293. A Nobel Prize winning view on wealth inequality
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Why are some countries richer than others?
Donald Trump put his name on the Kennedy Center. So it's the Kennedy, Trump and Kennedy Center or vice versa. And a court just ruled that he had to take his name down. So they took it down as far as anyone can see, but they put a big tarpaulin over it so you can't see that it's been taken down. Historically in the US, there have been some big confrontations over power. The system had become too slanted in favor of oligarchs, people who got their money from from from business and put that into politics and made themselves into leading political figures. So I would worry globally, Robert, about these US giants becoming so powerful and outrunning everyone except maybe the Chinese. Have we ever seen anything quite so powerful, quite so global and so adept at taking value from other places?
I don't think we have. I think we're in a new era now.
Do you think then wealth taxes, for example, are a good idea? Like how do we redistribute wealth more fairly?
So I think wealth taxes will be part of it, Steph. So the fact of the matter is that if you're sufficiently rich, you don't pay much tax.
Support for this episode comes from Octopus Energy and the founder and CEO, Greg Jackson, is with us now. So, Greg, talk to me about Kraken. What is it and why is it spinning off from Octopus Energy?
When we built Octopus, we also built a software platform, like an operating system, like iOS or Android on your phone, to enable energy companies, utilities... starting with Octopus, but frankly, anyone in the world, to be much more efficient, to use vast amounts of data, to be able to become more innovative and to serve their customers better. That piece of software is cracking. We've used it not only for Octopus, but companies in the UK like EDF and Eon have used it to improve their business too. But you know what? It turns out over time, companies realized that they were licensing from a competitor And so we've had to spin it off so it can reach its full potential.
Yeah, makes sense, Craig. Thank you. Right, we're going to go to the episode.
Hello and welcome to The Rest Is Money with me, Robert Paston.
And me, Steph McGovern.
How do historical institutions impact wealth inequality?
Now, what we want to talk about today is why, when ideas and money and people can flow freely around the world, are we not all rich? Well, with us today, we've got the guy who got a Nobel Prize in economics for answering that question. And when it comes to economists, CVs don't get much better than Simon Johnson's. He's a professor of entrepreneurship at MIT. He's a former chief economist at the International Monetary Fund. He's currently advising the UK government on AI. And on top of all of that... He is from Sheffield. He's a northerner. And so Simon is someone who you and I, Robert, have followed his work for many years. So we were kind of desperate to get him on to chat about it all.
Yeah. Well, obviously, I love it when you make common cause with another northerner, even though traditionally there's not been that much love lost between Middlesbrough and Sheffield. But anyway. I guess any alliance against a terrible Londoner like me is to be welcome for you. Listen, he is going to answer, we hope, one of the big questions we constantly talk about, why some countries perform better than others. And this is one of two gripping conversations that we're having.
So here's our interview with Simon Johnson. Simon, it's an absolute treat to have you on the podcast. We've got loads to ask you about. The thing I'd like to start with is your fascinating research, which led to you being a recipient of the Nobel Prize in Economics in 2024. And this work around looking at how the formation of institutions in history impacted the prosperity of of the countries, all depending on whether these institutions were essentially any good or not. And then kind of what that means about where we are now. I mean, it's totally fascinating. So can you just, first of all, give us that, give us a flavour of the research you did and what you found from it?
First of all, Steph, that's a great summary of the research right there.
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Chapters
8 chapters
1
Why are some countries richer than others?
0:01–2:11
2
How do historical institutions impact wealth inequality?
2:11–4:26
3
What role did colonization play in economic disparities?
4:26–7:11
4
How do extractive institutions affect local economies?
7:11–10:13
5
What is the relationship between democracy and prosperity?
10:13–12:39
6
Can wealth taxes help redistribute wealth more fairly?
12:39–15:15
7
What challenges do multinational corporations pose to local economies?
15:15–17:58
8
How can countries adapt to economic shifts caused by AI?
17:58–35:20
Speakers
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