Keynote: Inequality and the future of capitalism
Nov
11
06:00 PM - 07:00 PM
Video
NZZ Interview
«Jede Form von Sozialismus ist für uns die schlechtere Alternative. Denn die Kräfte des Marktes haben enorme Vorteile: Sie haben die Armut auf der Welt stark verringert und vielen Menschen zu Wohlstand verholfen. Doch für eine breite Schicht der Bevölkerung in den USA funktioniert der Kapitalismus derzeit nicht richtig. Es muss uns gelingen, dieses Biest besser zu zähmen.»
NZZ am Sonntag, Angus Deaton Interview, 21.11.2020
"Nobel Prize winner Angus Deaton speaks of 'death out of despair': In the USA, the mortality of non-academics has risen sharply. Deaton diagnoses a deep divide between people with good and poor education." Read our English translation of the interview.
«Jede Form von Sozialismus ist für uns die schlechtere Alternative. Denn die Kräfte des Marktes haben enorme Vorteile: Sie haben die Armut auf der Welt stark verringert und vielen Menschen zu Wohlstand verholfen. Doch für eine breite Schicht der Bev ölkerung in den USA funktioniert der Kapitalismus derzeit nicht richtig. Es muss uns gelingen, dieses Biest besser zu zähmen.»
NZZ am Sonntag, Angus Deaton Interview, 21.11.2020
"Nobel Prize winner Angus Deaton speaks of 'death out of despair': In the USA, the mortality of non-academics has risen sharply. Deaton diagnoses a deep divide between people with good and poor education." Read our English translation of the interview.
Summary
In his half-hour talk, Deaton provides a multi-faceted perspective on the issue of inequality. Right at the beginning he asks: Why is inequality a problem in modern capitalism? Of course, it is a problem when a few dozen individuals control the same amount of wealth as the poorest half of humanity. But capitalism has also brought great prosperity – both in today's rich countries and – over the last 50 years – in poor countries, too. Nevertheless, inequality is a topical issue creating many fronts, such as strong polarization in the US or the worldwide trend towards populism and failing democracy. There are various aspects of inequality that reinforce these processes. What role does capitalism play? "Capitalism generates inequality, it is in its genes," Deaton stresses. We cannot have the benefits without risking the cost. Thus, we must regulate it. Here, Deaton introduces an analogy, comparing capitalism to a casino. The bottom line is that even if all players have the same starting stake and face the same odds, the total number of successes for each player gets more and more unequal over time. How can we tame this growing inequality? Sticking with the analogy, Deaton explains one way out of the casino: While there is nothing inherently bad about inequality – since in the past we learned that economic growth and innovation are often driven by a few which benefits them first, then the rest follows – we should worry about what it enables rich people to do, e.g. via politics. Deaton uses the pharmaceutical industry and healthcare in the US as an example for what can go wrong if there are too weak or no regulations in place. Referring to the opioid catastrophe, he argues that the American pharma was allowed to addict and kill people for money. Today, healthcare costs in the US are through the roof, taking up 18 percent of national income, mostly financed by poll-tax on workers in employment, thereby also destroying low wage labor market. It is an apparatus that distributes upwards, from everyone to the few, held in place by 5 healthcare lobbyists for every member of Congress. “Antitrust is arguably much too weak: makers turn into takers”, says Deaton. Thus, we need to repair capitalism through better regulations and restore competition, e.g. fix antitrust, re-orient the courts, enforce rules on lobbying, eliminate tax havens. Still, we need to be aware that some of these measures might have side effects, like stifling innovation. The point is not to eliminate capitalism, but to repair what needs to be repaired – because according to Deaton, capitalism is worth saving after all.
In his half-hour talk, Deaton provides a multi-faceted perspective on the issue of inequality. Right at the beginning he asks: Why is inequality a problem in modern capitalism? Of course, it is a problem when a few dozen individuals control the same amount of wealth as the poorest half of humanity. But capitalism has also brought great prosperity – both in today's rich countries and – over the last 50 years – in poor countries, too. Nevertheless, inequality is a topical issue creating many fronts, such as strong polarization in the US or the worldwide trend towards populism and failing democracy. There are various aspects of inequality that reinforce these processes. What role does capitalism play? "Capitalism generates inequality, it is in its genes," Deaton stresses. We cannot have the benefits without risking the cost. Thus, we must regulate it. Here, Deaton introduces an analogy, comparing capitalism to a casino. The bottom line is that even if all players have the same starting stake and face the same odds, the total number of successes for each player gets more and more unequal over time. How can we tame this growing inequality? Sticking with the analogy, Deaton explains one way out of the casino: While there is nothing inherently bad about inequality – since in the past we learned that economic growth and innovation are often driven by a few which benefits them first, then the rest follows – we should worry about what it enables rich people to do, e.g. via politics. Deaton uses the pharmaceutical industry and healthcare in the US as an example for what can go wrong if there are too weak or no regulations in place. Referring to the opioid catastrophe, he argues that the American pharma was allowed to addict and kill people for money. Today, healthcare costs in the US are through the roof, taking up 18 percent of national income, mostly financed by poll-tax on workers in employment, thereby also destroying low wage labor market. It is an apparatus that distributes upwards, from everyone to the few, held in place by 5 healthcare lobbyists for every member of Congress. “Antitrust is arguably much too weak: makers turn into takers”, says Deaton. Thus, we need to repair capitalism through better regulations and restore competition, e.g. fix antitrust, re-orient the courts, enforce rules on lobbying, eliminate tax havens. Still, we need to be aware that some of these measures might have side effects, like stifling innovation. The point is not to eliminate capitalism, but to repair what needs to be repaired – because according to Deaton, capitalism is worth saving after all.
Nobel Laureate Sir Angus Deaton, © Nobel Media AB 2015 by Alexander Mahmoud.
Quotes
Capitalism generates inequality, it is in its genes. We cannot have the benefits without risking the cost. Thus, we must regulate it.
We need to repair capitalism through better regulations and restore competition by fixing antitrust, re-orienting the courts, campaigning finance reform, enforcing rules on lobbying, and eliminating tax havens.
Program overview
| Research slam: (In-)Equality and prosperity |
Wednesday, 21.10.2020 | 16:30–17:30 (CET) Moderator: Nir Jaimovich Speakers: participants as listed |
| Panel session: Inequality - facts and consequences |
Wednesday, 28.10.2020 | 16:00–17:15 (CET) Moderator: James Mackintosh Speakers: Janet Currie, David Dorn, Branko Milanovic |
| Webinar: Taxing the superrich |
Tuesday, 3.11.2020 | 16:00–17:00 (CET) Speaker: Florian Scheuer |
| Keynote lecture: Inequality and the future of capitalism |
Wednesday, 11.11.2020 | 18:00–19:00 (CET) Speaker: Nobel Laureate Sir Angus Deaton |
| Research slam: (In-)Equality and prosperity |
Wednesday, 21.10.2020 | 16:30–17:30 (CET) Moderator: Nir Jaimovich Speakers: participants as listed |
| Panel session: Inequality - facts and consequences |
Wednesday, 28.10.2020 | 16:00–17:15 (CET) Moderator: James Mackintosh Speakers: Janet Currie, David Dorn, Branko Milanovic |
| Webinar: Taxing the superrich |
Tuesday, 3.11.2020 | 16:00–17:00 (CET) Speaker: Florian Scheuer |
| Keynote lecture: Inequality and the future of capitalism |
Wednesday, 11.11.2020 | 18:00–19:00 (CET) Speaker: Nobel Laureate Sir Angus Deaton |
Forum for Economic Dialogue
Special times call for special measures. That is why our annual forum this year took place online. Despite the change in format, we had sought to maintain our customary standards. We had a series of events in store, focusing on different aspects of inequality – a topic that has become even more important in light of the global pandemic and its devastating consequences, which has hit many of the most vulnerable people in the world particularly hard. Visit our event hub for timely updates and background information.
Special times call for special measures. That is why our annual forum this year took place online. Despite the change in format, we had sought to maintain our customary standards. We had a series of events in store, focusing on different aspects of inequality – a topic that has become even more important in light of the global pandemic and its devastating consequences, which has hit many of the most vulnerable people in the world particularly hard. Visit our event hub for timely updates and background information.
Speakers
Sir Angus Deaton is Senior Scholar and Professor Emeritus at Princeton University and Presidential Professor of Economics at USC. His interests span domestic and inter¬national issues and include health, happiness, development, poverty, inequality, and how to best collect and interpret evidence for policy. In 2015, he received the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel “for his analysis of consumption, poverty, and welfare.”
UBS Foundation Professor of Macroeconomics and Financial Markets, Research Fellow CEPR
Joachim Voth received his PhD from Oxford in 1996. He works on financial crises, long-run growth, as well as on the origins of political extremism. He has examined public debt dynamics and bank lending to the first serial defaulter in history, analysed risk-taking behaviour by lenders as a result of personal shocks, and the investor performance during speculative bubbles. Joachim has also examined the deep historical roots of anti-Semitism, showing that the same cities where pogroms occurred in the Middle Age also persecuted Jews more in the 1930s; he has analyzed the extent to which schooling can create radical racial stereotypes over the long run, and how dense social networks (“social capital”) facilitated the spread of the Nazi party. In his work on long-run growth, he has investigated the effects of fertility restriction, the role of warfare, and the importance of state capacity. Joachim has published more than 80 academic articles and 3 academic books, 5 trade books and more than 50 newspaper columns, op-eds and book reviews. His research has been highlighted in The Economist, the Financial Times, the Wall Street Journal, the Guardian, El Pais, Vanguardia, La Repubblica, the Frankfurter Allgemeine, NZZ, der Standard, der Spiegel, CNN, RTN, Swiss and German TV and radio.
Sir Angus Deaton is Senior Scholar and Professor Emeritus at Princeton University and Presidential Professor of Economics at USC. His interests span domestic and inter¬national issues and include health, happiness, development, poverty, inequality, and how to best collect and interpret evidence for policy. In 2015, he received the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel “for his analysis of consumption, poverty, and welfare.”
UBS Foundation Professor of Macroeconomics and Financial Markets, Research Fellow CEPR
Joachim Voth received his PhD from Oxford in 1996. He works on financial crises, long-run growth, as well as on the origins of political extremism. He has examined public debt dynamics and bank lending to the first serial defaulter in history, analysed risk-taking behaviour by lenders as a result of personal shocks, and the investor performance during speculative bubbles. Joachim has also examined the deep historical roots of anti-Semitism, showing that the same cities where pogroms occurred in the Middle Age also persecuted Jews more in the 1930s; he has analyzed the extent to which schooling can create radical racial stereotypes over the long run, and how dense social networks (“social capital”) facilitated the spread of the Nazi party. In his work on long-run growth, he has investigated the effects of fertility restriction, the role of warfare, and the importance of state capacity. Joachim has published more than 80 academic articles and 3 academic books, 5 trade books and more than 50 newspaper columns, op-eds and book reviews. His research has been highlighted in The Economist, the Financial Times, the Wall Street Journal, the Guardian, El Pais, Vanguardia, La Repubblica, the Frankfurter Allgemeine, NZZ, der Standard, der Spiegel, CNN, RTN, Swiss and German TV and radio.