Thomas Piketty’s Case For ‘Participatory Socialism’

The French economist Thomas Piketty is arguably the world’s greatest chronicler of economic inequality. For decades now, he has collected huge data sets documenting the share of income and wealth that has flowed to the top 1 percent. And the culmination of much of that work, his 2013 book “Capital in the Twenty-First Century,” quickly became one of the most widely read and cited economic texts in recent history. Piketty’s new book, “A Brief History of Equality,” is perhaps his most optimistic work. In it, he chronicles the immense social progress that the U. S. and Europe have achieved over the past few centuries in the form of rising educational attainment, life expectancy and incomes. Of course, those societies still contain huge inequalities of wealth. But in Piketty’s view, this outcome isn’t an inevitability; it’s the product of policy choices that we collectively make — and could choose to make differently. And to that end, Piketty proposes a truly radical policy agenda — a universal minimum inheritance of around $150,000 per person, worker control over the boards of corporations and “confiscatory” levels of wealth and income taxation — that he calls “participatory socialism.” So this conversation isn’t just about the current state of inequality; it’s about the kind of policies — and politics — it would take to solve that inequality. We discuss why wealth is a far more accurate indicator of social power than income, the quality of the historical data that Piketty’s work relies on, why Piketty believes the welfare state — not capitalism itself — is the most important driver of human progress, why representative democracy hasn’t led to more economic redistribution, whether equality is really the best metric to measure human progress in the first place, how Piketty would pay for his universal inheritance proposal, whether the levels of taxation he is proposing would stifle innovation and wreck the economy, why he believes it would be better for societies — and economic productivity — for workers to have a much larger say in how companies are governed, how Piketty thinks about the prospect of inflation and more. Mentioned: The Great Leveler by Walter Scheidel “Anne Applebaum on What Liberals Misunderstand About Authoritarianism” by The Ezra Klein Show Book Recommendations: The Great Demarcation by Rafe Blaufarb The Emergence of Globalism by Or Rosenboim The Origins of Totalitarianism by Hannah Arendt We're hiring a researcher! You can apply here or by visiting nytimes.wd5.myworkdayjobs.com/News Thoughts? Guest suggestions? Email us at [email protected]. You can find transcripts (posted midday) and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast, and you can find Ezra on Twitter @ezraklein. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs. “The Ezra Klein Show” is produced by Annie Galvin, Jeff Geld and Rogé Karma; fact-checking by Michelle Harris; original music by Isaac Jones; mixing by Jeff Geld; audience strategy by Shannon Busta. Our executive producer is Irene Noguchi. Special thanks to Kristin Lin and Kristina Samulewski.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:06Ezra Klein?

  I'm Ezra Klein. This is the Ezra Klein Show.

• 0:20Ezra Klein?

  So before we begin today, a bit of job creation, we are looking for a researcher on the show. This job is exactly what it sounds like, somebody who's gonna work with us on researching the guests, the episodes, the work, help write questions, help shepherd the episodes through. But this is the central thing that makes the show go. If that sounds like you, it sounds like your skill set, it sounds like something you want to be doing, have done, can show us that you'd be amazing at doing it, and that you really get the show on a deep level, we have put the link to the job description in the show notes. But for today's episode, Thomas Piketty, finally, Thomas Piketty, I think, one of our most requested guests. If you don't know Piketty, he's arguably the world's

• 1:01Ezra Klein?

  greatest chronicler of economic inequality. Across a series of papers now, working with a wide range of co-authors, he's put together these painstaking cross-national data sets showing the extraordinary amount of income and wealth that has flowed to the top one, and even 0.1, and even 0.01% of the population. His book detailing the way capitalism rewards wealth over work, detailing why those trends actually happen, Capital in the 21st Century, was a huge international bestseller, which was a real rarity for a book like it. It's a long, dense, complicated work of economics. But Piketty is one of those people who, through empirical work, through theory, has genuinely

• 1:46Ezra Klein?

  reshaped the way we think about central dynamics of the economy. He's really a transformational intellectual figure. And he's got more to say. His new book, A Brief History of Equality, isn't just detailing our continued descent into economic dystopia. It's a book that is much more optimistic about our past than people associate with him. He argues that we've seen a march towards equality that many of us still underrate. And then it's much more optimistic about the future we could have because Piketty thinks that we can have much more radical policies than most economists or politicians buy into that could really build a far more equal world. I mean, we're talking here a universal

• 2:27Ezra Klein?

  minimum inheritance of around $150,000 per person, worker control over the boards of corporations, massive levels of wealth taxation. He's really putting forward solutions proportionate to the size of the inequality problem. It's bracing stuff to read. Piketty, I should note, is French. His English is so much better than my French. But if there's anything here you have trouble understanding, we will have a transcript up at The New York Times a couple hours after the show comes out. As always, my email, [email protected].

• 3:03Ezra Klein?

  Tomas Piketty, welcome to the show.

• 3:05Speaker 01

  Thanks for inviting me.

• 3:07Ezra Klein?

  So I'm thrilled to have you here. I think you're arguably the world's leading chronicler of economic inequality. And so what then led you to write a book chronicling equality? A sort of more fundamentally optimistic work, I think, than many of your past pieces?

• 3:26Speaker 01

  You know, I've always viewed my work and conclusion as relatively optimistic. And I was a bit sad to see that some people had a different reading. So I thought, you know, it was time to sort of reframe everything to clarify maybe some of my thinking. You know, one of the problems that my past two books, Capital in the 21st Century and Capital and Ideology, were really long. And so, you know, people can get lost into the argument. And I really wanted to write a much shorter book. And by doing that, you know, I think, you know, maybe I was able to clarify my thinking and also maybe to clarify the fact

• 4:05Speaker 01

  that, yes, in the long run, there is a movement toward more equality. So when I talk about the long run, you know, I'm looking at the two centuries, two centuries and a half, starting at the end of the 18th century with the French Revolution, the US Revolution to some extent. And I look at the broad Evolution of, you know, political equality, social equality, economic inequality over this period. And yes, I see a long run movement toward more equality that did not come naturally or smoothly. You know, it came out of major political mobilization, social

• 4:43Speaker 01

  struggles in some cases, sometimes major crises. But in the end, this is the construction of new institutions, of new legal, educational, fiscal, social rules of the game that have transformed our societies in, I would say, you know, in a very positive manner, that have made them both more equal, more prosperous. And, you know, this is the story I wanted to focus upon because I think in the end, this is a major lesson from, you know, all this body of historical sources and data that I have been gathering for a number of years now.

• 5:25Ezra Klein?

  Let's work through the argument of this book and an important move you make right at the start is particularly in America, when we think about inequality, we tend to focus on income statistics. And you argue that wealth inequality is the more important measure to focus on. Why?

• 5:46Speaker 01

  Well, I think wealth is in a way a better indicator of opportunity, of power than income. And more generally, you know, what I care about is really the equality or inequality of capabilities, as Amartya Sen would have said. So, you know, what you can do with your life, you know, the kind of choice you can make, the bargaining power you have vis a vis the rest of society and vis a vis your own life. And from this viewpoint, wealth is quite important because, you know, when you have no wealth at all and or even worse, when you have negative wealth, when you have only debt, you need to accept everything, basically. You need to accept any working condition, any wage, because you need to

• 6:31Speaker 01

  pay for your rent, you need to take care of your family or relatives. And, you know, you cannot really make choices. Whereas if you have just You know, even just one hundred, two hundred thousand dollars or three hundred thousand dollars, you know, or euros, you know, this can seem very small to someone who has millions or billions. But in fact, this makes a big difference as compared to having zero or negative wealth. Because then you can, you know, so if you are being proposed a job and, you know, you don't like it, you don't need to accept it right away. You can wait a little bit. You can try to create your own business. You can build your own home so that you don't need to bring in a wage and a rent every month. And you can start, you know, different kind of projects in your life.

• 7:13Speaker 01

  So this puts you, it's much more than money. It's really a question of bargaining power with respect to the rest of society and, and basically deciding the kind of life you want to have. So it goes well beyond just economics in a way. It's much more important than that. And indeed, this movement toward more equality that I describe in the book is primarily a movement where more and more people, you know, acquire more and more, you know, control, agency, power, opportunity with respect to their own life. And from this viewpoint, yes, wealth indeed is a better indicator than income.

• 7:55Speaker 01

  Generally speaking, you know, we need to have a sort of multi-dimensional approach to inequality and to the kind of social and economic indicators that can help us to monitor this long journey toward equality. So income is important, wealth is important, but there are many other indicators, you know, including access to political participation, to participation, to decision-making in companies. And so that's, you know, we need this multi-dimensional approach. And I think I am also clearer in this book about this maybe than I was in my previous two books.

• 8:33Ezra Klein?

  It's something I really appreciate in your thought, the attention to power in all directions, that wealth is a form of power, bargaining power, vis a vis society, as you put it, that it is often gained through power. It is not an automatic story of economic policy, or markets, or technology. But you're not just storytelling here, you're also tracking data. And tracking data over a quite long period of time, you're tracking wealth distribution across society, across multiple countries, over more than 200 years. What kind of data are you using for that? Why should I believe that the data we have

• 9:13Ezra Klein?

  on wealth in France, or the UK, or the US, from more than 150 years ago, is good enough data to build the kind of story and draw the kind of conclusions and run the kind of analysis that you do?

• 9:27Speaker 01

  Right. So, you know, I think the data we have on wealth and property for the late 18th century and the 19th century is probably better than what we have today. First, because, you know, at the time, you didn't have tax evasion, you didn't have progressive taxation. So, you know, people did not have a strong incentive to try to hide their wealth. And in fact, it was quite the opposite. Wealth and property was very often at that time a way to establish your political rights. And indeed, you have a political system which are very often based on property in order to grant you voting rights. So, the data is pretty good. In a way, the problem with the data is more today, where we need to

• 10:07Speaker 01

  make a lot of effort, you know, try to use various data sources in an imaginative manner in order to make sure we can correct for all the tax evasion, for all the wealth in tax evasion. We do our best to do that, you know, we've made progress, but certainly there's still a lot of progress to be made. You know, we, sometime we imagine we live today in a world of big data and big transparency. But in fact, some private companies accumulate a lot of big data, which sometime we would like them not to accumulate on ourselves. But in terms of- Public statistics and public information about who owns what and how this is changing over time.

• 10:49Speaker 01

  We actually live in an age of big opacity and it takes a lot of energy to try to combine the relevant information for the recent period. And you know, this is a kind of work that historians started to do a long time ago. You know, I should say, you know, all my work is really in the continuation of a, you know, large body of historical research on income and wealth and wages and prices, which started in the late 19th century. But for us, you know, when I started working on this, you know, in the late 1990s and in the post 2000 period, you know, we've been able to process a much larger quantity

• 11:32Speaker 01

  of data to increase drastically the number of countries. And you know, by having 10, 20, 50, 100 countries rather than one or two, you know, you can make comparison, you can start asking, okay, you know, what kind of impact did it have for this country to have a rise in inequality or a decline in inequality as compared to this other country? I mean, we're still very uncertain about a lot of conclusions. Let me say, you know, we are in the social sciences, we, you know, we are not going to have a mathematical formula.

• 12:04Ezra Klein?

  So when you track all this data, when you run the trends, you know, in the US and in France and the UK, other parts of Europe, there's obviously a lot that emerges. But what are the three things you feel you've learned from looking at these trends over time that people might not expect? Once you've immersed yourself in the data, how does the story of equality change from maybe what our folk wisdom or intuitions about it would be over this, you know, multi-century time period?

• 12:38Speaker 01

  Okay. The three most striking conclusions maybe to me will be, first, you know, there's been a long run movement toward more equality, both of income and wealth.

• 12:50Speaker 01

  And I'm gonna be more specific about this in a minute. Second main finding, you know, this movement toward more equality in terms of income and wealth really starts only after World War One and World War Two, you know, during the nineteen forty, nineteen forty-five period. There's really not much going on in the nineteenth century and pretty much until World War One. And three, you know, the third finding is that, you know, this movement toward more equality, although, you know, it's still there. If you compare the situation today with the situation in nineteen ten, nineteen fourteen, we live in a more equal world in terms of equality of wealth and especially equality of income. This movement has been of limited magnitude, you know, in the sense that the concentration of wealth is is still very large.

• 13:35Speaker 01

  So let me maybe be a bit more specific about the numbers that people should have in mind so that they can understand what I mean with these three findings. If you look at the at the distribution of wealth today in the United States or in Europe, what's really striking is that the the bottom fifty percent of the population basically owns almost nothing at all. So when I mean nothing at all, in the U S it's going to be two percent of total wealth owned by the bottom fifty percent. In Europe, it's going to be four percent, so that's better than two percent, but it's still very small.

• 14:14Speaker 01

  The top ten percent would own over seventy percent of total wealth in the U S and around sixty percent in Europe. And so the rest will be owned by the forty percent of the population that are in between the top ten and the bottom fifty by definition. So this illustrates, you know, the my sort of point number three, which is we still have a lot of inequality. You know, this looks like a very large concentration of wealth. And indeed, if we are looking at income, it will look less extreme, much less extreme than this. The bottom fifty percent, you know, maybe would have twenty percent of total income and rather than two or four percent. So it's it's this is much less extreme for incomes than for wealth.

• 14:57Speaker 01

  Now, although inequality of wealth today looks very large, you know, one century ago, it was even more extreme. So if you look at, you know, Europe in nineteen hundred or nineteen ten, the top ten percent would own ninety percent of wealth rather than sixty percent today. So that in the end, you know, this middle forty percent were in between the top ten and the bottom fifty percent at the time were almost as poor as the bottom fifty percent. You know, they would own, you know, between five and ten percent of total wealth and the the bottom fifty would own one or two. It's as if you have no middle class in the sense that the well, the middle class is,

• 15:39Speaker 01

  you know, is always a bit richer than the bottom fifty percent, but there's no, they really did not own much. So there has been some, you know, significant improvement in the long run, in the sense that this by middle forty percent group, who used to be almost as poor in terms of share of total wealth a century ago, now owns up to forty percent, almost forty percent of total wealth in Europe and and a bit less than thirty percent in the U S. So this is a significant improvement. The striking fact, which I didn't know, you know, before looking at the historical data, is that, you know, this movement toward limited diffusion of wealth to the benefit

• 16:22Speaker 01

  of this middle forty percent did not start really before World War One. So in the nineteenth century and in the early twentieth century until nineteen fourteen, you have, you know, either more concentration of wealth or a stabilization at a very, very high level of wealth concentration, but the movement toward less inequality really starts after World War One, World War Two, follow of wing, you know, large transformation of the social system, the fiscal system, the rise of progressive taxation, the rise of social security. So some of this political movement, of course, started before World War One and, you know, it's very difficult to rewrite history about, you know, what would have happened without World War One and World War Two.

• 17:06Speaker 01

  You know, you can certainly make the case that in, for instance, in the U S, the Great Depression was had an even bigger impact on the the the political landscape and social landscapes and the war. You have countries like Sweden. Which were World War I, World War II did not have such a big importance, such a large importance as in other countries and which still add this movement toward more equality and to some extent even more so than the other. So, you know, I don't mean to say, you know, it's really the war itself. It's more the, this entire process during the first half of the 21st century is going to lead to a transformation of the political, social and fiscal system in such a manner that, you know,

• 17:49Speaker 01

  this is going to lead to a limited diffusion of wealth and, you know, limited rise of more equality.

• 17:58Ezra Klein?

  Well, let me get to that emergence of a wealth middle class. So I think the story you tell there is incredibly striking for a couple of reasons. One, of course, the punctuated nature of it. While we can't know exactly how much of a driver war was, so another book about moments in time when inequality really changed, The Great Leveler, and I would say the takeaway of that book is the only force is stronger than those protecting great inequality of wealth are wars, plagues and total societal collapse. And it's a pretty grim conclusion, but I also find your story here surprisingly grim in a way, because on the one hand, you're telling a story of

• 18:40Ezra Klein?

  dramatically rising equality over a long period of time. But that story is actually really a story of change in inequality, wealth transfer almost entirely among the top 50% of the income distribution. So the bottom 50% goes from, you know, depending on the country, but roughly two points of the total wealth distribution, you know, in the 1800s, early 1800s to around five today. And I can then hear my conservative friends saying, well, doesn't this suggest something is wrong with your data? If wealth is power, If this is a measure of inequality,

• 19:20Ezra Klein?

  would you really rather be in the top 10% in 1800 or the bottom 20% today? Is it really not true that the bottom 50% of the distribution has a lot of political power today and just a lot of power that they didn't have in the early 1800s? So how do you respond to conservatives who say this is actually missing how much the economic changes in this era over this period did to diffuse the fruits of economic growth, of technological change, of riches, such that the wealth distribution is obscuring more than it reveals?

• 19:57Speaker 01

  Right, so what I would respond is that they should start reading chapter one of my book and in particular, figure one and figure two, where I start by analyzing the fact that average income per capita, you know, has been multiplied by 10 over the past two centuries. So, you know, that's the first, together with the big rise of, so figure one is about the enormous rise in life expectancy and the enormous rise in literacy rates. And figure two is about this enormous rise in income per capita. And so this is, of course, the first way. I mean, you asked me about what was the most surprising finding. So, you know, this, I did not invent the big rise in per capita income or life expectancy. So that's why I did not start with this.

• 20:42Speaker 01

  But in the book, this is, of course, where I start because, you know, this is the first way in which there's been an enormous increase in opportunities, in power, in equality. So the fact that, you know, you can live your life until age 60, 70, 80, rather than dying at 20 or 30, you know, is a, is a major positive transformation. The same thing about access to culture and literacy. Same thing to some extent about access to higher purchasing power. And the second thing on which I insist immediately at the beginning of my brief history of equality is that this historical

• 21:22Speaker 01

  Rise of modern economic prosperity and this multiplication by ten of average income came together with more equality and in particular with more equality in education. So to summarize, you know, the true source of economic prosperity is equality or at least a relative equality in education. And a big part of this very large rise in purchasing power, you know, which is one of the first form of of the rise of power in general. This big rise in purchasing power happened in the twentieth century, which is a time when you have

• 22:00Speaker 01

  big reduction of inequality, in some cases, you know, very high progressive taxation. So, you know, in the United States, the time when the United States has a maximum economic prosperity and maximum economic dominance over the rest of the world is also the time, you know, between nineteen thirty and nineteen eighty, when the top income tax rate, as we know, on average was about eighty percent. It was sometimes ninety-one, sometimes seventy. On average, it was of the order of eighty percent. Not only this did not damage American prosperity, but in fact, this was a period of time

• 22:40Speaker 01

  with the maximum US prosperity with respect to the rest of the world, with the biggest gap in terms of productivity between the United States and the rest of the world. Why is it so? Because the US at the time was the educational leader and you need to wait until the nineteen eighties, nineties to get convergence of other Western countries on this US educational level and also convergence in productivity level. So, you know, the the big lesson from history and from this big picture analysis is that historically, the true source of increased prosperity, increased productivity, increased income and purchasing power.

• 23:21Speaker 01

  Is the rise of education and relative equality in education in the sense that you want to have broad access to education. I mean, you don't want to have everybody going exactly through the same education, but you want to have 100% of the population going to primary school and then 100% going to secondary school. You know, you need this very broad access to education and this has been the true source of prosperity. So you see that, you know, this movement toward more equality is a movement that needs to be put into a perspective that is much broader than just the evolution of wealth concentration and wealth shares during the 20th century, which is, you know, also important, but in

• 24:06Speaker 01

  a way, you know, maybe it's less important than for this big long run rise in prosperity and also the, you know, the big long run rise in political participation.

• 24:19Ezra Klein?

  I want to get to political participation here because I think it raises the very puzzling question from the other side. A conservative might look at this and say, how can you not track a rise in wealth despite the fact that the lives of people at the 25th percent are so much better today than in 1800? I think the way somebody more on the left or certainly somebody who's more liberal, who believes more deeply in democracy, might look at this is to say, there's a puzzle here. The long time view, certainly the long time fear of democracy, was that if you give people the opportunity to vote, that 50% at the bottom of the distribution, that 50% plus one, that 60%, which has so much less

• 25:03Ezra Klein?

  wealth than the top 10%, but so many more people are just going to vote the wealth of the top 10% over to them. And ambitious politicians who want to win votes in a system that, you know, more or less, not perfectly, but more or less runs on votes. I was just going to go to those people and say, if you vote for me, I'm going to, you know, have a huge wealth tax and I'm going to take all these people's wealth and I'm going to give it right to you. And the fact that there is such unbelievable stability in the wealth distribution over this period where these countries do become vastly more small D democratic is really puzzling. It's really very puzzling. Like, how did it not happen? How did this fear and this seemingly logical outcome not come to pass that the bottom

• 25:47Ezra Klein?

  55% didn't vote themselves a much larger share of the top 10%'s wealth? How do you understand that?

• 25:55Speaker 01

  Well, there are several explanations. So the first factor I want to stress is that, you know, it took a long time to extend the right to vote. And, and, you know, even in the late 19th century, early 20th century, you still have lots of countries where the right to vote, you know, is very unequally distributed. So the first answer to your question is, well, in some countries, you know, it took a long time to actually get equal voting rights. The second answer is that equal voting rights is not enough, you know, if you have very unequal funding of political campaigns and, and, you know, typically that's what one of the key problems you have in the US today.

• 26:36Speaker 01

  But it's also, it was the same situation, you know, in countries like in France in 1900 or 1910, where you already have a universal suffrage for men. So it was more advanced than Sweden in a certain manner. Or in, in Britain, you know, it was, there was, there were several extensions of the suffrage. It was still not universal in 1900, 1910, but it was getting close. But in, the problem is that in France and Britain at the time, you know, you still had very unequal power in terms of influence into the political process, financing, political parties, campaigns, financing the, the media. In the US, you know, it was maybe less entrenched at the time than in Europe.

• 27:20Speaker 01

  I think it has become more entrenched today. So in a way, you know, the US has become the new old Europe of the world and, and, you know, is the form of inequality today, which I think is close in a way to Europe during the belly pocket. Period with, you know, very entrenched economic elite and political system where the private financing of political campaign and political action committee makes it really difficult to change the system and in particular the economic and tax policy. I mean, I think things can still change through political mobilization, but this makes things more complicated. And finally, you know, the third reason why things are complicated is also because, you know, it's not so obvious to determine for the majority of the voters, you know,

• 28:05Speaker 01

  what's the right level of equality or inequality. You know, I'm certainly not saying that, you know, full equality is the ideal, because you can have, you know, very good reason, you know, why different people want to conduct different lives, make different choices. You you may want to have some incentives. So even if you have, you don't have this problem of unequal political rights and unequal political influence, it's a matter of learning over history about the right institutions, the right level of equality and inequality. So just to take an example, you know, before very highly progressive taxation was experimented historically, in

• 28:46Speaker 01

  particular in the United States between 1930, 1980, you know, it was difficult to know how it would work. And so, you know, the way I write about this today is very different from what people could have written in 1910 or 1920 before it was experimented, where, you know, people could say, this is going to be a disaster, this is going to destroy the economy. Now, of course, some of these arguments were sort of self-serving argument, but partly they were also plausible arguments. So, you know, I think there's a process of large-scale experimentation and learning about the right institutions in history that is still going on, of course,

• 29:29Speaker 01

  and that is, you know, much more complex than simply, okay, you know, the poor are going to expropriate the rich and etc.

• 29:57Ezra Klein?

  One thing about this book that I really appreciated about it is that it isn't just a dry recitation of trends, but it is a proposal for a series of fairly transformative policies that I think, as you see it, would bring liberalism closer to many of its long-term claims that it does not tend to achieve. So tell me about what you call participatory socialism. What makes participatory socialism different from conventional social democracy?

• 30:29Speaker 01

  In my view, this is really the continuation of social democracy into the 21st century. So what are the, you know, the great limitation of social democracy? I see three main limitations. One is that in terms of wealth concentration, there has been limited progress. So, you know, the bottom 50% today, you know, in spite of the rise in incomes, the rise in the welfare state, you know, of course, they have a much better life today than one century ago. And that's quite abuse in there in terms of access to education, to health, to pension, to income. That's a huge progress. But still, in terms of wealth, as we've said at the beginning, they own, you know, 2% of the total wealth, 4% of total wealth. So there's

• 31:12Speaker 01

  been very limited progress. So how can we make progress in this direction? And what I argue in the book is that one way to move in this direction will be to have a minimum in returns for all. So, you know, that's not instead of social security, basic income, a free education, free health, you know, this comes at the top of all of this. And this is maybe, you know, the final step or one of the final step in this long process. So I give concrete example, you know, I say, okay, maybe you want to have everybody at age 25 who should receive, say, 120,000 euros, which in the European context will be about

• 31:52Speaker 01

  60% of average wealth, which is currently about 200,000 euros per adult. So in the US, maybe it will be a bit more, say, Hundred fifty thousand dollars, I don't know, something like this. I should say, we will still be very far from equality of opportunity in the sense that the bottom fifty percent who now receive close to zero, they would receive, say, you know, one hundred twenty thousand euros. People who are in the top ten percent, who today receive an average about one million euro, will still receive six hundred thousand euros after the progressive tax on inheritance and wealth that's paying for all of this. So you will still have, you know, substantial

• 32:36Speaker 01

  inequality of opportunity between these two broad groups. And if, you know, if you want my opinion, I think we could go much further away in this direction. But this will already make a big difference because this will give more power and more opportunities for the bottom fifty percent. And I'm always very surprised by the fact that people often claim that they are in favor of equality of opportunity at a theoretical level. And then when you propose concrete policies to move in this direction, you know, many people, especially people from the top of the distribution, you know, get completely crazy and say, oh, what? You're going to give money to these poor children, but you know, they are going to do

• 33:18Speaker 01

  terrible things with the money, you know, as if wealthy children always made good choices with the money they receive. So, you know, if people want to put limits on what people could do with their minimum inheritance, you know, I have no problem with this as long as you put the same limits on all inheritors, you know, including wealthy children. But otherwise, you know, this looks like a very illiberal and authoritarian approach to opportunities in society.

• 33:48Ezra Klein?

  A couple of places I want to dig into this policy because I think it's genuinely fascinating and I could not agree with you more. It drives me crazy. The trope in American politics where even conservatives will say, well, I don't agree about equality of outcome. What I believe in is equality of opportunity. And equality of opportunity is unbelievably difficult to achieve and nobody's even really trying. I have a couple of questions about this policy. The idea that you could impose a wealth tax of sufficient size that people who are wealthy now would not lose everything they have, but you could be giving every member of society around $200,000 in perpetuity, right? Not just for a year or two as you, you know, do the front end of that wealth tax, but in perpetuity.

• 34:33Ezra Klein?

  I think people are going to wonder about the math of that. Is that, is that really true or is that a fantasy? So can you say a bit about why you're confident in numbers of this net out? That you, you could make such a big guarantee to such a large population going forward without needing to do something, without doing something that would destroy the economy?

• 34:55Speaker 01

  One way you could do it is you could just redistribute the flow of inheritance each year. So, you know, each year, the average inheritance that is transmitted to the new generation, it will be, you know, of the order of, of 200,000 euros in Europe or 250 or 300,000 dollars in the US. So, you know, you could just replace this by a lump sum payment to everybody in the generation. And, you know, you did not, you don't need to tax wealth. You just do it through the redistribution of inheritance. Now, this is not the way.

• 35:26Ezra Klein?

  So just to, just to clarify that, so that you're saying that every year, the amount of money that is passed on in inheritance and say the US is so large that if you divided it by the denominator of all the people, I guess who had turned 25 that year in the US, you would get, it's like 250, 300,000 per person?

• 35:44Speaker 01

  Yeah, because this is exactly the average wealth of descendants in the US today. So on average, you know, descendants leave 250, 300,000 dollars, you know, per individual descendant every year. So it means that on average, you know, because families have about two children on average, you know, every children is going to receive on average, you know, 250, 300. Now, this is an average. Then if you look at the distribution, the bottom 50% of children. Actually receive close to zero. And you know, the top ten percent of top one percent are going to receive millions. But the average is about, uh, you know, two hundred fifty thousand, three hundred thousand dollars.

• 36:26Speaker 01

  So, you know, you could just redistribute this equally and by definition, everybody will get this, this same amount. And by the way, you could have it at twenty five for everybody instead of having, you know, some time at fifteen, sometime at forty five, sometime at sixty, depending on, you know, the, the, you know, at what time people die, etc. So that will be one way to do it. This is not the way I propose to do it because I think you, you know, you actually want to let, uh, people, uh, you know, leave different levels of inheritance for all sorts of, of good reason. And so the way I propose to finance this minimum inheritance, which in my proposal will be closer to one hundred twenty thousand euros

• 37:07Speaker 01

  or one hundred fifty thousand dollars, will, which could be paid for by a tax of around sixty percent of all inheritance. But this is not the way I propose to do it. I propose to pay partly by progressive tax on inheritance, but mostly by a progressive tax on wealth. Why is it so? Because, you know, I think generally speaking, the progressive wealth tax is a better instrument than the progressive inheritance tax. I mean, both are useful, but the progressive wealth tax is more useful because it allows you to, you know, adjust the contribution to public finance to, you know, your current situation basically. You know, life is long, life has always been long, but life is particularly long today.

• 37:50Speaker 01

  So, you know, when you have a life expectancy of eighty or ninety, if you make a large fortune at, at age thirty or forty, you know, we are not going to wait until you, you are eighty or ninety before you contribute to the public finance of your, of your country. So, you know, we, we, it's much better to have an annual wealth tax to contribute to redistribution. And so just to give you orders of magnitude, this, this minimum inheritance for all, if this is, uh, set at the level of sixty percent of average wealth, so everybody would receive at age twenty five, sixty percent of average wealth, the total cost. For a country will be, you know, of the order of five percent of national income each

• 38:35Speaker 01

  year, which is significant, of course, but you know, as compared to a large, modern welfare state, which in Europe will raise, you know, forty to fifty percent of national income, this will only be a component of five percent of national income. So that's significant, but you know, it will be smaller, for instance, than the the cost of a total healthcare system or total education system or pension system. So, you know, it would just be an extra component to the social state or to the welfare state in general. But let me make very clear that this is not a component that is hugely costly. I mean, it is costly, but it's not more costly than these other components that have been developed

• 39:20Speaker 01

  in the past. And generally speaking, you know, everything I'm trying to propose is very much, you know, in the continuation, quantitatively and and and politically and economically with with some evolution that have actually been taking place in the past century. So I'm not, you know, sort of dreaming about things which have nothing to do with what with what happened in the past. I'm really trying to look, okay, what happened in the past? What will be a logical next step if we just continue the evolution of what we've seen in the past?

• 39:52Ezra Klein?

  And the the argument you'll hear in response, and this is an argument you heard against progressive taxation, income taxation, an argument that got made against things like Medicare and social security, but is particularly at the scale that you will wreck the economy. And in particular, for something like this, that what you will do is you will destroy the incentive, and here I'm just making the argument, of the most innovative, creative, productive people, the people whose efforts do the most to push forward the total societal standard.

• 40:29Ezra Klein?

  Of living such that by doing this, it will look arithmetically like you are making people in the bottom 50% better off, but in fact, you're making everybody worse off because you're robbing people of the incentive to innovate. How do you respond to that argument?

• 40:45Speaker 01

  Yeah, you know, that's an interesting argument at a purely theoretical level. But again, if I look back at my historical comparative evidence, I see very little support, or in fact, no support at all for this argument for a couple of reasons. You know, first of all, if you look at the long run evolution, you know, we've seen less concentration of wealth. So you know, the top 10% of the wealth distribution today would have 60% in Europe, 70% in the US, you know, as compared to 90% before World War One in Europe. You know, this did not destroy the economy. If anything, this decline in the share of total wealth going to the top 10% and the corresponding increase in the share going to the next 40% has contributed

• 41:29Speaker 01

  to a much faster economic growth in the 20th century than in previous centuries. I think partly because it allowed more people to participate to the economy and also partly because it came also with a rise of education and this was the true source of higher productivity in the long run rather than the enormous level of inequality that we had before World War One. You know, this theoretical discourse that more inequality, more concentration of wealth is always better for economic growth, you know, was made, of course, throughout history by, you know, people who had large concentration of wealth, certainly in Europe before World War

• 42:10Speaker 01

  One. And, you know, this is the discourse that in the 1980s, Ronald Reagan, you know, tried to tell Americans, you know, basically tried to tell them, look, we've gone too far with the New Deal with Roosevelt in terms of progressive taxation, wealth redistribution. We are going to cut top tax rate by two. We are going to go down to 28% or 30%, you know, as compared to the 80, 90% top tax rate under Roosevelt. So the promise that was made by Reagan During the nineteen eighties was that, you know, cutting top tax rate might lead to more inequality, but will also lead to so much more innovation, more economic growth and the incomes of average Americans are going to grow much faster than they they they used to grow.

• 42:54Speaker 01

  Except that this is not what we've seen at all. So, you know, if you look at the three decades after Reagan, you know, nineteen ninety to two thousand twenty, the growth rate of national income per capita in the US was only, you know, one point one, one point two percent as compared to two percent, two point five percent in the period of nineteen fifty to nineteen eighty or nineteen fifty to nineteen ninety, which itself was not particularly exceptional. It was, you know, it was the same nineteen ten to nineteen fifty, it was about two, two point five percent, eighteen seventy to nineteen ten, around two percent. So, in fact, the post-Reagan period, you know, nineteen ninety, two thousand twenty has been particularly bad in terms of growth rate of national income per capita,

• 43:38Speaker 01

  which at the end of the day, you know, is the best economic measure we have of the increase in productivity and this should reflect innovation, et cetera. So, you know, this policy experiment has been a failure in the sense that we've not seen this enormous increase in the size of the pie that was supposed to justify this policy. Yes, certainly, we've seen the increase in inequality. You know, billionaires today are hugely richer than what they were thirty or forty years ago. But for the average American, you know, we've not seen the increase in purchasing power. And I think this disappointment, to say the least, following the Reagan decade

• 44:17Speaker 01

  is at the origin of many of the political troubles that we've seen in the US in the in the past ten to fifteen years, and in particular, the fact that the Republican Party, which at the time of Reagan, you know, was sort of very optimistic about the power of the market and the power of globalization and the power of economic incentives and of trickle-down economics. Well, thirty years later, you know, had to come with a different story because since the incomes of average American were actually not growing as was told before.

• 44:53Speaker 01

  Then, you know, people like Donald Trump, you know, had to come with a different narrative, typically saying, "Okay, this is the fault of the Mexican, of the Chinese, of the rest of the world, you know, that has been stealing the hard work of Americans." And, you know, this has become more and more frightening in a way. And I think this is partly the consequence of this failure of Reaganism. So, to summarize, you know, the theoretical claim that, you know, richer billionaires, more inequality leads to faster economic growth, you know, it's a very interesting theoretical claim from a purely, you know, abstract and theoretical perspective. But, you know, we're talking about serious issues, which have serious consequences on our society.

• 45:36Speaker 01

  So we cannot just do theoretical claims. We need to look at actual data, actual facts. And again, if you look at the big picture, you compare growth rate, you compare level of inequality across periods, across countries. The conclusion is that we don't need this kind of level of extreme inequality in order to grow. I'm not saying you want complete equality, you know. I, I think, you know, you need income gaps of, you know, maybe one to 10. Some people would say one to 20, you know. My reading of the historical evidence I have is that, you know, one to 10 or even one to five is probably sufficient to get the, the right incentives. But certainly, one to 100 or one to 200 or one to 1,000, this is completely useless.

• 46:21Speaker 01

  You know, if I compare different historical periods, different societies, it's very hard to make the case that we need such extreme level of inequality.

• 46:52Ezra Klein?

  So to stay on the idea of participation, because I really like that line in your idea of participatory socialism. So this kind of wealth redistribution would give people a lot more bargaining power to participate in society on a more equal ground, to chase opportunities, to follow passions and ambitions. But you also push for something else, which I think is very interesting and was something that was, in various ways, proposed by some Democrats in 2020, which is worker co-determination. Can you talk through what co-determination is and why you think it's so important?

• 47:28Speaker 01

  Right, so here again, I am trying to start from what has been successful during the 20th century and to see how we can push it further. So in the 20th century, an interesting policy innovation, together with progressive taxation, which happened in the US and many European countries. Another interesting policy innovation, which took place in Sweden, in Germany, and more generally in Nordic Europe, was what is sometimes called co-determination or co-management, which is the fact that workers' representatives have a significant voting rights in the board of companies, even if they don't hold any share in the capital stock of the company.

• 48:07Speaker 01

  So the way it works in Germany is that worker representatives can have up to 50% of voting rights in the board of large corporations, in the case of Germany. So shareholders still have 50% plus one, so there is a tie, they can make the difference. But still, this means that if, in addition, the workers have a small capital share in the stock of the company, say 10% or 20% of the capital, or if a local or regional government has 10 or 20% of the capital, which sometimes happen in Germany, then this can shift the majority. And basically, you can get the majority of the vote even in front of a shareholder

• 48:51Speaker 01

  who has eighty or ninety percent of the stock. So I can tell you that, you know, from the point of view of a shareholder, this is like communism, you know, and shareholders in my country, in France, or shareholders in Britain or in the US, you know, would not like at all this system. Except that this was applied, you know, not in some tiny obscure countries, this was actually applied in Sweden, in Germany, and this has been like that, you know, since the early nineteen fifty's. At the time, shareholders did not want to hear about that, but the balance of power in the specific context of after World War Two in these countries led to this institutional transformation. And seventy years later, you know, nobody wants to change that in Germany and Sweden,

• 49:34Speaker 01

  nobody could change that, because what people have seen is that, you know, not only this, you know, this has not destroyed the capitalist system, the economy, you know, otherwise we would have noticed it, just like for progressive taxation under Roosevelt, but in fact, this allowed for a better involvement of workers in defining the long-run strategy of the of the company. And, you know, workers, in a way, you know, are sort of investors in labor in the company. And sometimes, you know, they they are more serious and committed long-run investors than many of the short-term financial investors that we see. And so getting them to be involved in defining, you know, the long-run investment strategy of the company can be good. So how can we move further in this direction?

• 50:18Speaker 01

  Well, in my book, you know, I discuss various options, but I say, first, this should be extended to other countries, this should be extended to firms of smaller size. And in addition, you know, if you want to go further in this direction, what we could do is to say, okay, you have fifty percent of voting rights for worker representatives, fifty percent of voting rights for shareholders, and within the fifty percent of voting rights going to shareholders, maybe there should be a maximum, maybe ten percent or five percent of voting rights that a single shareholder could have in a very large corporation. We live in very educated society where millions of engineers, technicians, managers, you know, have something to contribute.

• 51:01Speaker 01

  The idea that, you know, you should have this sort of monarchical organization of power in companies is, in a way, completely at odds with with the current reality.

• 51:14Ezra Klein?

  So I agree with this. I'm a very, very big supporter of codetermination. But one thing I think about codetermination is that the experience we've seen with it in Germany, it both undermines the right wing argument against it because Germany has grown great. It's a very innovative economy. They have a great manufacturing sector, you know, in many ways a model. And also, I think, should probably lead one to moderate how much you think it'll do for the economy. You know, if I look at, I'm looking at income inequality here, which is not as good as what you're looking at with wealth inequality, but I forgot to bring the right chart with me. But Germany looks about like France and the Netherlands and Canada, a little bit lower, but not much. And growth is not super different in Germany than some of these other cases.

• 51:57Ezra Klein?

  So why do you think codetermination would do all that much? Why do you feel that it's more than a marginal change in how the economy works?

• 52:06Speaker 01

  Well, you know, first of all, I'm not saying this is a magic bullet. You know, I think it has to come together with all other set of policy, you know, including the redistribution of wealth itself. So, you know, that's why the minimum inheritance and the progressive tax on wealth, which you don't have in Germany, you know, is so important because, you know, if you don't redistribute wealth itself, you know, codetermination rules are not going to be sufficient. It also has to come with a system of true, real access to high-quality education, which we don't have in any country. And finally, don't forget that the codetermination rules in Germany so far, you know, only apply to very large companies. Basically, it's over 1,000 or 2,000 workers.

• 52:49Speaker 01

  If you are in a company of 100, 200, 300, let alone a company of 10 or 20 workers, this is not. So despite all of its limitations, you know, I think codetermination rules have contributed both in Germany and Sweden to limit the huge rise of very top compensation, you know, as compared to in particular the US and Britain. But yeah, the idea is to go further in this direction by first extending this 50% of voting rise to all firms, small and large, and also to put limit on the power of individual shareholders. Because, you know, in some cases with the current codetermination rule, you know, at the end of the day, the shareholders have the decisive vote.

• 53:33Speaker 01

  So, you know, it doesn't have as much impact as it could have.

• 53:39Ezra Klein?

  I think your vision for the future deserves to stand on so and so. I haven't wanted to tie you up in what's happening in economics right now. But, but I do want to ask one question I think will be in people's minds, which is, you know, these are big proposals. They would move a lot of money around. And at the same time, we're, we're living through a really quite unusual, although maybe not historically so, surge in inflation. There's been a dominant view, particularly, you know, in the U.S., pushed by Larry Summers and others. Some of it has come from too much redistribution, too much stimulus. How do you understand inflation and prices as part of this? How do you understand either the inflation rise at the moment? And how do you understand the dangers of inflation?

• 54:20Ezra Klein?

  Either for the politics that would produce these kinds of policies or as an outcome of these kinds of policies?

• 54:27Speaker 01

  So, you know, the short answer is that, you know, I want to finance redistribution through progressive taxation, not through money creation. So, you know, money creation and issuing public debt, you know, can be justified in some context. But, you know, clearly in the long run, that's not going to work. We know that. So, you know, my view of redistribution is that, you know, this should be paid for by progressive taxation and the wealthy. And, you know, the good news is that, you know, the, the wealthy are very wealthy. And, you know, you look at top billionaires today, you know, the wealthiest people have 200 billion or so. You know, 10 years ago, they had 30 or 40 million or so. And 10 years before, they had 10 billion or so.

• 55:09Speaker 01

  You know, you can see immediately that, you know, the rise of this very top wealth people has nothing to do with the rise of the size of the world economy. You know, they are rising a lot faster. You know, there've been some, there's been some rise of the size of U.S. economy or world economy in the past 10 years, but it has not been multiplied by three or four. So you cannot continue like this. And, and that's, of course, that's, you know, the way to pay for the, for the, for the redistribution. And, you know, I'm, I'm not saying everything is going to come from billionaires. You know, millionaires also will have to pay. But, you know, if you don't start by, you know, asking a fair share to, to billionaire, you know, it's going to be very hard to convince a millionaire that they also have to pay.

• 55:50Ezra Klein?

  And so I think that's a good place to end. So always our final question. What are three books that have influenced you that you would recommend to the audience?

• 55:57Speaker 01

  You know, there are so many books, you know, it's hard to say. To go back, you know, through time, you know, there's an excellent book on the French Revolution written by Ralph Blofarbe called The Great Demarcation, which I really recommend. I think it's a great book about the invention of the modern property system during the French Revolution and how, you know, complex the discussion was at the time. And, you know, I think it's fantastic. Another book, you know, talking about the much more, well, recent period, at least about the 20th century, is a book by O. Rosenbaum, which is about the history of globalization,

• 56:42Speaker 01

  which is the emergence of globalism, you know, visions of world order in Britain in the United States, 1939, 1950, it also talks about Europe. I think it's very interesting because it talks about this moment just before World War II and just after World War II, where people realize that we are shifting to a new world system and they are starting to think about new forms of federal organization of the world system with, you know, lots of deceptions in the end, lots of failures, but also lots of hope and lots of achievement. And, you know, I think it's a very useful book to think about, you know, also the situation in which we are and which we could end up in the future.

• 57:24Speaker 01

  And the third book I would recommend, which, you know, I was also very impressed by actually rereading a book by, you know, Anna Arendt and, you know, The Rise of Totalitarianism, which I did not realize how much she was also talking about the issue of federalism and democratic federalism and the fact that in the interwar period...

• 57:53Speaker 01

  You know, the failure of social democracy and social democratic parties is that they were, I mean, they pretended to be internationalists, of course, in their general ideology, but in their actual political projects and political practice, they were maybe the only players around that did not take seriously the fact that with the world economic system, you need some kind of world politics and you need to have some form of democratic federalism to think about, you know, global regulation of capitalism, global taxation. You know, in a way, it's one of the biggest challenges ahead which we have, which is that if the lower income groups voted for Brexit or also voted against Europe in every single referendum we've had in Europe,

• 58:38Speaker 01

  including in France in 2005 and 1992, you cannot just say, oh, okay, this is because these people, you know, are nationalist or racist or whatever. You know, I think we have to, you know, I am a strong federalist, not only at the European level, but at a broader international level, but we have to make federalism, you know, something like social federalism. It must be to the service of a better redistribution of wealth, of a more equitable distribution of income, of common progressive taxation of multinationals, high wealth individuals. And if we don't transform not only Europe, but but more generally, you know, the organization of our world economic system

• 59:22Speaker 01

  in this more equitable manner, you know, I think we will confront enormous difficulties, especially as developing countries in the South are going to have to pay partly for the the damage that we have created with global warming, you know, in North America and Europe. And, you know, I think there's a serious risk also that, you know, China will be in the end able to sort of propose to countries in the South alternative ways to finance for their development strategy. And, you know, I I think we are really at a time where if we don't think of another form of organization for the world economic system, things can turn really bad. And rereading some of this work and some of this thinking

• 1:00:07Speaker 01

  on mid 20th century globalism, I think is a useful, useful reading for that.

• 1:00:14Ezra Klein?

  I think there's a lot of wisdom in that. And I will say, if people are interested in the Arendt book, The Origins of Totalitarianism, a couple of weeks ago on the show, I had on Anne Applebaum for discussion, all about that book and what it teaches us today. So you might be interested in that. Tomas Piketty, thank you very much.

• 1:00:29Speaker 01

  Thanks, Sarad.

• 1:00:41Ezra Klein?

  The Azar Khan Show is produced by Annie Galvin, Jeff Geld, and Roche Karma. Fact checking by Michelle Harris and Kate Sinclair. Original music by Isaac Jones. Mixing and engineering by Jeff Geld. Audience strategy by Shannon Busta. Our executive producer is Ariya Noguchi. Special thanks to Kristin Lynn and Christina Semeluski.