what's a real pleasure to be back here again i always enjoy talking hearing seattle because it's a receptive audience it's excuse much more fun to talk with people who agree with you middle of last week i knew i had gotten under the skin of some people when the wall street journal complained about my complaining about inequality they thought there was too little inequality and i thought there was too much the the what i want to talk about today is is my my book but it's really the book is about what i've been really passionate about for a long time about the you're better than most other parts of the country the divide in most other parts of the country has gotten much more severe as you mention my interest was is named after the chairman of the board of u s steel and it was the largest integrated steel mill at the time and an x sinks gone into decline but when i was there what i saw was enormous amounts of inequality extensive racial discrimination and episodic unemployment you know my class makes parents were out of jobs every three or four years as the economy went into a downturn what i didn't realize was this was the golden age of capitalism this was the best that it got that that's one of the th early stages the development inequality would grow as some parts of the economy took advantage of new technology new opportunities and we see that pattern we saw that pattern in united states and we're seeing that pattern today in china but then as the parks that were legging behind caught up in the quality would decline the united states went through exactly that kind of pattern and did he was writing in the middle of the fifty's and he thought of this as a basic law of economics today we know that's not true because it we know that beginning around nine hundred eighty inequality in the united states and in many other countries has increased and i come to in a moment to explain the alternative interpretation of what is going on but i want to tell a little bit about my own story having grown up in gary indiana i was motivated to try to understand what gave rise to this high what i thought was then high level  quality i didn't understand how bad it could get and so when i went to so i went to amherst college i thought i was going to major in physics maybe something could have i could have a mom to something  solo who himself had had written his thesis on the destruction of the income inequality i mention this because this was very counter to the main trend in economics you know economists have had a lot of influence in our society but most of the mainstream of economics has taken the view that even talking about inequality is a bad thing bob lucas who teaches that university chicago got a nobel prize said just a few years ago that the most vicious the worst thing that any economist could do would be to talk about inequality and sort of echoing the view that mitt romney did when he said once you only talk about inequality in closed rooms in quiet voices you could understand why he might have said that  fair asked me to write about the subject and i wrote an article called that really summarizes a lot of what is in this book the title of the article was of the one percent for the one percent and by the one percent york times to ask me to two curated series in the new york times on the we called the great divide and some of those articles that i wrote are included in here as essays updated and and put in context of what has happened in the suing time so what i want to want to do this evening very briefly is a talk a little bit about it and say unfortunately i only have a few minutes and if you want to find out more about it you'll have to buy the book or or borrow it from somebody because i don't want this to be a private property issue so let me discuss repeal of cook who's next a law and there been two interpretations of this one is that world war two was brought the country together we have fought the war together that resulted in a kind of national cohesion that you know it was a period where we have our fastest economic growth but it was a period of shared prosperity every group in the country grew but those in the bottom grew faster than those at the top so we could we converged now just assisted stakes many of you may not know this  the top tax rate the top marginal tax rate at the time was ninety one percent now if you listen to some people today you would say at ninety one percent the economy must have been falling apart no one was working it just wasn't true it was as i say the period of our greatest fastest economic growth well  came the seventies we went through a very difficult period in our country but there were there was the oil price shocks vietnam war and it seemed for a while that our economic model wasn't working people advocated trying another approach and that was called supply side economics those of us who studied economics thought this is a bonkers idea  but you could understand the sort of the vacek the logic was you lower tax rates and that would provide more incentives they lowered it down to thirty five percent lower than  below thirty five and almost down to thirty percent a lot lower than the ninety one percent and you combine that with deregulation taking away the constraints and the two together would was supposed to to lead to a burst of economic growth and yes they realised that there would be more inequality doing this would lead to the people in the middle and the bottom to get a smaller share of the economic pie but the argument was the pie would get so much bigger that everybody would benefit even those in the middle in the bottom well we've now had a third of a century of this experiment and we should be able to judge and when we look at what's happened part of the forecast was right we didn't get more inequality but that was the only part of the forecast that turned  correct we room more slowly so much more slowly that in fact in the middle there's been a centrally stagnation today incomes are lower adjusted for inflation than they were twenty five years ago a quarter century ago but this is an average of across different demographic groups one demographic group that i have some empathy with is males and the median income of a full time male worker is lower than it was forty years ago so this for you four decades of stagnation but at the bottom things are even worse as most of you know in the country as a whole the minimum wage is lower adjusted for inflation than it was forty five years ago and i can imagine a half century in which those at the bottom have seen no increase in their standard of living a half century during which you know actually over the just the last thirty five years china has moved five hundred million people out of poverty the biggest change in  a sense in a global era and in the middle incomes have increased eight fold in that era that same period we increased not only the numbers of people in poverty the percentage of people in poverty so if an economic system doesn't deliver for most of the citizens something is wrong with economic system if we have an experiment that has failed that badly we ought to think about maybe trying something else two began to erode after several decades the other one is we try to flawed experiment welcome back to these themes of it a bit later the second big idea that  new understandings of inequality it was expressed this quite forcefully it used to be thought then yes inequality might be a bad thing but if we were to do anything about it we have to pay a high price we have to give up on economic growth economic performing sing some important dimension we now understand that the two are complements not substitutes that we can have more economic growth and less inequality this used to be a you know people like me argue this have argued this for a long time but now this is actually become a mainstream view the international monetary fund inequality especially when to choose the level of that in the form that it does in the united states is actually bad for economic growth i wish you know more government people our political leaders economic advisors under president johnson wrote a very famous book called the big trade off where he talked about this trade off and today we realize that's no longer true a third big idea relates to concepts one of the equality of income outcomes on the one hand and the other one of the equality of opportunity when the debate about inequality first began to heat up in the united states and there were some people like  ryan represented ryan who said we don't care about inequality of outcomes the america way american americans care about equality of opportunity that's what's really important well the fact is that not only does the united states have the highest level of inequality of income of any of the advanced countries but it has among the lowest level of equality of opportunity and that is so different from the way we see ourselves in the way others see us but that means is that the life chances of a young american are more dependent on the income and education of his parents than another that is countries so i tell my student the most important decision that you have in your life is to choose the right parent and if you make that decision wrong the game is all over and you see this thing so many different ways for instance if you look at a child born in the top half who just poorly in school he'll wind up  america and what's so striking is x much better in the other advanced countries including the old europe that we used to think of this being so class ridden and so rigid they've actually recognized that problems and they've tried to change the way the way to organize their society and they've succeeded to a large extent not perfectly but they've succeeded to a large extent the fourth id i want to emphasise in that turns out to be really important is that there is a huge variation in the levels of inequality across different countries in the world and even in the direction of changing some countries inequality has actually been coming down now why is that important that's important because the economic forces at play are the same all over the world they're global technology globalization affect essentially all countries around the world in particular all advanced countries around the world but the way these forces play out seem to be very different and what that means it's about our policies about how we've shaped our economy and our society and that in turn means it's about politics and come to that in in in a second but let me try to illustrate some ways in which we shape our economy we shape our society if you have more monopoly power then the monopolist can raise their prices and if you have weaker protection of workers weaker unions then that bargaining power can drive down wages people here in seattle recognize that back in one thousand nine hundred ninety nine ninety eight when you have what is sometimes called the seattle riots the protest about o and why would they protest that were the many issues there was an environment there were a concern about developing countries they're concerned about workers but all of this was a boat how do we set the rules and regulations legal frameworks which govern our our economy and that if you if globalization is an abstract force but the way you shape  can lead to more inequality right now the country is in volved in a very big debate or ought to be involved in a debate the president tried to slide through with nobody noticing and that's about the trade promotion authority and p p p the tracks of trans pacific partnership partnership is a euphemism there is one partner that's bigger than the others and  a trans atlantic agreement you know those of us who believe in democracy think you ought to have an open debate about the issues for some reason the administration in particular the u s t r doesn't believe that so the negotiating positions of the us are not only kept secret there stamped secret they've been made in national security secret not about national security it's about bargaining positions it's about the fact the corporate interests have a seat at the table they get to see the u s parkening position because they want to make sure that it is consistent with ways that will increase their profits but n g o s civil society even congressman have been having trouble getting a hold of it now how do you how can i be so adamant about that except bad agreement with the great news about america is that everything leaks anything about those leaks that that this trade agreement would for instance increase the power of big pharma the drug companies over generics and the  has made health care obamacare the signature achievement of his administration but these provisions in the trade agreement will drive drug prices up because it will weaken competition from generics and americans and people the way our economy functions has a lot to do as i say with the rules and regulations here in the in the northwest people value the environment and  the agreement as provisions that would make it very difficult to regulate to protect the environment there's a particular provision called the investment agreement which is particularly pernicious because what excess is that if any country including the united states changes a law in ways that reduce the the government has to compensate and the trial that doesn't occur in a public court one of the basic aspects of our society is that you di my concerns about this are not just hypothetical we've seen these suits and let me just share with you one example of something important but in effects one aspect of inequality health and equality but there are many many other aspects of  quality including regulations about about our financial system that we found out weren't so good and you change those regulation again you are inviting a suit and let me tell you countries half are really those who already signed these kind of agreements are now worried about what will happen if they change their financial regulation so this particular provision is a to me a very interesting one back in the nineteenth century there was a big trade imbalance between the west and china china had a lot of goods that the west wanted in particular they have porcelain china but there are a lot of other things whereas the west did not have very many goods that china wanted and there developed a big trade imbalance until your figured out a way of solving the problem and that was a good that had a property that we in the business school would columbia and all other business schools say is a great property repeat purchases and that of course was opium  one of things about opium is once you buy it you come tend to buy it again and again and again china figured out this wasn't so good and they said no thank you we don't want any more of your opium and the west said you're interfering with a basic right of free trade and not only did they say it they went to war they went to war twice are called the opium wars and they won they opened up the market the first open market initiative to to opium and they also took away a lot of the concessions on the east coast of  china well you may not know this but your government is waging the twenty first century opium war it's not opium this time of course it's a product that is addictive made in and australia passed a law regulating cigarettes not a very strong wall very similar to the united states where you said you had to label  cigarettes as being hazardous to your health they want to look at one step further they had pictures of lungs that were destroyed destroyed by the cigarettes the problem was that these labels actually worked and many people were discouraged from buying cigarettes philip morris was not very happy and they said well you're destroying our profits the profits that we would have expected because we expected more people to buy our cigarettes until they died and under a provision a century identical to the the president is existing and having the trade agreements philip morris is suing or gray and philip morris and if they win work way in australia will have to either stop the labeling or fortunately some well off americans like bloomberg and gates are paying for the cost of work way defending itself ok you imagine can you imagine a situation where americans have to pay to defend other countries against what our government has framed as as a basic right of country of companies to be able to sell poisonous products and this is just one example of many many regulations that will be undermined the trade agreement that the president obama is pushing and trying to get a blank check that can be used not only by the current president but the next president whoever that is in two thousand and sixteen and we don't know what the congress is we don't know what the next president is going to be we hope we know but but we don't know and he's asking for a blank check that will go on for years and years and years well the point i want to make is laws and regulations shape our economy and in shaping the economy they shape the do we have any quality and the u s has more inequality than other countries now it's not a question about what we can afford some people say you know we can't afford to do to take the actions that would lead us to have more equality and it's absolutely wrong just go back to the period that i mentioned before the period right after world war two we were down a much poorer country it was seventy years ago   in seventy years we've grown but at the end of world war two would we say we said that everybody would fund the war which was every able bodied man and a lot of women had the right free four year college education to the best education that they could get into they got into harvard or they got into a community college whatever they could get into our nation paid for  today when president obama proposed that we have two year community colleges for our poorest americans many conservatives said we can't afford it now is a question of can't afford  it's obviously not a question it's a matter of choice and this is one of the real themes that i try to bring up in the book the inequality that we have as a result of the choices that we've made when i say we've made it our political system and that brings me to the next point when you have the level of inequality economic inequality that we have almost inevitably translates into political inequality to the point where we numb with a system that is better described as one dollar one vote than one person one vote we have a kind of and it gets even worse because as they get as a as the money influences our political  it influences the rules of the economic game it influences the rules of the political game so what we are the country where money talks allowed us in the political sphere we  country where corporate citizens united corporations can give unlimited amounts of money for campaign contributions where the last election each candidate spent over a billion dollars and this expected to cost a lot more and when people when corporations make what are called campaign contributions these are not charity they view these as investments and when our banks made this investments these investments were better than any of their financial investments those were disaster but their political investments really paid off both in deregulation in the bailouts and then more recently in preventing increase in poverty but as the introduction to my talk pointed out the real problem eight a real problem united states is the visitor ration of the middle you describe how a hearing seattle which is one of the better performing places all of the growth has been at the top in the bottom but the middle class is shrinking you know that's reflected both in the fact that incomes in the middle just for the foot inflation are stagnant for a quarter century but it's also in that a smaller and smaller fraction of the population is plus or minus fifty percent of that middle income more more people are moving into the bottom and the top tails after world war two united states was successful in creating the first middle class society and the country which was being brought increasingly together but again since nine hundred eighty and especially since the year two thousand the basic attributes  what defines a middle class lifestyle are increasingly moved be moved out of reach for larger a larger number of americans kind of retirement security home ownership of the kind of home that they would like to have sending their kids to college all of these you might say almost basic necessities are becoming increasingly difficult to take the issue of education which is so important for getting ahead what's happened here in washington reflects what's happening so many other places around the country cup acts of support for universities and colleges have led to the wishing story the combination of the soaring to wish an and declining or stagnant incomes in the middle as meant the only way that you can get ahead is by borrowing student debt an is now over a trillion dollars larger than credit card debt it's affecting the way our economy functions in fundamental ways other countries have solved the problem in other ways australia has an income contingent loan program available for all the students so they can borrow but what they pay depends on their income so if they decide to go into teaching teaching high school then they know their income is going to be low but the amount that they pay back it's just commensurately whereas for so many i'm young americans they feel their choices are constrained they have to accept a job as a banker or a corporate lawyer when that's not really their passion for good reason and because it's the only way that they'll be able to pay back the crushing loans average student graduating from college now has twenty five thousand dollars debt but if you go on to graduate school the numbers are more like one hundred thousand and some cases two hundred thousand dollars well the final point i want to raise before i open to question is that these problems that i described won't be solved there's no magic bullet there's no the problems have been been growing for a quarter for a third of  things will get worse and worse we've seen the trajectory that our economy is on an economy where we have growing and increasing inequality where for instance eight people were inherited their wealth have more wealth than the bottom forty four percent of the country and exercis in the system won't solve the problem it is really important to increase the minimum wage it is really important to increase educational opportunities but unless we address some of the more fundamental structural problems that have led us to be the most the economy of the most inequality we just of dressing the symptomatic problems we aren't getting at the root causes so that's why i think you just have parroted that we begin to discuss what are the root causes and figure out what to do about it but i also think that we can't wait to solve the problem that is a safe going to take literally to correct the mistake of but that's been accumulating for a third of a century we'll take another twenty thirty years in the meanwhile i think we have to take actions to make sure that a middle class lifestyle is accessible to the majority of our of our citizens so i just want to end on on this note of urgency thirty five years ago we began this grand experiment which anybody with an inkling of a scientific background would say has been a dismal failure we are we have to change and we can't go on as business as usual i hope discussions like this town hall meetings all over the country will will be part of a process of bringing about that kind of change that we will take the course not of accepting business as usual continuing the course we've been on for a third of a century but really going into the different course that will be unable bust to restore the kind of society that we had the kind of social cohesion that we had  in the decades after world war two thank you how important do you believe that unions are and continue to be towards maintaining the middle class in this state we have a very worrisome problem there is a big movement to turn this state into i right to work state what suggestion is what help do you think i think that would be a big mistake and unions have played an important role  in as part of you might say our systems of checks and balances one of the things i didn't have time to talk about was the issues of corporate governance and the power of executives one of the really truly outstanding inequality in the united states is the growth of c e o pay relative to those of average citizens used to be twenty to one now is closer to three hundred one and that increase is not because they suddenly got more productive this the bank c e o s got huge bonuses not because even after two thousand and eight when they brought the banks and a country the brink of room they walked off with huge bonuses so what we have come to understand is that it's not just competitive forces in the way that you learned about in your own m textbooks that are driving the inequality in the united states but it's you might say a balance of power and right now we have an imbalance and really the voice of workers is not being adequately heard and it's not heard in locke's different form and brings things one of the issues i is the federal reserve monetary policy effects are supposed to affect output inflation unemployment that's supposed to be the mandate to look after all three of those but there's nobody representing workers a lot of people representing the banks and the financial sector and so you get an imbalance between a concern about inflation and a concern about unemployment some other countries that are much better performing i have always represented from workers on the federal reserve and their quibbling to the central bank of the federal reserve reserve board so unions are the way that workers get together in some sense and tried to reflect the interest and concerns of workers  you know there are imperfections in unions just like their imperfections a corporation is i mean no no humans to institution is perfect so you know when we know that there were a locks of problems in the past unfortunately the unions that bores strength has been diminished to the point where it's about ten percent of the labor force again some people said that this is a the natural evolution is not true other countries that have experienced just as much globalization just as much technology have a much greater voice of workers and one of the reasons why they have more equality so it's a game and it's the way we shape economic results were mostly an anomaly in that what we're doing is returning to what we were maybe we naturally are we were in the seventeenth and eighteenth centuries so i actually did talk about that in my book very explicitly a couple of the essays are respect written in response to picotee he said he tries to argue the title was book is capital in the twenty first century and the main thesis is precisely what you said that inequality is th capitalism of the fifty's sixty's and seventy's i argued that he's wrong that it's not about capital in the twenty first century it's about democracy in the twenty first century and the way we shape the economic system and that we can have a market economy let me say a market economy with where markets actually work like markets are supposed to where you have less market power on the part of monopoly where you don't have the c e o s having the kind of say over the division of the of the corporate pie that they have a whole set of of  deviations from textbook economics that have driven inequality to the extent that it is so so my view is he's right in documenting documenting the magnitude of but the interpretation of what of that i think is wrong that i'm much more hopeful that we can do something about it if we can get our politics  helped organize a community forum here in seattle for next month may thirtieth to talk about this issue inequality both locally here in king county and nationally and the goal of our form is not only a talkin about the here's what's happening you know the here's what and this so what how it really impacts us which you've talked a lot about tonight but then to get into a conversation about the now what what do we as local citizens community members do about it how do we get involved if you were to show up at our forum how would you counsel us to get more involved in what specific actions would you advise us to take so we can make a difference well first i mean i begin by saying you know the economic framework is the most determined most important determinant of inequality so enix it's every aspect of it's the laws and regulations except tax system that rewards for instance speculation more than were rewards hard work i mean and they talk about incentives but having lower taxes on  speculation on land has anybody ever shown that that leads to boring mand you know i still been waiting for the supply side response on this and you know a little bit of landfill but it's not a very big big deal so you know and education a lot of discussion finally going on about what happens before people children int those overall frameworks are really important but at the little local level there's still a lot that can be done because a lot of the inequality is in some sense google in nature now one of the reason wednesday announced an agenda i think motivated him to some extent by what what you've done announcing that a commitment to reduce poverty in new york city by eight hundred thousand and a key part of that was increasing the minimum wage so that local activity is important a second aspect of this housing is going to have communities that are diverse we have to have affordable housing if we want to live in economically segregated of course we don't the striking thing i didn't mention this but one of the reasons why united states is becoming a country with less and less inequality less and less equality of opportunity is that we've become a country with more and more economic segregation that rich people with rich people poor people with the poor people the next really destroying the sense of humanity that we have so housing zoning is a really responsibility at the local level public transit is a local issue and if you can't get to a job you can't get a job and and particularly you know poor people unfortunately one of the problems about being poor is that you don't have any money and that means that you if you try to buy a car you tend to buy a poor car and what is a problem of poor car those students all know about this they break down all the time and then you don't have the money to repair them and then you don't show up to work and your boss gets mad and he fires you an exhibitionist circle you need public good public transportation systems so there are a lot of things that you can do with the local level i think but the most important thing i think you know i think you have to do both of these try to change what goes on at the local level create more equality of the local level you have to actually take for the rules and regulations at the national level ok i'm convinced you can come to our meeting you offered two explanations for what happened in one nine hundred eighty one was the loss of the social cohesion the second this failed economic theory you've partially answered my question which is isn't there a that a shift of power to capital took place and that power was able to implement the policies that have produced the inequality and we didn't have a successful soviet union to  scare the capitalist says f d r did in the thirty's so isn't it really a lack of a viable socialist alternative that is the problem here well i think i think  say of the one percent i use that as a metaphor because a lot of people in the one percent are are actually worried about what has been happening to our our our society  e and what i've been trying to describe is how changes in the rules and regulations have have have affected this change in you know in new york we divided between east side west side between east and for central park and west and central park and and it's a little bit of a caricature but it's still true that there are different cultures and the side for those who don't know party and decided to invite a few academics and a number of billionaires multi billionaires it was interesting it was an interesting evening marked by you know  kinds of conversation that were really memorable this as one of the people who'd inherited a few billion dollars was saying you know how lazy people and then and then he went and you know people who are sure and then he went on and talked about with the guy sitting next to him about where is the best place to hide your money was a cayman islands better than  except for themselves i think it was in a sense of what is it just society it was we have to remember not to be too greedy because we are very many and  much of the pie that we can take for ourselves and so in a sense that is part of one of the things that i saw that in in the context of development of the way we treated countries in africa no swear when there was competition we treated them a lot better when the air of competition ended and  i think there's an important lesson from that we have time for one or two more questions well thanks this is the term fascism defined by mussolini as the marriage of corporation and state resonate with you you know especially regarding policies and supremes court decisions and data driven police states fortunately we're not down that far are you sure