For the New Superrich, Life Is Much More Than a Beach

By ROBERT FRANK
Source: The New York Times

 Peter and Maria Hoey

Jean Pigozzi, the venture capitalist and art collector, was lounging by the pool at his villa in Cap d’Antibes early this month, enjoying a rare break from what he calls “the circuit.”

He attended the TED ideas conference in March in Vancouver, mingling with the likes of the tech investor Yuri Milner and Larry Page of Google at the “billionaires’ dinner.” Then he was off to the art auctions in New York and the Cannes Film Festival, where he threw a pool party attended by Woody Allen, Uma Thurman and the billionaire Paul Allen.

In the next few weeks, after the Art Basel fair, he will be off to the Wimbledon tennis tournament and “the Mediterranean milk run” — the summer megayacht procession leading from St.-Tropez to Portofino and Capri.

“We go all around the world to see some of the same people,” Mr. Pigozzi said. “It’s a circuit. There are a lot of parties, sure. But you’d be surprised at how much business gets done.”

The new rich have developed their own annual migration pattern. While the wealthy of the past traveled mainly for leisure and climate — the ocean breezes of New England in the summer and the sunny golf greens of Palm Beach in winter — today’s rich crisscross the globe almost monthly in search of access, entertainment and intellectual status. Traveling in flocks of private G5 and Citation jets, they have created a new social calendar of economic conferences, entertainment events, exclusive parties and art auctions. And in the separate nation of the rich, citizens no longer speak in terms of countries. They simply say, “We’ll see you at Art Basel.”

An analysis using data from NetJets, the private-jet company, and studies from Wealth-X, the wealth research firm, offers a look at the annual flight path of this elite traveling circus. It starts in January in St. Bart’s, with the New Year’s Eve party thrown by the oil billionaire Roman Abramovich on his 70-acre estate, with top celebrities and business and media titans in attendance, and performances by bands like the Red Hot Chili Peppers. After that, it’s on to the World Economic Forum in Davos, then the Milken Institute Global Conference in Beverly Hills, where this year politicians like Tony Blair and Wesley Clark, along with billionaire hedge fund and private equity chiefs like Ken Griffin and Leon Black, chatted about the global economy.

The art auctions in New York in May kick off the spring. Then it’s back to Europe for the Cannes International Film Festival, the Monaco Grand Prix, Art Basel and the Royal Ascot horse race in Britain. In the summer, the wealthy disperse to the Hamptons, Nantucket, the South of France and other resorts. A conga line of megayachts rolls through the Mediterranean from France to Italy, including David Geffen’s 453-foot Rising Sun and the vodka magnate Yuri Shefler’s 436-foot Serene.

In late August, the car-loving rich head to Pebble Beach for the Concours d’Elegance auto show and auctions, where last year a vintage Ferrari sold for $38 million. Then it’s back to New York for the Clinton Global Initiative for philanthropy mixed with hobnobbing, with swings back and forth across the Atlantic for the Frieze London art fair, the fall auctions in New York and Art Basel Miami Beach.

David Friedman, the president of Wealth-X, said that many of today’s rich were self-made entrepreneurs who prize business connections and making deals over spending time on the beach. Being able to say you chatted about self-driving cars over drinks in Sun Valley with Sergey Brin of Google conveys far more status than a winter tan from skiing in Gstaad.

Just as they want a return on their investment and philanthropy, rich people now want a return on their leisure time. “When they travel or socialize, there has to be some redeeming business value,” Mr. Friedman said. “They want a transaction, even from their social calendar.”

The calendar is a closed loop of access because the rich want to be seen, he said, but only by one another. With outrage over inequality driving more wealth underground, flashy spending and public hedonism have become less fashionable in very wealthy circles. Yet the competition for status among newly minted billionaires has never been stronger.

“They can be a schizophrenic group,” Mr. Friedman said. “They want to be private and they don’t want to be public targets. But they want a community. These selective events over the course of the year give them that community of like-minded people, without having to deal with the public.”

Granted, some of the superrich attend only one or two events on the calendar. And the circuit has offshoots depending on interests. Art collectors will be heavy on the art fairs and auctions but may attend little else. The equestrian crowd flocks to the Kentucky Derby in the spring and the Keeneland yearling auction in September; media titans go to the Allen & Company conference in Sun Valley in July, while fashion devotees go to Fashion Week in New York and the couture shows in Paris. The foodies head to the Aspen Food & Wine Classic in June and to Italy in white-truffle season.

As Asia creates vast new wealth, events like the Hong Kong wine auctions and Art Stage Singapore will become bigger offshoots of the circuit. Yet for now, many of the superrich from China and other emerging markets are joining their fellow elites at events in Europe and the United States.

Major entertainment and sporting events are crucial dates for the rich. NetJets says the Super Bowl was one of its biggest flight events in the last year; 250 of its jets descended on Phoenix for the game, and weeks later, 250 to 300 of them departed for the Masters Golf Tournament in Augusta, Ga. So many private jets arrived in Las Vegas last month for the Floyd Mayweather-Manny Pacquiao fight that some were redirected to nearby airports.

NetJets’ other big events are the Cannes Film Festival, with over 200 flights, and Art Basel, with 200 to 250 flights. Each spring, more than 100 NetJets planes head to Warren Buffett’s annual Berkshire Hathaway shareholders’ meeting, known as the “Woodstock for Capitalists,” in Omaha. (NetJets is owned by Berkshire.)

“It’s the ‘birds of a feather’ phenomenon,” said Patrick Gallagher, head of sales for NetJets. “These events give them a sense of security and of belonging. It’s people of similar tastes and similar interests.”

 

In fact, so many rich people have been joining the circuit that Mr. Pigozzi said a new “supercircuit” is emerging, one that has V.I.P. events within the V.I.P. events. At the TED conference, the aptly named “billionaires’ dinner” held nearby has become the most sought-after ticket. And true media moguls now attend the Cannes Lions International Festival of Creativity, a few weeks after the Cannes Film Festival.

“Lions is now the important one,” he said. “Cannes has become too mainstream.”

Correction: July 5, 2015 

 
The Inside Wealth column on June 21, about the changing calendar of events attended by the very wealthy, referred incorrectly to the activities of the venture capitalist and art collector Jean Pigozzi. Although he was in Davos, Switzerland, in January, at the time the World Economic Forum was held, he did not attend it.

Corruption

The causes of corruption are rooted in a country's political and legal development, its social history, bureaucratic traditions, economic conditions and policies. Generally, the weaker the institutions of governance are, the more prevalent is corruption. In other words, a country that tolerates corruption is either weak or corrupt itself.

As long as governments are unwilling to enforce anti-corruption laws as well as harshly punish those who are involved in corruption, regardless of their public or private position, poverty and conflicts around the world will continue to rise!

President Barack Obama Weekly Address July 25, 2015 (Video/Transcript)

President Barack Obama
Weekly Address
The White House
July 25, 2015

Hi, everybody.  It’s been seven years since the worst financial crisis in generations spread from Wall Street to Main Street – a crisis that cost millions of Americans their jobs, their homes, their life savings.  It was a crisis that cost all of us.  It was a reminder that we’re in this together – all of us.

That’s how we’ve battled back these past six and a half years – together.  We still have work to do, but together, we prevented a second Great Depression.  Our businesses have created nearly 13 million jobs over the past 64 months.  The housing market is healthier.  The stock market has more than doubled, restoring the retirement savings of millions.  Americans of all stripes buckled down, rolled up their sleeves, and worked to bring this country back.  And to protect your efforts, we had to do something more – we had to make sure this kind of crisis never happens again.

That’s why five years ago this week, we enacted the toughest Wall Street reform in history – new rules of the road to protect businesses, consumers, and our entire economy from the kind of irresponsibility that threatened all of us.  Five years later, here’s what that reform has done.

Wall Street Reform turned the page on the era of “too big to fail.”  Now, in America, we welcome the pursuit of profit.  But if your business fails, we shouldn’t have to bail you out.  And under the new rules, we won’t – the days of taxpayer-funded bailouts are over.

Wall Street Reform now allows us to crack down on some of the worst types of recklessness that brought our economy to its knees, from big banks making huge, risky bets using borrowed money, to paying executives in a way that rewarded irresponsible behavior.

Thanks to Wall Street Reform, there’s finally an independent Consumer Financial Protection Bureau with one mission: to protect American consumers.  Already, they’ve gone after predatory or unscrupulous mortgage brokers, student lenders, credit card companies, and they’ve won –putting nearly $11 billion back in the pockets of more than 26 million consumers who’ve been cheated.

So this law is working.  And we’re working to protect even more families.  Just this week, we announced that we’re cracking down on the worst practices of payday lenders on military bases, so that our troops and their families don’t wind up trapped in a vicious cycle of debt.  As long as I’m President, I’m going to keep doing whatever I can to protect consumers, and our entire economy from the kind of irresponsibility that led to the Great Recession in the first place.

None of this has been easy.  We’ve had to overcome fierce lobbying campaigns from the special interests and their allies in Congress.  In fact, they're still trying everything to attack everything this reform accomplishes—from hiding rollbacks of key protections in unrelated bills, to blocking the financial cops on the beat from doing their job.  And they continue to claim this Wall Street reform is somehow bad for business.  But that doesn’t explain 13 million new jobs and a stock market near record highs.  This law is only bad for business if your business model depends on recklessness that threatens our economy or irresponsibility that threatens working families.  We can’t put the security of families at risk by returning to the days when big banks or bad actors were allowed to write their own rules.  And if any bill comes to my desk that tries to unravel the new rules on Wall Street, I will veto it.  We’ve worked too hard to recover from one crisis only to risk another.

In America, we should reward drive, innovation, and fair play.  That’s what Wall Street reform does.  It makes sure everybody plays by the same set of rules.  And if we keep moving forward, not backward – if we keep building an economy that rewards responsibility instead of recklessness, then we won’t just keep coming back – we’ll come back stronger than ever.

Thanks, and have a great weekend.

Exclusive BBC Interview with President Obama (Video/Transcript)

Barack Obama spoke with the BBC ahead of his trip to East Africa. Here is the full transcript of North America Editor Jon Sopel's conversation with the US president.

Going to Kenya

JON SOPEL: Mr President, you're about to fly to Kenya, to your ancestral home.

Given the al-Shabaab attacks on the West Gate mall and Garissa University, I'm sure your secret service could've suggested other countries for you to visit. But you wanted to go to Kenya.

PRESIDENT BARACK OBAMA: Well, I think it is important first of all that the president of the United States underscores our commitment to partnering with countries around the world, even though we're not intimidated by terrorist organizations. Second, the counter-terrorism co-operation between the United States and Kenya - and Uganda and other countries - in East Africa - is very strong.

And part of the subject of the visit is to continue to strengthen those ties to make them more effective. Third, as I wind down my presidency, I've already had a number of visits to Africa. But this gives me an opportunity to focus on a region that I have not been visiting as president, and I'm also going to have the opportunity to talk to the African Union.

So I'll be the first US president to not only visit Kenya and Ethiopia, but also to address the continent as a whole, building off the African summit that we did here which was historic and has, I think, deepened the kinds of already strong relationships that we have across the continent.

SOPEL: And you're going to talk about entrepreneurship at this summit in Nairobi.

OBAMA: Uh-huh.

SOPEL: Is there any link between security and entrepreneurship?

OBAMA: I think there is. I believe that when people see opportunity, when they have a sense of control of their own destiny, then they're less vulnerable to the propaganda and twisted ideologies that have been attracting young people - particularly now being turbocharged through social media.

And a while back, when we started looking at strategies to reach out to the Muslim world - to reach out to - developed countries, a common theme emerged, which was people are not interested in - just being patrons- or - or being patronised. And being given aid. They're interested in building capacity.

The more we can encourage entrepreneurship, particularly for young people, the more they have hope. Now that requires some reforms in these governments that we continue to emphasise. Rooting out corruption, increased transparency and how government operates, making sure that regulations are not designed just to advantage elites, but are allowing people who have a good idea to get out there and get things done.

SOPEL: And I suppose the - you know, you famously said when you went to Africa, I think when you first became president, you know, "What we need is strong institutions and- "

OBAMA: Yes.

SOPEL: " - not strong men". You're going to Ethiopia, where there is effectively no opposition in Parliament.

OBAMA: Right.

SOPEL: You're going to Kenya, where the International Criminal Court is still investigating certain members of the government, which seems kind of hardly ideal institutions.

OBAMA: Well, they're not ideal institutions. But what we found is, is that when we combined blunt talk with engagement, that gives us the best opportunity to influence and open up space for civil society. And the human rights agenda that we think is so important. And, you know, a good example of this is Burma. Where I was the first US president to visit there.

At a time when we saw some possibility of transition, by the time I landed in Burma - it is not a liberal democracy by any means. And there were still significant human rights violations taking place. But my visit then solidified and validated the work of dissenters and human rights activists.

And that has continued to allow them to move in the direction of a democracy. So, so our view is, in the same way that I visited Russia, and in the same way that I visited China, even when we know that there are significant human rights violations taking place, we want to make sure that we're there so that we can have this conversation and point them in a better direction.

SOPEL: Well, haven't the Chinese got there first in Africa? You're going to go to the African Union Building, which was built with Chinese money, you're going to travel along Chinese-built roads, you're going to go past endless Chinese traders on those roads.

OBAMA: Well, the - what is true is that China has - over the last several years, because of the surplus that they've accumulated in global trade and the fact that they're not accountable to their constituencies, have been able to funnel an awful lot of money into Africa, basically in exchange for raw materials that are being extracted from Africa.

And what is certainly true is that the United States has to have a presence to promote the values that we care about. We welcome Chinese aid into Africa. I think we think that's a good thing. We don't want to discourage it. As I've said before, what I also want to make sure though is that trade is benefiting the ordinary Kenyan and the ordinary Ethiopian and the ordinary Guinean and not just a few elites. And the Chinese, who then get the resources that they need.
And I think that we can help to shape an agenda where China, Europe, and the United States are all working together in order to address some of these issues.

SOPEL: I'm going to suggest there may be one other difficult issue when you're there. And that's the issue of homosexuality, gay marriage, after the Supreme Court ruling. I mean, the deputy president in Kenya, who you're going to meet, Mr Ruto, he said - "We have heard that in the US they have allowed gay relations and other dirty things."

OBAMA: Yeah. Well, I disagree with him on that, don't I? And I've had this experience before when we've visited Senegal in my last trip to Africa. I think that the president there President Sall, is doing a wonderful job in moving the country forward - a strong democrat. But in a press conference, I was very blunt about my belief that everybody deserves fair treatment, equal treatment in the eyes of the law and the state.

And that includes gays, lesbians, transgender persons. I am not a fan of discrimination and bullying of anybody on the basis of race, on the basis of religion, on the basis of sexual orientation or gender. And I think that this is actually part and parcel of the agenda that's also going to be front and center, and that is how are we treating women and girls.

And as somebody who has family in Kenya and knows the history of how the country so often is held back because women and girls are not treated fairly, I think those same values apply when it comes to different sexual orientations.

The next step of the Iran nuclear deal

SOPEL: Can we just move from difficult conversations that you're about to have in Kenya and the excruciatingly difficult conversations that you had in getting the Iran nuclear deal? I'm sure some people would say that yes, you've set out the case where there is no pathway to a nuclear bomb now for Iran -

OBAMA: Yes.


SOPEL: But, the net effect of lifting sanctions is that billions more will go to groups like Hezbollah, the Assad regime, and that is going to destabilize the region even more.

OBAMA: Well, keep in mind, first of all, we've shut off the pathways for Iran getting a nuclear weapon, which was priority number one. Because if Iran obtained a nuclear weapon, then they could cause all those same problems that you just listed with the protection of a nuclear bomb. And create much greater strategic challenges for the United States, for Israel, for our Gulf allies, for our European allies.

Second, it is true that by definition, in a negotiation and a deal like this, Iran gets something out of it. The sanctions regime that we put in place with the hope of the Brits, but also the Chinese and the Russians and others meant that they had funds that were frozen. They get those funds back. A large portion of those funds are going to have to be used for them to rebuild their economy.

That was the mandate that elected Rouhani. And the supreme leader is feeling pressure there. Does the IRGC [Revolutionary Guard] or the Quds Force have more resources? Probably, as the economy in Iran improves. But the challenge that we've had, when it comes to Hezbollah, for example, aiming rockets into Israel is not a shortage of resources.

Iran has shown itself to be willing, even in the midst of real hardship, to fund what they consider to be strategy priorities. The challenge is us making sure that we've got the interdiction capacity, the intelligence, that we are building a much stronger defence against some of these proxy wars and asymmetric efforts. And we've sent a clear message to the Iranians. We are settling the Iran deal, but we still have a big account that we're going to have to work. Hopefully some of it diplomatically, if necessary some of it militarily.

SOPEL: And you've had an intense campaign to settle the argument, which you've set out with great confidence.

OBAMA: Yes.

SOPEL: Have you managed to change anyone's mind yet of the Gulf states or in Congress?

OBAMA: Well, in Congress I'm confident that we're going to be able to make sure that the deal sticks. With respect to the Gulf states we had the leaders up to Camp David. And I described for them our interest in making sure that they built their capacity to defend themselves and their territory and to make sure that destabilising activities that Iran may be engaging in are checked. But keep in mind, our Gulf partners, for example, their combined defense budget is ten times Iran's defense budget.

SOPEL: But have they got the willingness to fight in the -

OBAMA: Well, and - and - and that's the issue. And that's the challenge as - so the point that I made to them consistently is, you have a strong, reliable partner in the United States. But ultimately, how issues get resolved in the Middle East is going to depend on both strengthening military capacity, but also addressing the underlying social and political issues that may lead not only to Iran being able to stir up problems among Shia populations, but also addressing some of the issues that are leading to the enormous and significant threat that they face from ISIL.

The UK and IS air strikes

SOPEL: Nowhere is facing greater instability, and you mention ISIL, than in Syria. It looks like the British may be about to start flying alongside America and launching airstrikes. Would you welcome that?

OBAMA: Let me first of all say that Prime Minister David Cameron's been an outstanding partner of ours on not just the anti-ISIL coalition, but on a whole host of security issues. And I want to congratulate his government for meeting the commitment of the 2% defence budget. Because we don't have a more important partner than Great Britain.

And for him to make that commitment, when he has a budget agenda that is, you know confined, a budget envelope that is confined, is really significant. And it is important for British leadership, but it's important for US stability. Now, with respect to Syria, we consult closely, Britain's one of the leading members of the 60-nation coalition that's addressing ISIL.

In combination with the Turks and the Jordanians and others, what we are trying to do is not only shrink the environment in which ISIL can operate, but also to create an environment in which we stop the border flows of foreign fighters into Syria, we've made progress there, we need to make more, and that's where Great Britain's participation can help.


But the second part of this is pushing Assad, the Russians, the Iranians, into recognising there's got to be a political transition before Syria pulls the entire region into what could be an even longer and more bloody conflict.

SOPEL: You talk about the 2% defence spending in Britain. I'm right in thinking that there was quite a bit of pressure put on from here, saying it would be very bad if you didn't.

OBAMA: I wouldn't say pressure. I think I had an honest conversation with David that Great Britain has always been our best partner. Well, you know, I guess you could go back to 1812 and that would (LAUGH) you know, that -
SOPEL: When we tried to burn this place down?

OBAMA: Yeah, right, right. But that's ancient history -

SOPEL: History.

OBAMA: In modern times there's no country where we have closer affinity in terms of values, and on the international stage a nation with greater capacity. And so I think David understands that part of the greatness of Great Britain, of the United Kingdom is that it is willing, as we are, to project power beyond our immediate self-interests to make this a more orderly, safer world.

SOPEL: And pe--

OBAMA: And we're glad we have that partner.

Leaving the EU

SOPEL: And people have talked about strategic shrinkage. That Britain is no longer playing its place on the world stage in the way that it used to. There's going to be a referendum on whether we stay in the European Union or not. And David Miliband, the former foreign secretary, he said, "It's almost like Britain would be resigning from the world and no US government would be impressed by that."

OBAMA: Well, I - you know, obviously the - the whole debate that's been taking place about the European Union, the eurozone, Greece that's a complicated piece of business. I will say this, that having the United Kingdom in the European Union gives us much greater confidence about the strength of the transatlantic union and is part of the cornerstone of institutions built after World War II that has made the world safer and more prosperous.

And we want to make sure that United Kingdom continues to have that influence. Because we believe that the values that we share are the right ones, not just for ourselves, but for Europe as a whole and the world as a whole.

Obama's legacy

SOPEL: Can we just talk about, because you mentioned a moment ago about that you're in the tail end of your presidency. After the midterm elections, I read every commentator say, "Well, this administration is effectively over now. The president is a dead man walking. And nothing is going to happen until 2016."

OBAMA: Right.

SOPEL: Except that you've kind of got this deal, you've got Cuba, diplomatic relations, healthcare reform embedded, major trade deal with Asia. It's not a question of journalist--

OBAMA: Climate change agenda with China.

SOPEL: Okay, so it's not -

OBAMA: I've got a pretty long list.

SOPEL: Okay, so it's not a question that a journalist often asks, what's gone right?

OBAMA: (LAUGH) You know the - it's interesting - that one of my - every president, every leader has strengths and weaknesses. One of my strengths is I have a pretty even temperament. I don't get too high when it's high and I don't get too low when it's low. And what I found during the course of the presidency, and I suppose this is true in life, is that investments and work that you make back here sometimes take a little longer than the 24-hour news cycle to bear fruit.

So some of this is just some serendipity and convergence of a lot of things that we had been working on for a very long time coming together. But some of it is I also believe a recognition that the kind of gridlock and obstruction that that Congress and the Republicans in Congress too often have engaged in is something that we just can't afford at a time when the world is moving so fast and there are so many challenges. And the robust exertion of executive authority within the the lawful constraints that we operate under is something that we've been spending a lot of time thinking about.

SOPEL: Let me just ask you this - finally, because- I'm sure you would like it to be written that President Obama turned "Yes we can" into -

OBAMA: "Yes we did."

SOPEL: "Yes we did."

OBAMA: Yeah.

Unfinished business

SOPEL: But is there an issue that there are be going to be unfinished business? Perhaps most notably on race and on guns by the time you leave the White House?

OBAMA: There will be. Look there was never a promise that race relations in America would be entirely resolved during my presidency or anybody's presidency. I mean, this has been a running thread - and - and fault line in American life and American politics since its founding.

And so some of the most recent concerns around policing and mass incarcerations are legitimate and deserve intense attention. And I feel that we are moving the ball forward on those issues. What I will say is that - eight years - well, after eight years of my presidency, that children growing up during these eight years will have a different view of race relations in this country and what's possible.

Black children, white children, Latino children. America is becoming more diverse, it's becoming more tolerant as a consequence there's more interactions between groups. There are going be tensions that arise. But if you look at my daughters' generation, they have an attitude about race that's entirely different than even my generation.

And that's all for the good. You mentioned the issue of guns, that is an area where if you ask me where has been the one area where I feel that I've been most frustrated and most stymied it is the fact that the United States of America is the one advanced nation on earth in which we do not have sufficient common-sense, gun-safety laws. Even in the face of repeated mass killings.

And you know, if you look at the number of Americans killed since 9/11 by terrorism, it's less than 100. If you look at the number that have been killed by gun violence, it's in the tens of thousands. And for us not to be able to resolve that issue has been something that is distressing. But it is not something that I intend to stop working on in the remaining 18 months.

SOPEL: Mr President, thank you very much.

OBAMA: Thank you so much. I enjoyed it.

Republican fear factor

This article originally appeared on AlterNet. 
Conservatives' paranoid alternate-reality can be explained by their brain chemistry -- and their media choices
Joshua Holland, Alternet

 Consider for a moment just how terrifying it must be to live life as a true believer on the right. Reality is scary enough, but the alternative reality inhabited by people who watch Glenn Beck, listen to Rush Limbaugh, or think Michele Bachmann isn’t a joke must be nothing less than horrifying.

 Research suggests that conservatives are, on average, more susceptible to fear than those who identify themselves as liberals. Looking at MRIs of a large sample of young adults last year, researchers at University College London discovered that “greater conservatism was associated with increased volume of the right amygdala” ($$). The amygdala is an ancient brain structure that’s activated during states of fear and anxiety. (The researchers also found that “greater liberalism was associated with increased gray matter volume in the anterior cingulate cortex” – a region in the brain that is believed to help people manage complexity.)

That has implications for our political world. In a recent interview, Chris Mooney, author of “The Republican Brain,”explained, “The amygdala plays the same role in every species that has an amygdala. It basically takes over to save your life. It does other things too, but in a situation of threat, you cease to process information rationally and you’re moving automatically to protect yourself.”

The finding also fits with other data. Mooney discusses studies conducted at the University of Nebraska-Lincoln in which self-identified liberals and conservatives were shown images – apolitical images – that were intended to elicit different emotions. Writing at Huffington Post, Mooney explains that “there were images that caused fear and disgust — a spider crawling on a person’s face, maggots in an open wound — but also images that made you feel happy: a smiling child, a bunny rabbit.” The researchers noted two differences between the groups. The researchers studied their subjects’ reactions by tracking their eye movements and monitoring their “skin conductivity” – a measure of one’s autonomic nervous system’s reaction to stimuli.

Conservatives showed much stronger skin responses to negative images, compared with the positive ones. Liberals showed the opposite. And when the scientists turned to studying eye gaze or “attentional” patterns, they found that conservatives looked much more quickly at negative or threatening images, and [then] spent more time fixating on them.

Mooney concludes that this “new research suggests [that] conservatism is largely a defensive ideology — and therefore, much more appealing to people who go through life sensitive and highly attuned to aversive or threatening aspects of their environments.”

But those cognitive biases are only part of the story of how a political movement in the wealthiest, most secure nation in the world have come to view their surroundings with such dread. The other half of the equation is a conservative media establishment that feeds members of the movement an almost endless stream of truly terrifying scenarios.

The phenomenon of media “siloing” is pretty well understood – in an era when dozens of media sources are a click away, people have a tendency to consume more of those that conform to their respective worldviews. But there is some evidence that this phenomenon is more pronounced on the right – conservative intellectuals have had a long-running debate about the significance of “epistemic closure” within their movement.

So conservatives appear to be more likely to be hard-wired to be highly sensitive to perceived threats, and their chosen media offers them plenty. But that’s not the whole story because of one additional factor. Since 9/11, and especially since the election of President Barack Obama, one of the most significant trends in America’s political discourse is the “mainstreaming” of what were previously considered to be fringe views on the right. Theories that were once relegated to the militia movement can now be heard on the lips of elected officials and television personalities like Glenn Beck.

Consider, then, what it must be like to be a true-blue Rush Limbaugh fan, or someone who thinks Michele Bachmann is a serious lawmaker with a grasp of the issues – put yourself into that person’s shoes for a moment, and consider what a nightmarish landscape the world around them must represent:

The White House has been usurped by a Kenyan socialist named Barry Soetero, who hatched an elaborate plot to pass himself off as a citizen of the United States – a plot the media refuse to even investigate. This president doesn’t just claim the right to assassinate suspected terrorists who are beyond the reach of law enforcement – he may be planning on rounding up his ideological opponents and putting them into concentration camps if he is reelected. He may have murdered a blogger who was critical of his administration, but authorities refuse to investigate. At the very least, he is plotting on disarming the American public after the election, in accordance with a secret deal cut with the UN and possibly with the assistance of foreign troops.

Again, these ideas are not relegated to the fringe of forwarded emails. Glenn Beck talked about FEMA camps on Fox News (he later debunked them, which only fueled charges of a media coverup); dozens of Republican elected officials have at least hinted that they are birthers, while an erstwhile front-runner for the GOP nomination has repeatedly claimed that Obama is not eligible to be president. The head of the NRA, and the GOP’s presidential nominee have both claimed Obama is plotting to take Americans’ guns.

In reality, Americans are safer and more secure today than at any point in human history. But inhabitants of the world of the hard-right are surrounded by danger – from mobs of thugs at home to a variety of powerful and deadly enemies abroad.

For the true believers, Latin American immigration isn’t a phenomenon to be managed, but a grave existential threat. A plot to “take back” large swaths of the Southwest is a theory that has aired not only on obscure right-wing blogs, but on Fox and CNN. On CNN, Lou Dobbs claimed immigrants were spreading leprosy; Rick Perry, Rep. Louie Gohmert and other “mainstream” voices on the right (that is, people with platforms) agree that Hezbollah and Hamas “are using Mexico as a way to penetrate into the southern part of the United States,” possibly with the aid of “terror babies” carried in pregnant women’s wombs.

In the real world, the rate of violent crime in the US is at the lowest point since 1968 – in fact, it is somewhat of a mystery that the violent crime rate has continued to decline even in the midst of the Great Recession. It’s also true that 84 percent of white murder victims are killed by other whites. But if you read the Drudge Report, or check in at Fox, on any given day you will see extensive coverage of any incident in which a black person harms a white person. These fit in with the narrative – advanced by people like Glenn Beck and long-touted by Ron Paul – that we stand on the brink of a race war, led by the New Black Panthers (just consider how frightening it would be if there were more than a dozen New Black Panthers, or if they did more than say stupid things).

Marauding “flash-mobs” of black teens – a near-obsession at many conservative outlets these days — are simply a harbinger of things to come.

Continue, for a moment, to stroll in the shoes of a true believer on the right. Imagine how frightening it would be to believe Frank Gaffney, a former Assistant Secretary of Defense in the Reagan administration and leading neoconservative voice, when he claims the Muslim Brotherhood has infiltrated the highest levels of the US government, or Newt Gingrich, when he says that “sharia law” (there isn’t such a thing in the way conservatives portray it – as a discrete canon of laws) poses a grave threat to our way of life.

Imagine believing that the Democrats’ business-friendly insurance reforms included panels of bureaucrats who would decide when to let you die, as Sarah Palin infamously suggested. Or that virtually the entire field of climatology is perpetrating a “hoax,” as senator James Inhofe claims, in order to undermine capitalism and impose a one-world government. Imagine seeing energy-efficient light bulbs as part of an international plot to, again, undermine capitalism, as Michele Bachmann believes. Imagine thinking that the public school system “indoctrinates” young children into the “gay lifestyle,” as influential members of the religious right – James Dobson, Bryan Fischer, Anita Bryant – have claimed for years. Imagine believing our electoral system is tarnished by massive voter fraud or that union thugs are running amok or that the Department of Homeland Security is making a list of people who advocate for “limited government.” Imagine if there really were a War on Christmas!

These dark narratives come in addition to more run-of-the-mill fear-mongering about the Iranian “threat,” or nonsense about how “entitlements” are leading our economy to look like Greece’s. Those of us in the “reality-based community” may look at these specters haunting the right with exasperation or amusement, but just consider for a moment how bleak the world looks to those who buy into these ideas.

Perhaps the most frightening part of all of this for the true believers is that even though these things aren’t just fringe ideas circulating in forwarded emails – they’re discussed by influential politicians and on leading cable news outlets – the bulk of the media and most elected officials refuse to investigate what’s happening to this country.

That one ideological camp is so consumed with fear also has a lot to do with why conservatives and liberals share so little common ground. Progressives tend to greet these narratives with facts and reason, but as Chris Mooney notes, when your amygdala is activated, it takes over and utterly dominates the brain structures dedicated to reason. Then the “fight-or-flight” response takes precedence over critical thinking.

President Barack Obama Weekly Address July 18, 2015 (Video/Transcript)

President Barack Obama
Weekly Address
The White House
July 18, 2015

This week, the United States and our international partners finally achieved something that decades of animosity has not – a deal that will prevent Iran from obtaining a nuclear weapon.

This deal will make America and the world safer and more secure.  Still, you’re going to hear a lot of overheated and often dishonest arguments about it in the weeks ahead.  So today, I want to take a moment to take those on one by one, and explain what this deal does and what it means.

First, you’ll hear some critics argue that this deal somehow makes it easier for Iran to obtain a nuclear weapon.  Now, if you think it sounds strange that the United States, Great Britain, France, Germany, Russia, China, and some of the world’s best nuclear scientists would agree to something like that, you’re right.

This deal actually closes off Iran’s pathway to a nuclear weapon.  Today, Iran has enough nuclear material to produce up to 10 nuclear weapons.  With this deal, they’ll have to ship 98% of that material out of the country – leaving them with a fraction of what it takes to make even one weapon.  With this deal, they’ll have to repurpose two key nuclear facilities so they can’t produce materials that could be used for a nuclear weapon.  So this deal actually pushes Iran further away from a bomb.  And there’s a permanent prohibition on Iran ever having a nuclear weapon.

Second, you might hear from critics that Iran could just ignore what’s required and do whatever they want. That they’re inevitably going to cheat. Well, that’s wrong, too.  With this deal, we will have unprecedented, 24/7 monitoring of Iran’s key nuclear facilities.  With this deal, international inspectors will have access to Iran’s entire nuclear supply chain.  The verification process set up by this deal is comprehensive and it is intrusive – precisely so we can make sure Iran keeps its commitments.

Third, you might hear from critics that Iran faces no consequences if it violates this deal.  That’s also patently false.  If Iran violates this deal, the sanctions we imposed that have helped cripple the Iranian economy – the sanctions that helped make this deal possible – would snap back into place promptly.

There’s a reason this deal took so long to negotiate.  Because we refused to accept a bad deal.  We held out for a deal that met every one of our bottom lines.  And we got it.

Does this deal resolve all of the threats Iran poses to its neighbors and the world?  No.  Does it do more than anyone has done before to make sure Iran does not obtain a nuclear weapon?  Yes.  And that was our top priority from the start.  That’s why it’s in everyone’s best interest to make sure this deal holds.  Because without this deal, there would be no limits on Iran’s nuclear program.  There would be no monitoring, no inspections.  The sanctions we rallied the world to impose would unravel.  Iran could move closer to a nuclear weapon.  Other countries in the region might race to do the same.  And we’d risk another war in the most volatile region in the world.  That’s what would happen without this deal.

On questions of war and peace, we should have tough, honest, serious debates.  We’ve seen what happens when we don’t.  That’s why this deal is online for the whole world to see.  I welcome all scrutiny.  I fear no questions.  As Commander-in-Chief, I make no apology for keeping this country safe and secure through the hard work of diplomacy over the easy rush to war.  And on Tuesday, I’ll continue to press this case when I address the national convention of the Veterans of Foreign Wars.  Because nobody understands the true cost of war better than those who’ve actually served in this country’s uniform.

We have before us an historic opportunity to pursue a safer, more secure world for our children.  It might not come around again in our lifetimes.  That’s why we’re going to seize it today – and keep America a beacon of hope, liberty, and leadership for generations to come.

Thank you, and have a great weekend.

The President Announces a Historic Nuclear Deal with Iran (Video/Transcript)

Today, after two years of negotiations, the United States, together with our international partners, has achieved something that decades of animosity has not — a comprehensive, long-term deal with Iran that will prevent it from obtaining a nuclear weapon.

This deal demonstrates that American diplomacy can bring about real and meaningful change — change that makes our country, and the world, safer and more secure. This deal is also in line with a tradition of American leadership. It’s now more than 50 years since President Kennedy stood before the American people and said, “Let us never negotiate out of fear, but let us never fear to negotiate.” He was speaking then about the need for discussions between the United States and the Soviet Union, which led to efforts to restrict the spread of nuclear weapons.

In those days, the risk was a catastrophic nuclear war between two super powers. In our time, the risk is that nuclear weapons will spread to more and more countries, particularly in the Middle East, the most volatile region in our world.

Today, because America negotiated from a position of strength and principle, we have stopped the spread of nuclear weapons in this region. Because of this deal, the international community will be able to verify that the Islamic Republic of Iran will not develop a nuclear weapon.

This deal meets every single one of the bottom lines that we established when we achieved a framework earlier this spring. Every pathway to a nuclear weapon is cut off. And the inspection and transparency regime necessary to verify that objective will be put in place. Because of this deal, Iran will not produce the highly enriched uranium and weapons-grade plutonium that form the raw materials necessary for a nuclear bomb.

Because of this deal, Iran will remove two-thirds of its installed centrifuges — the machines necessary to produce highly enriched uranium for a bomb — and store them under constant international supervision. Iran will not use its advanced centrifuges to produce enriched uranium for the next decade. Iran will also get rid of 98 percent of its stockpile of enriched uranium.

To put that in perspective, Iran currently has a stockpile that could produce up to 10 nuclear weapons. Because of this deal, that stockpile will be reduced to a fraction of what would be required for a single weapon. This stockpile limitation will last for 15 years.

Because of this deal, Iran will modify the core of its reactor in Arak so that it will not produce weapons-grade plutonium. And it has agreed to ship the spent fuel from the reactor out of the country for the lifetime of the reactor. For at least the next 15 years, Iran will not build any new heavy-water reactors.

Because of this deal, we will, for the first time, be in a position to verify all of these commitments. That means this deal is not built on trust; it is built on verification. Inspectors will have 24/7 access to Iran’s key nuclear facilities.

Inspectors will have access to Iran’s entire nuclear supply chain — its uranium mines and mills, its conversion facility, and its centrifuge manufacturing and storage facilities. This ensures that Iran will not be able to divert materials from known facilities to covert ones. Some of these transparency measures will be in place for 25 years.

Because of this deal, inspectors will also be able to access any suspicious location. Put simply, the organization responsible for the inspections, the IAEA, will have access where necessary, when necessary. That arrangement is permanent. And the IAEA has also reached an agreement with Iran to get access that it needs to complete its investigation into the possible military dimensions of Iran’s past nuclear research.

Finally, Iran is permanently prohibited from pursuing a nuclear weapon under the Nuclear Non-Proliferation Treaty, which provided the basis for the international community’s efforts to apply pressure on Iran.

As Iran takes steps to implement this deal, it will receive relief from the sanctions that we put in place because of Iran’s nuclear program — both America’s own sanctions and sanctions imposed by the United Nations Security Council. This relief will be phased in. Iran must complete key nuclear steps before it begins to receive new sanctions relief. And over the course of the next decade, Iran must abide by the deal before additional sanctions are lifted, including five years for restrictions related to arms, and eight years for restrictions related to ballistic missiles.

All of this will be memorialized and endorsed in a new United Nations Security Council resolution. And if Iran violates the deal, all of these sanctions will snap back into place. So there’s a very clear incentive for Iran to follow through, and there are very real consequences for a violation.

That’s the deal. It has the full backing of the international community. Congress will now have an opportunity to review the details, and my administration stands ready to provide extensive briefings on how this will move forward.

As the American people and Congress review the deal, it will be important to consider the alternative. Consider what happens in a world without this deal. Without this deal, there is no scenario where the world joins us in sanctioning Iran until it completely dismantles its nuclear program. Nothing we know about the Iranian government suggests that it would simply capitulate under that kind of pressure. And the world would not support an effort to permanently sanction Iran into submission. We put sanctions in place to get a diplomatic resolution, and that is what we have done.

Without this deal, there would be no agreed-upon limitations for the Iranian nuclear program. Iran could produce, operate and test more and more centrifuges. Iran could fuel a reactor capable of producing plutonium for a bomb. And we would not have any of the inspections that allow us to detect a covert nuclear weapons program. In other words, no deal means no lasting constraints on Iran’s nuclear program.

Such a scenario would make it more likely that other countries in the region would feel compelled to pursue their own nuclear programs, threatening a nuclear arms race in the most volatile region of the world. It would also present the United States with fewer and less effective options to prevent Iran from obtaining a nuclear weapon.

I’ve been President and Commander-in-Chief for over six years now. Time and again, I have faced decisions about whether or not to use military force. It’s the gravest decision that any President has to make. Many times, in multiple countries, I have decided to use force. And I will never hesitate to do so when it is in our national security interest. I strongly believe that our national security interest now depends upon preventing Iran from obtaining a nuclear weapon — which means that without a diplomatic resolution, either I or a future U.S. President would face a decision about whether or not to allow Iran to obtain a nuclear weapon or whether to use our military to stop it.

Put simply, no deal means a greater chance of more war in the Middle East. Moreover, we give nothing up by testing whether or not this problem can be solved peacefully. If, in a worst-case scenario, Iran violates the deal, the same options that are available to me today will be available to any U.S. President in the future. And I have no doubt that 10 or 15 years from now, the person who holds this office will be in a far stronger position with Iran further away from a weapon and with the inspections and transparency that allow us to monitor the Iranian program.

For this reason, I believe it would be irresponsible to walk away from this deal. But on such a tough issue, it is important that the American people and their representatives in Congress get a full opportunity to review the deal. After all, the details matter. And we’ve had some of the finest nuclear scientists in the world working through those details. And we’re dealing with a country — Iran — that has been a sworn adversary of the United States for over 35 years. So I welcome a robust debate in Congress on this issue, and I welcome scrutiny of the details of this agreement.

But I will remind Congress that you don’t make deals like this with your friends. We negotiated arms control agreements with the Soviet Union when that nation was committed to our destruction. And those agreements ultimately made us safer.

I am confident that this deal will meet the national security interest of the United States and our allies. So I will veto any legislation that prevents the successful implementation of this deal.

We do not have to accept an inevitable spiral into conflict. And we certainly shouldn’t seek it. And precisely because the stakes are so high, this is not the time for politics or posturing. Tough talk from Washington does not solve problems. Hard-nosed diplomacy, leadership that has united the world’s major powers offers a more effective way to verify that Iran is not pursuing a nuclear weapon.

Now, that doesn’t mean that this deal will resolve all of our differences with Iran. We share the concerns expressed by many of our friends in the Middle East, including Israel and the Gulf States, about Iran’s support for terrorism and its use of proxies to destabilize the region. But that is precisely why we are taking this step — because an Iran armed with a nuclear weapon would be far more destabilizing and far more dangerous to our friends and to the world.

Meanwhile, we will maintain our own sanctions related to Iran’s support for terrorism, its ballistic missile program, and its human rights violations. We will continue our unprecedented efforts to strengthen Israel’s security — efforts that go beyond what any American administration has done before. And we will continue the work we began at Camp David to elevate our partnership with the Gulf States to strengthen their capabilities to counter threats from Iran or terrorist groups like ISIL.

However, I believe that we must continue to test whether or not this region, which has known so much suffering, so much bloodshed, can move in a different direction.

Time and again, I have made clear to the Iranian people that we will always be open to engagement on the basis of mutual interests and mutual respect. Our differences are real and the difficult history between our nations cannot be ignored. But it is possible to change. The path of violence and rigid ideology, a foreign policy based on threats to attack your neighbors or eradicate Israel — that’s a dead end. A different path, one of tolerance and peaceful resolution of conflict, leads to more integration into the global economy, more engagement with the international community, and the ability of the Iranian people to prosper and thrive.

This deal offers an opportunity to move in a new direction. We should seize it.

We have come a long way to reach this point — decades of an Iranian nuclear program, many years of sanctions, and many months of intense negotiation. Today, I want to thank the members of Congress from both parties who helped us put in place the sanctions that have proven so effective, as well as the other countries who joined us in that effort.

I want to thank our negotiating partners — the United Kingdom, France, Germany, Russia, China, as well as the European Union — for our unity in this effort, which showed that the world can do remarkable things when we share a vision of peacefully addressing conflicts. We showed what we can do when we do not split apart.

And finally, I want to thank the American negotiating team. We had a team of experts working for several weeks straight on this, including our Secretary of Energy, Ernie Moniz. And I want to particularly thank John Kerry, our Secretary of State, who began his service to this country more than four decades ago when he put on our uniform and went off to war. He’s now making this country safer through his commitment to strong, principled American diplomacy.

History shows that America must lead not just with our might, but with our principles. It shows we are stronger not when we are alone, but when we bring the world together. Today’s announcement marks one more chapter in this pursuit of a safer and more helpful and more hopeful world.

Thank you. God bless you. And God bless the United States of America.

Thomas Piketty: ‘Germany Has Never Repaid its Debts. It Has No Right to Lecture Greece’

Source: Die Zeit

 

This forceful and important interview which is of enormous relevance to not just Greece, Germany or Europe but to India and English-speaking people all across the world, has been translated from the original German by Gavin Schalliol and is being published by The Wire in arrangement with Die Zeit.

 

In the interview, star economist Thomas Piketty calls for a major conference on debt. Germany, in particular, should not withhold help from Greece.

Since his successful book, Capital in the Twenty-First Century, the Frenchman Thomas Piketty has been considered one of the most influential economists in the world. His argument for the redistribution of income and wealth launched a worldwide discussion. In a interview with Georg Blume of Die Zeit, he gives his clear opinions on the European debt debate.

DIE ZEIT: Should we Germans be happy that even the French government is aligned with the German dogma of austerity?

Thomas Piketty: Absolutely not. This is neither a reason for France, nor Germany, and especially not for Europe, to be happy. I am much more afraid that the conservatives, especially in Germany, are about to destroy Europe and the European idea, all because of their shocking ignorance of history.

ZEIT: But we Germans have already reckoned with our own history.

Piketty: But not when it comes to repaying debts! Germany’s past, in this respect, should be of great significance to today’s Germans. Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. The first lesson that we can take from the history of government debt is that we are not facing a brand new problem. There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe.

ZEIT: But shouldn’t they repay their debts?

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Piketty: My book recounts the history of income and wealth, including that of nations. What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.

ZEIT: But surely we can’t draw the conclusion that we can do no better today?

Piketty: When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.

ZEIT: Are you trying to depict states that don’t pay back their debts as winners?

Piketty: Germany is just such a state. But wait: history shows us two ways for an indebted state to leave delinquency. One was demonstrated by the British Empire in the 19th century after its expensive wars with Napoleon. It is the slow method that is now being recommended to Greece. The Empire repaid its debts through strict budgetary discipline. This worked, but it took an extremely long time. For over 100 years, the British gave up two to three percent of their economy to repay its debts, which was more than they spent on schools and education. That didn’t have to happen, and it shouldn’t happen today. The second method is much faster. Germany proved it in the 20th century. Essentially, it consists of three components: inflation, a special tax on private wealth, and debt relief.

ZEIT: So you’re telling us that the German Wirtschaftswunder [“economic miracle”] was based on the same kind of debt relief that we deny Greece today?

Piketty: Exactly. After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece. Instead, both of our states employed the second method with the three components that I mentioned, including debt relief. Think about the London Debt Agreement of 1953, where 60% of German foreign debt was cancelled and its internal debts were restructured.

ZEIT: That happened because people recognised that the high reparations demanded of Germany after World War I were one of the causes of the Second World War. People wanted to forgive Germany’s sins this time!

Piketty: Nonsense! This had nothing to do with moral clarity; it was a rational political and economic decision. They correctly recognized that, after large crises that created huge debt loads, at some point people need to look toward the future. We cannot demand that new generations must pay for decades for the mistakes of their parents. The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books. But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s. 

We need to look ahead. Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.

ZEIT: The end of the Second World War was a breakdown of civilization. Europe was a killing field. Today is different.

Piketty: To deny the historical parallels to the postwar period would be wrong. Let’s think about the financial crisis of 2008/2009. This wasn’t just any crisis. It was the biggest financial crisis since 1929. So the comparison is quite valid. This is equally true for the Greek economy: between 2009 and 2015, its GDP has fallen by 25%. This is comparable to the recessions in Germany and France between 1929 and 1935.

ZEIT: Many Germans believe that the Greeks still have not recognized their mistakes and want to continue their free-spending ways.

Thomas Piketty: New thoughts on capital in the twenty-first century (Video/Transcript)

Source:TED

It's very nice to be here tonight.

 

 So I've been working on the history of income and wealth distribution for the past 15 years, and one of the interesting lessons coming from this historical evidence is indeed that, in the long run, there is a tendency for the rate of return of capital to exceed the economy's growth rate, and this tends to lead to high concentration of wealth. Not infinite concentration of wealth, but the higher the gap between r and g, the higher the level of inequality of wealth towards which society tends to converge.

 

 So this is a key force that I'm going to talk about today, but let me say right away that this is not the only important force in the dynamics of income and wealth distribution, and there are many other forces that play an important role in the long-run dynamics of income and wealth distribution. Also there is a lot of data that still needs to be collected. We know a little bit more today than we used to know, but we still know too little, and certainly there are many different processes — economic, social, political — that need to be studied more. And so I'm going to focus today on this simple force, but that doesn't mean that other important forces do not exist.

 

So most of the data I'm going to present comes from this database that's available online: the World Top Incomes Database. So this is the largest existing historical database on inequality, and this comes from the effort of over 30 scholars from several dozen countries. So let me show you a couple of facts coming from this database, and then we'll return to r bigger than g. So fact number one is that there has been a big reversal in the ordering of income inequality between the United States and Europe over the past century. So back in 1900, 1910, income inequality was actually much higher in Europe than in the United States, whereas today, it is a lot higher in the United States. So let me be very clear: The main explanation for this is not r bigger than g. It has more to do with changing supply and demand for skill, the race between education and technology, globalization, probably more unequal access to skills in the U.S., where you have very good, very top universities but where the bottom part of the educational system is not as good, so very unequal access to skills, and also an unprecedented rise of top managerial compensation of the United States, which is difficult to account for just on the basis of education. So there is more going on here, but I'm not going to talk too much about this today, because I want to focus on wealth inequality.

 

 So let me just show you a very simple indicator about the income inequality part. So this is the share of total income going to the top 10 percent. So you can see that one century ago, it was between 45 and 50 percent in Europe and a little bit above 40 percent in the U.S., so there was more inequality in Europe. Then there was a sharp decline during the first half of the 20th century, and in the recent decade, you can see that the U.S. has become more unequal than Europe, and this is the first fact I just talked about. Now, the second fact is more about wealth inequality, and here the central fact is that wealth inequality is always a lot higher than income inequality, and also that wealth inequality, although it has also increased in recent decades, is still less extreme today than what it was a century ago, although the total quantity of wealth relative to income has now recovered from the very large shocks caused by World War I, the Great Depression, World War II.

So let me show you two graphs illustrating fact number two and fact number three. So first, if you look at the level of wealth inequality, this is the share of total wealth going to the top 10 percent of wealth holders, so you can see the same kind of reversal between the U.S. and Europe that we had before for income inequality. So wealth concentration was higher in Europe than in the U.S. a century ago, and now it is the opposite. But you can also show two things: First, the general level of wealth inequality is always higher than income inequality. So remember, for income inequality, the share going to the top 10 percent was between 30 and 50 percent of total income, whereas for wealth, the share is always between 60 and 90 percent. Okay, so that's fact number one, and that's very important for what follows. Wealth concentration is always a lot higher than income concentration.

  Fact number two is that the rise in wealth inequality in recent decades is still not enough to get us back to 1910. So the big difference today, wealth inequality is still very large, with 60, 70 percent of total wealth for the top 10, but the good news is that it's actually better than one century ago, where you had 90 percent in Europe going to the top 10. So today what you have is what I call the middle 40 percent, the people who are not in the top 10 and who are not in the bottom 50, and what you can view as the wealth middle class that owns 20 to 30 percent of total wealth, national wealth, whereas they used to be poor, a century ago, when there was basically no wealth middle class. So this is an important change, and it's interesting to see that wealth inequality has not fully recovered to pre-World War I levels, although the total quantity of wealth has recovered.

  Okay? So this is the total value of wealth relative to income, and you can see that in particular in Europe, we are almost back to the pre-World War I level. So there are really two different parts of the story here. One has to do with the total quantity of wealth that we accumulate, and there is nothing bad per se, of course, in accumulating a lot of wealth, and in particular if it is more diffuse and less concentrated. So what we really want to focus on is the long-run evolution of wealth inequality, and what's going to happen in the future. How can we account for the fact that until World War I, wealth inequality was so high and, if anything, was rising to even higher levels, and how can we think about the future?

   

future. Let me first say that probably the best model to explain why wealth is so much more concentrated than income is a dynamic, dynastic model where individuals have a long horizon and accumulate wealth for all sorts of reasons. If people were accumulating wealth only for life cycle reasons, you know, to be able to consume when they are old, then the level of wealth inequality should be more or less in line with the level of income inequality. But it will be very difficult to explain why you have so much more wealth inequality than income inequality with a pure life cycle model, so you need a story where people also care about wealth accumulation for other reasons. So typically, they want to transmit wealth to the next generation, to their children, or sometimes they want to accumulate wealth because of the prestige, the power that goes with wealth. So there must be other reasons for accumulating wealth than just life cycle to explain what we see in the data. Now, in a large class of dynamic models of wealth accumulation with such dynastic motive for accumulating wealth, you will have all sorts of random, multiplicative shocks. So for instance, some families have a very large number of children, so the wealth will be divided. Some families have fewer children. You also have shocks to rates of return. Some families make huge capital gains. Some made bad investments. So you will always have some mobility in the wealth process. Some people will move up, some people will move down. The important point is that, in any such model, for a given variance of such shocks, the equilibrium level of wealth inequality will be a steeply rising function of r minus g. And intuitively, the reason why the difference between the rate of return to wealth and the growth rate is important is that initial wealth inequalities will be amplified at a faster pace with a bigger r minus g. So take a simple example, with r equals five percent and g equals one percent, wealth holders only need to reinvest one fifth of their capital income to ensure that their wealth rises as fast as the size of the economy. So this makes it easier to build and perpetuate large fortunes because you can consume four fifths, assuming zero tax, and you can just reinvest one fifth. So of course some families will consume more than that, some will consume less, so there will be some mobility in the distribution, but on average, they only need to reinvest one fifth, so this allows high wealth inequalities to be sustained.

 

Now, you should not be surprised by the statement that r can be bigger than g forever, because, in fact, this is what happened during most of the history of mankind. And this was in a way very obvious to everybody for a simple reason, which is that growth was close to zero percent during most of the history of mankind. Growth was maybe 0.1, 0.2, 0.3 percent, but very slow growth of population and output per capita, whereas the rate of return on capital of course was not zero percent. It was, for land assets, which was the traditional form of assets in preindustrial societies, it was typically five percent. Any reader of Jane Austen would know that. If you want an annual income of 1,000 pounds, you should have a capital value of 20,000 pounds so that five percent of 20,000 is 1,000. And in a way, this was the very foundation of society, because r bigger than g was what allowed holders of wealth and assets to live off their capital income and to do something else in life than just to care about their own survival.

 

Now, one important conclusion of my historical research is that modern industrial growth did not change this basic fact as much as one might have expected. Of course, the growth rate following the Industrial Revolution rose, typically from zero to one to two percent, but at the same time, the rate of return to capital also rose so that the gap between the two did not really change. So during the 20th century, you had a very unique combination of events. First, a very low rate of return due to the 1914 and 1945 war shocks, destruction of wealth, inflation, bankruptcy during the Great Depression, and all of this reduced the private rate of return to wealth to unusually low levels between 1914 and 1945. And then, in the postwar period, you had unusually high growth rate, partly due to the reconstruction. You know, in Germany, in France, in Japan, you had five percent growth rate between 1950 and 1980 largely due to reconstruction, and also due to very large demographic growth, the Baby Boom Cohort effect. Now, apparently that's not going to last for very long, or at least the population growth is supposed to decline in the future, and the best projections we have is that the long-run growth is going to be closer to one to two percent rather than four to five percent. So if you look at this, these are the best estimates we have of world GDP growth and rate of return on capital, average rates of return on capital, so you can see that during most of the history of mankind, the growth rate was very small, much lower than the rate of return, and then during the 20th century, it is really the population growth, very high in the postwar period, and the reconstruction process that brought growth to a smaller gap with the rate of return. Here I use the United Nations population projections, so of course they are uncertain. It could be that we all start having a lot of children in the future, and the growth rates are going to be higher, but from now on, these are the best projections we have, and this will make global growth decline and the gap between the rate of return go up.

 

Now, the other unusual event during the 20th century was, as I said, destruction, taxation of capital, so this is the pre-tax rate of return. This is the after-tax rate of return, and after destruction, and this is what brought the average rate of return after tax, after destruction, below the growth rate during a long time period. But without the destruction, without the taxation, this would not have happened. So let me say that the balance between returns on capital and growth depends on many different factors that are very difficult to predict: technology and the development of capital-intensive techniques. So right now, the most capital-intensive sectors in the economy are the real estate sector, housing, the energy sector, but it could be in the future that we have a lot more robots in a number of sectors and that this would be a bigger share of the total capital stock that it is today. Well, we are very far from this, and from now, what's going on in the real estate sector, the energy sector, is much more important for the total capital stock and capital share.

 

The other important issue is that there are scale effects in portfolio management, together with financial complexity, financial deregulation, that make it easier to get higher rates of return for a large portfolio, and this seems to be particularly strong for billionaires, large capital endowments. Just to give you one example, this comes from the Forbes billionaire rankings over the 1987-2013 period, and you can see the very top wealth holders have been going up at six, seven percent per year in real terms above inflation, whereas average income in the world, average wealth in the world, have increased at only two percent per year. And you find the same for large university endowments — the bigger the initial endowments, the bigger the rate of return.

 

 Now, what could be done? The first thing is that I think we need more financial transparency. We know too little about global wealth dynamics, so we need international transmission of bank information. We need a global registry of financial assets, more coordination on wealth taxation, and even wealth tax with a small tax rate will be a way to produce information so that then we can adapt our policies to whatever we observe. And to some extent, the fight against tax havens and automatic transmission of information is pushing us in this direction. Now, there are other ways to redistribute wealth, which it can be tempting to use. Inflation: it's much easier to print money than to write a tax code, so that's very tempting, but sometimes you don't know what you do with the money. This is a problem. Expropriation is very tempting. Just when you feel some people get too wealthy, you just expropriate them. But this is not a very efficient way to organize a regulation of wealth dynamics. So war is an even less efficient way, so I tend to prefer progressive taxation, but of course, history — (Laughter) — history will invent its own best ways, and it will probably involve a combination of all of these.

 

 Thank you.

 

 (Applause)

 

  Bruno Giussani: Thomas Piketty. Thank you.

Thomas, I want to ask you two or three questions, because it's impressive how you're in command of your data, of course, but basically what you suggest is growing wealth concentration is kind of a natural tendency of capitalism, and if we leave it to its own devices, it may threaten the system itself, so you're suggesting that we need to act to implement policies that redistribute wealth, including the ones we just saw: progressive taxation, etc. In the current political context, how realistic are those? How likely do you think that it is that they will be implemented?

 

Thomas Piketty: Well, you know, I think if you look back through time, the history of income, wealth and taxation is full of surprise. So I am not terribly impressed by those who know in advance what will or will not happen. I think one century ago, many people would have said that progressive income taxation would never happen and then it happened. And even five years ago, many people would have said that bank secrecy will be with us forever in Switzerland, that Switzerland was too powerful for the rest of the world, and then suddenly it took a few U.S. sanctions against Swiss banks for a big change to happen, and now we are moving toward more financial transparency. So I think it's not that difficult to better coordinate politically. We are going to have a treaty with half of the world GDP around the table with the U.S. and the European Union, so if half of the world GDP is not enough to make progress on financial transparency and minimal tax for multinational corporate profits, what does it take? So I think these are not technical difficulties. I think we can make progress if we have a more pragmatic approach to these questions and we have the proper sanctions on those who benefit from financial opacity.

 

 BG: One of the arguments against your point of view is that economic inequality is not only a feature of capitalism but is actually one of its engines. So we take measures to lower inequality, and at the same time we lower growth, potentially. What do you answer to that?

 

TP: Yeah, I think inequality is not a problem per se. I think inequality up to a point can actually be useful for innovation and growth. The problem is, it's a question of degree. When inequality gets too extreme, then it becomes useless for growth and it can even become bad because it tends to lead to high perpetuation of inequality over time and low mobility. And for instance, the kind of wealth concentrations that we had in the 19th century and pretty much until World War I in every European country was, I think, not useful for growth. This was destroyed by a combination of tragic events and policy changes, and this did not prevent growth from happening. And also, extreme inequality can be bad for our democratic institutions if it creates very unequal access to political voice, and the influence of private money in U.S. politics, I think, is a matter of concern right now. So we don't want to return to that kind of extreme, pre-World War I inequality. Having a decent share of the national wealth for the middle class is not bad for growth. It is actually useful both for equity and efficiency reasons.

 

 BG: I said at the beginning that your book has been criticized. Some of your data has been criticized. Some of your choice of data sets has been criticized. You have been accused of cherry-picking data to make your case. What do you answer to that?

 

 TP: Well, I answer that I am very happy that this book is stimulating debate. This is part of what it is intended for. Look, the reason why I put all the data online with all of the detailed computation is so that we can have an open and transparent debate about this. So I have responded point by point to every concern. Let me say that if I was to rewrite the book today, I would actually conclude that the rise in wealth inequality, particularly in the United States, has been actually higher than what I report in my book. There is a recent study by Saez and Zucman showing, with new data which I didn't have at the time of the book, that wealth concentration in the U.S. has risen even more than what I report. And there will be other data in the future. Some of it will go in different directions. Look, we put online almost every week new, updated series on the World Top Income Database and we will keep doing so in the future, in particular in emerging countries, and I welcome all of those who want to contribute to this data collection process. In fact, I certainly agree that there is not enough transparency about wealth dynamics, and a good way to have better data would be to have a wealth tax with a small tax rate to begin with so that we can all agree about this important evolution and adapt our policies to whatever we observe. So taxation is a source of knowledge, and that's what we need the most right now.

 

BG: Thomas Piketty, merci beaucoup.

 

 Thank you. TP: Thank you. (Applause)