In this episode, the ReSolve team sits down with Daniel Waldenström, a professor of economics with a focus on growth and distribution. Waldenström shares his insights on a range of topics, from the impact of economic crises on societal structures, to the role of policy makers in fostering growth, and the shifting landscape of wealth inequality.

Topics Discussed

• Waldenström's journey into economics, spurred by an interest in societal issues and historical events, particularly the economic crisis Sweden faced in the early 90s

• The importance of understanding both the size of the economic pie and its division, and how this realization shaped Waldenström's book, 'So Richer and More Equal'

• The role of policy makers in fostering growth and the common pitfalls they face, particularly in Europe

• The impact of the Swedish economic crisis in the late 80s and early 90s, centered around real estate and loose lending standards by Swedish banks

• The evolution of wealth distribution over time, with a focus on the shift from a wealth concentration in the hands of a few to a broader dispersion

• The unique case of wealth inequality in the U.S., and how it differs from trends in other Western economies

• The role of educational systems, labor laws, and trade unions in raising people's productivity and income levels

• The impact of asset price appreciation on wealth inequality, and how this has played out differently in the U.S. and Europe

• The role of income and income distribution in wealth inequality, and the implications of capitalization of income

• Waldenström's policy prescriptions based on his research, offering a positive view of capitalism and human ingenuity

This episode is a must-listen for anyone interested in understanding the dynamics of economic growth, wealth distribution, and the role of policy in shaping these outcomes. Waldenström's insights provide a nuanced perspective on these complex issues, offering valuable strategies for navigating the ever-changing economic landscape.

Daniel Waldenström: We could

also talk about stock prices,

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booming stock markets, and so on.

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This has totally different implications

for people's saving and their wealth

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today, as opposed to a hundred years ago,

because today, most people have a, stake

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in these assets that are appreciating,

and what it did to, what it has done to

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wealth inequality, is that despite the

enormous growth in the prices of financial

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assets, but also housing assets over the

last two or three decades, we haven't

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seen an equivalent growth, growth in

wealth inequality or wealth concentration.

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Adam Butler: Okay, welcome everyone

and welcome to Daniel Waldenström.

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Quick background on Daniel, who is a

professor of economics with the Research

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Institute of Industrial Economics.

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Received his PhD in economics from

the Stockholm School of Economics

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in 2003, and thereafter worked as

visiting assistant professor at

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UCLA and global fellow at the UCLA

International Institute from 03 to 04.

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In 2009, Daniel gained his

second PhD in economic history

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at Lund University, perhaps more

salient for today's conversation.

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Daniel's also authored a couple of books.

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me a little over a decade ago, coauthored

Sick of Inequality and just last year

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published Richer and More Equal, A

New History of Wealth in the West.

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And, Daniel, I stumbled across your

work and your thinking with the

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interview that you did with Michael

Shermer a couple of months ago.

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And, so that, that's what, Got me

curious in your research efforts

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and, and piqued my interest in

wanting to have you on the show.

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So Daniel, welcome to Resolve Riffs.

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Um, to get us started, I was hoping

I warned you before the show that

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maybe we would try to, go back a

little further, uh, into your past

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than maybe other, interviews have.

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So I was wondering if you could give

us some insight into, you know, how

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you grew up and, well, maybe first

start with what exactly you focus on.

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And then, then we'll talk about, how

maybe your upbringing and your early

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studies led to you to become curious

and doing more work in this field.

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Daniel Waldenström: So thank you guys

for inviting me and talk about these

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questions that are, you know, both my

work and but also my hobby, I would say.

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so, and, so I'm a professor of

economics doing academic economics

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research, focusing on questions

on growth and distribution.

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So how do the economies develop?

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How do we, you know, Get to live a

better life, but also how to make that

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broadly dispersed in the population.

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How do we get people to feel engaged,

but also to be taken care of?

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But so finding the balance between

promoting people's efforts and making them

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want to grow and want to like expand in

society, but also then how can society

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help in terms of redistributing by.

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Taxing people, but also then, you

know, supplying the needs to do

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and social safety nets and so on.

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And where do we strike a balance between

retaining the, the incentives, you know,

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the carrots to people, but also then

offering, broad, uh, you know, solutions

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for society to work well as a whole.

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So growth, inequality, taxation, and also

do some policy work and policy advice

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in, in, in Europe, I would say like

Sweden, Swedish government, different

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colors, and also European level, you

know, EU commission, OECD, and so on.

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So, you know, that's basically what I do.

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I do some, uh, Supervising

of graduate students as well.

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But then, this is, this is what I do.

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Adam Butler: Thank you.

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So Daniel.

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Maybe take us back, to,

to your, upbringing.

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were you always interested in

this kind of subject matter?

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Or was there something in your early

life or maybe in your early studies?

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That triggered a particular

interest in this focus.

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Daniel Waldenström: well, you could say

I kind of grew up in Stockholm, Sweden,

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or in the suburb of Stockholm, uh, in the

seventies, eighties, living relatively

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good life, I would say then in, uh,

some kind of middle class framework

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with parents, you know, coming out of

university, working on, these kinds

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of more academic professions, but also

there are, you know, some of these longer

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tides might with banking and so on.

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And that was an era of, political

engagement, I would say.

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my parents coming out of the, like,

the boom, baby boom generation,

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that kind of protested against, you

know, the older conservative society

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that they grew up in and wanting

to, you know, Improve on society.

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You had the Vietnam War was very

influential in Sweden and you had

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so those kind of sentiments I think

infused me to into like political

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interest I would say at early age.

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so I when I get got up became a teenager

I I kind of was kind of interested in

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societal issues, politics, and, more

of a social scientist than some kind

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of natural or science or math person.

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so I came in through into economics,

more from that background, also history.

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I've always been interested in history.

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so, well, Sweden also then lived

through a pretty serious economic

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crisis in the early nineties.

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So we had like had some centuries of very

low, low unemployment rates, high growth

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rates, but as it happened, also high

inflation rates, stagnation, You know,

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hollowing out of competitiveness as most

European, also the US and North American

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economies had in the 70s and early 80s.

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So, so that in Sweden, the policy,

there's the market failures or the

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market underperformance was really

grave and we lost a lot of industries.

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we had really high inflation rates,

bad policies, that, you know, gave

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us this really deep economic crisis.

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You know, unemployment levels

went up from maybe 2 percent to 12

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percent within a couple of years.

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and you know, we have bankruptcies,

banking crisis and so on.

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And I think many people then, I was

then like a teenager, became interested

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in, you know, wow, what's happening.

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we, we understood that economics matters.

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Then I kind of understood

that I wanted to.

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I needed to know more in order to

really get to know the facts so

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I think that kind of channeled me

into studying economics as a topic.

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Adam Butler: Okay.

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and particularly, you know,

development economics, I guess, right?

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what, what are the progenitors

of sustained growth?

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the progenitors of, of, wealth

generation, the dynamics that lead to

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increasing or decreasing inequality.

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Did that fall out of any early courses

in university or any experiences academic

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or otherwise at that time in your life?

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Daniel Waldenström: Well,

not exactly actually.

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So I think I was pretty much.

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Primarily interested in historical

questions, also the financial

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development, financial industries.

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So I started looking at the

interactions between policy, like

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political events and financial markets.

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So stock trading, taxation

of stock trading, also then

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within a historical context.

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So that was more of how I, you know,

this is what I did some research on in

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my, my, my dissertation in economics

at the Stockholm School of Economics.

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But, and then I was invited, or I

got a job at UCLA, as an assistant

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professor, and there I met Emmanuel

Sayes of Berkeley University.

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He gave a presentation on, the

wealth inequality in the U.

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S.

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and its, its development

over the 20th century.

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It was a really great paper with Vojtek

Kopchak, who's now at Columbia University.

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so, then I kind of, and I had

already felt that some parts of the

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financial sector was kind of unreal.

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I mean, it's almost by construction,

you know, not part of the real sector,

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but I felt, you know, I needed to

know more about how people fare.

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And, so I think And with my earlier

political interests, I think I kind

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of realized that the development

or like, yeah, development, but

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also inequality dimensions were

like what I wanted to look at.

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So then I was kind of, I was, became

interested in, in what Emmanuel had

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done and also Thomas Piketty in Paris.

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and then let me, we could come, come

back to this, but I think, at that

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time, I didn't really think that growth

development was that important, even

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though I kind of, I knew that it existed

and I'd studied it, but, and I think this

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is actually something we need to talk

about that many inequality researchers,

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but also people interested in inequality

have a problem of not really understanding

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that, you know, in order to have

something to tax, we also need income.

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We need profits.

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So, so not only the division of

the pie, but the size of the pie.

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And I think this is something

that I started to realize actually

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even later during the later years.

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And I think this is also what was kind of

the key driver behind my book on, uh, so

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richer and more equal, which is where I

really try to highlight, you know, that

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those two sides, both the size of the pie

and, and also the division of the pie.

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Richard Laterman: I'm curious to

maybe circle back to the crisis you

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mentioned in the early 1990s, ahh which

you said you grew up in the 70s and

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80s so that you, your early, young

adult is probably out of university,

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Daniel Waldenström: Yeah, you can see

that from my color on here, right?

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Sorry.

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Richard Laterman: Yeah, I wasn't

going to go there, but, I think what

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we're trying to get at is from the

outside, I've never been to Sweden.

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I think a lot of people's views on Sweden,

it's usually remarked along with the other

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Scandinavian countries as this, beacon

for social democratic policies, more

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homogenous society, a more equal society.

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And so the fact that you grew up

in Sweden, you're, you're, you're a

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Swedish guy and your, the outcome of

your research and the focus of your

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academic life has been on how, you

lionize capitalism and its effects on

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bringing up the bottom half, let's say,

of the income distribution might strike

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a lot of, listeners as surprising in a

lot of ways, given the, the, the, the

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more social democratic, bent, that the

Scandinavian countries seem to have.

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So I'm curious if perhaps that episode

in the 1990s, were there particularly

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bad policies that you remember,

that, the Swedish government imposed

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and maybe what, what those were

would be interesting to understand.

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Daniel Waldenström: Oh, I

mean, it's a great question.

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I think this is something that's actually

really on the agenda as of today as well.

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maybe I didn't really understand it at the

time, but so the policy makers, they of

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course wanted to do as good as possible.

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they wanted growth.

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All policy makers say they

want high growth and so on.

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The problem is that many of them

don't understand what it, what's

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needed in order for growth to happen.

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I think some of them, I think this

is particularly problematic for,

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for people interested in like maybe

inequality, but it's a policy makers,

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maybe leaning towards left side, left

side of the, of the political spectrum

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to, to see like the means of society

as given, you know, they're there, you

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know, not seeing, you know, the, the

efforts required for growth to happen.

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So for example, what happened

was a lot of deficits.

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So deficit spending, meaning not first

make sure that, that, that the means

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are created in the private sector, but

instead policymakers could, borrow,

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from the future, from future taxpayers,

raising government debt, without needing

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to prioritize between different areas.

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Because, you know, if you borrow,

you can just like add resources.

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you don't need to take from some area.

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and this is, What that kind

of destabilized Swedish, the

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Swedish economy during the 1980s.

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It generated like spending, which then

in turn generated higher inflation

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rates, you know, built up a fiscal

balance that also made, creditors, uh,

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Uh, leading to higher interest rates,

so that in, you know, increase the

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pressures on, on, on the budget, without

really solving the underlying problems

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of competitiveness on, on really,

you know, the growth, uh, potential.

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derivatives that are needed.

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Then we also had some other, some

other aspects at that time in terms

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of like, we had a fixed exchange

rate that was pegged towards, like

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a basket of European currencies.

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And as you may know, so if you have like,

you know, committed to a certain exchange

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rate and there is like these speculative

tax, then, uh, and, and typically also

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this fixed exchange rate may over time be.

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With respect to your like the

competitive level of your of your

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economy that became very expensive then.

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So that was just part of the of the in

the imbalances that were being built up.

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But as far as the deficit spending.

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You know, the lack of commitment,

and, long termness, long

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termness of, of, of politicians.

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I think, I think that is a really

grave problem that especially

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Europe is suffering from today.

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As you can see, I think that was

aggravated during the, during the

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pandemic, but we had it before.

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Many of the over inducted economies,

you know, just continued borrowing

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and they do still continue to borrow.

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France, for example, has a really large

government debt and they have low growth

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rates and yet their latest budget was

like some 5 6 percent of GDP deficit.

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just signaling that, you know, these guys

really are out of hand with what's needed

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for them to create long run stability.

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So, really what we

experienced 30 years ago.

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And, And this is something that Europe

is actually experiencing right now.

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Adam Butler: So that's a really

interesting framing of the Swedish,

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Economic crisis in the, in the late

80s, early 90s, because my recollection

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of it was that it was, it was centered

around real estate and, loose lending

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standards by Swedish, Swedish banks,

especially in commercial real estate.

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And so the banking system got over

leveraged with asset back loans.

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And then there was an interest rate

spike and some inflation, which

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obviously was probably the trigger

for a collapse in the real estate

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bubble, that had accumulated over sort

of a, the five or 10 years previous.

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and this kind of gets into some

of the frictions or tensions I,

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have found with, with some of your

conclusions and your, in your analysis.

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around wealth, right?

224

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So just taking the Swedish example,

obviously there was an enormous

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credit bubble, maybe it wasn't obvious

at the time, or, you know, it was

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obvious in retrospect, but it wasn't

obvious as it was accumulating.

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It had an enormous wealth effect, right?

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For a time, I'm sure, Swedish

citizens felt very wealthy, right?

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During the accumulation of this credit

bubble and the increase in commercial

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and residential real estate prices.

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so, you know, I, I just wonder to

what extent are we confabulating

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maybe a wealth effect, you know,

cause you do make the point that.

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Over the, you know, since the 1980s,

certainly since the early 1900s, global

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wealth has increased and it's not just

increased for the, those at the top of

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the food chain, but for those at, at other

stratum, strata in, in the food chain.

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to what extent are we confabulating

or conflating, asset price bubbles

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with a general wealth effect?

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Daniel Waldenström: Okay.

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So, you know, there are

several topics a little bit.

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So let's, so just very briefly on,

on the 1980s episode in Sweden.

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So you're perfectly right.

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So, so I think, so what we

did was to deregulate the

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banking sector in the 1980s.

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So this was part of the, of the kind of

the political, these were part of post

245

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war or like Second World War regulations.

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So we had regulations of

the financial industry.

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So all the banks, you know, basically were

required to do things that was steered by

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the finance minister or the central bank,

in terms of how much to lend or how much,

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what at what interest rate we couldn't

like have capital flowing across borders.

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We couldn't have borders taking active

part in our economy because of these

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regulations, capital account regulations.

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our tax system was, you know, such that

borrowing was really, supported or, or

253

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you could say, subsidized by, by, you

know, high deduction possibilities.

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And then what, when we deregulated

the banking system, because that was

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just part of what What was kind of

lacking in, in a dynamic economy.

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The problem is that we stick with our

older, with our tax system that, you

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know, promoted borrowing and having

these deduction possibilities, making

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it very beneficial to borrow a lot.

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so it's kind of boosted borrowing

and, and construction, and so on.

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And we can, so we had a bubble.

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That's right.

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I think though that that was

more like, so that was the bubble

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that kind of burst in a sense.

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When we, when we, when we redesigned

the tax system in the early nineties,

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but I think, the deeper economic

problems and political problems, you

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know, were in place in the 1970s, I

think throughout the Western World.

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And they kind of outlived the 1980s and

also then for Sweden then created this

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huger, much larger crisis in the, in the

early nineties, but, but fair enough.

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as for the other question that you

raised, and I think it's very kind

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of interesting about what is wealth,

and how is wealth generated, and what

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you allude to in, in the sense of, of

housing prices going up, and you could

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also have new buildings, of course.

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So this is basically

how wealth is created.

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Either we save, it's a kind of

volume growth of, of assets and

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wealth, or we have Price gains,

relative asset price gains.

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and that, that we can have actually both

in terms of the, of the non financial

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assets, the property or the housing and

the houses, or at the financial side,

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of course, we could have, capital gains.

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And so there is definitely the case

that a large part of middle class

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00:20:06,113 --> 00:20:10,473

wealth growth over the last two,

three decades, you could say, in many

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Western countries has been the, in the,

in the, has been asset price driven.

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So, and this is shown by, by some

scholars for different countries.

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So, and we see in fact, relative price

gains or capital gains are relatively

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dominant in, in middle class portfolio

growth, whereas higher end of the

285

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wealth scale, we see much more of

like new savings or like, maybe gains

286

00:20:35,483 --> 00:20:40,433

from income or whatever that makes

you expand in like buying new assets.

287

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and this has made people think, what

happens if prices Drop if prices

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fall, or whether there is like

some kind and, and, and, and how

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to interpret these kinds of gains.

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Uh, and I think there's like, isn't,

there's no really simple answer.

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I mean, wealth is a very

complex outcome in this sense.

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so capital gains, unrealized capital

gains are kind of paper gains.

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so they don't really change your life,

very much, you know, depending, you know,

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as you, as you know, I mean, if your house

becomes much more valuable, still your

295

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house, it provides the same services.

296

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We can, so there, there's like

some, so the liquidity dimension or

297

00:21:17,083 --> 00:21:20,873

interpretation of, of, of different

kinds of assets becomes important here.

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but, well, I don't know, I don't know

if this was not an answer really.

299

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This is just like some thoughts, but let,

let me hear what you, what you have to

300

00:21:27,188 --> 00:21:28,308

Adam Butler: No, no, it's

a, it's a good point.

301

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And I, and I put the car before the horse

a little bit, with, with my question.

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Right.

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So why don't I allow you to describe

what you investigated for your book and

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00:21:38,108 --> 00:21:41,928

probably what you've investigated as

kind of your life's work over the last

305

00:21:41,928 --> 00:21:45,678

decade or so, and then, you know, talk

about some of your main conclusions

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00:21:45,828 --> 00:21:48,378

and then we can follow up with some,

with some challenges potentially.

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Daniel Waldenström: Yeah.

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So thanks, thanks for, thanks for

reminding me about like bringing,

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bringing forth my, my, thoughts on this.

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So.

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So what I kind of found when looking

at the data, uh, in terms of what, what

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wealth is, what, what kind of people

wealth, what kind of wealth that people

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hold and how this has maybe changed

over time was precisely the fact that,

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all of a sudden the stuff that you

and I own, and what, what is that?

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00:22:14,341 --> 00:22:18,331

You know, the popular wealth that

people sometimes have are basically

316

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our, our homes, our dwellings.

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that's We know it like it dominates

most people's total portfolios, in all,

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you know, in the aggregate, but also

in the micro, like the household level.

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so that is, uh, and also

we have long term savings.

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We save primarily for old age.

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So this is something that, you know,

we as households always have wanted to

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do, but it, as it turns out, looking at

the very long time perspective, like a

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hundred year, It turns out that maybe

some people did, many people didn't.

324

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Because why?

325

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People were too poor to save.

326

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So basically, all that they

earned, they had to eat.

327

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we were underdeveloped.

328

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so looking at the aggregate, The

total amount of housing wealth and

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also long term savings, is like

maybe a one quarter of all wealth in

330

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society and the rest was other things.

331

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What was that?

332

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Well, agricultural domains, Land,

forestry and so on, but also industrial

333

00:23:19,521 --> 00:23:23,431

capital that, you know, grew, grew in

our economies in the early 20th century.

334

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Over time, this has changed.

335

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So why?

336

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Well, people started becoming

more, more educated, better paid,

337

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starting to build their lives.

338

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This is something we have not,

perhaps our generation have not seen

339

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that, but our parents have seen it.

340

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I think they have been part of it.

341

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And their parents were kind of.

342

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In the midst of it.

343

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So normal people could

basically start buying homes.

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and you know, our parent generation,

40s, 50s born, many of the, some

345

00:23:52,541 --> 00:23:55,831

of them are still the first ones

to get a university education.

346

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so these are real growth developments.

347

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And, and what happened was that, people

started building, you know, their own

348

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saving and building their own portfolios.

349

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So, and today, when we look at the

aggregate, three quarters instead

350

00:24:12,276 --> 00:24:16,556

of one quarter of all wealth are

made up of housing and long term

351

00:24:16,556 --> 00:24:18,076

savings, pension funds and so on.

352

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So that is like this huge

shift of the 20th century.

353

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And what it, what it does is

that whenever we have, you know,

354

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Price changes in the markets.

355

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So we talk a lot about housing

prices and house price, maybe

356

00:24:31,856 --> 00:24:33,046

inflation, but it doesn't matter.

357

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We could also talk about stock prices,

booming stock markets, and so on.

358

00:24:37,996 --> 00:24:43,786

This has totally different implications

for people's saving and their wealth

359

00:24:44,006 --> 00:24:48,276

today, as opposed to a hundred years

ago, because today, most people have a,

360

00:24:48,306 --> 00:24:54,486

have a stake in these assets that are

appreciating, not everyone but a lot of

361

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people and what it did to, what it has

done to wealth inequality, which is then

362

00:25:01,660 --> 00:25:07,950

like the other big theme of my work and

also my book, is that despite the enormous

363

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growth in the prices of financial assets,

but also housing assets over the last

364

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two or three decades, we haven't seen

an equivalent growth, growth in wealth

365

00:25:19,360 --> 00:25:21,150

inequality or wealth concentration.

366

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Let's, we could let U.

367

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S.

368

00:25:23,170 --> 00:25:27,540

be a little bit aside for the time being,

but if we will look at basically all

369

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European countries, but also Canada,

Australia, so despite asset gains of 200%,

370

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300 percent between say 1990 and 2020, top

wealth shares, the richest people's share

371

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of all wealth has not increased a lot.

372

00:25:46,118 --> 00:25:49,508

In some countries it hasn't increased

almost, you know, It's it's basically

373

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flat and this is because yeah, we've

had a lot of new entrepreneurs building

374

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new companies and so on but The values

of our economies have also increased,

375

00:25:59,848 --> 00:26:03,398

you know Both in terms of no savings,

but also these asset price gains.

376

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Then dampening or like basically balancing

out the wealth growth in the top.

377

00:26:10,008 --> 00:26:13,668

We can then talk about why we had

these asset price changes and so on.

378

00:26:13,668 --> 00:26:17,948

But this is just like looking at the value

of wealth as we, we, as we measure it.

379

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Namely the market, the current

market price of our assets.

380

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And we see that since people have started

saving and owning to a large extent,

381

00:26:27,379 --> 00:26:31,059

middle class people, they are also

part of these asset price increases.

382

00:26:31,329 --> 00:26:36,729

Meaning that, despite the value

creation, we haven't had the, boost or

383

00:26:36,749 --> 00:26:39,469

growth in, in, uh, wealth inequality.

384

00:26:39,589 --> 00:26:41,709

And I think this is worth pointing out.

385

00:26:42,179 --> 00:26:44,909

And this is completely different

from what we had, what we

386

00:26:44,909 --> 00:26:46,349

experienced like a century ago.

387

00:26:47,458 --> 00:26:49,724

Richard Laterman: It sounds

like the reason why you

388

00:26:49,724 --> 00:26:51,454

would put, excuse me, the U.

389

00:26:51,454 --> 00:26:51,604

S.

390

00:26:51,604 --> 00:26:54,524

aside is that because the

stock market in the U.

391

00:26:54,524 --> 00:26:54,794

S.

392

00:26:54,834 --> 00:26:59,424

plays such a magnified role as

a savings vehicle for the U.

393

00:26:59,424 --> 00:26:59,554

S.

394

00:26:59,554 --> 00:27:04,104

population, much more so than

any other European or Western

395

00:27:04,104 --> 00:27:06,004

country that would come to mind.

396

00:27:06,554 --> 00:27:11,914

is the access to real estate, to owning

real estate, what has been the main

397

00:27:11,924 --> 00:27:17,594

driver of wealth accumulation for that

bottom half of the income distribution?

398

00:27:18,284 --> 00:27:21,944

And is that maybe the main

reason why you would put the U.

399

00:27:21,944 --> 00:27:22,094

S.

400

00:27:22,094 --> 00:27:22,524

aside?

401

00:27:22,524 --> 00:27:24,504

Because in the U.

402

00:27:24,504 --> 00:27:24,684

S.

403

00:27:24,684 --> 00:27:28,674

so many people also own such a

large amount of stocks, and that has

404

00:27:28,834 --> 00:27:35,484

kind of shifted the perception on

asset ownership and wealth effect.

405

00:27:35,484 --> 00:27:35,674

Effect.

406

00:27:36,309 --> 00:27:37,489

Daniel Waldenström: actually not really.

407

00:27:37,654 --> 00:27:40,068

Um, so things are of course complex.

408

00:27:40,098 --> 00:27:42,538

and so I, the reason I wanted to put U.S.

409

00:27:42,538 --> 00:27:48,028

aside a little bit was that so, whereas

basically all Western economies have

410

00:27:48,048 --> 00:27:52,718

not experienced almost any increase

in, in, in wealth concentration.

411

00:27:52,718 --> 00:27:57,813

So measuring this by By like the

share of the rich relative to others.

412

00:27:58,143 --> 00:28:00,523

so these trends have been almost flat.

413

00:28:00,633 --> 00:28:03,543

there have been some changes, but

they're very small, especially

414

00:28:03,553 --> 00:28:07,813

historically in mostly in almost all

Western economies, except for the U.

415

00:28:07,813 --> 00:28:08,153

S.

416

00:28:08,393 --> 00:28:11,213

I think for the, and that's

why, why I wanted to take you

417

00:28:11,213 --> 00:28:12,963

as a little bit aside in the U.

418

00:28:12,963 --> 00:28:13,263

S.

419

00:28:13,463 --> 00:28:17,433

We've seen much clearer

increases in wealth inequality.

420

00:28:17,623 --> 00:28:22,503

and, but I don't think that's the main

reason, in fact, that would be if more

421

00:28:22,503 --> 00:28:26,959

people are kind of participating in,

in, stock market, ownership, they,

422

00:28:26,969 --> 00:28:28,279

they would also be part of that.

423

00:28:28,369 --> 00:28:29,759

And actually this is what we see.

424

00:28:29,999 --> 00:28:35,129

What, what is where the US is actually

kind of a little bit departing is

425

00:28:35,129 --> 00:28:41,179

that their top guys, their successful

business people have been the most

426

00:28:41,179 --> 00:28:43,489

successful globally, of any country.

427

00:28:43,559 --> 00:28:48,098

So their wealth growth has been

faster than And more, more pronounced

428

00:28:48,108 --> 00:28:49,438

than in other Western countries.

429

00:28:49,448 --> 00:28:51,618

So they have kind of, even

though middle class people have

430

00:28:51,618 --> 00:28:53,268

experienced higher wealth growth.

431

00:28:54,948 --> 00:28:55,858

The top guys in the U.

432

00:28:55,858 --> 00:28:55,998

S.

433

00:28:55,998 --> 00:28:58,848

have experienced the highest

wealth growth in the world.

434

00:28:59,068 --> 00:29:02,338

So this explains why wealth

inequality, wealth concentration

435

00:29:02,338 --> 00:29:03,138

has increased in the U.

436

00:29:03,138 --> 00:29:03,358

S.

437

00:29:03,548 --> 00:29:04,538

quite pronouncedly.

438

00:29:04,668 --> 00:29:05,308

So the U.

439

00:29:05,308 --> 00:29:05,448

S.,

440

00:29:05,468 --> 00:29:09,238

you have other kinds of, you

had the financial crisis where

441

00:29:09,248 --> 00:29:10,018

the middle class in the U.

442

00:29:10,018 --> 00:29:10,168

S.

443

00:29:10,168 --> 00:29:15,498

took pretty big hits on their home values,

which I think was more pronounced than

444

00:29:15,508 --> 00:29:17,148

maybe some other Western countries.

445

00:29:17,618 --> 00:29:22,818

But, but as for participation, I think

also, in fact, Sweden being a very

446

00:29:22,818 --> 00:29:27,058

small country, but, but, we have pretty

high financial market participation

447

00:29:27,058 --> 00:29:30,378

rates, especially when it comes to

mutual funds, that's a very popular

448

00:29:30,618 --> 00:29:34,208

saving vehicle in the US, in this,

in Sweden, as well as in the US.

449

00:29:35,578 --> 00:29:35,828

Adam Butler: How

450

00:29:35,828 --> 00:29:41,518

would you characterize the,

trajectory of this change in the

451

00:29:41,518 --> 00:29:43,268

distribution of wealth over time?

452

00:29:43,288 --> 00:29:43,538

Right.

453

00:29:44,578 --> 00:29:48,328

In my research, I noted that

you, I think you sort of.

454

00:29:49,112 --> 00:29:54,232

Primarily start your observation

in the very early 1900s.

455

00:29:54,862 --> 00:29:59,682

And then sort of paint the

trajectory of wealth inequality.

456

00:29:59,812 --> 00:30:04,152

when does that, how did that

look in the very early 1900s?

457

00:30:04,152 --> 00:30:07,352

You did touch on that with a, a

large concentration in agricultural

458

00:30:07,352 --> 00:30:08,282

wealth, that sort of thing.

459

00:30:08,942 --> 00:30:15,652

What was the arc of that trans, transition

over, you know, seven or 80 years?

460

00:30:16,722 --> 00:30:23,402

When did that kind of, when did equality

peak, let's say, kind of globally.

461

00:30:24,042 --> 00:30:27,729

and then what's happened since, and then

we can maybe talk a little bit about why.

462

00:30:28,462 --> 00:30:28,702

Daniel Waldenström: Hmm.

463

00:30:29,002 --> 00:30:32,812

So looking at the facts when

it comes to, so to national

464

00:30:32,812 --> 00:30:35,252

level wealth inequality, trends.

465

00:30:35,402 --> 00:30:40,698

So what I do was, is to basically

collect the numbers that we have

466

00:30:40,698 --> 00:30:44,298

for a few countries, maybe a

handful, maybe up to maybe a dozen

467

00:30:44,298 --> 00:30:45,858

of, of Euro of Western countries.

468

00:30:46,383 --> 00:30:51,113

And what we see is when

measuring wealth inequality.

469

00:30:51,468 --> 00:30:55,268

By the share of the richest

guys, the richest, for example, 1

470

00:30:55,348 --> 00:30:57,438

percent of the entire population.

471

00:30:57,828 --> 00:31:02,528

This means lining up the population

from the poorest to the richest, and

472

00:31:02,538 --> 00:31:04,708

dividing the population into hundredths.

473

00:31:04,758 --> 00:31:06,598

So 100 groups of equal size.

474

00:31:06,968 --> 00:31:11,238

Then we take the richest group in

that population and add and count or

475

00:31:11,258 --> 00:31:15,818

measure all their wealth and relate

it to the total wealth in the country.

476

00:31:16,507 --> 00:31:22,277

In the early 19 hundreds, the,

the share of this 1%, the richest

477

00:31:22,277 --> 00:31:30,160

1% was between 50 and 70% of all

wealth in, in, in the western world.

478

00:31:30,600 --> 00:31:35,940

Meaning that like 100th had, had

commanded basically more than half of

479

00:31:36,135 --> 00:31:39,690

all assets of, in the entire population.

480

00:31:39,870 --> 00:31:45,990

So I think the UK then has had at

some point, maybe 73% as the, you

481

00:31:45,990 --> 00:31:49,810

know, the peak of the inequality,

in the early 19 hundreds.

482

00:31:49,840 --> 00:31:54,820

In fact, I think this is the highest

degree of wealth concentration that

483

00:31:54,820 --> 00:31:56,740

any human society has ever seen.

484

00:31:57,290 --> 00:31:58,251

So we know that.

485

00:31:59,060 --> 00:32:03,690

Earlier societies were not as

unequal in wealth holding because

486

00:32:03,690 --> 00:32:05,220

there weren't that much values.

487

00:32:05,370 --> 00:32:10,440

so the value started being built up in

during like industrialization and then

488

00:32:10,900 --> 00:32:13,020

they went down during the 20th century.

489

00:32:13,020 --> 00:32:16,590

So that's around, so around 1900, 1910.

490

00:32:16,590 --> 00:32:20,040

Then we have a peak in wealth

concentration in the Western world.

491

00:32:21,250 --> 00:32:24,360

And after that, concentration

starts decreasing.

492

00:32:24,650 --> 00:32:26,030

A little bit differently.

493

00:32:26,955 --> 00:32:33,235

Exactly when they started in different

countries, but it starts decreasing during

494

00:32:33,235 --> 00:32:41,475

the 1910s and continues throughout the

20th century, 20s, 30s, 40s, 50s, up until

495

00:32:41,975 --> 00:32:45,100

around the 1970s when it flattens out.

496

00:32:45,380 --> 00:32:52,410

So then we go from, top 1 percent

wealth shares around 50 to 70%, down

497

00:32:52,410 --> 00:32:56,630

to maybe 20%, around the Western world.

498

00:32:57,200 --> 00:33:04,815

and this is, so then after the

1970s, this is one of my main Kind

499

00:33:04,815 --> 00:33:06,855

of facts that I want to highlight.

500

00:33:07,215 --> 00:33:12,295

so despite the deregulation of our

economies, so we started getting rid of

501

00:33:12,295 --> 00:33:17,855

the post war regulations or World War

regulations, despite the booming housing

502

00:33:17,855 --> 00:33:21,735

markets, especially, but then the stock

markets, values increasing by several

503

00:33:21,735 --> 00:33:28,460

hundreds of percent, we have not witnessed

them in similar vast increase in, in,

504

00:33:28,470 --> 00:33:31,400

in wealth inequality since the 1970s.

505

00:33:32,214 --> 00:33:33,414

so those are the data.

506

00:33:33,484 --> 00:33:34,504

Those are the numbers.

507

00:33:34,684 --> 00:33:40,334

The US began maybe a little bit lower

actually, in, in concentration, wealth

508

00:33:40,334 --> 00:33:42,584

concentration in the early 1900s.

509

00:33:43,034 --> 00:33:48,224

Coming down to the 1970s around the same

level as Europe, but then has shown a

510

00:33:48,224 --> 00:33:53,644

clearer increase in wealth inequality

rates, during the 90s and 2000s.

511

00:33:55,774 --> 00:34:00,964

so those are basically the broad, so when

I, you know, broad, broad trends and I,

512

00:34:00,964 --> 00:34:06,699

you know, I call in the book this for the,

I call this the great wealth equalization.

513

00:34:07,029 --> 00:34:10,059

I think, you know, those kind of,

some people like those brands and I

514

00:34:10,069 --> 00:34:14,062

couldn't find it actually anywhere else,

but, it is, has really been a great

515

00:34:14,062 --> 00:34:18,222

wealth equalization, within, Western

countries during the 20th century.

516

00:34:19,274 --> 00:34:22,704

Richard Laterman: what have been the main

drivers then for this wealth equalization?

517

00:34:22,704 --> 00:34:27,444

I mean, I think we've touched on a little

bit, on this, but, why don't you walk us

518

00:34:27,444 --> 00:34:31,543

through, I think education plays a major

role here and, institutional reform.

519

00:34:31,543 --> 00:34:35,724

So kind of maybe, and if you might be

able to, rank them in terms of hierarchy,

520

00:34:35,734 --> 00:34:39,994

what do you think is perhaps the single

most important variable that has driven

521

00:34:39,994 --> 00:34:41,543

this and then work your way down?

522

00:34:42,603 --> 00:34:45,149

Daniel Waldenström: ok thanks but

this is actually, but let, let me

523

00:34:45,149 --> 00:34:50,228

just mention that this is has, this

is actually one or the, you know, the

524

00:34:50,248 --> 00:34:55,929

main new things that I think I have

contributed to highlighting with my book.

525

00:34:55,929 --> 00:34:59,719

And also with my research, namely, I

mean, it's like, you know, why my, the

526

00:34:59,719 --> 00:35:04,179

subtitle on my book is called a new

history of wealth, uh, in the West.

527

00:35:05,189 --> 00:35:08,264

and the, the, you know, that

the reason is The drivers

528

00:35:08,294 --> 00:35:10,674

between this equalization here.

529

00:35:10,674 --> 00:35:15,614

I actually depart from my old, my, my

old colleague to my Piketty and, whereas

530

00:35:15,674 --> 00:35:18,944

where he highlighted shocks to capital.

531

00:35:19,354 --> 00:35:25,164

So wars, crisis, but specifically

wars, as being the main driver

532

00:35:25,554 --> 00:35:27,554

of, of the wealth equalization.

533

00:35:27,564 --> 00:35:32,474

So you could have outright capital

destruction, bombings of factories and,

534

00:35:32,744 --> 00:35:37,489

you know, stuff that the rich owned,

but also, you know, you can have wars

535

00:35:37,529 --> 00:35:42,449

coming with regulation of societies

that hampered, you know, the rich or

536

00:35:42,469 --> 00:35:44,339

like slash the wealth of the rich.

537

00:35:44,689 --> 00:35:45,739

And then we had capital.

538

00:35:45,899 --> 00:35:50,779

And then he proposes as a second channel

capital taxation, that came up, during the

539

00:35:51,229 --> 00:35:55,979

20th century, especially during the post

war era with like inheritance or estate

540

00:35:56,189 --> 00:36:00,889

tax rates being at very high capital

income tax rates, profit or corporate tax

541

00:36:00,889 --> 00:36:07,863

rates, Basically, so according to Thomas

Piketty, but also like Walter Scheidel,

542

00:36:07,863 --> 00:36:13,963

the historian at Stanford, who has said

like the wars are a necessary condition

543

00:36:14,473 --> 00:36:16,353

for sustained wealth equalization.

544

00:36:16,840 --> 00:36:21,650

So they kind of aim at factors

lowering the top of the distribution

545

00:36:21,690 --> 00:36:23,430

and thereby creating equality.

546

00:36:25,695 --> 00:36:30,775

I don't think that this is really,

the factors that we want to look at.

547

00:36:30,805 --> 00:36:33,505

I don't think they are

that important at all.

548

00:36:33,715 --> 00:36:36,485

I think they have contributed, but

they are not at all that important

549

00:36:36,505 --> 00:36:38,295

that they have kind of highlighted.

550

00:36:38,625 --> 00:36:44,065

In fact, or instead, my book, and

I think I lean on others like, you

551

00:36:44,065 --> 00:36:48,385

know, Daron Acemoglu, Jim Robinson,

like Doug North, of course, and

552

00:36:48,675 --> 00:36:53,095

Lance Davis and many of the economic

historians and promoting the view of.

553

00:36:53,591 --> 00:36:59,151

Economic growth generating values

that in combination with political

554

00:36:59,211 --> 00:37:03,351

changes, economic changes in the

20th century that allowed for these

555

00:37:04,141 --> 00:37:10,231

new, new values to be more widely

dispersed, namely the democratic values.

556

00:37:10,761 --> 00:37:15,221

Uh, events, the, you know, the extension

of suffrage, the, the educational

557

00:37:15,221 --> 00:37:17,191

reforms, labor laws and so on.

558

00:37:17,961 --> 00:37:23,071

That is what has changed totally,

our lives and that has lifted

559

00:37:23,201 --> 00:37:24,701

bottom of the distribution.

560

00:37:24,981 --> 00:37:29,461

Allowing people to start saving in

housing and pension savings and so on.

561

00:37:30,211 --> 00:37:33,451

And, so I, I will come back then

to talk about, you know, you

562

00:37:33,451 --> 00:37:38,161

know, some, perhaps some of the

magnitudes, but so, so this is then.

563

00:37:38,486 --> 00:37:43,046

Instead of having, you know, the shocks

to capital, slashing the wealth or

564

00:37:43,056 --> 00:37:47,856

the rich, lowering the top as, as the

main drivers, as you know, Piketty

565

00:37:47,876 --> 00:37:51,087

has promote it as main, main, causes.

566

00:37:51,307 --> 00:37:54,837

I instead promote, you know, that

it's lifting the bottom and here.

567

00:37:56,417 --> 00:38:03,392

So democracy, democracy, uh, is a key

to understand this, the kind of the

568

00:38:03,392 --> 00:38:06,852

inclusiveness of the institutional

changes that came, came during the

569

00:38:06,852 --> 00:38:10,872

20th century, this kind of almost like

a zero one thing, all of a sudden.

570

00:38:11,162 --> 00:38:14,612

You have to take into account

that people can't have a say.

571

00:38:14,832 --> 00:38:16,892

You can't get ousted as

a government, and so on.

572

00:38:17,052 --> 00:38:20,462

So we had democracy, kind of

pseudo democracies, and this

573

00:38:20,462 --> 00:38:22,502

has kind of come gradually.

574

00:38:22,852 --> 00:38:27,612

But then we see that over

time, we had changes.

575

00:38:27,612 --> 00:38:31,672

I mean, I, in my book, I highlight

the educational system, which means,

576

00:38:31,702 --> 00:38:34,292

so schooling becomes broadened.

577

00:38:34,892 --> 00:38:40,242

Access to higher education, is,

is expanded to more groups, like

578

00:38:40,262 --> 00:38:45,659

professional, professionalists, uh,

people with, uh, you know, skills,

579

00:38:45,899 --> 00:38:49,309

become more and more like larger and

larger share of the working population.

580

00:38:50,009 --> 00:38:56,389

And also we have labor laws, we have

trade unions being able to, you know,

581

00:38:56,649 --> 00:39:01,509

empower people to, you know, ask

for better work conditions, maybe

582

00:39:01,519 --> 00:39:05,799

restricting work hours, having a more,

having more say on, on environments

583

00:39:05,799 --> 00:39:06,859

at the working place and so on.

584

00:39:07,908 --> 00:39:09,328

And all of this raised.

585

00:39:10,113 --> 00:39:11,193

People's productivity.

586

00:39:11,593 --> 00:39:13,653

we see that incomes go up.

587

00:39:13,863 --> 00:39:18,183

We see that wage rates, uh, uh,

and, and, and labor incomes,

588

00:39:18,263 --> 00:39:20,933

uh, increase as, as a whole.

589

00:39:21,173 --> 00:39:24,113

And this is, uh, and this

is then especially for the

590

00:39:24,113 --> 00:39:26,013

laborers, normal workers.

591

00:39:26,383 --> 00:39:31,943

And I think this is like connect,

connected to then this new, new kind

592

00:39:31,943 --> 00:39:36,861

of institutional setting where we

had to take them into account when.

593

00:39:37,271 --> 00:39:44,501

When kind of promoting the educational, or

the economic development of our societies.

594

00:39:45,395 --> 00:39:48,455

so I wouldn't be able to rank

unfortunately like, education or

595

00:39:48,465 --> 00:39:52,645

labor laws or maybe some, you know,

variants of this, but so then democracy

596

00:39:52,976 --> 00:39:56,386

is key and then, but then don't

forget then the other part, namely

597

00:39:56,386 --> 00:39:58,176

the growth thing, the growth part.

598

00:39:58,256 --> 00:40:00,996

So technological change,

industrial, industrials.

599

00:40:01,896 --> 00:40:05,826

Uh, revolution bringing

more gains to the side.

600

00:40:05,826 --> 00:40:08,826

And here we also have

private property rights.

601

00:40:09,616 --> 00:40:13,729

And I think that is If, like, democracy

is very important, I think private

602

00:40:13,729 --> 00:40:20,122

property rights is perhaps the key,

uh, institution for value creation,

603

00:40:20,122 --> 00:40:26,042

for wealth, wealth creation, or,

that, you know, in all dimensions,

604

00:40:26,042 --> 00:40:27,622

perhaps the most important one.

605

00:40:28,092 --> 00:40:29,082

and that we had too.

606

00:40:29,387 --> 00:40:34,707

So we had our legal systems securing

private property rights to people.

607

00:40:34,937 --> 00:40:36,727

that was like, that came earlier.

608

00:40:36,967 --> 00:40:40,167

that was probably very important

for the Industrial Revolution to

609

00:40:40,167 --> 00:40:41,267

take place in the first place.

610

00:40:41,887 --> 00:40:46,567

and then after, during the 20th

century, having then the technological

611

00:40:46,567 --> 00:40:51,427

change, economic growth, and then we

have people being able to take part

612

00:40:51,427 --> 00:40:56,152

in this then this plays out either

through people starting buying homes.

613

00:40:56,322 --> 00:40:59,112

of course, then also thanks

to financial development.

614

00:40:59,142 --> 00:41:05,402

Banks becoming better to mortgage, home

purchases, And then with the pension

615

00:41:05,402 --> 00:41:10,752

systems being built up in various forms,

you could have, employee, employee,

616

00:41:10,752 --> 00:41:13,972

you could have like trade unions being

part of this, the private part in the

617

00:41:13,972 --> 00:41:18,172

private sector, you could also have state

solutions like or government solutions.

618

00:41:19,236 --> 00:41:23,691

this was then And the other kind

of main asset that people started

619

00:41:24,041 --> 00:41:25,961

building up during the 20th century.

620

00:41:26,031 --> 00:41:29,871

Here, of course, mutual funds as a

financial innovation also helped,

621

00:41:30,384 --> 00:41:36,053

of, uh, ramping, ramping up, growth

potential in, in, in pension savings.

622

00:41:36,912 --> 00:41:37,312

Okay.

623

00:41:37,392 --> 00:41:40,562

So, um, at least, so this is

the, you know, the broad picture.

624

00:41:40,612 --> 00:41:43,632

Uh, we can go into details, but, uh,

this is at least the broad picture.

625

00:41:44,477 --> 00:41:46,727

Adam Butler: Well, I think it's worth

exploring some of the differences

626

00:41:46,727 --> 00:41:53,627

between, this, this Evolution in

the US and versus ex US, right?

627

00:41:53,647 --> 00:41:58,187

Call it Canada, Australia, New

Zealand, Europe and the UK, right?

628

00:41:58,187 --> 00:42:02,517

So maybe let's start

with Europe and the UK.

629

00:42:02,627 --> 00:42:06,587

And then we can sort of transition

to a discussion of the U.

630

00:42:06,587 --> 00:42:06,777

S.

631

00:42:06,777 --> 00:42:08,477

as, as maybe a bit of a special case.

632

00:42:09,468 --> 00:42:09,758

Daniel Waldenström: Okay.

633

00:42:10,138 --> 00:42:10,818

Yeah, sure.

634

00:42:11,401 --> 00:42:12,631

Oh, do you want me to?

635

00:42:13,141 --> 00:42:13,311

Adam Butler: Yeah.

636

00:42:13,311 --> 00:42:14,911

What happened, what happened in Europe?

637

00:42:14,911 --> 00:42:20,351

Like it's, it seems like this,

wealth concentration or wealth

638

00:42:20,401 --> 00:42:26,085

equalization, I guess, really that,

that peaked in the late 1970s, very

639

00:42:26,085 --> 00:42:29,185

early 1980s has stabilized in Europe.

640

00:42:29,585 --> 00:42:29,995

Right.

641

00:42:30,215 --> 00:42:32,515

So first of all, why hasn't it?

642

00:42:33,095 --> 00:42:36,625

continue to go down, and,

and why has it stabilized?

643

00:42:36,625 --> 00:42:40,375

And then maybe we can contrast that with

what we've seen in other jurisdictions.

644

00:42:41,165 --> 00:42:41,535

Daniel Waldenström: Okay.

645

00:42:41,575 --> 00:42:41,985

Thanks.

646

00:42:42,005 --> 00:42:42,345

Thanks.

647

00:42:42,395 --> 00:42:43,095

so yes.

648

00:42:43,105 --> 00:42:47,565

So looking first at when we look

at the European countries, maybe,

649

00:42:47,745 --> 00:42:51,575

well, then I was, I think, well,

Canada, Australia, and so on their

650

00:42:51,585 --> 00:42:53,225

entire kind of Western offshoots.

651

00:42:54,165 --> 00:42:58,625

I think, What is striking is how similar

they are, actually, over the 20th century.

652

00:42:59,585 --> 00:43:05,345

So, as I said before, the levels

of concentration were very

653

00:43:05,345 --> 00:43:06,575

high in the early 20th century.

654

00:43:06,845 --> 00:43:11,005

to early 1900s, uh,

throughout the Western world.

655

00:43:11,375 --> 00:43:14,985

And then we see this equalization

also throughout the Western world.

656

00:43:15,015 --> 00:43:18,475

And this is kind of interesting because,

the countries are kind of different.

657

00:43:18,475 --> 00:43:24,605

So US or like, yeah, well, US, uh,

also, also equalized, but UK and

658

00:43:24,625 --> 00:43:30,455

looking at Europe, then UK, France,

Germany, Sweden, Spain, they were kind

659

00:43:30,455 --> 00:43:35,225

of Similar, but also different because,

you know, in terms of war experience,

660

00:43:35,555 --> 00:43:40,595

we know the big ones, big countries

had like really rough war experiences,

661

00:43:40,775 --> 00:43:42,415

during the first and second world wars.

662

00:43:42,585 --> 00:43:47,365

Whereas Sweden didn't even take

part in any of these wars and yet

663

00:43:47,405 --> 00:43:49,915

experienced the same equalization trend.

664

00:43:50,275 --> 00:43:54,685

meaning that I think this is kind

of exhibit A against wars as being

665

00:43:54,755 --> 00:44:00,390

a key Uh, of course, wars can affect

also non belligerent countries

666

00:44:00,390 --> 00:44:05,360

like Sweden, through, you know, war

economy spreading and war regulations.

667

00:44:05,360 --> 00:44:09,000

And this was indeed something

that Sweden was affected by.

668

00:44:09,340 --> 00:44:16,030

But, but still, Wars as a main or

a key driver necessity necessary

669

00:44:16,150 --> 00:44:20,470

kind of condition for wealth

equalization is clearly Not really

670

00:44:20,530 --> 00:44:24,510

kind of a strong strong conclusion

coming out of the historical data.

671

00:44:24,520 --> 00:44:29,830

I think So and also You could also

think that, you know, some of these

672

00:44:29,830 --> 00:44:34,040

other things that differ across these

countries are not playing out so much

673

00:44:34,040 --> 00:44:35,930

in the wealth concentration evolution.

674

00:44:36,824 --> 00:44:43,004

But then, as you say, this leveled out,

the equalization stops in the 1970s.

675

00:44:43,910 --> 00:44:44,540

Why?

676

00:44:45,170 --> 00:44:50,854

Well, I mean, this is now getting into

an area where we don't know exactly

677

00:44:50,854 --> 00:44:54,984

why we we have a certain level of.

678

00:44:56,097 --> 00:45:01,467

like dispersion in wealth or income so

we, we don't know what from theory what

679

00:45:01,467 --> 00:45:06,687

is the optimal level of income inequality

or wealth inequality, but we know that

680

00:45:06,687 --> 00:45:12,197

wealth is more unequally distributed

than income, ahh as we measure it.

681

00:45:13,007 --> 00:45:13,437

Why?

682

00:45:13,757 --> 00:45:19,267

Well we know for example that ah

looking at the diffusion of people

683

00:45:19,787 --> 00:45:23,007

owning wealth and not owning wealth,

we see that almost half of the

684

00:45:23,007 --> 00:45:27,237

population has almost no Net wealth.

685

00:45:27,937 --> 00:45:31,747

So, which is different from income

because, it's not that half of the

686

00:45:31,747 --> 00:45:35,277

population has no income because they, you

need to have income in order to survive.

687

00:45:35,767 --> 00:45:38,347

But you don't need to have

wealth in order to survive.

688

00:45:38,737 --> 00:45:39,147

Why?

689

00:45:39,287 --> 00:45:43,157

Well, I mean, we, a large part

of the population not having

690

00:45:43,167 --> 00:45:45,007

wealth are young people.

691

00:45:45,977 --> 00:45:52,367

People just becoming adults, maybe

going into higher education, they don't

692

00:45:52,377 --> 00:45:56,937

need, they can't save because they

have almost no income, and they don't

693

00:45:56,947 --> 00:46:00,684

need to save because they basically

live their lives and they study.

694

00:46:03,232 --> 00:46:08,262

Fair share, maybe one third, maybe half of

all the zero net wealth owners, net wealth

695

00:46:08,522 --> 00:46:12,102

people in the population, young people.

696

00:46:12,392 --> 00:46:16,992

And then we have people who

have like, maybe they have,

697

00:46:16,992 --> 00:46:18,197

you know, Very little saving.

698

00:46:18,197 --> 00:46:19,407

They don't want to save.

699

00:46:20,327 --> 00:46:20,837

Why?

700

00:46:21,067 --> 00:46:25,977

Well, they they they don't want to

save privately because they pay taxes

701

00:46:26,387 --> 00:46:31,187

and these taxes give them right the

right to Unemployment insurance if they

702

00:46:31,187 --> 00:46:36,367

gotta get become unemployed Their kids

can get schooling and even university

703

00:46:36,367 --> 00:46:38,617

dedication in many of these countries.

704

00:46:38,647 --> 00:46:43,287

That's cost cost free and also when they

get old they have elderly care and so

705

00:46:43,287 --> 00:46:48,322

on health care Basically provided for

everybody, but also specialized care.

706

00:46:49,082 --> 00:46:54,092

Meaning that after all the taxes,

they don't have a very high income.

707

00:46:54,112 --> 00:46:58,012

So they can save privately, but

they actually don't need to.

708

00:46:58,702 --> 00:47:03,052

Meaning that with half of the

population not holding wealth in

709

00:47:03,052 --> 00:47:09,252

the net, we would have to begin with

relatively high inequality levels.

710

00:47:09,502 --> 00:47:12,412

So this means that, and

where exactly would that be?

711

00:47:12,482 --> 00:47:13,022

I don't know.

712

00:47:13,785 --> 00:47:17,545

I did a, I did a kind of a

simulation of a population looking

713

00:47:17,545 --> 00:47:22,355

exactly the same, but the only

thing that differed was their age.

714

00:47:22,865 --> 00:47:27,965

And just from the age, we would have like

the famous Gini coefficient, which is

715

00:47:27,965 --> 00:47:33,095

an inequality measure from zero to one,

with zero being no inequality and one

716

00:47:33,115 --> 00:47:36,145

being that one individual has all wealth.

717

00:47:36,465 --> 00:47:40,725

And we would have, only looking

at the age differences, we

718

00:47:40,725 --> 00:47:42,475

would have maybe a Gini of 0.2

719

00:47:42,475 --> 00:47:43,475

or 0.3,

720

00:47:43,748 --> 00:47:48,328

meaning that life cycle effects

are very imminent in understanding

721

00:47:48,898 --> 00:47:50,208

or explaining wealth inequality.

722

00:47:50,598 --> 00:47:56,682

So when we have this flattening out of

wealth equalization in the 70s, we may be

723

00:47:56,682 --> 00:48:00,622

approaching a level where, are stagnating.

724

00:48:01,002 --> 00:48:03,532

Economists don't generate

a lot of new wealth.

725

00:48:03,592 --> 00:48:08,918

So our wealthiest entrepreneurs were

historically, I think, relatively poor,

726

00:48:09,478 --> 00:48:13,862

but, still it was, you know, we would

have a large share of the population not

727

00:48:13,872 --> 00:48:20,682

having a lot of wealth giving us some,

you know, Gini coefficient or maybe 0.

728

00:48:20,682 --> 00:48:20,821

6, 0.

729

00:48:20,821 --> 00:48:23,072

7 and a top 1 percent share or maybe 20%.

730

00:48:23,072 --> 00:48:28,907

Uh, We couldn't maybe go much lower than

that, simply because of these reasons.

731

00:48:29,547 --> 00:48:33,007

And also the US, I mean, I think

this is, this is something, I

732

00:48:33,017 --> 00:48:36,477

mean, I think up until then, I

think we have a large commonality

733

00:48:36,477 --> 00:48:39,137

across Western countries actually.

734

00:48:39,807 --> 00:48:44,693

but then in the areas, like in

the years thereafter, then we've

735

00:48:44,733 --> 00:48:49,343

had some differences, I think, uh,

economically, but also policy wise.

736

00:48:49,703 --> 00:48:53,903

And this could also matter for why

we have difference, differences

737

00:48:53,903 --> 00:48:55,623

in, in, in these developments.

738

00:48:55,623 --> 00:49:00,915

And I think, That will help us understand

why do we have that much of the kind of

739

00:49:01,105 --> 00:49:05,945

the growth, the new technologies that

we've seen, and the dominance of some

740

00:49:05,955 --> 00:49:11,545

larger economies have become more and

more oriented and more centered around the

741

00:49:11,545 --> 00:49:14,655

United States and not in other countries.

742

00:49:14,655 --> 00:49:18,555

In fact, looking at the top, the

top country, the top corporations

743

00:49:18,555 --> 00:49:21,905

in the world, uh, in terms of

market cap, The share of the U.

744

00:49:21,905 --> 00:49:22,125

S.

745

00:49:22,125 --> 00:49:25,725

has kind of increased, I think,

quite, quite markedly over the last,

746

00:49:26,385 --> 00:49:30,055

profoundly, exactly over the last

like four, four decades or something.

747

00:49:31,720 --> 00:49:32,100

Richard Laterman: when,

748

00:49:32,545 --> 00:49:32,905

Daniel Waldenström: yeah, sorry.

749

00:49:33,820 --> 00:49:36,620

Richard Laterman: no, I, I, as

you're describing this, I'm wondering

750

00:49:36,640 --> 00:49:38,620

if the, bottom half of the U.

751

00:49:38,620 --> 00:49:38,910

S.

752

00:49:39,050 --> 00:49:44,340

's income distribution, how that compares

to some of the other Western, countries.

753

00:49:44,340 --> 00:49:48,707

Because as you're describing this,

it occurs to me that, and you correct

754

00:49:48,707 --> 00:49:52,867

me if I'm wrong, but that's an

aspect of your argument is that some

755

00:49:52,867 --> 00:49:54,807

degree of inequality is increasing.

756

00:49:55,337 --> 00:50:01,707

Perhaps a necessary condition for much

larger growth and perhaps even innovation.

757

00:50:01,707 --> 00:50:03,467

I mean, the fact of the matter is the U.

758

00:50:03,467 --> 00:50:03,617

S.

759

00:50:03,637 --> 00:50:08,143

continues to be, the country where

almost everyone in the country, in

760

00:50:08,143 --> 00:50:09,753

the world wants to integrate towards.

761

00:50:09,753 --> 00:50:13,733

And so you have this influx of

talent and human capital, which

762

00:50:13,743 --> 00:50:17,073

obviously is one of the main

factors for economic growth as well.

763

00:50:17,073 --> 00:50:22,033

So allowing for perhaps some of

this, inequality or perhaps a higher

764

00:50:22,033 --> 00:50:26,413

Gini coefficient, perhaps it's a

necessary condition for you to,

765

00:50:26,413 --> 00:50:28,763

to generate this, this larger pie.

766

00:50:28,813 --> 00:50:33,293

But I am wondering how that, how that

argument stacks when comparing the bottom

767

00:50:33,293 --> 00:50:34,923

half of the income distribution of the U.

768

00:50:34,923 --> 00:50:35,223

S.

769

00:50:35,243 --> 00:50:36,823

against some of these

other Western countries.

770

00:50:37,768 --> 00:50:40,208

Daniel Waldenström: No, but, uh,

you know, that's a longstanding,

771

00:50:40,368 --> 00:50:41,408

longstanding question.

772

00:50:41,498 --> 00:50:47,078

so that kind of relates to both how the

cross sectional differences of the gaps

773

00:50:47,078 --> 00:50:51,948

in income, how they look and who are there

and so on, but also then the mobility.

774

00:50:52,628 --> 00:50:53,898

within the system.

775

00:50:53,898 --> 00:50:59,458

So how easy it is to improve on your

situation if you work hard, for example.

776

00:50:59,738 --> 00:51:03,928

and here research is also like try to

understand like how mobile is the U.

777

00:51:03,928 --> 00:51:04,298

S.

778

00:51:04,348 --> 00:51:09,298

Contra, uh, Europe and so on in terms

of when we look at both within people's

779

00:51:09,298 --> 00:51:11,778

careers, but also across generations.

780

00:51:11,788 --> 00:51:16,395

So the role of family, family background,

and as it turns out, So the U.

781

00:51:16,395 --> 00:51:17,005

S.

782

00:51:17,475 --> 00:51:23,095

has not a much more mobile or,

or dynamic economy, according to,

783

00:51:23,105 --> 00:51:24,385

you know, most of the studies.

784

00:51:24,395 --> 00:51:28,215

So, the gaps are very large in, in

the income distribution in the U.

785

00:51:28,215 --> 00:51:28,545

S.,

786

00:51:28,895 --> 00:51:32,855

meaning not so much that, you know,

the low income earners are much poorer,

787

00:51:32,905 --> 00:51:36,570

but But instead of the high income

earners are much richer in the U.

788

00:51:36,570 --> 00:51:36,750

S.

789

00:51:36,750 --> 00:51:39,670

It's a bigger, both bigger

economy, market size effects.

790

00:51:39,930 --> 00:51:44,010

But also as you say, you know, the kind

of selection of talents flowing in.

791

00:51:44,020 --> 00:51:46,380

You just get the best and

the brightest globally.

792

00:51:46,600 --> 00:51:49,580

Then, you know, that effect

on, on the income gaps.

793

00:51:49,980 --> 00:51:53,070

but also that makes it more

difficult to really reach the top.

794

00:51:53,330 --> 00:51:58,145

You need to You know, become much, much

more productive than otherwise, uh, in

795

00:51:58,145 --> 00:52:01,935

maybe in some other countries where, where

income distributions are more compressed.

796

00:52:02,595 --> 00:52:05,995

so I think, well, you brought up, so

this is, this is like, there are a

797

00:52:05,995 --> 00:52:11,760

number, a number of questions here,

but, I think, Here we have a difference.

798

00:52:12,400 --> 00:52:19,177

The low income earners in Western Europe,

maybe Canada, maybe Australia, have lower

799

00:52:19,177 --> 00:52:25,033

incentives to change their situation

because they're better taken care of.

800

00:52:25,483 --> 00:52:31,103

So I think these countries are, Western

countries outside of the US, more

801

00:52:31,103 --> 00:52:35,733

experienced and I think better in taking

care of people who have a hard time.

802

00:52:36,153 --> 00:52:42,513

And I think we could discuss levels But

I think, for example, I think when I talk

803

00:52:42,913 --> 00:52:44,553

about better, it's not just different.

804

00:52:44,553 --> 00:52:48,483

I think it's better because, for example,

when we came to the, when we saw during

805

00:52:48,483 --> 00:52:53,173

the pandemic, so many of the, our

countries had like systems of automatic

806

00:52:53,173 --> 00:52:57,663

stabilizers, basically setting systems

so that when you lose your job or so,

807

00:52:57,993 --> 00:53:03,178

you automatically get An insurance

income, which is set in the system, to

808

00:53:03,178 --> 00:53:05,288

have it practically, you know, decided.

809

00:53:05,668 --> 00:53:08,867

In the US, I think, you

had not so much of that.

810

00:53:08,867 --> 00:53:12,847

Instead, what you saw was they started

sending out checks to people, so that

811

00:53:12,857 --> 00:53:15,007

they, people shouldn't like starve, right?

812

00:53:15,367 --> 00:53:17,887

And this was the same, basically

the same as printing money.

813

00:53:17,887 --> 00:53:21,627

I think this is also then showing

that, you know, the safety nets

814

00:53:21,627 --> 00:53:25,872

didn't work as well in the US as

they did in other Western economies,

815

00:53:25,872 --> 00:53:29,152

but also then additionally they I

think that may have contributed to

816

00:53:29,302 --> 00:53:32,922

the You know inflation increases

basically that you printed money.

817

00:53:33,172 --> 00:53:37,379

so at the end of the day, we we don't

it's difficult, but I think this is this

818

00:53:37,379 --> 00:53:42,359

matters all of this matters to why we get

these, You know differences in outcomes,

819

00:53:42,789 --> 00:53:48,251

maybe more of getting high talented people

and having higher um Upsides in the US

820

00:53:48,251 --> 00:53:52,801

economy, lower, maybe lower tax rates on

high income earners, maybe having low,

821

00:53:53,071 --> 00:53:54,541

lower corporate tax rates and so on.

822

00:53:54,641 --> 00:53:58,431

Now at least, that contributes to

people wanting to, to be in the

823

00:53:58,431 --> 00:54:00,691

US and be successful in the US.

824

00:54:01,031 --> 00:54:05,311

Maybe more than having just like, you

know, looking at low income earners

825

00:54:05,401 --> 00:54:07,291

and finding the explanations there.

826

00:54:08,657 --> 00:54:14,887

Adam Butler: So the two primary factors,

just, I think from, from reading your

827

00:54:15,007 --> 00:54:23,187

work that have had the greatest impact

on this contraction of wealth inequality,

828

00:54:23,377 --> 00:54:30,447

have been the proliferation of private

pensions and the appreciation of, and

829

00:54:30,447 --> 00:54:33,392

participation in private home ownership.

830

00:54:33,422 --> 00:54:38,792

Is that, are those kind of the two big,

variables that you continue to highlight?

831

00:54:39,757 --> 00:54:41,677

Daniel Waldenström: I, I think so,

at least, you know, when it comes to

832

00:54:41,707 --> 00:54:45,427

outcomes of what people actually own

at the end of the day and looking at

833

00:54:45,427 --> 00:54:49,897

people's, people's portfolios, those

two are the kind of the dominant assets

834

00:54:49,897 --> 00:54:51,667

in in, in middle class households,

835

00:54:51,922 --> 00:54:54,012

Adam Butler: And then

how do you disentangle?

836

00:54:54,072 --> 00:54:55,932

This is kind of where I

was trying to go earlier.

837

00:54:55,932 --> 00:55:01,092

I was too, it was too early in the

discussion, but how do you disentangle

838

00:55:01,172 --> 00:55:06,712

the impact of just rising asset prices?

839

00:55:07,092 --> 00:55:12,432

Relative to their underlying

fundamentals, relative to the

840

00:55:12,502 --> 00:55:16,312

accrual of genuine capital, right?

841

00:55:16,312 --> 00:55:21,912

So, as an example, the, Association

of Civil Engineers in the United

842

00:55:21,912 --> 00:55:29,909

States, Forecasts that by 2030,

there's going to be a 29 trillion

843

00:55:30,289 --> 00:55:33,499

infrastructure deficit in the U.

844

00:55:33,499 --> 00:55:33,899

S.

845

00:55:34,069 --> 00:55:34,429

Right?

846

00:55:34,839 --> 00:55:39,169

That's a, we've accrued an enormous

liability, or not we, but the U.

847

00:55:39,169 --> 00:55:39,359

S.

848

00:55:39,359 --> 00:55:43,919

has accrued an enormous liability on the

infrastructure side of its balance sheet.

849

00:55:43,919 --> 00:55:46,939

On the other side, we have the U.

850

00:55:46,939 --> 00:55:47,209

S.

851

00:55:47,209 --> 00:55:51,469

and to a great extent,

Western democracies.

852

00:55:52,219 --> 00:55:57,009

Have succeeded beyond our wildest

dreams or nightmares, depending on

853

00:55:57,009 --> 00:56:01,389

how you look at it in capitalizing

854

00:56:01,944 --> 00:56:04,984

future labor income further

and further out, right?

855

00:56:04,984 --> 00:56:11,404

If you think about a US 30 year, fixed

interest mortgage, well, what you've

856

00:56:11,414 --> 00:56:18,074

effectively done is you've capitalized

30 years of labor income, all at once in

857

00:56:18,074 --> 00:56:23,144

this, you know, crystallization of this,

of this mortgage, which is obviously a

858

00:56:23,144 --> 00:56:25,624

bank asset and a homeowner's liability.

859

00:56:26,204 --> 00:56:30,024

In, in allowing homeowners to capitalize.

860

00:56:30,494 --> 00:56:34,594

An increasing duration or

maturity of their future income.

861

00:56:35,274 --> 00:56:38,734

that has allowed asset

prices to rise in proportion.

862

00:56:40,094 --> 00:56:45,884

So I just, I find a wealth effect

to be very difficult to kind of

863

00:56:45,894 --> 00:56:53,414

disentangle, what real wealth has

accrued and to whom, and has it accrued

864

00:56:53,964 --> 00:56:59,814

because we have built new things, we,

there are vastly more housing units

865

00:56:59,814 --> 00:57:02,364

or, productive enterprise units.

866

00:57:02,894 --> 00:57:07,114

in these economies, or whether we

have just valued the price of existing

867

00:57:07,114 --> 00:57:09,954

units at much larger multiples.

868

00:57:09,954 --> 00:57:14,354

And how does that impact your

analysis and your conclusions?

869

00:57:16,412 --> 00:57:19,882

Daniel Waldenström: You're raising

many, many important, you know, aspects

870

00:57:19,922 --> 00:57:24,742

of, you know, why, why we, we want to

look at wealth, but also why we do not

871

00:57:24,892 --> 00:57:29,102

want to look at wealth only in terms

of, both the kind of understanding

872

00:57:29,112 --> 00:57:30,672

the size of the economic pie.

873

00:57:30,822 --> 00:57:35,592

So the wealth of our societies, but

also wealth and welfare of people.

874

00:57:35,932 --> 00:57:41,812

so, so I think here we need to,

so you're, so we need to kind of.

875

00:57:43,827 --> 00:57:48,557

If you can allow me so it will be a

little bit like, not so crystal clear

876

00:57:48,557 --> 00:57:51,577

in all dimensions because I also

think this is like difficult area.

877

00:57:51,607 --> 00:57:53,327

This is a difficult domain

to really disentangle.

878

00:57:53,382 --> 00:57:54,949

Adam Butler: Mm hmm.

879

00:57:54,949 --> 00:57:55,732

Mm

880

00:57:55,797 --> 00:57:58,727

Daniel Waldenström: so

looking just at wealth.

881

00:57:59,377 --> 00:58:03,767

The wealth ownership, the assets that

we hold and their market value, our

882

00:58:03,767 --> 00:58:07,777

measure, our measures of wealth and

wealth inequality are simply to add up

883

00:58:07,987 --> 00:58:12,147

all the assets in our balance sheets in

the, you know, the non financial assets,

884

00:58:12,167 --> 00:58:16,887

whatever they may be, land and housing

and dwellings and holiday homes and so on.

885

00:58:17,327 --> 00:58:23,352

And then our financial assets could

be bank savings, could be Some mutual

886

00:58:23,352 --> 00:58:28,082

funds and then like stock market,

shares and, and, and pension funds.

887

00:58:28,832 --> 00:58:35,272

And these, this is just like simple

accounting and these values are both

888

00:58:35,272 --> 00:58:38,812

in this kind of volume stuff, you know,

the number of assets, but also their

889

00:58:38,812 --> 00:58:42,672

market values that in the market values,

the market prices can go up and down.

890

00:58:43,032 --> 00:58:49,402

And, but what's fascinating is that, yes,

it's not that If you want to double your

891

00:58:49,502 --> 00:58:55,642

market value as a like a normal working

household, you can't just like easily at

892

00:58:55,642 --> 00:58:59,432

least like a buy, construct a new home.

893

00:58:59,632 --> 00:59:04,772

like, like an entrepreneur, maybe starting

up a new firm, or like expand, you

894

00:59:04,772 --> 00:59:06,392

know, services and goods being produced.

895

00:59:06,932 --> 00:59:10,292

You just have your home and then

it may go up in value or not.

896

00:59:10,532 --> 00:59:15,222

and this is kind of, this is kind of the

basic contract that we, we agree upon.

897

00:59:15,992 --> 00:59:19,922

and yes, so the wealth gain for these

households is that their house of

898

00:59:19,922 --> 00:59:24,262

value has gone up, Does it give them

more power to influence politicians?

899

00:59:24,292 --> 00:59:25,342

Well, probably not.

900

00:59:25,382 --> 00:59:28,402

It's just like, paper gain as

long as they stay in their house.

901

00:59:29,062 --> 00:59:32,422

With exception for a fraction of

households who have actually been

902

00:59:32,422 --> 00:59:35,372

able to actually liquidize some part

of that, you know, that asset price

903

00:59:35,372 --> 00:59:39,502

game, namely by taking additional

mortgages, maybe by, you know,

904

00:59:39,512 --> 00:59:43,802

improving on their home or maybe even

buying a car or doing things, consume.

905

00:59:44,832 --> 00:59:48,902

So we had, I mean, in theory, they could

have also started, you know, setting

906

00:59:48,902 --> 00:59:52,502

up some, political action comedy or

something to, to influence politicians.

907

00:59:52,502 --> 00:59:58,202

But, whereas the liquidity share of

wealth held by, you know, of the, of

908

00:59:58,202 --> 01:00:03,842

the rich households or the rich people,

is, is most likely very clearly larger.

909

01:00:04,592 --> 01:00:06,412

So, but still that said.

910

01:00:06,662 --> 01:00:09,482

Our asset price change would

affect, the top as well.

911

01:00:09,522 --> 01:00:14,122

So I think during 2022, the

market value of Tesla shares or

912

01:00:14,152 --> 01:00:18,312

Tesla corporation decreased by,

I don't know, 65 percent or so.

913

01:00:18,712 --> 01:00:23,832

So asset price fluctuations affect

both the top and the bottom of

914

01:00:23,832 --> 01:00:25,552

the, of the wealth distribution.

915

01:00:26,172 --> 01:00:33,842

And this means that it's not really

clear at the end of the day where,

916

01:00:33,842 --> 01:00:38,212

you know, where distributional

changes will be the swiftest.

917

01:00:38,482 --> 01:00:43,542

We could have a financial crisis,

for example, they typically

918

01:00:43,542 --> 01:00:45,842

hit the rich guys hardest.

919

01:00:46,377 --> 01:00:49,947

We think that wealth, wealth

concentration goes down during,

920

01:00:50,287 --> 01:00:52,147

during financial crisis typically.

921

01:00:52,607 --> 01:00:56,207

And you would also have a lot

of reshuffling within the top.

922

01:00:56,207 --> 01:00:59,477

So some people just get bankrupt

and then get kicked out and

923

01:00:59,487 --> 01:01:00,737

being replaced by others.

924

01:01:03,032 --> 01:01:03,962

So that's one thing.

925

01:01:03,992 --> 01:01:08,702

And then the other part, okay, let me

just shift, shift a little bit to what you

926

01:01:08,702 --> 01:01:12,022

said about infrastructure and, you know,

the, the kind of the underinvestment,

927

01:01:13,072 --> 01:01:14,582

if one may want to talk about that.

928

01:01:14,582 --> 01:01:19,812

I, I, I think here, here's another

kind of interesting, you know,

929

01:01:19,882 --> 01:01:24,562

ground for comparison between the

US and other Western countries.

930

01:01:24,602 --> 01:01:31,142

I think we, and I, And I actually often

when I give talks, I, I emphasize the

931

01:01:31,142 --> 01:01:34,802

importance of separating out different

country experiences, especially,

932

01:01:35,022 --> 01:01:40,892

especially separating the U S from Europe,

maybe where Europe should also include

933

01:01:40,932 --> 01:01:45,876

Canada and Australia, I don't know, or,

or New Zealand, but, simply because we

934

01:01:45,886 --> 01:01:50,456

have such large differences in, you know,

and this has to do with how much we tax,

935

01:01:50,676 --> 01:01:56,779

so the average level of taxation is an

order of magnitude higher in Europe,

936

01:01:56,959 --> 01:02:03,339

meaning that we are more ambitious in

doing public infrastructure investments or

937

01:02:03,339 --> 01:02:08,849

like having collective expenditures that

comes into the education system and so on.

938

01:02:09,769 --> 01:02:14,549

So the question is then, are we

better, are we better in doing this?

939

01:02:15,159 --> 01:02:17,299

You know, there's one question

about should the government do this

940

01:02:17,299 --> 01:02:18,519

rather than the private sector?

941

01:02:18,609 --> 01:02:22,209

But I think in general, I think

it's fair to say that the U.

942

01:02:22,209 --> 01:02:22,359

S.

943

01:02:22,359 --> 01:02:28,369

has could do much better in terms of

taking care of their infrastructure.

944

01:02:28,369 --> 01:02:30,239

I think this is quite clear.

945

01:02:30,839 --> 01:02:36,696

And, uh, you know, then to add

to this is the role of growth,

946

01:02:37,016 --> 01:02:39,246

growth, potentially in the economy.

947

01:02:39,606 --> 01:02:43,546

So if we pick up on growth and

here, I think on the other end, then

948

01:02:43,556 --> 01:02:45,336

Europe is actually underperforming.

949

01:02:45,746 --> 01:02:48,256

We, I mean, we have a secular

stagnation throughout the Western

950

01:02:48,286 --> 01:02:55,841

world, but I think growth rates are, are

worryingly low in Europe at the moment.

951

01:02:56,271 --> 01:03:01,471

And, and why, and why this is a

big, big, big thing to discuss, but

952

01:03:01,861 --> 01:03:05,641

with higher growth, could we pick

up growth, meaning productivity

953

01:03:05,641 --> 01:03:08,021

growth and just like doing better.

954

01:03:08,541 --> 01:03:10,631

And what we do, maybe

doing new things as well.

955

01:03:11,721 --> 01:03:15,591

This would give us means

to do a lot of good things.

956

01:03:15,991 --> 01:03:21,331

Both in terms of expanding quality

in public infrastructure, but

957

01:03:21,331 --> 01:03:24,751

also then generating more means

for people to live good lives.

958

01:03:25,531 --> 01:03:29,691

And that then also then adheres

to like future income growth would

959

01:03:29,691 --> 01:03:33,541

then maybe that would then also have

capitalization effects on our assets.

960

01:03:33,951 --> 01:03:37,161

So we would then have

higher than housing values.

961

01:03:37,321 --> 01:03:42,341

In fact, I think a fair share of

the capital gains in the housing

962

01:03:42,341 --> 01:03:45,941

market over the last two or three

decades is part of the real,

963

01:03:46,131 --> 01:03:48,291

income increases that we've seen.

964

01:03:49,174 --> 01:03:55,564

Households in most Western countries have

fared really well over the last decades.

965

01:03:55,824 --> 01:03:56,894

On average, that is.

966

01:03:57,527 --> 01:03:58,047

Why?

967

01:04:00,297 --> 01:04:03,417

I think growth has been increasing

because of globalization, partly.

968

01:04:03,837 --> 01:04:09,337

I think not least the China entry into

the world economy has generated a lot

969

01:04:09,337 --> 01:04:14,932

of A lot of gains, both in terms of

lowering like consumption stuff or like

970

01:04:14,962 --> 01:04:18,932

goods and so on, but also their capital

flowing in and so on and so forth.

971

01:04:20,176 --> 01:04:23,316

anyway, so they're like, as you

can hear, a lot of things are

972

01:04:23,366 --> 01:04:25,046

interplaying at the same time.

973

01:04:25,516 --> 01:04:30,116

Finally, like interest rates, for example,

lowered interest rates is also capitalized

974

01:04:30,326 --> 01:04:34,126

in market values and maybe shares.

975

01:04:34,496 --> 01:04:38,446

So of course that could then be

offset if interest rates go up.

976

01:04:38,476 --> 01:04:40,246

We saw that a little bit a few years ago.

977

01:04:40,426 --> 01:04:45,829

this may be the way we come back if we

would have military conflicts and, you

978

01:04:45,829 --> 01:04:49,949

know, we would have like, you know,

extreme needs of, of, of capital in the

979

01:04:49,949 --> 01:04:51,699

military industry or defense industry.

980

01:04:51,699 --> 01:04:57,944

Maybe climate investments would then

Create, create demand all of a sudden, it

981

01:04:57,944 --> 01:04:59,534

would actually demand large investments.

982

01:04:59,784 --> 01:05:01,794

So we could have higher

interest rates because of that.

983

01:05:01,794 --> 01:05:05,614

And that would of course have effect on

housing values as well, but, but also

984

01:05:05,614 --> 01:05:07,674

on, on, on corporate values, I would say.

985

01:05:08,794 --> 01:05:09,574

Um,

986

01:05:09,609 --> 01:05:11,869

Adam Butler: Well, what's what's

interesting to just talking

987

01:05:11,869 --> 01:05:14,929

about cross sectional differences

between, for example, U.

988

01:05:14,929 --> 01:05:15,169

S.

989

01:05:15,169 --> 01:05:18,309

and and rest of the world or

rest of the developed world,

990

01:05:18,309 --> 01:05:20,769

call it, is, of course, that U.

991

01:05:20,769 --> 01:05:20,949

S.

992

01:05:20,959 --> 01:05:26,479

mortgages are typically fixed for decades,

whereas mortgages in the rest of the

993

01:05:26,479 --> 01:05:29,179

world are reset every two to five years.

994

01:05:29,288 --> 01:05:31,639

you've got to go back to the

bank in Canada and Australia.

995

01:05:31,639 --> 01:05:35,799

And I think in most places in Europe

and the UK, every two to five years and

996

01:05:35,799 --> 01:05:40,299

get a new interest rate and renegotiate

your mortgage with, with the bank.

997

01:05:40,339 --> 01:05:42,599

Whereas in the U S.

998

01:05:43,004 --> 01:05:47,074

We don't see the impact of higher

interest rates propagate to the same

999

01:05:47,074 --> 01:05:51,474

extent through the economy, despite

the fact that the U S is maybe more

1000

01:05:51,474 --> 01:05:53,864

financialized than the rest of the world.

1001

01:05:54,214 --> 01:05:57,514

But just by virtue of the fact that

those interest rates are locked in and

1002

01:05:57,524 --> 01:06:03,144

therefore asset owners don't experience

the consequences of their over leverage

1003

01:06:03,144 --> 01:06:08,014

in the way that, asset owners in

other jurisdictions might, right?

1004

01:06:08,054 --> 01:06:14,484

And so you're going to get a, Reset

of the of that capitalized value of of

1005

01:06:14,494 --> 01:06:19,413

future labor, as a function of a reset in

interest rates in the rest of the world.

1006

01:06:19,413 --> 01:06:19,704

Right?

1007

01:06:19,724 --> 01:06:24,934

So, I, I, I think that probably

meaningfully, certainly not completely,

1008

01:06:24,934 --> 01:06:26,584

but but meaningfully explains.

1009

01:06:27,014 --> 01:06:32,714

Some of the difference in the, reaction to

higher interest rates that we've observed

1010

01:06:33,314 --> 01:06:35,544

in the rest of the world outside of the U.

1011

01:06:35,544 --> 01:06:35,764

S.

1012

01:06:35,774 --> 01:06:36,424

versus in the U.

1013

01:06:36,424 --> 01:06:36,794

S.

1014

01:06:37,764 --> 01:06:41,021

Daniel Waldenström: this has been this

is an area of great concern also in,

1015

01:06:41,041 --> 01:06:46,663

in Europe, Sweden, with a large share

of, of, homeowners have mortgages, are

1016

01:06:46,663 --> 01:06:51,854

not even only set by every two or 52

or 50 years or five years, but instead

1017

01:06:52,413 --> 01:06:54,374

every third month, every three months,

1018

01:06:54,377 --> 01:06:55,517

Adam Butler: Ah, yes, holding rate.

1019

01:06:55,829 --> 01:06:59,479

Daniel Waldenström: Yeah, like,

and, so monetary policymakers are,

1020

01:06:59,489 --> 01:07:01,079

you know, follow this very closely.

1021

01:07:01,079 --> 01:07:03,809

And they were, of course, really

concerned, during the pandemic

1022

01:07:03,849 --> 01:07:05,399

or post pandemic, period.

1023

01:07:06,119 --> 01:07:09,559

so, uh, exactly what to take out of this.

1024

01:07:09,589 --> 01:07:11,199

so there's a difference across Europe.

1025

01:07:11,334 --> 01:07:12,064

European countries.

1026

01:07:12,064 --> 01:07:14,904

I mean, French, the French households

are, are, you know, more, much more

1027

01:07:15,124 --> 01:07:19,284

U S like in the sense of having

very long term, interest, contracts.

1028

01:07:19,564 --> 01:07:22,744

then on the other hand, this

is also something where we have

1029

01:07:22,744 --> 01:07:26,974

like relationships between banks

and, and, and, and the borrowers.

1030

01:07:27,064 --> 01:07:30,964

I think that also depends on how

is the banking system structured?

1031

01:07:30,974 --> 01:07:33,574

What do we have in terms of,

the guarantees, insurance

1032

01:07:33,574 --> 01:07:36,314

guarantees, for, for depositors?

1033

01:07:37,122 --> 01:07:39,742

but you know, but anyway, so, but

you're, you're perfectly right.

1034

01:07:39,742 --> 01:07:44,662

So that kind of propagation of, of

interest rate shocks, uh, into like

1035

01:07:44,852 --> 01:07:48,072

household behavior consumption and

so on, getting more real effects on

1036

01:07:48,072 --> 01:07:51,452

that, uh, is of course, something

which we, we are discussing.

1037

01:07:51,462 --> 01:07:52,657

And, there are kind of.

1038

01:07:52,927 --> 01:07:57,137

In fact, in Sweden, we try to have

had some regulation of, of, of like

1039

01:07:57,137 --> 01:08:01,681

ceilings on, on how much to borrow

against certain interest rates or when

1040

01:08:01,681 --> 01:08:05,241

you need to start having, paying off

your mortgage, mortgages and so on.

1041

01:08:05,721 --> 01:08:09,511

so it's kind of an experimentation,

institutional experimentation or policy

1042

01:08:09,521 --> 01:08:15,674

experimentation on how to get a little

bit of less reliance on, on, or maybe

1043

01:08:15,684 --> 01:08:17,663

exposure to these kinds of events.

1044

01:08:17,694 --> 01:08:19,742

But, I don't know.

1045

01:08:19,812 --> 01:08:23,032

I don't know what the, what the best

scenario is or what the best, you

1046

01:08:23,032 --> 01:08:24,242

know, where, where we want to be,

1047

01:08:24,983 --> 01:08:25,263

Adam Butler: Yeah.

1048

01:08:25,263 --> 01:08:28,433

I mean, just in general, I know, I

know I've sort of monopolized this

1049

01:08:28,433 --> 01:08:30,643

segment, Richard, to which I apologize.

1050

01:08:30,643 --> 01:08:34,033

I know you've got some other questions,

but I guess just to tie a bow on this

1051

01:08:34,042 --> 01:08:39,148

is, I think it's very difficult to make

assertions, strong assertions about, Okay.

1052

01:08:39,608 --> 01:08:44,898

Wealth accumulation or, the, the

share of wealth in an economy in the

1053

01:08:44,898 --> 01:08:47,058

presence of financialization, right?

1054

01:08:47,058 --> 01:08:51,707

The, just the ability to capitalize future

labor and the innovations in the financial

1055

01:08:51,707 --> 01:08:57,618

sector, I think have had a profound

impact and that impact is felt differently

1056

01:08:57,618 --> 01:09:02,408

in different jurisdictions because of

different banking and landing policies

1057

01:09:02,488 --> 01:09:05,098

and, and, and other things, right?

1058

01:09:05,198 --> 01:09:09,988

But I just think that substantially

weakens the conclusions that we

1059

01:09:09,988 --> 01:09:17,108

can make about wealth accretion,

the changes in wealth inequality

1060

01:09:17,108 --> 01:09:18,377

that we've observed over time.

1061

01:09:18,738 --> 01:09:22,127

And I think it's more than a

coincidence that if you look at the

1062

01:09:22,127 --> 01:09:28,643

trajectory of wealth concentration

or wealth, equalization over time.

1063

01:09:29,513 --> 01:09:34,173

Wealth tends to be the most equal

when asset prices are low, right?

1064

01:09:34,173 --> 01:09:38,792

In the very, in the late 19th cent

relative to cash flows, right?

1065

01:09:39,113 --> 01:09:44,913

When the home prices are low relative to

rents, when stock prices are low relative

1066

01:09:44,993 --> 01:09:50,113

to earnings, when interest rates are

high and therefore bond prices are low.

1067

01:09:50,488 --> 01:09:54,207

That tends to be when we see

the greatest amount of equality.

1068

01:09:54,788 --> 01:10:00,438

And when, after many years of asset price

appreciation, relative to fundamentals,

1069

01:10:00,718 --> 01:10:02,798

that's where we see the most.

1070

01:10:03,451 --> 01:10:09,411

unequal share of, of wealth and why

we also see a much more unequal share

1071

01:10:09,411 --> 01:10:13,851

of wealth in the US than we do in the

rest of the world, because the US has

1072

01:10:13,851 --> 01:10:18,661

experienced such a massive appreciation

of financial assets relative to the

1073

01:10:18,661 --> 01:10:22,281

rest of the world, which over the last

15 years, outside of the US, there

1074

01:10:22,281 --> 01:10:27,016

really hasn't been any growth in equity

markets, and in the US, Equity market

1075

01:10:27,285 --> 01:10:30,934

growth has been about twice the long

term average of the last 15 years.

1076

01:10:31,195 --> 01:10:36,390

So I think that explains a lot more

than maybe we give credit to and I

1077

01:10:36,400 --> 01:10:39,030

don't know how you disentangle it But

I think it's a really important factor

1078

01:10:39,383 --> 01:10:42,639

Daniel Waldenström: I, I, I agree, but

at least in part, but only in part, I

1079

01:10:42,649 --> 01:10:48,169

mean, I, so I think, so, uh, so yes,

when we get depressed asset values, when

1080

01:10:48,169 --> 01:10:52,999

we basically, you know, when, when the

value of the market value of wealth would

1081

01:10:53,009 --> 01:10:56,529

be zero, we wouldn't have any wealth

inequality as just like a core, as a

1082

01:10:56,529 --> 01:11:02,889

corner solution, let's say in a, commando

economy, or when, when private ownership

1083

01:11:02,889 --> 01:11:04,749

is disallowed entirely, uh, yeah.

1084

01:11:04,989 --> 01:11:10,509

But, you know, along that kind of angle

or that axis, in the seventies, yes,

1085

01:11:10,559 --> 01:11:16,029

markets were dysfunctional, economies

were dysfunctional, mass asset prices

1086

01:11:16,029 --> 01:11:17,949

were low, we had stagflation and so on.

1087

01:11:18,369 --> 01:11:23,022

And then, as you say, since then,

markets have appreciated, uh,

1088

01:11:23,032 --> 01:11:26,334

we have, and you could say they

have boomed, for several decades.

1089

01:11:26,764 --> 01:11:31,224

For different reasons,

still, not only in the U.

1090

01:11:31,224 --> 01:11:31,564

S.,

1091

01:11:31,814 --> 01:11:34,854

market caps have increased

a lot also in Europe.

1092

01:11:35,154 --> 01:11:42,264

and I think that is one of the striking

facts from comparing wealth distributions

1093

01:11:42,264 --> 01:11:47,414

across countries is that we have not seen

the same level of increases in wealth

1094

01:11:47,484 --> 01:11:49,764

inequality, that we've seen in the U.

1095

01:11:49,764 --> 01:11:50,084

S.

1096

01:11:50,304 --> 01:11:53,364

in comparison to what we've seen

in, in, in Europe and so on.

1097

01:11:53,364 --> 01:11:59,242

So in Europe, when we Wealth inequality

has not increased, secularly over

1098

01:11:59,242 --> 01:12:02,012

the, over the decades since 1980s.

1099

01:12:02,122 --> 01:12:06,712

that is basically, and this is part

of them because as you say, people's

1100

01:12:06,712 --> 01:12:10,392

houses have gone up, house prices have

gone up, but also that people have

1101

01:12:10,392 --> 01:12:15,312

started saving also in these financial

markets that have become more valuable.

1102

01:12:15,512 --> 01:12:19,432

thanks to, you know,

globalization, Funded capitalism.

1103

01:12:19,432 --> 01:12:23,752

So pension funds being built up,

perhaps driven by Japanese and U.

1104

01:12:23,752 --> 01:12:24,102

S.

1105

01:12:24,152 --> 01:12:27,942

pension funds, like investing in

smaller economies and so forth.

1106

01:12:28,432 --> 01:12:34,592

but again, a little bit picking up on,

So this kind of capitalization of income,

1107

01:12:34,742 --> 01:12:39,132

I think here, here's like, you know,

where we also want to talk about the

1108

01:12:39,132 --> 01:12:41,082

role of income and income distribution.

1109

01:12:41,342 --> 01:12:46,841

So, so, so there is just like so much

you can say about wealth inequality in

1110

01:12:46,841 --> 01:12:48,931

terms of this distributional discussion.

1111

01:12:49,151 --> 01:12:53,751

So, yes, people's wealth may go

up and down or maybe very subtle.

1112

01:12:54,141 --> 01:12:58,591

It's gonna, Reliant on, on house

price changes, and it doesn't really

1113

01:12:58,591 --> 01:13:04,001

matter for their kind of real wealth,

you know, life, you could say.

1114

01:13:04,101 --> 01:13:07,971

but instead for them, what is

crucial and also for the economy

1115

01:13:07,971 --> 01:13:09,401

as a whole is the income.

1116

01:13:09,761 --> 01:13:14,671

So as long people, as long as people

have an income, they're, they're fine.

1117

01:13:14,741 --> 01:13:20,786

they can buy, they can pay their mortgage

mortgages or like they could, you know.

1118

01:13:21,116 --> 01:13:22,006

live good lives.

1119

01:13:22,376 --> 01:13:27,780

So, and therefore, also when you talk to

monetary policy makers, instead of them

1120

01:13:27,860 --> 01:13:32,210

focusing on asset prices and so on, which

is very complex, we don't know really how

1121

01:13:32,210 --> 01:13:34,380

to think about this or the implications.

1122

01:13:35,170 --> 01:13:40,325

I think for them to promote equality is

to, to To try to reach full employment.

1123

01:13:40,805 --> 01:13:44,601

So that is what's kind you know, the

most by far important dimension in

1124

01:13:44,611 --> 01:13:50,771

where, in which we can create like,

inclusion and equality by basically

1125

01:13:50,811 --> 01:13:53,691

allowing people to live good lives.

1126

01:13:53,691 --> 01:13:58,511

And we take part, act apart in the

labor markets and then they can, if

1127

01:13:58,511 --> 01:14:03,371

they want, they can buy a home, they

can invest in the stock market, or

1128

01:14:03,371 --> 01:14:06,795

they could be like hand to mouth and

just like, go traveling or whatever.

1129

01:14:07,145 --> 01:14:10,785

consume whatever they want, as

long as, and then, so that's

1130

01:14:10,785 --> 01:14:12,695

my kind of also the take on it.

1131

01:14:12,745 --> 01:14:17,375

So you may have asset price changes

that are not really important for

1132

01:14:17,375 --> 01:14:22,645

people's lives with house price gains

and giving maybe, I get a feeling that

1133

01:14:22,695 --> 01:14:27,805

there is like, or people, I get these

comments when I, whenever I present,

1134

01:14:28,733 --> 01:14:35,753

feel like, how could you compare like,

super-billionaire asset gains to, to

1135

01:14:35,753 --> 01:14:40,363

middleclass people's housing gains,

they're just just different universes.

1136

01:14:40,593 --> 01:14:42,163

And I, kind of agree.

1137

01:14:42,743 --> 01:14:48,840

And yet, they're kind of, part of like

some, some kind of income wealth complex

1138

01:14:49,380 --> 01:14:55,220

that at the end of the day, want, want

us, want us to build, live good lives.

1139

01:14:55,986 --> 01:14:57,046

Adam Butler: Well, yeah,

I've got some other

1140

01:14:57,176 --> 01:14:57,516

Richard Laterman: I like the

1141

01:14:57,516 --> 01:14:58,436

Adam Butler: I'll let Richard

1142

01:14:58,593 --> 01:14:58,803

Daniel Waldenström: Yeah.

1143

01:14:59,773 --> 01:15:00,013

Yeah.

1144

01:15:00,143 --> 01:15:00,473

I,

1145

01:15:00,576 --> 01:15:04,221

Richard Laterman: like the way that you,

No, the, the way we're framing that I

1146

01:15:04,221 --> 01:15:08,651

think raises a very interesting, and

very important point, which is much like,

1147

01:15:08,701 --> 01:15:13,361

when, when central banks lower interest

rates, we, we, we see, stock markets boom.

1148

01:15:13,361 --> 01:15:17,021

But that has nothing to do with actual

repricing valuations because the, the

1149

01:15:17,021 --> 01:15:20,261

stock market is not narrowly focused

on short-term interest rates, but much

1150

01:15:20,261 --> 01:15:21,971

more on the longer end of the curve.

1151

01:15:22,271 --> 01:15:25,956

It's more on the, the transition,

the transmission mechanisms more

1152

01:15:25,956 --> 01:15:27,516

about animal spirits and confidence.

1153

01:15:27,816 --> 01:15:33,456

The idea of asset price appreciation,

more so, in the real estate, element of

1154

01:15:33,456 --> 01:15:36,616

this, but also in stock prices, because

people aren't necessarily, selling

1155

01:15:36,616 --> 01:15:38,616

those stocks and, and cashing them out.

1156

01:15:39,186 --> 01:15:42,656

Those are also, I think, play a much,

stronger role in terms of boosting

1157

01:15:42,666 --> 01:15:44,886

their confidence in terms of spending.

1158

01:15:44,896 --> 01:15:47,546

And so that, that, that prosperity

angle, I think really comes

1159

01:15:47,546 --> 01:15:48,866

from when they have the income.

1160

01:15:49,901 --> 01:15:54,911

To improve their lives on a daily basis,

people might have, you know, very large

1161

01:15:54,921 --> 01:15:58,301

properties and, and, and, and that are,

appreciating in value over time, but

1162

01:15:58,301 --> 01:16:02,251

unless they have the cashflow to sustain

their quality of life, they're actually

1163

01:16:02,251 --> 01:16:04,571

going to be downgrading, selling out.

1164

01:16:04,571 --> 01:16:08,751

And so the prosperity angle has to be

intertwined as far as I can see, to

1165

01:16:08,751 --> 01:16:11,251

the, to the income element of this.

1166

01:16:11,251 --> 01:16:11,321

And,

1167

01:16:11,611 --> 01:16:13,891

Adam Butler: Well, I don't, that's

the whole point about my, about

1168

01:16:13,891 --> 01:16:22,107

financialization is it, is it disconnects

asset prices and spending from incomes.

1169

01:16:23,022 --> 01:16:23,282

Right.

1170

01:16:23,322 --> 01:16:28,712

If you can, if you, if you were able to

take a 30 year mortgage on a home with 5

1171

01:16:28,712 --> 01:16:35,992

percent down, the home goes up 20%, then

without doing too much complex math, you

1172

01:16:35,992 --> 01:16:41,212

know, your, your wealth has increased

by 2 or 3 times in that period, your

1173

01:16:41,252 --> 01:16:45,852

equity in your home, and now that can be

used with a home equity line of credit.

1174

01:16:45,932 --> 01:16:46,642

You can pull that out.

1175

01:16:47,172 --> 01:16:50,692

You can redo your kitchen if you

want, but most, many people don't.

1176

01:16:50,732 --> 01:16:54,582

Instead, they take that key lock and

they spend it on a vacation or they,

1177

01:16:54,602 --> 01:16:58,832

you know, to Daniel's point, they buy a

new car or, you know, otherwise consume.

1178

01:16:58,832 --> 01:16:59,122

Right.

1179

01:16:59,732 --> 01:17:04,615

And so in this way, rising

asset prices subsidizes.

1180

01:17:05,188 --> 01:17:12,288

Incomes so that we don't need to see

the same appreciation in labor share

1181

01:17:12,388 --> 01:17:18,948

of the pie because labor can, or at

least asset owner labor, owner's labor

1182

01:17:19,588 --> 01:17:26,998

can take money out of their, you know,

unlock their savings by lending against

1183

01:17:27,008 --> 01:17:29,077

the assets that have gone up in value.

1184

01:17:29,348 --> 01:17:30,278

Richard Laterman: But mostly the U.

1185

01:17:30,278 --> 01:17:30,728

S.

1186

01:17:30,848 --> 01:17:36,068

because in the rest of the world, so I

guess to your point, the importance of

1187

01:17:36,068 --> 01:17:38,468

financialization, and I agree with you.

1188

01:17:38,468 --> 01:17:39,448

I agree with that argument.

1189

01:17:39,858 --> 01:17:44,148

It's hard to overstate that because

it does allow you to unlock.

1190

01:17:44,577 --> 01:17:48,418

the appreciation of these asset prices

towards actual consumption and towards

1191

01:17:48,418 --> 01:17:50,948

actual, perceptions of, of prosperity.

1192

01:17:50,948 --> 01:17:55,598

I, I guess, asset price appreciation is

a very narrow way to look at this, and

1193

01:17:55,598 --> 01:17:59,298

it doesn't account for these, for, for

the, the, the cash flow element, the,

1194

01:17:59,327 --> 01:18:04,651

the, the flow versus stock argument,

I think of, well, I think is the key.

1195

01:18:04,651 --> 01:18:05,781

I

1196

01:18:06,293 --> 01:18:08,263

Daniel Waldenström: let me just say

that, you know, we, so there are

1197

01:18:08,263 --> 01:18:11,663

like some differences across these

countries and then institutional

1198

01:18:11,673 --> 01:18:13,593

settings that is kind of interesting.

1199

01:18:13,603 --> 01:18:17,113

And I think we can learn from each

other how, you know, this is also a

1200

01:18:17,113 --> 01:18:21,763

function of how well we, how well we

are insured against shocks and so on.

1201

01:18:21,763 --> 01:18:26,883

And the more internationalized, maybe the

insurance industry, it becomes the, the

1202

01:18:26,893 --> 01:18:32,577

better our maybe also the banks become

in terms of being more flexible and

1203

01:18:32,698 --> 01:18:34,398

allowing for different kinds of contracts.

1204

01:18:34,407 --> 01:18:35,868

For example, the pension system.

1205

01:18:35,868 --> 01:18:40,238

So the occupational pensions or the, you

know, the defined contribution pensions,

1206

01:18:40,657 --> 01:18:46,103

can in some countries actually be taken

out before I know, for example, 401k,

1207

01:18:46,103 --> 01:18:49,943

you can borrow from it, but it's very

strict how you need to repay and so on.

1208

01:18:50,573 --> 01:18:56,323

I know Switzerland has that much more

flexibly, Italy, Denmark, Sweden doesn't.

1209

01:18:56,373 --> 01:18:57,983

So we're kind of very strict on that.

1210

01:18:58,702 --> 01:19:00,243

Of course, there's like a behavioral.

1211

01:19:00,758 --> 01:19:01,918

gradient here as well.

1212

01:19:01,918 --> 01:19:06,778

So people short termism and so on and so

forth, but it's just like, you know, the

1213

01:19:06,778 --> 01:19:12,978

financialization aspect of how to kind

of capitalize on your appreciated home

1214

01:19:13,748 --> 01:19:16,488

values in terms of living a better life.

1215

01:19:16,488 --> 01:19:20,478

I mean, so it's interesting

to hear us here.

1216

01:19:20,478 --> 01:19:24,988

I think this isn't yet another example

of how a dynamic economy like the U.

1217

01:19:24,988 --> 01:19:25,228

S.

1218

01:19:25,378 --> 01:19:28,068

can offer new institutional innovations.

1219

01:19:28,318 --> 01:19:29,308

Maybe not all good.

1220

01:19:29,418 --> 01:19:30,738

Maybe some of them will backfire.

1221

01:19:30,738 --> 01:19:31,238

Who knows?

1222

01:19:31,528 --> 01:19:35,138

but at least it's kind of, yeah, as

you say, it kind of strengthens, you

1223

01:19:35,138 --> 01:19:40,281

know, the wealth income, or connections

in this sense in people's daily life.

1224

01:19:41,854 --> 01:19:43,794

Richard Laterman: wonder if we

can maybe shift gears a little bit

1225

01:19:43,794 --> 01:19:45,144

and I'm cognizant of time here.

1226

01:19:45,144 --> 01:19:49,379

I want to understand a little bit what

might be your policy prescriptions given

1227

01:19:49,379 --> 01:19:53,609

your work and some of the recommendations

that you would have, for Sweden, for,

1228

01:19:53,629 --> 01:19:57,499

for the West and maybe for, for, for

the broader world, because you offer a

1229

01:19:57,499 --> 01:20:04,209

very positive view of capitalism and,

and of, the sort of human ingenuity and

1230

01:20:04,239 --> 01:20:08,734

innovation, which contrasts, I think,

pretty starkly with, your colleague,

1231

01:20:08,773 --> 01:20:12,244

uh, Piketty and the idea that you, you

need some mores in order to level the

1232

01:20:12,254 --> 01:20:15,834

playing field, which is a, which can

create some pretty perverse incentives

1233

01:20:15,834 --> 01:20:17,284

if you take that to the extreme, right?

1234

01:20:17,284 --> 01:20:21,124

So I'm, I'm, I'm wondering what the

policy prescriptions might be and how

1235

01:20:21,124 --> 01:20:25,624

your work has been received in academia

and in broader, uh, policymaker circles.

1236

01:20:26,386 --> 01:20:26,546

Daniel Waldenström: Yeah.

1237

01:20:26,546 --> 01:20:27,286

Thanks for asking.

1238

01:20:27,286 --> 01:20:33,566

I mean, I think so an overarching

policy insight for me, and I hopefully

1239

01:20:33,586 --> 01:20:38,356

maybe for some of the readers is

that so the rich are not the problem.

1240

01:20:39,031 --> 01:20:44,511

So they who have become successful

in generating wealth, either by being

1241

01:20:44,521 --> 01:20:48,571

entrepreneurs or maybe some of them just

being lucky, of course being lucky to be

1242

01:20:48,581 --> 01:20:53,271

maybe born in, in well functioning Western

societies, unlike, you know, Southern

1243

01:20:53,291 --> 01:20:55,371

South of Sahara and Africa and so on.

1244

01:20:55,631 --> 01:21:03,521

but nonetheless, These people taking part

in creating firms that become valuable,

1245

01:21:03,771 --> 01:21:05,841

offering services and goods and so on.

1246

01:21:05,871 --> 01:21:10,321

Offering jobs that people get,

they get income, they pay taxes.

1247

01:21:10,731 --> 01:21:13,541

This is adding value to society.

1248

01:21:14,736 --> 01:21:20,416

So even also for those who love taxes

and redistribution should love these

1249

01:21:20,425 --> 01:21:24,806

private actors, private industry actors

who actually generate these incomes

1250

01:21:24,806 --> 01:21:29,556

and profits that end up being taxed

and providing these tax, tax revenues.

1251

01:21:29,876 --> 01:21:32,590

So this is just like a first conclusion.

1252

01:21:32,780 --> 01:21:37,550

Growth is very good for the welfare of

societies and also welfare of citizens.

1253

01:21:38,020 --> 01:21:44,080

and this is like against, going against

some kind of zero sum, view of the economy

1254

01:21:44,080 --> 01:21:48,610

of like, Oh, that you have some, you

know, prosperous and successful people.

1255

01:21:48,750 --> 01:21:53,835

Meaning, means that someone else has, you

know, We don't have that in the economy.

1256

01:21:53,835 --> 01:21:56,195

We may have it in other, settings.

1257

01:21:56,285 --> 01:21:59,265

you know, we can talk about

climate, views of climate policy

1258

01:21:59,265 --> 01:22:01,465

and resource usage and so on.

1259

01:22:01,735 --> 01:22:06,265

But when it comes to values, the value

creation processes and growth, we don't.

1260

01:22:06,285 --> 01:22:07,335

I don't, I don't think so.

1261

01:22:07,535 --> 01:22:08,745

So that's just one thing.

1262

01:22:09,015 --> 01:22:12,915

Growth promotion, is very good for

society and that we have successful,

1263

01:22:13,434 --> 01:22:16,895

People in the private industry, private

sector, that's very positive actually.

1264

01:22:17,265 --> 01:22:21,575

and then when it comes to wealth, so

this book is about wealth inequality.

1265

01:22:21,775 --> 01:22:25,555

So it's not about broader, you

know, economic policies in general

1266

01:22:25,555 --> 01:22:30,255

or economic inequality or welfare

inequality or so, but so it comes in

1267

01:22:30,255 --> 01:22:32,555

terms of wealth, wealth ownership.

1268

01:22:32,555 --> 01:22:37,525

We know that, What has equalized

wealth is to have to have people start

1269

01:22:37,565 --> 01:22:44,305

participating in the economy so that

make to make them earn as much so earn

1270

01:22:44,305 --> 01:22:48,915

good enough so that they can start saving

and investing and we know historically

1271

01:22:48,915 --> 01:22:54,035

that what they did was to Buy their home

and then save for, for, for old age.

1272

01:22:54,365 --> 01:22:57,395

And I still think that that is

kind of the backbones or the

1273

01:22:57,395 --> 01:22:59,245

pillars of people's portfolios.

1274

01:22:59,565 --> 01:23:02,125

and this is something

worth promoting if we can.

1275

01:23:03,032 --> 01:23:08,722

I think for example, thanks to like

mutual funds, we've started doing this

1276

01:23:08,882 --> 01:23:11,642

at a much higher level, so we didn't,

we don't need to be experts in the, in

1277

01:23:11,652 --> 01:23:15,485

the stock market we can just like buy an

index fund and then take part of this.

1278

01:23:17,462 --> 01:23:22,502

so to promote private property,

private ownership in both in terms

1279

01:23:22,502 --> 01:23:27,552

of home ownership, like housing and

pensions, I think is very positive.

1280

01:23:27,742 --> 01:23:32,612

As for pensions, we have a

demographical hollowing out.

1281

01:23:32,737 --> 01:23:33,597

in our economy.

1282

01:23:33,597 --> 01:23:38,957

So fewer and fewer are supposed to

support more and more, meaning that,

1283

01:23:39,166 --> 01:23:43,347

uh, we need to think also about the

pension system here, this kind of human,

1284

01:23:43,666 --> 01:23:49,367

human capital hollowing out or human

capital deficit could, I think in part

1285

01:23:49,367 --> 01:23:54,677

be, counteracted by a building up of

financial capital in the pension system.

1286

01:23:55,077 --> 01:23:59,787

so I'm not the one saying this, only this

like Hans Van der Zeen, this ingenious

1287

01:23:59,817 --> 01:24:03,117

German economist who kind of dominated

much of Germany's pension system.

1288

01:24:04,207 --> 01:24:09,037

Discussions for years has also

pointed at this particular aspect

1289

01:24:09,037 --> 01:24:11,166

of promoting funded pensions.

1290

01:24:11,357 --> 01:24:15,207

and not only because it's kind of also

been part of a productive in productive

1291

01:24:15,427 --> 01:24:19,916

wealth growth in like when we have

growing economies, but also because it

1292

01:24:19,916 --> 01:24:25,427

kind of relies, makes us rely a little

bit less on the traditional PSGO pension

1293

01:24:25,427 --> 01:24:31,647

systems where today's pensioners are

are get their pension incomes based

1294

01:24:31,647 --> 01:24:34,137

on the taxes paid by by wage earners.

1295

01:24:35,087 --> 01:24:40,137

so those are and then on another kind

of policy, you could say a broader

1296

01:24:40,137 --> 01:24:48,087

policy inside I think is about uh, and

it can relate also to the kind of the

1297

01:24:48,087 --> 01:24:53,037

rich not being the problem is the kind

of the role of money, money and power.

1298

01:24:53,647 --> 01:24:59,277

I think power comes in a lot when I

talk to people, And why will It used

1299

01:24:59,277 --> 01:25:01,217

to be like Silvio Berlusconi and Trump.

1300

01:25:01,217 --> 01:25:02,747

Now it's maybe Musk and Trump.

1301

01:25:02,797 --> 01:25:04,017

there are other names.

1302

01:25:04,147 --> 01:25:05,187

We could have Rupert Murdoch.

1303

01:25:05,227 --> 01:25:10,143

We could have many, many like

successful individuals building up

1304

01:25:10,143 --> 01:25:14,923

huge fortunes and then stepping into

politics or media or so, and then,

1305

01:25:14,923 --> 01:25:16,163

you know, people get concerned.

1306

01:25:16,263 --> 01:25:18,118

and maybe rightly so.

1307

01:25:18,577 --> 01:25:23,478

I think in here being on this positive

angle, I think we could look at the

1308

01:25:23,478 --> 01:25:27,738

countries, where, where this, we have

been able to kind of strike a balance

1309

01:25:27,738 --> 01:25:31,978

between having a market economy,

providing growth and prosperity,

1310

01:25:32,198 --> 01:25:34,268

and maybe also super rich people.

1311

01:25:34,508 --> 01:25:39,868

And yet, Retaining well functioning

political systems with we think that there

1312

01:25:39,868 --> 01:25:45,327

are, you know, democratic functions that

provide good life and it's like balanced

1313

01:25:45,488 --> 01:25:51,298

and, and also media that that kind of we

think offers good information and so on.

1314

01:25:51,818 --> 01:25:56,873

And here, Look, I think it's like, like

learning from these positive examples, I

1315

01:25:56,873 --> 01:26:02,143

think is the way forward instead of just

like clanking down on, on, on fortunes

1316

01:26:02,183 --> 01:26:06,603

that we suspect may become influential

in the wrong way, but we don't know.

1317

01:26:06,903 --> 01:26:09,363

So instead, let them do their things.

1318

01:26:09,363 --> 01:26:10,433

Let the entrepreneurs do their thing.

1319

01:26:10,643 --> 01:26:16,193

Build their corporations and create their,

create value and try then instead shield

1320

01:26:16,193 --> 01:26:19,503

off politics from bad political influence.

1321

01:26:19,793 --> 01:26:23,963

Increase transparency, maybe have rules

against campaign contributions and

1322

01:26:23,963 --> 01:26:29,363

private, private like support politicians

and we could have public service.

1323

01:26:30,263 --> 01:26:35,163

Public service media as, as one, you

know, backbone of the media landscape.

1324

01:26:35,163 --> 01:26:37,961

we could have, support for smaller medias.

1325

01:26:38,130 --> 01:26:39,490

That's at least the way to go.

1326

01:26:39,490 --> 01:26:41,550

I mean, we, you know, what was her name?

1327

01:26:41,550 --> 01:26:43,150

Lisa Kahn, in the, in the U.

1328

01:26:43,150 --> 01:26:43,360

S.,

1329

01:26:43,940 --> 01:26:49,970

was a federal Lina Kahn, sorry, who wanted

to kind of break up these big corporations

1330

01:26:50,470 --> 01:26:55,570

in kind of preempting the risk of them

becoming too influential or whatever.

1331

01:26:55,630 --> 01:26:58,059

I think this is the

wrong way to go instead.

1332

01:26:58,660 --> 01:27:06,050

Uh, improve, kind of improve, the

market economy and you know, the

1333

01:27:06,050 --> 01:27:09,820

dynamism and in fact, looking at what's

happening in like Nvidia being great.

1334

01:27:10,240 --> 01:27:15,040

I mean, OpenAI didn't exist 10 years ago,

and I'm sure, you know, people may stop

1335

01:27:15,070 --> 01:27:18,230

Googling relatively soon because, you

know, the new services are coming up.

1336

01:27:18,240 --> 01:27:23,620

Maybe Google, in its dominant

position, may not be as dominant.

1337

01:27:23,850 --> 01:27:29,375

And what happens when, like, India

comes up as a major player on like AI

1338

01:27:29,385 --> 01:27:33,595

based systems and services and other

countries because, you know, we have

1339

01:27:33,595 --> 01:27:35,835

the open source basis of all this.

1340

01:27:35,995 --> 01:27:36,465

Who knows?

1341

01:27:36,495 --> 01:27:39,145

But that kind of, maybe

I'm, you know, too rosy.

1342

01:27:39,145 --> 01:27:39,655

I don't know.

1343

01:27:39,855 --> 01:27:44,065

But the idea is to keep on doing it.

1344

01:27:44,525 --> 01:27:48,615

What we do good, namely a market,

like a democratically embedded market

1345

01:27:48,615 --> 01:27:53,365

economy is kind of the, you know,

historically, globally, the total

1346

01:27:53,375 --> 01:27:57,585

dominant example of what we want

in terms of creating good lives.

1347

01:27:57,755 --> 01:28:04,838

And yet, let's try to then shield off that

from our democratic Arena, media and so

1348

01:28:04,838 --> 01:28:09,088

on in order to, or if we're going to have

private media, let's make sure that they

1349

01:28:09,088 --> 01:28:12,058

are embedded in transparency and so on.

1350

01:28:13,443 --> 01:28:16,883

Adam Butler: Um, if maybe we could

spend the last five minutes kind

1351

01:28:16,883 --> 01:28:18,273

of looking forward a little bit.

1352

01:28:18,333 --> 01:28:21,213

So you brought up OpenAI.

1353

01:28:21,273 --> 01:28:25,753

Obviously, we've got, Just unbelievable

innovation on the AI front.

1354

01:28:25,753 --> 01:28:30,593

We've got, astonishing, almost

mind blowing, innovation and

1355

01:28:30,593 --> 01:28:34,363

improvement in robotic capabilities.

1356

01:28:34,393 --> 01:28:36,073

much of this work is coming out of China.

1357

01:28:36,083 --> 01:28:39,013

It's just, it's crazy, honestly,

to see how quickly their

1358

01:28:39,032 --> 01:28:43,313

robotics programs are advancing,

looking out three to five years.

1359

01:28:44,448 --> 01:28:51,498

Do you see the potential for a

substantial displacement of, of labor?

1360

01:28:51,708 --> 01:28:57,758

how might a change in concentrated

ownership of the factors of production?

1361

01:28:57,768 --> 01:29:02,698

Labor has historically been a

primary factor of production.

1362

01:29:02,698 --> 01:29:06,758

The industrial revolution

obviously mediated that somewhat.

1363

01:29:06,758 --> 01:29:13,618

The AI revolution and robotics revolution

are set to, probably profoundly Affect

1364

01:29:13,818 --> 01:29:21,348

that, how does a market economy evolve

when the marginal product of labor goes

1365

01:29:21,348 --> 01:29:27,745

to zero and the factors of production

are increasingly owned by a smaller

1366

01:29:27,745 --> 01:29:34,495

and smaller group of AI and robotic

deployment technology companies?

1367

01:29:34,752 --> 01:29:36,162

Daniel Waldenström: Oh,

yeah, great questions.

1368

01:29:36,192 --> 01:29:37,392

I mean, actually I wrote a.

1369

01:29:38,212 --> 01:29:39,112

Piece on this.

1370

01:29:39,122 --> 01:29:42,752

very recently it came out like

in Oxford University Press.

1371

01:29:42,752 --> 01:29:48,142

Uh, no, it was Elger, maybe, an OCD

chapter on AI automation and, and

1372

01:29:48,142 --> 01:29:51,291

the implications for, for, for the

future tax, future of tax policy.

1373

01:29:51,712 --> 01:29:57,541

discussing precisely this, this kind

of complex of questions and I think so.

1374

01:29:57,977 --> 01:30:02,227

first of all, huge uncertainties, the

trajectories are going like maybe, you

1375

01:30:02,227 --> 01:30:06,207

know, or like 180 degrees in opposite

directions in terms of when it comes

1376

01:30:06,207 --> 01:30:12,057

to market concentration, uh, inequality

effects, the end of labor or not.

1377

01:30:12,197 --> 01:30:16,777

I, on my, on my end, let me, let

me be very concrete and very try

1378

01:30:16,777 --> 01:30:18,937

to be, you know, effective in time.

1379

01:30:20,682 --> 01:30:23,212

You said to begin with,

three to five years.

1380

01:30:23,402 --> 01:30:25,222

You know, have you heard of Amaro's Law?

1381

01:30:25,442 --> 01:30:31,541

This Roy Amaro, who's kind of said

that we tend to overestimate the impact

1382

01:30:31,552 --> 01:30:35,102

of technological changes in the short

run, but we tend to underestimate

1383

01:30:35,102 --> 01:30:37,052

their effect in the longer run.

1384

01:30:37,372 --> 01:30:42,372

So I think three to five years is

much too short in terms of seeing

1385

01:30:42,382 --> 01:30:44,182

huge effects in the labor market.

1386

01:30:44,222 --> 01:30:45,552

I think at least in the Western world.

1387

01:30:46,965 --> 01:30:47,725

So why?

1388

01:30:47,905 --> 01:30:49,975

Well, automation has

been around for decades.

1389

01:30:50,184 --> 01:30:51,245

this has been gradual.

1390

01:30:51,255 --> 01:30:55,615

So we don't see like bank

clerks counting bills anymore

1391

01:30:55,635 --> 01:30:57,785

as they maybe did in the 80s.

1392

01:30:58,115 --> 01:31:00,245

So things have kind of evolved.

1393

01:31:01,230 --> 01:31:06,240

I think we're going into a world where

almost 100 percent of the workforce

1394

01:31:06,460 --> 01:31:08,510

will be employed in the service sector.

1395

01:31:09,189 --> 01:31:14,099

So production will not be done by

humans in the traditional sense of

1396

01:31:14,109 --> 01:31:17,818

goods, that is, but production of

services will be all what we do.

1397

01:31:19,125 --> 01:31:21,535

Once again, I'm, I'm kind of positive.

1398

01:31:21,905 --> 01:31:28,495

I think, the traditional kind of liberal

minded approach to the market economy

1399

01:31:28,495 --> 01:31:31,515

would be to make sure that entry is, is.

1400

01:31:31,885 --> 01:31:33,305

is as free as possible.

1401

01:31:33,455 --> 01:31:37,225

I think that I'm not too

worried about these tech giants

1402

01:31:37,545 --> 01:31:39,395

dominate, totally dominating.

1403

01:31:39,695 --> 01:31:46,295

and I think because there will be new

entrants coming and offering new kinds of

1404

01:31:46,315 --> 01:31:48,325

robots that are doing things differently.

1405

01:31:48,325 --> 01:31:49,065

I think why?

1406

01:31:49,065 --> 01:31:50,965

And also because, you know,

because the gains are huge.

1407

01:31:51,175 --> 01:31:54,135

So I'm sure there are sitting

tons of people around the world

1408

01:31:54,335 --> 01:31:55,425

trying to think about this.

1409

01:31:55,895 --> 01:31:58,395

so I think we will have

quite Great deal of dynamism.

1410

01:31:58,905 --> 01:32:05,345

so no, no really like strong need to

hardly regulate, like regulate, you

1411

01:32:05,345 --> 01:32:10,925

know, specifically with robo taxes or

so, or like universal basic income, which

1412

01:32:10,925 --> 01:32:14,850

is another kind of policy thing that I

don't believe in at all because I think

1413

01:32:15,190 --> 01:32:21,340

we won't afford a really fully fledged

universal basic income and it will create

1414

01:32:21,400 --> 01:32:26,730

tensions also because how to map that

with market incomes in, for those who have

1415

01:32:26,730 --> 01:32:29,050

jobs and experience productivity growth.

1416

01:32:29,320 --> 01:32:33,815

So we will, so as a system, or

like as a specific policy that

1417

01:32:33,815 --> 01:32:37,005

won't work, but we will still

need, of course, income insurance.

1418

01:32:37,205 --> 01:32:41,535

So displace workers, like with any

like trade reform, like opening

1419

01:32:41,535 --> 01:32:45,565

up a trade, we would have like

maybe fishermen losing their jobs

1420

01:32:45,575 --> 01:32:46,855

in richer countries or whatever.

1421

01:32:47,095 --> 01:32:50,775

Let's support them and then still

having the open markets generating

1422

01:32:51,065 --> 01:32:54,765

their goods for, for, for the

majority for, for everyone, so to say.

1423

01:32:55,225 --> 01:32:59,465

So I don't think, and also I think

tax policy or like that kind of

1424

01:32:59,465 --> 01:33:03,135

policy won't be, you know, maybe best

we would have, we would need some

1425

01:33:03,135 --> 01:33:05,105

regulation of like maybe data ownership.

1426

01:33:05,385 --> 01:33:07,875

there are like, we need

to learn and think hard.

1427

01:33:09,308 --> 01:33:11,518

But I'm, I'm, I'm quite positive actually.

1428

01:33:11,518 --> 01:33:15,838

I think, uh, also when we have more

and more robots, they think they

1429

01:33:15,838 --> 01:33:19,748

may produce more and more, their

marginal products will also go down.

1430

01:33:20,138 --> 01:33:25,298

So, so the, the kind of the, the,

the, their value, the value added to

1431

01:33:25,298 --> 01:33:27,088

the capital owners will also go down.

1432

01:33:27,098 --> 01:33:30,788

So it's not, it's not necessarily

so that capital income shares of

1433

01:33:30,798 --> 01:33:32,678

national income will increase a lot.

1434

01:33:33,761 --> 01:33:40,546

at least looking at last 2, 3, 4 decades

capital shares haven't increased a lot in

1435

01:33:40,546 --> 01:33:46,236

the in the world or in the OCD countries,

especially when you account for that some

1436

01:33:46,236 --> 01:33:48,046

of that capital income is depreciation.

1437

01:33:49,016 --> 01:33:50,175

So rusting, titillation.

1438

01:33:50,331 --> 01:33:52,011

Technological aging and so on.

1439

01:33:53,041 --> 01:33:57,391

So the capital needs to be replaced

taking that into account like

1440

01:33:57,401 --> 01:34:02,538

wage shares aren't really Falling

maybe with exception for the U.

1441

01:34:02,538 --> 01:34:02,868

S.

1442

01:34:03,478 --> 01:34:06,238

and especially for some industries,

but but but look at other in other

1443

01:34:06,708 --> 01:34:08,798

look at the data that's pretty much so.

1444

01:34:09,577 --> 01:34:16,728

Finally final point on China Yes, it's

it's it's interesting I think on going

1445

01:34:16,748 --> 01:34:18,668

back to the private property rights thing.

1446

01:34:18,678 --> 01:34:22,843

I think this is what is key for

long run you evolution, economic

1447

01:34:22,843 --> 01:34:25,513

development and growth and innovation.

1448

01:34:26,032 --> 01:34:28,073

And we don't have that fully in China.

1449

01:34:28,083 --> 01:34:29,623

We have commando economy.

1450

01:34:29,623 --> 01:34:31,683

We have some private

property rights, for sure.

1451

01:34:32,463 --> 01:34:38,323

But so far, China, you know, has just

imitated or like, they just, they start

1452

01:34:38,333 --> 01:34:41,553

this, they have stolen for decades.

1453

01:34:41,583 --> 01:34:44,433

And now they do things,

they do things very well.

1454

01:34:44,603 --> 01:34:49,223

But it's just not, and it's basically

what Stalin did in the 30s and 40s, you

1455

01:34:49,223 --> 01:34:55,208

know, massing Productive power, that made

people think that this is a solution.

1456

01:34:55,898 --> 01:34:58,438

Schumpeter at Harvard, he said

like, you know, okay, his book

1457

01:34:58,708 --> 01:35:02,608

from the 40s, Capitalism, Socialism

and Democracy was basically, this

1458

01:35:02,608 --> 01:35:04,558

is the final stage of capitalism.

1459

01:35:04,768 --> 01:35:09,528

Monopoly, production, and several

people around, also in the US, you

1460

01:35:09,528 --> 01:35:14,008

know, accepted this, that this is

like, Stalin has kind of shown us

1461

01:35:14,038 --> 01:35:15,278

that this is how it's going to be.

1462

01:35:15,577 --> 01:35:19,728

Some people now think that China shows

us, you know, okay, they, they're just

1463

01:35:19,728 --> 01:35:21,268

like so good and so, so efficient.

1464

01:35:22,128 --> 01:35:25,568

I think they may be able to do

that, for some years, maybe decades.

1465

01:35:26,068 --> 01:35:31,038

but I mean, every new thing

comes from, from below.

1466

01:35:31,282 --> 01:35:35,733

From, from people wanting to do things

that they love, but also that they

1467

01:35:35,763 --> 01:35:39,733

think that they can benefit from, that

requires these private property rights.

1468

01:35:40,383 --> 01:35:43,532

So that's my, my two cents on, on China.

1469

01:35:43,593 --> 01:35:44,253

Um,

1470

01:35:46,498 --> 01:35:48,237

Adam Butler: Okay, awesome.

1471

01:35:48,268 --> 01:35:52,758

Well, there's plenty of other directions

that we might go, which might prompt

1472

01:35:53,038 --> 01:35:57,688

a future conversation, Daniel, but,

we're sneaking up on an hour 45.

1473

01:35:57,708 --> 01:36:02,212

Richard, unless you've got a burning

question you want to finish with,

1474

01:36:02,768 --> 01:36:05,568

Richard Laterman: I think this is a

great place for us to put a pin in

1475

01:36:05,568 --> 01:36:11,577

the conversation and, we can have a

round two in the coming months, as the,

1476

01:36:11,608 --> 01:36:16,458

response to your work, becomes a little

bit clearer and, and policies start to

1477

01:36:16,458 --> 01:36:21,268

evolve, especially with the new, the new

leadership in the U S it'll be interesting

1478

01:36:21,298 --> 01:36:25,448

to see how that plays out in contrast to

some of the other, Western policymakers.

1479

01:36:25,448 --> 01:36:27,278

So thank you very much

for coming today, Daniel.

1480

01:36:27,318 --> 01:36:27,907

This was great.

1481

01:36:28,590 --> 01:36:29,309

Daniel Waldenström: thanks guys.

1482

01:36:29,320 --> 01:36:31,420

Awesome input and awesome questions.

1483

01:36:31,430 --> 01:36:33,020

It was a great pleasure speaking to you.

1484

01:36:33,833 --> 01:36:34,483

Adam Butler: Fantastic.

1485

01:36:34,813 --> 01:36:35,393

Thank you.

1486

01:36:35,487 --> 01:36:36,088

Richard Laterman: Till next time.

1487

01:36:36,253 --> 01:36:36,817

Adam Butler: do it again soon.