What the 1% Don't Want You to Know

welcome even in this age of hyperlinks in cyberspace nearly six centuries after Gutenberg devised his printing press it's still possible for a single book to shake the foundations rattle cliches up in Dogma unnerve ideologue and arm everyday people with the knowledge they need to fight back against the predatory powers that have robbed them of their birthright as citizens this is such a book capital in the 21st century by the French economist Thomas Piketty the book of the season too many to others the book of the decade reviewers have called it a bulldozer of a book Magisterial seminal definitive a watershed and 700 pages it's already a best-seller and there isn't a single scene of seduction not one celebrity interview not one picture just graph after graph fact on fact drawn from two centuries of data and embedded in prose that can suddenly explode like a supernova in the brain here's one of its extraordinary insights we are heading and to a future dominated by inherited wealth as capital concentrates in fewer and fewer hands giving the very rich ever greater power over politics government and society patrimonial capitalism is the name for it and it has potentially terrifying consequences for democracy for those who work for a living the level of inequality in the u.s. rights Piketty is probably higher than in any other society at any time in the past anywhere in the world over three decades between 1977 and 2007 60% of our national income went to the richest 1% of Americans no wonder this is the one book the 1% doesn't want the other 99% to read Paul Krugman has been writing extensively and generously about picking his book the Nobel prize-winning economist and New York Times columnist calls it a tour de force a magnificent sweeping meditation on inequality that will change both the we think about society and the way we do economics scholar author of many books and widely read columnist and blogger Paul Krugman has himself changed a lot of thinking on politics and economics welcome back i inequality has been on the table for a long time you've written extensively others have too I mean it's it's a familiar issue but what explains that this book has now become a phenomenon actually a lot of what we know about inequality actually comes from him because he's been a invisible presence behind a lot so when you talk about the 1% you're actually to a large extent reflecting his prior work but what he's really done now is he said even those of you who talk about the 1% you don't really get what's going on you are living in the past you're living the 80s you think that Gordon Gekko is the future and Gordon Gekko is a bad guy he's a predator but he's a self-made predator and right now what we're really talking about is we're talking about Gordon Gekko son or daughter we're talking about inherited wealth playing an ever-growing role so he's telling us that we are on the road not just to a highly unequal Society but to a society of an oligarchy a society of inherited wealth patrimonial capitalism and he does it with enormous amount of documentation and it's it's a revelation I mean even for someone like me it's a revelation I was gonna ask what did what this Paul Krugman had to learn from this this book even the title that first word in the title capital we stopped talking about capital even people like me stopped talking about capital cuz we thought it was all about human capital we thought it was all about earnings we thought that the wealthy were people who one way or another found a way to to make a lot of money and we knew that that wasn't always true we knew then in the Gilded Age or in the Belle Epoque in Europe which he prefers to talk about the that that high incomes were most the result of having lots and lots of assets but we sort of said well that's not the way things work anymore and he says oh yeah it turns out that you're wrong that it's true that right now a lot of high incomes in America are people who didn't start out all that rich but we're rapidly moving towards a state were inherited wealth dominates I didn't know that I really was I should have known it I should have thought about it but I didn't and so then here here comes this book with I mean it's it's it's it's beautiful it happens to be analytically beautiful if that makes any sense at all as you know I'm no economist but I found this book as I said in the opening just yeah very readable and the suddenly there'd be this moment of Epiphany yeah it's a real Eureka book you suddenly say oh this is not the world is not the way I saw it the world in fact has moved on a long way in the last 25 years and not in a direction you're gonna like because we are seeing not only great disparities and income and wealth but we're seeing them get entrenched we're seeing them become inequalities that will be transferred across the generations we are becoming very much the kind of society we imagine we're nothing like here's piketty's main point capital tends to produce real returns a four to five percent an economic growth is much slower what's the practical result of that what that means is that if you have a large fortune suppose that our family has a large fortune they can the inheritors of that large fortune can live very very well they can live extraordinary star living and still put a large fraction of that does the income from that fortune aside and the fortune will grow faster than the economy so that big dynastic fortunes tend to take an ever-growing share of total national wealth so once you when you have a situation where the returns on capital are pretty high and the growth rate of the economy is not that high you have a situation in which not only can people live well off inherited wealth but they can actually pass on to the next generation even more and even higher share so it's all in his terms are the rate of return on capital and gee the rate of growth the economy and and when you have a high are Logie economy which is what we now have then you're talking not you're talking about a situation in which dynasties come increasingly to dominate at the top of the economic spectrum then a tiny fraction of the population ends up very dominant what's the realistic impact of this own working people there's a direct impact which is that part of income is always going to go to labour although that seems to be a diminishing fraction but the part that comes from capital is gonna be in the hands of a very few people the other thing which i think is critically important he talks about more towards the end of the book is political economy that when you have that's what Teddy Roosevelt could have told you and did that when you have a few people who are so wealthy that they can effectively by the political system the political system is going to tend to serve their interests and and that is going to reinforce this shift of income and wealth towards the top do you agree with him that we are drifting toward oligarchy oh yeah I don't think that's even I I don't see that there's any question of it if you look at the certainly if you look at what we what we know already and we're we're learning more we know already about the concentration of income of wealth you can see that it is growing you can see that and you can actually see I spent a little while just sort of going through the Forbes 400 list and what you find is already that's an awful lot of inherited wealth in there it's no longer a list of self-made men and of the self-made men a lot of them are pretty elderly and they're those fortunes are going to be passed on to next generation so in the wheat the drift towards oligarchy is very visible both casual observation in the numbers I was taken with something you wrote the other day you said that in your opinion the real problem is not capital accumulation per se as much as it is quote remarkably high compensation and incomes now how does that differ from what you were just saying about wealth that passes to the next generation so right now high incomes are still primarily coming from people who've made a lot of money typically as corporate executives that has been the story so the big expansion of inequality in the United States since the 1970s has so far been driven by high salaries high bonuses no law so on that's where we are now but our image at the top is really a quarter century old it is about with the way things were when these great fortunes were just getting started when we're just seeing the explosion of inequality but we're well along the way towards one in which it is in fact an older thing where people accumulate capital pass it on to their heirs and you get these dynastic wealth so right now and this is where picky as interesting things to say but not this compelling vision about why America is so unequal right now but looking forward is he's telling us that the story is already changing and it's it's going to change more so we are going to probably unless something gets better we're gonna look back nostalgically on the early 21st century when you could still at least have the pretense that the wealthy actually earned their wealth and you know by by the year 2030 it'll all be inherited and at the same time we can't even manage to pay workers a minimum wage of $10.10 yeah and what's amazing I I thought actually one of the most depressing things although enlightening in his book is he talks about France in the the Belle Epoque the years before World War one which was ideologically as much a society committed to equality in principle as we are today but in practice was totally dominated by very wealthy families where it was impossible to even raise the possibility of seriously taxing great wealth it was very hard to do anything to improve the conditions of ordinary workers and it shows you how that can happen how you can have the society where the even though the ideology is democratic even though we claim that all men are equal in practice not a chance isn't that what's happening now and exactly exactly that's the point and what's funny is at that time Americans used to say oh we should never allow ourselves to become like old Europe and in fact we have but we have had the Rockefellers we've had the Carnegie's we've had the pews we've had big dynasties that transferred their wealth from one generation to another yes before World War one we had our dynastic families but they were not nearly as dominant as they were in Europe largely not because we didn't have high returns on capital but because we were growing so fast we were an immigrant nation of a fast growing nation so they hadn't been able to establish a lock and then after that we had a long period of high taxation of large estates of high taxation of capital income but now we're on our way back now we're on our way back towards something that looks much more like that kind of hierarchical Society Piketty makes the point at the very size of inherited for today it's so great that it practically makes them invisible quote wealth is so concentrated that a large segment of society is virtually unaware of its existence sure if you have conversations with people who are not in this business we're not economists they have no idea what it what real wealth means in America they think that having a million dollars makes you wealthy they think that they are having a salary of several hundred thousand dollars make you wealthy and well it's certainly true that's a vastly privileged condition compared with most people they sheer size of those big fortunes is so far outside our normal experience that it does become invisible you're never you're never going to meet these people you're never going to have any sense of what it is that they control and most people I think have no idea just how I'm trying to how far the the commanding Heights are from you and me you remind us often and you did so just the other day that the United States has a much more unequal distribution of income than other advanced countries and that much of this difference comes from government action such as if you look at well look at European country it's just about all of them they don't actually necessarily have higher taxes on very high incomes that's that's not so much the factor and they they have higher taxes overall which are used to pay for a lot of programs of aid so you have universal health care and we have sort of are stumbling our way towards something like that now but they have a lot of income support for people with low incomes they have lots of support for for young parents they have lots of basically a lot of redistribution which is a dirty word in US politics but in fact is essential to having a decent Society so that to be the average American is richer than the average person in France although that's mostly because we work longer hours but but the to be in the bottom of the the bottom fifth in France is a far far better thing than to be in the bottom fifth in the United States because of these government policies it's not that wages are especially high the bottom in France a little bit higher than in the United States was they have a high minimum wage but mostly you have government programs which make an enormous difference the the level of inequality of market income what people actually make is not that different among advanced countries the level of inequality of disposable income once the government has gotten through taxing and spending is much much higher in the u.s. than it is in most other advanced countries and that's because of the government why is as you said redistribution such a noxious word in our political system I think mostly it's just because there's a very effective apparatus that of TV and and print media and think tanks and so on who hammer against any suggestion of redistribution it's just they've managed to convince a lot of people that it is somehow unamerican which actually if you look at American history that's not at all true but they it's just been pushed very hard as I think also in the United States look we have to admit that race is always lurking under almost everything in American life and redistribution in the minds of a lot of people means taking it taking money from people like me and giving it to people who don't look like me and I think that is a big difference between us in Europe you do know that conservatives are regularly consistently saying that inequality doesn't matter that if the very rich were less rich it wouldn't really make a difference to people out there working for a living but of course what Europeans do which is to tax the rich and use it to provide benefits to other people lower down the scale that makes a big difference that can make an enormous difference in title take a few percent of national income take it away from that top one percent and directed towards the bottom 20% that's a tremendous gain in the quality of life at the bottom 20% so just just think about actually we have a health reform it's not the health reform we would have wanted but it's it but it's better than no reform it's financed in large part with smaller taxes on high incomes that's if you actually ask where the money's coming from a lot of is coming from an additional tax on investment income and initial tax on earned income for high earners that is going to give basically everybody in America the guarantee of being able to have essential basic health insurance at an affordable cost that's a huge change in people's lives which is being financed in large part by taking a little bit from the top so a little bit of robin hood ism does a lot you could do a lot more than that so no one is talking about just you know let's punish the rich for the sake of punishing them but the question is can you do redistribution in a way that makes this a better society and the answer is yes well at the end of his book Piketty is talking about the global tax on wealth do you think that's feasible well is it feasible politically you know if the United States were behind it lots of things would become possible if the United States were to support this then I think you could pretty much guarantee that the Europeans would enough Europeans would be willing to go along and while there would be some countries that would be a rogue countries that would want to serve as as havens for tax evasion that we would have a lot of leverage over them so it really it's not that the international global system makes this impossible it's really it's the US political system that makes it look impossible right now and then that can change but given the dysfunction of Congress given the fact that the Supreme Court has in effect decided to enable corporations and the rich to consolidate their hold on our political system do you have any hope of the kind of change that both Piketty and you would advocate I think you don't give up hope on these things we have look look at the American political tradition look at the one of the interesting things that Piketty says is that serious progressive taxation of high incomes and great wealth is an American invention we invented it and we invented it in the early twentieth century right at the peak of our Gilded Age and somehow we found it in ourselves to turn to to find political leaders people like Teddy Roosevelt who are willing to say this is a bad thing we do not want the society that is emerging here so I think things can change what if you ask you know are we going to get a wealth tax wealth tax before the 2016 election well no we're not might we get one by the 2024 election possibly do you grow something of the day that's hard to to forget you said we live in such an ugliness in America right now yeah this is one of the things that puzzles me actually about my own country which is it's one thing to have disparities of income and wealth and to have differing views about what we should be doing about it but there is a there is a level of harshness in our debate mostly coming from the people who are actually doing very well so you know we've had a parade of billionaires whining that the about about being you know the incredible injustice that people are actually criticizing them and then comparing anyone who criticizes them to to the Nazis you know that's been it's almost a tic that they have this is this is very strange and it's kind of scary because you know it's one thing if someone without a lot of power seems to be going off and into a rage I'm no good for no good reason but these are people who have a lot of influence because of the amount of money they control given what you've just said and given the fact that there's this ugliness what do you think it's going to take a mass uprising consistent demonstrations insurgent politics how we go to stem the tide that he says is taking us into oligarchy there's a negative in this positive take pinky argues seems to argue for much of the book that that we only escaped from the old oligarchy for a while thanks to really disastrous events to thanks to Wars and depressions which disrupted the system there that's an argument you can make on the other hand if you are read histories of the New Deal you know that it didn't come it didn't spring out of nowhere that we had a progressive movement and a lot of proto New Deal programs building for quite a long time that were there was in fact a move in America there was a increasing political philosophical readiness to take on inequality of wealth and power long before FDR moved into the White House and so I think there are better angels of our nature that there's is this ugliness and which can be frightening but there is also a redemptive streak in here and in other places and that you don't give up hope on this that they're given consistent argumentation given events and perhaps you know as people become more aware of what is actually going on then then there is a chance of changing things do we know that no but there's nothing in what we know now that says that you should give up hope of being able to change this even without catastrophe paul krugman thank you very much for joining me well thank you for having me on the evidence keeps mounting just this past Tuesday the 15th of April tax day the AF of l-cio reported that last year the chief executive officers of 350 top American corporations were paid 331 times more money than the average u.s. worker those executives made an average of eleven point seven million dollars compared to the average worker who earned thirty five thousand two hundred and thirty nine dollars as that analysis circulated on tax day The Economist Robert rice reminded us that in addition to getting the largest percent of total national income in nearly a century many and the one percent are paying a lower federal tax rate than a lot of people in the middle class you will no doubt remember that an obliging Congress of both parties allows high rollers of Finance the privilege of carried interest a tax rate below that of their secretaries and clerks and that state and local levels while the poorest 20% of Americans pay an average tax rate of over 11% the richest 1% of the country pays half that rate now neither nature nor nature's God threw up our tax codes that's the work of legislators politicians and it's one way they have as Chief Justice John Roberts might put it of expressing gratitude to their donors Oh mr. Adelson we so appreciate your generosity that we cut your estate taxes so you can give eight billion dollars as a tax repayment to your heirs even though down the road the public will have to put up 2.8 billion dollars to compensate for the loss in tax revenues all of which makes truly repugnant the argument heard so often some quarters of the rich that inequality doesn't matter of course it matters inequality is what has turned Washington into a protection racket for the 1% it buys all those goodies from government tax breaks tax havens allowing corporations and the rich to park their money in a no tax zone loopholes favors like care and interest and on and on and on listen there's a big study coming out in the fall from Martin gilens at Princeton and Benjamin page at Northwestern based on data collected between 1981 and 2002 their conclusion quote America's claims to being a Democratic Society are seriously threatened the preferences of the average American appear to have only a minuscule near zero statistically non significant impact upon public policy sad that it's come to this the drift toward oligarchy that Thomas Piketty describes in his formidable book has become a mad dash and it will overrun us and overwhelm us unless we stop it at our website billmoyers.com you can find out much more about picket e's book and the debate has sparked on both the left and right that's at billmoyers.com i'll see you there and I'll see you here next time don't wait a week to get more moyers visit billmoyers.com for exclusive blogs essays and video features

Channel: Moyers & Company

Views: 3,293,183

Rating: 4.70683 out of 5

Keywords: Paul Krugman, Bill Moyers, Thomas Piketty, Income Inequality, Oligarchy, Capital in the Twenty-First Century

Id: QzQYA9Qjsi0

Length: 24min 30sec (1470 seconds)

Published: Fri Apr 18 2014

Reddit Comments

[u/rizla7]

respect to mr. krugman for continually writing about and discussing this issue. also, that due to mr. moyers and mr. piketty.

nice to know i'm not alone in my thinking, as well.

1 thing i might add, missing from the discussion, was the enormous transfer of wealth over the past 30+ years from the rest of us, to the top 1%.