BILL MOYERS: Welcome. Even in this age of hyperlinks and cyberspace, nearly six centuries after Gutenberg devised his printing press, it’s still possible for a single book to shake the foundations, rattle clichés, upend dogma, unnerve ideologues, and arm everyday people with the knowledge they need to fight back against the predatory powers that have robbed them of their birthright as citizens.
This is such a book: Capital in the Twenty-First Century, by the French economist Thomas Piketty. The book of the season to many. To others, the book of the decade. Reviewers have called it “a bulldozer of a book,” “magisterial,” “seminal,” “definitive,” “a watershed.” […]
Here’s one of its extraordinary insights: we are heading into a future dominated by inherited wealth as capital concentrates in fewer and fewer hands, giving the very rich ever greater power over politics, government, and society. “Patrimonial capitalism” is the name for it, and it has potentially terrifying consequences for democracy. For those who work for a living, the level of inequality in the US, writes Piketty, is “probably higher than in any other society, at any time in the past, anywhere in the world.” Over three decades, between 1977 and 2007, 60 percent of our national income went to the richest 1 percent of Americans. No wonder this is the one book the 1 percent doesn't want the other 99 percent to read. […]
BILL MOYERS: Here’s Piketty’s main point: capital tends to produce real returns of 4 to 5 percent, and economic growth is much slower. What's the practical result of that?
PAUL KRUGMAN: What that means is that if you have a large fortune, or a family has a large fortune, they can—the inheritors of that large fortune—can live very, very well. They can live an extraordinary standard of living and still put a large fraction of the income from that fortune aside and the fortune will grow faster than the economy.
So the big dynastic fortunes tend to take an ever-growing share of total, national wealth. So once you-- when you have a situation where the returns on capital are pretty high and the growth rate of the economy is not that high, you have a situation in which not only can people live well off inherited wealth, but they can actually pass on to the next generation even more, an even a higher share.
And so it's all, in his terms, "r" the rate of return on capital, and "g” the rate of growth of the economy. And when you have a high r, low g economy, which is what we now have, then you're talking not-- you're talking about a situation in which dynasties come increasingly to increasingly to dominate the top of the economic spectrum and a tiny fraction of the population ends up very dominant.
BILL MOYERS: What's the realistic impact of this on working people?
PAUL KRUGMAN: There's a direct impact, which is that part of income is always going to go to labor, although that seems to be a diminishing fraction. But the part that comes from capital is going to be in the hands of a very few people. The other thing, which I think is critically important, that he talks about more towards the end of the book is political economy.
That when you have—Teddy Roosevelt could’ve told you and did—that when you have a few people who are so wealthy that they can effectively buy the political system, the political system is going to tend to serve their interests. And that is going to reinforce this shift of income and wealth towards the top.
BILL MOYERS: Do you agree with him that we are drifting toward oligarchy?
PAUL KRUGMAN: Oh yeah. Oh, I don't think that’s even—I don't see that there's any question of it. If you look at the—certainly if you look at what we know already, and we're learning more, but what we know already about the concentration of income, of wealth, you can see that it is growing. You can see that—and you can actually see—I've spent a little while just sort of going through the “Forbes 400” list.
And what you find is already there’s an awful lot of inherited wealth in there. It’s no longer a list of self-made men. And of the self-made men, a lot of them are pretty elderly. And their—those fortunes are going to be passed on to next generations. So the drift towards oligarchy is very visible, both casual observation and in the numbers. [...]
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