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Transcript
Rob Johnson:
Welcome to Economics and Beyond. I’m Rob Johnson, President of the Institute for New Economic Thinking. (singing). We have the good fortune today to be in conversation with a person who I think my young scholar should study closely, not just your work, but your courage and your breadth of curiosity, and the way in which you rigorously analyze real problems. I’m talking about Thomas Piketty, who is a professor of economics, at the Paris School of Economics, and author of many, many articles in all the top journals. He’s written a number of books, most powerfully, at least in my experience, was Capital in the twenty-First Century, Capital in Ideology. I’ve skimmed through A Time for Socialism, and his new book on the brief history of equality.
But I am stunned by, in preparing for this conversation, is in these difficult times, how positive, constructive and courageous this gentleman has been. I see this book as an example, like I said, for our young people to follow. But I also see a long history of work. When I was a graduate student I knew Doctor Anthony Atkinson, worked with him and the whole group, including Facundo Alvaredo, Gabriel Zucman, Emmanuel Saez and Doctor Piketty as they built the world top income database, and basically created the platform for rigorous analysis on the questions of inequality.
That’s a tremendous gift and it’s a gift that keeps on giving, as you’re going to find out in the next hour. Thomas, thanks for joining me, it’s a pleasure to have you here.
Thomas Piketty:
Thanks. Thanks for inviting me.
Rob Johnson:
So let’s talk, with that body of work, with the prominence of you and that whole constellation of people that you work with, what inspired you to create this particular message?
Thomas Piketty:
Well, it was important for me to try to write a short book on the history of equality, that’s one thing. My previous books, I don’t regret anything, but of course they are quite long, in particular Capital and Ideology was 50% longer than Capital in the Twenty-First Century, which was already very long. So after writing Capital and Ideology, I thought, okay, I have to stop somewhere. I cannot continue writing longer and longer books.
So objective number one was to wrote something more concise. And objective number two, and I guess the main novelty of the book, it’s not only that it’s shorter. It’s that by being shorter I clarified, I think the general message and the main lessons that I have learned from all this work. And I guess the main message that I’m trying to push in this new book called A Brief History of Equality, as opposed to inequality, is that I try to develop a optimistic perspective. I try to show, look, this can seem paradoxical because there’s lots of terrible things in the world today. And in some dimensions inequality has worsened in the recent decades.
But, if we take a very long perspective, in fact there’s been a long run movement around more equality, both more political equality, social equality and also economic equality to a large extent. This is a movement that has never been easy, that has never been natural in any meaningful sense. It has been grounded in political mobilization, social struggles. And most importantly, the constructive transformation of institution, there was a development of a new legal system, fiscal system, educational system, electoral rolls.
This is a movement that has not been there forever, it’s grounded in history, it’s not a long run trend that has been going on since neolithic times. It started, basically at the end of the 18th century with the French Revolution, the US Revolution to some extent.
And it starts in particular with the abolition of tax privileges of the aristocracy in the French context. It also starts with the first slave revolt in [inaudible 00:05:23] in 1791, which sets the beginning of the end of slave in colonial societies. And then, in the following two centuries, it has been continuing, in the 19th century with the final abolition of slavery, the development of the labor movement, the rise of male suffrage, universal male suffrage in the 20th century with the rise of universal female suffrage. Decolonization, war, civil right movement in the US, the rise of social security, the rise of progressive taxation.
And this is a movement that’s continuing today, of course with the Black lives matter movement, the me-too movement, and this long running quest for more social, political, economic equality, equality of status is still going on because we still I’ve in societies where there is enormous power of money, for instance in politics. So we are not back in the 18th century with the privileges of the aristocracy, but there are all sorts of new privileges around our democracy is still very, very imperfect and incomplete. Maybe one day in 50 years, 100 years, when we look at today’s period, where you can put whatever private money you want with no limit in the financing of political campaign in the influence or the media.
We have such a system of unequal political participation, unequal work. Maybe one day we look at this as something intermediate between 19th century or 18th century democracy, and more effective democracy. It is the same for other dimensions of inequality. Okay, we’ve seen the end of slavery, decolonization, civil right, but we still have racial discrimination, racial injustices within each country and at the international level.
So the general viewpoint in the book is, okay, there’s been a long run movement around more equality. This has been very successful in the long run, this has come more economic prosperity, in particular the rise to have more equal access to education has been absolutely central, both for the rise of more equality and more prosperity. We can and we should continue in this direction in the 21st century. This will take, again, big political mobilization, big political battles.
But we should not lose sight of the fact that this story is not deterministic, it’s nor frozen. So the enormous transformation in the political systems, the economical systems, the fiscal systems that have already happened over the past two centuries. It’s something, if you had told someone in 1900 or 1919 that there would be an enormous progressive taxation, a rise of social security in the following century, many people would have not believed it.
I think, when we look at the future, we have to take this long run perspective. So in my book, when I make proposal about what I call new form of democratic socialism, and participatory socialism, rich socialism, I’m not saying this is going to happen next week, right away. At the end of the day, I think the kind of perspective that I am proposing, the international economic stance that I am proposing is no different from the system we have today, than the system we have today is different from the system we had one century ago.
So I think it’s important to reopen the discussion about the kind of long run future we want, which doesn’t mean we will get there next week, but if we don’t even know where we want to go in 50 years or 100 years, we are certainly not going to get anywhere. The other side of the political spectrum, you have all this xenophobic, racist, identitarian retreat movement, which don’t hesitate to push for a very strong view, and I think very reactionary view of the future.
It’s very important that the progressive camp, so to speak, or at least people who are ready to stand for equality of all firms, between social classes, between genders, between races, are ready to take again this task of saying, “Look, this has worked in the past, we’ve made a lot of progress, we can, we should continue.” And looking at the historical record, enormous success in terms of very progressive taxation of income in the 20th century in the United States. We have to revisit this record in order to push an ambitious agenda for the future.
So that’s what I’m trying to contribute to in this optimistic book. Which I should, let me just conclude, this is a book of my own. Of course, I’m not the only one responsible for whatever views are being expressed. But, the collective work and in particula enormous project of historical and comparative data collection on which I rely and which I’m trained to give a short synthesis of this work in this new book. Also, this research work would never have been conducted without this incredible international research network. So there are all the great people, you have mentioned, [inaudible 00:11:11] Emmanuel Saez, Gabriel Zucman, but it’s much bigger than this. It’s over 100 researchers from all over the world, lots of institutions also.
I met a [inaudible 00:11:23] a number of years ago in the United Nation development program, European research council, lots of public and non-profit institutions have developed this little global public group where we’re trying to provide more transparency on income and wealth inequality. Because in the end we really believe that this is a democratic mobilization, democratic awareness. And the fact that most citizens can appropriate for themselves this kind of evidence. Economic data is too important to be left to economists and to experts. We want citizens to be able to appropriate this for themselves. And so we are trying to contribute to this with this little global public group, which is a world equality database, and this could never have been possible without so much support from so many people. And yeah, so this little book that I write is just one little output out of this much broader collective research agenda.
Rob Johnson:
Well, I would say, from my experience many people treat the economy like it’s some mechanical thing that doesn’t require software, to use an analogy. And the software of governance, of innovation, or thinking about how to handle externalities in public goods. Those are little building blocks in the back pages of our textbook. But you’re bringing all this light, and you’re also bringing to light, in the more recent books and interviews, that there’s a big difference between scientific analysis for the public good, and marketing for self-interest.
A lot of the information and a lot of the debates, I see you providing what I’ll call the north star of the public good to navigate toward. If no one does that, we don’t know where we’re going, we’re swamped in the marketing for self interest. And despondency rises, and what I might call despondency and resignation, the temptation towards authoritarian alternatives becomes stronger.
So I see what you’re doing is very purposeful and it’s very deep and it’s very credible. But I’m quite interested in what you might call the institutions that you think that this time, perhaps with climate on the horizon, having just experienced the pandemic. I just made a podcast and talked with the people, Max Lawson at Oxfam. They said the top 10 wealthiest people on earth doubled their net worth versus the pandemic, and didn’t pay any tax, well not a reasonable slice tax. Not of their wealth but of the increment in their wealth, could’ve largely paid for vaccination of everyone on the planet and saved trillions of dollars in fiscal stimulus that people used in COVID.
So, I see all of these dilemmas. Many people who are not economists, not trained formally like you or I, or many of our audience today, they smell a rat right now, but they just don’t know how to find the exterminator and get back to feeling like they’re on a healthy backyard. How do we organize the process? How do we create the nautical society that’s directed towards your north star? Especially in the realm of globalization with a nation state is not any longer… The treaty of Westphalia model doesn’t work in the era of nano seconds mobility of capital, people hiding their money offshore and all kids of other things. So we have to have almost like a global governance solution, that’s even before we talk about climate.
Thomas Piketty:
Yeah, no, these are big challenges. I think the democratization of economic knowledge is really, to me a big part of the solution. And there is so much more progress to be made in this direction. I’ve tried to contribute a little bit to that, but let’s be honest, the kind of very long books I’ve written, even though it’s sold a lot, millions of copies, I’m not sure this is really something everybody’s going to read.
So writing shorter books can contribute, but it goes much beyond this. I think for instance, the world inequality database today, it’s easier to use it when you’re a researcher or a scho;ar. There are lots of other ways to communicate knowledge, through video, through training sessions, through other means of communication which, modern communication, technology would allow us to do so much more and to [inaudible 00:16:42] we’ve done so little for now, partly because we were focused on the research, partly for lack of resources, partly because this takes time.
We are not going to stop there. With that long term commitment I really believe that a big part of our democratic problems today, and sometimes some of the disappointment with democracy has to do with the fact that economic knowledge and economic issues have been left to sometimes a very small group of experts with very conservative views. And getting back the citizens and also other social scientists from sociology, from history to go back to economic issue sand not leave these issues to smolder, self proclaimed experts, I think is very important.
Now, there’s also, you mentioned the nation state and the national limitation of our public conversation. I have been involved ion another project in recent years which is called the Manifesto for the Democratization of Europe. Which, we tried to develop, we got between 150 and 200 signatures, which is not huge, but it’s the equivalent of the population of [inaudible 00:18:10] after all, which have a veto on every tax decision in Europe, which is less than 1%. This is less than 0.1% of the population of Europe.
So in France and ancient regimes, the mobility was about 0.5 to 1% of the population, and they had a view to data poll, were on the tax registration until the revolution took it away from them. So today we live in a very different world, but we still have some deep institutional problems. So in the case of the European union, the fact that 0.1% of the population can veto on any possibility to have a tax policy for the other 99.9% is a problem.
So we have set up a institutional system which has lots of good ingredients into it, again, the federalist European and I am a federalist citizen of the world. So you might believe we need more European union, we need more agreements between the African union, the European union, we need to [inaudible 00:19:17] to develop again, new, more ambitious federalist approach to solve the problem of this.
So I am a deep federalist and internationalist, but we need to put international cooperation to the service of social justice, fiscal justice. In the manifesto for the democratization of Europe, what we say, basically is, okay, a group of countries, say the core Euro zone countries should be able and should decide on their own to create a common democratic assembly so that they can have common budget in terms of green investment, in terms of progressive tax on high wealth, high income citizens. And if other countries in the European union want to join, that’s perfectly fine. But, if they don’t want to join, they should not make it impossible for countries that want to move to a more equitable kind of political and economic system to do so.
Because if we continue with free trade, free capital flows without any tax coordination, without any coordination with carbon emission and social objectives and inequality objectives, then we should not be surprised that we have very big part of the lower income groups and lower and middle income groups who feel very aggressively about globalization and about European integration in the context of Europe.
This is what had led to Brexit, this is what had led, to some extent to Trumpism. I’m really trying hard on my own country, where there’s a tendency today in the European union to say, okay, Brexit, these crazy British nationalists, there’s nothing we could do to keep them with us, they were just crazy. But, in fact, when you look at who voted for Brexit, you have the same profiles as what we had in France when we had a referendum in 2005 about Europe. Upper income groups, upper education groups are very happy with European integration globalization, lower middle income groups are very negative.
You cannot just say, okay, they are nationalists, they are stupid, they don’t understand, we will explain better. I think this has to do with structural problems in the way we organize globalization and the fact that it benefits in a disproportionate manner the most mobile economic actors. In particular, we’ve created a very sophisticated legal system of free capital flows without any control, and without any way to make the different social groups contribute in relation to how much wealth and income they have accumulated.
So you create a system where, basically you can benefit from the public infrastructure of a country, from the public education system in a country in order to actually relate well. And then you can press on a button and transfer your assets in another jurisdiction and nothing has been planned to follow you and to make you contribute a proportion to how much you have benefited from the public infrastructure and how much you have been able to accumulate.
And then you explain the immobile classes, the rest of the population, you tell them, oh, that’s too bad, we don’t know where the high wealth individuals have gone, and we’re going to have tax you, the immobile people, because at least you are still there. At some point, this is the machinery to make the middle class and the lower middle class very skeptical about this entire organization which has not seemed natural. It is man made, it is a specific institutional set up, and the institution could be designed differently. International tolls that the labor have recently started, since the 2008 financial crisis, to talk about this and move in this direction.
We’ve had this agreement last year about the minimum tax rate and multinational corporation. But this is till far too limited, and in particular that example, the 15% minimum tax rate was far too small. Small and medium sized company’s and middle class tax payers paying very often a lot more than 15%, if you include income tax, social contribution, everything.
So if a multinational creating a subsidiary that can be benefiting persons, that won’t work. And in addition, probably the even bigger problem was the agreement last year, was that the countries in the south didn’t get anything. So it was basically a scheme where rich countries in the north, we’ll split between them some of the tax base that is currently location in tax havens in the north. And the south will get almost zero share of the new tax base, which to me is the biggest problem. This is what makes this kind of deal completely unsustainable, especially given the huge damages that countries in the south are going to suffer because of global warming, because of all the negative examples that is produced by the north.
But even without that, I mean this makes things even worse, but even without that, I think it’s important to realize that there will be no rich country, or rich firms, or rich industry. The global economy, without poor countries, the entire process of wealth accumulation since the beginning of the Industrial Revolution, did not happen, it happened through a global economic system based on global division of labor and global exploitation of natural resources and also of human resources, sometimes in a very brutal manner.
Without this system, there would be no rich country today. So I think today, of course nobody individually is responsible for all of this long colonial days, et cetera, but we are all responsible individually for accepting to… Deciding to not take this into account in our analogies of the world today. And to take a concrete example, I think when we talk about international tax reform, there should be, every country in the world should receive at least positive fraction of the total tax revenue coming from the largest, the most powerful economic actors in the world, multinationals, and high worth individuals.
And every country in the world should receive a fraction of this on the basis of their population. Even if it’s a small fraction of this total tax revenue, for very poor countries it will make a major difference, to be able to count on this resource. As opposed to a system where they have to beg year after year. The basic justification for doing that is simply that there should be a minimum equal right to development, to investment in education, healthcare from every citizen of the world.
When we were talking about the vaccine during the pandemic, we should have seen that everybody should have access to this minimal expenditure, but it’s more general than this. And if you add to this also damages that are related to global warming, of course this makes the case even more compelling. But even without that, it would still be, I think very important to move the discussion in this direction.
Rob Johnson:
In an earlier essay, you did with Daniel Steinmetz Jenkins, I believe it was at the nation. You talked about the dynamics, I’ll call it among elites, that there’s brahmin elite that is very intellectual. And then what they might have called merchant class. I’ve often thought, let’s say I was an undergraduate at MIT, went into electrical engineering. If I’d stayed in merchant class building in this digital age, and I thought today either I or my son or daughter had a great idea, I’d be afraid it couldn’t be realized because of the breakdown of all of our systems.
In other worlds, what I’m saying is the brahmin elite should be saying to these guys, an ounce of prevent is worth a pound of cure. You guys have great commercial ideas, but unless we do things like the adjustment assistance, when we talk about globalization, we can make everybody better off and nobody worse off. I grew up in Detroit, walk around Detroit or Cleveland, see if anybody believes that possibility.
Without transformational assistance there’s going to be a lot of resistance to energy transformation related to the danger of climate and global warming. So what I guess I’m saying is, I think you might be the best friend of a long term equity portfolio. And your own books have taught me that the time when the distribution of wealth gets flattened, less extreme, is the time of world wars and crisis. So if you can, like I say do the ounce of prevention, you don’t have to pay the pound of cure from the social collapse, and your good ideas can blossom.
Thomas Piketty:
Oh, sorry, Rob, I think I missed a sentence. You’re saying I would be the best friend of?
Rob Johnson:
Of the merchant class, aspiring merchant class, because by creating with your vision of these government structures something which you might call making social sustainability more likely, you’re allowing a blossoming and a vitality and an appreciation of innovation that will make them profitable. You’re not necessarily in this.
Thomas Piketty:
In the long run, you’re right.
Rob Johnson:
I’m not talking about on Wednesday night at the bar, that’s different.
Thomas Piketty:
Yeah.
Rob Johnson:
But if you have a pristine vision, and they probably don’t fear the collective social instability as much as I sense they should.
Thomas Piketty:
Yeah, no, you’re right. It’s always a problem. When you look back in time you always feel that the elite, in some cases, should have accepted the structural change before. But I was talking on the French revolution, of course experts you feel how did these people in the mobility, how could they imagine that they could get away with this system of tax privileges for basically 1% of the population. But, they were accustomed to an organization of the world where, if I’m trying to give them a chance and not just being selfish. They were selfish, of course, but if I’m trying to give them a chance about what kind of view of the world justified their views, conservatism.
Their view of the world, just like many elite today, is to say, “Okay, that’s all fine, you’re theory about social justice, tax justice is perfectly fine. But the only problem is here, if we start moving in this direction, we will never know where to stop.” So it will be chaos, sc. So we have to organize societies through strong principles. And the division, different function in society between the nobility players, the clergy class, the working class was the organizing principle.
Then it was replaced by another organizing principle which was the principle or property. So everybody should have access to property, but once you have property you should never question property rights. In the 19th century this was very strong, this was when we abolished slavery, slave owners were compensated for their loss of property, so there was no compensation for slaves, but there was a compensation for slave owners. In past France Haiti pay huge war tribute in effect between 1825 and the 1950s, so during almost one century and a half, in order to compensate slave owners for their loss of property.
Liberal thinking, so-called liberal thinkers, like Tocqueville in 1848 was a very strong supporter of compensation to slave owners. He didn’t want to hear about doing something for slaves, because he said, if you start questioning property rights, including the property rights of slave owners, where are you going to stop? Because what are you going to do with the slave owner who sold his slave five years ago and who now owns a building in Paris or Bordeaux financial portfolio on Paris? Are you also going to go after him?
And indeed, probably a fair abolition of slavery, should have involved compensation to slaves. Actually some people at the time, like [inaudible 00:33:53] French revolution really was in favor of compensation to slaves, but then you need to have some democratic deliberation and some democratic decision making about where you are going to stop in terms of redistribution of rights. And indeed this is a complicated process and it was a complication process back then, it is still a complicated process today. But I think we have no other choice than to first democratic deliberation, democratic decision making to arrive at some acceptable compromise about the right distribution of increment.
But, I guess one perpetual and classic argument by the elite, and also by some people who are trying to listen to the different arguments around is to say, “Okay, that’s all good and fine, but where is this going to stop? Isn’t there a risk that this ends up in complete chaos?” Look, it is a complicated discussion. In the end, my own view is that if you look at history, in particular the experience during the 20th century with very progressive taxation of income from, for instance in the United States. I think it was a big success, and I think that’s one reason to believe that we can do it again in a more ambitious scale, involving not only income redistribution, but also redistribution of wealth. Involving more international perspective and more global perspective on these issues.
So that’s the basis of my optimism, is to look at these successes in history. Now, is it simple to convince everyone of that? No, it’s not simple it will never be simple. So you’re right, in the long run, even the elite should realize that their own prosperity will not continue for very long without a different distribution.
But, these things are never solved with unanimity, at some point this is a balance of power. What I want to stress is that the balance of power is primarily intellectual, institutional and not simple just pure balance of power. It’s very important to think and think again about the set of institutions or the economic platform that we want to put in place. That’s what I’m trying to contribute to.
Rob Johnson:
You mentioned in one of the interviews something… Let me broaden up for a second. I see lots of work that, like my kindred spirits growing up in Detroit, are resentful or globalization. Some are resentful of automation and machine learning because the school systems haven’t built the ropes and ladder to allow people to transform from physical work to mental work adequately in many of these places.
But, I also see another side of this, and Branko Milanovic has been very illuminating in his work with [inaudible 00:37:18]. The narrowing of income and wealth inequality between the global north and the global south, particularly within China, has been quite extraordinary. So as somebody once said to me, it’s not clear that God was born in Pittsburgh or Detroit. Meaning there are things to care for here. And the other dimension which I find to be very, very tricky, and you brought this up and you talked about cultural diversity among the brahmin elite. A lot of the people, what I’ll call working class, particularly white people that I know in Michigan say the brahmin elite are the marketing men for this new globalized system of power of Wall Street and Silicon Valley. What they do is they understand that there’s 400 years of woundedness of people of color, that something like reparations is deserved.
But by appointing a handful of them to be in the 1% isn’t changing the system. In other words, they didn’t appoint Martin Luther King to come and upend militarism, racism and materialism. They view it as a cynical decoration on the part of the brahmin elite, and it doesn’t send people in the direction of the merchant class, it sends them in the direction, I think you called nativism. It become polarized and very ugly, because these people feel like those symbols of transformation which are deserved, are leaving them out. And that deepens their despair.
So I see so many of these things are quite, what I’ll call subtle, quite complex, and at some level you’re talking about, I think democracies where what you’ve got to be is called a human being, regardless, you’ve got to be treated equally, as though you have birth rights, not rights based on one piece or another, or a degree or education, or the color of your skin and all that. Especially with the history of woundedness, it’s a very, very tricky really to navigate when we’re in such a tumultuous time.
Thomas Piketty:
Yeah, it is tricky, and I think to some extent it’s also the price to pay for some of the collective success. So I think, again, like you said, in recent decades, if you look at the post 1980 evolution of the global structure of inequality. There’s been some negative evolution, but there’s also been some positive evolution at the international dimension. I think by and large poor countries have made progress, although not all of them. I think it deepened also the possibility to construct, to go into a process of state building and construction of state legitimacy. Which is is a much more complicated process than just free trade generalizing market competition.
If you don’t go through this complex process of state building in the different countries, you cannot benefit from market integration, you cannot benefit from anything. So depending on the country we look at, China, India, southern Africa, we get very different outcome of globalization, depending on how this process of state building are developed in different manners.
And, in the post 1980 period there’s also been some very positive evolution in terms of gender inequality, which is much less extreme than what it used to be, although it is still enormous. In terms of racial inequality, the thing is that we started from a situation in the sixties of seventies which was a situation of extreme racial inequality. A situation in fact where in many cases people from different races or from different ethnic or religious origin did not even meet. They met through a complete domination, in the context of colonial empires, through basically military relations.
But there was very little direct contact. We now live in societies in many parts of the world where people with different origins and grandparent or ancestors coming from a completely different part of the world now live in a single political community with, in principle equality of political rights, although this equality of political rights can be qualified and we’re still far from a really meaningful equality of political horizon, and ability to influence the process.
But at least in terms of formal rights, they live together under a principle of equality of rights. Which, as compared to the situation a few decades ago, it’s enormous progress. Still it created frustration, in particular among people who felt that their situation has deteriorated or did not improve as much as the rest of the population. And they feel they have been abandoned for the sake of making progress for other group of people. So the only solution is more equality, more democracy, more redistribution in all dimensions.
So I think the only way to make some of the [inaudible 00:43:15] today feel close to the kind nativist ideology you’re describing, and why poor voters in the US or in Europe, the only way to bring them back to the political process and constrictive political agenda is to propose much more ambitious program of redistribution of income, of wealth, educational expanditure, health expanditure which has been proposed so far.
I think in the end in many cases you have the feeling of being completely abandoned and left behind which has created this resentment. The good news, so to speak, is that if you look at the lower income voters both in the US or in Europe, they actually have very low rate of political participation, which is not good in itself, but which shows there is a demand, I think for something different. If these workers were very happy with the sort of nativist political parties or xenophobic platforms, you would see 90% participation rate. Which, in Europe in particular in the period of 1950 to 1980 the participation rate for lower income groups was very high, 80% just like for low income groups, they were voting for labor party in Britain, social democratic party in some cases, a combination of socialists communist party.
They were voting. If you look at the post 1980, post 1990 period, all the decline in participation rate has come from lower income groups, probably because they felt that the political choices that were offered to them were not very convincing. Including the xenophobic platforms that they have been offered, which some of them go for it because that’s the only option they think they have. But at the end of the day most just stay at home, they are not satisfied with either platform.
So the only possibility in the longer run is to change this. This will take a very long time, because this is itself a process that spans over several decades. But there’s no other solution in the long run. So when I hear sometimes democratic party leaders in the UK, or similar political leaders in Europe saying, “There’s no way we can bring them back. We’ve done everything we could, they just don’t understand final point.” Look, if you say that, how can you then convince other people or other parts of the world that you believe in electoral democracy? You have to be optimistic, otherwise you cannot even defame the very basis of electoral role institution, which are adopting correctly.
Rob Johnson:
Okay. Just one last question. Often people in Asia talk about who is going to lead the world in the next phase, 21st century Asia. China, US vying for leadership. And many people point to the United States, like [inaudible 00:46:55] and say, “Is it a plutocracy or a democracy why are there so many people in prison, and so forth?” But I recently read in the south China Morning Post a story about when your book, I think it was Capital and Ideology was planned to be released in China. They don’t want to show your research or data on how concentrated the distribution of income and wealth is there.
So all these people that come out of the Marxian or Oberlin schools of thought are now in countries, and I would add Russia to that, where the concerns you have about concentration of income and wealth may be as or more severe there than it is in the democratic west.
Thomas Piketty:
Yeah, definitely. So yeah, they wanted to cut every part about China, basically. This was ridiculous. I received this incredible letter from the publisher in China, saying, “Okay, this is the list of 30 or 40 pages.” Basically every page where I was talking about China. So the nice thing is that okay, I told them, “No way, you will just not publish my book.” And in the end there were a couple of articles in the international press, and in the end they came back to me, they came back to my French publisher, [inaudible 00:48:12] and they said, “Okay, we are not going to cut anything.” So of course we were very suspicious about their change in mind.
So we said, “Hold on, we are going to have a very well written contract where we want to be able to change the translation, so we hire people who will check the translation here in Paris.” It’s still in the process in fact, it’s not yet published. We’ll see, if there is a problem we will say no anyway. That was an interesting experience.
I think if the west want to resist the rise of China and the rise of autocratic countries in general, in particular China and Russia, I think western countries also have to put forward more ambitious egalitarian development model and economic systems than what they have been doing so far. If western countries simply say, “Okay, we are the ruler of law, we are the ruler of justice, we are the ruler of democracy and you should agree with us about everything because we are much more advanced than you are.” That’s not going to work, first because it’s not very nice to hear from the rest of the world. And next because this is not true.
There are some institutions that were developed in western countries that are working better than other institutions, but there are also so many problems with the functioning of our democracy. The funding of political campaigns is incredibly unequal, access to education is incredibly unequal, the international tax system, and of course the domestic tax system, but particularly the international tax system is not treatable.
So if the western countries don’t come with concrete proposals to changes, how are they going to be able to tell people in India, people in Brazil who today are happy to get cheap oil from Russia, or happy to get investment subsidies from China? If you continue with an economic system where we keep the west for us, we don’t want to share at all any of the new resources that we get from tax havens. How can we convince these countries who are very poor as compared to western countries, that they should not take this cheap oil from Russia, et cetera?
So all the discussion about the ruler of law, the ruler of democracy, and of course the fact that we need to resist to the military escalation by Russia, and possible new military escalation by China, after the terrible crush on democracy in Hong Kong which happened in the past two, three years, and what would be the next step in Taiwan. But if we want to be credible on these issues, I think we have at the same time to propose to the south and to poor countries much better deal, and in a way which is a much more respectful of state building, state legitimacy.
So typically we need automatic rights to get a certain fraction of certain tax resources in the past, rather than forcing countries to beg year after year for aid, which typically never comes. Remember some of the commitments that we have made at the end of 2015 at the Paris summit on global climate change. We are still not paying. So western countries during the conference committed to actually two small commitments to finance adaption find and mitigation fund that countries in the south could use in order to limit the consequences of global warming.
But two of the payments that were announced by rich countries at the time have still not been made in full. So the credibility of these countries is severely damaged by this. So if we want to be convincing and to confront the alternative model, starting with China, this will have to change.
Rob Johnson:
Okay. So thank you. Let’s turn to the questions. I have one quick one, and then a couple that I’ve paired together. The first one is, what is your view, Thomas, of universal basic income and its potential role in creating income security in a world of growing economic insecurity and its ability to reduce inequality and create a floor of economic rights as part of a citizens rights?
Thomas Piketty:
So, you know I like the form of universal basic income, or let’s call it the minimum income scheme that in fact we already have in a large number of European countries. It’s not sufficiently automatic, but it’s targeted at individuals who have a labor income below a certain level. I think it could be improved, it could be made automatic. But I think basically this is the right approach, because once I pass a certain income level I think we should have the ideal of wage status, with wage stability and labor rights for workers in corporations. I am very much in favor of having more voting rights for workers representative in the board of companies where they can negotiate better salaries, get better wages.
I am concerned that by giving basic income to absolutely everyone, even if people have a job, even if people have an income above a certain level, this could be a way to then deregulate the labor market and deconstruct the wage earner status. So I think minimum income is absolutely a central institution, that’s for sure. But, in any case, let me say this, it will never be very large. I am in favor of it, but basic income, depending on the proposal is going to be anywhere between 50%, 75% of a full time minimum wage.
Okay, that’s good, it’s important to have it so that nobody falls below this level, but that’s not going to be the magic bullet. So I think it has to come together with a very ambitious welfare set program, access to education, access of much egalitarian ways than what we have today.
It could come with other system like the job guarantee proposal that was pushed by a number of people, including Pavlina Tcherneva recently, where you can have access to a full time minimum wage job that is administered by local bodies, and municipalities, and various non-profit organizations. And this has to come also in my view in the long run with a minimum inheritance for all through redistribution of wealth, which is even more misused. Because in addition to the minimum income which would be maybe 50% or 75% of full time minimum wage, and job guarantee at the level of minimum wage.
If you are in addition to that minimum inheritance where I proposed everybody would have, say 120,000 euros or $150,000, around 60% of average worth per adult at age 25. This would make a big difference, because people worth millions maybe don’t make the difference between adding a zero or adding 100, or 200 Euros. But in fact it makes a huge difference. Remember the bottom 50% of the population in the US owns less than 1% of total wealth, they own basically nothing at all.
In Europe it would be three to 4%. Okay, that’s better than one or 2% in the US, but it’s ridiculously small. When you don’t own anything, or when you only have debt, negative wealth, you are in a very weak bargaining position, vis a vis your whole life, vis a vis society in general. Because this means you have to accept anything, you have to take any working condition, any job that you are being proposed, any wage because you need to pay for your rent, you need to pay for your family.
Whereas, if you have 100, 200, in addition to the basic income, to a job guarantee system, then you can start to make a change. You can start saying no to certain offers, you can start your own business, you can start projects which you would not dare starting otherwise. You can buy a little home so that you don’t need to pay your rent every month. This makes a more dynamic society, a more decentralized society where more people could have access to more opportunities and more bargaining power.
So this is just to say, okay, basic income is important, but it will always be relatively small in terms of amount, as compared to average income, average wealth in society. So this will never be the magic bullet, that’s important. We need to do it, but this has to come with a whole series of more ambitious reforms. To me this is really ground zero of social reform and wealth redistribution.
Rob Johnson:
Thank you. In a time when elites are becoming more powerful, not only economically but politically, do you think it’s possible to change the institutions that product inequality? What incentive do they have? The second one is, you talked about how money and politics is a corrupting factor, can you give us a comparative view across different countries? And finally, a question about the United States. While your data tells a story of long run progress towards equality, the period from 1980 to present has seen a retracement in America. Given the difficulty, near impossibility of amending the US constitution, where do you see hope?
Thomas Piketty:
Look, it’s true that sometimes when I look at the US, and in particular the fact that money has taken so much control of the political process and the situation in many ways so entrenched in… So many congressman, so-called Sam Graves, the congressman in Washington from the democratic party or from the republican. But in terms of the democratic party are so financed in a way by big money that they couldn’t use… Their fiscal views are so conservative.
Sometimes I feel like everyone, I feel that that’s not going to be easy to change. I tend to be more optimistic for Europe or other parts of the world sometimes than the US, but at the same time I should say we are always surprised by electoral mobilization political process in history. So something I want to remember is that in the United States, everyone there 10 years ago, back in 2014, after the publication of Capital in the Twenty-First Century I was having public debate with Elizabeth Warren in Boston. I remember at the time I was pushing for the progressing wealth tax, with tax rate up to five to 10% per year for a billionaire.
I remember Elizabeth Warren telling me, “Oh, this is too big, how can you think about something like that?” Then six years later, in 2020, Elizabeth Warren and Bernie Sanders were competing about who was going to propose the biggest wealth tax with a wealth tax rate of up to five to 10% per year.
And most importantly, there was majority approval, if you look at opinion polls, not only among democrats, but also among republicans about the idea for a billionaire tax. We should remember that every country has a complicated and ambitious relation with equality, including of course the United States, which invested very progressive taxation at the beginning of the 20th century.
And I think even today the large fraction of the population feel that this is necessary to renew this kind of policy. Also, let’s remember that Elizabeth Warren and Bernie Sanders got almost half other the vote, and actually much more than half of the vote, if you look at voters in the primary below 40 in age. So with a different candidate, with maybe someone younger, maybe someone whose more diverse, original, I don’t know. Things could change. So I am not impressed by people who know in advance what’s going to happen or what’s not going to happen.
I guess the best way to contribute whenever we are about this process, I think is to contribute to this democratization of economic knowledge and economic conversations that I was talking about at the beginning, which to me is really a key condition for transformation of power, relation in general. And then whatever will happen will happen. And we cannot predict everything but we have to be ready to contribute to this collective process and to this process of democratic change and deliberation.
Rob Johnson:
Okay. So we should close here. I always use some kind of artistic or music parable that comes to my mind as I’m listening to you talk. And I’ve often thought today of a song called Woman of Heart and Mind by Joni Mitchell because I think you are an economist of heart and mind. But the one that really comes through to me is by a man named Todd Rundgren, it’s called I Saw the Light. I Saw the Light. It was late last light, I was feeling something wasn’t right. There was not another soul in sight, only you. So we walked along, though I knew there was something wrong, and a feeling hit me very strong about you. And you gazed up at me and the answer was plain to see, because I saw the light in your eyes.
I think that you should tell your children that we did a lot, that my children are going to hear about this discussion on the day when you win the Nobel prize in economics. Because I’m proud to have met you. You are shining a light on where we have to go. You are our navigator in this profession. You are a leader, almost without compare, other than your other members of your inner circle. And I want to thank you for being here today, but more importantly, the work you’re doing for your children and my children and everybody with the courage that you demonstrate.
Thomas Piketty:
Well, thanks a lot Rob, this is very moving. Well, thanks a lot for this conversation. Sorry that I have to go, but I hopefully can talk again.
Rob Johnson:
Yes. There’s a long, long list of questions. You’ll see the enthusiasm, because we’ll print that out and send it to you.
Thomas Piketty:
Okay.
Rob Johnson:
So you can reflect on the energy that you generated today.
Thomas Piketty:
Thanks a lot, and sorry that I have to go.
Rob Johnson:
No problem.
Thomas Piketty:
Thanks a lot for everything.
Rob Johnson:
Thank you.
Thomas Piketty:
Yeah, bye-bye.
Rob Johnson:
Bye-bye. And check out more from the Institute for New Economic Thinking at ineteconomics.org.
