The 1% and Piketty

April 30, 2014 By Michael Hudson

Welcome to The Real Nes Netor!" #$m %essica &es'arieu( in Baltimore" And elcome to this edition o) The
Hudson Report"
No *oinin+ us is Michael Hudson" Michael is a distin+uished research pro)essor o) economics at the ,ni'ersity
o) Missouri-.ansas /ity" His to neest 0oo!s are The Bu00le and Beyond and 1inance /apitalism and #ts
&iscontents"
Than!s )or *oinin+ us, Michael"
M#/HA23 H,&45N, 6R51" 2/5N5M#/4, ,N#7" 51 M#445,R#, .AN4A4 /#T89 Than! you, %essica"
&247AR#2,:9 4o, Michael, this ee! e$re +oin+ to 0e tal!in+ a0out the 'ery popular 0oo! 0y 1rench
economist Thomas 6i!etty" #t$s a ;00-pa+e 0oo! that ta!es on the topic o) income ine<uality" Why do you thin!
so many people are tal!in+ a0out this 0oo!= What$s in it that has people 0u>>in+=
H,&45N9 4tatistics" #t shos that ealth ine<uality is actually much ider than income ine<uality, 0ecause i)
you earn income, you ha'e to pay ta(es on it, and rich people, the 1 percent, don$t li!e to pay ta(es, so they
0asically e(pense most o) their income" They e(pense it as interest, they e(pense it as depreciation" There are all
sorts o) e(penses" But he shos statistically in almost e'ery country not only that income and ealth are +ettin+
ider and ider apart, the 1 percent 'ersus the rest o) the economy?0ut it$s not *ust the 10 percent o) the
population that$s richer than the 0ottom hal) or the 0ottom 20 percent@ it$s the 1 percent that has the 'ast ma*ority
o) the ealth and controls the orld$s stoc! mar!ets o) the 0ond mar!ets" And since 1AB0 there$s 0een <uite a
turnaround" And the 1 percent ha'e 0ou+ht +o'ernment as i) +o'ernment ere sort o) li!e a )actory that you can
ma!e pro)its on" And you can +et much more pro)its 0y 0uyin+ a +o'ernment than you can e'er +et 0y 0uyin+ a
property or real estate" And so hat e$'e 0een turnin+ into is an oli+archy"
Well, a lot o) people sa this, 0ut hat 6i!etty did as sho that in e'ery country since 1AB0, since Rea+an and
Mar+aret Thatcher had the hole neoli0eral re'olution, the re'olution that$s no 0ein+ supported 0y the ,"4"
+o'ernment, 0y the euro>one, 0y the international monetary )und and the World Ban!, that all o) this
neoli0eralism and so-called )ree mar!ets is really *ust a property +ra0 0y the rich" And he shos that +i'en this
+ra0, you$re not +oin+ to 0e a0le to +et more e<uality as lon+ as all o) this ealth that$s accumulatin+ at the 'ery
top amon+ the 1 percent is inherited and passed don and +ros and +ros" And so, 0asically, he$s descri0ed the
symptoms o) hat$s ron+" And people are 'ery +lad that at least he$s descri0ed the symptoms that e'ery0ody
!ne 0ut no0ody had spent the three or )our years that it too! to ma!e all o) the charts charts that he$s made"
&247AR#2,:9 4o it also sounds li!e he$s )ocused on the 1 percent speci)ically" What a0out the AA percent=
What do you thin! is missin+ in 6i!etty$s ar+ument=
H,&45N9 Well, the one percent ha'e +ot rich 0y holdin+ the AA percent in de0t" Basically, you ha'e an
economy here +o'ernments and 0usinesses, homeoners, credit card users, and people +ettin+ an education all
ha'e to run into student de0t, mort+a+e de0t, credit card de0t, +o'ernment de0t, corporate de0t, all to the 1
percent" 4o the 1 percent ouldn$t 0e ma!in+ all o) this income and concentratin+ all this ealth i) they didn$t
hold the 0ottom AA percent in de0t to itsel)" 4o you ha'e a polarity" 8ou ouldn$t ha'e the 1 percent +ettin+ rich
i) they eren$t?i) it asn$t in an e(ploitati'e ay, ma!in+ the AA percent more dependent on them"
No, i) the 1 percent made their money?you !no, they call themsel'es *o0 creators as i) they$re creatin+ the
prosperity, 0ut they$re not creatin+ the prosperity, 0ecause hat they$re +ettin+ is interest and economic rent
much more than pro)its" They$re +ettin+ rich in an e(ploitati'e ay, not in a producti'e ay that helps the
economy +ro and raises li'in+ standards"
&247AR#2,:9 What are some o) the solutions that 6i!etty proposes=
H,&45N9 Well, the )irst solution he proposes is that the people are?all this ealth at the top is 0ein+ inherited"
And since the Rea+an and Thatcher re'olution, they$'e +ot rid o) inheritance ta(" The 1 percent says, thin! o) the
small )amilies that ant to +i'e a little 0it o) property to their children@ let$s not ta( them" And 0y the ay, let$s
ma!e us completely ta(-)ree )or all o) our 0illions o) dollars, *ust so the middle-class )amilies can may0e end up
ith their house or so" 4o they$'e hidden 0ehind the middle-class to, really, a0olish the e))ecti'e inheritance ta("
And so this ealth is 0ein+ inherited to +ro and +ro" 4o the )irst thin+ he ants is an inheritance ta("
The second thin+ he ants is more pro0lematic" He said, ell, may0e there can 0e a orld ta( on ealth,
0ecause a)ter all, the rich )amilies in America hold their money o))shore or in 4iss 0an!s or in the /ari00ean"
4o he ants a +eneral ealth ta(" And that$s hat he$s 0een critici>ed )or, 0ecause he hasn$t really +one to the
root o) hat is creatin+ this polari>ation"
&247AR#2,:9 And, also, ho ould you e'en implement somethin+ li!e that, Michael=
H,&45N9 Well, that$s hy the neoli0eral$s lo'e 6i!etty" That$s hy .ru+man lo'es 6i!etty" 8ou can$t
implement it" 4o he$s produced a 0oo! ithout any solution, and the )ree enterprise 0oys li!e that" The 1 percent
don$t mind 0ein+ critici>ed as lon+ as there$s no solution to their pro0lem" And that$s hat the critics ha'e come
out sayin+9 ait a minute, there are a lot o) solutions" 1or one thin+, some !ind o) ealth is 0etter than others"
8ou don$t ant to ta( people 0uildin+ )actories and impro'in+ li'in+ standards li!e the one percent pretend that
they do, 0ut hat you do ant to ta( is unearned income, economic rent, capital +ains" Ri+ht no, the capital
+ains ta(, most people, rich people, ma!e their money not 0uy earnin+ income@ the na!ed on capital +ains, on
stoc! mar!ets +oin+ up, on 0ond prices +oin+ up, on all o) the asset prices that the 1ederal Reser'e$s <ualitati'e
easin+ has 0een *ust )loodin+ the mar!et ith" 4o the )irst thin+ to do is to raise the capital +ains rates much
hi+her, closer to 100 percent, 0ecause that$s unearned" These are in)lationary +ains" Ri+ht no, the economy$s all
a0out capital +ains, so i) you ma!e C1 million li!e?as Warren Bu))ett said, he ma!es hundreds o) millions o)
dollars" He pays a loer ta( rate than his secretary" 4o the ta( system is all ron+"
What 6i!etty does not su++est is +ettin+ rid o) re+ressi'e ta(es li!e the 1#/A a+e ithholdin+ that e'ery0ody
has to pay that$s no more than 1D percent o) their paychec!" This is a re+ressi'e ta(" That should 0e +otten rid
o)"
But most o) all, he doesn$t tal! a0out the hole restructurin+ that$s part and parcel o) this neoli0eral re'olution to
pri'ati>ation" He doesn$t critici>e pri'ati>ation" And most o) this increased ealth 0y the 1 percent since 1AB0 is
all ta!en?a result o) pri'ati>in+ the pu0lic domain?pu0lic utilities, thin+s that?100 years a+o e'ery0ody e(pected
0an!in+ to 0e a pu0lic utility, roads, railroads, pu0lic transport, telephone systems, 0roadcastin+ systems" No
that these are 0ein+ monopoli>ed, the rich are +ettin+ their money 0y monopoly rents"
And the solution isn$t simply to let the rich e(ploit the AA percent 0y raisin+ the prices you pay )or your ca0le,
)or )rid+es, )or transportation@ it$s to ta!e?to depri'ati>e these assets, to put them 0ac! in the pu0lic domain, so
that you can pro'ide 0asic ser'ices to people at a 'ery lo price instead o) at an e(tortionate price that$s all
meant to pay the 1 percent that 0asically has 0een )oreclosin+ on +o'ernments and +ra00in+ the pu0lic domain"
And 6i!etty <uotes the 1rench no'elists, in 2n+lish, o) the 1Ath century and points out hy is it that no'elists
understand the pro0lem that$s happenin+ in the economy more than economists" 2conomists all tal!ed a0out the
economy 0ecomin+ more e<ual" But i) you read Bal>ac, he said that the ori+in o) almost e'ery +reat )amily
)ortune is a +reat the)t, o)ten undisco'ered, and people thin! it$s *ust a part o) nature" And it$s thie'ery and the)t,
as Bill Blac!, ho$s o)ten on your sho, also points out e'ery ee!9 you ha'e essentially the decriminali>ation
o) )raud" And hat really pays is crime" And it$s the criminals that ha'e risen most rapidly into the 1 percent" #t$s
the Wall 4treet 0an!ers ho$'e 0een doin+ the *un! mort+a+es and en+a+in+ in the !ind o) )raud that e$'e 0een
hearin+ a0out on Wall 4treet" This is not hat 6i!etty discusses" He doesn$t say, thro the cler!s in *ail@ he
doesn$t say, ha'e +o'ernment re+ulatory a+encies to pre'ent this !ind o) e(ploitation@ he doesn$t say, reimpose
anti-monopoly re+ulations to pre'ent monopoly pro)its )rom enrichin+ the one percent@ he doesn$t say, ta!e all o)
these pu0lic utilities that Mar+aret Thatcher pri'ati>ed in 2n+land and Ronald Rea+an did in America and put
them 0ac! in the pu0lic domain so that they can pro'ide 0asic ser'ices to people at cost" All o) this is a di))erent
topic )rom his 0oo!"