Capital What the 1% Dont Want You to Know

Economist Paul Krugman. (Photo: Moyers & Visitor) Economist Paul Krugman explains how the The states is becoming an oligarchy – the very system our founders revolted confronting.

The median pay for the tiptop 100 highest-paid CEOs at America's publicly traded companies was a handsome $xiii.nine million in 2013. That's a ix percent increase from the previous yr, according to a new Equilar pay study for The New York Times.

These types of jumps in executive compensation may have more of an event on our widening income inequality than previously thought. A new book that's the talk of academia and the media, Capital in the Twenty-First Century by Thomas Piketty, a 42-year-one-time who teaches at the Paris School of Economics, shows that ii-thirds of America's increase in income inequality over the past 4 decades is the event of steep raises given to the country's highest earners.

This week, Bill talks with Nobel Prize-winning economist and New York Times columnist Paul Krugman, about Piketty's "magnificent" new book.

"What Piketty'southward really done now is he said, 'Fifty-fifty those of you who talk about the 1 percent, you don't really get what'south going on.' He's telling u.s. that nosotros are on the route not merely to a highly unequal order, only to a order of an oligarchy. A order of inherited wealth."

Krugman adds: "Nosotros're seeing inequalities that will be transferred across generations. We are becoming very much the kind of order nosotros imagined we're null similar."

Pecker MOYERS: This week on Moyers & Company, Nobel Laureate Paul Krugman of The New York Times on a revolutionary new volume most wealth and democracy.

PAUL KRUGMAN: Piketty is telling us that we are on the road not just to a highly unequal society, but to a social club of an oligarchy. A society of inherited wealth.

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BILL MOYERS: Welcome. Even in this age of hyperlinks and cyberspace, nearly vi centuries afterwards Gutenberg devised his printing press, information technology's still possible for a unmarried volume to shake the foundations, rattle clichés, upend dogma, unnerve ideologues, and arm everyday people with the cognition they demand to fight back confronting the predatory powers that have robbed them of their birthright as citizens.

This is such a book: Upper-case letter in the Twenty-Commencement Century, by the French economist Thomas Piketty. The book of the season to many. To others, the book of the decade. Reviewers have called information technology "a bulldozer of a book," "magisterial," "seminal," "definitive," "a watershed."

At 700 pages information technology's already a all-time seller. And there isn't a unmarried scene of seduction, not ane glory interview, non one flick — simply graph after graph, fact on fact, fatigued from two centuries of data and imbedded in prose that can suddenly explode similar a supernova in the brain.

Here's one of its boggling insights: we are heading into a futurity dominated by inherited wealth as majuscule concentrates in fewer and fewer hands, giving the very rich always greater power over politics, authorities, 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 US, writes Piketty, is "probably higher than in any other society, at whatsoever fourth dimension in the past, anywhere in the world." Over iii decades, between 1977 and 2007, sixty percentage of our national income went to the richest i percent of Americans. No wonder this is the one book the i percentage doesn't want the other 99 pct to read.

Paul Krugman has been writing extensively and generously about Piketty's book. The Nobel prize-winning economist and "New York Times" columnist calls it "a tour de strength…a magnificent sweeping meditation on inequality…that volition change both the fashion nosotros think about club and the way we exercise economics."

Every bit 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.

PAUL KRUGMAN: Hi.

Beak MOYERS: Inequality's been on the table for a long time. You've written extensively, others have, too. I mean, it'due south a familiar issue, but what explains that this book has now go a phenomenon?

PAUL KRUGMAN: Actually, a lot of what we know nearly inequality actually comes from him, because he's been an invisible presence backside a lot. So when you lot talk near the i percentage, you're actually to a larger extent reflecting his prior piece of work. But what he's really done now is he said, "Even those of you who talk almost the 1 percent, y'all don't really become what's going on. You're living in the past. Y'all're living in the '80s. You think that Gordon Gekko is the future."

And Gordon Gekko is a bad guy, he'south a predator. But he'southward a self-made predator. And right now, what nosotros're really talking virtually is we're talking nigh Gordon Gekko'southward son or daughter. Nosotros're talking well-nigh inherited wealth playing an ever-growing role. So he'south telling the states that nosotros are on the road non merely to a highly diff society, but to a social club of an oligarchy. A club of inherited wealth, "patrimonial capitalism." And he does it with an enormous amount of documentation and it's a revelation. I mean, fifty-fifty for someone similar me, it's a revelation.

Neb MOYERS: I was going to ask, what could— what has Paul Krugman had to larn from this book?

PAUL KRUGMAN: Even the title, the first discussion in the title, "uppercase." We stopped talking virtually capital. Fifty-fifty people like me stopped talking most uppercase because nosotros idea it was all near human capital letter. We thought it was all about earnings. We thought that the wealthy were people who ane style or another establish a way to brand a lot of coin.

And we knew that that wasn't always true. We knew that in the Gold Historic period or in the Belle Époque in Europe, which he prefers to talk about. That loftier incomes were mostly a result of having lots and lots of assets. Simply we sort of said, "Well, that's non the way things work anymore." And he says, "Oh yeah? Information technology turns out that y'all're wrong." That's true, that right at present, a lot of loftier incomes in America are people who didn't beginning out all that rich. Merely we're rapidly moving towards a state where inherited wealth dominates. I didn't know that. I really was— I should've known it. I should've thought about information technology, just I didn't. And so then hither comes this book with— I mean, it's beautiful— admittedly analytically beautiful, if that makes any sense at all.

BILL MOYERS: As you know, I'm no economist, but I institute this book, as I said in the opening, just very readable and of a sudden at that place would be this moment of epiphany.

PAUL KRUGMAN: Aye, it's a real "eureka" book. You suddenly say, "Oh, this is not— the globe is non the mode I saw it." The world in fact has moved on a long way in the final 25 years and not in a direction you're going to like because we are seeing not only great disparities in income and wealth, only we're seeing them go entrenched. We're seeing them become inequalities that will be transferred across generations. We are becoming very much the kind of society we imagine we're zilch like.

Neb MOYERS: Here'due south Piketty's main indicate: majuscule tends to produce real returns of 4 to 5 per centum, and economical growth is much slower. What's the practical result of that?

PAUL KRUGMAN: What that means is that if you lot have a large fortune, or a family has a big fortune, they can — the inheritors of that large fortune — tin can live very, very well. They can alive an extraordinary standard of living and still put a large fraction of the income from that fortune aside and the fortune will grow faster than the economy.

Then the big dynastic fortunes tend to take an e'er-growing share of full, national wealth. And so one time you— when you have a state of affairs where the returns on capital letter are pretty high and the growth rate of the economy is not that high, you take a situation in which not only tin can people alive well off inherited wealth, but they can actually laissez passer on to the next generation fifty-fifty more, an even a higher share.

And and so it's all, in his terms, "r" the rate of return on uppercase, and "thousand" the rate of growth of the economic system. And when yous have a high r, low 1000 economy, which is what we now have, then you're talking non— you're talking about a situation in which dynasties come increasingly to increasingly to dominate the top of the economical spectrum and a tiny fraction of the population ends up very dominant.

Neb MOYERS: What'due south the realistic impact of this on working people?

PAUL KRUGMAN: There's a direct impact, which is that part of income is ever going to go to labor, although that seems to be a diminishing fraction. But the part that comes from uppercase is going to be in the hands of a very few people. The other thing, which I think is critically important, that he talks virtually more towards the end of the book is political economy.

That when you lot have — Teddy Roosevelt could've told yous and did — that when you accept a few people who are so wealthy that they can effectively purchase the political system, the political system is going to tend to serve their interests. And that is going to reinforce this shift of income and wealth towards the top.

Bill MOYERS: Do you agree with him that we are drifting toward oligarchy?

PAUL KRUGMAN: Oh yeah. Oh, I don't think that'southward fifty-fifty — I don't see that there's any question of it. If you wait at the— certainly if you look at what nosotros know already, and we're learning more than, but what we know already well-nigh the concentration of income, of wealth, you lot can see that it is growing. You tin encounter that— and you can actually run across— I've spent a little while just sort of going through the "Forbes 400" list.

And what you find is already in that location's an awful lot of inherited wealth in there. It's no longer a list of self-made men. And of the cocky-made men, a lot of them are pretty elderly. And their— those fortunes are going to be passed on to side by side generations. Then the drift towards oligarchy is very visible, both casual ascertainment and in the numbers.

BILL MOYERS: I was taken with something you wrote the other twenty-four hour period. You lot said that in your opinion, the existent problem is not capital letter accumulation per se every bit much as information technology is, quote, "remarkably high compensation and incomes." Now how is that different from what you were just saying well-nigh wealth that passes to the next generation?

PAUL KRUGMAN: 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 and then far been driven past high salaries, high bonuses and all, so on.

That's where we are now. But our image of the top is actually a quarter century quondam. It is about the way things were when these great fortunes were just getting started, when we were merely seeing the explosion of inequality. But we're well along the way towards 1 in which it is, in fact, an older thing, where people accumulate capital, pass it on to their heirs, and you get this dynastic wealth.

So right now, and this is where Piketty has interesting things to say, simply non this compelling vision near why America is so unequal correct now. Only looking forward, he's telling the states that the story is already changing. And it'southward going to change more. And then we are going probably, unless something gets better, we're going to wait back nostalgically on the early 21st century when you could still at least take the pretense that the wealthy actually earned their wealth. And, you know, by the year 2030, information technology'll all be inherited.

BILL MOYERS: And at the same time, we can't even manage to pay workers a minimum wage of $ten.10.

PAUL KRUGMAN: Yeah. And what's astonishing, I idea actually 1 of the most depressing things, although enlightening in his volume, is he talks about France in the Belle Époque, the years before Earth War I, which was ideologically as much a society committed to equality in principle every bit we are today. But in practice, was totally dominated past very wealthy families, where it was impossible to fifty-fifty raise the possibility of seriously taxing dandy wealth.

Where information technology was very hard to do annihilation to ameliorate the conditions of ordinary workers. And it shows you lot how that tin happen. How you can take a society where the— even though the credo is democratic, fifty-fifty though nosotros merits that all men are equal, in practice, non a chance.

BILL MOYERS: Isn't that what's happening now in this country?

PAUL KRUGMAN: Exactly, exactly. That's the signal. And what'due south funny is at the time, Americans used to say, "Oh— we should never allow ourselves to become like former Europe." And in fact, we have.

BILL MOYERS: Just we have had the Rockefellers, nosotros've had the Carnegies, we've had the Pews. We've had large dynasties that transferred their wealth from one generation to some other.

PAUL KRUGMAN: Yes. Earlier World State of war I, we had our dynastic families, only they were non almost as ascendant as they were in Europe. Largely— not because we didn't have high returns on capital, but because nosotros were growing and then fast. We were an immigrant nation, a fast-growing nation.

So they hadn't been able to establish a lock. And then later that, we had a long menstruum of loftier revenue enhancement of large estates, high taxation of capital income. But at present we're on our way dorsum. Now we're on our style back towards something that looks much more similar that kind of hierarchical society.

Neb MOYERS: Piketty makes the point, that the very size of inherited fortunes today is then corking that information technology practically makes them invisible. Quote "Wealth is and then concentrated that a large segment of society is virtually unaware of its being."

PAUL KRUGMAN: Sure. If yous have conversations with people who are not in this business, who are non economists, they have no idea what existent wealth means in America. They think that having a 1000000 dollars makes you wealthy. They think that— or having a bacon of several hundred grand dollars makes you wealthy. And while information technology'due south certainly true, that's a vastly privileged status compared with nearly people, the sheer size of those large fortunes is and so far exterior our normal feel that it does become invisible. You're never going to meet these people. Y'all're never going to have whatsoever sense of what it is that they control. And most people I recall have no thought just how far the commanding heights are from you and me.

Neb MOYERS: You remind us frequently, and you did then but the other day, that the Us has a much more unequal distribution of income than other advanced countries. And that much of this departure comes from authorities actions, such every bit?

PAUL KRUGMAN: If you look at, oh, wait at European countries, just about all of them. They don't actually necessarily have higher taxes on very high incomes. That's not so much the factor. And they take higher taxes overall, which are used to pay for a lot of programs of aid.

Then you have universal healthcare, and we have— sort of are stumbling our fashion towards something like that now but they take a lot of income support for people with low incomes. They accept lots of support for immature parents, they have lots of basically, a lot of redistribution. Which is a dingy word in United states politics, simply in fact is essential for having a decent society. So that to be the average American is richer than the boilerplate person in France.

Although that's by and large considering we piece of work longer hours. But to be in the bottom fifth of France is a far, far better thing than to be in the bottom fifth in the United states of america considering of these government policies. Information technology's not that wages are especially loftier at the lesser in French republic. A fiddling scrap higher than in the United states, because nosotros accept a high minimum wage. Merely mostly, you have government programs, which make an enormous difference. The level of inequality of marketplace income what people actually make is non that different amongst avant-garde countries. The level of inequality of disposable income, once the government has gotten through taxing and spending, is much, much higher in the US than it is in most other advanced countries. And that'southward because of the government.

Pecker MOYERS: Well why is, as you said, redistribution such a baneful discussion in our political organization?

PAUL KRUGMAN: I think mostly it's just because at that place'southward a very effective apparatus of TV and impress media and recollect tanks and so on who hammer confronting whatsoever proposition of redistribution. It'south simply, they've managed to convince a lot of people that it is somehow united nations-American.

Which actually, if you look at American history, that's non all true. But they— it's but been pushed very hard. I think also the United States, look, we have to admit, race is ever lurking under nigh everything in American life. And redistribution in the minds of a lot of people means taking money from people similar me and giving it to people who don't wait like me. And I think that is a big divergence between us and Europe.

Nib MOYERS: You exercise know that conservatives are regularly, consistently proverb that inequality doesn't matter, that if the very rich were less rich, information technology wouldn't really make a divergence to people out there working for a living.

PAUL KRUGMAN: But of course, what Europeans practice, which is to tax the rich and utilize information technology to provide benefits to people lower down the scale. That makes a big departure. That tin can make an enormous difference. Accept—

Bill MOYERS: How so?

PAUL KRUGMAN: Take a few per centum of national income, have information technology away from the top one per centum and directly it towards the bottom 20 percent, that's a tremendous gain in the quality of life for the bottom 20 percent. Then just think about it. Actually, nosotros have a wellness reform. It'southward not the health reform we would've wanted, but it's ameliorate than no reform.

Information technology's financed in large role with small surtaxes on high incomes. That'southward, if you actually ask where the coin's coming from, a lot of it is coming from an additional taxation on investment income, an boosted tax on earned income for very 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 alter in people'south lives. Which is being financed in large office by taking a little bit from the top. So a trivial scrap of Robin Hoodism does a lot. You can do a lot more with that. And and so no one is talking nigh just— permit's punish the rich for the sake of punishing them. But the question is, can you lot exercise redistribution in a way that makes this a better gild, and the answer is aye.

BILL MOYERS: Well at the finish of his book, Piketty is talking well-nigh the global tax on wealth. Exercise you think that'south feasible?

PAUL KRUGMAN: Well, is it feasible politically? You lot know, if the United states were behind it. Lots of things would become possible. If the U.s.a. were to support this, and then I call back you lot could pretty much guarantee that the Europeans would— enough Europeans would be willing to go along.

And while in that location would be some countries that would, you know, rogue countries that would want to serve as havens for tax evasion, nosotros would have a lot of leverage over them. So really information technology'due south not that the international global system makes this impossible, it's really, it'southward the US political system that makes it look impossible right now. And that can alter.

Beak MOYERS: But given the dysfunction of Congress, given the fact that the Supreme Court has in effect decided to enable corporations and their rich to consolidate their hold on our political organization, do y'all accept any promise of the kind of change that both Piketty and you would advocate?

PAUL KRUGMAN: I recollect you lot don't give up hope on these things. We have— expect at the American political tradition. Expect at the— one of the interesting things that Piketty says is that serious progressive taxation of loftier incomes and great wealth is an American invention. We invented it, and we invented it in the early 20th century, correct at the peak of our Gilded Historic period.

And somehow we establish it in ourselves to turn— to observe political leaders, people like Teddy Roosevelt, who are willing to say, "This is a bad thing, nosotros do not desire the society that is emerging here." So I retrieve things can modify. What— if you ask, you lot know, are we going to go a wealth tax, a global wealth tax earlier the 2016 election? Well no, we're not. Might nosotros become one by the 2024 ballot? Possibly.

Bill MOYERS: Y'all wrote something the other day that's hard to forget. You said, "Nosotros live in such an ugliness in America correct now."

PAUL KRUGMAN: Yeah. This is one of the things that puzzles me actually near my own land, which is it's one affair to have disparities of income and wealth and to have differing views most what we should exist doing almost it. But there's a level of harshness in our debates more often than not coming from the people who are actually doing very well.

So, y'all know, we've had a parade of billionaires whining virtually being— you know, the incredible injustice that people are actually criticizing them. And then comparing anyone who criticizes them to the Nazis. You know, it'southward almost a tic that they have. This is— this is very strange. And it's kind of scary because, you know, it'southward one thing if someone without a lot of power seems to be going off and into a rage for no proficient reason. But these are people who have a lot of influence considering of the amount of coin they control.

Neb MOYERS: Given what you just said and given the fact that in that location's this ugliness, what do you lot think information technology's going to take? A mass uprising? Consistent demonstrations? Insurgent politics? How are we going to stem the tide that he says is taking us into oligarchy?

PAUL KRUGMAN: In that location's a negative and there's a positive have. Piketty argues— seems to debate through much of the book that we merely escaped the former oligarchy for a while thank you to actually disastrous events. Thanks to wars and depressions, which disrupted the system. That's an statement you can brand.

On the other hand, if you lot read histories of the New Deal, yous know that it didn't come— it didn't leap out of nowhere. That we had a progressive movement and a lot of proto New Bargain programs edifice for quite a long time.

There was, in fact, a move in America. There was an increasing political, philosophical readiness to take on inequality of wealth and power long before FDR moved into the White House. And then, I think there are better angels of our nature. That there is this ugliness which can be frightening. Simply there is too a redemptive streak in— here and in other places.

And that— don't requite up hope on this. That given consistent argumentation, given events, and possibly you lot know, as people go more than enlightened of what is actually going on then at that place is a gamble of irresolute things. Practise we know that? No. But in that location's nothing in what we know now that says y'all should surrender hope of being able to modify this fifty-fifty without a ending.

Pecker MOYERS: Paul Krugman, give thanks you very much for joining me.

PAUL KRUGMAN: Thank you for having me on.

BILL MOYERS: The bear witness keeps mounting. Just this past Tuesday, the 15th of April, Taxation Day, the AFL-CIO reported that last year the primary executive officers of 350 pinnacle American corporations were paid 331 times more money than the average US worker. Those executives made an average of $xi.7 million compared to the boilerplate worker who earned $35,239.

As that analysis circulated on Taxation Mean solar day, the economist Robert Reich reminded us that in addition to getting the largest per centum of full national income in nearly a century, many in the 1 percent are paying a lower federal taxation charge per unit than a lot of people in the center-form. Y'all will, no uncertainty, retrieve 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 at land and local levels, while the poorest xx percent of Americans pay an average tax rate of over 11 percentage, the richest one per centum of the state pays half that charge per unit. At present, neither nature nor nature's God drew up our taxation codes. That'south the work of legislators, politicians, and it's one way they take, every bit Chief Justice John Roberts might put it, of expressing gratitude to their donors. Oh, Mr. Adelson, nosotros and so appreciate your generosity that nosotros cut your estate taxes so you can give $viii billion as a revenue enhancement-free payment to your heirs, even though down the road the public volition accept to put upwards $2.viii billion to recoup for the loss in tax revenues.

All of which makes truly repugnant the argument, heard and then often from courtiers of the rich, that inequality doesn't thing. Of course information technology matters. Inequality is what has turned Washington into a protection noise for the one percent. It buys all those goodies from government: tax breaks, tax havens, allowing corporations and the rich to park their coin in a no-tax zone, loopholes, favors like carried interest, and on, and on, and on.

Mind, there's a big written report coming out in the autumn 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, about-zero, statistically non-meaning impact upon public policy."

Distressing, that information technology'south come to this. The migrate toward oligarchy that Thomas Piketty describes in his formidable book has become a mad dash, and information technology volition overrun the states, and overwhelm us, unless we cease it.

At our website BillMoyers.com, yous can detect out much more than near Piketty'due south book and the argue it has sparked on both the left and right. That'southward at BillMoyers.com. I'll see you in that location and I'll see you here, next time.

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Source: https://truthout.org/video/paul-krugman-what-the-1-dont-want-you-to-know/

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