How We Build An Economic Transition For All | Thomas Piketty

0:00This week, Bold Politics is going international. I'm in Paris right now at the Paris School of Economics. This was founded in 2005, and I'm going to be speaking to one of its co-founders, Thomas Piketty. Thomas is like one of the economists' economists. So many other economists that we speak to reference Thomas Piketty's work, whether it's Capital in the 21st Century or his recent Global Justice Report. We're going to be talking about wealth taxes, about the new UK government, about fiscal and monetary policy. All our questions about the economy are going to be happening right now. This is this week's Bold Politics with Thomas Piketty.

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1:41That's Z-O-C-D-O-C, ZocDoc. Thomas, thank you so much for having us in Paris. It's a real honor to be here. Last week, I was on TV with Jeremy Hunt, who is a former chancellor in the United Kingdom. and we were having a debate about wealth tax. And he said to me that the UK economy has grown hugely and that people are wealthier than ever before. Why would you say that he's wrong? Well, I think, you know, people in the UK, like in many countries, would say that, you know, they have problems to pay for their bills, they have problems to access housing, they have problems to pay for their health care, to pay for the education of their children.

2:24So I don't think they would, you know, they would agree that everything is going great. Now, in the longer run, if we take, you know, I look at the long run history of income and wealth, you know, of course, there's been an improvement in the very long run. But the important part is that this long run improvement in living standards, say, over the past century or so, has come also with a very large compression of inequality. So, you know, in Britain, you know, inequality is very high today, but 100 years ago, it was even bigger. And this compression happened through many new policies, you know, including setting up social security system, national health service, very progressive tax on income and wealth.

3:11And, you know, Britain for a long time has been a champion of tax progressivity. And, you know, there's been a retreat away from tax progressivity starting in the 80s in the U.S. and in Britain. And I think in the end, you know, this neoliberal turn of the 80s has not been a huge success for the middle class and for average living standards. You know, the big promise that was made in the 80s by Reagan and Thatcher was, look, we are going to kill off progressive taxation. Maybe inequality will rise, but, you know, the size of the pie is going to grow so fast like you've never seen. You know, average wages, average income are going to grow like you've never seen.

3:55And so everybody will be happy. 30 years later, 40 years later, when I look at Brexit or when I look at the Trumpist United States, I don't see a very happy people. And I think partly because of the failure of this promise. And this is why right-wing parties in these two countries, the Republican in the US and the conservative and now reform party in Britain, have turned anti-migrant toward identity politics because they have not delivered on the economic front and on living standards. So I think, you know, if there was any progress in the longer run, it was actually due to the compression of inequality and partly to very progressive taxes on the rich, which in the long run have been a very successful policy.

4:41And the return of high inequality since the 80s, you know, if anything has contributed to a slowdown of economic growth and economic progress. And I think it's time to revisit these narratives in order to design a plan for the future. And if I can go really back to basics with you, people, including myself, often talk about inequality as a bad thing. And I think in many ways it's obvious why it's a bad thing. But you wrote what really has become a foundational text, Capital in the 21st Century, that really details the problems with inequality and why that impacts so many other areas across our entire society.

5:22So it's a big question. Why is inequality a bad thing? And what happens if you allow it to keep growing unchecked? Well, extreme inequality is bad because it leaves very little, basically, to very large part of the population. So just to take an example, if we look at the bottom 50 percent of the population, the bottom half of the population in a country like Britain or France today, you know, they would own, you know, three or four percent of total wealth. So total wealth includes all the housing stock, but also financial assets, business assets. So this means that the bottom half of children typically are going to inherit from, you know, two or three percent of everything that there is to inherit.

6:05And the top 10 percent of children will inherit of 60 percent of the total and the top one percent of the children, maybe 30 percent of the total. Now, is this fair? Probably not. Is this good for the economy? Well, probably not either because you have a lot of talent, you know, in the bottom 50 % group. You know, the idea that all wealthy children have great ideas as compared to poor children, you know, would seem like a completely outdated ideology going back to, you know, the 19th century or early 20th century. But our economic reality is still, you know, very plutocratic in some way, in the sense that you have a concentration of money and therefore power and opportunities in such a small group of the population that, you know, in the end, it's not only unfair, it's also a waste of opportunities and resources for the country.

7:00Again, in the long run, you know, things were even worse 100 years ago. So 100 years ago, the top 10 % would own 90 % of total wealth in a country like Britain and the top 1 % alone 60 or 70%. Which means that, in fact, there was virtually no middle class. So, you know, the middle 40 % who are not in the top 10 and not in the bottom 50 were basically as poor as the bottom 50 100 years ago. They were a little richer by definition, but they had 5 % or 6 % or 7 % of total wealth and 2 % or 3 % for the bottom 50%. But there was a limited gap between the bottom 50 % and the next 40%. What happened over the past century is that, in fact, there was a huge rise of the middle class.

7:45So now this middle 40 % today would own maybe 30%, 35 % of everything there is to own. These are people who typically can own their own, sometimes a little business. And this is good for economic activities. This has been good for social mobility. But if you had told, you know, the richest economic group in Britain 100 years ago in 1910, look, your share is going to be reduced from 90 percent to 60 percent. But don't worry, this is going to benefit the people below you. They would have said, oh, no, don't do that. You know, the sky is going to fall. The economy is going to collapse. This is going to be communism or socialism or whatever.

8:27You know, in fact, this compression of inequality did take place sometime following big catastrophes, but also most importantly, following a positive, constructive transformation of institution and policy through the rise of progressive taxation and public services. and in the end, the fact that you now have this middle class that is able to, you know, they can own homes, they can start business, you know, this has been good for society as a whole. The problem is that now we've had a sort of shrinking middle class in recent decades and the bottom 50 % has basically always been very poor in terms of assets.

9:05Whereas what we would like to do for the future is to extend the rise of the middle class in wealth to the bottom 50%. And, you know, the great lesson of history is that if you want prosperity in the long run, prosperity in the 21st century, you need a very inclusive economic model. You need to have more and more people who can access to economic opportunities, economic decision-making, be active in their economic life. And, you know, we've gone from a society where, you know, back in the 50s, you had less than 2 % of a generation going to university in a country like France or Britain. Today, it's like a majority of each generation is close to 60%.

9:51And, you know, it's going to keep going up and it's not going to go back. And so in that kind of society, the very extreme concentration of wealth and decision-making power that you had, you know, in imperial times or colonial times, you know, it's never been great. But for that kind of society, it simply cannot deliver growth and prosperity anymore. So to summarize, you know, inequality is not just unfair. It's also collectively inefficient for the kind of development models that we need for the 21st century. And when we also say inefficient, I often talk about how we've gone for an economy in the UK where we used to make things a productive economy and now we're an economy where we own things.

10:34It's become an asset class, which speaks, I think, to this gap. Again, what are the consequences if you allow that to carry on unchecked? You know, the big problem of this strategy is that it leaves a very large part of the population and of the territories, you know, because this kind of economy is very much concentrated in a very large agglomeration starting with London. And it leaves a very big part of the population out of the gap. And, you know, also, you know, from a more global sustainability perspective, what we need to do if we want to address not only our social challenges, but also our environmental challenges, is to develop more and more immaterial sectors in care services, in education, in health, in transportation, in clean energy system.

11:22The huge specialization on financial services and consulting services, you know, it's not really producing, you know, this transition that we need collectively at the level of the world. Because finance, as you know, can be quite blind in terms of where do you invest in terms of, you know, fossil fuel and, you know, whatever sector that is very intensive in material input and material footprint, whether this is taking place in Britain or in some other part of the world. And then if I could ask you in terms of how we measure wealth. So obviously we have this concept of GDP by Simon Kuznets. It feels like a leading question because I feel like it's a very flawed model.

12:09But what are the problems with it? And do you have suggestions of alternatives? I think the alternative and what we're trying to promote, you know, at the World Inequality Lab in Paris and in our recent global justice report is to promote a generally speaking view of material accounting. So, you know, you need some accounting of the sort of the real stuff that you're producing. So the real quantities, well, of carbon emission, of impact on temperature, but also the real quantity of health services, education services, the real quantity of material input, labor hours. So this is what I mean by material accounting.

12:48You need this sort of multi-sectoral material accounting. Now, does it mean that monetary accounting, where you aggregate all these sectoral activities into single numbers in order to measure output, GDP, income, wealth, does it mean that this kind of monetary accounting is useless? No, that would be a mistake. We also need this monetary accounting, if anything, to measure inequality and income and wealth. Because, you know, if you tell people, OK, we don't care about GDP or income and wealth anymore. It's just material accounting. And don't worry, we are going to count very well the carbon emission and, you know, the quantities of forest and temperature and material stuff and everything will be great.

13:32Well, you know, for people who have a small income, small wage, middle income, middle wage, and you tell them income and wages and monetary quantities do not exist anymore, I'm not sure they will be very reinsured by your platform. So I think there's a sort of illusion sometimes of classless ecology, an ecology where we completely forget about social class and vertical inequality, which has been very harmful and which has put us in this very difficult situation today. And I know that you agree, certainly, with this general perspective. And I think the way to address this is to have both to combine material accounting with monetary accounting.

14:12And that's where things are getting difficult because, you know, it's very tempting to say, okay, let's burn monetary accounting completely. Let's burn GDP completely. Let's look only at material stuff. And some people would have the opposite extreme view. In fact, we need both. We need to articulate both. Basically, what we're trying to show in the global justice report is that if you want to think of formulating a desirable development strategy and development trajectory for the future, you need to start from some material goals. You know, what kind of living standard, for instance, how many hours of work in the long run, what share of hours of work should be devoted to education and health.

14:57You know, you have to start from sort of very, very material objective for the long run and what it means to reach real prosperity in the long run for all countries in the world. But then at some point, you also need to translate this into monetary outcomes. You always have to be very careful about the exact GDP number you get out of this is always a bit artificial because depending on how you aggregate these different sectors and sort of the relative values that you put on these different goods is going to affect your aggregate GDP computation in a way that will always be partly artificial. So what matters is not so much the aggregate GDP number, but more the scale of income and the scale of wealth.

15:45So I would say, you know, monetary quantities are still important to analyze inequality, inequality within countries, between countries. I think to me that this is the right approach. You know, it is a bit complex because the reality is a bit complex. We care about material outcomes, but we also care about monetary inequality because it means, you know, also inequality in power, inequality in opportunities. And so we need to combine the two. In a way, we need to combine, you know, ecological perspective with the class and the inequality perspective. That's the key. And if you're advising the chancellor, I suppose you're trying to balance more than two things, but two main things here.

16:23the cost of borrowing so if you're borrowing money for investment particularly if it's for ecological investments so investing to tackle the climate crisis but also this concept of spending multipliers how do you find a measurement that looks at the kind of return of investment so you're building say social housing council housing you know that's going to be good for people's health for instance because they're going to be living in a house that's not damp and moldy you know if there's a heat wave they're going to be living in a home that's insulated But how do you economically account to the fact that you're both borrowing and you're looking kind of at 5, 10, 15 years in the future?

16:58I mean, you could ask the same question on, you know, how do you evaluate the benefits of a clean energy system or low carbon energy system? You know, the benefit is supposed to come in the future in the form of less global warming, less heat wave in the summer. How do you account for this? and I think in both cases there's no magic bullet in the sense that you can try to put some valuation, some monetary valuation on this and for instance that's what people do when they look at the price of the ton of carbon which is supposed to be a valuation for the extra carbon emission and the extra global warming that you're putting in the air and you know you could do the same thing for the valuation of clean in housing and the impact on, you know, children's success in school.

17:53But, you know, at some point, putting monetary valuation on everything, you know, is not necessarily the right approach. It's useful to do it a little bit, but, you know, at some point, this has to be some form of collective and democratic deliberation, you know, in a local municipality council, in a parliament, at a broader international level when we meet about a climate objective at the world level, where, you know, we will have to weight all these different pieces and evidence of, you know, the consequences for children's welfare, the consequences for global warming, and to make collectively our own mind.

18:34You know, I think the sacralization of the market valuation process And the GDP computation out of market prices as the only indicator of success is clearly leading us to dead ends, you know, because in practice, you know, there will never be, you know, a sort of single number to aggregate all these social and environmental costs and benefits. So we have to accept the discussion about the numbers a little bit, but at some point, it's going to be also human judgment and democratic deliberation using other forms of language and communications and just statistical language. This answer makes complete sense to me.

19:25I also know if we had a British journalist in the room, particularly from a right-wing press, but actually any of the press, the number one response they would say to you is, what about the bond markets? And so if I could put that question to you, this answer makes sense to me, but how do you make sure that the bond markets are brought along? This is why also, you know, at some point you cannot pay for everything by borrowing. You know, this is why also you need taxation and you need wealth taxation. And again, you know, on this issue of taxation and progressive taxation on the richest group, let me simply say that you will always find journalists or economists who are very skeptical, to say the least, very negative about any progressive change in the tax system.

20:11You know, 100 years ago in Britain, all, you know, mainstream economists and journalists were against the progressive income tax. They were all completely against it. And they were all saying, you know, if you go in this direction, this is going to be, you know, complete collapse of the economy, end of the world. And, you know, at the end of the day, it happened. The tax system became progressive. Some people think it became too progressive at some point in the 50s, 60s. But, you know, nobody wants to return, as far as I know, to the system of the 19th century with no progressive. Well, at least nobody is saying it, you know, explicitly.

20:48You know, the only country in the world where it's interesting, where you don't have any progressive form of taxation anymore, is actually Putin's Russia, you know, where you have a flat income tax system. You know, it's 12 percent. Whether you have 1 ,000 ruble or 1 million or 10 million rubles, they have no inheritance tax. You know, in China also, you know, it's interesting. Communist China, you know, very authoritarian and opaque system. They have no inheritance tax. And, you know, in East Asia, if you're a billionaire and you want to preserve your wealth, you should go and die in communist China.

21:24You know, if you go in Japan or in Taiwan or in South Korea, you have a 40 % or 50 % tax on inheritance that you pay. And even in Japan, the top tax rate on inheritance was raised from 40 to 50 % a couple of years ago. It was not by a left-wing government. It's always a right-wing government in Japan, and they raise the tax to 50%. So this is just saying that the ideal of no tax progressivity at all is actually something you see in authoritarian regime and plutocratic regime like Russia and China. And as far as I know, even the conservatives in Britain or the Republicans in the U.S. or the Christian Democrats in Germany are not advocating for complete revocation of tax progressivity and return to 19th century flat tax system.

22:14So what I mean by this is that, you know, there has been a great social, democratic and fiscal revolution in the 20th century, which initially the elite and mainstream economies were completely against it. But it has been a success historically and it has become almost consensual. And now, you know, we need to do the same for the future because now we have new challenges to fight, you know, in particular, you know, the existential challenge of planetary habitability and global warming because, you know, we have this aspiration to prosperity, you know, not only in Europe or in North America, but all over the world.

22:53People in India, in sub-Saharan Africa, they're not going to give up their aspiration to prosperity. But if we don't manage to articulate together a model of development, a model of energy production, a model of dematerialization of the economy, reduction in working time, which makes all of this aspiration compatible with planetary habitability, we're all going to suffer a lot. We are all going to have three, four degrees or more in global warming. And I can tell you, the kind of heat wave we had two weeks ago are going to look almost nothing at all as compared to what we'll have in a few decades.

23:36So the challenge of the future is to try to have the kind of social and democratic and fiscal transformations that we had in the 20th century at the national level, to have it at a broader level, because the problem we have to solve are global. And, you know, if conservatives find a way to fight global warming in Britain alone, you know, I'm all for it. But, you know, that's not simply this simply does not exist. And here's a quick message from our friends at Crowdfunder. We're stronger when we're together. But the reality is there's been a deliberate shift to make us forget about the things that matter in life.

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26:47People who watch this podcast will be very familiar with the arguments around the wealth tax. It's something we talk about a lot. I think your particular unique vision to you and Gabriel Zuckman and various other economists is to have a global wealth tax. How, I don't want to say realistic, because there's a question that's put to me all the time. I think what's unrealistic right now is we can continue as we are and everything will be okay. But do you have a vision of how the world can come together to say, actually, we need to cooperate to make sure that a global tax actually works? First of all, let me make very clear that individual countries like Britain or France can very well have a progressive wealth tax and billionaire on their own right away.

27:26They don't need to ask the permission of their neighbors or the United Nations. They don't need to wait for world unanimity. The only thing they need to do when they do wealth tax on their own is to make clear that if you have made your wealth in Britain for many decades by benefiting from the public services in Britain, by the legal system of Britain, because creating wealth, accumulating wealth is always the outcome of a collective process where you use institution, the legal system, the education system, the health system, the transportation system, the road. system. If you have benefited from this during many decades, you cannot simply walk away at age, you know, 50 or 60 or whatever and say, okay, now bye-bye, I don't pay tax anymore.

28:15So the first, the only important thing you need to do when you set up a wealth tax in, say, in Britain is to say, even if you go away, you know, you keep paying. The way the Americans do it is by saying, as long as you keep US citizenship, you pay even if you're in Switzerland, wherever you want. I don't think this is the best way. I think a better way would be to make people pay, you know, in proportion to the years of residence that they have spent in the country. So if you have spent your first 50 years in Britain, you move at age 51. Well, that's fine. Do that. But, you know, you keep paying 50, 51st of the tax that you would have paid.

28:55So the fiscal cost for the treasury is quite limited. Yes. So that's the important point. And once you have said that, you know, I think all the arguments about tax evasion sort of fall down almost immediately. Now, people will tell you, oh, but you cannot do that. Of course you can. You know, the problem is that we have put ourselves in a situation to think that the very specific treaties about capital flows, what we have come to call free capital flows that were set up in the 80s and 90s, are a sort of law of nature. The idea is that you have a sacralized right to benefit from the public services, legal system in a country as much as you want.

29:40And then you push on a button and you can transfer your assets wherever you want. And nobody can follow you and nobody can make you pay. And it's a sort of new sacralized right. But look, this is a completely crazy system. This is a machinery to make normal people, middle class and lower class people, hate globalization. And if you tell people there's nothing you can change about this, there's nothing you can change about inequality, about economic policy, the only thing government can do is to, you know, control their border for migrants. And then, you know, of course, 20 years, 30 years later, the entire political conversation is about border control and identity.

30:20And that's because you close the discussion entirely about economic and fiscal policy. So we have to reopen the discussion. And the first thing to do that is to question three capital flows in the sense that you don't have the freedom to escape taxation after you have benefited from the public services and public institutions of a country during so long. So if you address this directly and make clear that you will keep paying in proportion to the number of years you have stayed in Britain, then, I mean, you can also combine that with rules about the location of the assets themselves. You know, as long as the assets are located in Britain, of course, you can make people pay.

31:03But it's important to have also the number of years you've spent in the country so that even if you move your assets away, you keep paying. And, you know, you don't have the choice. You know, otherwise your assets can be taken away from you if some of them are in Britain. If you return to Britain and, you know, you've not paid your tax, well, you know, you will be subject to the sanction which anybody not paying your tax. So that's the first big thing is that, you know, you don't need to have a world wealth tax. You know, you can do a lot at the level of Britain, and we should not use this global wealth tax idea as an excuse not to do at the country level what national governments can do at the level.

31:40Now, having said that, why do we also need a global perspective or global wealth tax? Well, this is because, first, of course, you could do even more by doing it together. You can have a more progressive wealth tax, but that's not the most important part. The most important part is what we have to finance. And what we have to finance, broadly speaking, are climate investment and in particular climate reparation. I'm sorry to say that, you know, to my fellow citizen of the North, but, you know, we have collectively a responsibility for historical emissions. And the countries that are now, you know, getting already the largest reduction, for instance, in their agricultural productivity are, for instance, in sub-Saharan Africa.

32:26And, you know, many countries in the global south are suffering from very, very large climate increase. And so collectively, we need to find a way to finance adaptation, mitigation and investment in low carbon energy. And, you know, if you look at what was discussed in COP meetings over the past 10 years, you know, since the Paris Agreement in 2015 in particular, rich countries under the pressure of poor countries have said, okay, we are going to have a fund, an adaptation fund, a climate fund in order to pay for some of the spending. They just forgot to put money in the fund. And I can see why, because, you know, they don't want to ask the average taxpayer in Britain or in France to pay for that.

33:15That won't work. You know, the average taxpayer and lower income taxpayer in France and Britain are going to say, look, there are some people at the top, you know, who are taking private jet and give us lessons about the environment. You know, maybe there's a problem. So this is the yellow vest crisis in France, where you want normal people to pay the bills and to pay a very large increase in carbon tax. And at the same time, you have a complete exoneration for kerosene that you put in claim for people who go to Barcelona for the weekend. And you use the tax revenue to suppress, at the time in 2017, the wealth tax paid by the top 1%.

33:57So this was the policy of Macron in 2018. And, you know, usually things are a bit more dissimulated. You know, when you do something unfair, you try to make it less visible. Here you were just taxing the transportation cost and what people pay to put oil on their car to go to work to, you know, suppress the tax for top 1%. So people got mad and this killed the idea of a carbon tax for very long. So this is just saying that if we want to pay for climate, we need some kind of global wealth tax. And, you know, I think the fact that Brazil and South Africa were the countries to put the global wealth tax at the agenda of G20 summit in 2024 is very interesting.

34:46You know, when I wrote Capital in the 21st Century in 2013, 10 years ago, I was already advocating for global wealth tax. But I could not imagine, first, that it will be officially discussed at the G20 summit 10 years later, which was not obvious at the time. And most importantly, that it will come at the initiative of countries from the global south rather than from, you know, European countries trying to preserve their welfare state and their tax revenue, which would have been another possibility. I think, generally speaking, a lot of the initiative in the future of the political initiative is going to come from the global south because, you know, the demand for economic justice and climate justice will be stronger and stronger.

35:28And, you know, I think will be very difficult to resist for us. And so I think what we have to do in Europe and in the north is first to understand, you know, that this aspiration to prosperity from the rest of the world is legitimate. it's not going to go away. You can, you know, it's going to be there and these countries will do whatever they can to reach prosperity. So if the only possibility is through a fossil fuel extractivist model, they will do it. But then we will suffer some of the consequences. A better solution is to try to share the burden together. And in my view, this is where the discussion on global wealth tax comes in.

36:08But, you know, you really have to start from the concrete development objective and you know taxation is just a sort of technical tool to to to finance some some bigger goal there were so many interesting things you talked about there in terms of the cost of action versus the cost of inaction and also i think this is fascinating this idea that the economy so often gets talked about as a natural phenomenon that politicians or chancellors or governments don't have it in their ability to be able to shape and actually i think of the economist in the UK, Mariana Matsukar, who often talks about government not being there to fix market failures, but actually to be able to set a direction for the market to follow.

36:48What I find depressing is we're very early on in a new Labour government in the UK, and they've announced this week to cap bus fares, which I totally support. It's really important that people can get on buses, but they want to fund it by turning some of the grants through loss and damage funds, turning them into loans, which we don't know the details of, but that could also include interest, which will be putting more debt on some of the countries. What is the argument, I guess, the reverse argument, the reparations argument in terms of our historic responsibility towards these countries? And also, I suppose, the selfish argument, the global instability that happens when countries aren't supported and the kind of effects that that has on migration.

37:23I think the future that the conservative and the nationalist and sometimes, unfortunately, also the centrist and sometimes even center-left government are preparing for us is so unsatisfactory. Because, you know, if you don't try to change the economic model and to mobilize, you know, resources for, you know, normal people in the north and to help for the climate transition in the north and in the south and everywhere, what kind of future are we heading for? You know, what are you going to do with, you know, countries unable to develop in the South? You know, are you going to put millions of drones in the Mediterranean or in the Manche, you know, to make sure that people don't come?

38:07You know, at some level, you know, I feel the European nationalists are preparing a project, you know, that's even more frightening. the U.S. nationalists with their data centers and colonization of Mars and, you know, all the techno-nationalists in the U.S. are quite crazy, but, you know, the Europeans with their, you know, their strategy to sort of prevent the poor people from Africa from coming simply by basically a brute military force and no development project, no serious concern about how you redefine the development model, how you pay for this climate investment, for this education and health investment.

38:52Right now, there's one number in the global justice report which I find quite striking. If you look today, the per capita spending in health in sub-Saharan Africa, this is 100 euros per capita per year. In the US, this is 8 ,000 euros, 80 times more per capita For education, the gap is 1 to 20. It's 200 euros per capita in sub-Saharan Africa, 4 ,000 euros per capita in the U.S. And the gap with Europe is almost as large. Now, we are supposed to believe in equal opportunity. You know, everybody is supposed to be in favor of equal opportunity. But here you have a gap of 1 to 20 for education and 1 to 80 for health in how each children can access basic educational expenditure.

39:42and health expenditure. Now, it's a miracle that with so little, they actually managed to grow a little bit. You know, just so, you know, the idea that, you know, we can keep having this kind of economic system and, you know, that's fine. We just need to prevent them from coming and, you know, we'll put whatever military budget, you know, to make sure. This is the world you are building for us for 2050, but, you know, the demographic projection, And at some point, it doesn't square up. It doesn't work. So people are trying to gain time by pushing this kind of discourse, but this is simply not going to work.

40:23So this is why I think it's important to prepare ourselves for different trajectories. Because sometimes people tell me, when they look at the global justice reports, they say, okay, that's utopia. You know, you have a global justice fund, you have a global wealth tax, you have a world sovereign fund, you have a new international currency. You know, OK, this is maybe this is utopia, but I think in the end, this is more realistic utopia. You know, that's a kind of crazy dystopia that you are selling us, you know, with your techno nationalist platform. And I think, you know, I'm not saying things will happen exactly like in the global justice trajectories that we are describing.

41:02But what I know for sure is that when catastrophe happens, crises happen, and they are already there. You know, heat wave are already there. Geopolitical rivalries over resources and energy supply are already there. They are going to get worse and worse. We don't know, you know, how much worse. We had at the Paris School of Economics a few weeks ago, we had this World Inequality Conference. I was having a discussion with science fiction writer Kim Stanley Robinson, who is the author of the Ministry for the Future. where, you know, he's sort of predicting an enormous heat wave in Uttar Pradesh, killing millions of people, and then a wave of eco-terrorists shooting airplanes, and finally governments in the north and international institutions changing the system.

41:48You know, I'm not saying this is going to happen. You know, nobody knows how bad the catastrophe can get. What I know for sure is that whatever solution was discussed before the catastrophe happened, has a bigger chance of being adopted after the catastrophe. Because when crises come, what history shows us, the Great Depression, World War I, World War II, when big catastrophes happen, governments need to find solutions. Societies need to find solutions. And very often, they change their economic view and their financial view incredibly fast. We've already seen that to a small extent after 2008 and 2020.

42:27Look, Europe was supposed to have a currency where you cannot print euro. And then suddenly they started printing euro like crazy, started to borrow together after 2020, which was supposed to be completely impossible. And we will have in the future much bigger crises to address than what we had in 2008, 2020. So governments will have to find solutions. And we are not heading for steady times. You know, we are heading for times with, you know, lots of crises will happen. So we need to think in a sort of bold way about, you know, different trajectories. And that's why, you know, that's what we're trying to do in the global justice report.

43:11And, you know, I know to a large extent, this is also what you are trying to do by opening up the discussion on wealth tax and putting together, you know, ecological objective with equality objective in Brighton. And I think this is exactly the way to go. And, you know, I wish the Labour Party could also hear some of that and move in your direction. I don't know whether this is realistic or not. It's interesting in the UK because in the recent elections, the Labour Party lost four times as many votes to the Green Party as they did to reform. But just the internal politics of it feels like they're very obsessed with what reform are doing and pulling them towards migration as opposed to pulling them in the other direction.

43:58Can I ask you about an even more dystopian kind of timeline and then maybe we'll get more hope? I know a big theme of your work as well is that wealth is not a problem in itself. It's a problem because it also buys power and it buys democracy. And I increasingly think about a world of Elon Musk's and trillionaires, where if they are buying up big parts of our government and big parts of our kind of state infrastructure, and the catastrophism, the climate crisis hits even harder, there's a place where they're actually insulated from it and it's not a problem for them because, you know, the most extreme example, they go to another planet.

44:30In a less extreme example, they build a flood barrier and say the village of the town is flooded, but actually the super wealthy are protected. Does it feel to you as if we're on this track and knowing this information, what can we do differently? We're sort of on this track, but people will not accept this. I think the demand for equality, for dignity, for democracy, for participation is bigger than ever. And I think there's, generally speaking, in history, what I try to write in my brief history of equality is that there's a long-run collective mobilization, democratic mobilization, which historically has proven to be, you know, stronger than whatever, you know, oligarchs and plutocrats want to impose.

45:18And so, you know, the U.S. techno-billionaires and all the Trumpist crowd, you know, they look very powerful because they try to project this, you know, feeling of power and sort of decisiveness, etc. But I think, in fact, they are very fragile. And a big part of the nervousness that we see in Washington, to say the least, comes from the fact that, you know, they are largely aware of the fact that they are in some way on the wrong side of history. I mean, they know that they are being accused of being largely responsible for climate change. And it is true that, you know, very large asset holders have a responsibility for the investment decision that have been made in recent decades and that are still being made today in terms of fossil fuel, in terms of material footprint.

46:08You know, the average consumer, you know, it's very difficult to change the economic system just by deciding where to go. I mean, I'm not saying there's no responsibility on the consumer side, etc. We should help people to access, you know, different kind of goods and with different kind of material footprint. But it is clear that the responsibility of asset holders and people who own the wealth and who make the investment decision and the portfolio decision is way bigger than that of average consumers. And so, you know, at some point, I think they are aware that they will be asked for, you know, well, basically they will have to transfer some of their wealth will have to be transferred, in my view, to public sovereign fund.

46:53You know, Bernie Sanders a few weeks ago said that 50 % of the share of AI companies should be transferred to a public sovereign fund in the US. This is very popular in the US, including among Republican voters, by the way. And in a way, what we're proposing in the Global Justice Report is to do the same for all sectors of the economy. So, you know, we have this 20 percent tax on billionaire, 20 percent per year. And so after a few years, in effect, you have transferred a big part, most of billionaire wealth and also centimillionaire wealth to a sovereign fund, which then can, you know, redirect investment flows with different priorities.

47:36So maybe less data centers, more low-carbon energy infrastructure, more transportation system, whatever you want. I mean, the general idea is to be able to take back control of our economic future. And I think, actually, this demand for taking back control and having this kind of sovereign fund can be very popular among voters coming from very different political persuasion. from the left, but also from the right. And then maybe with different projects about what to do with the surviving fund. Maybe some people on the right will want to have more military spending and people on the left, more low-carbon energy investment.

48:17And that's fine. But in any case, I think billionaires know that the legitimacy of their power is very fragile. And so they're trying to eat very hard. And with Trump, they believe they have found their champion. And to some extent, they have found their champion. Except that this is also a very fragile champion, because I think, you know, at the end of the day, the nervousness we see with the Trump administration expresses the fact that it's just the expression of the fact that the U.S. as a country is losing control of the world. This is the reality. You know, the U.S. they used to have in 1950, they had almost made almost 40 percent of the world GDP, a bit like the great European powers in 1910, which together made 40, 50 percent of the world GDP.

49:04But today, the U.S. is down to 15%, 14%, and they're going to go down to 5%, 10 % by the end of the century. They're just losing control. And now they try to, in addition, they have accumulated enormous foreign debt, enormous trade deficit, which is, you know, we've never seen a leading military power in the world who has enormous foreign debt and who is about to pay huge interest payment to the rest of the world. In 1910, Britain or France had huge foreign assets on the rest of the world, and the rest of the world was paying interest to them. Now we are in this very strange situation where the U.S.

49:39is about to pay a lot of interest to the rest of the world, and so they are in a complete panic, basically. So their solution is to say, well, let's put the guns on the table, and let's try to grab resources wherever we can, you know, minerals in Ukraine, Greenland, oil in Venezuela. You know, it's as simple as that. And so that's not going to work. That's not going to work for a simple reason, which is that, you know, U.S. public opinion may be a bit crazy sometimes, but they are not sufficiently crazy to let Trump, you know, send thousands of troops on the ground in Iran or all over the world, which is what it will take to grab these resources.

50:19And so at the end of the day, you know, there's a sort of Trumpist techno billionaire crowd is looking very powerful. But I think they are a lot more fragile than what they pretend. This is also what makes them nervous and dangerous in a way, because, you know, they are ready to do anything. They change their mind every morning because their previous idea did not work usually. so that's dangerous but you know in the longer run we should stop talking about them all the time and prepare ourselves for a different future because you know that's not going to last forever and can I ask briefly I had an interesting conversation with Joseph Stieglitz about economic sovereignty about the need for the country to manufacture more and produce particularly in light of the climate crisis that's saying solar panels and not require materials from China, for instance, particularly because of the human rights impacts.

51:16How can a country find this balance between kind of protecting its own economic sovereignty and its own manufacturing, but also recognizing that trade is important and, you know, can benefit a country both culturally and socially? I think we've gone far too far in terms of delegating to China the production of manufacturing goods and in particular solar panels and low-carbon energy infrastructure. I think this is a consequence of several illusions, illusion about free trade always delivering harmonious and balanced growth, which is wrong. This can also deliver a lot of inequality and a lot of carbon emission because all these goods are traveling thousands of kilometers.

51:58It's not particularly good for the planet. It's also the consequences of a very badly regulated international trade and monetary system. So, you know, I was talking about the trade deficit of the U.S. to a large extent. This is a consequence of the fact that the U.S. is a smaller and smaller economy as compared to the size of the world. But people from all over the world are still using the U.S. dollar as a reserve currency, which leads to enormous overvaluation of the U.S. dollar. because you can be the reserve currency in the world when you are 40 % of the world GDP, but when you're getting to 10 % of the world GDP and you're going toward five, if the entire world is putting their reserve assets in your country, this is driving a dollar and this is putting you in trade deficit.

52:48In a way, this is what Trump is saying. Our dollar is too strong, except that his solution, his response to this is, let's put the gun on the table. We're going to get our money back with our military. and this gets completely irrational and nationalist and destructive. What's the right answer? Well, the right answer is that we'll need to move to another international reserve currency, which will have to be some weighted basket between dollar, euro, yuan. I mean, it's a little bit what the special drawing rights of international currency created by the International Monetary Fund looks like. Remember Keynes in the 40s wanted to create the bunker at the time.

53:30He did not care too much about sustainable development in the global south. You know, his main problem was he wanted the dollar not to dominate the British pound. So, you know, he had his own concern at the time. But I think his intuition was right, which is that you need a reserve currency, which he called the banker, which we could call, you know, the United Nations currency. You can still call it the special drawing rights of IMF if you want, but this is really a very technocratic name and impossible to understand. But it has to be a weighted currency. And I think we are going to get there because I think the dollar as a reserve currency is harmful for everybody.

54:07You know, this is creating huge trade deficit in the US. This is also contributing to the large trade surplus of China. So going back to China, because every other country in the world, including large countries like China or Germany, are so afraid about the instability of the international financial system and monetary system with an expectable fluctuation in the rate of the dollar in interest rates that everybody wants to accumulate crazy reserves outside. So they want to have enormous trade surplus. But of course, you cannot have every country making a trade surplus in the world. So this is completely self-defeating because this is creating social problems and other problems in other countries, including in countries with a disappearing manufacturing base.

54:56So this situation is a consequence of a sort of very unbalanced international monetary and trade system. And this has to be addressed. And I think this will be addressed. You know, I think in the end, the current situation is not sustainable, not even from a U.S. viewpoint. So we'll have to redesign the monetary system. What this is also showing is that China has been, in a way, more pragmatic than Europe in terms of helping the sectors of the future. And so, take an example with the solar panel sector. For a long time, the central bank of China and the banking system in China has been making loans with much lower interest rates to green sectors than for the rest of the economy.

55:47And, you know, this is something that we're discussing now at the European Central Bank, but, you know, the European Central Bank, and I don't know about the Bank of England, but are still quite conservative in saying, no, if we're starting to have differentiated interest rate with green sector versus brown sector, that's too complicated for us. We don't want to do that. Okay, that's too complicated for you, but this is what China has been doing for 15 years. And if you don't do it, you will never recover from the solar panel sector. Because fiscal resources, wealth tax is one thing, but monetary policy with differentiated interest rate, new international currency is another thing.

56:25And in some way, it's easier. Taxation is always more complicated than monetary policy. So we should use both. In a way, the monetary tools are easier to mobilize, faster to mobilize. My own fear is that in the future, both at the national and international level, we might rely a bit too much on monetary tools like what we did after 2008-2020 crisis. At the international level, for instance, there's large demand today from countries in the global south to issue more special drawing rights of the IMF in order that this money could go into regional development bank, which then could use it to pay for climate investment.

57:12And I think that's part of the solution. But, you know, if you only do that, you know, you get inflation, as we've seen after 2020, so you also need taxation. You need a balance between the two, and that's what it will take, including, you know, to address the problem on the manufacturing base that you were alluding to. I feel like you've taken us back to the very beginning as well when we're talking about resources and the productive capacity in your economy. Thomas Piketty, this has been amazing. Thank you so much for your knowledge and for sharing with us. I hope people will check out the Global Justice Project, which is available online and find out more about you and your work.

57:46And thanks so much. Thank you. Thank you. This episode was brought to you by CrowdFunder. What's your bold idea? Start it at crowdfunder.co.uk forward slash bold. You