Talking Again With Gabriel Zucman

**Paul Krugman** (0:05)
So hi, everyone, Paul Krugman here. Bringing back Gabriel Zucman, probably the best guy, certainly the guy I rely on heavily for thinking about inequality, especially wealth issues. And since I've been writing about that and stealing a lot of Gabriel's research, I thought we should talk again. So hi, Gabriel.

**Gabriel Zucman** (0:28)
Hi, Paul. Thanks for having me on.

**Paul Krugman** (0:30)
Yeah. So you have been writing, and now I've been cannibalizing it, a lot about wealth concentration.
Why don't you tell us about your reasons for focusing on wealth? And I have some further questions.

**Gabriel Zucman** (0:48)
Basically because there's a fundamental tension in democratic societies between extreme wealth and the very possibility of a well-functioning democracy. And it's not a new idea. Don't get me wrong. All the thinkers of democracy have written about this all the way back to Aristotle more than 2,000 years ago.
But there was a period of time after World War II, when many people thought that this issue belonged to the past. And it corresponded to a very particular moment in history when extreme wealth had largely disappeared after World War II, after the shocks of the first half of the 20th century.
But now, of course, it's making a dramatic comeback. And so we are back to this discussion of how do we deal with this tension? How do we organize the economy and our society to prevent the forms of capture of the political process in particular that are associated with extreme wealth?

**Paul Krugman** (2:13)
Now, there's a question. I mean, I've been on the inequality beat for alarmingly long time since you were a small child, actually. But in the early 90s, let's say, it was all income rather than wealth. It was kind of, a lot of it was top quintile and maybe top 1 percent. And now we have, you're telling us that we need to focus on the wealth rather than the income of the top 0.0002 percent.
Why that shift? Why are we, why wealth rather than income?

**Gabriel Zucman** (2:53)
Well, it's for two reasons. Number one is a macroeconomic reason, which is that wealth as a whole has been growing much faster than income. So if you look at the ratio of total household wealth to GDP in the US in 1980, it was around 200, 250 percent, and today we are past 500 percent. So it means that the total wealth of the country is equivalent to more than five years of annual production, five years of annual GDP.
The second reason is that wealth itself has become much more concentrated, and the rise of wealth inequality, especially at the top of the distribution, at the very top, has been massive and has been even faster and stronger than the rise of income inequality. So we all know about the rise of the 1 percent, the top 1 percent share of total income has increased from about 10 percent of income in the US in 1980 to about 20 percent today.
But at the top of the wealth distribution for wealth, the increase has been even more dramatic than that.

**Paul Krugman** (4:19)
At the risk of derailing it slightly, one thing that I myself have gone back and forth on, and certainly I get from comments on things I write, there's a question comparing wealth of the top 0.001 percent or whatever.
Should we be comparing it to total wealth or to total income? And I know you've used wealth to GDP. And I have some thought, but could be what you've done it both ways. Which do you have? Why would you use it? I don't know which is right, but whatever. Yeah.

**Gabriel Zucman** (4:54)
I think both statistics are interesting and capture different aspects of reality. So if you're interested in wealth inequality, in the concentration of wealth, the most meaningful statistic is to divide the wealth of the super rich by total wealth in the economy. So for instance, if you look at billionaires, roughly the top 0.001% of the population, they own about 7% of total US wealth today. In 1980, they used to own about 1% of total US wealth. So it gives you a sense of the rise in wealth concentration.
If you look at the super top, the oligarchs, the 20 wealthiest families, so it's really a very, very small fraction of the population, top 0.0001%.
Their total wealth is 2.2% of total household wealth in the economy. So I think that if you care about wealth inequality, these are the relevant numbers. Now, it's also interesting to compute another statistic, which is the wealth of those top groups, and in particular the oligarchs, relative to total income or total output in the economy, because it gives you a sense of their influence on the economy. And also because it gives you a sense of how much revenue there is at stake from taxing their wealth. So let me illustrate.