Transcriber: Ellen Maloney Reviewer: Denise RQ
My name is Dennis Kneale, I have been a journalist for 30 years.
I am thrilled to be here.
It is kind of a newer role for me;
usually, I ask the questions, people like you give answers,
and then I do the best I can to misrepresent what you say.
(Laughter)
I want to talk to you today "In Defense of Capitali$m".
Lately, it feels like capitalism is the scourge of society,
it is the heavy in every story-line, even in the "Lego" movie.
You see protests like the Occupy Wall Street,
and people were so upset that the rich are getting richer,
and our leaders just jumped on that and loved that idea,
and said that basically, the reason that the rest of us have only so much
is because the rich have gotten so much more.
The reason the poor are poor is because the rich got richer.
I am here to tell you today that it simply is not true.
What I am worried about is that I think that America, the Land of Opportunity,
is at risk of turning into the Land of Envy
where the rich are held up
as targets for scorn and resentment from the rest of us.
Capitalism has many enemies, of course, today, all over the place,
but probably enemy number one is Thomas Piketty
- if we can get that up there; there he is! -
the French economist,
author of the New York Times bestseller "Capital in the Twenty-First Century".
It's been on the bestseller list for seven weeks,
it is going to set a new world record
for books that everybody buys, but almost no one actually reads.
(Laughter)
He spent a decade studying 250 years of economic data,
and it took 685 pages
- that's his book right there, it's doing really well -
685 pages, basically to say this:
[CAPITALISM BAD]
It could have been the title: "Capitalism Bad".
He wants a global tax
on all the accumulated wealth in the world held by the 1%.
Let's take 2% of it a year: imagine if you had a million dollars,
you were lucky enough to save it up in your retirement account,
but every year, the government wants to take 20,000 dollars of it.
Simply because you saved a million. For no other reason.
And for what?
To spend it on government programs that have failed for 50 years?
We've spent 16 trillion dollars on federal anti-poverty programs,
since LBJ declared a War on Poverty in 1964.
In 1964, 23% of children in this country lived in poverty.
Today, after 16 trillion dollars,
it is 22%.
We have gained a point of advantage, a point reduction,
for 16 trillion dollars.
Capitalism has not failed the poor, government has failed the poor.
Capitalism is saving the world.
Capitalism makes people free.
Capitalism is our only hope.
Capitalism manages to renew itself though, despite its critics like Thomas Piketty.
The reason I love capitalism is because I've been a business journalist
covering business and capitalism for 30 years.
And when I have grown up, I might have had reason to resent it.
I grew up lower-middle class in Hialeah,
my father left when I was 12,
I remember my mom switching us to brown-bag lunches
because we did not want to spend 35 cents
on a hot meal in the school cafeteria.
My dad was a little bit on and off;
on the side of being a mechanic had a carpet-cleaning business; it fizzled.
Two years after he left, he died suddenly.
It was the morning I turned 14 years old.
He had an insurance policy; 175,000 in today's dollars.
That could have made a big difference.
He left it to his mother, she chose to keep it for herself.
She bought a Cessna.
Which was a nice little plane in those days.
My first paying job was with the other side of the family, Grandpa Olinger.
He was an entrepreneur, he had a fish farm that he supplied pet stores
- nope, that's way too early, hang on -
(Laughter)
- and get rid of my photo here of Mr. Picketty -
and I was shoveling snails out of the concrete pools
that he had built by hand, for 50 cents an hour.
I negotiated for more, but he would not budge.
He was under competition from foreign rivals.
Asia fish sellers were bringing in guppies on the cheap,
and ultimately, put him out of business.
That's capitalism, you know?
Sometimes, you get put out of business by other competition.
But in that time, you learn certain lessons about how good capitalism is.
By the time I joined Forbes in 1998,
capitalism was full bloom; the dotcom bubble.
For the first time, I got the exhilaration of stock options.
Forbes gave me 30,000 options.
If Forbes.com, a website
- and all you had to do in those days was be a website, have 'dot com' in your name-
if Forbes.com went public, I would score several hundred thousand dollar upside.
Liking that!
Then the crash came, oh my gosh.
Hundreds of companies out of business, thousands of jobs lost.
Worst of all, my options, worthless.
Yet, capitalism renews itself. Capitalism is resilient.
Business comes back.
Stocks fall and plummet,
but then they manage to come back up to where they were,
and then, they build on top of that.
By 2007, I joined CNBC and within a year,
I have a front row seat, I am on air,
at the worst meltdown of our lifetime, really,
the worst thing since The Great Depression.
Very scary stuff and a lot of people lost faith in capitalism.
Our own president said,
"At certain times, government is the only thing you can count on."
You know what? I think government is the last thing you can count on.
I think you can always count that people will want to earn money
by creating a product or service so they can get some money.
That is far more reliable than government.
Everything fell apart, people got really afraid,
but government is now hampering the comeback
that could help close that wealth gap that we are all so upset about.
Capitalism is not the problem;
how government handles capitalism is the problem.
In the meltdown of 2008,
it was the result of a bipartisan dream of home-ownership for all, both parties,
eased loan restrictions, poor people bought houses they could not afford.
Why is that moral? It ended up hurting the poor more than helping them.
They ended up putting what little savings they had into homes that they lost,
they got kicked out, then banks got sued
for kicking them out when they did not pay their mortgage.
If you do not pay your bill, you get kicked out.
Unfortunately, that is capitalism too.
But that is immoral.
Government loans, subsidized loans,
to entice people into buying homes that they cannot afford,
that they will lose with the first layoff.
Why is that a good thing to do?
Now, the Obama administration just eased loan restrictions
to make it even easier for poor high-risk people to borrow.
The poor should rent.
They do not have the money to risk that real estate will go down in price,
but our government keeps wanting to get them to do that
because our government is afraid that home sales will go down.
Let's give easy loans to the poor so they will keep stoking home sales.
Why is that a moral policy?
Enemies of capitalism are much more interested in pounding down the top,
than they are in lifting the bottom.
Hence, Mr. Piketty there.
Persnickety Piketty.
He is distressed that 10% of America, the top 10% of earners,
control 50% of the wealth.
The worst gap since 1930.
Implicit in this French lament is a warning:
if the rich don't start sharing more of all that wealth that they have built,
there is going to be a revolt by the rest of us.
Hence....that is going to happen.
"Where do you get that idea?"
Oh yeah, he is from France, where in the late 18th century,
13,000 aristocrats lost their heads to the guillotine.
No wonder he is a little worried.
He figures we ought to tax 2% of all the accumulated wealth every year;
and I have done some numbers, I think that's 2.2 trillion dollars a year
in extra money for government.
Oh, and let us raise income tax rates to 80% on the rich.
The problem is that the definition of "what is rich" keeps going down.
If you go back to 1913, when the income tax first passed,
7% was the very top rate, and it applied to earnings over, what today would be,
twelve million dollars.
Today the top tax rate is 40% on anything over half a million.
You know what? They are coming after your money next.
Because our President says even half a million isn't rich;
250,000 for a couple makes you rich,
he wants to raise taxes on those people.
Why would you raise the taxes? What is it you hope to do with all those taxes?
First a comment say that Piketty is kind of wrong.
Some comments say that he leaves out the whole home crash.
That caused the whole gap to blow out,
it will come back when home prices recover.
The FT has studied his stuff, all his footnotes, and found that OG,
no evidence really to support a lot of his assertions.
Sometimes you decide what you want to say in a book and then you go out
and go ahead and find a way to prove what you want to say in a book.
That is good story-telling.
He focuses on the US and Europe, Piketty does,
but capitalism is doing its best work in the developing world.
Hundreds of millions of people lifted out of poverty in China, India, Korea,
and the Africa continent is next.
In Ghana, there is an 80% increase in purchases of homes and cars.
In one of the poorest nations on earth.
Capitalism does that.
Right now, in this world, we have 1.8 billion middle-class people.
Piketty is worried about a revolt
because there is separation of rich and poor.
In just the next six years,
we will have a total of 3.2 billion people in the middle class.
That is a 77% increase as people who are dirt-poor,
lift into the middle-class in other parts of the world.
They do not own capital, they do not own stocks,
but they are having a better life; they are being lifted up.
By 2030, that's only 15 years or so from now, five billion people,
around the world, middle-class. That is almost two-thirds.
So really, what is Dr. Piketty's problem?
Why is he complaining?
Studies show that a big wealth gap actually drives more economic growth
in countries that have more than 2,000 of income per capita.
More economic growth, because of the gap.
it gives people at the bottom something to shoot for, something to reach for.
That's 158 countries in the world
that have per capita income over that amount.
Even in communist China, Deng Xiaoping is said to have said,
"To get rich is glorious."
In America, it feels like you are supposed to feel guilty about it today.
That desire to get rich is what drove the American dream.
It is what makes our economy the most innovative in the world.
In America, we should be proud to get rich.
We should be happy for those who get richer.
America does all it can to guarantee equal opportunity,
but it does not guarantee equal outcome.
That part is up to us.
My fear is what happens next.
If we believe that that 1% got rich by screwing the rest of us,
it justifies government seizure of wealth, and they will just take it.
I think that that is a mistake because I think that government
does the wrong things with the money.
It is handing out money to people who have not earned it too often,
instead of giving them a leg-up, to allow them to earn it themselves.
There are things we could do.
We could give companies tax breaks so they give stock to all employees.
And the richer the stock plan? The more the tax breaks.
We could give companies that agree to set up factories in the inner-city
where the neighbourhood is worst, ten years tax-free.
And let every employee who works there
and lives there, in the community, building it,
go ten years tax free as well.
These are ways to try to get business, to incentivize business,
because business is self-interested.
If you give them the right incentives, they will create more jobs.
The poor are not poor because they are in jobs that do not pay enough.
Only 3% of people in poverty have jobs.
Over 90% of the poor do not have jobs at all.
They are poor because they do not have jobs.
They would work in jobs if we created jobs for them.
Government is not the way to do it;
capitalism and business is the way to do it.
I just think that we are going down the wrong course here.
We are abandoning our principles of industry and self-motivation.
The profit motive is a good thing, capitalism is a good thing.
I think it is about time, we in America caught on
to what the rest of the world is learning,
and we began to defend capitalism instead of burying it.
Thank you very much.
(Applause)