Thomas Piketty interview

There is an excellent Thomas Piketty interview in the Times where he makes several interesting points.

On how those who frame the rules of the economy themselves represent the interests of the well-off,  

The Supreme Court for decades made it impossible to create a progressive income tax. They were fine with the racial segregation, but having a progressive income tax was unconstitutional. In the end, it took 20 years to change the Constitution, but then it happened and contributed to reduced inequality. The 16th Amendment, allowing for the levy of federal income tax, was passed by Congress in 1909 in response to an 1895 Supreme Court ruling striking down an income tax. The amendment was ratified into law in 1913.

What are widely accepted practices or norms need not always have been the case. Interesting example about Sweden, 

Sweden until 1910, 1920 was one of the most unequal countries in the world, with a special sophistication in the way inequality was organized. You could have between one and 100 votes, depending on the size of your wealth. This rule, which varied by municipality, excluded all women and approximately 80 percent of men from voting. Even corporations had the right to vote in municipal elections in Sweden until 1910. Sweden was like this but then moved to something else.

About the shockingly regressive nature of taxation in the US,

According to that ProPublica investigation of 2021, the 25 richest Americans paid federal income tax at what amounted to a rate of 3.4 percent. That’s compared with a rate of 14 percent for those American households making the median income of roughly $70,000.

He debunks supply-side economics by pointing to conclusive evidence about its outcomes,

The evidence that we have is that if you take the United States, the growth rate of national income per capita has been divided by two following the Reagan decade. It’s been a little more than 1 to 1.2 percent per year — the national income per capita real growth rate between 1990 and 2020. It used to be more than 2, 2.5 percent between 1950 and 1980. The tax performance in the Reagan decade was supposed to boost growth: Maybe you would have more inequality, but the size of the pie is going to grow so much faster than before that the average wages and income of average Americans will grow like you’ve never seen. This is not what we’ve seen.

The big lesson from this is that the period of maximum prosperity of the U.S. economy in the middle of the century was a period where you had a top income-tax rate of 90 percent, 80 percent, and this was not a problem because income gaps of 1 to 100 or 1 to 200 are not necessary for growth. That is, the top marginal income-tax rate, which peaked in the United States at 94 percent in 1944. From 1932 to 1980, the average top rate was 81 percent. Between 1980 and 2020, the marginal tax rate applied to the highest incomes was, on average, 39 percent.

He talks about the importance of education for economic prosperity,

The key reason the U.S. economy was so productive historically in the middle of the 20th century was because of a huge educational advance over Europe. In the 1950s, you have 90 percent of the young generation going to high school in the U.S. At the same time, it’s 20 to 30 percent in Germany, France, Britain, Japan... There is compelling correlation between income inequality and education: Researchers have found that there is a little more than a 30 percent probability of gaining entrance to an institution of higher learning for young adult Americans whose parents’ incomes are within the bottom 10 percent. That probability rises to 90 percent for children whose parents’ incomes are within the top 10 percent... The story that Reagan tried to tell the country in the ’80s, which is basically forget about equality, the key to prosperity is to let the top become richer and richer — it doesn’t work.

Finally, about oligarchs in the US,

To me, maybe the best comparison between the U.S. is not so much with Russia today but with Europe and the Belle Époque before 1914: a system which is nominally democratic but where the concentration of wealth is so high and lacking proper rules about political finance, political influence, that the democratic system is not enabled to have a common-sense reaction to this excessive level of inequality that, in the long run, is not good for U.S. prosperity.