00:07:38.160I think one of the reasons why housing is always on the agenda, there are new initiatives now, for instance, to take away land from councils which are not building the number of houses, is because of the issue we talked about a moment ago, which is inequality.
00:07:53.680So if you have a great intergenerational divide, the younger people who are part of generation rent, if they can't get on the housing ladder or feel it's going to be out of reach for probably until their way into their middle age, that is not going to make for a happy electorate.
00:08:14.940So those are voters. So yes, there's certainly, you want the housing market to be buoyant,
00:08:21.700you want prices to be, nothing dramatic happening to prices. But I think even the baby boomers
00:08:30.040would say that no one really expects the housing market to be rising the way that it used to.
00:08:37.260And maybe that's a good thing, because it does increase the prospect that younger people can
00:08:42.960get on the housing ladder, and that would help with social cohesion. And importantly, as I said
00:08:48.740a moment ago, they are also voters. They could voice their dissatisfaction at the polls.
00:08:54.960It was quite interesting, as you touched on the United States, and you were saying about the
00:08:59.040American dream, which is to better yourself and to, you know, essentially rise up through the
00:09:04.140rungs of society. And you touched upon the fact that that really doesn't seem to exist anymore.
00:09:09.760Are you sort of saying, Linda, that the American dream is dying?
00:09:15.440I think the American dream has always been an aspiration.
00:09:20.880I'm not sure if the economic reality really has matched it for some time.
00:09:28.360This is actually a work done by Joseph Stiglitz, the Nobel laureate.
00:09:32.120His latest book actually traces, I think,
00:09:35.620the disconnect between what the American dream represents and the reality of a lack of social
00:09:42.940mobility for lots of young Americans. So what is the American dream? Why pick a fence, a house,
00:09:52.020a good job? I think that's sort of the trappings of it. And you're the aspiring thinking you can
00:10:02.160do that regardless of your own background is part of what makes gives I think America the sense of
00:10:07.340entrepreneurship that it's had because in one sense America is pretty extraordinary right the
00:10:12.580world's biggest economy very technologically advanced and they keep producing innovation
00:10:17.600and innovators it's not like anyone sits rests on their laurels so that is still there and there
00:10:23.760and there and they are there are some who still break through the ranks they come from nothing
00:10:30.480and they end up tech billionaires or what have you.
00:10:33.820But in Stiglitz's book, he documents that for lots of the American public,
00:10:41.360doing better than your parents isn't likely to happen.
00:10:46.900And so that's, I think, one worrying trend in America.
00:10:51.940So a couple of economic trends behind that, which I do also discuss in my book,
00:10:56.740is that quite extraordinarily, median income, so that's the income of the person in the middle
00:11:03.920of the income distribution, the very rich, the very poor, median incomes have been stagnant
00:11:08.720in America for four decades. So that means that America's economy has grown, GDP per capita average
00:11:17.020incomes have grown, but that's going to the wealthy. So that means that for the average person,
00:11:22.940incomes have stagnated for a very long time. And the middle class, which is defined as those in
00:11:30.280the middle of the income spectrum, that has now shrunk to be less than half of the American
00:11:38.920population for the first time since at least the 1970s. So you have a shrinking middle class,
00:11:45.920stagnant incomes for 40 years in a country that by all accounts is a rich country with
00:11:51.640lots of great innovators and I think that divide really suggests the American dream is possible
00:11:58.040for some but for a lot it's not really it's not it's not a reality for them it's not within their
00:12:04.740grasp. And that's very interesting and another question I wish to ask is two questions actually
00:12:09.240how much of a part does race play in that? Is it are you more likely to succeed if you are white
00:12:15.460and are you less likely to succeed if for instance you are black or you come from a
00:12:19.860Latino, Hispanic background, and also as well, do you think that ultimately gave rise to somebody
00:12:25.440like Trump, who famously said that we need to drain the swamp, as it were?
00:12:31.520I think socioeconomic background is very much linked to privilege. So I think there is a racial
00:12:37.080element to it, but I think a lot of it is socioeconomic. So if you're born to a household
00:12:41.580with college-educated parents, if your parents are professional workers, entrepreneurs, that's
00:12:49.140going to be a massive determinant as to whether or not you become college-educated and move up
00:12:54.840in terms of income. And that, of course, is linked to race and ethnicity and racial minorities in
00:13:01.520America. And I think what's worrying about it, obviously lots of things are worrying about it,
00:13:09.240but one of the things that's worrying about it is that America is also the land of immigrants.
00:13:13.860So part of the American dream is this belief that you could go to America with nothing and you could arrive in Ellis Island or Angel Island from Italy, thinking The Godfather, you know, from Asia, and you could literally make yourself into anything you want to be.
00:13:35.660And if that isn't actually what the evidence is suggesting, then that is really striking at the heart of what is part of the American identity.
00:13:45.180Did President Trump capitalize on this?
00:13:49.860I think he realizes that despite America's overall prosperity, there's a lot of people who feel left behind by the changes that have caused some of these trends that we're discussing.
00:14:01.600So globalization is part of the reason why you see this divide.
00:14:05.360But it's actually not the biggest factor.
00:14:24.800It's kind of pervasive, but not in a tangible way.
00:14:28.800It's much harder to grasp that on the campaign trail than to talk about globalization, unfair trade, immigration.
00:14:36.920And so I think a lot of the rise of populism, which is not limited to Trump, is related to this economic malaise that has characterized America very quietly, but it's now coming to more of the forefront.
00:14:49.880It's interesting. I think we've started talking about inequality.
00:14:53.220We've probably said the word inequality about 100 times since we started in 10 or 15 minutes.
00:15:27.180I think there's been a lot of research on why it is you have a gender pay gap, and I'm not sure that we fully understand it yet.
00:15:39.280But the British government's forcing companies to declare in quartiles the pay gap between men and women adds a huge level of transparency.
00:15:51.080So what you tend to find in these companies is at entry-level jobs, men and women tend to be paid around the same.
00:16:01.900But as you move up the ranks, the gender pay gap widens, and it tends to be the highest in the top quartile.
00:16:07.500So what that's suggesting is that women are not being promoted to senior positions with higher pay.
00:16:14.240It could also be suggesting that women are not as able to ask for raises or bonuses.
00:16:22.420And partly, perhaps, that's a lean-in argument that Sheryl Sandberg has made.
00:16:27.540But maybe it's also an unconscious bias on the part of employers, where if a woman asks for something, maybe it's viewed less favorably than if a man asked for it.
00:16:40.280So I think unconscious bias is probably part of the explanation.
00:16:44.980Quite a lot of the economic studies on gender suggest that once you control for observable characteristics,
00:16:54.560such as your education, your occupation, your level of experience, your years in the job,
00:17:00.480even taking into account labor market interruptions, such as if you go and have children,
00:17:12.840I think the, well, the British reporting has given us the most immediate data.
00:17:19.580I think something like eight out of 10 firms have a substantial gender pay gap.
00:17:24.340And I think across industry, some of the pay gap is as small as maybe 2%, 3%.
00:17:30.220But if you get into finance, construction, the gender pay gap is in the double digits.
00:17:36.720But are we talking about like-for-like comparison?
00:17:38.720This is the counter argument I'm putting to you because I was actually on Mumsnet this morning reading the forums about this issue because there was a particular airline, I don't want to mention their name, that had a big one.
00:17:48.420And there were people discussing it, women from both sides.
00:17:51.000And one of the arguments that was made by many people there is when they're making these comparisons, they're not a like-for-like comparison.
00:17:57.380So you're not comparing someone in the same pay grade or someone in the same position.
00:18:01.380so the reason I'm asking you is I'm trying to understand if say two two people man and woman
00:18:09.240do the same job and there is that unexplained difference in their pay what kind of difference
00:18:15.640are we talking about in terms of these people who are doing exactly the same thing with the
00:18:19.640same qualifications it depends on the industry and it differs across countries as well so I think
00:18:27.240the, you know, I think probably as a rough rule of thumb, women are probably paid, if you looked
00:18:35.840across studies over a number of years, 10 to 20% less than men, something like that. But it's bigger
00:18:43.440for some industries like construction and finance. So what the government's pay revelations have
00:18:50.280shown is that they have, it's not completely comparable, but if you're in the top quartile
00:18:57.400of wage earners in a company, then you are, you're unable, you know, without declaring everybody's
00:19:03.940income, which some countries in Scandinavia, I believe do, without actually declaring everyone's
00:19:10.660income, there's no way you could do what I described in economic studies, which is to control
00:19:15.060for your level of education, your skill, your experience.
00:19:18.920And let's not forget, as you rise up in corporate ranks,
00:19:21.680a lot of soft skills are involved, which are very difficult to measure.
00:19:25.320But what you do find, and this is also part of the reporting,
00:19:28.680is people in the top quartile of income,
00:19:33.360it's also broken down in terms of numbers of men and women,
00:19:36.900and there are fewer women in senior jobs.
00:19:39.740So another way to look at it is why are senior positions not being filled by men and women equally if they enter at the entry level in about equal numbers?
00:19:52.800What you find is a tailing off of women compared to men as you move into the top.
00:19:58.900There was an interview which went viral on Channel 4.
00:20:03.560Jordan Peterson is a professor of psychology at Canadian.
00:20:07.000And he was saying that the reason that there's this big gender pay gap is that a lot of getting a higher pay grade is due to reasonableness.
00:20:18.140And men tend to be more aggressive when it comes to negotiating a salary.
00:20:29.720And also in their general behaviour at work in general.
00:20:31.620In their general behaviour, whilst it is not as socially acceptable for a woman to behave in that manner,
00:20:37.320would you think that would impact it or do you think it's something far more complex?
00:20:43.320I do think, I mean, when we ascribe things to unconscious bias, it's just sort of a catch-all
00:20:51.000because there must be behaviours that when men do it, it looks more acceptable than if a woman were to do it.
00:21:00.340And I can think of instances where it works the other way.
00:21:02.700But what we do know is unconscious bias also captures a concept called cognitive dissonance.
00:21:09.500So people like people who are like them.
00:21:13.600So you understand people who are culturally similar to you.
00:21:19.260Maybe you share an interest in similar interests.
00:21:23.160And I think that's part of the unconscious bias.
00:21:25.940So maybe with greater transparency, what that allows people to do is to say, OK, have I really thought hard about the qualifications of the applicants for this job or how much of what I'm basing it on is other unarticulated traits?
00:21:43.980And where it gets tricky at the senior levels is that soft skills of leadership are very hard to objectively assess whether you're a good manager.
00:21:53.400It's not really something that comes off your CV because you have so many years of experience or training.
00:21:59.900And I think that's why at the senior levels, you do find a bigger gender cap, both in terms of income, but also in terms of promotions and employment.
00:22:08.540But quite a lot of progress has already been made.
00:22:12.000I think you already see, for instance, women going on to boards.
00:22:15.500There's a lot of focus on putting women on the executive track.
00:22:18.960So I think there have been a number of policies and efforts around this.
00:22:28.760But I think what's probably we shouldn't expect is for this issue to be solved quickly.
00:22:37.400As in now that we see the numbers, I think there's going to be quite a lot to debate for some time around why it exists,
00:22:45.620what can be done about it, whether it's, you know,
00:22:48.980and this is not something that's just happening here,
00:22:51.100it's happening in different countries around the world.
00:22:52.880So, Linda, you wrote a really fascinating article in The Guardian that I read
00:22:57.280about the trade war between the United States and China,
00:23:01.760and Trump is saying that he wants to implement it,
00:23:04.560and you think this would be disastrous for both countries.
00:23:07.120Could you give a little bit of explanation as to why?
00:23:10.480Yeah, anything that has war in it is probably going to be America.
00:25:41.060They're looking at almost a kind of economic nationalism.
00:25:46.080And this is somewhat consistent with what President Trump has said.
00:25:50.220He wants American companies to bring production back to America.
00:25:54.360But they went overseas to produce things because it was cheaper and more efficient.
00:25:59.660So that's also going to raise costs and prices for Americans.
00:26:03.020And then the final thing I find really worrying about all of this is who's going to resolve this dispute
00:26:07.960if the Americans and the Chinese can't agree quietly,
00:26:10.940which so far they haven't been able to agree on how to stop this escalation.
00:26:18.140The World Trade Organization is the body that oversees global trade.
00:26:23.180And President Trump has described the WTO as a disaster.
00:26:28.260And if he pulls America out of the WTO, I think that would upend the global trading system as we know it.
00:26:35.540So the global trading system was actually formed based on American rules and American standards, but it's provided more of a level playing field.
00:26:44.940So that means that a developing country like Thailand can take America to the WTO to say your standards on nets is unfair.
00:26:54.760That's a protectionist measure. It has nothing to do with the nets.
00:26:57.780And that's exactly what – and they won.
00:26:59.540So prawn producers in Thailand couldn't sell their prawns to America because they weren't using the right kind of nets.
00:27:05.600But before the WTO, they make that argument and they win.
00:29:22.040Wow. So they're literally trying to hit them where it hurts.
00:29:24.820Exactly. And there's midterm elections coming up in the United States. Congress gets – the House of Representatives is reelected every two years. A third of the Senate is reelected every two years. It's six-year terms.
00:29:35.380So you're hitting members of Congress and saying, do you really want economic damage here, especially when the Republicans are a free trade party?
00:29:47.160And then that would, and there's already some pressure coming from Republicans telling Trump to sort of not escalate this.
00:29:55.820And remember, and this is a really, you know, another kind of, another step way outside the normal discussions, is there's even talk in Congress of restraining the president's powers when it comes to trade.
00:30:10.420So the president's powers on trade is a delegated power from Congress, which is the legislative branch.
00:30:16.160So Congress, in theory, could restrict the president's trade powers.
00:30:32.840What is happening in China and why is it happening
00:30:35.360in terms of the political structure and system?
00:30:38.360Well, President Xi Jinping has, I think, set himself up to be president indefinitely.
00:30:45.640I think President Trump joked that's something they should try in America.
00:30:53.160I think Xi Jinping is politically very powerful.
00:30:59.220That's clear from what he's been able to do.
00:31:04.280One of the, I think, challenges around whether he can really be president indefinitely
00:31:10.400is that one of the tricky things about China's economic development
00:31:15.080is that it's happened without political reform in any substantive way.
00:31:20.620So it's always the case as a country becomes richer.
00:31:24.720People need their policymakers to be accountable.
00:31:29.480And if you have a president you can't get rid of,
00:31:34.680before Chinese elections were not really elections,
00:31:38.100presidents served two five-year terms.
00:31:41.060I'm from Russia. I know what you're talking about.
00:31:42.920And so I'm not suggesting that it was, you know, that may not be much different than it was.
00:31:49.080But I think China is now richer than it was 30, 40 years ago.
00:31:52.800So if you don't have a safety valve for people's dissatisfaction, then delivering on the economy becomes very important.
00:32:00.580And Xi Jinping has really focused on local official corruption to try.
00:32:05.100And because he knows that's an area that the Chinese people are just very unhappy with local officials, you know, taking their possessions, being arbitrary, all of violent, all of those things.
00:32:18.260So his policies are trying to keep him in power, stabilize the system, address where a lot of the grievances are.
00:32:27.580But I suppose if the economy slows down, will the system work?
00:32:31.480And I suppose every time I think about where China is headed, to me that's one of the biggest unknowns, which is at some point most economies have to have some degree of rule of law that's independent from the politicians so people can protect their homes, protect their livelihoods.
00:32:53.960And in China, that's very weak, and that's unlikely to get any stronger once you have
00:33:23.960So if you look at South Korea, if you look at Taiwan, it's one of those things where I still remember the Arab Spring when you first had the initial, you know, pretty small incident in Tunisia, as in it wasn't Tahir Square straight off.
00:33:42.880And it's just really hard to predict what could spark something that really brings about change.
00:33:49.980But no, at the moment, I think China has its own version of democracy as an intraparty competition, but that's being eroded by Xi Jinping's centralization of his power.
00:34:06.760So, you know, like the Arab Spring, I find this area very, very difficult to assess and predict.
00:34:14.680Well, of course, an advantage of a more authoritarian system is continuity and strength and power.
00:34:19.980as a country, isn't there? There is that element. And do you think what's happening in North Korea
00:34:24.040now is an example of China flexing its muscles, essentially?
00:34:28.800I think with North, well, I think North Korea is, has been a headache for some time for China,
00:34:35.140because it's a very unstable regime on their doorstep. The bulwark between it and South Korea,
00:34:42.940which is aligned to the United States, this is left over from the Cold War.
00:34:46.660and I think whether there's no question that China is the most influential player when it
00:34:55.700comes to North Korea and the fact that the North Korean leader made a initially quite quiet trip
00:35:04.580to Beijing where nobody was sure if he was there or not you know in a train probably suggests that
00:35:11.080China is indeed powerful in this respect because they discussed what might be discussed between
00:35:18.560President Trump and Kim Jong-un. And there's never been a meeting between the North Korea
00:35:23.980leader and the president of the United States. But the North Korean leader went to China first
00:35:27.760and that tells you a lot. By the way, if President Trump were to sit down with Kim Jong-un
00:35:35.260and they resolved the North Korea issue.
00:35:43.280That could be a huge success story for Donald Trump,
00:35:46.080could it not, if that were to be achieved?
00:35:47.980Yeah, if he did nuclearize North Korea, if he normalized it.
00:35:51.420But here's another part that would be interesting.
00:35:53.040So say they have the summit and North Korea agrees to dismantle its nuclear weapons,
00:35:59.000which, okay, this is all a bit of a long shot.
00:36:02.260And it begins to talk about reunification with South Korea.
00:36:09.220A unified Korea, which is attached in terms of a land border to China, isn't necessarily something the Chinese would want.
00:36:19.560Because a unified Korea is probably going to be Western orientated.
00:36:24.660And so China would want the status quo.
00:36:28.040And so even if the South Koreans and the Americans think the only way to stabilize North Korea would be to remove the DMZ, normalize, integrate, all the kinds of things they've been hoping to do for a very long time, I wonder how much support they would get from China for that because China would be worried about having a so clearly U.S.-orientated country that is on their doorstep.
00:36:54.800So I think the status quo would be what the Chinese would want.
00:37:00.680And I think realistically, that's probably what we'll end up with.
00:37:36.920Is that something that the Chinese would go for and would be interested in?
00:37:40.440I think they would still prefer the status quo.
00:37:42.880I think taking responsibility for a regime that, because essentially you would have to take responsibility for the Kim regime, I think it's probably a step they'd be quite unwilling to take.
00:37:55.980So the Chinese have operated for a long time based on a doctrine of non-interference.
00:38:00.840They don't interfere in the affairs of other countries.
00:38:03.680And by implication, you don't interfere in the affairs of China.
00:38:07.500So they don't, for example, mess with congressional districts in the United States or anything like that?
00:38:13.880No, unlike perhaps some other countries.
00:42:33.780and this is under Xi Jinping's, one of his policies,
00:42:37.120and they talk about the Chinese dream,
00:42:38.740which is even if you are from the countryside and you're a migrant worker, then you too can have a house, a picket fence, a car, a good job.
00:42:50.580So it's basically a mirror of the American dream.
00:42:54.260And so in that way, communist China is very similar to capitalist America because they're both not going to reduce inequality in the way that you would see in northern Europe, which is more equal because governments redistribute incomes to reduce inequality.
00:43:15.400Both America and China seem to be using social mobility and economic opportunity
00:43:20.920as a way of counteracting very high levels of inequality.
00:43:27.080I'm not sure that... We'll see how it works out.
00:43:30.820I'm not sure that is going to be socially acceptable,
00:43:35.540given how vast the income divide is in a country which is still only a middle-income country.
00:43:43.380So it's not as if on average people are well off.
00:43:45.720On average, average incomes are $9,000 per year.
00:43:49.700So it's still a developing emerging economy to have this kind of inequality.
00:43:56.880But I think the prognosis for it is that they seem like they're going down the American route.
00:44:03.900We'll do one more question, Chyna, and we'll move on.
00:44:06.440I remember at Kilconomics hosting a discussion between you and other experts on the subject of China.
00:44:11.300And one of the things that I remember absolutely struck me is that I'd come into the conversation thinking that China's this big threat to the West and everything else.
00:44:20.040And what emerged actually as a result of one of the contributions that you made is the idea that China's financial system has got a lot of problems in it.
00:44:28.800And those problems could affect China, which then would affect the rest of the world.
00:44:33.600And basically the idea being that China's biggest threat to the world is not its intentional actions.
00:44:38.200It's the collapse of its financial system potentially.
00:44:40.460Can you talk a little bit about that and tell us what that's about?
00:44:44.560Yeah, so I think China is likely to have a financial crisis.
00:51:19.040is entitled, Why Are So Few Countries Prosperate?
00:51:24.620And the answer, part of the answer, is that the institutions in these countries need reform.
00:51:31.940So we've been focused, economists focus a lot on growth.
00:51:35.100But actually, it's about trying to get the institutions to work better, if that means using social capital or social networks or some other way to make growth more inclusive.
00:51:45.660But because there is a recognition that something different has to be done, it is possible, given how much nations around the world are focused on this, that we could end up by 2030 eradicating poverty or most extreme poverty.
00:52:04.580And on current trends, we will, by 2030, live in a world where, for the first time, more than half of the global population is middle class.
00:52:17.540That means earning between $10 to $100 per day.
00:52:21.540It basically means you can afford a refrigerator.
00:52:24.940So that's the – but that's quite the –
00:52:27.820I'm not sure a lot of middle class people in Britain are going to go with that definition.
00:52:30.800But I think, you know, we are on the cusp of potentially a transformative period in the world because there is, I think, yeah, a recognition that we need to think differently about it.
00:52:43.580And I'm always very hopeful that we will get to this point where we'll see hundreds of millions of people in the middle class.
00:52:52.580In fact, I think the projections by the OECD are that there will be 4.9 billion people who are in the middle class out of a global population of 8.6 billion in 2030, and that would be extraordinary.
00:53:06.780Linda, so the one thing we do like to do at the end of the show is we're always curious, because we ask you questions that we think are interesting, but actually we're constantly aware that we may not know the most interesting questions.
00:53:16.560So what we'd like to ask is, is there an issue or several issues that you think we ought to be talking about or ought to be focusing on that actually no one is talking about or no one is focusing on?
00:53:26.040Is there something like that that you want to bring to our attention?
00:53:29.840I think probably, well, this is an issue that lots of people do talk about, but I think we should talk about it more, is the question of why are wages so low?
00:53:43.460And the reason I think this question is important is because typically if you look at what matters in economics, it has to be people's standard of living.
00:53:52.960So when you look at this question of why wages have not kept up with productivity, it gets you into this whole world of trends that we know is affecting our livelihoods.
00:54:06.640But I don't know that we've done enough research or analysis to understand some of these trends.
00:54:12.700So, for instance, we've talked about globalization and a bit on technology, but technology is one of the biggest issues around what happens to the world of work.
00:54:24.680And automation is one of the issues that's causing this hollowing out of mid-skilled jobs and then therefore depressing median wages.
00:54:37.260And another component of why wages are so low is that workers, in terms of bargaining power, have been getting less.
00:54:45.040So if you look at the share of income, for instance, in America, the trend is very clear.
00:54:48.980The share of income going to owners of capital has been rising.
00:54:52.060The share of income going to workers has been falling.
00:54:54.720So why are workers losing bargaining power?
00:54:58.740And that's also contributing to their low wages.
00:55:01.940And this then all gets tied up into this dissatisfaction that people rightly have if they feel they're being left behind by the growth of a country.
00:55:11.200So the populist movements we've seen in America and other parts of Europe, I think, do reflect the fact that people do not feel, and they would be right, they're not better off than they were years ago.
00:55:24.940But we're not, I think, thinking hard enough about what to do about these trends.
00:55:32.660And I think bargaining power for workers is one of the hardest things.
00:55:36.160There is a correlation with unionization, but that's not the whole answer either,
00:55:40.980because you don't have, as I say, kind of a simple solution to it.
00:55:46.980but until we get a hold of why it is that people are not being paid what they're actually producing
00:55:55.620because that's what it means for wages to keep up with productivity
00:55:57.900that they're going to be dissatisfied with the status quo
00:56:00.880if they're dissatisfied with the status quo
00:56:02.500then you can get electorates which start to throw out the policy makers
00:56:08.220they view as part of the establishment
00:56:09.740and this kind of anti-establishment political mood
00:56:14.380is linked to people's economic circumstances.
00:56:18.060And just because you live in a rich country,
00:56:19.600it doesn't necessarily mean you feel better off.
00:56:23.580So to me, this issue around low productivity,