Thomas Piketty on Inequality, Trump, Wealth Redistribution

French political economist Thomas Petty's last book capital in the 21st century wasn't just a publishing phenomenon it's drew the world's attention to the problem of growing inequality in his latest work the 1200 page long capital and ideology he proposes a solution in a word expropriation he joins us now is that true that's an interesting summary I don't know much you've read of it but you know it's a very readable book nice to read book easy to realize I can I just show everybody have I it's it's a big book but you know when you think about it there are so many things that we do every day that is not so useful you know I think you know reading books and this kind of book that is useful and I think people then can draw different conclusion this is first a book about the history of inequality in a very large set of society my previous book was very much on Western Europe North America this one talks a lot about the evolution of inequality in India in Brazil in Latin America in China and so it takes a much more global perspective which i think is necessary if we want to understand the challenges of today it is a much more political book it is it taught it I got we talked about expropriation it does basically talk about removing wealth from the rich and delivering it to the poor via not to the to the poorer parts of society via kind of giving the money at 25 by providing aid a kind of minimum wages around 60 percent of the average I this is this is a big wealth transference you're talking about you're talking about taking a lot of money away from the rich and distributing it's the rest of society okay cool I'm not going to expropriate you okay this is a book telling the story of our economic prosperity during the 20th century came from a huge reduction of inequality so if you look at the past century you know what we've seen is an enormous reduction of inequality that was achieved through education huge public investment in education that were achieved through progressive taxation and indeed I revisit you know the historical experience whereby in the u.s. starting in the 1920s and nine Serkis with Roosevelt in 1980 and Reagan so from 1930 to 1980 you know the top income tax rate in the US was an average 82 percent and believe it or not but this did not destroy American capitalism you know otherwise we would have noticed it and what I do in this book is to try to bring a lot of historical evidence showing that in fact it worked pretty well both to reduce inequality but also to invest in public infrastructure in education which delivered in the end more economic prosperity and you know there was the discourse in the 1980s saying well you know by Reagan saying we are gonna reduce top tax rate and this is going to stimulate more innovation more growth you know this could have been right but certain years later what we've seen is a growth rate in the US have been divided by two you know in those 50 years after the reagan reagan term and today you know you have lots of people you know in the middle class and the lower socioeconomic groups in the u.s. in the UK we feel that globalization has not been working very well for them and now they turn to nativist solution you know Trump breaks it basically building a wall with Mexican workers China's the rest of the world and this is very frightening to me because this is not going to solve the problem but if you want to understand why we are there today you have to take seriously the fact that you know rising inequality since the 1980s and no good growth performance as you know we did not work and so you have to to think again you know what work better in previous period of time and I think you know public investments in education and progressive taxation of income and wealth is part of what worked now I you know I don't ask you to agree with me about everything but just to have a look at the hook and historical evidence so that you know you can make your own opinion and that's all I'm asking for absolutely and I might just one person sex procreation might be another person's redistribution for example mr. McKenna can I ask you a question about the president's trade policies because he might actually say that he is involved in this trade war with China in order to redistribute wealth from the Chinese labor back to the u.s. labor is that an outcome well you know I think if you wanted to redistribute you should first you know disclose its owner income tax return explain how you know you will stop paying your more tax you know this is a president who wanted to repeal the tax on inheritance you know the estate tax so you know I don't think this kind of policy is going to reduce inequality so I know you know Donald Trump is not too much interested in history and historical evidence and I'm not too optimistic about him reading this book but I think it's important that all of us know try to take some distance with you know the current political debate and accept to look at you know what worked over history try tax to me is not really the right way to to to reduce inequality I believe more in income tax well it's tax and most importantly investment in education public infrastructure you know you cannot get prosperity just out of a few billionaire or few top universities that are doing very well in the in the United States indeed you need you know much more inclusive growth and investment if you want to true to rebound you and to have you know long-run sustainability of US economic growth and and world economy grows more generally so in the race for the Democratic nomination we have basically two tracks of people which you know would broadly be considered sort of more centrist and more left but to the rest of the world those left is Social Democratic and other candidates may not even be considered that radical obviously there are similarities between certain of the contenders but if you look at Iowa and the Iowa caucuses you see that Bernie Sanders and P Budaj were neck-and-neck what does that suggest about the u.s. voter and whether they're voting their own interests well there's clearly a lot of excitation among among us voters but it's very striking to see that you know with the vote for Sanders the vote for Warren you have almost you know almost half of the electorate you know was been supporting a program of redistribution you know with the proposal to create a federal tax on millionaire in the US and and net wealth above a 50 million dollar in the US you have a proposal to increase the minimum wage to invest in public university you did not have this kind of proposal you know and Clinton or even four years ago I I remember I had a public meeting in Boston with Elizabeth Warren and at the time you know the progressive wells tax was something that she was not explicitly proposing and neither of Sanders was proposing this so what what I think this shows is that you know this debate are are changing I think partly as a response to the perception that growing inequality needs some response so again you have to change you cannot continue business as usual you have to change the way you organize mobilization there's one possibility which is to control the movement of people to control immigration basically this is the trend way or the brexit way if you want to build a wall and there is the other solution which is to control capital a little bit more to control the circulation of investment and to ask in return for circulation of capital and investment you know some more equitable tax system and I think this is by and large a better way not only to curb the rise of inequality but also if we think of you know the challenge of climate change and and you know the big shock that we're gonna have in the future as climate change shows its devastating effects more and more you know we'll need international solution and it's sort of rise to nationalist retreat and identity politics that Trump Boris Johnson or you know Modi in India also now in Brazil a property that's not going to solve the big challenge that we have to solve so you know I'm trying in this book to promote a more international solution to the problem but you know at the same time you you have to change you the way globalization is organized you can just know you cannot just continue you know business as usual and wait for the following crises the following break seeds for the wing shock that that will come from a very unequal globalization how do you maintain property rights if we are in a situation where we are looking at wealth taxes that go quite a long way how do you would you expect though they asked quite a lot of asset deterioration in terms of pricing once you start to go down this road do you think asset prices what presumably they would fall quite sharply and ultimately how do you maintain property rights if you are going down that road and a long way down that road well this is what we've done during a long period of the 20th century you know we had very progressive tax system up to 80 90 percent and very high income or very I inherited wealth in particular in the United States but also in the number of European countries and you know the property rights system was functioning perfectly well and the economy if anything was growing at the eye of speed than anything we've had since the 1980s so so this can work you know the problem is how you give access to more people to education to property so in my book I talk about you know how you can create a right to inner returns to all you know right now as a bottom fifty percent of the population in there it's zero zero zero dollar you know very little you know I show that by using you know progressive tax and inheritance and wealth you put finance you know inheritance for all of 120 thousand euros at the age of 25 now this is not complete equality you know people were about to receive zero will now receive one hundred twenty thousand euros people were about to receive 1 million who still receive six hundred twenty thousand so it is not complete equality is still a large inequality between two kids and rich kids but you know I think all all children can have economic projects to create companies or to bury their home and and this is one way to change the distribution of bargaining power in society and the end these benefits to the overall growth and dynamism that you have in society because we live in in you know the most educated society we've ever seen and and we need a very broad participation to the economy and and for this you know access to property together access to education is either absolutely from the mountain just because you're not talking about big government here are you you're talking about a government doesn't hold no no this is this is redistribution to the population to the population absurd rather than government's absolutely absolutely you know for if you want to administer an education system or public health system you may need the government of course but this needs to be well organized with you know proper the centralization of decision but as far as wealth and property is concerned no I you know I don't want the government to step in except for public infrastructure but most of the wealth has to be private but it has to be more equally distributed and and you want again I want everybody to access private property and I you know I think this is what we need to get a more vibrant economy you know the idea that because someone has made a fortune at the age of thirty this someone should keep the entire power at age 50 70 90 and have all voting decision rights in a company of tens of thousands or hundreds of a particular well no I just think you know we live in a world where you know many people have lots of ideas and you don't want to concentrate economic decision-making power just in a small number of godlike billionaire which you know of course are nice and great people but there are lots of nice and good people out there and and you need you know circulation of power and property if you want to get the economy going mr. Bukhari does society or any society have to choose though between several of what it wants several of the things that it would like so good conditions for its laborers and good GDP growth and sustainability and add Ephesus that's not crippling can a society have all of those things well to some extent yes you know we are not talking I'm not talking about having complete equality but I think with the level of inequality we have today we can have both a reduction of inequality and more rows I think it's also important if we want to have sustainable growth to change the way we measure up growth so in the book I tried to use national income results and GDP for instance as an indicator of progress the big difference is you know national income is equal to GDP minus capital income going abroad but also - conception of fixed capital including natural resources so if you take 100 billion euros in oil reserves from the ground and put it on the ground you know you get 100 million euro in GDP but you get zero euro in national income because you've just depleted the stock of resources that you already had and if in addition when you burn this are you know you increase temperature on earth and make life and Mirabal if you properly take into account the price of this cooperation you actually have negative national income results and positive GDP so depending on how you measure of growth and our you know economic decisions and political decisions are taken on the basis of these indicators you can have a completely different evaluation of what we do so we we have to take seriously these these questions of indicator and and looking at the distribution also of national income and not only at averages and aggregate

Channel: Bloomberg Television

Views: 20,722

Keywords: Bloomberg

Id: 9lySKu9MiOg

Length: 14min 41sec (881 seconds)

Published: Fri Feb 07 2020