this week on "moyers & company," "the new york times" on a revolutionary new book about wealth and democracy. >> telling us that we are on the road not just to a highly unequal society but of inherited wealth. >> funding is provided by encouraging the renewal of democracy, carnegie, the ford foundation, working with visionaries on the front lines of social change worldwide, the her b albert foundation, whose mission is to promote compassion in our society, the katherine t.

mcarthur foundation, more information online. park foundation, dedicated to awareness of critical issues, the colbert foundation, and by our soul corporate sponsor mutual of america, designing customized individual and group retirement products. that's why you're retirement company. >> welcome. even in this age of hyper links and cyber space, nearly six centuries after gutenberg e devised the printing press, it's still possible for a single book to shake the foundation and arm everyday people with the knowledge they need to fight back against the predatory powers that have robbed them of their birthright as citizens. this is such a book. capital in the 21st century by thomas pickety, the book of the

season to many, to others, the book of the decade. reviewers called it a bulldozer of a book, seminole, definitive, a water shed. at 700 pages, it's already a best seller and there isn't a single scene of seduction not one celebrity interview or picture, just graph after graph, fact on fact, drawn from two centuries of data and embedded that can explode in the brain. here's one of its extraordinary insights. we're heading into a future dominated by inherited wealth, giving the very rich ever greater power over politic, government and society. it has terrible consequences for democracy. for those who work for a living, the level of inequality in the

u.s. is probably higher than in any other society at any time in the past, anywhere in the world. 60% of our national income went to the richest 1% of americans. no wonder this is the one book the 1% want to read. paul krugman has been writing about the book. it's called a tour deforce, a magnificent sweeping meditation that will change both the way we think about society and the way we do economics. now scholar, author of many books and widely read columnist and blogger paul krugman has changed a lot of thinking on politics and economics. welcome back. >> hi. >> inequality has been on the table for a long time. you have written extensively,

others have too. what explains that this book has now become a phenomenon? >> a lot of what we know about inequality comes pr him. when you talk about the 1%, you're actually reflecting his prior work. but what he's really done now is he said even those of you who talk about the 1%, you don't really get what's going on. you're living in the past, you're living in the '80s. you think gordon gekko is the future. he's a self-made predator. we're talking about his son or daughter, we're talking about inherited wealth playing a role. he's telling us that we're on the road not just to a highly unequal society, but to a society of an inherited wealth. and he does it with enormous amount of documentation. it's a revelation. even for someone like me, it's a revelation. >> what does paul krugman have to learn from this book?

>> it's in the title. the first word, capital. we stop talking about capital. we thought it was all about human capital. we thought it was about earnings. we thought people found a way to make a lot of money. and we knew that wasn't always true. we knew in the guilded age, that high incomes were mostly a result of having lots and lots of assets. we sort of said that's not the way things work anymore. he said, oh yeah? it turns out you're wrong. a lot of high incomes in america are people who didn't start out all that rich, but were rapidly moving towards a state where inherited wealth dominates. i should have known it, but i didn't. so then here comes this book. it's beautiful. it's analytically beautiful, if that makes any sense at all.

>> im i'm no economist, but i found this book very readable and there was this moment of epiphany. >> you suddenly say, oh, this is not the way i saw it. the world has moved on a long way in the last 25 years and not in a direction you're going to like. we are seeing not only great disparities in income and wealth, but we're seeing them become inequalities that will be transfer transferred across generations. we are becoming very much the kind of society we imagined we're nothing like. >> here's his main point. capital tends to produce real returns at 4 to 5% and economic growth is much slower. what's the practical resolve? >> what that means is if you have a large fortune, suppose our family has a large fortune, they can inheritors of that large fortune can live very, very well. and still put a large fraction of that income from the fortune

aside and the fortune will grow faster than the economy. so the big fortunes tend to take an ever grow iing share of tota national wealth. so when you have a situation where the returns on capital are pretty high and the growth rate of the economy is not that high, you have a situation in which not only can people live well off inherited wealth, but they can pass on to the next generation even more, an even higher share. it's the rate of return on capital and the rate of growth of the economy and when you have a high economy, which is what we have now, you're talking about a situation in which dynasties come increasingly to dominate the top of the spectrum and a tiny fraction of the population ends up very dominant. >> what's the realistic impact of this on working people? >> there's a direct impact, which is that part of income is always going to go to labor. but the part that comes from capital is going to be in the

hands of a very few people. the other thing is political economy, when you have a few people who are so wealthy that they can affectively buy the political system, the system is going to serve their interests. that's going to reenforce this shift of income and wealth towards the top. >> do you agree with him that we are drifting to ole gar i can? >> i don't see think invest question. if you look at what we know already and we're learning more, we know already about the concentration of income of wealth. you can see that it is growing. you can see -- i spent awhile going through the forbes 400 list. what you find is already an awful lot of inherited wealth. it's no longer a list of

self-made men. a lot of them are pretty elderly and those fortunes will be passed on to next generations. so the drift towards ol gar i can is a shift in the numbers. >> i was taken with something you wrote the other day. in your opinion, the real problem is not capital acc accumulation as much as it is income. how does that differ from what you were saying about wealth that passes to the next generation? >> right now high incomes are still primarily coming from people who made a lot of money typically as corporate executives. that has been the story of the big expansion since the 1970s has been driven by high salaries and high bonuses and so on. that's where we are now. our image of the top is really a quarter century old. it's about the way things were when they were just getting started and just seeing the

explosion of inequality. we're well along the way towards one in which it is an older thing where people accumulate capital, pass it on to their heirs and you get these die nastic wealth. there's interesting things to say, but not this compelling vision about why america is so unequal right now. but looking forward, he's telling us that the story is already changing and it's going to change more. so we are going probably unless something gets better, we're going to look back nostalgically on the 21st century when you could have the pretense that the wealthy earned their wealth. by the year 2030 it will all be inherited. >> at the same time, we can't even imagine to pay workers $10. >> what's amazing, i thought one of the most depressing things, although enlightening in the book, is he talks about france.

years before world war i, which was ideologically as much a society committed to equality in principle as we are today. but in practice was totally dominated by very wealthy families where it was impossible to even raise the possibility of seriously taxing great wealth. it was hard to do anything to improve the conditions of ordinary workers. and it shows you how that can happen, how you can have a society where even though the ideology is democratic, even though we claim that all men are equal, in practice, not a chance. >> isn't that what's happening now? >> at the time we should say we should never allow ourselves to become like old europe, but we have. >> we have had the rock fellers, the carnegies, dynasties that transferred hair wealth from one generation to another. >> before world war i, we had our families, but they were not

as dominant as they were in europe. not because we didn't have high returns on capital, but because we were growing so fast. we are an emigrant nation. we hadn't been able to establish a lock. after that, we had a long period of high taxation of large estates, of high taxation of capital income. but now we're on our way back towards something that looks more like the hierarchy society. >> fortunes today is so great that it practically makes them invisible. wealth is so concentrated that a large segment of society is virtually unaware of its existence. >> if you have conversations with people who are not in this business, who are not economists, they have no idea what real wealth means in america. they think having $1 million makes you wealthy.

and while it's certainly true, that's a privileged condition compared to most people, the shear size of those big fortunes is so far outside our normal experience that it does become invisible. you're never going to meet these people. you're never going to have a sense of what it is they control. most people have no idea -- how far the commanding heights are from you and me. >> you remind us often, and you did so just the other day, that the united states has a much more unequal distribution of income than other advanced countries and that much of this deference comes from government action. such as? >> if you look at european countries, just about all of them, they don't necessarily have higher taxes on high incomes. that's not so much the factor. they have higher taxes overall which are used to pay for a lot

of programs of aid. so you have universal health care, we have sort of stumbling our way towards something like that now, but they have a lot of income support for people with low incomes, lots of support for young parents, basically a lot of redistribution, which is a dirty word in u.s. politics, but is essential to having a decent society, so that to be the average american is richer than the average person in france. although that's mostly because we work longer hours, but to be in the bottom of the bottom fifth in france is a far better thing than to be in the bottom fifth of the united states because of the government policies. it's not because wages are high at the bottom in france, but mostly you have government programs which makes an enormous difference. the level of inequality of marketing, what people actually make is not that different among

advanced countries. the level of inequality once the government has gotten through taxing and spending is higher in the u.s. than most other advanced countries and that's because of the government. >> why is, as you said, redistribution such a noxious word in our political system? >> mostly it's just because there's a very effective apparatus of tv and print media and think tanks who hammer against any suggestion of redistribution. they managed to convince a lot of people that it's somehow un-american, which actually if you look at american history, that's not at all true. it's just been pushed very hard. i think also in the united states, we have to admit that race is always lurking under almost everything in american life. redistribution in the minds of a lot of people means taking money from people like me and giving it to people who don't look like

me. that's a big difference between us and europe. >> you do know that conservatives are regularly, consistently saying that inequality doesn't matter. if the very rich were less rich, it wouldn't really make a difference to people out there working for a living. >> what europeans do, which is to tax the rich and use it to provide benefits to people lower down the scale, that makes a big difference. that can make an enormous difference. take a few percent of national income and direct it towards the bottom 20%, that's a tremendous gain in the quality of life in the bottom 20%. so just think about it. we have a health reform, not the one we would have wanted. it's financed with small surt surtaxes on high incomes. that's where the money is coming from. it's coming from an additional tax for high income.

that is going to give basically everybody in america the guarantee of being able to have essential, basic health insurance at an affordable cost. that's a huge change in people's lives, which is being financed, in large part, by taking a little bit from the top. a little bit of robinhoodism can do a lot. no one is talking let's punish the rich for the sake of punishing them, but can you do redistribution in a way that makes us a better society, and the answer is yes. >> at the end of his book, he's talking about the global tax on wealth. do you think that's feasible? >> the united states were behind it, lots of things would become possible. if the united states were to support this, you could pretty much guarantee that the europeans would be tlwilling too

along. we would have a lot of leverage over them. it's not that the international system make this is impossible. it's the u.s. political system that makes it look impossible right now, and that can change. >> given the dysfunction of congress, given the fact that the supreme court has decided to enable corporations in their rich to consolidate their hold on our political system, do you have any hope for the kind of change that both would advocate? >> i think you don't give up hope on these things. look at the american political tradition. look at the -- one of the interesting things that he says is serious progressive taxation of high incomes and great wealth is american invention. we invented it in the early 20th century right at the peak of our guilded age and somehow pe found it in ourselves to turn to find

political leaders who are willing to say this is a bad thing. we don't want the society that is emerging here. so i think things can change. if you ask are we going to get a global wealth tax before the 2016 election, no, we're not. might we get one by the 2024 election, possibly. >> you wrote something the other day that's hard to forget. you said we live in such an ugliness in america right now. >> yeah. this is one of the things that puzzles me actually about my own country, which is it's one thing to have disparities of income and wealth and to have differing views about what we should be doing about it, but there's a level of harshness in our debate mostly coming from the people who are doing very well. so we have had a parade of billionaires whining about being incredible injustice that people are criticizing them. and then comparing anyone who

criticizes them for the nazis. it's almost a tick that they have. this is very strange. it's kind of scary because it's one thing if someone without a lot of power seems to be going off into a rage for no good reason, but these are people who have a lot of influence because of the amount of money they control. >> given the fact there's this ugliness, what do you think it's going to take, a mass uprising, consistent demonstrations, how are we going to stem the tide that he says is taking us into al gar i can? >> he seems to argue for much of the book that we only escaped from the old ole gar key for awhile. thanks to wars and depressions, which disrupted the system. that's an argument you can make.

on the other hand, if you read histories of the new deal that it didn't spring out of nowhere, that we had a progressive movement and a lot of new deal programs building for quite a long time, there was, in fact, a move in america that was an increasing political philosophical readiness to take on inequality of wealth and power long before fdr moved into the white house. so i think there are better nature that there is this ugliness which can be frightening, but there is also a redemptive streak here and in other places. you don't give up hope on this. that given consistent argumentation, given we become more aware of what is going on then there is chance of changing things. do we know that, no, but there's nothing that says you should give up hope of being able to

change this. >> paul krugman, thank you for joining me. >> thank you for having me on. the evidence keeps mounting. tax day, it was reported that last year the chief executive officers of 350 top american corporations were paid 331 times more money than the average u.s. worker. those executives made $11.7 million compared to the average worker who earned $35,239. as na analysis circulated? an economist reminded us in addition to getting the largest percent in nearly a century, many in the 1% are paying a

lower federal tax rate than a lot of people in the middle class. you will no doubt remember that in the congress of both parties allows high rollers of finance the privilege of carried interest, a tax rate below that of their secretaries and clerks. and that state and local levels while the poorest 20% pay over 11%, the richest 1% of the country pays half that rate. now, neither nature nor nature's god drew up our tax codes. that's the work of legislators, politicians and it's one way they have, as chief justice john roberts put it, of expressing gratitude to their donors. mr. ai-- even though down the rd the public will have to put up $2.8 billion to compensate for the loss in tax revenues. all of which makes truly

repugnant the argument heard often that inequality doesn't matter. of course, it matters. inequality is what has turned washington into a protection bracket for the 1%. it buys tax breaks, allowing corporations and the rich to park their money in a no-tax zone, loopholes, favors like carried interest and on and on and on. listen, there's a big study coming out in the fall from princeton and northwestern based on data collected between 1981 and 2002. their conclusion, quote, america's claims to being a democratic society are seriously threatened. the preferences of the average american appear to only have a minuscule, near zero, statistically nonsignificant impact upon public policy. sad that it's come to this.

the drift that is described in the formidable book has become a mad dash and it will overrun us and overwhelm us unless we stop it. >> at our website you can find out more about the book and a debate that's sparked on both the left and the right. i'll see you there. the left and the right. i'll see you there. and i'll see you here next time. -- captions by vitac -- www.vitac.com >> don't wait a week to get more moyers. visit our website to see blogs. funding is provided by

encouraging the renewal of democracy, carnegie corporation of new york, celebrating 100 years of philanthropy and committed to doing real and permanent good in the world, the ford foundation working with visionaries on the front lines of social change worldwide, supporting organizations whose mission is to support compassion and creativity in our society, the john d. and katherine t. mcarthur foundation, more information on their website, park foundation, dedicated to heightening public awareness of critical issues, the colbert foundation, and by our soul corporate sponsor, mutual of america, designing customized, individual and group retirement products. that's why we're your retirement company.

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