Thomas Piketty: prediction

Transcript context

…Well, if we want to make people better off, the world we live in — it has plenty of wealth, and we observe many people who are not rich who have very high standards of living because they, in the broad sense, are well educated, can enjoy amenities, can live in Paris or London on a limited income, take in what the city has to offer. Doesn’t that suggest that wealth inequality shouldn’t really be the focus? It should be inequality of cultural capital. Yes. I think all of this is important because if you only have high cultural capital, living in Paris or London is going be difficult, given the rent level. I think you want to care about both, and so I care a lot about making access to education more egalitarian. As I told you, in France, there’s a lot of inequality and a lot of hypocrisy everywhere in terms of access to education in France. In the US, you have all this work by Raj Chetty and Emmanuel Saez showing the relation between the parental income percentile and access to higher education, the level of hypocrisy about the claims that are being made about equal opportunity and blah, blah, blah. When you look at what you see in the data, we are very far from that, but there’s a lot of hypocrisy everywhere in terms of unequal access to education. In my country, in France, we put three times more public resources in the elite schools, where more socially advantaged students go to, than in the normal university scheme, where more socially disadvantaged students tend to go to. Through public funding, sometimes you actually magnify initial inequalities of resources and reduce them. There’s enormous hypocrisy everywhere. And to me, making more effective equality in access to education is absolutely central. That being said, I also want to redistribute wealth and inheritance and property because, if you only have high education but you have no wealth at all, it’s more complicated. It’s more complicated to buy a home for your family, or it’s more complicated to start up a business. In the long run, there’s been a movement to have more equality of labor income through educational expansion, through more labor rights. But if you look at the distribution of wealth, what’s very striking is that the top 10 percent wealth share has declined in the long run. It used to be 80 percent, 90 percent of the total in the 19th century in Europe. Today it’s more 50 percent, 60 percent in Europe. In the US, it would be more 60 percent, 70 percent. People can disagree about the details, but these are really details as compared to this order of magnitude. Now, this decline in the very top 10 percent wealth share has been mostly to the benefit of the next 40 percent, which is already good. But if you look at the bottom 50 percent of the distribution — they have 2 percent of total wealth in the US. They have 4 percent in Europe or in a country like France. It’s a bit better than 2 percent, but basically, they have nothing. So if you take, in particular, the bottom 50 percent children generation in France today or in the US today, they basically receive nothing at all in inheritance. Whereas, the top 10 percent children will receive 60 percent, 70 percent of the total. We are very far, to say the least, from equality of opportunity. This is the least you can say, which is interesting because equality of opportunity is a theoretical concept that people very often say they are in favor of. y the least, from equality of opportunity. This is the least you can say, which is interesting because equality of opportunity is a theoretical concept that people very often say they are in favor of. But if you try to move in a concrete manner to have more equality of opportunity, for instance, by distributing inheritance, people get completely crazy and say, “Oh, how could you do that?” I’m making a proposal about this in my recent book, saying, okay, maybe everybody at age 25 should receive a minimum inheritance. Let’s say it could be 60 percent of average wealth. In France today, that would be €120,000 if the average wealth is €200,000 euros per adult, so everybody, say, would receive €120,000 euros at age 25. People who today receive zero would receive €120,000 at age 25. People who today receive €1 million will still receive €600,000 after the progressive taxation of inheritance and wealth that’s paying for that, so we would still be very, very far from equality of opportunity. If you want my opinion, I think we could and we should go beyond that. But just doing that would increase the share of the bottom 50 percent children in total inheritance, which today is between 2 percent in the US and 4 percent in France. It would be 20 percent to 25 percent, which is still much less than 50 percent because after all, they are the poorest 50 percent children. But I think it will make a big difference in terms of real opportunity to start a business. But also, more generally, wealth has a big impact on your bargaining power in life. When you don’t own anything, when you just own zero or when you only have debt, you have to accept everything. You have to accept any working condition, any wage, any job because you need to pay your bills. You need to pay your rent. If you have a family, you need to do something, so you have to accept this. For people with millions or billions, maybe 100 is like zero. They don’t make the difference. But for people who are at zero, having 100, 200 puts you in a position in terms of bargaining power vis-à-vis the rest of society. It is very different. I think it’s very complementary to control capital and human capital because €100,000, €200,000 — okay, that’s not going to make you buy an apartment in Paris. That’s not enough. But there are many other cities which, for many people, are more enjoyable, where you can actually buy an apartment or house. You can start a business. It makes a real difference for the bottom 50 percent people.…

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