Thomas Piketty on the Politics of Equality | Conversations with Tyler

Hello everyone, and welcome back to Conversations with Tyler Cowen. Today I'm here with Thomas Piketty, and he has a new book out, A Brief History of Equality, which in my opinion is the very best introduction to his overall views. Thomas, welcome.

Thank you for your invitation.

Let me start with some questions about France. Now, as you've pointed out yourself, France adopted a progressive income tax relatively late in its history. Just how egalitarian as a country do you think France actually is?

Well, as I stress in my new book, A Brief History of Equality, there's been a long-run movement toward more equality in history, and together with a movement toward more prosperity, toward more economic prosperity. I argue that the two movements really came together, and France is part of this movement. So, you know, each country has its own limitations and its own hypocrisies with equality and inequality. And, you know, France, you know, has lots of limitations, you know, lots of hypocrisy in the way to deal with, you know, very unequal access to, for instance, different funding in higher education, or, you know, a lot of discrimination that is not well addressed. But By and large, if I take a sort of big picture and look in the long run, there's been a movement toward more equality of income, more equality of wealth, more equality in access to political power, more equality in access to education, in health, over the long run. Now, this has not been a steady process. This is an evolution toward more equality that has taken place through political mobilization, social struggles, and it starts The story I'm telling is really a story where the movement toward more equality starts at the end of the 18th century. So typically, in the case of France with the French Revolution, the abolition of aristocratic privileges, the slave revolt also in Saint-Domingue, which— so these two events, the abolition of aristocratic privileges and the slave revolt in Saint-Domingue, are sort of the beginning of the end of aristocratic societies, societies based on privileges, and slave and colonial societies on the other hand. But you can see very well how these two movements, these two evolutions toward more equality, are not over. They continued during the 19th century, 20th century, with the end of slavery, the end of colonialism, the rise of Social Security, the rise of progressive taxation. But in France, just like in the US, you know, there is still a lot of discrimination today. You know, there is still a lot of gender inequality today. There is still a lot of political inequality, you know, in access to voice, access to participation, political power. There's still enormous concentration of wealth. You know, to some extent, this has increased, especially in the US, in recent decades, less so in France or in Europe. So, you know, in the long run, there's a movement toward more equality, but I'm not saying this to conclude that everything is great and we should just stay like we are. I'm saying this in order also to suggest that this movement could and should continue. And I think it will continue, because in the end, this is a way to address some of the biggest challenges that we have to address.

Well, let me ask you just a very specific question. So it's a common American perception of France, and maybe Paris in particular, that there are relatively few dimensions of status competition. One is supposed to dress a certain way or have particular habits of cultural consumption, and that thus along the dimension of cultural status, France and Paris are especially inegalitarian. Now, as someone from France and nearby Paris. Just what's your impression of that portrait of your own country? Is it misleading?

Oh, you have to tell me that again. So what's exactly the comparison you're making between Paris and New York, for instance?

If you compared Paris to New York or even Paris to Berlin, an impression that many outsiders have is there are relatively few dimensions of status competition. So there's the civil service. There's a certain notion of doing well in business. The number of ways you could be expected to dress and be considered to be well-dressed, that seems fairly circumscribed in Paris. But somewhere like Berlin, there seem to be many more open dimensions of status competition, or in New York City. Do you think in this particular way Parisian life is especially inegalitarian?

You know, I have never thought about this, but maybe you're right. You know, I have never heard of this before, but So you're saying the diversity of dress, of dressing codes, is less extensive in Paris than in Berlin or New York. That's—

But not just dress. You could look at cuisine. You could look at the status, say, of tech nerds in Berlin or New York relative to France.

Okay. You know, maybe that's right. Maybe that's wrong. I don't know what's the metric for this. Yeah, I'm not sure. Frankly, I had never thought of that before.

Let me try another question. For someone trying to place you in French intellectual history, let's say they're not an economist and they want to know which traditions from the French left are you closest to. Would it be utopian socialists, critical theorists, objective Marxists, 1968 crowd? Where do you place yourself? In your own country's history?

Well, okay, this I can answer more precisely. Well, I would say first, none of the above. So I would put myself more, you know, in the tradition of the Annales school. You know, I don't know if this rings a bell for you or not, but there's a tradition of research in social and economic history that was sort of particularly active in France, I would say, you know, between the 1930s and 1980s with people like Brodel or Labrousse. And in a way, it's— and these are people who have started working on the history of the distribution of wages, for instance, during the 18th century, in the period going to the French Revolution. Is the French Revolution due to the fact that wages were lagging behind land rent? That was one of the big questions that these people were asking. And, you know, in a way what I've been doing is to try to pursue this tradition in social and economic history with also strong influence from, you know, Anglo-Saxon research in this area, you know, Kuznets, Atkinson, and, you know, there's a long tradition also of British and US historians and economists and social scientists, you know, trying to collect this kind of income and history. You know, that's what I've been doing. So yeah, so I'm not— I don't feel very close to the sort of philosophical or political thought tradition you are referring to because my work, you know, has mostly consisted of, you know, trying to collect these historical data sources and, you know, then of course to propose some interpretation of these data sources, but I feel I've always been very close to my sources. This is what has kept me busy 95% of my time for the past 25 years or so.

When I read Brodel, it strikes me there's something quite conservative about the argument. I don't mean politically conservative, but I mean literally conservative, the sense of long structures, stretching through decades or even centuries. Do you share that with him, or do you think in some way you deviate that makes you more politically radical?

Okay, so you're right. You know, I don't know if this makes me more politically radical, but you're perfectly right that, you know, one big difference between the work I've been doing and the work like people like Brodel or Labrousse were doing is that, you know, I had to deal a lot with the 20th century, whereas most, you know, these people were working a lot on previous centuries, you 18th century, 19th century, or even before in the case of Brodel. And so working on the 20th century data, and in particular, you know, the enormous reduction of income inequality during the 20th century, you know, led me to a different kind of perspective and a different kind of thinking and issue. So to be very precise, you know, the political dimension is sort of much more important and in a way unavoidable and impossible to escape when you study the 20th century. You know, when you study the 18th century or 19th century, or you— maybe you can have this sort of, you know, sort of Marxist or economic perspective, you know, stressing the sort of long-run evolution, the sort of deterministic economic forces. When you study the 20th century, you know, politics is everywhere because, you know, World War I, World War II, the Great Depression, the creation of Social Security systems, the development of progressive taxation, decolonization, end of apartheid— politics is everywhere if you want to understand the evolution of inequality. I would say it's also to some extent the same for the 19th century and, you know, the the end of the 18th century. I talk about the French Revolution and the slave revolt in Saint-Domingue. So I think, you know, the history of equality or inequality cannot just be an economic history. It has to be a political history, because if you want to account for what you see, if you want to explain what you see, it's, you know, political processes, sometimes revolution, sometimes tax reform, sometimes, you know, political confrontation of all sorts play a major role. So I, you know, I had to develop this perspective, and indeed this is a big difference with the Annales school. You know, the Annales school in a way did not sort of disappear before reaching the 20th century, you know, so they were not confronted to the same kind of of issues that I was confronted just because I write later than them with data covering the more recent period. And so, you know, I had to develop a different perspective and a different kind of interpretation. Yes, stressing the role of politics and political institutions and fiscal institutions social institutions and the like.

Now, as you know, there's a competing longue durée tradition. If you look at the work of Greg Clark and Neil Cummins on surnames, they take data from England, from Sweden. There's one paper where they have about almost 8 centuries of data, I think, and social status is more heritable than height. A given status relationship has persistence for 15 or 20 generations. What do you think of that work? Do you think it's a perspective that contrasts to yours and shows it's really very hard to redistribute what really matters in society?

Look, well, this is very interesting. Every time there is a lot of historical data collection, I am very interested. This is very interesting work. Now, that being said, I find the perspective a bit too conservative in a way and a bit to maybe because it's very long run. But if I— again, if I look, my period of study is the period, you know, ranging from the end of the 18th century until today. So this is, you know, 1780, 2020, if you want. So, and over these two centuries and a half, I, you know, I— what I see is a movement toward more equality, both in terms of political rights but also in terms of social and economic equality. And what I argue is that, you know, this process is very much related to political development, political revolution, you know, slave revolt, wars of independence, tax reform, changing balance of power between capital and labor, development of Social Security, development of public school system or public health system, and over this period, you know, this has led to a very strong movement toward more equality in all these dimensions and also toward more economic prosperity, and I stress this. Now, before this period, you know, I'm aware that, you know, there are people like Greg Clark and others who stress the sort of the continuity across 8 centuries of, you know, the sort of perpetuation of status inequality. There are also, you know, historians like Scheidel, you know, going back to the Neolithic period or to ancient history, who stress, you know, a relatively— so, you know, pessimistic— with a relatively pessimistic perspective in the sense that they say, okay, without, you know, major destruction or war, you know, you never have a reduction of inequality. I mean, all this work is very interesting, but the perspective I stress is a bit different. You know, I think it's more optimistic in a way, because, you know, I think if you look at this, you know, shorter period, but which is still very long, you know, two centuries and a half, you know, 1780-2020, you see this, you know, political movement toward more equality. To be honest, I must admit, I must confess that I am always a bit skeptical about some of the data sources, you know, before the late 18th century, you know, when, you know, for one, you know, partly because I know them less well, so, you know, I feel less confident with them, partly because, you know, when I don't have, when I don't have a census, when I don't have a tax administration, when I don't have when I don't even know the population that is out there and how it is changing over time, I find it very, very difficult to say, okay, did the concentration of wealth increase in Europe between 1500 and 1750, let alone the question of did it increase between the end of the Roman Empire and 1500? I don't know the answer to these questions. I would suspect concentration of wealth inequality was always pretty large, in this, you know, pre-18th century period. But from what I read, and I tried to read carefully most of what is written on this topic, I'm not sure, you know, we have the data sources to really answer these questions, unfortunately. And so I, you know, this is why I'm, you know, I'm a bit, you know, this is why I try to focus on the more recent period, which is still very long.

If I look at France in the early 1960s, as you know, the rate of finishing or even starting higher education is extremely low, but France basically is doing fine. Do you view that as evidence for the view that it's really the continuity of cultural capital that matters and not so much policy?

Oh no, because there's been a huge educational expansion since then. You know, that's Between 1950 and 1990 and until today, educational expansion in France and throughout Europe and in most of the world has been considerable. And so it is true that in the 1950s, France, but to a large extent Western Europe, is lagging behind the US in terms of educational achievement. And to me, it's clear that the key reason why the US has been an economic leader at the world level for, you know, most of the 20th century is because it was an educational leader. And in the 1950s, as you know very well, you know, you have 90% of a generation going to high school in the US, whereas in France or actually in Germany, you know, it's 20 to 30% of a generation. And you need to wait until the 1980s or '90s to reach the same kind of, you know, 90% of the cohort going to high school and to have a sort of universal access to it. And, you know, it was the same also, you know, in the 19th century, the US reached 90% primary school attendance rate, you know, almost a century before Europe, or at least half a century or, you know, two-thirds of a century before Europe. And, you know, I think this was absolutely, you know, That was a key explanation why also economic productivity was so much higher in the United States. But I think here policy made a big difference. So especially after World War II, there was an enormous educational push, not only in France and Germany, but also, of course, in Japan, and then other countries in Asia also followed this push. And this has completely transformed the economic geography the geography of productivity, and the huge advance that the US had, you know, in the middle of the 20th century, to a large extent, has disappeared today. And, you know, I think policies, institutions played a major role in these dynamics with, you know, specific political and social history in the different countries. And, you know, of course, it's not only Politics is also the product of the belief system and the perceptions that families have about education, about the culture of education. So all these different dimensions have to be studied together, obviously.

As you know, Matt Rhonely and a number of other researchers have argued the relevant increase in wealth inequality really is centered in real estate. Real estate and housing wealth. Do you agree? And if so, isn't it enough just to be a Georgist? Can't we just do the redistribution there?

Well, but I, you know, if you look at the top of the wealth distribution, you know, I don't see a lot of real estate. You know, if you look at that, so, you know, I don't think Matt Rungley or anyone who is saying that the huge rise in billionaire wealth in the US has anything to do with real estate, as far as I know. Nobody has ever tried to put this theory on the table. So, you know, I'm not saying real estate is not important. You know, I think for middle-class assets and, you know, lower middle class and upper middle class assets, you know, for the middle of the distribution, real estate is of course very important. And the movement in real estate prices explains a lot of what's going on, both in terms of aggregate value distribution. So, you know, I'm not saying it's not important. It is very important. And, you know, if you go back to You know, our paper with Gabriel Zucman, which was published now almost 10 years ago in the Quarterly Journal of Economics in 2014, called, you know, Capitalist Back Wealth Income Ratio in the Long Run, 1700-2010, you will see, you know, we have complete decomposition about the role of real estate in aggregate wealth accumulation. And, you know, it's absolutely central for many countries over many periods of time. So there's no We cannot have any disagreement on that because this is our data, this is what we did almost 10 years ago. But that's not going to explain, for example, what happens at the top of the distribution because real estate is absolutely negligible when you look at top billionaire wealth. So you need— here you need other stories. Yes?

But for the distribution overall, it seems there's a lot of papers quite recent like Audran Bonnet, Jorda, the Ronley work, Canole, Pfeffer, and Waitkus. They seem to think it's primarily about real estate, if not 100%, predominantly real estate. So you don't agree with their estimates, or you just think you're addressing a separate problem of billionaire inequality at the top?

No, I think it, again, it depends whether you look at aggregate wealth or you look at the distribution of wealth. If you look at aggregate wealth, Then, you know, real estate is a really big part of the increase in aggregate wealth-to-income ratio, you know, especially in Europe. Less so in the US. You know, in the US, the aggregate wealth-to-income ratio increased much less than in Europe. But so for the aggregate wealth-to-income ratio, especially in Europe or Japan, real estate is the central explanation. There's no doubt about this. Now, if you look at the distribution, It's a very different story. In fact, the increase of the relative price of real estate asset relative to, say, stock market prices or financial asset is actually relatively good overall for the middle class as compared to the very top, because the middle class owns mostly real estate, whereas the top owns mostly financial and business assets.— if the only force at play was the big increase in real estate price, in fact, wealth inequality should have declined, or at least top wealth share should have declined relative to the middle, which, you know, obviously, this is not what we see. I mean, there is some disagreement about the magnitude of the increase in top wealth shares, but nobody is saying that top wealth shares have been declining in recent decades in any country. So by definition, real estate— the real estate argument is not going to explain what we see for the wealth distribution. And if so, then, you know, it depends what segment of the distribution you are interested in. But if you're interested at the top share, I mean, if you're interested at the very top, you know, billionaire wealth, which, you know, after all is interesting in its own sake and it's a non-negligible fraction of total wealth, you know, I think again nobody is saying that real estate is explaining this. I mean, if you see a paper saying that, please send it to me.

If I look at nominal income data for the US, or for that matter Switzerland, those two countries measure as being wealthier than either France or Germany. Do you think citizens in US and Switzerland are happier than French and Germans?

Well, again, here it's important to, you know, if you're interested in welfare you need to look at productivity. So, you know, that's the first thing. So you need to look at GDP per hours of work, or income per hours of work. And you probably know very well, you know, if you look at OECD data or Bureau of Labor Statistics series in the US, which are almost similar, or Eurostat series, everywhere you go to, you know, you will see that GDP per hours of work is virtually the same in US, Germany, France, you know, it's a few percent different. I'm sure you know this series.

Sure, of course.

Okay, so in terms of welfare, of course, as economists, you know, what matters is productivity, not income per se, because, you know, if you have a higher income just because you work longer hours, the effect on welfare is ambiguous. You know, it depends how you value you know, leisure versus work, etc. And, you know, presumably, you know, if European countries, you know, decided to have more vacation and a bigger reduction of working times than the US in the 20th century— by the way, this was not the case, you know, a century ago. In the early 20th century, working hours were actually shorter in the US than Europe, you know, partly because productivity was higher, so you can afford working less. But anyway, today, and in the past century, the decline in working hours has been bigger in Germany and France. Presumably, this was a choice. I mean, this was a complicated political process, but nobody in Germany or France today is proposing to divide by 2 the number of weeks of vacation and go to the US federal law. In that respect. So in terms of welfare, I mean, my own view, if you— my own view, as you can imagine, is that when you have such— when you multiply your productivity by 10 over the past century, it actually makes sense to take some of this increase in productivity to have more vacation, to spend more time with your children and family, to spend more time traveling around the world.. And, you know, for me, like for many Europeans, the idea of taking only 2 weeks in vacation over the summer when you are so rich looks like one of the most stupid things you can do in life. But, you know, look, it's, you know, different, you know, people can make different choice, of course, about this.

But if the relationship between wealth and happiness is so diffuse, —and I would agree, it may be. So I'm happier than some billionaires I know. Why worry so much about wealth inequality? Why not focus on inequality of well-being, which could be something quite different?

Oh yeah, no, you know, I care ultimately, you know, what I care about is, you know, access to fundamental goods like education, health, participation. You know, participation to the political life, participation to economic life. So ultimately, you know, this is what I care about, you know. I, you know, income and wealth per se, you know, are just mechanisms and tools and ways, you know, to go in this direction. But in the end, you know, what's really important for me, you know, is to have the the highest possible opportunities and rights to access fundamental goods for everybody. This is all what matters.

But, you know, I see that in Paris and I tend to think it's cultural capital. So rents are very high. There are people who are not huge earners. They live in Paris. They enjoy Paris immensely, as they should. They have incredible cultural capital, amenities, smart people they can talk to. They're partaking in those goods, yet there's very high wealth inequality in Paris. You teach in London, super high wealth inequality in London. You can live there very well if you do it smartly. So again, why not focus on cultural capital for individuals rather than the wealth?

Yeah, first I only teach in Paris. I was in London a long time ago as a student, but I have not I'm not teaching there. Yeah, you know, cultural capital is part of what I am interested in. When I look at the inequalities in education and access to education, this is about cultural capital. When I look at the— I try to understand the changing structure of political cleavages and who votes for whom and which party and coalition, which is a topic on which I been working quite a bit in recent years. Cultural inequality and different access to education and reversal of education cleavage over time, you know, is certainly, you know, is very important. But maybe I don't get exactly your question.

Maybe you should tell me again. 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. And doesn't that suggest that wealth inequality shouldn't really be the focus? It should be inequality of cultural capital?

Yeah, you know, I think all of these are important because, you know, if you only have high cultural capital, living in Paris or London is going to be difficult, you know, given the rent level. So I think you want to care about both. And so, you know, I care a lot about making access to education more egalitarian. And, you know, as I told you, France, you know, there's a lot of inequality and a lot of hypocrisy everywhere in terms of access to education in France. I mean, in the US, you know, you have all this work by Raj Chetty and Anil Saiz, you know, showing the relation between parental income percentile and, you know, access to higher education, you know, the level of hypocrisy about, you know, the claims that are being made about equal opportunity and blah blah blah, you know, when you look at what you see in the data, you know, we are very far from that. But, you know, there's a lot of hypocrisy everywhere in terms of, you know, unequal access to education. In my country, in France, you know, we put 3 times more public resources in the sort of elite schools where more socially advantaged students go to than in the sort of normal university schemes where more socially disadvantaged students tend to go to. So, you know, through public funding, you sometimes— you actually magnify initial inequalities rather than reduce them. So there's enormous hypocrisy everywhere in— and to me, you know, 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, you know, if you only have high education but you have no wealth at all, you know, it's more complicated. It's more complicated to buy a home for your family, or, you know, it's more complicated to start up a business. It's more— so, you know, if you look at the— you know, in the long run, there's been a movement toward more equality of income, labor income, you know, through educational expansion, through more labor rights. But if you look at the distribution of wealth, you know, what's very striking is that, okay, the top 10% wealth share has declined in the long run. You know, it used to be 80, 90% of the total in the 19th century in Europe. Today it's more 50, 60% in Europe.— in the US it would be more 60-70%— you know, 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% wealth share, you know, has been mostly to the benefit of the next 40%, which is already good, but if you look at the bottom 50% of the distribution, you know, they have 2% of total wealth in the US, they have 4% in Europe or in a country like France, it's a bit better than 2%, but basically they have nothing. So if you take in particular the bottom 50% children in a generation in France today, or in the US today, they basically receive nothing at all in inheritance. And whereas the top 10% children will receive 60, 70% of the total. Now I think this is— so 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 it. But if you try to move in a concrete manner toward more equality of opportunity, for instance, by redistributing inheritance, people get completely crazy and say, oh, how could you do that? So I'm making proposals about this in my— my recent books, you know, saying, okay, maybe, you know, everybody at age 25 should receive a minimum inheritance. Let's say, you know, it could be 60% of average wealth. So, you know, in France today, that would be €120,000, you know, if the average wealth is €200,000 per adult. So everybody, say, would receive €120,000 at age 25. Now, you know, this is still— so people who today receive zero would receive €120,000 at age 25. Today, 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. And if you want my opinion, I think we could, we should, we could and we should go beyond that. But. But just doing that, you know, would increase, you know, the share of bottom 50% children in total inheritance, which today, you know, is between 2% in the US, 4% in France. You know, it would be 20 to 25%, which, you know, is still much less than 50% because after all there are the poorest 50% children. But it will be a— I think it will make a big difference in terms of real opportunity you know, to start a business, but also, you know, more generally, you know, wealth has big impact on your bargaining power in life. So, you know, when you don't own anything, when you just own zero, or when you only have debt, you know, you have to accept everything. You have to accept any working condition, any wage, any job because, you know, you need to pay for your bills, you need to pay for your rent, if you have a family you need to, you know, to do something and to— so you have to accept it. So when you have 100 or 200 or 300, so, you know, for people who have millions or billions maybe 100 is like zero, you know, they don't make the difference, but for people who are at zero, you know, having 100, 200, you know, puts you in a position in terms of bargaining power vis-à-vis the rest of society is very different. And I think it's very complementary to cultural capital and human capital because, you know, if you— you know, €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, you know, 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 bottom 50% people.

But if I visit every major country in Europe, what I observe is the highest living standard is arguably in Switzerland, Norway and Luxembourg aside. Switzerland has one of the smallest governments and they attempt relatively little redistribution. What is your understanding of Switzerland? What if someone said, well, Europe should try to be more like Switzerland. They're doing great. Why is that wrong?

Oh, you know, Switzerland, you know, it's a very small country. So, you know, it's about the size— actually, it's smaller than Île-de-France, you know, which is the Paris region. Now, if you were to make a separate country out of Île-de-France, you know, GDP per capita, I think, would actually be higher than Switzerland. And, you know, of course, you can always, you know, you can take a wealthy region in your country and say, okay, I don't want to share anything with the rest of the country. I'm going to keep my tax revenue for me. I'm going to be a tax haven based on bank secrecy. And that's going to make you 10 or 20% richer. I'm not saying all the—

But it's been a long time since Switzerland relied on bank secrecy, right? Following 9/11, that Swiss advantage largely went away.

Oh, that's wrong. Oh, you're wrong on this.

No, no, no. It's the US that's the secrecy haven.

Yeah, you know, it's still— it still brings— no, no, I can tell you, you know, the banking sector and, you know, the status as a tax haven still brings an additional income of, you know, at least 10 or 20% to Switzerland. But I agree with you, you know, Switzerland would still be rich, you know, even without this. But they would not be— they would be a bit poorer, and they would certainly not be richer than, you know, if you compare to, say, the Paris region GDP per Per capita. capita, you know, the London region, or, you know, if you take the wealthiest region. So you have to compare, you know, it's important to compare, you know, countries of comparable size, regions of comparable size. You mentioned Norway, you know, again, Norway without the oil would be more comparable to Sweden or Denmark in terms of GDP per capita. Now the oil is making them richer, but, you know, I think this this oil should actually remain in the ground. And, you know, I don't know if you've seen this incredible TV series Occupy, which today with what's happening in Ukraine, you know, we— you know, you can— you know, this is a series where Russia invades Norway in order to restart the oil production in order to make the European Commission happy. And the European Commission looks as ugly as it can possibly look, which unfortunately— you know, it's sometimes an accurate description where, you know, oil production is so important that you're ready to, you know, in effect to tolerate things that in fact you should not tolerate. But anyways, this was just an aside note about Norway. But anyway, oil, you know, is playing an important role. Luxembourg, okay, you know, look, Luxembourg benefits a lot from its, you know, But Switzerland is a real country with a diversified economy.

Yeah, yeah, sure. Very little of it is Paris.

The Paris region is a real region.

That's a clustering effect within France. Like, France is much poorer than Switzerland. Could not France bring Swiss prosperity to—

This is not comparable in size, you know. It's, you know, you cannot— I don't think it makes sense. You know, again, if you want to compare region of about 5, 10 million inhabitants, you know, which is the size of Switzerland. You find many other regions with comparable GDP per capita all across Europe. So anyway, yeah, but you know, there are many good things in Switzerland, by the way. You know, I think, you know, the local democratic system, you know, has lots of good aspects to it. You know, the education system has been— so, you know, I'm not I think there's a lot to learn from each of these experiments. The US has a much smaller government than Sweden or Denmark or France, but I think there's a lot to learn historically from the US, including in terms of equality. And I think the enormous educational advance that was there in the US in the 19th century, in the middle of the 20th century, is key to understand many of the issues I I refer to. Now, the case of Norway shows that you can also have a very generous welfare state, and that certainly does not prevent you from being prosperous. Look, at the level of Europe, we have 27 countries in the European Union. If you look in terms of tax-to-GDP ratio,— you know, the countries with the lowest tax-to-GDP ratio are Bulgaria and Romania. The countries with the highest tax-to-GDP ratio are Denmark and Sweden. So, you know, if it was enough in order to become rich to have a small government, you know, Bulgaria and Romania would be richer than Denmark and Sweden. So, you know, we know that things are more complicated. And it depends what you do with your tax revenues. If you use it well, then it's obvious from this evidence that this is complementary with high prosperity.

Now, you've been awarded a Legion of Honor, but you turned that down, if I understand correctly, on the grounds that you don't trust or don't want government handing out status. If you do not entirely trust governments to hand out status, why trust them so much to redistribute all this wealth? What's the political economy constraint on that wealth redistribution process where you say, "Look, this isn't going to go the way I want it to go." No, this is because I believe in anonymous rules.

I believe— and it's not a belief, it's not a religious belief or religious faith. I study history and I see that governments under certain conditions have been able to develop a public education system, public health system, tax administration, you know, following anonymous rules which have been working pretty well and which we can improve, we should improve. Whereas, you know, deciding on an individual basis, you know, who is honorable, who is not honorable, you know, it's a very different kind of business. And I think indeed that, you know, governments are not elected to do these kinds of things.

But how do you keep the anonymous rules anonymous, right? There's slippage. It's not something you can easily write into a constitution.

Yes, but again, if I look at the history of state construction and welfare state development in Sweden or France or Germany, I don't see what episode you have in mind exactly. What would be the—

Well, in the United States, France for that matter, most countries, there's plenty of corruption. There are people, companies that get privileges due to tariffs, due to policy. Oh, yeah, sure, sure, yeah. And it doesn't stay anonymous. So why trust the government so much to redistribute wealth?

No, so sorry, I didn't follow. The corruption you have in mind Is it in the government of Sweden or France or Germany, or is it in the private companies, or is it—

I think it's both. It's maybe higher in France and America than in Sweden. It's relatively high in Germany, actually. You have Schröder, he's put on the board of Gazprom. You can't say Germany isn't corrupt, right?

Well, but this is when he joined the private sector. It was not when he was in government.

Well, clearly they were buying the services of people in German government, right?

Yeah, but that's actually— now, the example you mentioned is very important because it's exactly, you know, the example where in fact, as you know, when you are in government, I don't think any of these people, you know, when they were in government, took money. You know, the problem is if you let them go in the private sector and, you know, and join the, you know, this sort of completely insane level of remuneration that you observe in the private sector. This is a problem. But I don't think, you know, in any of these countries, you know, give me an example of a political leader who became billionaire by taking money when he was in office. You know, I don't know, I don't know.

I think they sell their votes much more cheaply than that. I mean, most of U.S. Congress is quite happy to pass special interest favoring legislation. They don't get a billion dollars for their vote. Maybe that's a kind of economic puzzle.

The perversity and the bad incentives come from the private sectors in all these examples, not the public sector where you have salary scale, which in some cases could be reduced further, but which are in general much more reasonable than in the private sector, as far as I can see.

You've argued France should pay reparations to Haiti. As I understand it, Haiti does not now really have a well-functioning government. Should France still pay? Should France wait? What's your view?

Yeah, I think France should pay. So let me just summarize, remind the story very quickly. This is an example where, so when Haiti became independent, and when the French state recognized finally in 1825 the independence of Haiti, you know, the French state said, "Okay, we are going to recognize your independence only if you pay us a huge amount of money," which was the equivalent of 300% of GDP of Haiti of 1825, in order to compensate, you know, the French slave owners for their loss of property. This, of course, was impossible to repay in one year or in a few years, so French bankers came, refinanced the debt, and in the end the debt was repaid, you know, until the 1950s. You know, you have payment to the Bank of France until 1957. And so, you know, there was many renegotiations. U.S. was involved in the process at some point. Some of the debt was was, you know, sold by the French bankers to a consortium of U.S. bankers. But anyway, to make a long story short, you know, Haiti effectively repaid between 1825 and 1957, so, you know, almost a century and a half, an enormous public debt in order, in effect, to compensate the French slave owners for their loss of property. I think it is impossible to say today, okay, this is too old, we don't care. Because, you know, there are reparations that are being made today for expropriation and various injustices that took place during World War II or sometimes even during World War I. So if you say for Haiti this is too late and for this other reparation or expropriation during World War II we can still do reparation, I think you have a problem because then it makes it very difficult to develop a language of mutuality, of justice upon which we can build future.

I wouldn't say it's too late, but won't the money just go into private bank accounts and it will increase wealth inequality in precisely the way you object to?

Oh, that's certainly not what I am proposing. So what I am proposing is, of course, that when, you know, whenever there is a, you know, transfer for reparation or, you know, for development aid or whatever you want, you know, we need to have a very strict monitoring of individuals who might, you know, get rich or get the money about this. And, you know, whether they are in the public sector, in the private sector, wherever they are, We should be very strict about that. And so that's for sure.

But isn't that reimposing a kind of colonialism on Haitian government? If the French are going to monitor where all the money flows within Haitian government, that would require establishing quite a bit of sovereignty over Haiti.

Yeah, I think Haiti should be part of that. I think there are lots of people in Haiti who would like to monitor how this money is being used. Look, you know, I'm not saying this is simple, but, you know, reparations are never simple. You know, I can tell you, you know, in my country, you had to wait until 1999-2000, so, you know, almost only 20 years ago, for an official commission to look seriously at post-World War II separation— reparation and, you know, Jewish expropriation during World War II. So, you know, this process takes time. If you look in the US, remember, you know, you have to wait until 1988 to see a law adopted by US Congress, you know, to have reparations for the Japanese Americans, which, as you know, were interned during World War II. And during many decades, you know, people were saying, oh, that's impossible, that's too complicated, where are we going to draw the line, where are we going to stop, how can you decide the amount? And Look, I understand these are complicated decisions to be made. Now, is this a reason to, you know, forget about it and say, okay, we don't care anymore? I don't think so. I, you know, I think this would be the worst answer. So I fully recognize, you know, the complexity of the task. You know, I'm certainly not trying to say this is easy, etc. But, you know, I reiterate my claim that if you abandon any attempt, you know, for justice, then you are in a very difficult situation to prepare the future. Because then, you know, people will tell you, okay, you know, you care about, you know, this kind of expropriation and injustices, but you don't care about this other kind. So you have to try to develop some universal approach to justice in terms of objective criteria, including the distribution of income, the distribution of wealth, access to education. I don't know any other, any other approach.

I know you're very much a European federalist, and in at least one interview you argued that the major countries in the current European Union should in a sense secede and set up their own arrangements, part of which would redistribute more wealth. Would the net actual effect of that Would that not be to greatly weaken the European Union we have now? You would have multiple tiers, or how is that going to work?

Well, first of all, so I have been involved in writing this manifesto for the democratization of Europe. And so we have made, with a very large group of scholars from all over Europe, lawyers, political scientists, economists, we have been proposing concrete changes in the treaties that organize the European Union. So, you know, we are making very concrete proposals on, you know, improving the working of the European Union. And indeed, you know, I am a European federalist. I am a European, what I call, social federalist, in the sense that, you know, I want federalism to be able to deliver more social justice, to deliver more popular support to Europe, which, you know, today is not exactly the case. If you look at the Brexit vote, you know, the lower income groups voted to exit, upper income groups and upper education groups voted to stay. So, I think there's something wrong going on, you know. So, I think we need a different kind of Europe which brings more social justice, fiscal justice. And so, I think one of the solutions, certainly not the only one, you know, is to be able to make a majority rule decision-making over taxation. You know, I think, you know, the problem today is that if Luxembourg wants to put their veto on, you know, taxation of multinationals or taxation of billionaires in Europe, then you cannot do anything together, in spite of the fact that, you know, Luxembourg with 300,000 inhabitants is, you know, less than 0.1% of the population of the European Union, which is about 500 million. So, you know, it's even less than the nobility in France in 1789, where the nobility was about 1% of the population and they had veto power about taxation. So I'm saying, you know, this cannot continue for very long. So in the proposal we've been making, you know, it's not— what I want to say regarding your question is that it's not open only to large countries, you know, and it's also open to every country in the European Union or actually even outside the European Union which may want to join at some point. So, I'm just saying that if you take Germany, France, Italy, Spain, these 4 countries make almost 80% of the population and GDP of the Eurozone. So, if these 4 countries are ready to go, I think they should go. They should try to convince as many other countries as possible. But, you know, I think the current arrangement where officially we have the unanimity rule for all fiscal and budgetary matters, and then, you know, remember, you know, what happened last year with the COVID— post-COVID recovery plan. In effect, France and Germany put so much pressure on the Netherlands, Sweden, etc., that in the end there was unanimity. To have common borrowing and a recovery plan. But in a way, this was a sort of fake unanimity, which, you know, there's a risk that in the end you make everybody unhappy because people were forced to agree. In effect, what happened is that France and Germany told the Netherlands and Sweden, okay, if you don't want to come in, we're going to have a separate arrangement between us and we will do it without you. So they said, okay, we will do it with you. But I don't think this is the right way to organize political decisions. I think we should have majority rule decision-making and not based on country against country. That's why the proposal we are making in the Manifesto for the Democratization of Europe is to have a European assembly where members of national parliament will come and be in front of each other. They will be there in proportion to the population of each country and in proportion to the size of each political group in each country, so that it's not just country against country. Because when you have the head of state of Germany, the head of state of France, the head of state of Sweden, or the minister of finance of Germany, France, and Sweden, when you have only one individual to represent the supposed interest of 80 million Germans or 65 million French, It's a sort of machinery to make sort of national interest against national interest, whereas in fact, within Germany or within France or within the Netherlands, people disagree, obviously. They have different political leanings. And I think the current European Parliament is not enough, because in the end, it's really the national parliament, the German Bundestag, the French Assemblée nationale, who have the political legitimacy to make their taxpayers pay more or less tax and to take budgetary decisions. So today, we are in this strange situation where each national parliament has, in effect, a veto power on all budgetary and fiscal decisions. And indeed, I think one way to go beyond that is to actually put these national parliament members together, maybe one week per month, in the European Assembly to vote over budgetary decisions. Now, what will come out of this? I don't know, but I trust democracy. I think it could bring more social justice and fiscal justice. If I just take one example, which is corporate taxation, remember that the US, until Trump, had a federal corporate tax rate of 35%, and in addition, you had the state corporate tax rate. Whereas in Europe, corporate tax competition had led, you know, corporate tax rate to go to 20%, 10%, etc., which is very paradoxical in a way, the fact that Europe has led the movement toward more tax competition and corporate taxation, because Europe has a bigger welfare state to pay for than the US. And I think this shows that political institutions. So the fact that you have federal corporate tax and income tax in the US but not in Europe makes a difference. And I think if there was— so anyway, that's, you know, we could talk a lot more about this, but that's basically my view.

If we really want to limit wealth inequality, why shouldn't the European Union let in as immigrants many, many more non-Europeans? Won't that just limit wealth inequality almost overnight? I mean, is that a good idea? I don't think you endorse it in your book, but that seems to me by far the easiest and most direct way to limit wealth inequality.

You mean to reduce wealth inequality at the world level?

Sure. There's poor people all over the world, including in former French colonies, and take many more into the EU.

Yeah. No, but you know, look, I am in favor of more migration and more open borders. And, you know, roughly speaking, I am in favor of more control of capital and capital flows and less control of labor flows. And whereas today we sort of do the opposite— we have completely free capital flows and no fiscal coordination about corporate taxation or capital taxation, and we have strong restriction of labor flows. But, you know, I think it's important to address the two issues together, because if you only open labor flows without changing the regulation of capital and wealth taxation, then okay, you're going to reduce inequality in the sense that people from— many people from the South might benefit, but you're going to increase inequality within, you know, the populations that today live in the North. And, you know, the big winners may be, you know, top people in the North, also, you know, top people in the South, but, you know, bottom people in the North will lose. So I think— you know, if you want a fair solution, you need to do exactly what you say, but together with redistribution of wealth and income, not only in the North, but also in the South. So, you know, I think that's perfectly complementary with what I am saying.

Last question: What do you think of Michel Houellebecq and his book Submission?

This is too nihilistic for me. I mean, he has some talent, you know, he makes me think a lot to Céline, you know, Céline, you know, maybe I don't know if you know Céline, but he's a novelist of, you know, the interwar period in France who wrote this incredible novel, Voyage au bout de la nuit, which is an incredible novel. Basically, when he tells us his experience about during World War World War I, and then after World War I he goes to Africa, then he goes to Detroit. Basically, he's completely desperate about the world he sees. He's desperate about World War I, of course, he's desperate about colonialism, he's desperate about capitalism in Detroit. He's completely nihilistic, but he has a lot of talent. Well, I think Houellebecq is about the same. So he has a lot of talent, you know, I think he's not— but in terms of political views, You know, he's— yeah, to me, he's just very nihilistic. I mean, I had the opportunity to have debate with him and public discussion with him. He's— yeah, he's too nihilistic for me. So, you know, I believe we can make the world better. I believe, you know, I believe the problem is with institutions, not with people. You know, I think human beings, you know, are basically good, so to speak, and just the institutions are not always at the level of the human beings. But, well, but, you know, partly because it's difficult, of course, to set up the right institution. But we can learn from history, and, you know, I'm trying with my work, you know, to contribute to this collective process of learning from history on how to build better institutions to have a better world.

Thomas, thank you very much. Again, everyone, the new book is A Brief History of Equality. Thanks a lot, Tyler Cowen.