making and the upper sloping line tells you that the issues that matter to the rich who are actually uh you know on the horizontal axis are getting a greater hearing by the political system in other words the political system is more sensitive to the issues of the rich than of the middle class and the poor i actually think that this is very important result because empirically this is something that we didn't know in the past we thought it could be the case but we see it now for the first time empirically and finally sixth point which is important is the use of education to reproduce you know social advantages this is quite a famous graph that shows you in the u.s college attendance by percent by parental income uh you see that if your parental income is in the very top then almost everybody goes to college if your parental income or actually parents your parents are at the median which is number 50 you will have about 60 percent of chance of going to college and moreover then there is a link between the high returns to college education and high intergenerational correlation of income now to make it simple this big name intergenerational income correlation is simply indicator of social mobility so in other words the higher is the intergenerational income correlation the lower is social mobility in other words what we see here is the following and that's very important point with which i will actually conclude my talk is that the rich people are able especially in the united states where many colleges are private are able to send their children to very expensive colleges which by the fact that they're expensive rule out competition from all these kids and parents who cannot afford to pay 50 or 60 or 70 000 per year for education and not only that to pay for that throughout the lifetime because it really starts from very beginning that kind of a discrimination between the rich and not so rich and then they of course produce graduates that are able to get extremely high wages high incomes and that sort of ties the whole system in the way that you have people who have high capital and labor income people who then intermarry each other rich to rich people who then control the political process through what we have just seen before and people who are able to send their children to school which gives them a sort of a cachet of meritocracy or deserved result and who thereby maintain that advantage over generations so the last point here is actually that i have to and i think we have to think seriously about the possibilities of a lower social mobility in the future and the creation of a quote-unquote meritocratic upper class people who would actually feel that they deserve what they have because they actually we know that they do work quite a lot they work oftentimes 60 or 70 hours away and they are also also high wage earners high cap i mean large capitalists because have lots of income from property and they are able to do best for their children which is understandable but they are also thereby making la uh ability for social mobility for the others much less so this would be the issues that i discussed in the book regarding uh liberal meritocratic capitalism somewhat similar uh is my discussion of china where we do have some of the issues like a very strong correlation between parental income and access to the top education rising share of capital in total income and connection in china as well although under different guys connection between political power and economic power because what we see i think in both systems is that political and economic power tend to go together or at least the holders of economic power in the west try to really convert that economic power into political power and by controlling political power reassure their future economic power and wealth so i will stop here and thank you very much for your attention and i'm sorry if i went a few minutes over my allotment thank you so much professor milanovich for this analysis of inequalities and analysis of wealth so if there are questions please come over to the microphone and please wear your masks always hello good evening i have two questions in your book you explain the importance of the middle class in history in relation also to differences which exist in this society and you make a sort of a comparison between uh western countries and uh poorer countries and the middle class in western countries has promoted a liberal democracy while the lack of a middle class in countries such as china or african countries well communism there has had a more positive impact and then i have another comment or question about what you just said i was wondering about that a political party leader in italy once again spoke about inheritance attacks but he was not very successful isn't it possible to find a solution so that we have a inheritance tax which relates to the uh inheritance but uh which then uses that tax return for i don't know job creation or other things what do you think about that okay uh thank you to both very good questions on the first one this is a very i would have to give a very long answer so i would have i would really make it short uh the illusion was made to the chapter three that i briefly mentioned were actually i talk of the global historical role of communism and my argument is that in countries like china in particular communism had a two-fold role it actually had the role of making country free from a sort of semi-colonial status so in other words it had to fight for national independence and second role was to destroy the feudal institutions which exist or quasi-feudal institutions you know positional women lack of education uh uh agrarian reform all of that that's the difference and that's actually why my argument was with sort of what they called in typical marxism of western parts of development the difference with western countries were the first role which was the role of national liberation did not exist because countries were not you know colonists and then i think that the argument goes is that that role that the left-wing parties and communist parties did in countries like china opened the way to development of capitalism today so it is a reversal in terms of timing if you will from the standard marxist classification in this case you have really communist revolutions that are indispensable for the creation of a domestic capitalism regime or system and i think that's that in that sense china's capitalism is i think almost paradigmatic because it actually builds upon the achievements of the communist revolution so this is the the role which i think was played by the left-wing parties and communist parties in countries like china and vietnam but also in others algeria angola ethiopia even you can actually argue that for india but in the more standard marxist model it was really or actually modernization model it was the the size it was the middle class or the working class in the marxist model that played that role but uh as i said the difference between the west and the rest of the world was that the west was not politically dependent on others and that was i think a big difference and of course i think it was not seen very much until the early or even mid 20th century that there were really fundamental differences between countries that were uh conquered and there were colonies and countries that were not um and then regarding inheritance tax yes actually as you know many countries actually sweden for example doesn't have an inheritance tax many countries have actually uh eliminated the reduced tax oftentimes it is not popular but i think there is also a question of information here i think actually many people who would not pay the tax don't like it uh because when we're talking about inheritance tax we are not talking about confiscation of wealth we are talking simply about the tax that would be uh substantial but that would actually still leave quite a lot of wealth to the next generation and that would be also only above certain threshold but if you don't like that then of course an alternative as they were saying before a wealth tax but that is an annual tax on wealth that would be okay too but you have either way to come up with the solution of checking the rising concentration of wealth and stopping that rising concentration of wealth from increasing in the percent o'clock gratitude thank you very much any other question from the floor yes there is another question because we only have a maximum of 10 minutes can i ask the question in english so the gentleman is going to ask in english debate in place some people say that billionaires shouldn't exist at all full stop because the mere existence of billionaires is bad for democracy and is bad for economic efficiency other people disagree i'd like to have your opinion about the new existence of billionaires well this is of course a difficult question uh we could of course not have them actually you could simply put the tax that would take their the entire wealth above a billion i i don't think that it would be an unreasonable proposition to have it is it's very uh sharp and it seems very sort of unlikely because there are so many of them but there is a problem and i totally agree with with what you said in the question is not only well first there is a political influence which they have but i would even go more deeply it is there is a social influence we have now the situation that billionaires are deciding uh how the health policy should be conducted billionaires are actually funding uh uh things that the united nations is doing you know to anybody who knows the or the origin or founding of the league of nations at united nations it is an almost unbelievable development that interstate organization now depends on rich people funding uh billionaires of course are extremely influential as we see them in davos every year so there is a an influence that goes through the media for example which you know in italy quite well which of course also happens in the us that actually probably the second most important uh paper in the united states is fully owned by the richest person in the world so when you put these two together i mean it really is kind of striking that the richest person in the world owns the most influential newspaper and then you have bloomberg as well so it you know their influence has spread to so many domains where they that should not be and the reason why they spread is because they have money and everybody depends on that money universities depend on their money so they decide what university should study because they fund universities and i think that's a basically a very unhealthy influence on thank you very much so let me ask a question then in the book you never mention banks but in the capitalist system banks do play an important role in the financial system should enable the people who do not inherit such resources to be capable of doing so what is the role of the banking system and is there a solution in that regard as well or should it only be transfer of accumulated wealth you know i mean this is a good question there are many things that i don't mention in the book because the organization of the book was really something that of course plays to my strengths which is essentially work on income inequality so my book is geared toward showing as i did today here the systemic features that increase inequality or affect inequality to put it more broadly in political capitalism and in liberal countries there are many other aspects including banking that you mentioned and production that are not actually included in the book for example i don't discuss and i sort of say it openly because there are actually there are issues there that i don't know there i don't discuss for example increased role of monopolies which is quite important uh the the the patent rights for example also as you said the role of the banking system that of course would really make the book much uh uh sort of greater i mean more more voluminous there will be like three times the size that it is now and it would go into the areas that i know much less so i really was my objective here was to focus on inequality transmission of inequality across generation elite formation and a combination of political and economic power in the two systems i was talking about the social mobility that is not helped by the financial in in system either so it seems that the g7 countries have come to an agreement that they will submit to the g20 and in the end to the oecd concerning taxation business taxation or minimum tax on business income or corporate income what about corporate tax system and social mobility i have to say that i am fairly skeptical about that there were like lots of work like 20 years ago which argued that the deeper is the financial system uh the greater is the ability or the financial system to for example fund your education to actually give you loans without collateral and basically the idea is that you would solve income inequality through the financial system i you know there were many papers about that i think that the crisis in 2006 2007 2008 has really put the rest that idea the the us has a very deep financial system and it has actually most deeply crashed and it really was you it is really essentially an idea that you would be able to solve inequality and to increase social mobility i have to say it by tricks by sort of landing against zero collateral and that somehow people would of course then later be earning money and they would be replaying uh repaying that money but it really didn't work so i am not at all convinced that the financial system has to is strong enough to play really a role of increasing social mobility if we want to do that i think we have to do it in a more standard way which is opening up the education system and making social transfers well i think we have to conclude so as to keep to the time frame allotted to us unless there is a super urgent question if not i would like to thank professor milanovic for accepting our invitation and for giving us this very interesting lecture that will for sure contribute to the enhancement of the debate at the international level so thank you again and hopefully we will see you in person next year at the festival thank you you