Thomas Piketty, welcome to The Daily Social Distancing Show.
Thanks for inviting me.
Or should I say, comment ça va?
Comment ça va? Très bien, merci.
(chuckles) Um, you are one of the economists in the world
many people regard as a rock star economist,
not just because of your ideas but because of how easily
you break your ideas down.
One of the biggest things you talk about
is inequality in the world.
Coronavirus is going to shake up the world in a big way.
Either there's gonna be more inequality
or things are gonna get fixed.
Just looking at the world the way it is now,
what do you think we're about to experience?
Well, you know, I think this is one of these crises
that we see in history that can really change people's view
about the world and how we should organize the economy.
Because at this stage, what we see is actually a big,
uh, increase in inequality, so, you know,
if you are locked down in a big apartment
or in a big house, it's not the same
that if you are in a very small apartment
or if you are homeless.
And marginally, you know, if you have a very, uh, low wage
and very precarious, uh, job status, you know, you...
you have to go out to find work, to find money,
you know, even though it can be very risky for you.
Uh, you have lots of problem
with people who still need to pay their rent.
I think this is a kind of time period
where there is a pressure, some pressure, you know,
that can actually change the balance of power,
which is also a balance of ideology.
If we learned from the 2008 crisis,
if there's anything we learned, it was that...
the people who are the quickest to bounce back
weren't people at all-- it was the big corporations
and the big banks.
The little people lost everything.
They lost their houses.
They lost the money that they had put into their houses.
They lost the jobs.
Many people even lost their investment,
whether it was 401(k)'s, or whatever they had put aside
to save money in life.
We... learned about what happened,
but if this is another recession,
if this is another crisis, what can be done
to prevent that from happening again?
Well, first, I think we have to use public debt
and money creation for the people
rather than just for banks.
So basically, after 2008, you know,
we used money creation in order to save Wall Street,
to save bankers.
You know, it's probably better than if we didn't do anything,
because in the 1930s, we let financial institutions
go bankrupt one after the other, and this was not very good,
so at least we've learned from this experience.
But, you know, it's not enough to save bankers--
you also want to save the planet,
you also want to save the people--
and I think, with this crisis right now,
uh, people are going to be asking for proof
that we can also use, you know, this power of money creation
and the Federal Reserve in order to invest in people.
You know, investing in hospitals,
investing in public infrastructure,
uh, increasing, you know, wages
for, you know, health care workers
and all the, you know, low-wage and middle-wage people,
which we see today, you know, are so necessary
for our existence and-and our society.
In the longer run, of course, we cannot just pay for everything
with public debt and money creation,
so we'll have to rebalance our tax system.
I think we need a wealth tax in the U.S.,
because an income tax, you know, is not enough to, uh,
to make the billionaire pay in proportion
to their ability to pay.
You know, very often you have billionaire like Warren Buffett,
who actually says that he was paying a lower income tax rate
than is appropriate, and this is because many very...
billionaire actually have a relatively small income,
because most of the, uh, income to their wealth
is being, like, is in a family holding a corporation,
so taxing wealth in itself can make them contribute
more in line with their ability to contribute to the premise
It's not to punish wealth.
It's just to make people contribute, you know,
in proportion to their ability to contribute.
Now, whenever... whenever people bring up that idea,
whenever it's Bernie or Elizabeth Warren,
or anyone, for that matter, who says we need a wealth tax,
we need to look at different ways
to tax the wealthiest of the wealthy,
the billionaires and the corporations
that have endless amounts of money and don't pay any taxes,
and find loopholes to not pay the taxes,
the pushback inevitably becomes
that you are discouraging innovation,
you're discouraging the creation of wealth,
and they say, "Oh, the money will move elsewhere."
So if you were trying to convince a billionaire,
or if you were trying to convince a mega-corporation,
to be contributing more and paying their fair share in tax,
what would be in it for them?
Why would you say to them, as Thomas,
"This is why you should pay more as a billionaire,
this is why you should be paying more as a corporation"?
Well, you know, what I would say
is that in the past three decades in America,
you know, we've seen a lot more billionaire,
but we've seen a lot less growth,
and so in the end, you know, the idea that you get prosperity
out of inequality just didn't work out.
So, you know, of course you need to pay them well
when they are successful, but you don't need to, you know,
you don't need to have people that have $10 billion,
$100 billion, you know, where are we going to stop?
So the evidence that we have, again,
is that the real source of economic prosperity
is, uh, moderate the role of inequality,
you know, reasonable amount of inequality,
and education, education, public...
and relative equality in access to education and arts.
This is what works historically.
This is the way we got our highest growth rate in history.
And when we started, uh, sort of investing in billionaire
rather than investing, you know, in education and arts,
In fact, we've a growth slowdown,
and the past three decades, you know,
have not been decades of prosperity, uh, for America.
So at some point, you know, the theoretical discourse
that we could have more growth by having more billionaire,
could be true, but if you look at evidence,
you know, it's just... it's just not working.
It's not happening. Yeah. It's not happening.
What do you think is the worst-case scenario, then?
If... if you live in a world where the inequality
just keeps on growing, the rich get richer
and then the poor get poorer, what do we inevitably get to?
Well, to me, the worst scenario is that, you know.
some... still politicians, you know, like Donald Trump
or, you know, Marine Le Pen in my country, in France,
you know, will use the frustration
coming from income and wage stagnation
and rising inequality in order to point out, you know,
some foreign workers or, you know, some people to blame,
and you can always find people to blame.
You know, in the U.S., you can find Mexico, China.
In France, you know, we can find Germany or...
or North African immigrants.
You know, you always... it's easy to find people to blame.
And this is what really worries me.
That if we don't change our discourse,
and if we don't propose another economic model
that is more equitable, more sustainable,
then, in effect, we open the door
for, you know, all this nationalist discourse,
and, you know, if you keep telling people
that there's only one economic policy,
and that governments cannot, uh, reduce inequality,
that a man cannot do anything about redistribution, taxation,
and that the only thing that governments can do
is to control borders,
then you should not be surprised that, you know,
ten or 20 years later, the entire political discussion
is going to be about border control
and controlling national identity.
-Right. -So I think there can be
conflicting effects of this pandemic.
On the one hand, this is going to reinforce
the legitimacy of hospitals and public services
and-and, in a way, more equality,
-Mm-hmm. -and it could also reinforce,
you know, the fear of strangers and the return to the borders
of the... of the nation state.
And which view is going to win,
you know, depends also on all of us.
This is a way, in the end, to pick the right trajectory,
or at least to put pressure on, you know, our politicians
and our political system to-to...
to go in the... in the right direction.
Thomas, thank you so much for taking the time.
Um, good luck in the pandemic.
And hopefully we'll see you on the other side.
-Okay. Thank you. Bye-bye. -Au revoir.