What the 1% Don’t Want You to Know

Moyers & Company features economist Paul Krugman.

Bill Moyers and Krugman discuss Capital in the Twenty-First Century by French economist Thomas Piketty and what the 1% don’t want you to know. Krugman explains how the United States is becoming an oligarchy – the very system our founders revolted against.

Transcript below:

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.”

At 700 pages it’s already a best seller. And there isn’t a single scene of seduction, not one celebrity interview, not one picture — just graph after graph, fact on fact, drawn from two centuries of data and imbedded in prose that can suddenly explode like a supernova in the brain.

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.

Paul Krugman has been writing extensively and generously about Piketty’s book. The Nobel prize-winning economist and “New York Times” columnist calls it “a tour de force…a magnificent sweeping meditation on inequality…that will change both the way we think about society and the way we do economics.”

As scholar, author of many books, and widely read columnist and blogger, Paul Krugman has himself changed a lot of thinking on politics and economics. Welcome back.


BILL MOYERS: Inequality’s been on the table for a long time. You’ve written extensively, others have, too. I mean, it’s a familiar issue, but what explains that this book has now become a phenomenon?

PAUL KRUGMAN: Actually, a lot of what we know about inequality actually comes from him, because he’s been an invisible presence behind a lot. So when you talk about the 1 percent, you’re actually to a larger extent reflecting his prior work. But what he’s really done now is he said, “Even those of you who talk about the 1 percent, you don’t really get what’s going on. You’re living in the past. You’re living in the ’80s. You think that Gordon Gekko is the future.”

And Gordon Gekko is a bad guy, he’s a predator. But he’s a self-made predator. And right now, what we’re really talking about is we’re talking about Gordon Gekko’s son or daughter. We’re talking about inherited wealth playing an ever-growing role. So he’s telling us that we are on the road not just to a highly unequal society, but to a society of an oligarchy. A society of inherited wealth, “patrimonial capitalism.” And he does it with an enormous amount of documentation and it’s a revelation. I mean, even for someone like me, it’s a revelation.

BILL MOYERS: I was going to ask, what could– what has Paul Krugman had to learn from this book?

PAUL KRUGMAN: Even the title, the first word in the title, “capital.” We stopped talking about capital. Even people like me stopped talking about capital because we thought it was all about human capital. We thought it was all about earnings. We thought that the wealthy were people who one way or another found a way to make a lot of money.

And we knew that that wasn’t always true. We knew that in the Gilded Age or in the Belle Époque in Europe, which he prefers to talk about. That high incomes were mostly a result of having lots and lots of assets. But we sort of said, “Well, that’s not the way things work anymore.” And he says, “Oh yeah? It turns out that you’re wrong.” That’s true, that right now, a lot of high incomes in America are people who didn’t start out all that rich. But we’re rapidly moving towards a state where inherited wealth dominates. I didn’t know that. I really was– I should’ve known it. I should’ve thought about it, but I didn’t. And so then here comes this book with– I mean, it’s beautiful– absolutely analytically beautiful, if that makes any sense at all.

BILL MOYERS: As you know, I’m no economist, but I found this book, as I said in the opening, just very readable and suddenly there would be this moment of epiphany.

PAUL KRUGMAN: Yeah, it’s a real “eureka” book. You suddenly say, “Oh, this is not– the world is not the way I saw it.” The world in fact has moved on a long way in the last 25 years and not in a direction you’re going to like because we are seeing not only great disparities in income and wealth, but we’re seeing them get entrenched. We’re seeing them become inequalities that will be transferred across generations. We are becoming very much the kind of society we imagine we’re nothing like.

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.