Original subtitles

...promise from the authorities

that there would be some change,

the pressure for reform is gathering pace

and is gathering support.

Differences between capitalism and communism is so strong

that only concrete and barbed wire could hold them...

We want another way to reconstruct our society.

On the streets of East German cities,

scores of people demanding democratic reforms

were dragged off by...

Security police dragged individuals

from the crowd, beating them over the head,

and throwing them into the back of waiting lorries.

I was born in 1971.

I turned 18 in 1989, when the Berlin Wall came down.

I remember being glued to my radio

listening to the fall of the communist regime.

As a student, I travelled to Romania, Hungary and Russia.

So I personally know the impact this collapse had.

I saw an economic and social system

in a complete state of failure.

A political system that had promised human emancipation,

but instead ended up producing misery

and incredible political repression.

And when the fraud of the communist promise was exposed

and it collapsed,

it greatly reinforced the capitalist argument.

The problem was that it went too far.

♪ Cristal, Maybach ♪

♪ Diamonds on your timepiece ♪

♪ Jet planes, islands, tigers on a gold leash ♪

♪ We don't care ♪

♪ We aren't caught up in your love affair ♪

The fall of the Soviet Union

led to infinite faith in the deregulation of markets

accompanied by a new

glorification of private property.

As a consequence,

we're facing challenges of rising inequality

and the rise of nationalism and xenophobic tensions,

like there was in the very unequal world

before World War I.

♪ We didn't come from money ♪

♪ But every song's like gold teeth, Grey Goose ♪

♪ Trippin' in the bathroom ♪

♪ Bloodstains, ball gowns, trashing the hotel room ♪

♪ We don't care... ♪

And I'm very scared for the 21st century

because what I see in the historical data

suggests we risk returning to a capitalist system

similar to the highly unequal world

of the 18th and 19th centuries.

- ♪ And we'll never be royals ♪ - ♪ Royals ♪

♪ It don't run in our blood ♪

♪ That kind of lux just ain't for us ♪

♪ We crave a different kind of buzz ♪

- ♪ Let me be your ruler ♪ - ♪ Ruler ♪

♪ You can call me Queen B ♪

♪ And, baby, I'll rule ♪

♪ I'll rule, I'll rule, I'll rule ♪

♪ Let me live that fantasy ♪

In 18th century Europe,

capital is concentrated in the hands

of a very small group of people.

The aristocracy represents 1% of the population.

The boundaries of money limit social mobility,

and hard work and education

don't allow you to climb very high.

Through the evocative power of literature,

film and popular culture

we can see the importance of capital throughout history.

It's a story much darker

than the idyllic vision

of a march towards progress and light.

In the 18th century, life for the poor is grim.

If you're lucky, you might be a servant.

Everyone else is a hand-to-mouth laborer,

moving from place to place, following the work,

being treated by the landowners exactly as they please.

And of course there were no benefits,

there's no health service, there's no free schooling,

there's absolutely nothing.

So poverty is a death sentence.

And what's very striking is the average life expectancy

in the 18th century is 17.

At the time, what capital really looks like is

money, money-lending and land-owning.

You have a guy that sits in a fort and basically claims taxes

on all the people that work his land.

And we sort of know what that looks like

from all kinds of movies.

Really, with what I get from these peasants,

I can hardly afford to pay my perfume bills.

What about Roulet? Has he paid his rent?

Roulet died last week.

He died with his rent unpaid.

- What did he die of? - Hunger.

Hunger is an indulgence with these peasants.

Oh, I keep forgetting, Gabelle,

you're a humanitarian, aren't you?

You think that one person is as good as another...

a naive notion so contradicted by the facts.

For the rich, inheritance is the obsession.

It's a very strict code.

The eldest son gets the capital.

He gets everything... he gets the money,

he gets the house, he gets the land...

and that makes him incredibly powerful,

just through an accident of birth.

These land-owning men, these first sons,

they also have a huge amount of political power,

because a lot of them are the MPs, they're elites.

And as a consequence, they are driven by a desire

to protect their own income, to protect their own world,

and it simply doesn't occur to them

that poor people deserve some redistribution of wealth.

Taxation, they resist very strongly.

And this is the way that the aristocracy worked,

not just in Britain, but all through Europe,

and the aim is to conserve the aristocratic power.

The examples that Thomas Piketty has

of Jane Austen and Balzac, they're very fitting,

because when you read Jane Austen,

it is all about money,

and this money is not earned through work,

it's not earned through owning businesses,

it's earned through land, it's inherited land.

Mr. Darcy, for example, in Pride and Prejudice,

he has this huge estate.

He doesn't even have to be there.

This land just creates money for him.

How good of you to come.

He looks miserable, poor sod.

Miserable he may be,

but poor he most certainly is not.

- Tell me. - 10,000 a year,

and he owns half of Derbyshire.

The miserable half?

Jane Austen created a fantasy

that you could get your hands on this wealth

if you were just a bit fun and a bit witty.

But the reality is there's no way a Mr. Darcy would marry

girls like Lizzie Bennet,

who actually haven't got a penny to their names.

He would marry an heiress, possibly even a cousin,

and create this, sort of, megalopolis estate.

Money marries money. There's nothing to do with love.

And what we see now,

almost a cycling back to the 18th century.

In Britain, inherited wealth is everything... again.

Nowadays, 1% of the population owns 70% of our land.

♪ I've been broke all my life ♪

♪ Now wonder ♪

♪ How does it feel to be rich? ♪

♪ How does it feel to be rich? ♪

♪ Oh, I done worked all my life ♪

♪ Now wonder ♪

♪ How does it feel to just live? ♪

♪ How does it feel to just live? ♪

There's always been an elite, which is usually adept at

reproducing its privilege through generations,

monopolizing both economic and social and cultural capital.

The way the elite stays in power and passes on their privilege

to the next generation

is also by shaping the way that we think.

♪ How does it feel to be rich? ♪

♪ How does it feel to be ri-i-ich? ♪

♪ How does it feel to just live? ♪

♪ How does it feel to just live? ♪

Traditionally, economists have argued

that inequality is a very powerful driver

of progress and innovation

because the idea is that competition, essentially,

makes people try harder.

The problem is that extreme inequality

increasingly seems to be a source of great economic stress,

social stress and political stress.

Because if you have a situation where an elite

are so rigidly protective of their ranks

that nobody can ever rise, there's no social mobility,

you tend to end up with a full-blown revolution.

Life in the 18th century is not static.

We see the development of new political ideas

demanding equal rights

and an end to privileges linked to birth and nobility.

In the French Revolution, the banner is

"Liberté, égalité, fraternité."

It's going to be brotherhood, everyone's going to be free.

But yet within a tiny amount of time,

you have this government of bankers,

and what they do is start to create the elites once more.

♪ This is the land that fought for liberty ♪

♪ Now when we fight, we fight for bread ♪

♪ Here is the thing about equality ♪

♪ Everyone's equal when they're dead ♪

♪ Take your place, take your chance ♪

♪ Vive la France Vive la France! ♪

Vive la France!

It turns out the French Revolution is based,

in part, on hypocrisy. With a vision of equality

that is, at best, a little optimistic or naive

and at worst a little cynical.

We imagine that equality is going to occur naturally

or spontaneously, a bit like a fairy tale.

But the reality is that we also need political institutions,

an education system, health care, a transport system

and a tax system that targets the highest incomes.

But none of this was put in place

after the French Revolution.

What we see in the late 18th

and early 19th centuries is the Industrial Revolution.

It replaces the work of people's hands with machines,

so you bring in machines to make wool, to make cotton,

to make all kinds of commodities.

This makes goods faster, it standardizes them,

and this makes more profit.

Capital's no longer this fixed thing that's your land

or even your ability to lend money.

You finally figure out that you can expand your own factory

by, kind of, selling stuff, keeping the profits,

then reinvesting those profits in expanding your factory.

And that's kind of what capitalism in its modern form

really lets us do... is that capital becomes this thing

that can, kind of, perpetually expand.

But the gap between wages and productivity is substantial,

and you have these kind of feudal legacies of labor

persisting very, very late into the game.

British master and servant law meant that it was a crime

for you to quit your employer without permission.

And, you know, this is getting actively used

in the mid-19th century, during, like, the heyday of capitalism

in England... the most advanced country in the world...

and they're throwing workers in jail,

and they're being beaten

because it's a crime to go on strike.

This whole idea developed around escaping the Old World

and setting up a new, more egalitarian society.

When the new world countries were being set up...

so New Zealand, Australia, Canada...

these places were being set up by these refugees, essentially,

fleeing Europe

at a time that capitalism was really taking hold.

And that's why a lot of these people wanted to get out

of these countries... they wanted a flatter society.

It was this idea of moving beyond the class system,

but it was done largely in a laissez-faire way.

It wasn't a political movement, by and large.

And very quickly it was the wealthy that started dominating

right from the start.

If you're a white man in sort of, like, 1800-ish,

Australia and the US...

these places are, like, the best places for you to go.

You've got this wide-open frontier; it's filled with land.

But the big constraint on your production

is your ability to mobilize labor.

So if you're a small family farmer,

the only labor you can mobilize on to the frontier

is your kids.

But if you're a slave owner, you can basically go to New Orleans,

you can take out a loan, use that loan

to buy a bunch of slaves in the New Orleans slave market,

then take them out to the Alabama frontier

and start clearing land and growing cotton.

And you're again able to take the profits from that

and expand, buy more slaves, buy more land,

and so you can again now think of the slave economy

as participating in this circuit of accumulation.

But also being a slave owner didn't just mean that you had

access to the labor of your slaves,

it also meant you had increased access to capital,

because you can use your slaves as collateral.

So if you, basically, are looking to lend to somebody

and they can offer an equivalent amount of

slave collateral versus land,

you'd prefer the slave collateral

because it's much easier to move them around

or resell them or something like that.

The 19th century is when the division of labour,

inequality and power are established worldwide -

first with slavery,

and then with incredibly violent colonial domination.

It's very difficult to say how much of European wealth today

comes from their colonial past.

But what is clear is that the crucial advantage

won at the time of the Industrial Revolution

was closely linked with military force.

Attack!

From 1870 to 1914, the United Kingdom and France,

who are the two main colonial empires,

own so much around the rest of the world

and it brings them so much profit,

interest, dividends, rents

that they can afford to keep on investing

and become owners of more of the world.

So the rest of the world works for them.

It's no good speeding up production

if there's no one to buy the stuff.

So fashion fuels the Industrial Revolution.

By the 19th century, the cult of fashion is all-encompassing.

It's come down even to the working classes.

Even working class women are trying to stay in fashion.

The idea that, "You can't wear that. That's from last season,"

that will be very strange to a 16th or 17th century person.

They think, "Well, it's still working,

it's still hard-wearing. I'll wear the same outfit."

And the industry that accelerates the fastest

in the 19th century is the industry about Christmas.

In the 18th and 17th century,

Christmas was a very low-key affair.

It was usually about drinking with your friends and relations.

It wasn't really about present-giving;

that was perhaps in New Year.

But by the mid-19th century, we have the Christmas cracker,

the Christmas card, the Christmas tree.

People are bankrupting themselves

to have a yearly Christmas, and it really was seized upon

by the manufacturers as a way to make a huge amount of money.

Just as you were getting all these new technologies

like the railroad and the telegraph and mass production

and the corporation... all of these new innovations,

all of this additional production...

and inequality becomes very, very large.

It's actually this period of enormous conflicts,

where you have open wars in the mines in Colorado

between strikers and armed militia hired by capitalists.

And the overwhelming use of the US Federal Army

in this period is strike-breaking.

And similarly, today, we have this whole

transformation of the economy happening,

both with trade and with technology,

that exactly have the sort of same property of

creating lots of monopolies.

And so it's generating, again,

a small class of very, very wealthy people.

- 22... - 43 million.

- 75 million.

$107 million. Sold.

Around 1914, in Paris,

1% of the population owns 70% of all assets.

And in contrast, two-thirds of the population

die without any assets.

You have this rise in nationalism and competition

between European countries,

partly due to very strong social tensions

linked to the stagnant standard of living

and very high levels of inequality.

And competition between countries, nationalism,

is often used by elites

to make people forget class conflict

and instead focus on national identity.

And all this contributes to the arrival of

the First World War in the summer of 1914.

In Berlin, the Germans know the hour

of glory is at hand.

There's like a cultural militarism that's happening

on the Continent, and they're competing with each other

over both imperial territory and trade routes.

The warlord is ceaseless, indefatigable,

as he makes the rounds of his armies.

The British Empire was so powerful;

they had a quarter of the world's population.

The other countries wanted a piece of the cake.

And Germany, in particular, wanted a piece of the cake.

A lot of these new capitalists

are still, kind of, basically feudal in their outlook.

So particularly in Germany, you have these Junkers

that are these big industrialists,

but they also think there's nothing better for society

than a good fight.

Britain and the Allied powers take on Germany

in what they think is going to be a short, sharp shock

over in a few months' time.

Instead, it goes on for years and decimates both populations.

World War I is, at its base, a fight over capital.

And we see this massive post-war economic crash.

So, you have this new idea after World War I,

basically born out of the fact that the government is bankrupt,

that tax is not bad, that it actually could be good.

And the only way you're going to get money

is by taxing the aristocracy.

There is nothing in the working class and the middle class

left to tax.

So you see the beginning of the drop in aristocratic power.

And also what you see in the '20s is the growth of the power

of women and also of the working classes...

both of them, essentially, are saying to the government,

"Look, we worked really hard for you in this war.

We sacrificed. You need to give us something back."

So suddenly the whole principle that the working classes

and women must sit there and put up with the way that society is,

is completely overturned in the '20s.

All of the crowds of the Empire City,

the wonder city, the windy city, the passion city,

the people, yes.

♪ Gone are my blues, and gone are my tears ♪

♪ I've got good news to shout in your ears ♪

♪ The long-lost dollar has come back to the fold ♪

♪ With silver, you can turn your dreams to gold! ♪

♪ Oh, we're in the money ♪

♪ We're in the money ♪

♪ Let's lend it, spend it, send it rolling around ♪

All of the crowd get the big money...

2 million, 5 million... make a pile and raise a pile.

The '20s was maybe irrational exuberance.

Watch us grow! What am I bid? Going up!

There was a boom in stock prices,

but people kept bidding into the stock market,

because people always think there's magic in Wall Street.

You know, we have a mythology in this country, in particular,

that what's good for Wall Street is good for Main Street,

but that's really never been true.

♪ We're in the money, I'll say we're in the money ♪

♪ We've got a lot of what it takes to get along ♪

A lot of banks were selling products that they knew

were absolutely no good.

There were dodgy bankers doing dodgy deals knowingly.

There weren't a lot of regulations in place.

It was a real free-for-all of capital.

The bubble of the 1920s

was characteristic of many other bubbles...

a kind of euphoria that happens.

Stocks go up, you can borrow against that stock.

You use that money to buy more stock,

the price goes up even more, and everybody's feeling giddy.

At the same time, you've got tremendous

dislocation going on in the job market...

a lot of people getting very rich,

but a lot of workers at the bottom,

not enough in the middle.

Credit was then being offered to kind of paper over that divide.

That credit cycle fed this bubble,

and like every other bubble,

it broke.

This time around,

a number of bankers actually went to jail,

and there really were some regulatory changes, you know,

like, in particular the Glass-Steagall Depression-era

legislation that actually fixed the banking system

and made it safer... until it was overturned in 1989.

After the financial crash, countries all around the world

also ended up getting in a trade war.

There were tariffs that were imposed,

and that created a snowball cycle,

which led to more pain globally,

and that helped to provoke the Great Depression.

If you read John Steinbeck's Grapes of Wrath,

you realise the extent of the shock caused by

the complete collapse of economic activity.

They told me to tell you to get off,

and that's what I'm telling ya.

You mean get off of my own land?

Don't go to blaming me, it ain't my fault.

Whose fault is it?

You know who owns the land...

the Shawnee Land and Cattle Company.

And who's the Shawnee Land and Cattle Company?

It ain't nobody! It's a company.

They got a president, ain't they?

They got somebody knows what a shotgun's for, ain't they?!

What's the use of pickin' on him?

He ain't nothin' but the manager.

And he's half crazy hisself tryin' to keep up

with his orders from the East.

- Then who do we shoot? - Brother, I don't know.

If I did, I'd tell ya.

I just don't know who's to blame.

I'm right here to tell you, mister, there ain't nobody

gonna push me off my land!

My grandpa took up this land 70 years ago.

My pa was born here. We was all born on it!

And some of us was killed on it!

Banks fail one after another,

which results in everyone losing their savings.

And this decreases in demand in other areas,

causing a cascading phenomena of bankruptcy and unemployment.

The crisis of the 1930s creates such a strong trauma

that leads to the public and politicians

holding capitalism accountable.

The pain in the United States had become so great,

so grave... absolute poverty... and as a consequence of that,

the willingness to make political solutions

that were severe.

This nation is asking for action and action now.

Price-fixing, massive change in labor rates...

all of these things under FDR

was something that Americans hadn't seen before,

and absolutely that led to massive infrastructure build

and it led to extraordinary redistribution.

The existence of a communist alternative

scared the capitalist world into thinking that if it didn't

at least address some of the basic inequality issues,

that they would lose the battle for ideas.

In the New Deal itself, Roosevelt actually borrowed

some ideas... the heavy state involvement in the economy;

heavy regulation.

There was a clear recognition that unless the state tried to

do something about jobs

and do enough redistribution to keep people from starving,

that you wouldn't have basic social stability.

The Wall Street crash creates poverty in America,

it creates poverty in Britain,

but it has a massive effect on Germany,

because Germany is already poor. After World War I,

they were given these very punitive reparations...

they had to give huge amounts of money to the other countries.

And what you have is this horrific inflation

in the Weimar Republic...

Germany as it was known in the 1920s...

in which, basically, at one point,

a whole barrel of banknotes cannot buy you a loaf of bread.

We can absolutely link, as tight as that, the rise of fascism

in Europe in the 1930s and extreme poverty.

And you can see how seductive it is

when someone like Adolf Hitler comes up and says,

"I'll make Germany great again. We'll be powerful again."

And really what he's saying is,

"The reason why we're so poor in Germany is because of Britain,

is because of America, is because of the rest of Europe."

These downtrodden people were so open, so vulnerable

to the rise of fascism and the call of racism,

the call of exclusionism

and the call of invading other countries.

We want to see no more class divisions.

We want to be one people.

And you, my youth, are to be this people.

One American airplane factory... one of many.

One bomber... thousands on the way...

an angel of death.

What really gets rid of the Depression is transforming

the economy into World War II.

And the scale of this is just something that humanity

had never seen before.

The governments of all the societies involved

just kind of take over production,

and this is an industrial war,

so production is, kind of, the terms under which,

in the long run, this will be won or lost.

The labor movement got a lot of political power.

Like, if you're producing for the war,

you have to automatically recognize a union.

And then just also raising the money to pay for that

just involved raising taxes.

This period was the last gasp of feudalism,

and it took this to finally purge the influence

of the aristocracy in advanced countries.

The wars themselves are used to destroy capital.

Firstly, there are bombings that destroy entire cities.

But at the same time,

this only accounts for a third of the total loss of capital.

So where do the other two-thirds come from?

A third is from inflation that destroys the public debt,

which was lent by the citizens to finance the war.

And then there is a third from new rules,

like rent controls,

nationalisations and financial regulations.

But this collapse of capital is not necessarily a bad thing

because the power relationships within society are transformed.

♪ Oh, give me land, lots of land ♪

♪ Under starry skies above ♪

♪ Don't fence me in ♪

♪ Let me ride through the wide open country... ♪

Everyone is equal in the face of death.

Wars, with their death and despair,

are also moments when humanity is found in us all.

♪ Let me be my myself in the evening breeze ♪

♪ Listen to the murmur of the cottonwood trees... ♪

This new political context will ultimately lead

to a realisation of the spirit of the Enlightenment

and of equality proclaimed in the 18th century.

♪ Don't fence me in ♪

The social landscape is completely different

in the aftermath of World War II.

You see the biggest shift in attitudes that you ever see.

Bit different from what it used to be,

I can tell ya.

There will be sickness and unemployment benefits,

retirement pensions, industrial injuries benefits,

guardians allowances, widows' benefits, maternity grants.

It's a move towards creating a benefit system.

We have the idea of sickness pay, holiday pay.

In Britain they created the National Health Service...

free service from cradle to grave.

It's a move towards nationalization of industry,

it's a move towards taxation of inheritance,

taxation of property and wealth.

I'm telling you, it works out fine.

Television, with its promise of endless hours

of enjoyment, entertainment, was part of the peacetime green.

Television... an unparalleled blending of private incentive

and public service.

In America in the '50s,

you see capital restrained also.

You have rent controls on apartments,

you have limits on landowners.

Capital can't just roam free, it can't just increase itself.

Capital must be harnessed like some wild horse.

This is the land of the thoroughbred.

There is a very clear vision that capital needs to be

helping the people, that actually the whole principle

in which the rich do whatever they want with their capital

and that's good for the nation,

well, that's being challenged across the world.

♪ I wish I had a castle in the sky ♪

♪ A way up high where bluebirds like to fly ♪

The new vision is that the '50s is going to be the age in which

everyone can have wealth.

♪ ...with a hundred rooms or more... ♪

...some day...

♪ With stars for windows, clouds for rugs ♪

♪ A rainbow for a door ♪

People who are born just after World War II

had a life that no child before them could ever imagine.

I just wish I had a decent kitchen.

For the first time,

hard work and study can get you to the top.

- Hello, Mrs. Thatcher. - Nice to see you.

Have a seat.

My father left school at 12 or 13,

and didn't have some of the chances

that you and I have to go on to college.

And I think you'll find when you're a parent,

what you're always trying to do is to give your children

the sort of chances you didn't have.

Would you like to see a woman prime minister?

I think it depends upon who the person is.

I don't think that there will be a woman prime minister

in my lifetime.

What you see in Margaret Thatcher's life

is incredible social mobility.

An ordinary shopkeeper's daughter from the North,

she went to grammar school, she went to Oxford,

and became the first female prime minister,

and, of course, wealthy.

And that is simply through this new society

in which social mobility was actually possible.

And what you have is this real surge of the middle classes

and the lower middle classes into positions of power.

If you look at the development of inequality

through the 20th century, the most striking transformation

is the growth of an extremely strong middle class.

Until 1914, the middle class doesn't exist.

Or more accurately, they're almost as poor as the poorest.

The decades after the war -

30 years that saw glorious economic growth -

are marked by a steep increase in purchasing power,

especially for lower and middle-class workers

who can buy consumer goods, improve their standard of living

and save money to buy a house and acquire capital.

And we'll have the kitchen right here,

so we can see the children playing in the yard.

Children?! How many you planning on?

Not more than six, I hope.

They're a group who are neither very rich nor completely poor,

but still have a substantial share of national capital.

But in recent decades,

the share of wealth owned by the middle class

has started to decline sharply in the US

and a little less sharply in Europe.

Clearly we've taken a very different direction,

which can be quite disturbing if we look into the 21st century.

One of the greatest challenges for the future

is whether the middle class will continue to shrink,

with the risk of returning to an impoverished middle class

like we had a century ago.

The decades immediately after World War II

were quite remarkable.

There was a high degree of social consensus

that really sprang out of the whole war effort.

It was so... You had a solidarity,

but it was on the basis of a pretty stratified society.

There were other forms of inequality that existed

in that period.

But that began to change after the civil rights movement

in the 1960s and then all of the other social movements

that occurred thereafter.

- ♪ You better think ♪ - ♪ Think! ♪

♪ Think about what you're trying to do to me ♪

The negro still is not free.

♪ ...let yourself be free ♪

- ♪ Oh, freedom ♪ - ♪ Freedom! ♪

- ♪ Some freedom ♪ - ♪ Freedom! ♪

♪ Oh, freedom ♪

♪ Yeah, freedom! ♪

I think that, politically,

having a broad middle class is quite important.

It's part of what's called modernization

through this idea that as your income rises,

you develop a middle class that are better educated,

and therefore they will demand a higher level of participation.

- ♪ Oh, freedom ♪ - ♪ Freedom! ♪

- ♪ Some freedom ♪ - ♪ Freedom! ♪

♪ Oh, freedom! Yeah, freedom! ♪

We have been victims for so long.

- ♪ Freedom ♪ - ♪ Oh, freedom ♪

- ♪ Freedom ♪ - ♪ Give me some freedom ♪

♪ Oh, freedom! ♪

- ♪ Whoo! To the ball, baby ♪ - ♪ To the ball ♪

Then that kind of all unravels in the '70s.

This is NBC Nightly News, Wednesday October 17th.

Good evening. The Middle East war produced developments

all over the world today.

The oil-producing countries of the Arab world

decided to use their oil as a political weapon.

There was an announcement in Kuwait

that prices for Arab oil were going up...

a huge increase voted in an overnight meeting

until Israeli forces leave occupied Arab land.

This oil shock hits all of the advanced economies,

and oil was an input into everything.

It was announced today that gasless Sundays

will go into effect as of next month.

The price of foreign oil

had jumped from $3 to $12 a barrel.

Quadrupling the price of oil translated into this period

where, like, prices started to increase

and wages weren't keeping pace,

but then unions and workers started demanding

even higher wages to keep pace with prices,

and then what firms would do is then increase prices

even further to pass on the effects of wages,

and so you got what's called a wage-price spiral.

And so you had this period of high inflation and low growth,

so that's why it got called stagflation.

Globalization is starting to happen.

The emerging markets are coming online in the world.

Europe is back on its feet,

Germany is becoming a producer again,

a number of European nations are becoming more competitive.

The global picture is changing.

American capital suddenly doesn't have

the world to itself anymore.

♪ Tumble outta bed and I stumble to the kitchen ♪

♪ Pour myself a cup of ambition... ♪

But another thing that's happening in the 1970s

is you see a very kind of siloed, financialized

way of thinking about how to run a corporate balance sheet...

cut costs, marshal your capital,

treat labor as a cost, not an asset.

♪ Working 9 to 5 ♪

♪ What a way to make a living ♪

♪ Barely gettin' by ♪

♪ It's all takin' and no givin' ♪

♪ They just use your mind ♪

♪ And you never get the credit ♪

♪ It's enough to drive you crazy if you let it ♪

Companies are not investing in their workers,

they're not raising wages,

so you start to really get that big 'X'

where Wall Street's going here, Main Street's going down here.

♪ It's a rich man's game ♪

♪ No matter what they call it ♪

♪ And you spend your life puttin' money in his wallet ♪

♪ 9 to 5... ♪

Germany and Japan took a different model...

a model in which workers sat on the boards of companies,

had more of a say.

This actually gave them a big advantage.

They were able to use that expertise

and increase their efficiency,

and eventually gain market share from US companies.

When it started, America was unprepared.

From across the ocean, they came...

little cars determined to change the buying habits of a nation.

It's a great-looking car. What do you call it?

- Isuzu. - Gesundheit.

Road-hugging, heart-pounding,

hood-soaring, deck-sloping...

♪ We are... ♪

♪ Cadillacs drive Subaru ♪

Reagan for president.

Japanese production of automobiles is almost

twice as great per worker as it is in America.

We were once the greatest producer of automobiles,

producing more than all the rest of the world combined.

That is no longer true.

Every country feels the need to tell a story about

why it's richer than another or why it has become poorer.

And it's this story that Reagan and Thatcher tell

the American and British public.

Thank you very much.

Can anyone look at our reduced standing in the world today

and say, "Let's have four more years of this"?

No!

For those who've abandoned hope, we'll restore hope

and we'll welcome them into a great national crusade

to make America great again.

In the United States there was a feeling

that Germany was catching up,

that Japan was catching up -

these countries that lost the war.

And Reagan, and also Thatcher to a certain extent,

use this ideological argument to say,

"Look, these countries are catching up.

"Something needs to change. What could we change?

"Ah, it's because of the welfare state

"that was put in place following the New Deal.

"That's what's made us soft.

"And so we must return to the mythical capitalism

"of the 19th century. That's how we're going to re-energise."

Here comes the Prime Ministerial Rover,

bearing now Mrs. Thatcher.

Enter Margaret Thatcher,

a grocer's daughter educated among the privileged classes

at Oxford University.

There is now work to be done.

In deciding that, actually, what we need to do

is increase the value of assets in order to increase investment,

some of the thinking behind what would happen

when you let capital free,

you had to suppress the power of labor.

This 12-foot-high pile is part of two weeks' rubbish

piled outside the local refuse depot.

Like others in Central London,

it's been closed now for two weeks

because of the dustmen's indefinite strike.

The teachers' union are today putting forward

a pay claim. 33,000 school children are out of school

in the worst-affected London borough of Haringey.

Cancelled operations

meant empty beds up on the wards,

which would otherwise have been used.

You have to remember, at those times,

there were issues about strikes; the public were upset about

the way some labor unions were acting in that time.

I'm going to boil everything because the sewage men,

I understand, are still on strike,

and so it'll be polluted, so you can get typhoid,

can't you?

There was a mandate to do something about

the power of labor against capital.

And it certainly is a tricky job trying to get that right.

This government has rolled back the frontiers of the state

and will roll them back still further.

Millions have already become shareholders

in British Gas, British Airways, British airports.

Attention, all passengers.

Flight 307 is cancelled until further notice.

This incredible hostility to unions

starts in the '80s and is really crystallized

when Reagan fires all these air traffic controllers.

I must tell those who fail to report for duty

this morning, if they do not report for work within 48 hours,

they have forfeited their jobs and will be terminated.

End of statement.

That's kind of seen as like a greenlight

to a whole industry.

Good evening. This afternoon, President Reagan started firing

the strikers, and the government claimed it was ready to rebuild

the whole system without them.

By this evening, federal judges had sent

five local union leaders to jail.

What we've seen over time... and this is fundamental

to understanding why inequality has worsened...

is that the share of all the money that's made in the economy

is going less and less to the workers, so that is declining...

the wage share...

and the profit share, essentially what those that own

the capital will get, is growing.

And that is essentially about power.

Well, I, uh... I appreciate the opportunity you're giving me,

Mr. Cromwell, as the single largest shareholder

in Teldar Paper, to speak.

America has become a second-rate power.

Now, in the days of the free market,

when our country was a top industrial power,

there was accountability to the stockholder.

The Carnegies, the Mellons,

the men that built this great industrial empire,

made sure of it because it was their money at stake.

The point is, ladies and gentlemen,

that greed... for lack of a better word...

is good.

Greed is right.

Greed works.

And greed...

you mark my words...

will not only save Teldar Paper,

but that other malfunctioning corporation called the USA.

Thank you very much.

When Gordon Gekko was seen on film saying,

"Greed is good," that was intended to be a howl of protest

against the system.

But such had the cultural fabric changed,

that actually for some people coming through universities

applying to join investment banks,

that phrase "Greed is good" actually became a license

to pursue riches.

The era of the yuppie came to rule.

♪ Friday night and everyone's moving ♪

♪ I can feel the heat, but it's soothing, heading down ♪

It began to become very cool to be an entrepreneur,

to be riding that boom,

and the idea of arguing for high taxes and redistribution

began to seem very out of fashion.

- ♪ We're the kids in America ♪ - ♪ Whoa ♪

- ♪ We're the kids in America ♪ - ♪ Whoa ♪

♪ Everybody live for the music-go-round ♪

The new mantra of deregulation took hold,

and so financial services were deregulated dramatically,

bankers began to get paid a lot more,

and then market forces were unleashed,

which made capitalists a lot richer.

♪ Hot-shot... ♪

The big reforms of the Reagan-Thatcher era

were lower the tax rates on the rich

on the assumption it would trickle down. Didn't happen.

When they adopted these kinds of policies,

it was very clear that they would increase inequality.

The promise was that the pie would be bigger,

you would be getting a smaller percentage

of a bigger pie, and your slice would get bigger.

So in some sense,

there was no surprise

that there was a growth in inequality.

But the magnitude of the increase in inequality

was much larger.

When we look at the numbers, we can see it very vividly.

The bottom 90% have experienced near-stagnation.

Most of the growth has gone to the top 10%.

Median income for a typical American household is roughly

at the level it was a quarter century ago.

Real wages, adjusted for inflation, at the bottom

are at the level they were 60 years ago.

In fact, life expectancy has been declining.

These are dramatic statistics that shows the economy

has not been working for most Americans.

By the 1990s, American banks really became the exporters

of American capitalism, and they went everywhere...

they went to Europe, they went to Asia.

And everyone was sold our version of a trickle-down,

laissez-faire deregulate capitalism.

Life seemed to get better in the 1990s,

because the globalization of the system

made things for ordinary people for a while cheaper,

but then on top of that, you get credit.

When the credit boom took off,

suddenly ordinary people could get credit.

Master the moment.

Suddenly, extraordinarily poor people could get credit.

- You can apply... - ...right over the phone.

People with terrible credit histories could get credit.

There is absolutely no risk.

People who in no way should be given a mortgage

could get a mortgage.

And the investment banks created ever more exotic

credit derivatives... ways of parceling up your bad debt

and disguising its badness.

That's what kept the system going for as long as it did.

And 2008 was where that blew up.

Wall Street in panic mode this morning.

How did this happen?

22% of homeowners are underwater on their mortgage...

Millions of American homeowners...

- Homeowners defaulting... - Greed.

The essence of the American Dream could be threatened.

- Sub-prime lending... - Higher interest rates...

Let's see here, uh, balloon payment,

37% interest compounded every minute,

not understanding the contract fee,

da, da, ba, da, ba, ba-da, bow.

And here's your new monthly payment.

Listen, you, when you gave me that money,

you said I wouldn't have to repay it till the future.

This isn't the future! It's the lousy, stinkin' now!

Now, calm down. This country takes care of its middle class.

Ah, don't be sore at the banks.

Hell, we fired our CEO and he barely got out with $50 million.

Banks are afraid to lend money to each other.

We're seeing a freezing of the credit market.

- ...credit markets. - ...credit markets.

The fear is rising.

The fear was, and I think it was a well-founded fear,

that the availability of credit would disappear,

and perhaps our ability to even transact,

to even be able to access cash to make payments,

use a credit card, use a debit card.

Perhaps that would break down also.

Worst week since the crash of 1929.

- ...global sell-off. - ...the Dow tumbled...

- ...hoarding cash. - Japan down nearly 10%.

The British government blamed American bankers.

When it starts to unravel, then you start to worry...

how broadly will this spread around the world

and are we on the verge of another Great Depression?

American taxpayers woke up this morning to learn their money

makes up most of a...

Big package, because it was a big problem.

Too big to fail.

The Fed loaned the banks some $7.7 trillion.

Global markets soared at the news of the US rescue plan.

With the bail-out news, the stock rebounded nearly 60%.

...Hong Kong more than 8%. London's FTSE...

Stokes rose 15% in one hour...

the largest single bounce in FTSE history.

Those companies came to us and said,

"Uh, if you don't give us $700 billion,

everything you love and hold dear in this world

will turn to."

And in return for this in no way ransom money...

...the American people would now be the proud owner

of these bales of.

The collapse didn't occur. The system was preserved

and the opportunity to substantially reform the system

was set aside. The stock market went down sharply,

and then it came back up sharply as a result of these measures.

In addition, wealthy people, rich people,

have a lot of exposure to the stock market,

so they kept their jobs, they kept their bonuses,

the businesses they were in were not

substantially disrupted, and they made more money

through stock appreciation

and through dividends and through expected dividends

than they had in the last couple of years.

Bloomberg estimates the banks made

a $13 billion profit on the spread.

73 executives from the unit that engineered

the company's downfall all just got bonus checks

- worth a million or more. - ...$1.6 billion in bonuses.

Wall Street and the views of Wall Street

had taken over policy.

That's the quiet coup.

Democracies in general are susceptible to this

capture by elites.

And unless the democracy is renewed by the non-elites

every now and then rising up,

the democracy will continue to move in this direction

where power and wealth are more and more concentrated.

All across the world, you now have this layer of oligarchs

that use their money to buy political influence.

When you have too strong a concentration of capital

it leads to excessive influence over the media,

and also financing of political campaigns and political parties

that are in their own best interests.

But this logic of 'one dollar, one vote' is completely opposed

to the democratic logic of 'one person, one vote'.

Rationally speaking, it would make sense that

the more of something you have, maybe the more inclined

you would be to share it with other people.

But that's not what our research and what a lot of other research

seems to find.

We brought strangers into the lab in pairs of two;

with a flip of a coin determined

who was going to be a rich player

and was going to be a poor player.

The rich player got two times as much money to play the game,

they got to roll both dice instead of one,

so they got to move around the board a lot quicker,

and that mattered because when they moved around the board

and passed 'Go, '

they would collect $200, whereas the poor person,

they'd collect $100.

The inequality's almost immediately apparent

to the players. How couldn't it be?

But within a couple of minutes, dynamics start to crystallize.

And the rich player started to behave a little differently.

Rich players become more dominant.

Rich players eat more pretzels.

When moving their piece around the board, they become louder.

They start smacking the board with their piece.

And the rich players were significantly ruder.

They were far more likely to showcase and talk about

how well they're doing

and to belittle the plight of those poor players.

So they became less compassionate.

These are patterns that we're observing consistently over

hundreds of different individuals.

You see people who are winning because of the flip of a coin

start to act as if they actually deserve to win.

One of the questions we ask is "Why did you win the game?"

And you can imagine the rich players would say,

"Well, I won the game because of that flip of the coin

and I had two times the advantage."

But none... not one... of the rich players

attributed their inevitable success in this game

to that force of luck that randomly got them

that privileged position in the first place.

And when we watch patterns of human interactions,

people who feel entitled and deserving of their own success

are more willing to privilege their own interests

above the interests of other people

and often engage in ways that undermine

other people's welfare so that they can get ahead.

And that's a fairly pernicious social consequence.

But it's not about people who are rich,

but rather that the experience of being relatively better off

than someone seems to affect everyone,

or would affect everyone, in the same way.

Yes, we won the lottery!

Peter, my God, what the hell are you wearing?!

It's a solid gold tuxedo, Lois. I had to fight three rappers

down at the Nonsense Store for this.

Look, Peter, this is not who we are.

I'm worried the money is changing this family,

and not the way you hoped.

Well, I was hoping it would make you shut up, so you're right.

When we, in experiments, get actually poor people

or we make poor people feel rich,

again, same pattern of results.

Lois, don't you understand?

We don't got any of our old problems anymore.

We don't have to worry about paying bills,

we don't have to worry about saving dough.

All we gotta do is enjoy ourselves.

Interested?

Oh my God!

Peter, it's beautiful. Is it a blood diamond?

Ah, the bloodiest.

The two kids who found it were forced to murder each other.

Oh, Peter, I love it!

We translate perceptions and experiences

of being better off than others materially

to being better than others.

The mind makes that translation, it seems.

Once you get people whose entire life is lived

on a kind of plane, you know, in First Class,

in the bubble of the security system,

and your villa in three or four different countries

you can move to if things get a bit unpleasant,

what happens to taxation?

What happens is large amounts of wealth are moved offshore.

For decades, individuals and companies have moved

their legal selves in order to avoid paying tax

that benefits the people who work for them.

So that when you come out of the HQ of one of these

giant trendy IT companies,

you fall over, you hit your head,

and you're lying on the pavement in a pool of blood,

an ambulance arrives

that has not been paid for in any way, shape or form

by the taxes of that company.

That's a very new system in capitalism.

And it is unsustainable

because to make it work,

the state must have access via taxation

to the incomes of the rich.

The EU has ordered the Irish government

to recover almost $15 billion of unpaid taxes from Apple.

$15 billion is more than the four years

of annual austerity cuts imposed by the Irish government.

Amazon's tax benefits are illegal.

Facebook paid less UK corporation tax

than your average teacher.

90,000 come from zero corporation tax.

- Scrutinize... - ...the rich avoiding taxes.

Google, Microsoft...

- McDonald's... - Facebook...

It just works much better for the holders

of capital than it does for people on the ground.

In particular, the giant cash-rich tech firms

can put people and money wherever they want to put them.

They just fly 35,000 feet above national concerns.

They create far fewer jobs than big industrial companies

of the past, yet they make vastly more money.

The great irony here is that everything that makes

a smart phone smart...

the internet, GPS, touchscreen technology...

all that was our taxpayer money going into federal agencies

like DARPA that created this stuff,

and yet the wealth doesn't flow back into the ecosystem.

Irish guys pay a fee to Google Netherlands Holding BV.

Is that to save withholding tax?

That's my understanding.

It therefore goes to Google Holdings Ireland?

- That's correct. - Which is registered in Ireland

but administered from Bermuda?

- That's correct. - So if that happens,

your profits actually go to Bermuda?

♪ All that money, the money is the motive ♪

♪ All that money, the money is the motive ♪

♪ All that money, the money she be folding ♪

♪ Girl put in work ♪

♪ Girl, girl, put in work ♪

♪ Girl put in work ♪

♪ Girl, girl, put in work ♪

♪ Girl put in work... ♪

In 2015, Google Alphabet reported making $15.5 billion

profit in Bermuda.

But nothing actually happens in Bermuda.

This is the first way countries

steal the tax base from each other.

The other way is through the industry of wealth management,

which has developed in many countries.

This industry sells shell companies and numbered accounts

protected by bank secrecy to wealthy families.

♪ All that money ♪

- ♪ The money is the motive ♪ - ♪ The money is the motive ♪

♪ All that money, the money she be folding ♪

♪ Girl, put in work... ♪

You can't tax what you can't measure.

♪ Girl put in work ♪

♪ Girl, girl, put in work ♪

And so we live in an incredible statistical fog

about who owns wealth, who owns real estate in New York,

who owns real estate in Paris.

We check the records and we see shell companies.

The key to effectively fighting tax havens is pretty simple.

We need sanctions against territories

that enable tax evasion.

And we have to change the way we calculate

taxable profits in each country.

Let's take Apple.

Imagine Apple made $50 billion in global profits last year

and 10% of its worldwide sales were in France.

Then France could say, "10% of Apple's global profit,

"so $5 billion, should be taxed in France."

The beauty of this system is that

multinationals can manipulate the location of their profits,

but they cannot manipulate the location of their customers.

Their customers are in France, in Germany,

in England, in the United States.

You cannot send them to Bermuda.

Globalization has opened a global community up

to each other,

but it's also meant that in the developed world,

corporations were able to take jobs and move them

and make a lot of money out of it.

And on the other hand, the working and middle classes

that were doing quite well have lost quality of life

and opportunities.

And their governments and their corporations

have done very little... in some cases, really nothing at all...

to address that.

The United States and Europe are vastly more divided

because of globalization.

India, The Philippines, China are not.

Chinese people, they believe that if they work hard,

their kids are gonna have better lives,

and that's probably true.

But in the United States, that's just not true anymore.

If you go to Beijing or Shenzhen or Shanghai

or Guangzhou or any of these sort of

wealthier cities in China that have made it...

Shanghai, where per capita income

is higher than Portugal... you will meet middle class Chinese,

and I mean global middle class Chinese;

I don't mean middle class from the Chinese context.

And that is a very different China from what you saw

even 10 years ago.

China's now almost the largest economy in the world;

within the next decade it will be,

but it will still be state capitalist.

State capitalism is where state-owned enterprises

are the most important actors in the economy.

These corporations are, in principle,

trying to make money and build themselves,

and sometimes they do compete against each other

in a fairly controlled fashion.

But the other important Chinese actors are what you'd call

privately owned national champions.

So, in other words, they are actively supported by the state,

even though they're privately held,

and they benefit accordingly.

Also you have hundreds of millions of people

who are quite poor,

but they want state capitalism.

It's fine for them, as long as they can make enough money

to ensure that their kids will do better.

The average income in China since the late 1970s

has increased by 800%.

800% is huge.

But the income of the richest 1% increased by 2000%.

So it is a country that is growing,

but this growth is highly unequal.

China does show what freeing up capital will do to

income distribution.

Capital really has to be regulated much, much more

strictly than things in the real economy.

There's a fundamental difference between liberalization

of capital markets

and liberalization of trade and goods and services.

This was one of the big lessons of the Great Depression.

Modern capitalism is all about the free movement

of global capital,

and the financial system itself has changed

over the last 40 years.

The financial industry has about doubled in size as a percentage

of the economy, and that's actually created slower growth,

not faster growth.

When Adam Smith, the father of modern capitalism,

was thinking up the idea of the free market system,

he was living in a very different world.

Hey, why not? My own business.

All you need's a little capital, a little push and an idea.

Small and mid-sized family-owned businesses

were the norm.

I wouldn't wear that hat to a dog fight.

Why, there isn't a decent hat in the entire village.

Why not? Women's hats! My own business!

He believed that the financial markets

were just an intermediary... they were supposed to take

everyone's savings, hold them as bank deposits,

and then lend them out to the hairdresser down the street.

Not to be too cliché, but it's kind of the

"It's a Wonderful Life" model of banking.

I think if Adam Smith time-warped,

he would have no idea what to make of a "too big to fail" bank

or a giant multinational company that's doing business

in 120 different countries,

all of which have different regulatory systems.

It's a completely different world.

Statistics today show that only 15% of money

coming out of the largest financial institutions

is actually going to that kind of productive lending.

So what's the other 85% doing?

It's just moving around this closed loop

of the financial system...

its assets being bought and sold by the same people;

their value going up, up, up, up, up.

For the rich, it's easier to keep your wealth away

from productive, risky activity,

and this is producing a new social story.

It's easier to build a property,

and maybe you don't fill that property,

maybe all the apartments in the property aren't filled,

but you know in five years' time that property will be worth

so much more, that your business is really to sit on assets

and hope their value rises,

rather than to try and make money by risking your money

in activities like open a factory or invent something new.

If you own a house, you're making capital gains

out of that far in excess of what people get

through just regular jobs.

Therefore, people have become property speculators.

And this changes the whole way the housing situation operates.

And, essentially, it starts dividing.

This housing crisis that's happening

really throughout the West is something

that particularly affects the young.

Most people view this as some sort of generational fight.

The baby boomers benefited from buying houses

when they were relatively cheap,

and therefore have a very nice nest egg for their retirement,

and it's the young people that can't even rent cheaply.

Those at the bottom, I think, are quite polarized...

angry, in fact.

These houses, essentially, earn more money than they do,

and they have to rent them.

It transmits to the poor or middle class person

that the best thing they can do is to hope that their home

rises so much in value

that it offsets all the other problems in their life,

like that their pension was destroyed

or that they lost their job

or that their kids are gonna be poor.

Young people are naturally more hopeful.

But they are aware, they are acutely aware,

that they've been given a raw deal.

You know, why is it, to educate yourself,

you have to get yourself into £50,000 of debt?

And a lot of young people feel infantiled.

Why does my incredibly smart 26-year-old brother-in-law

still have to live at home?

He's asking that, my in-laws are asking that.

What we've told people is that, "You're not poor;

you're a millionaire-in-waiting.

And because of that, don't worry about inequality,

just focus on how hard you're working

and trying to run, run, run, run up that hill,"

which is ironic, because societies that are more unequal

have less social mobility.

The rungs of the ladder grow apart,

people have the money to make sure they stay at the top,

and it means it's harder for people to climb.

That's something that you find again and again in the data.

The system is rigged.

And people aren't stupid... they recognize that.

Essentially, what's happening is that you're

getting an economy which is more and more productive,

but where the gains of those productivity increases

are going into the hands of a very small number of people.

And where there is job growth

is at the lower end of the spectrum,

which is often low-paid, fairly unsatisfactory work.

Our labor market is shifting.

More and more, it classifies people as "self-employed."

And what that means is that companies won't owe them

holiday pay, won't owe them a pension,

and those individual workers have to make sure

that they can look after themselves if they're sick,

if they want to take a holiday.

You know what, when Piketty says

that the future for capitalism is this highly illegal,

highly socially immobile future, it's already happening.

America's about to see the biggest wealth transfer

in history take place, as the generation which made money

after World War II

is passing that wealth on to their children.

Something in the order of $12 trillion or more

is going to be passed on to the next generation

in the next 10 to 15 years.

And that will be invested in a way that it creates more wealth.

It's very likely that in the 21st century

inheritance will return to playing a role

as significant as in 19th century England and France.

Inheritance allows a small portion of the population

to lead a very opulent lifestyle

because inherited wealth produces an income.

In fact, the rate of return on capital throughout history

has almost always been higher

than the rate of economic growth.

If we look back to 1700,

which is the very beginning of Industrial Revolution,

until today, 2018, the growth rate of the world economy

is 1.6% per year over three centuries.

This is much less than the rate of return on capital,

which is around 4% to 5% a year over the same period.

But is it catastrophic? No, not necessarily.

If everyone owned a portion of the capital,

so if everyone owned an apartment

and shares in a pension fund,

it wouldn't be so bad that the return on capital

is higher than the growth rate.

The problem is concentration of ownership

and therefore also of power within society,

which leads to a reproduction of social hierarchies

and rising tensions among the working and middle classes.

There's now research showing that in advanced economies,

that two-thirds of the population is now on track

to be poorer than their parents,

which is a huge, huge mega political trend.

People on the streets are starting to say, "Enough"...

Disperse yourselves or we will have to use force.

...enough of the inequality and enough of not having a story

about how this ever gets better.

And people are reaching out

for the nearest thing they can cling to,

and often that is their identity, their ethnicity,

their religion.

And they lash out against the nearest enemy they can find.

Vast amounts of unskilled labor

coming into this country.

They're bringing drugs, they're bringing crime,

they're rapists.

Behind mass immigration is Islamism.

Behind mass immigration is terrorism.

But ultimately, none of that will work.

Blaming your neighbor doesn't make you any richer.

There are always politicians

tempted to exploit the rising inequality.

And you could see this very clearly

in the world before 1914.

And I'm very afraid at the beginning of the 21st century

that because we feel we cannot

regulate international capitalism,

we cannot properly tax multinationals and billionaires,

instead we vent our anger on immigrants.

It's safer than attacking multinationals.

But the truth is,

to solve the rise and persistence of inequality,

we need a progressive tax on capital.

And also, ownership rights cannot be eternal.

The moment capital is inherited by the next generation,

and also each year if you own a lot of capital,

you have to return to the community 1%, 2%, 3%,

or why not 5% or 10% if you own billions and billions?

And if you continue to invest your capital usefully,

with high returns, you can continue to prosper.

But if financial markets allow you to have a high return

without doing anything,

then tax rates are set to erode this mechanism.

This means we'll be able to control

some of the concentration of capital,

and therefore political power,

and also access to property for the middle class.

A lot of people are not ready to discuss the merits

of strong taxation rates on revenue and inheritance.

But without this to regulate capitalism,

there will be disastrous consequences for everyone.

You know, if you wanna think about what the longer term

implications are, I mean, the truly dystopian implications,

you think about horses.

I mean, we used to have a lot of horses.

End of the 19th century, right,

I mean, horses were critical for industrialization.

And then they weren't,

because you have all these industrial processes

that are much more efficient than horses are.

And, you know, for all of the technophiles

that are saying, "Technology has always created more jobs,

and so it will continue to,"

I say, "Technology has always created more jobs,

as long as you had things that human beings could do."

But when technology starts actually getting at

the basic functionality of a human being,

then human beings start becoming the equivalent of horses.

And that doesn't mean

that we can no longer have meaningful lives,

but it means that you have to change your model

because capitalism is no longer about labor.

And the problem is this is coming soon, soon, soon.

You look at driverless technologies.

Driving is, by the way, the single largest or second largest

employer of people in every one of the 50 US states,

and within 10 years, most of those jobs are gone.

So you will address capital, because if you don't, right,

you are going to have very serious problems.

We're leaving an industrial economy

and going to a post-industrial economy.

And we have to make choices

about which future we wind up in.

You can have abundance that is very unequally distributed,

where we have the robots that can do anything,

but the only people that own the robots are a very small

segment of society,...

basically like Elysium, where a bunch of people

live in ecologically protected spaces

and everyone else is living in, like, a hot, putrid mess.

And so it's a political problem.

The challenges today of creating a more equal society

are obviously different from the 20th century.

But the important point I want to stress is that

it's not technically impossible;

it's primarily a political and intellectual challenge.

And the good news is that

we can also find reasons from history to be optimistic.

History shows us that if we want society to be cohesive

in a peaceful and harmonious way,

we must prevent inequality from becoming too high.

I am for controlling capital to go beyond capitalism,

with ways that are more democratic, more inclusive,

and finally allow us to project ourselves into the 21st century.