WEBVTT 00:00:00.629 --> 00:00:05.917 So here's the most important economic fact of our time. 00:00:05.917 --> 00:00:09.947 We are living in an age of surging income inequality, 00:00:09.947 --> 00:00:12.872 particularly between those at the very top 00:00:12.872 --> 00:00:14.708 and everyone else. 00:00:14.708 --> 00:00:18.730 This shift is the most striking in the U.S. and in the U.K., 00:00:18.730 --> 00:00:20.928 but it's a global phenomenon. 00:00:20.928 --> 00:00:23.251 It's happening in communist China, 00:00:23.251 --> 00:00:24.974 in formerly communist Russia, 00:00:24.974 --> 00:00:28.268 it's happening in India, in my own native Canada. 00:00:28.268 --> 00:00:31.235 We're even seeing it in cozy social democracies 00:00:31.235 --> 00:00:34.860 like Sweden, Finland and Germany. NOTE Paragraph 00:00:34.860 --> 00:00:38.771 Let me give you a few numbers to place what's happening. 00:00:38.771 --> 00:00:41.480 In the 1970s, the one percent 00:00:41.480 --> 00:00:45.757 accounted for about 10 percent of the national income 00:00:45.757 --> 00:00:47.521 in the United States. 00:00:47.521 --> 00:00:50.830 Today, their share has more than doubled 00:00:50.830 --> 00:00:53.269 to above 20 percent. 00:00:53.269 --> 00:00:55.369 But what's even more striking 00:00:55.369 --> 00:00:58.055 is what's happening at the very tippy top 00:00:58.055 --> 00:01:00.297 of the income distribution. 00:01:00.297 --> 00:01:03.301 The 0.1 percent in the U.S. 00:01:03.301 --> 00:01:06.530 today account for more than eight percent 00:01:06.530 --> 00:01:08.420 of the national income. 00:01:08.420 --> 00:01:12.913 They are where the one percent was 30 years ago. 00:01:12.913 --> 00:01:15.681 Let me give you another number to put that in perspective, 00:01:15.681 --> 00:01:19.199 and this is a figure that was calculated in 2005 00:01:19.199 --> 00:01:20.658 by Robert Reich, 00:01:20.658 --> 00:01:23.397 the Secretary of Labor in the Clinton administration. 00:01:23.397 --> 00:01:28.701 Reich took the wealth of two admittedly very rich men, 00:01:28.701 --> 00:01:31.421 Bill Gates and Warren Buffett, 00:01:31.421 --> 00:01:34.370 and he found that it was equivalent to the wealth 00:01:34.370 --> 00:01:39.123 of the bottom 40 percent of the U.S. population, 00:01:39.123 --> 00:01:41.965 120 million people. 00:01:41.965 --> 00:01:44.329 Now, as it happens, 00:01:44.329 --> 00:01:47.133 Warren Buffett is not only himself a plutocrat, 00:01:47.133 --> 00:01:50.860 he is one of the most astute observers of that phenomenon, 00:01:50.860 --> 00:01:54.162 and he has his own favorite number. 00:01:54.162 --> 00:01:58.105 Buffett likes to point out that in 1992, 00:01:58.105 --> 00:02:00.267 the combined wealth of the people 00:02:00.267 --> 00:02:02.596 on the Forbes 400 list -- 00:02:02.596 --> 00:02:05.993 and this is the list of the 400 richest Americans -- 00:02:05.993 --> 00:02:08.765 was 300 billion dollars. 00:02:08.765 --> 00:02:09.966 Just think about it. 00:02:09.966 --> 00:02:11.993 You didn't even need to be a billionaire 00:02:11.993 --> 00:02:14.966 to get on that list in 1992. 00:02:14.966 --> 00:02:18.979 Well, today, that figure has more than quintupled 00:02:18.979 --> 00:02:21.865 to 1.7 trillion, 00:02:21.865 --> 00:02:24.043 and I probably don't need to tell you 00:02:24.043 --> 00:02:26.504 that we haven't seen anything similar happen 00:02:26.504 --> 00:02:27.889 to the middle class, 00:02:27.889 --> 00:02:32.590 whose wealth has stagnated if not actually decreased. NOTE Paragraph 00:02:32.590 --> 00:02:36.650 So we're living in the age of the global plutocracy, 00:02:36.650 --> 00:02:38.691 but we've been slow to notice it. 00:02:38.691 --> 00:02:40.374 One of the reasons, I think, 00:02:40.374 --> 00:02:43.352 is a sort of boiled frog phenomenon. 00:02:43.352 --> 00:02:45.915 Changes which are slow and gradual 00:02:45.915 --> 00:02:47.455 can be hard to notice 00:02:47.455 --> 00:02:50.359 even if their ultimate impact is quite dramatic. 00:02:50.359 --> 00:02:53.591 Think about what happened, after all, to the poor frog. 00:02:53.591 --> 00:02:56.406 But I think there's something else going on. 00:02:56.406 --> 00:02:58.516 Talking about income inequality, 00:02:58.516 --> 00:03:01.047 even if you're not on the Forbes 400 list, 00:03:01.047 --> 00:03:03.188 can make us feel uncomfortable. 00:03:03.188 --> 00:03:06.633 It feels less positive, less optimistic, 00:03:06.633 --> 00:03:09.162 to talk about how the pie is sliced 00:03:09.162 --> 00:03:12.214 than to think about how to make the pie bigger. 00:03:12.214 --> 00:03:14.942 And if you do happen to be on the Forbes 400 list, 00:03:14.942 --> 00:03:17.740 talking about income distribution, 00:03:17.740 --> 00:03:21.427 and inevitably its cousin, income redistribution, 00:03:21.427 --> 00:03:23.967 can be downright threatening. NOTE Paragraph 00:03:23.967 --> 00:03:28.243 So we're living in the age of surging income inequality, 00:03:28.243 --> 00:03:30.356 especially at the top. 00:03:30.356 --> 00:03:33.944 What's driving it, and what can we do about it? NOTE Paragraph 00:03:33.944 --> 00:03:37.610 One set of causes is political: 00:03:37.610 --> 00:03:43.205 lower taxes, deregulation, particularly of financial services, 00:03:43.205 --> 00:03:48.335 privatization, weaker legal protections for trade unions, 00:03:48.335 --> 00:03:50.775 all of these have contributed 00:03:50.775 --> 00:03:54.892 to more and more income going to the very, very top. NOTE Paragraph 00:03:54.892 --> 00:03:58.315 A lot of these political factors can be broadly lumped 00:03:58.315 --> 00:04:01.644 under the category of "crony capitalism," 00:04:01.644 --> 00:04:03.821 political changes that benefit a group 00:04:03.821 --> 00:04:05.983 of well-connected insiders 00:04:05.983 --> 00:04:09.521 but don't actually do much good for the rest of us. 00:04:09.521 --> 00:04:12.910 In practice, getting rid of crony capitalism 00:04:12.910 --> 00:04:14.951 is incredibly difficult. 00:04:14.951 --> 00:04:18.444 Think of all the years reformers of various stripes 00:04:18.444 --> 00:04:21.838 have tried to get rid of corruption in Russia, for instance, 00:04:21.838 --> 00:04:24.867 or how hard it is to re-regulate the banks 00:04:24.867 --> 00:04:28.024 even after the most profound financial crisis 00:04:28.024 --> 00:04:29.646 since the Great Depression, 00:04:29.646 --> 00:04:34.242 or even how difficult it is to get the big multinational companies, 00:04:34.242 --> 00:04:38.253 including those whose motto might be "don't do evil," 00:04:38.253 --> 00:04:41.027 to pay taxes at a rate even approaching that 00:04:41.027 --> 00:04:43.135 paid by the middle class. 00:04:43.135 --> 00:04:46.171 But while getting rid of crony capitalism in practice 00:04:46.171 --> 00:04:48.167 is really, really hard, 00:04:48.167 --> 00:04:51.635 at least intellectually, it's an easy problem. 00:04:51.635 --> 00:04:57.284 After all, no one is actually in favor of crony capitalism. 00:04:57.284 --> 00:04:59.931 Indeed, this is one of those rare issues 00:04:59.931 --> 00:05:03.166 that unites the left and the right. 00:05:03.166 --> 00:05:05.986 A critique of crony capitalism is as central 00:05:05.986 --> 00:05:10.283 to the Tea Party as it is to Occupy Wall Street. NOTE Paragraph 00:05:10.283 --> 00:05:14.621 But if crony capitalism is, intellectually at least, 00:05:14.621 --> 00:05:16.656 the easy part of the problem, 00:05:16.656 --> 00:05:19.931 things get trickier when you look at the economic drivers 00:05:19.931 --> 00:05:22.684 of surging income inequality. 00:05:22.684 --> 00:05:26.423 In and of themselves, these aren't too mysterious. 00:05:26.423 --> 00:05:29.470 Globalization and the technology revolution, 00:05:29.470 --> 00:05:32.010 the twin economic transformations 00:05:32.010 --> 00:05:33.708 which are changing our lives 00:05:33.708 --> 00:05:35.805 and transforming the global economy, 00:05:35.805 --> 00:05:39.272 are also powering the rise of the super-rich. 00:05:39.272 --> 00:05:40.852 Just think about it. 00:05:40.852 --> 00:05:42.840 For the first time in history, 00:05:42.840 --> 00:05:45.579 if you are an energetic entrepreneur 00:05:45.579 --> 00:05:47.278 with a brilliant new idea 00:05:47.278 --> 00:05:49.693 or a fantastic new product, 00:05:49.693 --> 00:05:53.372 you have almost instant, almost frictionless access 00:05:53.372 --> 00:05:57.352 to a global market of more than a billion people. 00:05:57.352 --> 00:06:01.186 As a result, if you are very, very smart 00:06:01.186 --> 00:06:02.981 and very, very lucky, 00:06:02.981 --> 00:06:05.832 you can get very, very rich 00:06:05.832 --> 00:06:08.362 very, very quickly. 00:06:08.362 --> 00:06:11.204 The latest poster boy for this phenomenon 00:06:11.204 --> 00:06:13.184 is David Karp. 00:06:13.184 --> 00:06:16.039 The 26-year-old founder of Tumblr 00:06:16.039 --> 00:06:18.821 recently sold his company to Yahoo 00:06:18.821 --> 00:06:21.854 for 1.1 billion dollars. 00:06:21.854 --> 00:06:23.392 Think about that for a minute: 00:06:23.392 --> 00:06:27.806 1.1 billion dollars, 26 years old. 00:06:27.806 --> 00:06:31.253 It's easiest to see how the technology revolution 00:06:31.253 --> 00:06:34.874 and globalization are creating this sort of superstar effect 00:06:34.874 --> 00:06:36.817 in highly visible fields, 00:06:36.817 --> 00:06:39.120 like sports and entertainment. 00:06:39.120 --> 00:06:42.495 We can all watch how a fantastic athlete 00:06:42.495 --> 00:06:46.839 or a fantastic performer can today leverage his or her skills 00:06:46.839 --> 00:06:50.507 across the global economy as never before. 00:06:50.507 --> 00:06:52.587 But today, that superstar effect 00:06:52.587 --> 00:06:55.569 is happening across the entire economy. 00:06:55.569 --> 00:06:57.746 We have superstar technologists. 00:06:57.746 --> 00:06:59.467 We have superstar bankers. 00:06:59.467 --> 00:07:02.803 We have superstar lawyers and superstar architects. 00:07:02.803 --> 00:07:04.232 There are superstar cooks 00:07:04.232 --> 00:07:05.744 and superstar farmers. 00:07:05.744 --> 00:07:08.527 There are even, and this is my personal favorite example, 00:07:08.527 --> 00:07:10.518 superstar dentists, 00:07:10.518 --> 00:07:12.622 the most dazzling exemplar of whom 00:07:12.622 --> 00:07:15.984 is Bernard Touati, the Frenchmen who ministers 00:07:15.984 --> 00:07:18.303 to the smiles of fellow superstars 00:07:18.303 --> 00:07:20.984 like Russian oligarch Roman Abramovich 00:07:20.984 --> 00:07:23.845 or European-born American fashion designer 00:07:23.845 --> 00:07:25.890 Diane von Furstenberg. NOTE Paragraph 00:07:25.890 --> 00:07:28.973 But while it's pretty easy to see how globalization 00:07:28.973 --> 00:07:30.885 and the technology revolution 00:07:30.885 --> 00:07:33.356 are creating this global plutocracy, 00:07:33.356 --> 00:07:37.523 what's a lot harder is figuring out what to think about it. 00:07:37.523 --> 00:07:39.049 And that's because, 00:07:39.049 --> 00:07:41.426 in contrast with crony capitalism, 00:07:41.426 --> 00:07:45.336 so much of what globalization and the technology revolution 00:07:45.336 --> 00:07:47.699 have done is highly positive. 00:07:47.699 --> 00:07:49.434 Let's start with technology. 00:07:49.434 --> 00:07:53.044 I love the Internet. I love my mobile devices. 00:07:53.044 --> 00:07:54.878 I love the fact that they mean that 00:07:54.878 --> 00:07:58.564 whoever chooses to will be able to watch this talk 00:07:58.564 --> 00:08:00.611 far beyond this auditorium. 00:08:00.611 --> 00:08:03.720 I'm even more of a fan of globalization. 00:08:03.720 --> 00:08:05.707 This is the transformation 00:08:05.707 --> 00:08:08.131 which has lifted hundreds of millions 00:08:08.131 --> 00:08:11.180 of the world's poorest people out of poverty 00:08:11.180 --> 00:08:12.622 and into the middle class, 00:08:12.622 --> 00:08:15.664 and if you happen to live in the rich part of the world, 00:08:15.664 --> 00:08:19.171 it's made many new products affordable -- 00:08:19.171 --> 00:08:21.697 who do you think built your iPhone? — 00:08:21.697 --> 00:08:25.519 and things that we've relied on for a long time much cheaper. 00:08:25.519 --> 00:08:28.143 Think of your dishwasher or your t-shirt. NOTE Paragraph 00:08:28.143 --> 00:08:30.679 So what's not to like? 00:08:30.679 --> 00:08:32.571 Well, a few things. 00:08:32.571 --> 00:08:34.675 One of the things that worries me 00:08:34.675 --> 00:08:38.838 is how easily what you might call meritocratic plutocracy 00:08:38.838 --> 00:08:41.534 can become crony plutocracy. 00:08:41.534 --> 00:08:44.193 Imagine you're a brilliant entrepreneur 00:08:44.193 --> 00:08:47.570 who has successfully sold that idea or that product 00:08:47.570 --> 00:08:48.949 to the global billions 00:08:48.949 --> 00:08:51.515 and become a billionaire in the process. 00:08:51.515 --> 00:08:53.884 It gets tempting at that point 00:08:53.884 --> 00:08:56.859 to use your economic nouse 00:08:56.859 --> 00:09:01.131 to manipulate the rules of the global political economy 00:09:01.131 --> 00:09:03.217 in your own favor. 00:09:03.217 --> 00:09:05.966 And that's no mere hypothetical example. 00:09:05.966 --> 00:09:10.395 Think about Amazon, Apple, Google, Starbucks. 00:09:10.395 --> 00:09:12.499 These are among the world's most admired, 00:09:12.499 --> 00:09:15.045 most beloved, most innovative companies. 00:09:15.045 --> 00:09:17.969 They also happen to be particularly adept 00:09:17.969 --> 00:09:20.207 at working the international tax system 00:09:20.207 --> 00:09:24.765 so as to lower their tax bill very, very significantly. 00:09:24.765 --> 00:09:29.080 And why stop at just playing the global political 00:09:29.080 --> 00:09:31.168 and economic system as it exists 00:09:31.168 --> 00:09:33.313 to your own maximum advantage? 00:09:33.313 --> 00:09:37.630 Once you have the tremendous economic power 00:09:37.630 --> 00:09:40.703 that we're seeing at the very, very top of the income distribution 00:09:40.703 --> 00:09:43.953 and the political power that inevitably entails, 00:09:43.953 --> 00:09:46.466 it becomes tempting as well 00:09:46.466 --> 00:09:50.054 to start trying to change the rules of the game 00:09:50.054 --> 00:09:52.156 in your own favor. 00:09:52.156 --> 00:09:54.890 Again, this is no mere hypothetical. 00:09:54.890 --> 00:09:56.825 It's what the Russian oligarchs did 00:09:56.825 --> 00:10:00.087 in creating the sale-of-the-century privatization 00:10:00.087 --> 00:10:02.057 of Russia's natural resources. 00:10:02.057 --> 00:10:03.831 It's one way of describing what happened 00:10:03.831 --> 00:10:05.866 with deregulation of the financial services 00:10:05.866 --> 00:10:08.101 in the U.S. and the U.K. NOTE Paragraph 00:10:08.101 --> 00:10:10.027 A second thing that worries me 00:10:10.027 --> 00:10:12.758 is how easily meritocratic plutocracy 00:10:12.758 --> 00:10:15.504 can become aristocracy. 00:10:15.504 --> 00:10:17.579 One way of describing the plutocrats 00:10:17.579 --> 00:10:19.386 is as alpha geeks, 00:10:19.386 --> 00:10:21.900 and they are people who are acutely aware 00:10:21.900 --> 00:10:24.308 of how important highly sophisticated 00:10:24.308 --> 00:10:28.490 analytical and quantitative skills are in today's economy. 00:10:28.490 --> 00:10:30.909 That's why they are spending 00:10:30.909 --> 00:10:33.686 unprecedented time and resources 00:10:33.686 --> 00:10:35.583 educating their own children. 00:10:35.583 --> 00:10:38.850 The middle class is spending more on schooling too, 00:10:38.850 --> 00:10:41.211 but in the global educational arms race 00:10:41.211 --> 00:10:42.995 that starts at nursery school 00:10:42.995 --> 00:10:46.733 and ends at Harvard, Stanford or MIT, 00:10:46.733 --> 00:10:50.211 the 99 percent is increasingly outgunned 00:10:50.211 --> 00:10:51.750 by the one percent. 00:10:51.750 --> 00:10:54.456 The result is something that economists Alan Krueger 00:10:54.456 --> 00:10:58.161 and Miles Corak call the Great Gatsby Curve. 00:10:58.161 --> 00:11:00.964 As income inequality increases, 00:11:00.964 --> 00:11:03.737 social mobility decreases. 00:11:03.737 --> 00:11:06.495 The plutocracy may be a meritocracy, 00:11:06.495 --> 00:11:08.711 but increasingly you have to be born 00:11:08.711 --> 00:11:13.595 on the top rung of the ladder to even take part in that race. NOTE Paragraph 00:11:13.595 --> 00:11:16.619 The third thing, and this is what worries me the most, 00:11:16.619 --> 00:11:20.970 is the extent to which those same largely positive forces 00:11:20.970 --> 00:11:24.160 which are driving the rise of the global plutocracy 00:11:24.160 --> 00:11:27.592 also happen to be hollowing out the middle class 00:11:27.592 --> 00:11:30.546 in Western industrialized economies. 00:11:30.546 --> 00:11:32.633 Let's start with technology. 00:11:32.633 --> 00:11:35.706 Those same forces that are creating billionaires 00:11:35.706 --> 00:11:39.729 are also devouring many traditional middle-class jobs. 00:11:39.729 --> 00:11:42.668 When's the last time you used a travel agent? 00:11:42.668 --> 00:11:45.749 And in contrast with the industrial revolution, 00:11:45.749 --> 00:11:47.905 the titans of our new economy 00:11:47.905 --> 00:11:50.707 aren't creating that many new jobs. 00:11:50.707 --> 00:11:54.526 At its zenith, G.M. employed hundreds of thousands, 00:11:54.526 --> 00:11:57.549 Facebook fewer than 10,000. 00:11:57.549 --> 00:12:00.219 The same is true of globalization. 00:12:00.219 --> 00:12:03.462 For all that it is raising hundreds of millions of people 00:12:03.462 --> 00:12:05.802 out of poverty in the emerging markets, 00:12:05.802 --> 00:12:08.668 it's also outsourcing a lot of jobs 00:12:08.668 --> 00:12:10.969 from the developed Western economies. 00:12:10.969 --> 00:12:13.736 The terrifying reality is 00:12:13.736 --> 00:12:15.993 that there is no economic rule 00:12:15.993 --> 00:12:18.930 which automatically translates 00:12:18.930 --> 00:12:20.633 increased economic growth 00:12:20.633 --> 00:12:22.943 into widely shared prosperity. 00:12:22.943 --> 00:12:25.617 That's shown in what I consider to be 00:12:25.617 --> 00:12:29.300 the most scary economic statistic of our time. 00:12:29.300 --> 00:12:33.358 Since the late 1990s, increases in productivity 00:12:33.358 --> 00:12:36.020 have been decoupled from increases 00:12:36.036 --> 00:12:37.970 in wages and employment. 00:12:37.970 --> 00:12:40.914 That means that our countries are getting richer, 00:12:40.914 --> 00:12:43.538 our companies are getting more efficient, 00:12:43.538 --> 00:12:45.479 but we're not creating more jobs 00:12:45.479 --> 00:12:49.350 and we're not paying people, as a whole, more. NOTE Paragraph 00:12:49.350 --> 00:12:53.559 One scary conclusion you could draw from all of this 00:12:53.559 --> 00:12:57.270 is to worry about structural unemployment. 00:12:57.270 --> 00:13:01.057 What worries me more is a different nightmare scenario. 00:13:01.057 --> 00:13:03.649 After all, in a totally free labor market, 00:13:03.649 --> 00:13:06.851 we could find jobs for pretty much everyone. 00:13:06.851 --> 00:13:08.879 The dystopia that worries me 00:13:08.879 --> 00:13:12.525 is a universe in which a few geniuses 00:13:12.525 --> 00:13:14.605 invent Google and its ilk 00:13:14.605 --> 00:13:19.800 and the rest of us are employed giving them massages. NOTE Paragraph 00:13:19.800 --> 00:13:22.433 So when I get really depressed about all of this, 00:13:22.433 --> 00:13:26.262 I comfort myself in thinking about the Industrial Revolution. 00:13:26.262 --> 00:13:30.157 After all, for all its grim, satanic mills, 00:13:30.157 --> 00:13:32.657 it worked out pretty well, didn't it? 00:13:32.657 --> 00:13:39.680 After all, all of us here are richer, healthier, taller -- 00:13:39.680 --> 00:13:41.706 well, there are a few exceptions — 00:13:41.706 --> 00:13:46.697 and live longer than our ancestors in the early 19th century. 00:13:46.697 --> 00:13:49.281 But it's important to remember 00:13:49.281 --> 00:13:52.103 that before we learned how to share the fruits 00:13:52.103 --> 00:13:53.782 of the Industrial Revolution 00:13:53.782 --> 00:13:56.345 with the broad swathes of society, 00:13:56.345 --> 00:13:59.740 we had to go through two depressions, 00:13:59.740 --> 00:14:01.599 the Great Depression of the 1930s, 00:14:01.599 --> 00:14:04.453 the Long Depression of the 1870s, 00:14:04.453 --> 00:14:07.620 two world wars, communist revolutions 00:14:07.620 --> 00:14:09.699 in Russia and in China, 00:14:09.699 --> 00:14:12.024 and an era of tremendous social 00:14:12.024 --> 00:14:14.780 and political upheaval in the West. 00:14:14.780 --> 00:14:17.500 We also, not coincidentally, 00:14:17.500 --> 00:14:20.038 went through an era of tremendous 00:14:20.038 --> 00:14:22.617 social and political inventions. 00:14:22.617 --> 00:14:24.961 We created the modern welfare state. 00:14:24.961 --> 00:14:26.703 We created public education. 00:14:26.703 --> 00:14:28.407 We created public health care. 00:14:28.407 --> 00:14:30.182 We created public pensions. 00:14:30.182 --> 00:14:32.207 We created unions. NOTE Paragraph 00:14:32.207 --> 00:14:34.723 Today, we are living through an era 00:14:34.723 --> 00:14:36.684 of economic transformation 00:14:36.684 --> 00:14:39.990 comparable in its scale and its scope 00:14:39.990 --> 00:14:42.258 to the Industrial Revolution. 00:14:42.258 --> 00:14:45.449 To be sure that this new economy benefits us all 00:14:45.449 --> 00:14:47.567 and not just the plutocrats, 00:14:47.567 --> 00:14:49.231 we need to embark on an era 00:14:49.231 --> 00:14:53.150 of comparably ambitious social and political change. 00:14:53.150 --> 00:14:55.808 We need a new New Deal. NOTE Paragraph 00:14:55.808 --> 00:14:59.808 (Applause)