have known james kenneth galbraith for almost all my life and for most of that time he's been one of my greatest heroes in one thousand nine hundred three when i walked from seattle to the united nations in new york for galbraith was working in congress in washington d c and realized that he could come up and walk with me from george washington bridge down to the united nations and he did sell were very loyal friend james chairs the board of economists for peace and security and as marchers say no justice no peace jamie stands for both in  he advised brazil to stop paying their debts and to reallocate their resources towards the poor they did so and today brazil is on track to being the fifth largest economy in the world in two thousand and nine and since he advised greece to dump austerity measures that were strangling their economy and especially the poor today the election of the leftist government brings hope that this course of action will come to fruition james k galbraith struck stand strong against legions of neo liberal economists who shill for the ninety for the point zero one percent and against the ninety nine point nine nine percent his book the predator state documents how the u s government facilitates the transfer of wealth from the majority to the minority his new book inequality and instability demonstrates how in inequality destabilizes the economy and the society this afternoon jamie came to seattle to keynote a conference on the crisis of the black community the economic crisis in the black community and this crisis has all the earmarks of an inequality driven phenomenon i believe it's the strength and integrity coupled with a powerful and revolutionary intellect that call that cause the land sea and academy of which the brilliant rebel astronomer galileo was an early member to seek out and  james into its ranks it's my great honor and privilege to present to you author economist lloyd benson chair of government business relations and professor and if you suspect that you didn't get the full story of my relationship with that young lady you would not be very far off the mark we met at a dance in ninth grade and i should also say and confess that while it is true that i met her on the new jersey side of the george washington bridge in one thousand nine hundred three after she had walked there from seattle  when we got to the other side of the bridge the new york saw and it developed that she was running late for her arrival at the united nations where she was being met by a deputy secretary general and so she took off to run across manhattan and i'm afraid to say that was the last i saw of her on that particular day the event i want to do something to begin the talk that we're giving you a little flavor of some of the academic work that i've been doing for many years on the subject of economic inequality and the this work has been entirely focused really on an arriving and reasonable and accurate measures of the change of inequality on a global scale over extended periods of time the something which is largely carried out as all we have over the course of some years put together what we believe to be about the largest consistent set of inequality measures available anywhere in the world and it's possible to this is estimated household income inequality as you can see and it's possible to represent them decade by decade in a very simple way on a map with a color scheme that runs from the blues  relatively low inequality to the yellows and oranges and reds for the highest levels of inequality this is the one nine hundred sixty s and you can say nothing terribly surprising about the pattern countries of the developing world such as we have measures for have high inequality those of the developed world much lower but as you go through time in one nine hundred seventy s and into the nineteen eighties and into the nineteen ninety's and on to the two thousands you can see that the world has indeed changed and i think this is a simple and i hope relatively persuasive  that particular trend i'm going to come back to this a little later on well at the end of my top but i just wanted to give you that by way of illustration and that's at the global scale but i should like to bring it very quickly back to the level that one can see and feel directly and it's i think especially interesting to talk about this topic here in seattle because this is a city where so many of the common drums and issues to economic and equality are in plain view this is after all though the home town or in any event the home county of a man who has widely advertised to be the wealthiest in the world esther's in my college contemporary o although i don't think that's entirely accurate i think it would be more fair to say that he's is or was the wealthiest men in the world who was subject to reasonably accurate accounting and reasonably transparent disclosure it's obviously not coincidental that this city is also a fortress on the technological front tears a focal point of one of the great both creation and destruction in our time and therefore as a result of a a place which is mar by the particular type of extreme wealth accumulation that technological revolution is capable of producing one of the common dreams associated with that is that is this is a city with a reputation of being from a political point of view reasonably progressive in a state with a similar reputation although i deeply suspect from having spoken to friends here that it appears this way more to people on the outside than to people who observe it very closely and yet it's also a city of vast gaps between the wealthy and the poor of on affordable rents displaced people and there's everywhere of enormous racial divide so the kinds of things that i study in it from a very draw i and almost abstract point of view are part and parcel of the lives of you who live here as they are of the lives of so many of our contemporaries in this country let's take up this question from a more theoretical perspective and i want to begin to do that by offering a contrarian thought which is that at the least economic inequality is not an unmixed evil it is after all and equality is after all a universal condition  there is and never has been any society that has successfully eradicated it entirely over any lengthy period of time and efforts to do so in our nor are even the vast rewards that flow to successful technological innovation and entrepreneurship that these rewards have an effect on the larger society in that they draw a great many people of talent into endeavors and competitions that only a few ever hope to win but in doing so they concentrate and focus the activities the brains the energies of the society in particular ways that advance technological progress more rapidly than would otherwise be the case even though most of the people who join in this challenge in this struggle this race are going to fall by the white wayside and end up with few if any of the rewards progress in other words requires its victims and there is perhaps the somewhat consoling thought that at least technical monopolies rarely last all that long since the forces of technological progress continually open up opportunities to destroy that which has just been created and there are intrinsic advantages to enterprises  attack old problems from a new perspective and without the baggage of the pension commitments of the previously existing firms that's perhaps the most extravagant defense of vast economic inequality that i think exists in the economic literature if you look at the other great economists of the past they tended to hold at least somewhat more tempered even if they were basically oriented to the free market adam smith the scots economist who is given credit for founding political has a section in the wealth of nations published in seven hundred seventy six on the inequalities ok jand by the policies of europe it's an interesting section and what he meant by that was the  qualities that stem from government granted charter patents and monopolies from the privileges given to the east india  company to the restrictive rights of guilds or of masters to require long apprenticeships excessively long apprenticeships restraining the competition to which they would otherwise  and we have that complaint occasionally in our own time firms with excessively powerful patent control over their products and i'm sure that complaint has never been made by anyone in  the english economist david ricardo when the american at the end of the nineteenth century henry george drew an important distinction which much of economics in the twentieth century has been at great pains to try to forget between profit which is the necessary return to capital investment entrepreneurship the organizational capacity of the business person on the one side and rent on the other rent being the utterly functionless reward that accrues to offered by ricardo and george was to tax the rent tax the land leaving wages and profits substantially untaxed so that they could be so that labor and capital could be rewarded according to the contributions that they made the land need to be rewarded because after all it didn't contribute anything at least the owner of the land did not contribute anything that required ward this was a philosophy a theory which as you may imagine was not terribly popular with an sense in the american republic who should be entrusted with the writing of constitutions if not men of property that is to say landlords we have at least in my state of texas a constitutional prohibition against property taxes at the state level it's not accidental that such things got written in to constitutional codes and as a result inequality is exacerbated by taxes imposed heavily on working people payroll taxes and on poor people sales taxes and in europe on everybody's consumption value added tax is all of that instead of being imposed on the wealthiest people who in fact contribute the least to economic activity karl marx feared or would be more accurate  hoped that the concentration of capital ownership and the conflict between capital and labor and the tendency of the system to drive wages down to a minimum creating the vast inequality between the property and the propertyless between the bourgeois and the proletarian would throw the system periodically into crisis and ultimately into revolution and while there were communist revolutions it actually never happened anywhere quite along that model particularly did not happen in the industrial systems that were the focus of marx's own study and analysis in  nineteen young british economist named john maynard keynes writing his extraordinary attack on the versailles treaty noted that this outcome of the dispossession of the capitalists as a result of their of this inequality had not happened and in fact argued that the there had been a ongoing by the capitalists of the victorian period as keynes wrote like bees they saved and accumulated and so the cake room in other words they avoided the mar by relatively disciplined behavior the problem being that that behavior could not always be relied on and the first world war had demonstrated to everybody that it could go badly wrong and that it seems to me is the problem in a nutshell it's not so much in every case the existence of the inequalities as it is the behavior of those who hold the upper hand adam smith wrote on this what is to me the the best sentence is also the shortest sentence in his entire book but it's the most wonderfully comment and that is indeed the nub of the matter what matters is the power that wealth brings and the use and abuse of that power this phenomenon is surely all round us and one can make a handful of points relating the sources of wealth that we observe to the abuses of power that we also observe a key instance of the state support of monopoly power in our world today is surely the too big to fail bank the bank so large and so essential that it controls the government from which it derives its power and it charter there was a time back way back in the twentieth century when it was thought that bankers were reasonably dangerous people and that no bank should be larger or more powerful than the government that regulates it this thought and practice gave us forty or fifty years of relatively stable economic expansion but we live clearly in a world in which no government is permitted to be larger or more powerful than the banks that control and you can see this from the person now that staff governments both parties in this country and you can see this from the attitudes of the creditor countries in europe toward the just elected government of gr the key or at least one perhaps of many instances of power derived from rint from the rental incomes and particularly in oil and coal in specific manifestation that we all are familiar with is the work of our modern day citizens cane the brothers  who have taken on the rather interesting challenge of coming to control the state legislatures of the preponderance of states in this country the applying their wealth to acquiring politicians on a retail level with the result that the house of representatives has become an organization institution whose political control cannot be changed by the effective action of the voters because of the redistricting process and that will be true for a generation or longer unless some thing dramatic happens in the politics of this country to rein in the affective option of politicians has occurred and then there are more generalized and frequent instances of bad behavior by the merely super rich these would and i have to say i haven't my notes and i was going to mention a second example today when that was the name of the honorable romney but i was on on the airplane ride on the way up i saw a headline saying he's not running for president so a moment of christian charity has prevailed and i will take him off the list for the day but of course waiting in the wings and in fact not in the wings as my high school classmate jeb bush so it's ok we're not one to run short of people like this the distinction between land rents mineral rents and land rents on the one side and the rents that accrue to the technology baron on the other i think is worth dwelling on for another minute or two because it has implications for the correct political strategy in the former case it's clearly to reduce the power of those who live on those rents by direct and immediate taxation in the latter it's not so clear that this is the correct strategy because we have an interest it's we've organized our pursuit of technical change and our presence in the world economy around the success of firms of this kind and if they were not we didn't organize it this way we would be back in the environment of the one nine hundred forty s fifty's and sixty's where technology was in the hands of large regulated corporations like t and t and bell labs or in the hands of the government itself through its national laboratories with a very strong military orientation as everybody i think in this community can remember and i'm not sure that that's a better way of doing things in any event it's not a way which we can recreate at the present time so the question is not so much whether accumulation should be allowed to occur clearly they should at some of the question is how long should they have allowed the allowed to persist and there i think the answer is reasonably clear one generation is fine second generation is too much and there's certainly no reason to believe that the second generation of that wealth will be put as big as deserving of having it as the generation that acquired it and that is the function of course of the estate tax associates to abolish that tax altogether but they really should now be strengthened because the function of the estate tax is not simply is not in fact not at all simply to recover accumulated wealth for the government real function of it is to put that wealth which is idle for a time back to work in the service of the larger community and that is to say to funnel it back into approved activities on a decentralized basis such as universities and hospitals and churches theatres and museums and parks and environmental works and foundation activities and this is not a bad thing to do it has enormous advantages in my mind over the socialist model which has prevailed in europe which is vulnerable in a much more serious way to budget cutting to the austerity these institutions tend to be fragile if they rely too much on a single source of and the effect of having a large and vibrant recycling through the nonprofit sector of these accumulations is to create a great deal of employment that would not otherwise exist and has a lot to do with the fact that the s characteristically has had a lower unemployment rate than modern european countries so i've spoken for quite a while now on what should be done about humiliations of great  wealth the kinds of distinctions that should be drawn from the kinds of policies that might be effective i'd like to spend a few minutes now talking about what should be done with respect to the other part of the population those who do not have the great wealth to fall back on and here i have to say i am an enduring fan of the twentieth century in some respects this was a period in which for the first time on society organized itself in the united states and europe  parts of the rest of the world in a coherent way to support and sustain a large and successful middle class on which a south governing democracy could be built so the elements of that it seems to me some of which are still present and are still very vital parts of our institutional infrastructure need to be reviewed and we need to remind ourselves what they are social insurance is perhaps the most comprehensive of these institutions social security medicare medicaid food unemployment insurance deposit insurance disability insurance an entire spectrum oh of ways to protect the working population from can tendencies that are unpredictable but that everybody will face eventually ill health old age and other such problems the value of these institutions needs to be cannot be stressed too much forty years ago about one third of the elderly population of the united states was in poverty often very dire poverty today the figure is on the order of ten percent a little less that's the work of the social security system nothing else that population lives on social security benefits they are in many cases not adequate that could be strengthened but their value needs to be recognized and affirmed because these institutions continue to have enemies wage regulations collective bargaining but especially in a world where labor is spread out over many decentralized service sector firms the minimum wage extraordinarily important foundation of a stable and successful society seattle congratulations you are the leader on this but don't rest on your laurels laurels seattle get out there and proselytize and i monitor your own experience spread it to the whole state of washington to the whole pacific northwest to everything west of the mississippi and then come down and persuade us to enact it in texas public goods it's an ordinary thought but there are many things which we consume in common environmental quality public education cultural facilities the basic infrastructure on which we are well i for transportation mitigation and prevention of climate change is the foundations of the common life in the commonwealth now and in the future they need to be a fundamental part of our political program and the fourth thing i have in mind is employment jobs and here it seems to me worth saying a word or two about the relationship between jobs and technology my fellow economists are tend to be techno optimists they regard technology is an unmitigated blessing which will raise living standards for everybody well and raises living standards for everybody who has an income with which they can afford to pay the cellphone fees that you are required to pay if you want to have a functioning cellphone the difficulty is that technology has another side which is that from the perfectly legitimate perspective of the business owner it can be used to replace labor and cut costs cut costs cut cost cut insurance cost cuts all kinds of costs and maybe the business does not do that normally in normal times but when they've already laid off a large part of their workforce in a recession and they're coming back they think again about how many people they need and how they can restructure operations and this means and we've seen this in the last six years that the private sector does not create new jobs as rapidly as our past experience indicates and the digital revolution is especially i think striking in this respect because it means and the vast body of office work communications and information processing and accounting and all of that that was built up in the twentieth century and if you want a parallel just think about how the automobile revolution in the early twentieth century displaced so we have to think in terms of jobs about not only what it is that needs to be done but how it is we can create institutions that will provide that employment in a sensible and organized well regulated way and of course there are many jobs that we are now free to do including the caring for for an elderly population which requires a lot of work that cannot be  automated and cannot be replaced by information but will only be done if there is some institution providing an income to the people doing it and that's an enormous structural task we cannot rely on private sector enterprise to create those jobs unless you first created the sources of income that will pay for coming to sort of a conclusion at this point i want to make three points about the larger economics of a more  society where as i say the abuses at the top are brought under control and the instruments are in place to stabilize economic life for the broader population first point relates this kind of inequality to the level of employing economists will by and large tell you that if you let the labor market run freely and have as much inequality as it will produce that everybody will have a job empirical evidence based on our the work that i and my associates have been doing says exactly the reverse in fact societies which are more egalitarian in their structures of wages tend to have less unemployment and there are good reasons why this is so basic one being that if you have only a few good jobs and lots of bad ones a few factories and many people out there on as presents are sharecroppers on the farms people leave the farms to go find jobs in the factories and there are many more people looking for jobs than there are drops of the result as you see this everywhere you see this in china where the peasantry comes into the cities looking for construction jobs you saw it in the united states in the forty's and fifty's when the black population of the south came up to the cities of the midwest it is a function of inequality and unemployment results second point has to do with the overall productivity level of the country one of the things that the countries of northern europe discovered and experienced and in fact it was built into their thinking and planning in the one nine hundred fifty s was that if they maintained egal arian pay structures reasonably egalitarian they would put pressure on their backward businesses and benefit their more advanced but this is who can afford to pay the high wages and the result would be an improving composition of employment and higher productivity and a higher living standard for everybody that's fundamental to the way a country like sweden rose from being about average in european terms in  one of the richest countries of the world the end of the millennium as part of a regulatory process that works to improve the quality of work and therefore the quality of life in the final point actually the second to final point i wanted to get your hopes up a little and relates question inequality to the issue of economic instability and up with the point this way a nice analogy for economic inequality is human there's a range which is acceptable within that range having a lower value is generally considered to be better it's health economic body zero that's for the morgue as for the graveyard nobody should want to go there and the final bit of the analogy is why i think it works as well as it does is that when the number starts going up the inequality number the blood pressure number you don't necessarily feel bad in the economic body that's a credit boom but it's a sign that you're heading for trouble and that crisis when it comes can be very severe and very difficult to recover from and that's something that we have already experienced in the wake of the great financial crisis of two thousand and seven to two thousand and nine and that we will experience again if we don't think seriously about how to deal with this problem effectively and in the sustainable way ok now i'm at the final point and the final point has to do with  work of a certain now by now extremely well known french economist who has made the argument that rising inequality is  intrinsic and unavoidable feature of capitalist society the there is a little difficulty with the argument that which is that it requires you to explain away most of the twentieth century  but leaving that aside i want to show you just a few more measures and these are not measures of the level of inequality but of the change over certain period of time six year olds actually and the color scheme is that a blue is a decline of inequality and the yellows and reds are now increases so if you just watch how this happens over the course of this period around the world this is the late nineteenth sixty's this is the one nine hundred seventy s where inequality starts rising in the countries that consume oil it's still going down in the countries that produce it in the one nine hundred eighty s you see the effects of the debt crisis in latin america in africa in the nineteen nineties we are that's the collapse of the soviet union and the eastern european  communist regimes enormous rises of inequality all the way through this period rising inequality in basically around the world but then when you get up into the two thousands actually you see something a little different you see that in a lot of countries this is not incomes this is industrial wage structures so it's a little narrower than incomes but it's it's a kind of precursor for the income data you can see that at least in this period two thousand and three to two thousand and eight there were substantial parts of the world were inequality was actually declining according to our measures it's true over much of latin america doesn't show up so well in this data  because of the phenomenon that esther spoke of brazil working on its poverty problems in argentina repudiating neoliberal idiology and coming coming back to a more sensible strategy in russia whether you like the russian government or not the fact that it had the fiscal space for high oil prices to develop its economy produced a lower inequality and even in china it seems to us that inequality which rose enormously up to about two thousand and two peaked and started come down in the second half of that decade so the point being is not that this problem is solved these are numbers that are declining from extremely high levels the point is that there is nothing inevitable about rising inequality in the world it depends a great deal upon the policies that you follow in the governments that you will act and appends a great deal upon thinking carefully and sensibly about what strategies will be most effective in dealing with this challenge  were anything you'd like to say yeah  i have to say the election in greece was a very exciting event but what happened in greece was the rise over a period of just a few years of a thoroughly alternative political force and one which offered all first to europe at least some slight chance of redemption and survival which is otherwise not very promising because the party which is now the government of greece framed a program which is pro european but which does require a rationalization of europe's approach it is not at all clear that will happen in the immediate task facing the government facing my friend be honest photo fokus who is now the finance minister of greece and until two weeks ago he was a visiting professor at the l b j school of public affairs university of texas at austin so it's not as though i was out of touch with the guy  is to arrive at a agreement with the european partners over what is a debt that is nominally about one hundred seventy percent of reeses p and oh it's not that the service is all that problematic but the periodic repayments are basically a matter of extend and pretend and resolving the dead is a way of achieving policy autonomy for the new government so it can do some things what can it do initially it can do two things it can extend help to the most vulnerable populations and these and this is basically nutrition assistance it is electricity for people who are cold the wind and other very fundamental supports to people who are in serious distress and there are a lot of them raise at the present time and the second thing it can do is since it has abandoned the agreement with the troika that requires greece to maintain a large surplus in it to have percent of g d p they can reduce the amount that it's made of of surplus that it is maintaining and that will give it space to produce some economic growth and broad some employment generally one hopes then you've got some profits and you've giving it to them i believe these issues you mention about dealing with the all the guards ok it's going to be a problem it's going to be hard this is a tough political environment but they do have the capacity and they understand the mechanics of how to achieve a better result the problem will be that if europe doesn't want that lesson to be learned it has all of the heavy weapons available to prevent it and we shall see what the governments of germany in particular france and the other major creditor countries decide t and ability to grow out of recession is and to grow in general that we've seen essentially since world war two has depended on a middle class that both has money and has the economic security in their jobs or whatever source of that we're really losing that middle class and and the money instead of going into those people's pockets is going into the top one percent who who doesn't need shoes or televisions or cars and where they put the money and some kind of investment vehicle doesn't is not nearly as effective in generating economic growth as is the expenditure on consumer goods by the middle class and it seems to me that whatever you might think about the philosophical arguments that that this human about the importance of equality to sustain economic growth is really compelling and i'm like your thoughts on that you know it's an argument which has a lot of force but i think less now than in part because so many of the consumer goods in question are brought in from overseas and are available quite cheap in the  domestic market so my own gloss on this argument is that what i think happened to the middle class in the great crisis and its aftermath was there was certainly some loss of income there was a major loss of jobs but the more fundamental things were the loss of security loss of value in your house the loss of retirement savings and the deterioration of the services on which we all rely on clothing the public schools and other basic in a simple services that are provided by by entities in deep financial stress and all of those things combined to undermine the sense of middle class i had another thought here and it's now fleeting so i'll go to the next question will come back to i have a two part question very brief part of it relates to the greek elections but the other part relates to some of the nations that you show are actually successfully dealing with this issue of inequality with china owns russia almost brazil these are brics nations and what i think is relevant is the fact that the incoming government in for example commandos is part of the independent greeks he's got ties to russia he's actually calling for working with the brics suppress made a phone call to some of the european union leaders voicing opposition to the  sanctions i think there's a certain level of chauvinism that exists in the united states and in factions of the west where they dismiss the role of the brics nations particularly what we're seeing with greece the fact that they're opposing the status quo policies my for the first part of my question is more for your comment on what role these brics nations can play in dealing with the issue of the second part which is again very brief i do work with linen you know very well we're on the question of what happened with respect to russia to be clear the european union put out a statement which about which the greek government was not consulted and that was their objection i don't believe the at the moment picking a fight perhaps one could argue were they should or not on the questions of the e u position on russia itself that was it was fundamentally a question of and possibly there may have been behind it  provocation of putting out a statement without having informed the government of greece and putting them in the position of either swallowing going along with it or voicing an objection which they did not properly so y didn't to return to my thought on the previous question which came back to me the effect of all of these things was in part to cause households to be very aggressive about reducing their debts about paying them down  lower middle class spending so i think that's the mechanism one has to be aware of and that raises the question is it really a good idea to have a middle class whose admin flow is spending depending on whether they go into or coming out of debt if you run your economy that way you're going to be running a very large it's going to be a very large cyclical element to it