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Welcome to the LSE Events podcast by the London School of Economics and Political Science. Get ready to hear from some of the most influential international figures in the social sciences.
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Good afternoon everyone. Good afternoon. And a very warm welcome both to our online audience and to our full house audience here at the Sheikh Zayed Theater at LSE. Welcome to this second keynote lecture of a conference that is celebrating the 10th anniversary of the International Inequalities Institute. And this one is also a public event. My name is Francisco Ferreira. I'm the Amartya Sen professor of Inequality Studies here at the LSE and director of the III on Logistics. Let me say that this event is being recorded and barring technical issues, it will be made available on the III's YouTube channel in due course. Obviously we'll have some time for you to ask questions at the end of the talk. We'll get to that. But I should warn you that we do have a hard stop at 4:30. There's another event happening here afterwards. I think it's the Rolling Stones and Tomahawks warm up. So we will have to stop at 4:30. Now I am just delighted to welcome Professor Thomas Piketty to deliver this lecture. You know, we often say this of a lot of people, you know, so and so needs no introduction. In Thomas's case, it's actually probably true that he doesn't need an introduction, but in any case, I will give him one. He's a professor of economics at the Ecole d' Autude d' Unciennes Social and the Paris School of Economics, as well as a co director of the World Inequality Lab, which produces the World Inequality Database. He is the, you know, one could go on for a very long time. He's the author of a long list of truly influential papers published in leading journals in economics, as well as many books, including two big international bestsellers that you all know. Capital in the 21st century and capital and Ideology. And I think it is no exaggeration. You know, when you get to my age, you start sometimes having to think about the history of study in a field. And I think it is no exaggeration to say that the first of those two books in particular actually ushered in capital in the 21st century, ushered in a new era in research and in public debate on inequality around the world. When it was published in 2014, not only in economics, but across the social sciences. Indeed, Thomas is one of the very few people who are both extremely well respected as a leading academic economist by his peers, as well as being widely known across other disciplines and by the general public. And if you are an economist, you know, that's very hard to do to be able to have both of those things. It's also worth mentioning in the context of today that Thomas has a long standing relationship with the lse going back to a couple of years he spent here during his PhD which we were just reminiscing about upstairs in the mid-1990s. It's also when I first met him personally, we used to both hang out at the fourth and fifth floors of the Lionel Robbins Building where Stickard and the Financial Markets Group used to be in those days. And later, of course, he continued that association, had a hugely fruitful collaboration with Tony Atkinson. And even though in some of that time Tony was no longer here, we think of Tony as a perennial LSer. And so, so that counts as well. And finally, Thomas also played a special role in the early days of the III itself. This was before my time, but we have here Mike Savage, who was the founding director then, along with the late Professor Sir John Hills. And they tell me that it was after one of Thomas lectures here at LSE that some key people, including some key donors, were convinced that an institute such as this should exist and be properly funded. And so it's very fitting then that he should return today to help us celebrate our 10th anniversary with another keynote lecture for which we are very grateful. Thomas will speak for about 40 minutes on global inequality in historical and comparative perspective. I'll give you a sign out around five minutes if that's okay. And please join me in welcoming Professor Thomas.
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Thank you. Thanks a lot for this very warm welcome. This is always great to be back at lse. I'm sorry that my English did not improve over the years. It still sounds a lot like French, but hope you can understand what I have to say. Look, it's really a great pleasure to be here for this anniversary. The fact that we now have this International Inequality Institute at LSE is tremendously important. I was very impressed when I first visited IAI, I don't know how to call it with Mike 10 years ago to see all these fantastic Master PhD student faculty from all departments at LSE participating. Except maybe the Economics department, which was not as represented maybe as some as it could have been. I mean it was there, but it's fantastic also to have from geography, urban studies, European Economic history, whatever, from every field. It's a place to talk about inequality. And I think the fact that we have today a number of research center in London, in Paris, in other European places In Germany, in the U.S. you know, studying inequality in a comparative historical perspective, a multidimensional perspective with people from all fields in the social sciences working together in many cases is really something fantastic. And so I'm very glad to be there to help celebrate this today. Okay, so this is very general title. What I'm going to do, I'm going to do in this lecture. I'm going to show first a few results from the World Inequality Database, which you can go online and you will find a lot more data. I should say this is a very collective research program. There are now more than 200 World Inequality Database fellows that have contributed to the database by putting in inequality series for income, for wealth, for gender inequality, for environmental inequalities, for their country or for a set of countries. And we are always trying to get new people to participate. So if you want to participate, don't hesitate to contact us. So I will show you some results and world map of inequality coming from this website. I will show you a few results from my Brief history of equality, which I strongly recommend to you. First, because it's a very short book. So, you know, unlike my previous books, which Chico was kind enough to mention, which you know, are very long books, which, you know, sometimes people buy and put it in the shelf and don't necessarily read it till the end. And I don't blame them because, you know, people have all sorts of things to do and writing such long books is very demanding on readers. But you know, it takes time to be short. It took me many years of discussing about my previous book and trying to clarify things. And I think this book to me is better than the previous books. Well, first, because it is shorter. So it's like 200 pages long, 250 pages. So you can read it over a weekend, you can really read it until the end. And also it's sort of clearer in a way about the bigger message. And in particular it has a more optimistic dimension, which I like. So it's called Brief History of Equality rather than a brief history of inequality. And that's of course on purpose. And that's because the main message in the end that I'm trying to push in this book and that I will answer is also today that you know, in the long run there is a movement toward more equality, socioeconomic equality, political equality, equality of rights in many different dimensions. It's not just economic or monetary. And you know, this long run perspective, you know, I think it's important today, you know, especially when you have sometimes a very depressing news and political news and geopolitical realities. I think it's important to keep some distance and try to remember that in the big picture, in the long run, we have this movement toward equality. It's never been easy. It has come from enormous social struggles, labor movement mobilization, sometime of crisis. So it's never been easy. But in the end this is a, you know, this is a fight that has been won in the past and I think which can be won in the future. So I will show you a few results from this book. I will also show you some results from a project, the Global Justice Project, which we have at the World Inequality Lab, which is a sort of a new project that, you know, instead of just maintaining the World Inequality Database where we look at the past and try to measure the evolution of inequality across countries over the past decade, in the Global Justice Project we're trying to look at the future and we're trying to describe development paths until for the 21st century where we can reconcile sustainable development with explicit carbon target, climate target, biodiversity target, together with more equality. So in a way it has a lot of in common with so called shared socioeconomic pathways that are being studied in IPCC report, except that we have a lot more focus on inequality and social class basically because in IPCC report, you know, it's very much sometimes sort of macro modeling at the country level, sometimes also some people would say very optimistic assumption of carbon capture or various technology which we try to avoid as much as we can and we put a lot more on phases and you know, getting a reduction of the material footprint. Also I will talk about reduction in workers, but also through reduction of inequality because we believe that inequality can be a powerful force that gets you into a rat race for always more material consumption. And also because if you want to be able to finance the climate investments, the energy investment, the health education investments that we need in the future, there's no way you can convince the lower income class or the middle income class to get into this path if the burden relies on them. So this will have to rely on top income, top wage group in one way or another. So this will have to come in one way or another with huge compression of inequality. I'm not saying this will be easy, but you know, the other possible route that we hear today, you know, the nationalist discourse, the ethno center issues, the anti migrant discovery discourse, the billionaire class discourse, are not going to solve these challenges in the long run. So I think in the end what makes me optimistic is that we'll have to return to equality and to this long run movement toward equality that we have seen in the past. So I will show you some ingredients of this project, which is still very much ongoing. I should mention that a full presentation of this project and of this report will be made next year in June 26 at the World Inequality Conference that will take place in Paris. You are all welcome to submit research papers if you are PhD student, faculty, mathematicians, whatever. There will be hundreds of people and one of the events will be the presentation of this full report. So today is just a little preview to try also to get you interested if possible. And there's a lot of more information online. On the website. I will also show a few results from these two books on political cleavages and social inequalities, because of course, we also need to think about the political coalition that can get the movement toward equality to continue. So the first book is a book, a collective book that was written with Amauri Gaetan Clara Martinez Trainedo, who is by the way, an assistant professor at Imperial College London. And this is a book involving several dozen of courses and we've built a this world political cleavage and inequality database together. This is a more recent book written with Julia Kaget, which is only on France, but covers a much longer time period and which actually was published just three weeks ago, I guess in English. And we are now extending this framework to actually Germany, Britain, US, et cetera. So I'm happy to show you some few reasons. Okay, so let me start with a similar simple map of inequality from the World Inequality Database. So we start with a very simple indicator, which is the share of national income going to the top 10%. So just to get the orders of magnitude straight, you know you have 10% of the population. If you have, if you had full equality, you should have 10% of total income. If you have full inequality, you should have 100%. So in practice it's always in between 10 and 100. And the first thing I want you to remember is that it varies enormously. So it doesn't go quite from 10 to 100, but it goes from say 20 to 70. So 20, 25% will be in Nordic Europe, 70 will be in South Africa, with an obvious reason in terms of legacy of extreme inequality. So first thing, distribution matters a lot. There are lots of variation. It's not, not as if it's stable. It's maybe even more striking when you look at the other side of the distribution, which is the bottom 50% share. So by construction, what you don't have for the top 10 or the bottom 50 goes to the 40% in between. So again, bottom 50% share, you are 50% of the population. So if you had complete equality, you should have 50% of total income, complete inequity, you should have zero. So it's always between zero and 50. In practice it goes from 5, 10 up to 25, 30 or even 35 in post tax terms. So here it takes into account a monetary transfer. It doesn't take into account in kind transfer. It would vary even more if we do after all tax and after in kind transfer. But already here, so in South Africa it's going to be 5%, in Nordic Europe it's going to be 25, 30%. So just try to do the math a little bit. You know, if you are, when you have 25, you are 50% of the population, you have 25 or 30% of total income. This means that your income of course is less than average. You know, after all you are the bottom 50%, but it's not that much below average. So if you have 25, it means that your average income is higher half of the average income of the country in which you are. If you have only 5% of total income, it means your average income is only one tenth of the average income of your country. So the gap basically between the poor, you know, large group of the poor, the average of the bottom 50% average in South Africa is going to be enormous. And it's not just about money, it's also in terms of dignity, access to basic goods. So the bottom line I want you to remember from this world map is that there's a lot of variation in inequality. So people who only want to look at per capita gdp, you know, they miss a lot because basically for same level of per capita GDP, depending on whether your bottom 50% share is going to be 5% or 25%, it means that the average income of the bottom 50% is going to vary effect of 1 to 5. So in terms of concrete access to everything, it will matter tremendously. So you need to care about the distribution. And the second thing is that rich countries by and large are more equal than poor countries. And the interesting thing is that it's not always been like that. As we are going to see in a minute. They have actually become more equal over time. In particular along the course of the 20th century, through the construction of the welfare state, public services, progressive taxation, and it has been very successful because this is to a large extent, this is also, this movement toward more equality is also what allowed this country to become richer. So let's look in time perspective. So this is a graph for France that comes from my book, from my brief history of equality. And I will show you that this in a minute. This is quite representative of many European countries, and in fact, in Nordic Europe it's even more striking. So what you can see here is that in the case of France, if you take the bottom 50%, it used to be 10%, so it was not quite South Africa, but it was like Latin America today in the 19th century. Now it's 2025. And this is not taking into account in kind transfer. And this is not, this is before income tax. So if you do after income tax, after in kind transfer, and I will show you data like this in a minute, in fact, the bottom 50% share will be even a little higher than the top 10% share, or very close. Now, of course, the bottom 50% group is five times more numerous than the top 10%. So even if you have the same share, it doesn't mean complete equality. It means that you have an income scale of 1 to 5, basically. But in the 19th century it would an income scale of 1 to 21 to 31 to 20. So this corresponds to an enormous compression in the long run of the income scale, which I will return to in a minute. Now, if you look at wealth inequality, you also have a compression in the long run, but it's much more limited. So first you can see that for wealth, so these are exactly the same number as before, but for wealth, for wealth, the, the top 10% share until World War I was like 80, 85%. Today it's 50 to 60%. So it has declined tremendously, but it is still incredibly high. And the decline happened mostly to the benefit of what I call the patrimonial middle class. In my work, this group of 40% of the population that is in between the top 10 and the bottom 50, so they are not really the middle, they are more the upper middle by construction. But these are the people whose wealth share has increased. So again, to get orders of magnitude, if you are 40% of the population and you have about 40% of wealth, it means that you have roughly the average wealth of your country. So today the average wealth in a country like France would be 55,6 years of per capita GDP. So maybe €200,000 per capita. So these are people who have anywhere between 100, 200, 300, 400, €500,000 per capita in wealth. So these are people who are not millionaire and billionaires you know, from the point of view of billionaires, they look very poor, almost like zero. But in fact, it's very different from zero when you have a few hundred. Typically, you can own your own, you can start a business, you have a lot more economic security. You know, it's much more than just money. It's also you have more bargaining power vis a vis your own life. You know, you don't need to bring a wage each month to pay for your rent. You can make different professional choices. So, you know, I would like to be in a society where the bottom 50% would also have this kind of wealth, but unfortunately, you know, this is not what we see. So there's been some progress in terms of wealth distribution in the long run, and I think it's been again, a big success. The emergence of a middle class in wealth after World War II came with more economic prosperity because these are more people in effect were able to purchase their own to start up a business. But in terms of the bottom 50%, the progress has been very, very low. So how do you make progress on the wealth front is complicated. You know that if you just wait for growth and, you know, market forces to deliver the diffusion of wealth, which would be, you know, the traditional view, you know, we've had growth for 200 years and, you know, we don't see much in terms of improvement of the bottom 50%. So I think we need something a bit more radical, which will be the redistribution of inheritance returns, which I discuss in my brief history of equality. So basically, where everybody would get. So here this is a simulation of a proposal where Everybody at age 25 will get 60% of average wealth. So say €100,000 if average per capita wealth is 200. You know, I'm not saying this is going to happen next week, but, you know, I think if you don't do something like this, then then it probably will continue with quite an extreme distribution like this for a long time. So that's about wealth. Now for the rest of the talk, I'm going to focus not so much on wealth, but talk about income and the compression of the income scale because I want to focus on this more optimistic dimension for the long run. And there's been definitely more progress in terms of income scales than for the wealth scale so far. So if we look in terms of income scale, so this is, you know, this is a very simple indicator of inequality where this is the ratio between the average income of the top 10 and average income of the bottom 50%. Hi, I'm interrupting this event to tell you about another awesome LSE podcast that we think you'd enjoy. Lseiq asks social scientists and other experts to answer one intelligent question like why do people believe in conspiracy theories? Or can we afford the super rich? Come check us out. Just search for lseiq wherever you get your podcasts. Now back to the event. And you know, today I told you, and this is after tax and after all in kind transfer. So this is a post tax ratio. So today in Europe the ratio is about 5, which, you know, remember the graph, I'm from France. This corresponds to a situation where the bottom 50% and the top 10 have about the same share, around 25, 30% of total income. But you know, so this ratio of 1, so this is sort of the income scale between the bottom 50 and top 10. And you can see that until World War I it was like 20, 30, 40. So there has been an enormous reduction and it's been particularly strong in Europe. But also, also if you look at Japan, North America, in particular the US it's been less strong as in Europe. But generally speaking, rich countries have gone through a big reduction historically of inequality, which you don't find in Latin America, in sub Saharan Africa, in other parts of the world for which we have data. If you look more specifically at European countries, it's very striking to see that Denmark, Sweden, so you get as low as 1 to 2.5. So in terms of the income ratio between the top 10 and bottom 50%, so you know, the compression of inequality has been enormous. So you know, we are certainly not the first one to say that Nordic countries are more equal than average and they've been very successful. But the order of magnitude of the compression, if you put it in longer perspective and in comparative perspective, is really even more structural than what I imagined before. And this is also true, you know, if you take the ratio between say the 99th percentile and the 10th percentile, it went from 1 to 50 and before World War I to less than about 1 to 5 today. So you know, it's been divided by 10 if you look in post tax. So if someone has told, you know, 100 years ago in Europe and countries, okay, you're going to divide it income scale by 10, you know, people would have been shocked and would have said this is a communism, you know, the world is going to fall, the sky is going to fall, everything is going to disappear. And in fact it worked. And I also want to stress that the rebound of inequality that we have since the 80s, 90s, it does exist. And you know, I would like this trend to have continued in this direction. But you know, as compared to the huge compression is the historically it's not that big. It's bigger for the US or Japan, but for European countries it's not so big. Now what's striking is that these countries in which you've had the biggest reduction of inequality have also been extremely successful. So if you look probably the best indicator we have, so this is another indicator which is the reverse of the previous indicator, which is an equality indicator. So this is the ratio of the average income of the bottom 50% by the average income of the top 10. So when you have 40% in Denmark, it means that in Denmark today on average the bottom 50% has 40% of the average of the top 10. So this just corresponds to the ratio of 1 to 2.5 that we had before. But this illustrates the rise of equality. Now together with this rise of equality, you have an impressive rise of productivity. So this comes from new historical series on labor hours and GDP where basically you see Europe and North America have almost the same GDP per hours of work. So it's actually net domestic product per hours of work today around €55,60. World average is €15,16. Sub Saharan Africa is 4. And now if you break down the countries in Europe, you know, this is what you get. So you know, at the top you have countries like Denmark, Sweden. If you were to put Norway, it would be even higher. Now you could say Norway has a lot of oil and gas, but remember the US also have a lot of oil and gas. And if you take out the oil and gas sector in the us the will actually fall below Europe quite substantially. Now that's important because today, you know, we hear a lot of stupid claims about the gap between Europe and the US which completely forget to take purchasing power parity. So here this is using the latest 2023 international comparison program run by World Bank IMF Eurostat to compare the price level between countries. You know, if you take the market exchange rate then you know, right now the prices in the US relative to the to the exchange rate or relative to the Eurozone are 40% higher. So if you don't take into account the purchasing power politic election. But you know, it's as if you were comparing the evolution of wages without taking into account inflation. You know, it makes no sense. And people on the ground in the US actually care quite a lot politically about inflation. So you'd better take into account the price table and the other thing in this comparison that you forget to divide by the number of hours of work, which is quite important because, you know, if you work 60 hours per week, of course it's easier to have higher income, but if you do it right, in fact, these countries in Europe in general, and particularly in Nordic Europe, but that's also applied to a large extent to Germany, France or Britain, have actually higher or equal productivity as the U.S. and so this is clearly signs that, you know, this enormous reduction of inequality that's taken place in the long run did not hurt growth, especially if it came with, you know, massive investment in education, public services and all sorts of institutions that favor development. So now if we start from this historical basis and think about the future, you know, of course the difficulty is going to be that at the world level. So you will have more information on the global justice project online. There's a description here about what we're trying to achieve. We have put online already a number of research papers which you are very most welcome to read, criticize, send us comments. This is really an ongoing project, just if we look at the future. So one first scenario will be what we call business as usual scenario, where basically you take the situation today where you have enormous inequality in productivity. So you know, sub Saharan Africa has four hours, four euros per hour in PPP productivity. I mean, this comes, this can be explained by the fact that you have very, very little investment in infrastructure, in physical capital, but even more so in human capital, in human capital. All the current spending per children in education in Sub Saharan Africa is €200 PPP per year, which is about 40 times smaller than in Europe, North America, where it's going to be €8,000, that's in PPP. If you take MER, it will be twice or three times as big. But in PPP terms, you have a gap of 1 to 40 between the resources, at least as we measure them in PPP that you put into children in Sub Saharan Africa than what you put in the North. The fact that you have a productivity gap from €4 to €60, in a way it could be even bigger given the difference in investment in education, health, infrastructure. There's nothing really mysterious about the perpetuation of such a big gap. Now, if in the business as usual scenario, we assume that it just continues like this. So what do we do? We just take the average growth rate of productivity of the past 35 years, you know, 1990, 2025, and we project it to the future. Well, except for, you know, when China starts to converge with the west, we decline A little bit the growth rate, but basically that's what we do. If you do that, you know, by 2100 you have enormous persistent inequality. You know, €8 per hour in Sub Saharan Africa, 150 in Europe and North America. And you know, this is a situation where the population of Africa according to UN projection has gone from 1.3 billion today to 3.3 billion. So you have two extra billion people. The population of Europe has fallen below 500 million and you have this gap in the development level. This is not even taking into account the negative impact of climate warming on sub Saharan Africa GDP and productivity, which is going to worsen this. So this is just saying, okay, this is business as usual scenario, but this is not sustainable. I mean, this goes, you know, this goes to a very catastrophic situation. So what we do in the Global justice project is to try to explore the conditions under which you get conversions. So why do we set convergence in 2100? Well, you know, because it's sufficiently fair that, you know, it's not completely crazy. You know, some people would like convergence to happen before. Some people would say, oh, that's too fast. But, you know, what do you want? 20 225, you know, anyway, we take this as a target and we are asking to ourselves, what does it take in terms of education investment, health investment, in infrastructure investment, but also what does it take in terms of content of growth? Because of course, if we keep having the same material footprint that we have today in the US or even in Europe for everybody else in the planet, you know, probably that's not going to work too well. So, you know, this €100 per hour, the first key question is going to be what do you produce with this? And how do you, what kind of structural transformation do you have in terms of, of production sector? So we are trying to do this kind of simulation and to summarize, you know, we try to think of a world where in the future we have a lot more immaterial services than today, in particular education. I mean, these sectors have less material intensities and manufacturing, construction, energy, but they still have, they are not completely material. They do have a lot of material consumption. So you also have to work with the input, output table, try to see how you can reduce the material content of these services. But you know, the first thing is to have an enormous expansion in particular of education, health services, which is necessary. Well, first to get the productivity convergence for sub Saharan Africa, for the entire world. It's also necessary because it's a source of welfare in itself to have access to education and health. And also it has. The material footprint is less than in manufacturing. Now, given the general productivity growth we've seen in the past, it's possible to satisfy material needs without this big decline in the share of material sector. Now 40% of labor hours in education services. You can think, okay, that's a lot. That's far too much. Let me just. You should have in mind that this is a situation today, in 2020, 2025. So, you know, in Sub Saharan Africa and South South Asia, it's only 5% or 6 or 7% of labor hours which go into education, health, public services. So that's for them, that would be a big increase. But for Europe as a whole, it's already almost 25. For North America, in particular, the US it's actually already 30%. A lot of private education and private health, which maybe, you know, could be more efficient with the public education, public health, especially for us. But in the end, this comes with a lot of inequality in the case of the US but the thing is that they're already spending 30% in GDP in education, health and public services. If you take Sweden or Norway, they already have almost 35%. So in fact, the 40% target, 41% target might be too small. Given aging and given the size of a generation, the share of a generation going to higher education is going to the sky. It could be, probably my best guess would be that it should be 45, 50% or more by 2100. So if anything, we are more on the lower side. But here the difference is that we are trying to finance for this, for everybody, which requires big global redistributions. This comes with a change in the monetary system and trade system, also in our proposal. So this is a major change. This comes also in our scenario with a decline in labor hours. So, you know, we assume we go to about 1,000 of economic labor hours. So this is excluding for now, domestic labor per worker by 2100. This is a big change. But you see in the long run, this, this is sort of in the continuation of what happened in the past. Now, what happened in the past happened only through enormous labor mobilization, trade union movement. So it's not as if these things happen just like this spontaneously when individuals are supposed to bargain their laborers directly on their own with their employer. As you know, this is not working too well. So this requires collective legislation. That's not, you know, it's not going to be easy, but it's never been easy. And finally, when you, you know, we also believe that in order to get men to contribute more to domestic labor, this reduction in economic labor time, you know, can also be quite critical. So, you know, the objective is both to reduce material footprint, but also to get more gender equality in domestic labor and economic labor. So here we have a target with equal distribution, distribution of economic labor and domestic labor between gender in 2100. Now, this is all fine, but how do we get political coalitions to move in this kind of direction? And, you know, I don't have the answer. I have five minutes to try to give the answer. Let me make clear that you're not going to get an answer to that. Let me simply say two things. First, we obviously need international coalition. And you know, it's complicated with Trump, you will tell me, but, you know, at the same time, I think Trump is showing how much, you know, people need to rethink about possible coalition with sometime without the US Sometime maybe with the US with another government. But, you know, you have to rethink the possible international coalition to get things moving. And the fact that at the G20 summit last year, you know, Brazil was proposing to introduce a minimum global wealth tax, I think was very interesting because it shows that, you know, when I was writing 10 years ago that we should have a global wealth tax, you know, everybody was nothing. And you know, the fact that actually 10 years later is discussed as a G20 and it comes from Brazil, from the global South, I think is very interesting because it shows that in the future, I think the demand for environmental justice, social justice will become, you know, tremendous coming from the south. And, you know, European countries individually, collectively will have to respond to this to build coalition. So first thing is international coalition. Now, if we need, if you want to get things moving, we also need our domestic political coalitions to work. And so let me conclude, you know, I'm going to summarize each of these book with one figure each or two figure for the first one and one figure for the last one. What are we saying in these books? We are trying to understand why we don't have more political response to rising inequality in recent decades. Why the redistributive policies that we could expect are not being implemented. What is the problem? And the first book is stressing one dimension which we call the rise of the Brahmin left versus the merchant right. So the fact that the higher education have moved to the left, higher income, higher wealth have remained on the right, and you have sort of this multiple elite political system where the disadvantage feel completely abandoned. To summarize, and either Stay at home or all sorts of alternative parties, but basically because they feel abandoned because of this new political structure. And in the other book we stress another explanation which is called completely complementary to the first one, which is the rise of territorial division. So let me just show you very simply so the Bremen Left story. So you will find it online if you go to the World Political Cleavage and Inequality database. But what this shows is that higher educated voters are now voting more to the left than to the right, controlling for income, I should say. Whereas higher incomes voters are still voting more to the right, Whereas in the 50s, 60s, in all dimensions of social stratification, people at the bottom will vote more to the left. So whether you have low income, low education, low wealth, anything, you will vote more, say labor in Britain, Whereas here you have this disconnection between the two dimensions, controlling for the other dimension. And if you have both high income and high education, you can be a bit close, but. But the income effect can actually dominate. So the high income people, the high education people that want the left. The most extreme case will be if you have a PhD in Sociology and zero income, you will tend to vote for the left. But this is not very representative. The more representative situation, the more representative situation will be primary school teachers, nurses who can have quite high education degree as compared to the country average, but their income is actually not so good. And so this is where the big numbers are. So now I regret a little bit that we invented this term Brahmin left, because it looks like a very entrenched elite. Whereas in practice this can be more people with an education degree where primary school teacher, secondary. So we have to be careful with this. Now what's striking is that this happened, you know, this turn on education happened everywhere. So here I show you us, France, Britain, Britain was lagging behind France and us, which means that the British Labour Party had sort of more working class roots historically than either the US Democratic Party, which you will not be surprised, but also the French Socialist and Communist Party, which is maybe more interesting. So anyway, we have this comparison across countries. Now what's missing in this analysis of the Prime Minister left and the merchant right, I think is the territorial dimension. And this is what we stress in our book on France with Julia Kaget, which is this territorial division. So, you know, we are accustomed to things that, you know, European voters historically vote more to the left than rural voters. And yes, that's true. You can see here we take the ratio between, between the vote for the left in the top 50% urban versus the bottom 50% sure. Ban. And it's always above one. So we have all French legislative elections since 1848. So we've digitized with Julia Kaget all the electoral results at the level of the 36,000 municipalities in France. So very granular data. We know the size of the conurbation to which the municipality belong, and we classify municipality, whether you have in the largest. So it's always above one. But for a long time period after World War II, it was. The territorial divide was not so strong. Which means what? Which means that, for instance, when Mitterrand was elected socialist president in 1981, he was getting in fact almost the same score in the most urban and most rural part of the country. And in particular the. And this is something we see not only in France, but from the data we have started to collect in Britain, in other Western democracies. You know, the post World War II left right conflict corresponds to a situation where somehow the class divisions are more important than the territorial division. And the left parties are able to sort of convince the urban poor and the rural poor that what they have in common is more important than their differences, which is always complicated because you always have very different aspirations depending on the territory in which you live. Because this comes with different industrial sectors, different problem in terms of transportation, housing. You know, it's a very. So, you know, in the 19th century and early 20th century, the territorial gap was most typically the urban proletariat would vote for the left socialist parties. But you know, the agricultural class and poor peasants, they will not recognize themselves a lot in socialist parties. They will feel ignored basically by these parties. And this is why you have this huge territorial gap. But in the post war period, this went down and then this went up again in a very spectacular manner. Why is it so? Because this is not the return of the peasants that Marx accused of being backward in 1848. This is a different story. So what's happening, what we think is that instead of talking of cultural backwardness of the whole world extra, it's more interesting to look at what are some of the concrete dimension of existence which matter for these different social class, different territorial social class, or geo social class, as we call them in the book, and maybe what has been happening in recent decades, we feel are two major effects. One is access to public services and large transformations transportation infrastructure. So, you know, if you want your children to go to, for example, to university, or you want to go to a large hospital, you want to have a high speed train, whatever you are in a rural or in Small cities, you feel completely left out. And so you have this new inequality in access to high end public services, because we don't talk anymore just of access to primary school, it's really access to university, access to hospital, access to high end transportation infrastructure. And so you have these new territorial inequalities which have created to some extent this new gap. And two, the second main factor in our view is different exposure to international trade. Because when you look at the structure of manufacturing jobs, historically they were in the last congratulations. But in recent decades they have largely shifted to the smaller cities because the first wave of manufacturing job destruction happened in the large. And so today the second wave of decentralization starting in the 1990s, 2000, 2010, it particularly are the smaller cities, which has also created a lot of resentment against the larger mission where you have a lot of services, either low skill, high skill services, but who are less exposed to international trade. And so these basically the large cities are being accused to have gone in the direction of completely free trade if you, even if it comes with the largest fraction of manufacturing job. And if these two issues are not addressed well by the left parties, basically it will be addressed by the nationalist parties in another way. And probably not in the best way in my view. But in any case, we think we have to return to these different dimensions of social and political cleavages if we want to understand why red distributive coalition have stopped being efficient. And while they were efficient at some point now, the good news is that, you know, it was possible in the past to reduce this territorial divide. It was not easy, but it was possible. So, you know, there's no reason why it should be impossible in the future. Whereas with the Brahmin left explanation, there's a sort of more structurally pessimistic view of the future because, you know, the rise of higher education is going to continue. And I think this, this book is a bit more optimistic than the previous one. Anyway, this is where I stop. So just to conclude, there's been a very substantial and successful historical movement toward more socioeconomic and political equality in the past. I believe this movement can and should continue because this is in the end the only way to address our social environmental challenges and the unending aspiration for equal participation and dignity. I think social science research on inequality and equality can be useful for that. And I want to wish a long life to the International Inequality Institute for its contribution to this fight and process. Thanks a lot for your attention.
- [46:41]
B
Thank you. Thank you so much, Tamar, for a really inspiring Talk. Drawing on a remarkable wealth of data. So now we have some time for questions. Is it okay if I take three questions at a time? You.
- [46:55]
A
Yes, sure.
- [46:56]
B
All right, so let's start one there. So I'm gonna ask the two ladies, I'm gonna point to the next person. Just give them the microphone. Okay. We'll go easier that way.
- [47:07]
A
Go ahead.
- [47:07]
B
Tomas, thank you for, for an inspiring talk.
- [47:09]
A
In these dark times, could you say something about the role of high tech sectors in generating wealth and equality versus productivity? My reading of the literature of claiming that Europe is less productive tends to.
- [47:23]
B
Focus on the size of startups, successful technical firms, et cetera.
- [47:28]
A
The work you're doing on productivity is essential in addressing that. But I was hoping you could elaborate that specific issue of the tech sectors. Hello. Thanks a lot for the talk. My question also concerns productivity and in the graphs, you. I would like to know the focus. Why the focus on productivity? Because there is a lot of literature on labor markets that highlight that it's a very thin link between productivity and wage growth. So how are we comparing this? So why didn't you go for like wage gaps and how to close wage gaps? Because we're making big assumptions if we focus on productivity, on the fact that there'll be a translation of productivity growth onto wage growth, which just doesn't happen in context where there's weak unionization. Thank you.
- [48:19]
B
Take those three.
- [48:20]
A
Yeah, let me take those three. Let me start with the productivity question because indeed I went very fast. And I just want to. To clarify maybe, you know, when we talk. Let's start here. You know, when you have Europe, when I say, you know, Europe, there's a productivity of €55,60.
- [48:42]
B
We'll send the bill to the PSC.
- [48:44]
A
Don't worry. Okay, let me go down here. That will work better. So when what this is saying is simply for every hour of work, say in Britain, GDP as recorded by national account is going to be €60. Now, that doesn't mean that every worker, of course, is getting €60 for every hours of work. Well, first, because there's inequality of wages and there's a labor share and a profit share. And so indeed, the wages can be lagging behind. If the profit share is rising, then you have wage inequality. So some people are going to get 10 or €20, some people are going to get €200 per hour. But the reason why it's still useful to look at this average is that in the end, I mean, this is what you can share at this stage. This is what you have you can redistribute income as much as you want for now. This is the production that we have now with these very different sectors. And this is why, you know, you need to look at the structure of the sectors and how this is changing over time because, you know, there's a little bit with gdp, this illusion of a universal money metric to compare everything. And you know, we, we spend a lot of time looking at the different sectors. But I think it's still useful to start from this perspective because then you can ask the question about the labor share, the profit share, the wages lagging behind productivity, the inequality and the, you know, catch up between countries and comparison between countries. So, you know, I think it's a useful starting point for the discussion. But that's, you know, that's of course not the end point. We need to bring the wage, we need to bring everything. You know, I still think again, this is a better starting point than the GDP per capita measures that you use usually here to compare countries. Because in the end, in terms of welfare, you know, again, if you have very high GDP per capita because you work 60 hours a week, you know, that's not so useful. And you know, historically the reduction in labor hours has been a very important process and a very important process. You know, so in the general rise of well being and the rise of life expectancy, expectancy and people having vacations, spending more time with their families, their friends. So it's an incredibly important process which tends to be neglected by economists in particular. And at least looking, dividing GDP by total hours of work is the first way to try to correct for that. And I think that's important in this sense. Now there were two questions, one on AI, artificial intelligence and the other one in high tech sector. So will AI be a great equalizer? You know, for now this is not the road this is taking. You know, that's, you know, as usual with technological change, it all depends on how you govern technical change, who owns the technology and who decides. For now, you know, it looks as if, you know, countries are competing with one another and are following the US leaders in many ways to sort of let the private interest put their property rights and things which just should not belong to them, should belong to all of us. So typically the artificial intelligence algorithm, as we all know, are using knowledge that was produced by all of us here, by journalists or by artists, a lot of public money, private money, whatever, and they don't even need to say clearly what they use. And they put their property right. And the answer that is in effect, generated by using all this material. So this is, to me, this is the caricature of sort of creating a new domain for a private wealth accumulation. When you don't know what more you, you know, in which area you should accumulate private titles, private property titles. So you just create a new area. This could be run very differently. You know, of course we, you know, there are proposals on the tables, but I, you know, I think it's very important again that there are coalitions, you know, organization in universities, but also, you know, in the trade union movement, political parties, all sort of civic organization to put on the table, you know, concrete legislation, platform that can, you know, be, you know, serious competitor to the, to the deregulation voices, you know, which, you know, are going to be extremely strong in the future. I take sectors very quickly. You know, of course they play a very important role for rise of wealth inequality. But, you know, remember, there are also many other sectors which are also important for rising wealth equality. You know, the luxury sector in my country, the finance sector, you know, so, you know, I think it's a more structural, you know, question of what you accumulate. And yes, there are, yes, I think there are common factors to all of these sectors which in my view should, should be addressed together rather than sector by sector.
- [54:04]
B
Thank you very much, Thomas. Now, unfortunately, we do not have time for more questions. I'm really sorry. The Rolling Stones are coming, as you know. But before I thank Thomas, let me just make two quick announcements. One is for people at the conference. There's now the poster session and some drinks and stuff, and you have it in your program where it is. So please head out there in a moment. The second announcement is that let's please stay sitting. There's an arrangement. I've been told somebody's going to come and whisk Thomas away and then we can get up and leave. Okay? So if you brought your book for him to sign. I'm really sorry, this is not me. These are instructions that I've. That I've received. So TAMA will have to go because of constraints that we have. So first now, let me thank all of you for coming, you who are here and those who've joined online. But in particular, please join me in thanking Professor Tamar Piketty.
- [55:15]
A
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