The puzzling politics of inequality

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MARK BLYTH: From the Rhodes Center for International Economics and Finance at Brown University. This is The Rhodes Center Podcast. I'm the Director of the Center, and your host Mark Blyth. About a decade ago, Economist Christoph Lakner and Branko Milanovic produced a graph from their research that went viral.

It got the nickname based on the shape it makes, the Elephant Curve. I know it's hard to do graphs on a podcast, but bear with me. So there's two axes. The horizontal axis showed the percentile of the global income distribution. One occupies. The vertical axis was real income growth.

It showed that between Nineteen Eighty-Eight and Two Thousand Eight, there was a ton of income growth at the bottom of the global distribution, mainly located in China and East Asia. And a ton at the very top, which was the 1%. What was interesting was the middle, the upper working classes, and lower middle classes of the West. They got squeezed. And today, nearly 20 years later, that squeeze has only gotten worse.

As soon as I saw it, I thought this was a sign of trouble brewing. And so it proved to be, but not in the direction I expected. With a few exceptions, inequality, which is what this thing is measuring, never seems to be a topic around which our politics gets organized, despite its importance and despite the fact that it worsens over time.

So in this episode-- another puzzle episode, if you will, I'm going to talk with two folks who know much more than I do about this topic and try and get a better sense of why that is. Later on, you'll hear from one of the co-creators of the Elephant Curve, Branko Milanovic.

But to start, I spoke with Charlotte Cavaille, an Assistant Professor of Public Policy at the University of Michigan's Gerald Ford School of Public Policy, and author of the grade book, Fair Enough: Support for Redistribution In The Age Of Inequality. Here's our conversation. Charlotte, welcome to the podcast.

CHARLOTTE CAVAILLE: Hi. Thanks for having me.

MARK BLYTH: So I brought you on because I wanted to do an episode on inequality. And essentially, as I've just said in the intro, why isn't it more politicized? Now I have a theory. It's got no empirical basis whatsoever and has never been rigorously tested. But I'm going to run it past you and see what you think.

I tend to think the populations break into thirds. I think this is generally true. 1/3 are conservative and convinced that everyone is cheating all the time. 1/3 are liberal, and they're kind of convinced that the world is stacked against certain groups, and therefore you need to redistribute towards those groups. And 1/3 are in the middle. They could be convinced either way or they don't care.

Now, assuming that that's not complete nonsense, and given the degree of inequality that societies have generated over the past 40 years, why is this not the dominant issue of the day? Shouldn't the 2/3 swamp the 1/3 and just basically redistribute from the top to the bottom?

CHARLOTTE CAVAILLE: I really like your typology. Yeah. The first one would be the traditional far-right voter who sees cheats everywhere-- elites, immigrants, welfare recipients. The other side would be more the Mélenchon-type voter who really thinks that oppressed groups-- again, immigrants, women, the working class back in the day.

And then I think potentially a middle could be the folks who just don't have strong priors about the fairness of the world, about cheats, et cetera. So to your question, so why are we not seeing the 2/3 swamp the 1/3?

So first of all, I actually think the 1/3 middle is a little bigger than you think, partly because of the disengaged folks. So a lot of the question is, why aren't we shrinking the middle of disengaged folks towards one of these two outraged groups that you described?

MARK BLYTH: Right.

CHARLOTTE CAVAILLE: And I think more importantly, though, the two outraged groups are not outraged about the same thing. And so that precludes the coalition basically against the middle. So I'm happy to give you some sense of how I think they differ.

MARK BLYTH: Yeah, go on.

CHARLOTTE CAVAILLE: OK.

MARK BLYTH: Tell us how they differ.

CHARLOTTE CAVAILLE: The thing I usually do-- let's see if it works, is I try to build an analogy with the difference between Occupy Wall Street and the Tea Party. Like these are two groups of very much outraged after the Great Recession about what was happening. But in terms of flavor, the Tea Party was really outraged at seeing government funds used to bail out banks, for sure. But actually, the famous rant that started the Tea Party was about homeowners.

MARK BLYTH: Yeah, profligate homeowners. I should never have had a mortgage, right?

CHARLOTTE CAVAILLE: Exactly. They shouldn't have gotten one. Why are you bailing them out? And so, to some extent, it seems to be concerns about moral hazard, what economists call moral hazard. You shouldn't be rewarding bad behavior and generating this disincentives.

MARK BLYTH: Right.

CHARLOTTE CAVAILLE: But in practice, I think what I found in my research is that what economists describe in a very-- let's say, technical way as moral hazard, is really this strong moral concerns about free riding. And so that's what the Tea Party was mostly concerned about.

The Occupy Wall Street guys were mostly concerned about the fairness of capitalism. To them, homeowners were victim of that unfair system, and so you could not build a coalition between these two groups. And so that's the intuition to my answer to your question. They don't come together because they don't see fairness the same way.

MARK BLYTH: So I originally framed this as like there's a 1% that owns everything. And why aren't we going after it? Why is it OK that America has more billionaires and we think that that's OK They don't pay any taxes, et cetera, et cetera. Surely, there's 2/3 of the people there that could get together and say, no, give us some of the cash.

And what you're saying is actually, no, there's a polarization. And they both believe in a sense not so much in redistribution, but they have problems they want to solve. And the problems are so orthogonally different that even though it's about inequality, they can never agree on what to do of it. Is that a good summary?

CHARLOTTE CAVAILLE: So that's a good summary. And I would add to this that for the Tea Party ideal type-- again, I'm putting this just to get the conversation started. They don't care about inequality per se. So the only people who see inequality as a problem are actually more on the far left.

MARK BLYTH: I remember when Piketty's book came out and Obama actually talked about it and said, this is the defining book of a generation. And then once his rich donors found out, he promptly dropped the book in the White House toilet and never spoke about it again.

But nonetheless, that was a thing for a moment. And there was this feeling of you know, now we now have the numbers. We can put it on the agenda and people will mobilize around this. And of course, it just didn't happen.

But what you point to is there is something here and it's about fairness. It's about different conceptions of fairness. So tell me about that. How does fairness play into our discussions or our theories of inequality?

CHARLOTTE CAVAILLE: So what is fairness? When you find something unfair, you are implicitly applying or explicitly applying an understanding of what ought to be. And if you say it's unfair, you say what is, is not what ought to be. And so I think that's the basic thing.

What I tried to do in my research is to think, what are the odds that we all agree on, and that organize our political discourse in the following way. We agree on the [INAUDIBLE], but I say that what is doesn't align with what should be. And you disagree with me. That's basically ideological disagreement, right?

MARK BLYTH: All right. So let me give you an example of that. See if I've I got it right. Let's do a simple Left-Right one.

CHARLOTTE CAVAILLE: Yeah.

MARK BLYTH: So I'm on the left and I read Piketty and I come along and I say, well, this is where we ought to be. And it looks a lot more like a balanced world. So we need wealth taxes, et cetera, et cetera.

And then somebody on the other side says, actually, no, I think that's completely wrong. This is just dessert story. Basically, you end up with what you end up with because of the talent in the world. So no, I disagree. I have a different conception of fairness from you.

CHARLOTTE CAVAILLE: Exactly. But where you agree is that people should have rewards proportional to merit, broadly defined. We are all, unfortunately, meritocrats.

MARK BLYTH: We're all--

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CHARLOTTE CAVAILLE: Meritocracy.

MARK BLYTH: OK. So we're all meritocrats. Right. Right. This is the common thing.

CHARLOTTE CAVAILLE: Exactly. That's the common norm. Where we differ is that you think we're not there yet. And my comment and say, yeah, it's not perfect, but we're not that far. So one norm-- you can think of it, I call it proportionality in my research.

The other norm that tap's more about how we evaluate the fairness of social solidarity is this reciprocity norm. So it's to say to what extent is social solidarity rewarding free riders over cooperators like the good team players?

MARK BLYTH: I pay my taxes, I play by the rules.

CHARLOTTE CAVAILLE: And I don't get help from the government. How bad, right?

MARK BLYTH: Right.

CHARLOTTE CAVAILLE: It's these types of folks who don't. So this is the other [INAUDIBLE] out there. And so you can think of people using these two meritocracy and reciprocity and disagreeing on whether or not the status quo deviates from what these two norms prescribe. Does that make sense?

MARK BLYTH: It totally makes sense. Let's break it out.

CHARLOTTE CAVAILLE: Yeah.

MARK BLYTH: So let's say that I-- let's do a little 2 by 2 in our heads. So I think that most people reciprocate.

CHARLOTTE CAVAILLE: Yeah.

MARK BLYTH: And I think that things are unfair.

CHARLOTTE CAVAILLE: Yeah.

MARK BLYTH: I'm going to be a redistributionist.

CHARLOTTE CAVAILLE: Oh, you're going to love all aspects of redistribution.

MARK BLYTH: So the second quadrant would be the opposite of that one. So I basically think that the world is already fair. I don't think it needs a retooling. And also, I think that most people free ride. So even if you tried to make it fair, it would just make it worse.

CHARLOTTE CAVAILLE: Yeah.

MARK BLYTH: All right. Then you've got your mixed cases. Then you'll have the ones where I think that the world is unfair, but I do believe that people cooperate. And then the opposite of that one. Is that how you break it out?

CHARLOTTE CAVAILLE: Yeah, no. Exactly. And so the way I like to put countries in there, actually.

MARK BLYTH: Yeah, go on. That's a good one. Give us the cooperators. The cooperators are Sweden, right? It's always bloody Sweden.

CHARLOTTE CAVAILLE: [CHUCKLE] Yeah. Denmark in my case, actually.

MARK BLYTH: I remember-- years and years ago, there's a guy called [INAUDIBLE] [? Pederson. ?] He's actually beyond my generation. He's retired now. And he was a big political economist in Denmark. And he wrote this book called Denmark, The Cooperative Economy. And yeah, he was, everyone's congratulating themselves on how wonderful they are because the book says Denmark is special.

So I think he was actually invited to the royal Palace or someplace like this to give the big public talk. And he came out and someone said to him, so can you-- before you start, give us a quick summary of what your book is. And he said, certainly when you have 80 million Germans up your backside, everyone cooperates.

CHARLOTTE CAVAILLE: [CHUCKLES] Yeah.

MARK BLYTH: So--

CHARLOTTE CAVAILLE: No.

MARK BLYTH: Maybe it's a small, small country security threat. I there's lots of things that can go into this.

CHARLOTTE CAVAILLE: Yeah. Yeah.

MARK BLYTH: So fairness basically breaks into these two things. One is do you reciprocate with others? Do you think that they cheat or not? And then how close is the world to your median conception of the way things should be? And that's how everything revolves around it. OK. Given that we've got this understanding, how do you then do redistribution?

Let's think about-- there's an electoral coalition where enough of the people who think that things are a bit off, and we should probably redistribute a bit. How should they think about this? Because you also make a distinction in your work, which I think is really interesting between redistribution to people and redistribution from people.

So to break that down, redistribution from is Elon Musk has all that money, he's never going to spend it. This is ridiculous. Let's give him a 90% marginal tax rate and you'll still be worth hundreds of billions. And then the redistribution to people is, well, obviously these groups-- this particular group, just this group, they deserve compensation for historical injustice or whatever it is.

Now that makes sense to me. But at the same time, in order to do redistribution [? two, ?] you've obviously going to have to take something from someone else. It's always redistribution. It doesn't come out de Novo. How should we think about this?

CHARLOTTE CAVAILLE: So two thoughts. So one is the redistribution from versus redistribution to. I partly came up with these expressions because I wanted to show that asking people about do you support redistribution from the rich to the poor was mixing things together.

So it's partly an artifact of this other question that was asking. What I mean by that, it's less specifically taking from the rich to give to the poor separately. Redistribution from is what I call the Piketty type redistribution, which is fundamental reforms that affect the foundations of institutions that generate market income.

MARK BLYTH: All right. So it's pre-distribution effects in a sense?

CHARLOTTE CAVAILLE: Yeah, I think you can think of redistribution and taxation if it's progressive.

MARK BLYTH: Right. Got it.

CHARLOTTE CAVAILLE: Redistribution to is debates over the generosity of social solidarity. By definition, social solidarity is going to benefit some more than others because of class inequality and health and unemployment risk, et cetera. And also because we might want to make it more redistributive by means-tested benefits or designing the taxation the way we pay our taxes in a more progressive way. So social security in the US could be more progressive in the way people like me pay into social security funds, for instance. Like they've got this ceiling.

MARK BLYTH: We could lift the cap. I mean--

CHARLOTTE CAVAILLE: Exactly.

MARK BLYTH: You just lift the cap. If you lift the cap, there is no social security crisis. It's completely manufactured.

CHARLOTTE CAVAILLE: Exactly. Right.

MARK BLYTH: Right.

CHARLOTTE CAVAILLE: So this is also what I mean by redistribution from and redistribution to. But two thoughts. So one institution, the institutions that generate market income. Another one is the institutions that underpin social solidarity. And then there's the taxation system as a whole.

The taxation system, I don't talk about it tons in the book because Ken [? Shivi ?] and Margaret Levy have worked on it. And I didn't want to stamp on their feet. But going back to your question. So first of all, thanks to deficits and debt, you can do one without the other.

So what is Obamacare? It's a coalition of groups who are self-interestedly supporting a reform because they need healthcare coverage, and a bunch of people who support it because they think it's fair. In practice, the way it was designed, even the taxation of the Cadillac plan's got watered down a little bit over time.

The cost of this was not that clear. And thanks to United States' ability to borrow, we know it has contributed to the deficit, and then other things have contributed. So the contribution now is relatively low. So you can have both things to debt to some extent.

But the other way to think about this is that redistribution to doesn't always require progressive taxation. That's the whole point of social solidarity and social insurance. It's insurance to some extent. And so you can tweak it to be more or less redistributive. But you don't need to have progressive taxation to fund a generous social insurance system if that makes sense.

MARK BLYTH: It does. OK. So this is all good and it helps me think through how people think about inequality and why it usually doesn't become a political issue because it's complex. It's to do with how they think about fairness. It's how you decompose fairness. And it's everything else that we just spoke about.

So let's make this more over time. And the micro level, do people change their minds about this stuff over time? And on the macro level, do populations change over time? And is that because politics politicizes it in a certain way? Do certain frames work and then do they stop working? Because that's actually something I've been interested in for years.

Why does a frame that never used to work suddenly become resonant? And it allows you to change a bunch of stuff. And then after a while, for example, if you think now with markets are good neoliberalism, very few people are like standing on a soapbox saying, this is the way, the truth, and the light. It seems to have run its course.

CHARLOTTE CAVAILLE: Yeah.

MARK BLYTH: So does fairness have-- how put it? Fashionable frames?

CHARLOTTE CAVAILLE: You can think of frames-- So let's say I believe that labor market income is distributed in an unfair way. It's not meritocratic. This is my belief. It will be easy for you to mobilize me if you use a frame that taps into that. The issue, you will mobilize someone who already is mostly on board.

So that's why I think frames at the individual level when we use them in surveys, you see how someone like me if you use that frame, will maybe increase my support for redistribution in this context.

MARK BLYTH: Just to give you an example on that, just to make sure we're on the right track. This is my argument about why the Democrats don't waste any time talking about green issues, because everyone who already cares about green issues is obviously going to vote Democrat.

CHARLOTTE CAVAILLE: Yeah. No, no. That's it. So in a two-polarized party system where these beliefs go together in a pretty consistent way, the Americans are more ideologues than we think, actually. In that sense, yes. Exactly. I think in other countries with more than two parties, it's a bit more leeway on the elite side here,

MARK BLYTH: Right.

CHARLOTTE CAVAILLE: Or different strategies at least. So that's one thought. The other thought-- so how do these beliefs change? So to be honest, I've been working hard at it and it's pretty hard. Like the best evidence I have, I would say it's a back-and-forth between a discursive context that puts new ideas about new statements, about the fairness of the status quo repeatedly.

It is hard to update your fairness beliefs, so it needs to be repeated exposure. And the extent to which my situation at the time makes these types of frames echo. So it's both individual and contextual. So let me give you COVID as an example.

It was a moment where we actually could have framed-- especially the Amazon guy.

MARK BLYTH: Jeff Bezos.

CHARLOTTE CAVAILLE: Thank you. Bezos, as someone who was exploiting a terrible crisis for his own benefit. However, unfortunately, I think welfare states worked a little too well. And so the level of hardship was either not a big shock or concentrated on populations that were already disorganized. And so they were not the ones.

So you see how there's a bit of push and pull here. And unfortunately, COVID was a moment where the discursive concept pluralized, but the hardship was not 100% there.

MARK BLYTH: The big push was for build back better before it became the Inflation Reduction Act. And that was about the care economy and the expansion of the care economy and all these things that we could do, et cetera, et cetera. We have to do it now when COVID goes away. But ultimately, not enough people suffered for it to really have resonance. That's basically it.

CHARLOTTE CAVAILLE: Yeah, which is a little sad. But historically, Ken [? Shivi's ?] work also shows that the moments where we see some evidence that beliefs and perceptions of the status quo are shifting, it's this mix of entrepreneurial elites who pluralize the discourse and huge shocks like a world war.

And then my third insight-- the one I hadn't fully grappled, is the following. So we've got these norms like meritocracy, which better applies to the rat race of trying to get the most income that you can. Because you work hard, and you've got talent and you've got skills. And there's reciprocity, which is more about to what extent am I willing to contribute to this collective effort. Because I think it's the right type of people getting out of it, something good out of it.

I think what I've not fully grasped is that there was a time where market institutions, or the institutions that shape market income were talked about from a perspective of cooperation and interdependence. So when we used to set wages based on seniority, it was this idea that they've paid into the production of goods for a long enough time, and they deserve a bit more towards the end.

For instance, where Obama tried to say you did not build this. I can't remember exactly how we said it, but remember, he was trying to say the rich people.

MARK BLYTH: And it was picked up by Elizabeth Warren. Elizabeth Warren really banged that one to death. You didn't build that roads. You didn't build that school that educated the workers that you used to make your money. That's sort of stuff.

CHARLOTTE CAVAILLE: Exactly. It's not a rat race, just based on your talent. The race is structured around public goods, and so you ought to give back in a way that's not just about whether or not you deserve your income. And when he tried, he got-- I mean. Elizabeth Warren, I keep talking, but Obama withdrew that narrative.

MARK BLYTH: Yeah, absolutely. Trial balloon, done. That's it. We're on. Yeah.

CHARLOTTE CAVAILLE: Yeah. So there was a time where you could talk about income inequality, both from a meritocracy norm and from a reciprocity norm. And I think what neoliberalism is, is the crowding out of reciprocity concerns from critiques of the market. That's how I think of this.

MARK BLYTH: Oh, that's a nice way of thinking about it. Right.

CHARLOTTE CAVAILLE: Yeah.

MARK BLYTH: So basically, you just don't have that concern about-- to give your seniority example, you've been in the company longer. You deserve a bit more. That's just gone.

CHARLOTTE CAVAILLE: Yeah.

MARK BLYTH: It's simply what you bring. It's what I say when I sometimes meet my wife for a drink, I'll just sit down at the table in front of her and say, so, [? Jules, ?] what do you think you can bring to the company?

CHARLOTTE CAVAILLE: [CHUCKLES] Exactly So that-- but also-- even though I acknowledge that maybe, yes, you have less talent and your skills are less valuable. But my skills are only valuable if I work in cooperation with you. They're nothing. And so to that sense, I think I--

MARK BLYTH: Yeah, that's gone. It's been hyper-individualized.

CHARLOTTE CAVAILLE: Exactly.

MARK BLYTH: So let's bring all that around then. You've got these complex norms of fairness, which we can dis-aggregate into the norm regarding fairness itself and then the reciprocity component. How does salience get into this? When does this become important to you?

Is it really just when there's like moments when the shit hits the fan and everyone goes, [GRUMBLING] is that when you start to care about these things? Or are there other triggers for the salience of these issues?

CHARLOTTE CAVAILLE: Yes. So first of all, just to clarify, reciprocity to me, is a norm that generates perceptions of fairness. It's all about fairness. The cases I study-- so the British case is fascinating. I study the shift from old labor to new labor. And the way I think about this is new labor decreased the salience of redistribution from debates.

Did this kind of very meek change towards, oh, we're just going to make it more meritocratic. It's like, it's already pretty, but let's just make it more. And then really focused on reciprocity, social solidarity, making sure the deserving have access to. So it could be single mums. They put quite a lot of money on children.

They didn't not spend on social solidarity, but they totally de-emphasized debates [FRENCH]. So in that sense, I give a lot of roles to elites. But, of course, you need them to explain why do elites suddenly shift? The US, to some extent, was always a case where the redistribution from frame was weaker than the redistribution to one.

So I think of the history of America, and I guess I agree with King on this. It's really all about to what extent a group deserves social solidarity or not. And so that was what the North versus South on Jim Crow was about. That's what Obamacare was about to some extent.

So to me, a lot of American history is about redistribution from and like, how generous and how extensive should social solidarity be? And so it was always a little weak on the redistribution front part. In terms of how beliefs about the fairness of the status quo as shaped by reciprocity-- and I'm going to call it meritocracy in the context of this podcast.

Because of the two parties have polarized. To some extent, the two go more and more together.

MARK BLYTH: Hold on. Unpack that for me. Because they've become polarized, they become more together.

CHARLOTTE CAVAILLE: So in a polarized two-party system, knowing your beliefs about the fairness of the status quo as defined by the reciprocity norm tells me a lot about what you think on the other norm. So that's what I mean, they go increasingly together, which is-- if you have poor redistribution fairness beliefs in terms of social solidarity, you will also have them when it comes to redistribution from when it comes to meritocracy. That's more and more correlated.

Ultimately, in the US, though, most people believe this idea that we just want a meritocratic system and we just want to make it more meritocratic. So they're not very radical in their critique of pre-redistribution and of capitalism. A lot of the differences are really on social solidarity and how extensive and generous it should be. And so what is really interesting is that this is, to me, one of the major ideological differences in the US today.

What is the result is that the more politically engaged folks tend to actually be middle to high-income. And so they develop pretty-- if you're a Republican, pretty anti-redistribution beliefs about moral hazard free riding. But on the Democrat side, you have what we call bleeding heart liberals-- these high-income Democrats who actually think moral hazard is not an issue. There are no free riders. We need to extend the generosity of social benefits.

And so I joked that in the American context, it's not about these poor people voting against their interests. It's these rich Democrats who are looking a little too liberal on economic issues. This is only true at the national level. The way they behave at the local level is very different, of course.

MARK BLYTH: So let's bring it all back to where we started then. I suggested 1/3, 1/3, 1/3. And you broke out the middle third and fattened it up a little bit and said, it's actually about polarization and details. They can't actually get their act together to ever agree on anything. So you don't get a coalition that really tries to change these things.

We've also learned that part of what people care about is meritocracy, in a sense, and they care about reciprocity as well as two side of this norm of fairness that does the work here in terms of how we think about it. These things change slowly. They change over time.

Sometimes they change because of political action, but sometimes it's happenstance, luck, a big economic shock, some entrepreneurship. It's inherently unpredictable how they shift. So they tend to just trend along. But we've seen during the neoliberal period in both the UK and the US and some other places, the reciprocity norm, in particular, has been downplayed. Is there any sign of that changing?

CHARLOTTE CAVAILLE: Not really. The problem with my type of research is I'm backward-looking, and it's only when a trend is truly a trend that I tell you, it's happening. It's too late. I thought COVID would be a time. Didn't see it happened. And then I thought, OK, I think it's because not enough hardship.

I've been following how far-left groups are talking about capitalism. I'm not seeing a innovation in how they could criticizing capitalism, which makes me-- I'm not this pluralist context. The third reason why I'm not super optimistic is that I do think, to the extent that we have enough free trade at the global level, but also within the European Union like this bloc is built on that.

If you are trading and you have also pretty integrated capital markets. I don't see how your incentives would be to talk about new critiques of markets, basically. I do think. And the third thing is that ultimately-- and this is where I agree with Piketty on the Brafman and Merchants argument like I do think center-left parties are stuck with middle to upper-middle class and donors who are fine with some redistribution, but they're fine about making social solidarity more generous.

They're not on board for the more radical solutions to inequality, which are the ones that get at redistribution, taxation of wealth, et cetera.

MARK BLYTH: Right. So to give an example, I'm a donor to Labor just now. I'd love to have better workers rights, better gender protections. I'd like to have a bunch of things that don't really cost that much money. We could do a little bit more on unemployment benefit and so on and so forth. Maybe a little bit of labor mobility and training. It would be a good idea. I'd be willing to pay a little bit more tax for that. But you can forget putting a wealth tax out there.

CHARLOTTE CAVAILLE: Yeah, basically.

MARK BLYTH: And it's funny that we haven't mentioned self-interest in the entire conversation, but at the end of it, it always reappears.

CHARLOTTE CAVAILLE: Of course. When stakes are high and for sure a policy is going to affect you, you're not going to like it.

MARK BLYTH: That's when you think about yourself.

CHARLOTTE CAVAILLE: Yeah.

MARK BLYTH: And when the stakes are low and the uncertainty is high, you can be as generous as you want.

CHARLOTTE CAVAILLE: Exactly. And in order to be generous, you draw on your fairness beliefs.

MARK BLYTH: Yeah. This has been great. This has been super helpful. I'm going to take one of the last things that you said there. Alternative models. Are there other ways of thinking about this? And I'm going to bring that into the next conversation.

CHARLOTTE CAVAILLE: Sounds good.

MARK BLYTH: Thanks a lot.

CHARLOTTE CAVAILLE: Thank you so much.

[AUDIO LOGO]

Two big things stood out for me from that conversation. The first is that the fact of inequality doesn't matter. What matters is how our norms of fairness interpret that inequality. If we see free riders everywhere, then redistribution is a bad thing. If we see inequality as structurally driven, then redistribution to address the inequality is a good thing.

Second, it's hard to generate a coalition around inequality, given that it signifies two very different things to do, very different constituencies. You get action in the tails of the distribution, the Tea Party on one side and Occupy Wall Street on the other. But they can't combine to become a coalition because they see the whole issue very differently and the rest of the distribution is split.

To help me think this through more, I spoke with the inventor of the Elephant Curve that we talked about at the top, Branko Milanovic. Branko is a senior scholar at the Stone Center on socioeconomic inequality at the CUNY Graduate Center in New York. Here's what he had to say.

[AUDIO LOGO]

Branko, welcome to the podcast. It's great to talk to you again.

BRANKO MILANOVIC: Well, Mark, it's of course, always a pleasure.

MARK BLYTH: So we're talking about something that you've been writing about for a very long time, inequality. And I'm interested in why inequality? Which academics seem to think is a big problem, doesn't seem to generate sustainable political movements, at least in rich democracies. Is that your sense as well? How do you think about the relationship between inequality and politics in general?

BRANKO MILANOVIC: Let me start a little bit with a part that I discuss in my book-- In Visions of Inequality. I discuss why inequality was really not a big topic in economics in those days. I'm talking about Nineteen Seventies, '80s, '90s. Because of the competition with the Soviet Union, they [INAUDIBLE] claim on the West-- in the West side that basically there are no social classes.

Everybody can become rich. And mobility is high, and so on. Inequality on the other hand, also went down and there was really rejection of study of inequality per se in economics. Because essentially, there was a representative agent. Everybody was an agent within whatever income or wealth you have, and so forth.

Now, that has indeed changed in the 21st century, in part because of the global financial crisis, the realization that so many people have made money. People who are responsible were not punished and all that. So it really changed. And the movement-- the top 1% movement brought it to popular attention.

Now-- but that's really the big question that you ask. Why really has not stuck that as an issue in the political arena? The answer is that inequality is a diffuse topic. It does not have sharpness of a single issue. And then with the diffuse topic, different people think of that differently and cannot really-- how should I say, cannot really create a coalition that would have one clear objective.

I have to admit, inequality is not a clear objective. When you say, I want the minimum wage to be $12.50. It's a clear objective.

MARK BLYTH: Right. So it's diffuse, so it's hard to mobilize around. It means different things to different people. That jives very much with what Charlotte Cavaille said earlier. So let's push this a little bit further. One moment where it did seem to have a bit of political impact, and it was actually your work from just over a decade ago was the Elephant Chart.

BRANKO MILANOVIC: Yes.

MARK BLYTH: So for the people who are listening, the elephant chart was essentially a mapping of the global income distribution. And what it showed was that most of the growth had been in what we now call the Global South [INAUDIBLE] East Asia.

That at the top end, the returns had been pretty good. That's your top 1%. And this had resulted in squeeze of the working caste, and the middle class in the OECD countries. This came out, before Brexit. This came out before we had the first round of Trump, et cetera.

And there was a sense of, oh, hang on a minute, this is interesting. And people took very different things out of it. Write the globalization boosters were like, see, everybody's out of poverty in the third world. This is fantastic.

The inequality people are like, look at the 1%. This is terrible. But the really salient bits seem to be the squeeze. The squeeze is what populism has thrived on, particularly in America, Anglo countries, and Western Europe. When you produced that graph for the first time, did you think, oh, hang on, there's going to be some trouble here because of this?

BRANKO MILANOVIC: No, and to be quite honest, Mark, when I saw the graph first time, honestly, I actually saw all the implications immediately. Because the advantage of this graph is that it really plays on your tacit or implicit knowledge. In other words, I think, like many graphs, it is powerful to the extent that it gives a numerical presentation to something that you intuitively already know.

So when I saw it, it was quite clear to me, this is a big issue. You have this really people in the middle, and they are in some sense squeezed between the rising Asia and their own top 1%. And you can say that essentially Trump. I remember that. Actually I was-- believe it or not, I was sitting in a car going to a presentation. I think, actually, of my book with Krugman.

And that was before Twenty Sixteen. So it was like Trump was already running for the election, but nobody really believed that he would win. But anyway. So I said to Krugman, really, this graph really should help-- I mean, should help him, because that's basically what he's talking to, a dissatisfied constituency that was actually left aside by this all increase in incomes on the top and globalization.

Krugman says, well, he says luckily, he doesn't read anything. So he's not likely to see that. And surely he has not seen that. But in some sense, his campaign even then in Twenty Sixteen, played that theme.

MARK BLYTH: Right.

BRANKO MILANOVIC: He didn't need to have a graph, but that theme was played. And of course, that continued even you can say to some extent Biden tried to adjust for that by all the different measures that you see recently-- bringing jobs back to the United States, limiting high technology transfers to China, supporting United auto workers.

So they have realized that there is some problem there. So, yes, I think that's true. In that sense, inequality did play somewhat of a role in the US.

MARK BLYTH: So let's push this on a little bit further then just to see where we end up with this. One of the ironic moments of the current moment might be the fact that the people who really learned to weaponize inequality were the right rather than the left. And I'm going to give you a hypothesis as to why this is. And I want you to say maybe, maybe not. We'll see where it goes, right?

BRANKO MILANOVIC: Yeah.

MARK BLYTH: Riffing off of Henry Farrell's observation from his, Substack Programmable Matter, which if you don't read it, you should have a look at. It's really good. He said that the problem with the Democrats face is fundamentally, they don't really want to change anything. They're actually quite happy with the status quo.

Maybe a few airbags, basically a minimum wage or whatever, But other than that, it's fine. No big structural transformations. And they're supposed to be the party that cares about inequality and would like to do something about it. On the other hand, what you've got is a weaponized Right, which is increasingly obviously run by the plutocracy.

And yet, they've managed to take these concerns about relative incomes falling over time, deprivation, falling apart of traditional industries, the need to rebuild, and basically weaponize it to their advantage. So the plutocrats who benefit from inequality are the ones who are benefiting from it politically. Is that a fair reading of what's going on?

BRANKO MILANOVIC: I think there is some truth. I think nobody would deny that, that there is a correlation between one part of the plutocrats. Because not all plutocrats are obviously pro-Trump, but one part. And significant chunks of-- not only the working class, it's maybe lower-middle class. I actually call them in my book malcontents.

Because malcontents is really a broad category. It can include many people who are not happy. And I think, unfortunately, when it comes to liberals, even I prefer the term to Democrats. They are like the victims of their hubris. Their hubris goes back, in my opinion, to Nineteen Nineties, their view that actually their view of the world has won. This is the only imaginable and acceptable view of the world.

And then, of course, as you know, in Greek mythology, hubris, there is a nemesis coming back. And the nemesis came back twice, not only once. It was not enough for them that it should come once. They wanted it twice. And I'm afraid actually, they will get it the third time, because it doesn't seem to me that there is much learning happening.

And when I criticize them, they get angry because they say, well, now really, whom you should criticize is Trump. And it's true. But if you don't really absorb and accept and look at what are the errors of the past, you're just going to keep on repeating it forever.

MARK BLYTH: Fair enough. Another thing that's interesting on this, let's say, for example, we could wave a magic wand and just magically reduce the Gini coefficient or the [INAUDIBLE] statistic or whatever for the United States.

Do you think that would change the politics fundamentally? Or are the sources of the malcontents diffused enough that really wouldn't be the salve that we would hope it is?

BRANKO MILANOVIC: Mark, it's, of course, a great question. You know my answer. I wish I could say yes. Because I work on inequality. I wish I could tell you, look, reduce Gini, by two points and everything is going to be fine. But I think that the problems are much deeper. The Gini, again, is such a general measure. Nobody even knows what it is. And it does actually show when it goes down by two percentage points, it does show a difference.

Let me give you an example. Twenty Twenty, the Gini coefficient of the market income-- which means before social transfers and everything else-- went up by almost two Gini points. Because, of course, as you know, people were not working. These were mostly people with low incomes. So they suddenly had zero incomes.

US Gini market income and Gini went up by almost two points, huge transfers. CARES Act and everything else drove the disposable income Gini to the lowest level that it has been. I think actually-- I don't know, maybe about 25 years. But the decline of the disposable was 1 and 1/2 Gini point. So they shaved off 3 and 1/2 Gini points out of 40 that the US has.

So in other words, in one year-- actually, it was 10% decline in the Gini. And people did notice. My kids friends noticed actually that they were getting, I think, $2,000 and they didn't have to work. And they liked that idea. So there was noticeable change. But already obviously by Twenty Twenty-One, the programs stopped or actually were significantly reduced. Twenty Twenty-Two, everything went back to Twenty Nineteen. So there was a change. It was not a sustainable change, but people did notice it.

MARK BLYTH: And of course, the attempt to actually redistribute in that way produced a backlash that basically got them out of power in a weird way. So again, no good deed goes unpunished. Just one question on this. Should we think less about inequality and think more about what some people call precarity?

Is it really the conditions in which we live and the fragility of those conditions, rather than the level of inequality that might be driving a lot of this?

BRANKO MILANOVIC: Yeah, I agree with that. Of course, there is this whole literature of precarious jobs, and many multiple jobs-- gig jobs that people have to do and all of that. I agree in some sense, Mark, you can say that it's almost like a return to the whatever-- 17th century in Western Europe. And in less developed parts of Eastern Europe, like the one that I come from, from 19th century.

Because in 19th century, you would have people gather at center of the village on a daily basis and they would say, OK, I'm free. Just hire me today. And then someone would be hired, others would not. And the gig economy and this precarious economy is basically like that. Like the beginnings of capitalism.

People just-- they don't need to go nowadays into the city center, but they have to hang around their computers to find if they will have a job that day or not. So yeah, it's not a pleasant situation at all actually for many people. And I think psychologically it's very destructive.

MARK BLYTH: So could it be the case that that's the grounds out of which you begin to get more of a political reaction towards inequality? Because this is not only a symptom of inequality, it's something that's driving it further. And if more and more people are affected in this way, does that create-- if you will, the immiseration that leads to the political movement? Or does that one just clash on the rocks and not do much either?

BRANKO MILANOVIC: No, I think if you were to put all of this-- well, significant number of these things together, I think you could start by making a difference. But, of course, there are some elements which are due to the perception that some incomes really-- they're really out of the ordinary, that they should be controlled, and that the power that comes with such incomes and wealth is to be reined in.

So there is also work on the very top. But let me only say one word there. I'm much more in favor of what you said, actually, in working maybe on precarious jobs than seeing every problem as something in search of a tax solution, I think people have become allergic to just imposing taxes on everything which moves.

The tax rates in the Western world are already very high. People are not really very happy to pay them. And if you just come up with proposals that you want to tax everything, they don't like it. Even people with moderate incomes, they are just-- honestly, I think they are just fed up. This is not. And you know that Mark, better now.

This is not the Europe of Nineteen Sixty that you would actually tax and people believed in the government and stuff like that. This is the new world, that they know that the government is going to rip them off and they don't like to pay it.

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MARK BLYTH: And on that wonderfully bleak note, we will finish our conversation until the next time we meet. Branko, it's always illuminating, enlightening, and certainly sometimes a little bit perplexing. But it is the unequal world we live in. Thanks very much for joining us today.

BRANKO MILANOVIC: Thank you so much, Mark. It's always a pleasure speaking with you.

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So what's the take-home on all of this? First, as Branko points out, mainstream politicians and the economic theories that they draw upon were quite blind both to the existence of inequality and actually their role in generating it.

The second is that while rising inequality is a massive driver of populist anger, simply reducing the level of inequality is not going to put those politics back in the bottle. The third is that in societies where top earners have a hugely disproportionate amount of income and wealth, and governments tax and spend, and in some countries redistribute quite a lot, there really are limits to what tax policy can do.

The fourth one, and this may be the real issue here, not just for the mobilization itself, but for understanding it. It goes back to Charlotte's insights about the micro level. How our views of inequality as individuals shape how we feel about it? That's really important.

In a world of increasingly precarious employment, short-term contracts, platform work, and uncertainty. That's when and where inequality bites, through generating precariousness and uncertainty in our lives. But does it bite hard enough and broadly enough to produce a sustained political response?

The jury is still out on that one. But thanks to folks like Branko and Charlotte, we're at least getting a better understanding of the aspects of inequality that don't produce change. And that's a good start.

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This episode was produced by Dan Richards and Zack Hirsch, with production assistance from Sabrina Clumeck. If you like this episode, leave us a rating and a review on Apple, Spotify, or wherever you listen. And be sure to subscribe to the show while you're at it. We'll be back soon with another episode of the Rhodes Center Podcast. Thanks for listening.

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