No rich person is going to say, ‘Okay I am rich. Too bad for the poor, but this is not my
problem.’ You know, nobody would say that. You know, even the richest people will always say,
‘Well, okay I am rich. There is a lot of inequality but this is good for the poor.’
And sometimes they are right and sometimes they are wrong and you know we need to know more about
when they are right and when they are wrong. When I started as graduate student working
on inequality I started writing theoretical models of inequality and then I realized that
there was actually very little data collection and historical data collection. I think theory
can be useful but I think sometimes economists spend too much time doing very sophisticated
theory without knowing what are the facts that they are trying to explain and understand.
So what was new in the approach that I have been developing with a number of courses was actually
to go back to historical data and to collect in a much more systematic manner than what was done
before. All the long-run evidence on income and wealth distribution that we could find,
these were tax records because this is the oldest data source on an income and also on
wealth. So it’s important to realize that taxation is always more than taxation, it’s also a way to
produce information about society which can then be used by economists and also social scientists.
Probably one of the most striking findings for me was if you look at the evolution of wealth
concentration in a country like France, you know, you see a very high, an extremely high,
level of wealth concentration up until 1910, 1914. You know, with 60% of total wealth belonging to
the top one per cent of the population in France. And if you take the top ten persons, and that’s
basically all of wealth over 90%, so this means that at that time you know the middle class,
which I define in my book as the middle 40%, were in between the bottom 50% and the top 10%. Well,
basically, there was no middle class in the sense that their share in total wealth was
very close to zero just like the bottom 50%. This is very striking because at that time much
of the elite, particularly in Republican France, was trying to deny this and a big statement at the
time was to say well look we we have made the French Revolution so that’s enough basically.
Now we are an egalitarian country. Britain, of course, is a very inegalitarian country because
they have aristocracies, they have landed estates, so they should introduce a progressive income tax
but in France we don’t need it because we have made the French Revolution and so that’s not
necessary. Except that in the data that we have collected what we find is that the concentration
of wealth was just as extreme in France as in Britain, or actually in Germany, or in Sweden,
or in every European country for which we have data up until World War One.
Starting in 1914 you have a long sequence of violent political shocks that basically transforms
the dynamics of distribution. So, a lot of the private wealth is brought down to very low levels
because of destruction, inflation, bankruptcy during the Great Depression, nationalization after
World War Two. The big decline in equality between 1910 and 1950, 1960 was due to political change.
And, going in the other direction starting in 1970, 1980, you have political change
going in the other direction following the Thatcher and Reagan revolution in in Britain
and the US. This whole set of reforms tend to advantage the highest income and wealth group
in a disproportionate manner. So the view that it’s only, you know, natural forces and pure,
deterministic economic forces which induce certain dynamics of inequality is just wrong.
That doesn’t mean that you know we’ll get back to this extreme level of inequality of a century ago,
which we are still quite far from there, in particular in Europe, but this means that we
have to be careful about sometimes, you know, the strong denial. We have to measure these
things to make proper comparisons to see, you know, when these claims are justified
and when when they are not justified. Better data is not going to make the
world a peaceful place. You know, it’s not gonna make everybody agree about the right level of
taxation or inequality but at least it can allow us to have a more informed discussion and I think
this is where social scientists and economists can be useful. You know, we have to be modest,
you know. It’s not that we are more clever than the normal people, it’s just that we have more
time to do research and we are paid for that which is really a big privilege. So let’s try to be
useful and instead of just proving sophisticated mathematical theorems in order to impress others
we should just, you know, try to collect data, establish facts, and try to learn something.