What the 1% Don't Want You to Know

welcome even in this age of hyperlinks in cyberspace, almost six centuries after Gutenberg devised his printing press, it is still possible for a single book to shake the foundations, shake the clichés in Dogma, unsettle the ideologue and provide the common people with

know

ledge What do you need to fight against the predatory powers that have stripped you of your innate right as citizens? This is a capital book in the 21st century by French economist Thomas Piketty, the book of the season, too many for others, the book of the decade, critics have called it a book excavator Definitive seminal Magisterial a milestone and 700 pages it's already a best-seller and there is not a single seduction scene nor a celebrity interview nor an image just graph after graph fact after fact extracted from two centuries of data and embedded in prose that can suddenly explode like a supernova in the brain here is one of his extraordinary ideas as we head towards a future dominated by inherited wealth as capital is concentrated in fewer and fewer hands giving to the very rich increasing power over politics, government and society patrimonial capitalism is the name for it and it has potentially frightening consequences for democracy for those who work for a living, the level of inequality in the US rights Piketty is probably higher than in any other society at any time in the past anywhere in the world for three decades between 1977 and 2007 60% of our national income went to the richest 1% of Americans no wonder this is the the only book 1% doesn't

want

the other 99% to read Paul Krugman has been writing extensively and generously about his book choice.

The Nobel Prize-winning economist and New York Times columnist calls it a tour de force, a magnificent radical meditation on inequality that will change them both. the one we think about society and the way we do it economist author of many books and widely read columnist and blogger Paul Krugman has changed a lot of thinking about politics and economics welcome back i inequality has been on the table for a long time you 'I have written extensively, others have too. I mean, it's a familiar theme, but which explains why this book has now become a phenomenon. In reality, a lot of

what

we

know

about inequality comes from him because he has been an invisible presence behind so many things. about the 1% you're actually very much reflecting on his previous work, but

what

he's really done now is he said that even those of you who talk about the 1% don't really understand what's going on, you're living in the past. you're living in the '80s, you think 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 Gordon Gekko's son. o daughter, we are talking about inherited wealth playing an increasing role, so it is telling us that we are on the path not only towards a highly unequal society but towards a society of oligarchy, a society of inherited wealth, patrimonial capitalism , and he does it. with a huge amount of documentation and it's a revelation, I mean, even for someone like me it's a revelation.

I was going to ask what did Paul Krugman have to learn from 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 because we thought it was all about human capital, We thought it was all about profit, we thought the rich were people who in one way or another found a way to make a lot of money and we knew that wasn't always true, we knew that back then in the Gilded Age or the Belle Epoque in Europe, which he prefers to talk about, that high incomes were primarily the result of having lots of assets, but we kind of said, well.

That's not how things work anymore and he says oh yeah, turns out you're wrong, it's true that right now a lot of high-income people in America are people who didn't start out that rich, but we're moving quickly. towards a state where inherited wealth dominates I didn't know it really was I should have known I should have thought about it but I didn't and then here comes this book with I mean, it's, it's, it's beautiful, it happens to be analytically beautiful if that makes any sense. , as you know, I'm not an economist, but I found this book, as I said at the beginning, yes, very readable and suddenly there would be this Epiphany moment, yes, it's a real Eureka. book you suddenly say oh, this is not the world, this is not the way I saw it, the world has actually come a long way in the last 25 years and not in a direction that you would like because not only are we seeing huge disparities and the income and wealth, but we are seeing them take hold, we are seeing them become inequalities that will be transferred across generations, we are becoming the kind of society we imagine, we are nothing like Piketty's main point that capital tends to produce. real returns of four to five percent economic growth is much slower what is the practical result of that what that means is that if you have a great fortune let's say our family has a great fortune they can the heirs of that great fortune can live very well Well, they can live an extraordinary star life and still set aside a large fraction of the income from that fortune and the fortune will grow faster than the economy, so the great dynastic fortunes tend to take a cut every of the total national wealth, so once you find yourself in a situation where the returns to capital are quite high and the growth rate of the economy is not that high, you have a situation where people Not only can they live well off inherited wealth but they can also pass it on to the next generation. an even bigger and even bigger share, so everything is on their terms: the rate of return on capital and the growth rate of the economy, and when you have a high logie economy, which is what we have now, then you are not talking about you.

We're talking about a situation where dynasties come to dominate more and more at the top of the economic spectrum, so a small fraction of the population ends up being very dominant. What is the realistic impact of these working people themselves? There is a direct impact that is that part of the income. will always go to work, although it seems to be a decreasing fraction, but the part that comes from capital will be in the hands of very few people. The other thing, which I think is critically important, that he talks about more towards the end of the book is political economy, when you have that's what Teddy Roosevelt could have said to you and done to you, when you have a few people who are that rich that they can effectively use the political system, the political system will tend to serve their interests and that will reinforce this shift of income and wealth towards the top.

Do you agree with him that we are heading towards oligarchy? Oh yeah, I don't think so. I don't see that there's any doubt about that if you look at Certainly, if you look at what we already know and we're learning more, we already know about the income concentration of wealth, you can see that it's growing, you can see that and, in fact, You can see I spent a moment just looking at the Forbes 400 list and what I found is that there's already a tremendous amount of inherited wealth there, it's no longer a list of self-made men and men who made themselves. themselves, many of them are quite old. and those fortunes are going to pass on to the next generation, so in wheat the tendency towards oligarchy is very visible, both by casual observation in the numbers.

I was surprised by something you wrote the other day, you said that, in your opinion, the real problem is not so much capital accumulation per se as it is citing remarkably high compensation and income. Now, how is that different from what you just said about wealth passing to the next generation? So right now, high incomes still come primarily from people who have made a lot of money typically as corporate executives, that's been the story, so the great expansion of inequality in the United States from the 1970s to now. It's been driven by high salaries, high bonuses, no laws, so that's where we are now, except our image. at the top is actually a quarter of a century old, it's about how things were when these big fortunes were just starting out, when we're just seeing the explosion of inequality, but we're on the way to a situation where it's in fact , it's an older thing where people accumulate capital and pass it on to their heirs and you get this dynastic wealth, so right now and this is where there are interesting things to say, but not this compelling view on why America is so uneven at the moment, but looking forward is telling us that history is already changing and is going to change more, so probably, unless something improves, we will look back with nostalgia, to the beginning of the 21st century, when we still you could at least have the pretense that the rich actually earned their wealth and you know that by the year 2030 everything will be inherited and at the same time we won't even be able to pay workers a minimum wage of $10.10, yes, and it which is surprising, I thought that's actually one of the most depressing things. although it is illuminating in his book, he talks about France in the Belle Époque, the years before the First World War, which was ideologically a society as committed to equality in principle as we are today, but in practice it was totally dominated by families very rich where it was. impossible to even consider the possibility of seriously taxing the great wealth, it was very difficult to do something to improve the conditions of ordinary workers and that shows how that can happen, how you can have a society in which, although the ideology is democratic, although we Claiming that all men are equal in practice is not a coincidence, isn't that what is happening now and that is exactly the point and the funny thing is that at that time Americans used to say oh we should never allow us to become like old Europe and, in fact, we have had the Rockefellers, we have had the Carnegies, we have had the banks, we have had great dynasties that transferred their wealth from one generation to another, yes, before the First World War we had our dynastic families, but they were not as dominant in Europe, largely not because we did not have high returns on capital, but because we were growing so fast that we were a nation of immigrants from a fast-growing nation, so there were no able to set a lock and then after that.

We had a long period of high taxes on large estates, high taxes on capital income, but now we're on the way back, we're on the way back to something that looks much more like that kind of hierarchical society. Piketty points out the very size of what is inherited today is so large that it practically makes them invisible. Wealth is so concentrated that a large segment of society is practically unaware of its existence. Surely if you have conversations with people who are not in this business, we are. They are not economists, they have no idea what real wealth means in America.

They believe that having a million dollars makes you rich. They think that having a salary of several hundred thousand dollars makes you rich. And well, it is true that it is a very privileged condition. Compared to most people, the size of those vast fortunes is so far outside our normal experience that it becomes invisible. You will never meet these people. You'll never have any idea what that is. they control and I think most people have no idea how I am trying to find out how far the Higher Command is from you and me. He reminds us often, and he did 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, for example, if you look closely at European countries, almost all of them actually do not necessarily have higher taxes on very high incomes, that is not So. factor a lot and they have higher taxes overall that are used to pay for a lot of relief programs, so you have universal healthcare and we're stumbling towards something like that now, but they have a lot of income support. for people with low incomes they have a lot of support for young parents they have basically a lot of redistribution, which is a bad word in American politics, but in fact it is essential to have a decent society so that the average American will be richer. than the average person in France, although that is mainly because we work longer hours, but being in the last fifth place in France is much better than being in the last fifth place in the United States because of these governments. policies is not that salaries are especially high (in France, a little higher than in the United States, they have a high minimum wage), but above all there are programsgovernments that make a huge difference in the level of market income inequality with what people actually Not so different among advanced countries: the level of disposable income inequality once the government has surpassed taxation and spending It is much higher in the United States. than in most other advanced countries and that is because of the government, why, as you said, is redistribution such a harmful word in our political system?

I think it is mainly because there is a very effective apparatus which is television, print media, think tanks and So who opposes any suggestion of redistribution? They've just managed to convince a lot of people that it's somehow un-American, which actually, if you look at American history, that's not entirely true, but I think a lot of pressure has been put on them. Also in the United States, we have to admit that race is always lurking in almost everything in American life and redistribution in many people's minds means taking money from people like me and giving it to people who don't look like me and I think There is a big difference between us in Europe.

You know, conservatives consistently say that inequality doesn't matter and that if the very rich were less rich, it wouldn't really make any difference to people who work for a living. but of course what the Europeans do is they tax the rich and use them to provide benefits to other people who are lower down the scale, that makes a huge difference, it can make a huge difference in titles, take away a small percentage of the national income, take away from that. top one percent and directed towards the bottom 20%, that is a tremendous gain in the quality of life in the bottom 20%, so think about reality, we have a health reform, it is not the health reform that we would have

want

ed, but it is, but it's better. that neither reform is funded largely by smaller taxes on high incomes, i.e. if you really wonder where the money comes from, a lot of it comes from an additional tax on investment income and an initial tax on earned income for people with high incomes that will basically everyone in the United States is guaranteed to be able to have basic essential health insurance at an affordable cost, which is a big change in people's lives and is largely funded taking a little bit of the high, so a little bit of Robin Hoodism does it.

Much more could be done than that, so no one talks about it. You know, let's punish the rich for punishing them, but the question is: can redistribution be done in a way that makes this a better society? and the answer is Yes, well, at the end of his book, Piketty talks about the global wealth tax. Do you think that is feasible? Well, is it politically feasible? You know, if the United States was behind this, a lot of things would be possible if the United States supported this. so I think you could guarantee that the Europeans would be willing to accept enough Europeans and, while there would be some countries that would be rogue countries that would want to serve as havens for tax evasion, we would have a lot of leverage over them, so it's not really that the international global system makes this impossible;

It's actually the American political system that makes it seem impossible from time to time, that can change, but given the dysfunction of Congress and the fact that the Supreme Court has in fact, we decided to allow corporations and the rich to consolidate their control over our political system. Do you have any hope for the kind of change that both Piketty and you would advocate? I think we don't lose hope in these things we have. If you look at the American political tradition, one of the interesting things that Piketty says is that serious, progressive taxes on high incomes and great wealth are an American invention, we invented it and we invented it in the early 20th century, right at the height of our Golden War. age and somehow we found it in ourselves to draw on to find political leaders, people like Teddy Roosevelt, who are willing to say this is a bad thing, we don't want the society that's emerging here, so I think things can change, what if you ask?

I know we're going to get a wealth tax before the 2016 election. Well, no, no, we might get one by the 2024 election. Possibly something will grow from the day that's hard to forget. You said we live in such an ugly situation. In America right now, yeah, this is one of the things that baffles me about my own country, which is that it's one thing to have income and wealth disparities and have different views on what we should do about it, but there are A level of harshness in our debate comes mainly from people who are actually doing very well, so you know, we've had a parade of billionaires complaining about being, you know the incredible unfairness of people criticizing them and then compare anyone. who criticizes the Nazis, you know, that's been, it's almost a tic they have, this is very strange and a little scary because you know, it's one thing if someone without much power seems to be breaking out and going into a rage, I'm not 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 just said and given the fact that this ugliness exists, what do you think is going to happen? take a mass uprising consistent demonstrations insurgent politics how are we going to stem the tide that he says is leading us to oligarchy is there something negative about this positive take Pinky argues that he seems to argue for much of the book that we only escape the old oligarchy to For a while, thanks to really disastrous events, thanks to wars and depressions that disrupted the system, that's an argument you can make, on the other hand, if you read the histories of the New Deal, you know that it didn't come, it didn't come about.

Out of nowhere, we had a progressive movement and many proto-New Deal programs building for quite some time, and if there was indeed a movement in America, there was a growing political and philosophical willingness to address inequality of wealth and power much earlier. FDR moved into the White House and I believe there are better angels of our nature than this ugliness and it can be terrifying, but there is also a redeeming streak here and elsewhere and in which hope is not lost. This is that they are given a consistent argument given the events and maybe they know, as people become more aware of what is really happening then there is a chance to change things.

We know not, but there's nothing in what we know now that says that. you should give up hope that you can change this even without a catastrophe paul krugman thank you very much for joining me well, thank you for inviting me to let the evidence continue to mount this past Tuesday, April 15, tax day, the AF of l-cio reported that the Last year the CEOs of 350 major American corporations were paid 331 times more money than the average American. worker those executives earned an average of eleven point seven million dollars compared to the average worker who earned thirty-five thousand two hundred thirty-nine dollars according to that analysis circulated on tax day.

Economist Robert Rice reminded us that in addition to earning the highest share of total national income in nearly a century, the many one percent are paying a lower federal tax rate than many people in the middle class; They will no doubt remember that a obliging bipartisan Congress allows high rollers in Finance the privilege of carried interest. a lower tax rate than their secretaries and employees and at the state and local level, while the poorest 20% of Americans pay an average tax rate of more than 11%, the richest 1% in the country pay half that rate, now neither nature nor nature's God threw improving our tax codes is the job of political legislators and it is a way for them, as Chief Justice John Roberts would say, to express gratitude to their donors.

Oh Lord. Adelson, we appreciate your generosity so much that we reduced your estate taxes so you can give $8 billion as tax refunds to your heirs, although in the future the public will have to come up with $2.8 billion to make up for the lost income. prosecutors. which makes truly repugnant the argument heard so often in some sections of the rich that inequality doesn't matter, of course it does. Inequality is what has turned Washington into a protection business for the 1%: it buys all those benefits from tax breaks from governments, tax havens. Allow corporations and the wealthy to park their money in a tax-free zone; loopholes, favors such as care and interest, and so on.

Listen for a big study by Martin Gilens at Princeton and Benjamin Page at Northwestern based on collected data to be published in the fall. between 1981 and 2002 his conclusion cites the United States' claims to be a democratic society are seriously threatened the preferences of the average American appear to have only a miniscule near-zero and statistically non-significant impact on public policy sad that drift has come to this towards the oligarchy that Thomas Piketty describes in his formidable book that has become a mad race that will invade and overwhelm us unless we stop it on our website billmoyers.com.

You can find out much more about picket e's book and the debate has raged on both the left and the 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 articles.