All language subtitles for Capital in the Twenty-First Century (Pemberton, Justin 2019)_WEBRip.1080p.x264.AAC5.1_VO

...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.