Thomas Piketty Believes There’s Still Time to Save the Middle Class | Big Think

Thomas Piketty Believes There’s Still Time to Save the Middle Class
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Globalization has created more wealth around the world, but in America, rather than being the rising tide that lifts all boats, money is increasingly concentrated in the hands of the population's top 10 percent. But robust democratic institutions can turn this trend around, says Thomas Piketty, professor of economics at the Paris School of Economics and author of the landmark 2013 book Capital in the Twenty-First Century.
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THOMAS PIKETTY:
Thomas Piketty is Professor of Economics at the Paris School of Economics and author of the landmark 2013 book Capital in the Twenty-First Century. He is the author of numerous articles published in journals such as the Quarterly Journal of Economics, the Journal of Political Economy, the American Economic Review and the Review of Economic Studies, and of a dozen books. He has done major historical and theoretical work on the interplay between economic development and the distribution of income and wealth. In particular, he is the initiator of the recent literature on the long run evolution of top income shares in national income (now available in the World Top Incomes Database). These works have led to radically question the optimistic relationship between development and inequality posited by Kuznets, and to emphasize the role of political and fiscal institutions in the historical evolution of income and wealth distribution.
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TRANSCRIPT:
Thomas Piketty: If you look at a country like the United States, the share of the total income going to the top 10 percent of the population used to be about one-third of the total income back in the early 1980s and now in 2015 it is over one half. So it has gone from 30/35 percent to over 50 percent of total income. Marx in the 19th century says that inequality would have to rise forever. Kuznets in the 20th century on the contrary assumes that there were natural forces that would make inequality go down in the long run. My main conclusion is that there are powerful forces going in both directions and that ultimately which one dominates really depends on the institutions, policy that we choose in the area of education, labor market, taxation, corporate governance, minimum wages. And all of these matter and there are several possible futures.

If your parents are rich, like 100 percent of the generation, almost, goes to college. If your parents are poor, it's like 20/30 percent going to college and these are not the same colleges if you're rich. And so there's very unequal access to education prevents inequality from going down. Now, even if you get education policy right, there are other forces which can lead to rising inequality in the long run. In particular there is a tendency of the rate of return to capital to exceed the economy's growth rate in the very long run — can act as a powerful force to very high concentration of wealth and property as opposed to income inequality, in particular labor income inequality, which is primarily determined by education and labor market institution. So again, it really depends on the institution and policies like progressive taxation of income, wealth that we put in place in order to regulate these dynamics.

Sometimes people want just to blame globalization and say, well, because of globalization, because of the competition with emerging countries inequality has to increase and in any case there's not much we can do about it; that's just globalization. And I think this is wrong. I believe in globalization, but I believe we also need strong democratic institution and fiscal and educational policies so as to ensure that more people actually benefit from globalization so you don't have the same rise in inequality everywhere. For instance, in Europe and Japan where you also have globalization and competition with the emerging countries, inequality of income or wealth did not increase quite as much as in the United States. So this shows a different course of action can make a difference.

Globalization has created more wealth around the world, but in America, rather than being the rising tide that lifts all boats, money is increasingly concentrated in the hands of the population's top 10 percent. But robust democratic institutions can turn this trend around, says Thomas Piketty, professor of economics at the Paris School of Economics and author of the landmark 2013 book Capital in the Twenty-First Century.

[JimmyBackbeat]

I would really favor French speaking and subtitles before this.
I can't understand what I'm listening to.

[Charlotte_Martel]

I have to disagree about globalization. Unions have become a dirty word because employees know that even casually chatting about them can bring the threat of lay-offs, Business owners can hire only non-union workers, they can move their factories overseas where there is little/no worker protection and environmental regulation. Jobs in the tech industry can easily be out/in-sourced for a fraction of the cost. The Middle class has stagnated and lives on a knife's edge of insecurity. Who can demand change when he's worried about paying for insurance and rent?
Our corporate overlords know exactly what they're doing.

[adubever]

Vote Bernie Sanders 2016! FEEL THE BERN!!!

[blipblop]

For anyone wondering what the thumbnail is from. Its Ho Chi Minh City in Vietnam. A huge city with unbelievally poor and rich people living and walking together everyday.

[jaieet]

You know your country's mastered propaganda when people will come into a discussion about economics complaining that they LIKE the wealth disparities.
"It's no big deal - everything's fine! Everything's fine!"


[20% chance of additional racist and/or dismissive remark about French people]

[JimJWalker]

02:13 Globalization is NOT competition between nations, commerce, and it's byproduct of inequality. Globalization is theoretical framework to understand how to study the phenomenon of modernity and its symptoms of acceleration, growth, interaction, extensity, and velocity. Don't use words that you don't understand the meaning of.

[OmniphonProductions]

1:26 - That's a big IF since America's K-12 education policy has shown consistently diminishing returns over the last fifty years.  Public Education is a primarily Democratic institution, as described in the details of this video, marked by heavy support (both vocal and monetary) for almost exclusively Democratic candidates in return.  Perhaps before providing equal access to college for all, we should straighten out the pre-college educational shortfalls. 

This includes bringing back vocational education since starting wage for many of THOSE jobs is actually HIGHER than many careers that require a degree.  When Piketty talks about Labor Income Inequality, much of that is because America's labor market is shrinking.  Thanks to minimum wage requirements, (another Democratic institution) much of our manufacturing is either outsourced or done by illegal aliens who get paid "under the table"...both of which force American's out of the American labor market.  Add to that the ever-growing number of college-focused students, and we reduce our OWN labor FORCE to such a point that, even if we brought back all the outsourced jobs, there wouldn't be enough skilled Americans to do them.

Finally, while he's right about rate of growth for income inequality in Europe and Japan, he neglects the fact that LEVEL of wealth among the wealthy has gone down to create that equilibrium.  Thus, no matter how hard one works or how wisely one invests, there is effectively a cap on how wealthy one can become, because everything over a certain level is taken by the government to be redistributed to others...again regardless of how hard they work or how wisely they invest.  "Fair" is a very tricky word, but redistributing wealth under threat of punitive governmental action is not equality or charity; it's robbery.

The way for the government to promote income equality is to get out of the way, and let the economy enjoy (and suffer) its natural ebb and flow...without giving bailout TAX DOLLARS to CEOs who bankrupt their companies while promoting unwise real estate investment among those they know can't afford it.

[madlinezhang]

1:06 very true, education is given to people who can afford it

[LoneWolf-wpdn]

unless there is a war or some economic cataclysm the people with money are going to continue to make money cause they have the tools to do so

[NsMs]

No one got a smaller slice of the pie, the size of the pie increased and those who had more ingredients to put in made their slices grow faster than those with less. Every slice still got bigger. Is this fair? Would it be better if all slices grew proportionally to each other? I dont know, but it certainly isnt bad for anyone. The middle class doesnt have to be saved.

[darksg]

Piketty never adresses what caused the income inequality in the first place. It was corporate subsidies and tax breaks along with low interest and safety nets rates that allow for otherwise extremely risky investment strategies to pay off every time. The Middle Class is fine, they've always been this way, their wealth has stayed at a steady growth rate, the rising wealth of the rich just gives the illusion that the Middle Class is dying. The government caused this inequality and it shouldn't be very hard to realize the problem and then fix it.

[jzk]

As long as the rich have the option to lobby with money, those with resources will ALWAYS get the policies that mostly favors them.

This is how people that make millions a year get away with just paying 15%, while people struggling end up having to pay up to 50% of their low income.

[InfernosReaper]

Education isn't really a problem. It's the inability to do something with that education. There are too many people with degrees who can't find work in that field. Why a problem, education isn't much of a contributor.

The biggest economic inequality issue comes from the upper management end of business. In Japan, the CEOs & board of directors make more than lower end employees, but they don't make millions of dollars like their American counterparts. Combine *that* gap with the growing drive towards short-term profits over long-term sustainability and the gap widens. Pay employees as little as you can get away with leaves you with employees who are less capable of making purchases they don't need. Since unnecessary purchases are the driving force behind capitalism, these companies start seeing declining sales. They compensate by cutting back on employees and discarding higher paid, more experienced employees to offset the decrease in profits. Then the cycle continues.

[wgaskill]

The populace is starting to wake up to the ubiquitous problem of low wages with a lack of benefits, but the other trend that is devastating the U.S. is the lack of control over monopolies. In market after market, the main players are merging with or acquiring each other, pushing each market to 3 players or less. When there are this few players, there is a strong tendency to collude because it is much less expensive than competing (and becomes feasible at this point). We currently see a number of markets where prices are inflated above reasonable profit levels - for instance phone, cable, and internet are double the price in the U.S. .vs. other countries. We can expect to see this trend continue, and with wages and benefits continuing a race to the bottom, Americans can expect to be squeezed from both sides, thereby accelerating income inequality.

[nikamegrelidze]

There is no such thing, as a middle class!

[PabloIzurieta]

It is not only about inequality.  It is also important to note that the middle class has constantly increased its lifestyle in the United States.  It is also important to note that the middle class in the United States is financially better off than in Europe and in Japan.  

Piketty's work is tremendous, but I believe his proposed solutions are either wrong (for example raising minimum wage) our unrealistic (global high income tax).

[christopherkettler]

Vote bernie and please put subtitles on this guy next time i had to listen 3 times this dudes accent is thick

[TheInevitableX]

Something about "power" is very fascinating - it inherently exist in every society. This paradigm of societal power can take many forms and is completely malleable, but also, at times, rigid. Yes - some peoples' in their respective society attempt - in the creation of a state - allocating such power in a deliberately autocratic fashion.  Others, a more republican-like democratic mode. 

But, regardless every society must manage and distribute "power" as for example: every society must manage and conjure a way that efficiently addresses their wants while accommodating for their lack of resources. We [Humans] call the former: Politics/Civics and the latter: Economics. Essentially, no need to be explicit for this. These two fields are in a variety of ways associated with one another. 

In the United States we have a republican form of governance along with ostensibly democratic officials. Though we are not a democracy [and many are cognizant of this, increasingly so], but I digress. What I am fundamentally hinting at is when manufacturing a small republican form of government than "power" of said government will traverse to whatever in society is being given additional "powers". You can have in a capitalist society a mixed economy [Capitalism (foundation of economy) and Socialism (state assistance of markets)] this usually entails a large government. 

In a mixed economy a great deal of "power" is within the boundary of government, this is not necessarily a terrible thing. Unless of course, like in the United States you are able to flood the democratic political process with money. This kind of big government is large in only explicit domains, not all. Usually like, say a portion of regulation here and a portion of deregulation there.

In a small government, you only get deregulation. And with deregulation, corporations are conferred additonal "powers". The big government dies and the big corporatism "state" lives. A big government that tackles attempts to impinge the democratic process [i.e. Gerrymandering] and a big government that rids itself of the deleterious effects of money can certainly be prosperous. A small government which is a weak government will almost certainly be entirely corruptible.

There would not exist or it would be difficult to implement regulation, taxes, federal laws, safety nets, broader structure etc. A big corporatism "state" could more effectively manipulate said small government. Frankly I would rather have a large republican form democratically elected government with or without the corporate manipulation. Than all "power" traversing into the hands of small groups of non-elected corporate elites. I do apologize for the long winded comment, I can't help myself.

[Paetaor]

Let's go for the French method and give everyone welfare. What's the worst that can happen?

[firstnamelastname]

I'm not american so I don't give a shit