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September 24, 2020
It's Time to Redistribute the Wealth
It's Time to Redistribute the Wealth

Economic inequality has become a linchpin of modern politics. As nations around the world face a reckoning on racial and social justice and work to combat the economic impacts of the pandemic, we ask: Is it time to redistribute the wealth? Should we address growing inequality by overhauling our tax system, expanding our social safety nets, and investing more in public initiatives like universal health care, education, and infrastructure? Or would a wealth transfer unduly punish the economic elite, destroy the promise of a meritocracy, and inevitably lead to excessive government intervention in our social and economic lives?

  • 00:00:00
    John Donvan:
    Economic inequality has become a central issue in our current political discourse as nations around the world face a reckoning on race and social justice and work to contain the economic damage from the pandemic.

    Robert Reich:
    We have a choice in this country, and that choice is either great wealth in the hands of a few or a democracy.

    John Donvan:
    Is it time to redistribute the wealth?

    Larry Summers:
    Pointing to billionaires and saying we should take their take their money away is -- may feel good, but it's an ineffective political strategy.

    John Donvan:
    Two perspectives.

    Allison Schrager:
    How else you going to take a lot of wealth from rich people and give it to poor people if it's not through taxation?

    John Donvan:
    On a cornerstone of our economic future.

    Yanis Varoufakis:
    It's not a debate about the wealth tax. I'm far more concerned about corporate wealth, the accumulation of gargantuan power.

    John Donvan:
    Join us for "That's Debatable," presented by Bloomberg and Intelligence Squared.
  • 00:01:01
    [music playing]

    From Washington, D.C., I'm John Donvan, your host and moderator, and welcome to That's Debatable, an interactive series on today's most pressing issues. The resolution: it's time to redistribute the wealth. 44 percent of the world's wealth is owned by the richest 1 percent alone. Is that a trend that merits disruption? We presented that question to our two teams of two. Against the motion, Larry Summers, former U.S. Treasury secretary, and Allison Schrager, senior fellow at the Manhattan Institute. Arguing for the motion, Yanis Varoufakis, former finance minister of Greece, and Robert Reich, former U.S. secretary of labor. Let's go to their opening statements.

    Robert Reich:
    What we need to understand is that -- and many of you already know this -- this country cannot afford to do many of the things it needs to do.
  • 00:02:02
    Our infrastructure is crumbling. It is falling apart. Many of our schools, our public schools, in working-class and poor areas are overcrowded. The classrooms have 30 to 40 kids, teachers underpaid, the facilities are bad. We also know that there is a dearth of basic research and development in this country. People are concerned about American competitiveness, but we are not doing much about it in terms of basic R&D. And health care, we know there are huge numbers of people who are not able to afford health insurance, millions of Americans.

    During this period of coronavirus, it is all worse because we have something on the order of 35 million Americans who are out of work. Many of them, many of them are trying to decide between paying the rent and putting food on the table. We have an extraordinary number of children who are, at this moment, either homeless or hungry or both.
  • 00:03:04
    Now, where is that money going to come from? It turns out that the typical American pays about 25 to 30 percent of his or her income in taxes right now, if you include sales taxes and property taxes, every tax, about 25 to 30 percent. But if you are a billionaire today, you’re actually paying 23 percent on average. In other words, the richer you are, if you’re very much at the very, very top, you are paying a lower tax rate.

    That’s not only unfair, but at a time when so many people are so desperate and so many people are struggling so hard, it is unwarranted, it’s bad policy. Now, let me just add one other very important fact here and just quote Justice Brandeis to say, “We have a choice in this country."
  • 00:04:02
    "And that choice is either great wealth in the hands of a few or a democracy. We can’t have both because money at the top turns into political power."

    Allison Schrager:
    These are really sort of wild estimates, often based on some very dubious assumptions. In fact, the numbers you just heard cited by our opponent might be off more than a factor of 4. And the reason why we know so little is most of the richest Americans made their money starting their own companies, which they held closely and managed as they grew rich.

    If you look at the Forbes 400 richest Americans, eight of the 10 top richest Americans all got rich starting their own companies. And 2/3, a full 400, are self-made entrepreneurs. And unlike stock or a publicly held company, it’s only hard to put a value on a privately held company. It’s also really hard to sell. And most rich people are much richer on paper and don’t have a lot of liquid wealth to pay the tax, which means paying it will force them to sell their company sooner.
  • 00:05:05
    Usually private equity funds will have a say in management and be a lot more short-term focused. Now, other countries have grappled with this when they had wealth taxes, and the way around it was maybe limiting the wealth tax based on how much income or financial assets they had. But this just created tons of loopholes, which allowed them to get around paying the tax. And that lack of compliance is why so few countries tax wealth. In 1990, 12 countries, European countries, taxed wealth. Now only four do. And the tax rates are very low and make up a really trivial amount of their total tax revenue. Switzerland probably collects the most in wealth taxes, and it’s only 3 percent of their total tax revenue. A wealth tax also, because it’s so hard to value, creates an incentive to keep a company private for longer and not do that IPO. That could mean, possibly, the next Amazon won’t be sold in public markets, which in some ways worsens inequality, because it means the average American doesn’t have access to own our best fast-growing companies.
  • 00:06:04
    So even if you think we should need to tax rich people more, or even if you don’t and you just think we need to -- we need more revenue to pay for all of the services we want, or just pay off our debts, and you think it’s better to tax rich people than lower income people, redistributing wealth or a wealth tax is a terrible way to do it.

    Yanis Varoufakis:
    The wealth tax is just one way and not the most efficient way. I would agree with you. Look, you were referring to wealth creation as if we live in a front-porch community where, you know, wealth is distributed in proportion to the entrepreneurship, you know, baker, butcher, and brewer. That’s not the world we live in. Take Jeff Bezos. You mentioned Amazon. He’s a smart man. He innovated. He, you know, he got a lot of money. Good on him. Good on him. But which part of his 200 billion is due to his entrepreneurship and which part of it is due to the simple fact that his wealth brings more wealth, because, as we know, the ultrawealthy grow rich in their sleep, as it were.
  • 00:07:12
    It’s got nothing to do with hard work, with risk taking or economizing. While millions, billions, are not so much left behind, but they’re held behind because the wealth concentration and the power of big business, they conspire to cause stagnation for the majority. Uber market power enables corporations to usurp markets, to buy justice, to capture regulators, to, you know, pad political campaigns, in short, to poison our liberal democracies. In 1901, Theodore Roosevelt famously broke up Standard Oil against the background of a huge cacophony [laughs] of those screaming blue murder about the attack on innovation and entrepreneurship and so on.
  • 00:08:02
    However, those democratic acts of redistributing power and wealth together eventually ascertained capitalism’s finest hour. Now, sadly, since the end of [unintelligible], we have allowed cartels to dominate again. We face a stark option. Let the ultrarich continue to snuff out society’s potential by constantly redistributing wealth from the producers themselves or alter the direction of distribution from the ultrarich to society’s innovators and maintainers, the added bonus being a chance for democracy to breathe again. As for how to do this, there are many different tools. The wealth tax is just one.

    Larry Summers:
    We are debating whether an approach, based on a politics of envy, that starts by putting the central problem as being tearing down the people who are most successful is the right approach to that problem.
  • 00:09:01
    Or instead, a politics of inclusion, building up, bubbling up to support prosperity is the right way forward. That’s the approach that I favor, and it’s the reason why I oppose this resolution. These kinds of approaches are symbolic. They’re not effective. There’s a practical tax reform agenda. It raises the capital gains tax rate. It ensures that everybody complies with the income tax. It eliminates a range of tax shelters. It can raise $4 trillion far more than any reasonable estimate that any reputable economist supports for the wealth tax and can do it without arguing that there are people who need to be torn down.
  • 00:10:01
    Now look, I’m worried about political money. We should repeal Citizens United. We should change the laws that allow all kinds of giving to PACs, especially in nontransparent ways. Here’s what will happen if you actually try to say that people’s wealth has to go away. They’ll give their money to so-called charities. Those charities will intervene in all the political process that way. And if you don’t like the Koch brothers and what they do to American politics right now, you will have far more of it if you tell them that they can’t keep their wealth and they can give it to whatever they want, and they’ll give it to something that will do much more to subvert the process. So the most important thing that I’ve learned is that it’s not enough to care. You have to count carefully and rigorously if you want to make the world a better place. And framing the problem in terms of tearing down the most successful people isn’t the way to fix those schools.
  • 00:11:06
    It isn’t the way to clean the air. It isn’t the way to repair a decaying infrastructure. Building from the middle class without a politics of envy is the way.

    [music playing]

    Robert Reich:
    This is not about the politics of envy. This is about a concern about the relationship between wealth and power. Wealth translates into power. Larry Summers and I both served in the government. Both of us know what that means.

    [music playing]

    John Donvan:
    And now we move on to Round two. And that’s where the debaters take questions from me and also from you in our audience. The resolution is this. It is time to redistribute the wealth.
  • 00:12:00
    And I want to go back to Robert Reich to start with my first question. Is your argument that imbalance, in and of itself, is the thing that’s destructive to democracy? Or is it the particular kind of imbalance we have now?

    Robert Reich:
    Well, let me make the argument very, very clear. John, this is not about the politics of envy. This is about a concern about the relationship between wealth and power. Wealth translates into power. Larry Summers and I both served in the government. Both of us know what that means. It's not only campaign contributions and lobbying, it's also huge amounts of money in to public relations campaigns, into hiring squadrons, platoons of lawyers who can appeal and contest regulatory proceedings under the radar. It's all sorts of ways in which big money even paying off professors to testify for the things that the wealthy want.
  • 00:13:02
    All of these ways in which you get a kind of vicious cycle of wealth creating political change that alters the market to reward wealth, that generates more wealth and therefore more political change in the direction of wealth. That's what we've seen over the last 50 years. That's why so many people think that the game is rigged against them.

    John Donvan:
    Let me take that to Allison Schrager, then. What's your take on that?

    Allison Schrager:
    Well, I mean, do we feel that way about how Bill Gates is spending his money trying to cure COVID, trying to cure diseases in Africa? And besides, I mean, I'm not going to sort of deny that certainly wealthy use their money to gain power about a lot of that is happening at the corporate level. And I think we're talking about individual wealth, not corporate wealth. And besides, if we want to address this problem, we should address it directly, as Larry has pointed out. There's ways we can address that, you know, problems with the campaigns giving all this sort of political influence.
  • 00:14:00
    But we don’t have to redistribute wealth to do it; let's just solve the problem directly.

    John Donvan:
    So, let me take that to Yanis. But take on Allison's point that the kinds of problems that your team has been talking about so far could be addressed other ways than having to take money away from rich people.

    Yanis Varoufakis:
    It's not a debate about the wealth tax. I'm far more concerned about corporate wealth, the accumulation of gargantuan power in the hands of very few corporations that distort markets, usurp markets, push real investment down, leading to what Larry Summers has described quite aptly as secular stagnation. In order to get out of this, you're not going to get out of this through tweaking income tax. I'll grant you, yet again, that we are not going to get out of it through wealth taxes. But we need to have a shift in the distribution of ownership, of wealth, of shares of control over corporations.
  • 00:15:04
    We need something. That's why I mentioned Theodore Roosevelt. We need to break up monopolies. This is all about redistributing power and wealth. This is exactly what happened in 1901; it's also what happened under the New Deal when, you know, FDR put the financial genie in the bottle, as I said. So let's have a discussion about whether wealth should be redistributed and let's, you know, then have another discussion about particular ways of doing it.

    John Donvan:
    I want to I want to take that to you, Larry. Yanis did not use the word "socialism" yet, but he is talking about a major reorganization of the way things are done in the capitalist part of the world as -- in terms of wealth distribution, as a way to address this issue and inequality. So, can you respond to that?

    Larry Summers:
    So, I'm not sure exactly what Yanis has in mind. He's written that we should end capitalism itself and that there shouldn't be any market where shares in companies could be traded.
  • 00:16:07
    I think that's a strategy that will lead to massive declines in everybody's income. And that's hardly the way to benefit the middle class. I believe that we should pursue a set of policies that would reduce the influence of money in politics. As I look, it's mostly corporations that do damage. It's mostly large coalitions, the Sugar Producers, the trade association representing 7,000 banks in the United States, the million realtors that keep prices high. We got to do something about those kinds of exploitations with political money, but a wealth tax isn't going to do that. Bob knows actually, because he's been around all of this as much as I have, that you can be an enormous player around a political party if you contribute $6 million.
  • 00:17:10
    There's no wealth tax we're talking about. There's no proposal they're making that's going to go anywhere near making Jeff Bezos, or whoever's number 400 on the Forbes 400, unable to be a big player in money in politics. You're just not going to go at it in an effective way by trying to take their money away. You can go at it by trying to insulate the system from the effects of money with all kinds of rules about transparency and all kinds of rules about where the donations can go. And so, the question is whether the center of your strategy is trying to tear down the people who have been most successful or whether the strategy is to allow people to be successful, to protect the system from being subverted, and to pick everybody else up.
  • 00:18:07
    Is the problem that some people have billions or is the problem that most people don't have hundreds of thousands? If we start from the idea that we want to do what's most effective for the people with hundreds of thousands, we'll get to the right kinds of answers, but redistributing the wealth won’t be the central theme.

    Robert Reich:
    If I can say something, I want to suggest as gently as I can that my very, very esteemed opponents are putting on the table a bunch of red herrings. We are, as Yanis keeps saying -- we're not debating a wealth tax and probably the best way of generating revenue, not just in terms of protecting democracy, but also generating revenue for all the other things we need to do would be higher levies on capital gains and eliminating the stepped up basis used to calculate capital gains at death, broadening the estate tax base, closing loopholes and shelters disproportionately used by the wealthy, such as carried interest.
  • 00:19:15
    And I could go through a long list, but the point is that all of these require that you accept the notion that now is the time to redistribute wealth. That is what all of these notions are about. In fact, Larry Summers, I want to congratulate you because everything I just listed, you put into a paper published recently about what policies are appropriate. And I want to agree with you publicly. These are all good ideas. But tell me that these are not about redistributing wealth. Of course they are about redistributing wealth. That's what they do; they redistribute wealth. They don't vilify the wealthy. This is not about tearing anybody down.
  • 00:20:00
    This is about generating revenue and also indirectly -- and we can talk more about it -- about protecting the democratic process.

    [music playing]

    Allison Schrager:
    The only way you can do massive wealth redistribution is through a wealth tax or I guess, as Yanis’ suggests, some sort of collectivization, that sort of either Stalinist or Maoist.

    Yanis Varoufakis:
    When did I exactly suggest that, Allison?

    [music playing]

    John Donvan:
    Allison Schrager, your opponent, Robert, in his opening said, again, we need the money. The money's there. You know that all of society could be lifted through investment in infrastructure, basic R&D, et cetera. That's where the money is. My question to you is, can that money be found in the pockets of the wealthy and brought constructively into the broader society and used that way without consequences, without negative consequences?
  • 00:21:02
    Allison Schrager:
    Well, it depends how you do it. I mean, I definitely agree with I share that, you know, the best way to reform taxes is to remove distortions, broaden the base. No one likes [unintelligible] bases, which is just a way of sort of avoiding estate taxes, which, no, I've never heard a good argument for. But the thing is, if we're talking about redistributing wealth, these are not this is not going to be a lot of large wealth distribution. The estate tax is 40 percent and only really applies to very rich people. And I mean, we could bring it down, but it's still -- a lot of people find ways around it. The only way you can do massive wealth redistribution is through a wealth tax or I guess, as Yanis’ suggests, some sort of collectivization, that's sort of either Stalinist or Maoist. I'm not quite sure what he's arguing, how else you could get --

    Yanis Varoufakis:
    When did I exactly suggest that, Allison? I'm sorry, when did I exactly suggest that? Please do not do this. Play the ball, not the man.

    Allison Schrager:
    I'm sorry.

    Yanis Varoufakis:
    Especially not with kicks that are completely out of order.

    Robert Reich:
    This is -- this is -- this is the very meaning of a red herring, quite literally [laughs].
  • 00:22:04
    Allison Schrager:
    Well, but how else are you going to take a lot of wealth from rich people and give it to poor people if it's not through taxation?

    Yanis Varoufakis:
    Well, you did hear me in my four-minute introduction refer to the two Roosevelts. Both Theodore and Franklin affected the massive wealth distribution through breaking down corporate power, putting the financial genie in the bottle and embarking upon a process of pricing into public service idle cash of rich people. So, you may want to dismiss your own [inaudible] --

    Allison Schrager:
    I mean, I would just -- I would disagree with that.

    Yanis Varoufakis:
    You’re calling me a Stalinist, but I think that this is -- you know, this simply lessens the quality of the conversation.

    Allison Schrager:
    Now, I would argue more that the New Deal --

    John Donvan:
    Do you withdraw the Stalinist/Maoist comment so that we can move forward?

    Allison Schrager:
    I do. I do. I do.

    Yanis Varoufakis:
    I would like you, Allison, to do this.
  • 00:23:01
    Please do.

    Allison Schrager:
    I do. I do. It was unfair. It was unfair, but I do think you're mischaracterizing [inaudible].

    Yanis Varoufakis:
    It was grossly offensive, Allison. It was not just unfair.

    Allison Schrager:
    I'm sorry.

    Yanis Varoufakis:
    It was grossly insulting.

    Larry Summers:
    Yanis. Yanis.

    [talking simultaneously]

    Larry Summers:
    Wait, I would not have said what Allison said. But when you write in 2020, "My dream is to end capitalism, you need to be prepared --

    Male Speaker:
    [unintelligible] wrote in 2020.

    Larry Summers:
    You need to be prepared to accept that people are going to read it in that kind of way.

    Yanis Varoufakis:
    No, I'm happy to answer that.

    Robert Reich:
    But, Larry -- wait a minute. Wait a minute. Can we just stop for a second?

    [talking simultaneously]

    Robert Reich:
    This has nothing to do -- this has nothing to do with what Yani may or may not have written years ago. This debate is --

    Yanis Varoufakis:
    I'm sorry --

    [talking simultaneously]

    Larry Summers:
    -- now, is time to redistribute the wealth?

    [talking simultaneously]
  • 00:24:05
    John Donvan:
    As the moderator I'm calling a time out. As moderator, I’m calling a time out on this. As moderator, I’m calling a time out on this. That's why, at Intelligence Squared, we sort of discourage labels and ad hominem argumentation because we then go down a rabbit hole of an individual feeling offended and we go around many circles. I appreciate, Allison, that you withdrew it. So, thank you.

    Larry Summers:
    If you start from the idea that you're going to wage some kind of war on the billionaires, even if you win, you're not going to take the money out of the system.

    [music playing]

    John Donvan:
    Welcome back to That's Debatable, presented by Bloomberg and Intelligence Squared.
  • 00:25:02
    The motion: is it time to redistribute the wealth? In 2019, there were an estimated 2,825 individual billionaires in the world; of those, 788 were in the United States. What does the modern global billionaire class mean for the economy and for politics today? Here's more from two of our panelists: Robert Reich and Larry Summers, who both served in the Clinton administration, but who take seriously, starkly different positions on America's economic future.

    Robert Reich:
    Would Jeff Bezos be as motivated as he was to create Amazon if at the end Rainbow was $2 billion instead of $200 billion? In other words, do we need the kinds and magnitude of riches that are extraordinary, that are new, that we haven't seen in this country before, in order to actually get Steve Jobs or Elon Musk or Jeff Bezos or anybody else to do what they are doing?
  • 00:26:07
    Now, when you talk about deserving, when you talk about the word "deserving," that assumes that the market itself is neutral, but the market is not neutral. The market has been created by human beings, by legislators and agencies and courts. And the wealthy because of the influence they have -- and I'll include big corporations have changed the organization of the market over time. Yani talks about antitrust law. Well, if antitrust law were enforced as it was enforced 40 years ago, the chances are the big high-tech companies would not be nearly as large as they are right now. They would still be doing a lot of maybe good things, maybe not so good things. But anti-trust has become a dead letter, pretty much largely because of the lobbying and political power and also the public relations exercises that a lot of the wealthy, including big corporations, have undertaken.
  • 00:27:10
    We could talk about bankruptcy laws. We could talk about securities laws. Why were the banks bailed out and almost nobody sent to prison? And why is Dodd-Frank -- that that piece of legislation that's supposed to prevent us from going down that rabbit hole of financial calamity, why has that been watered down by the big banks? Because of political power. Because they have so much wealth in the system. Larry, you know that; you and I have been there on the front lines.

    John Donvan:
    Robert, I'm jumping in. I'm jumping in because I want to move onto to something else, but I want to let Larry respond briefly to that point, and then I want to move on.

    Larry Summers:
    Here's the problem, Bob. Most do most of the reforms increase that I trust and so forth that you talk about, they are good ideas. They should happen. The problem is that you take somebody who's got $10 billion and you make them have $3 billion, they've got plenty of money to do the kind of lobbying that they do.
  • 00:28:08
    So, there are approaches that would stop us from having those policies. But they're not launching some kind of attack that starts from the objective of redistributing the wealth. So, the approach we favor -- the approach I favor, anyway, is an approach that starts from the objective of having a better, fairer society. And that'll lead you to want to have better anti-trust law; that will lead you to want to have stronger financial regulation. But if you start from the idea that you're going to wage some kind of war on the billionaires, even if you win, you're not going to take the money out of the system because it's going to come from corporate treasuries, which will still exist even when you've taken a lot of money from the billionaires. So, the question is, what's your central theme for responding to problems of society?
  • 00:29:06
    And pointing to billionaires and saying we should take their take their money away is -- may feel good, but it's an ineffective political strategy that doesn't respond to the problem. And when they get -- when you do take their money away and they dodge it by giving away the set of foundations and charities that will lobby for all the causes you loathe, you will have the problems you're worried about to a greater extent. So I share your commitment to a fairer society. The question is whether a political strategy like that the Bernie Sanders use this spring of focusing on tearing down the wealth is the right way to get to what you and I both want to get to in the United States.

    [talking simultaneously]
  • 00:30:01
    Robert Reich:
    You are using metaphors that don't have any bearing upon what is actually being discussed. The real issue here --

    [talking simultaneously]

    John Donvan:
    Okay, time out again -- time out because we have to move along.

    [music playing]

    Yanis Varoufakis:
    It destroys the market incentives and signals to have so much wealth concentrated in such few hands.

    [music playing]

    John Donvan:
    I want to move on to the next part of our debate. And what we're going to be doing now is actually bringing in our global audience. Over the past few weeks, thousands of people around the world alerted to this debate submitted their point of view by making an argument on the topic. But we will use now artificial intelligence to help us understand what matters most to this global audience, what arguments and ideas that they thought were most important.
  • 00:31:02
    And we did that by turning to IBM Watson, which uses AI to scale public opinion. Let's take a look at how that works. First, people around the world submit their arguments online. Then, the AI assesses the quality of the arguments, filtering out any irrelevant submissions and sorting the remaining arguments into for and against. Next, the technology identifies the recurrent key points, ranking them based on their quality and frequency. Finally, the AI creates a coherent narrative of the strongest and most prevalent points for both sides of the debate. Okay, and now we get to hear at a selection of the key points and arguments that our global audience, thousands of people around the world, thought were most important on this topic. So, let's go to that.

    Male Speaker:
    Hello. Ahead of this debate, more than 3,500 arguments were submitted on the motion, it's time to redistribute the wealth.
  • 00:32:00
    The following analysis used AI models to identify the critical key points made by each side. 56 percent were for redistributing wealth, with 20 percent of submissions arguing that there is currently too much wealth inequality in the world. One argument was that income inequality has increased dramatically over the past few decades, causing excessive suffering to large populations, and that if wealth is not redistributed, far greater will suffer. Another key point for the motion was that redistribution of wealth will allow those with less opportunity to achieve success. People also think huge wealth gaps lead to social unrest and decreased security for all. The remaining 44 percent were against the motion, with 15 percent of submissions arguing that redistributing wealth would discourage some people from working hard. One argument in support of this is that redistributing the wealth discourages individual initiative, entrepreneurship, and accountability for choices. Please visit the website to see the full results. Good luck to the human debaters.
  • 00:33:01
    John Donvan:
    All right. And as we continue with the human debaters, it was interesting to hear the global audience hitting on some of the same dividing lines. But there was one I want to zero in on that was brought up in that analysis that we haven't heard, whether there would be a behavioral impact on those whose wealth would increase as a result of a redistribution, that it would discourage the desire to work. Let's take that to you, Yanis, that there would be a moral hazard to redistribution of the wealth. What's your take on that?

    Yanis Varoufakis:
    If anyone, you know, a singer, actor, director, whatever produces a service, and a performance and the public out there are prepared to give millions in order to experience that, I'm quite happy for them to have it as long as they pay their income tax and they are legally okay. But what happens once he has accumulated this money in a financial system that breeds a lot more money at the expense of stagnation for the many out there who are not simply, as I said, left behind, but they are held behind by very low investment in good quality jobs, in high technology and so on.
  • 00:34:17
    So this is why we need, seriously, to tackle concentration of power, corporate power, and of wealth. This is why we need to redistribute wealth in a big bank way like it happened under the two Roosevelts. Because it stifles innovation, it destroys the market incentives and signals to have so much wealth concentrated in such few hands.

    John Donvan:
    And, Allison, I want to -- I want to thank you for the answer, Yanis. It took a little bit away from the question that I asked, although you started at it. But I do want to hear from the other side on this question of whether there's a moral hazard to people who have less now getting more in a distribution, or would that actually be a beneficial thing?
  • 00:35:01
    Allison Schrager:
    Well, I'm not -- I've never really completely bought the argument that Jeff Bezos would have only worked as hard if he only made, you know, 500 million versus, you know, several billion. But I do think there are definitely consequences. Again, I'm still not clear on how we're redistributing wealth. I guess the one thing we're all agreeing on is on a higher capital, income taxes. And what that certainly does do is I'm not sure it will reduce the incentive to work hard, but it will certainly reduce the -- sort of the gains from investing. And so, whenever you make an investment, it's not that the money just sits there idly. It's not like the money of the rich is just idle. It's actually invested. And usually they put their money in something called a risky asset. And when you have a high capital income tax, you know, that lowers the returns from risky investment, which might mean -- I mean, maybe they'll still start to try to find a sort of good company. But where will the capital for that company come from? Because often it's rich people who invest in sort of new startups and are willing to take on that risk.
  • 00:36:00
    And the returns from that investment will be smaller. And so, it might -- maybe won’t reduce the incentives to work hard, but it will reduce the incentives to invest. And that's just as important.

    Larry Summers:
    Let's be clear about where we agree and where we disagree. I don't think there's anybody here -- possibly Allison is in the category, but certainly, I am in agreement with Bob and Yanis that a more progressive tax system would be desired. That's not the question. The question is whether the center of the strategy should be around taking from the wealthy, which runs the risk that things will be pushed to a point where you will do substantial damage to the economy in terms of incentives. Bob's absolutely right. I've written in favor of higher capital gains taxes in terms of stepped up bases, in terms of closing the estate tax loophole. There are things we can do that will raise money from people who are wealthy in order to make necessary public investments in our country.
  • 00:37:05
    And those investments should be just disproportionately paid for by people who are wealthy. And yes, we should do things that reduce the influence of money in our politics and in our policy process. That is not the debate. The debate is whether the basis of the economic strategy should be some concept not of raising money for necessary public functions from those who are most fortunate, but whether the center of our economic strategy should be taking from the people who are most successful in order to have substantial distributions to the rest of us.

    [talking simultaneously]

    Robert Reich:
    That's wrong, okay?

    Larry Summers:
    -- in a strategy based on taking and redistribute?

    Robert Reich:
    Okay, let me just -- if I can.
  • 00:38:00
    Larry is trying to restate and reinterpret and reframe what we're debating. Let me go back to what we were actually talking about. If we adopt many of the policies that Larry and I and I believe Yanis also have supported, everything from stricter antitrust enforcement to a more progressive income tax to better regulation of financial institutions, and I could go on, and the list is quite long, the consequence of all of these would be to redistribute wealth from the people at the top to the middle class and below. Now, why do you call that a strategy that is a strategy of envy or a strategy that is based somehow on the goal of redistributing wealth? No, the consequence would be to redistribute wealth because we are trying to do other things. We're trying to both provide revenue for a variety of purposes that are publicly needed, and we're also trying to, at the margin, reduce that kind of political impact the great aggregations of wealth in corporations and by individuals have created.
  • 00:39:13
    Now, that's what we are actually debating. We're not debating whether redistribution itself should be or necessarily is the goal. We're talking about the consequence of policies that we all agree on.

    [music playing]

    Larry Summers:
    Let's raise taxes in the right way. Yes, let's have the right regulation. But let's not make tearing down the wealthy the theme and organization of our economic policy.

    [music playing]

    John Donvan:
    Let's move on to round three, the resolution one more time. It's time to redistribute the wealth. Here, making his closing statement in support of the motion, Robert Reich.

    Robert Reich:
    In 2015, a year before the last election, I was out in Minnesota, Wisconsin, and Missouri, a lot of Rust Belt states, southern states, doing research for a book.
  • 00:40:11
    I was doing Free-floating focus groups, and I kept on asking people -- middle-class, working-class people, many of them hourly wage workers, who do you support in the upcoming presidential race? And most of them came back to me and said something quite surprising. In the same sentence, they said, "We like Bernie Sanders, and we also like Donald Trump." Now, I was amazed when I first heard that because I had never heard those two men, the names, in the same sentence. How could that possibly be? But what I discovered after listening to their stories, these middle-class, working-class people in the Rust Belt and in the South, what I heard from them is we want somebody who's going to shake things up. We want somebody who's antiestablishment. We want somebody who's going to be on our side.
  • 00:41:02
    In other words, what we have created in this country because of the enormous power of great wealth concentrated in the hands of a few, because of the enormous power of big corporations, concentrated power in terms of their political ability to get what they need, people in this country believe the game is rigged, and they are willing -- again and again whether they are on the left or the right, Democrats or Republicans -- to support somebody who they believe is going to topple the power structure. That is a recipe for instability.

    Allison Schrager:
    So I also the story. Last March, Kylie Jenner, the reality show and makeup mogul at just 21, was declared a billionaire when she sold 51 percent of her cosmetics company for 600 dollars. Although about a year later, as people look a little bit more closely or the company was run by public company that was little more rigorous, it was revealed that while Ms. Jenner is indeed a very wealthy woman, she is not a billionaire.
  • 00:42:00
    And I think this story reveals a couple things. One, we really don't know how wealthy a lot of people are. If you have an incentive to make your wealth look larger, you can; if you have an incentive to make it look smaller, like you have a tax liability, you also can do that. And Kylie Jenner also shows, you know, we might have mixed feelings about the wealthiest people. You know, the Kardashians are a divisive bunch of people. But you can't deny that the wealthiest people in America, a lot of them made their money in not a zero-sum way. They created value. They created jobs. They created products that we use every day. And economist William Nordhaus estimates that innovators only capture 2 percent of the economic value they create. So is there scope for more equality, for improving the safety net, for expanding the equality of opportunity? I mean, absolutely. I think these are the hallmarks of a civilized society. But there are always tradeoffs in cost to redistributing resources, and wealth redistribution tends to pose the most cost and offer the fewest benefits.
  • 00:43:06
    Yanis Varoufakis:
    If life under capitalism resembled the 100-day sprint in the Olympic Games, of course it would be absurd to ask the fastest athletes, you know, to slow down or to, you know, stop them from going fast in support or in solidarity with the laggards. That would have been absolutely ridiculous, and nobody would want to watch this race. But life is no Olympic Games. It resembles more -- these days -- the Roman arena in which very well-armed gladiators are facing victims that are weaponless. Victims were defeated not because they did not try hard enough or because they were not clever enough, but because they were unarmed, because of the asymmetry in the initial distribution of armor, of wealth. You see, for a while now -- I think we know that, don't we? Hard work can no longer be relied upon to lift people from poverty.
  • 00:44:03
    This is the tragedy of the last 30 years. But let's finish off positively, and let me convey to Larry my kind of socialism, the kind of ideal that fires me up. You know, it would be a sporting parallel, but it's not going to be the Olympics; it's going to be the National Football League. Europe NFL, where in the interest -- remember, in the interest of competition, not fairness, teams face a harsh salary cap, and the best players, the best young players, are forced to sign up for the weakest of teams. So by preventing the successful team from monopolizing the best players, the NFL constraints liberate the true spirit of competition. This is the point about, you know, socialism, which is NFL, living together with markets in sync with harsh competition, which is what the NFL is, is, I think, a good model for the future.
  • 00:45:07
    Larry Summers:
    I think Yanis showed what this debate is about very powerfully in what he just said. By signing up for the resolution that put central focus on the redistribution aspect, he showed where he was. He thought the NFL, where there're salary caps put on people, where the best players aren't allowed to go work for the best teams, where it's all centrally controlled, he held that out as a model for how our society should be organized. And that's the kind of direction you have when you make redistributing wealth the central theme of your policies, rather than creating a better society for the middle class the central theme of your society. And that's not where I think we should go, and I think it's pretty dangerous.
  • 00:46:01
    And here's a way of thinking about it. I asked myself the question, would it have been better if there were more people like Andrew Carnegie? If there were more people, for all his flaws, like John D. Rockefeller? Would we be a better, more flourishing society with more of that or with less of that? Would we be better if we had five more people who started in America like Steve Jobs? I think we'd have been better. So, yes, let's raise taxes in the right way. Yes, let's have the right regulation. But let's not make tearing down the wealthy the theme and organization of our economic policy.

    John Donvan:
    All right, that concludes the final round of the debate. Let's look how it went. Our audience cast a vote before and after the arguments, and it is the difference between the first and the second vote that determines our winner. Here are the results. On the first vote on the resolution, it’s time to redistribute the wealth, 57 percent of our audience watching agreed, 20 percent were against it, 23 percent were undecided.
  • 00:47:08
    That's the first result. It's again -- we're looking for the difference. So on the team arguing for the resolution, it’s time to redistribute the wealth, their first vote was 57 percent. Their second vote was 59 percent. They pulled up two percentage points, which is now the number to beat. Let's look at the other side. The team arguing against the resolution. Their first vote was 20 percent. Their second vote was 37 percent. They pulled up 17 percentage points. That means that they are the winning team. The team arguing against the resolution, it’s time to redistribute the wealth, declared our winner. Congratulations to them.

    But really, congratulations to everybody for taking part in the debate, for shedding light, for teaching us, and for making it interesting. Stay tuned for Bloomberg's next debate in partnership with Intelligence Squared on November 6th at 7:00 p.m., the U.S.-China Space Race: is it good for humanity?
  • 00:48:01
    I'm John Donvan. More Bloomberg television starting now.

    This is a rough transcript. Please excuse any errors.
Post-Debate
Winner

Against The Motion
37 %
59 %
For The Motion
4 %
Undecided
Pre-Debate
Against The Motion
20 %
57 %
For The Motion
23 %
Undecided
Breakdown
Against The Motion
16% - Remained For the Against Side
13% - Swung From the For Side
8% - Swung From Undecided
For The Motion
4% - Swung From the Against Side
42% - Remained For the For Side
13% - Swung From Undecided
Undecided
0% - Swung From the Against Side
2% - Swung From the For Side
2% - Remained Undecided
Post-Debate
Winner

For the Motion
78 %
22 %
Against the Motion
0 %
Undecided
Pre-Debate
For the Motion
63 %
19 %
Against the Motion
19 %
Undecided
Breakdown
For the Motion
4% - Swung From the Against Side
63% - Remained For the For Side
11% - Swung From Undecided
Against the Motion
15% - Remained For the Against Side
0% - Swung From the For Side
7% - Swung From Undecided
Undecided
0% - Swung From the Against Side
0% - Swung From the For Side
0% - Remained Undecided
About The Debaters
For The Motion
An image of Robert Reich
Robert Reich − Former Secretary of Labor
Robert Reich is a professor of public policy at the University of California at Berkeley and senior fellow at the... read bio
An image of Yanis Varoufakis
Yanis Varoufakis − Former Finance Minister, Greece
Yanis Varoufakis, a former finance minister of Greece, is secretary-general of the MeRA25 party and professor of... read bio
Against The Motion
An image of Allison Schrager
Allison Schrager − Senior Fellow, Manhattan Institute
Allison Schrager is an American economist, author, and senior fellow at the Manhattan Institute, where she studies... read bio
An image of Lawrence Summers
Lawrence Summers − Former Secretary of the Treasury
Lawrence Summers has held several senior policy positions, including secretary of the Treasury under the Clinton... read bio
Main Points
For The Motion
  • As wealth becomes more concentrated, the global elite are richer and more power than ever before. This economic inequality fuels corruption in both the public and private sectors and undermines democratic values.  

  • Wealth begets wealth, and the market, as it stands, will not correct itself. A wealth tax or similar redistributive policy is needed to reduce inequality and promote economic justice for all.  

  • Income and wealth inequality are inexorably linked to social class and race. We must act to address the racial wealth gap and pose a more inclusive, economically just society.  

Against The Motion
  • Global poverty is in decline. While inequality may be increasing in some countries, the world's poor are better off now than they were 100 years ago.  

  • Wealth taxes are not feasible, and no country has fairly or effectively redistributed wealth. Further, when meritocracy is no longer valued, social and political turmoil soon follows. 

  • The world’s wealthy make a fair contribution in taxes, and redistributive policies, such as a wealth tax, would incentivize those with wealth to hide their assets. Further governmental intervention in free markets should be met with scrutiny.