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I was born in 1971.
I turned 18 in 1989, when the Berlin Wall came down.
I remember being glued to my radio
listening to the fall of the communist regime.
As a student, I travelled to Romania, Hungary and Russia.
So I personally know the impact this collapse had.
I saw an economic and social system
in a complete state of failure.
A political system that had promised human emancipation,
but instead ended up producing misery
and incredible political repression.
And when the fraud of the communist promise was exposed
and it collapsed,
it greatly reinforced the capitalist argument.
The problem was that it went too far.
The fall of the Soviet Union
led to infinite faith in the deregulation of markets
accompanied by a new
glorification of private property.
As a consequence,
we're facing challenges of rising inequality
and the rise of nationalism and xenophobic tensions,
like there was in the very unequal world
before World War I.
And I'm very scared for the 21st century
because what I see in the historical data
suggests we risk returning to a capitalist system
similar to the highly unequal world
of the 18th and 19th centuries.
In 18th century Europe,
capital is concentrated in the hands
of a very small group of people.
The aristocracy represents 1% of the population.
The boundaries of money limit social mobility,
and hard work and education
don't allow you to climb very high.
Through the evocative power of literature,
film and popular culture
we can see the importance of capital throughout history.
It's a story much darker
than the idyllic vision
of a march towards progress and light.
Life in the 18th century is not static.
We see the development of new political ideas
demanding equal rights
and an end to privileges linked to birth and nobility.
It turns out the French Revolution is based,
in part, on hypocrisy. With a vision of equality
that is, at best, a little optimistic or naive
and at worst a little cynical.
We imagine that equality is going to occur naturally
or spontaneously, a bit like a fairy tale.
But the reality is that we also need political institutions,
an education system, health care, a transport system
and a tax system that targets the highest incomes.
But none of this was put in place
after the French Revolution.
The 19th century is when the division of labour,
inequality and power are established worldwide -
first with slavery,
and then with incredibly violent colonial domination.
It's very difficult to say how much of European wealth today
comes from their colonial past.
But what is clear is that the crucial advantage
won at the time of the Industrial Revolution
was closely linked with military force.
From 1870 to 1914, the United Kingdom and France,
who are the two main colonial empires,
own so much around the rest of the world
and it brings them so much profit,
interest, dividends, rents
that they can afford to keep on investing
and become owners of more of the world.
So the rest of the world works for them.
Around 1914, in Paris,
1% of the population owns 70% of all assets.
And in contrast, two-thirds of the population
die without any assets.
You have this rise in nationalism and competition
between European countries,
partly due to very strong social tensions
linked to the stagnant standard of living
and very high levels of inequality.
And competition between countries, nationalism,
is often used by elites
to make people forget class conflict
and instead focus on national identity.
And all this contributes to the arrival of
the First World War in the summer of 1914.
If you read John Steinbeck's Grapes of Wrath,
you realise the extent of the shock caused by
the complete collapse of economic activity.
Banks fail one after another,
which results in everyone losing their savings.
And this decreases in demand in other areas,
causing a cascading phenomena of bankruptcy and unemployment.
The crisis of the 1930s creates such a strong trauma
that leads to the public and politicians
holding capitalism accountable.
We want to see no more class divisions.
We want to be one people.
And you, my youth, are to be this people.
The wars themselves are used to destroy capital.
Firstly, there are bombings that destroy entire cities.
But at the same time,
this only accounts for a third of the total loss of capital.
So where do the other two-thirds come from?
A third is from inflation that destroys the public debt,
which was lent by the citizens to finance the war.
And then there is a third from new rules,
like rent controls,
nationalisations and financial regulations.
But this collapse of capital is not necessarily a bad thing
because the power relationships within society are transformed.
Everyone is equal in the face of death.
Wars, with their death and despair,
are also moments when humanity is found in us all.
This new political context will ultimately lead
to a realisation of the spirit of the Enlightenment
and of equality proclaimed in the 18th century.
If you look at the development of inequality
through the 20th century, the most striking transformation
is the growth of an extremely strong middle class.
Until 1914, the middle class doesn't exist.
Or more accurately, they're almost as poor as the poorest.
The decades after the war -
30 years that saw glorious economic growth -
are marked by a steep increase in purchasing power,
especially for lower and middle-class workers
who can buy consumer goods, improve their standard of living
and save money to buy a house and acquire capital.
They're a group who are neither very rich nor completely poor,
but still have a substantial share of national capital.
But in recent decades,
the share of wealth owned by the middle class
has started to decline sharply in the US
and a little less sharply in Europe.
Clearly we've taken a very different direction,
which can be quite disturbing if we look into the 21st century.
One of the greatest challenges for the future
is whether the middle class will continue to shrink,
with the risk of returning to an impoverished middle class
like we had a century ago.
Every country feels the need to tell a story about
why it's richer than another or why it has become poorer.
And it's this story that Reagan and Thatcher tell
the American and British public.
In the United States there was a feeling
that Germany was catching up,
that Japan was catching up -
these countries that lost the war.
And Reagan, and also Thatcher to a certain extent,
use this ideological argument to say,
"Look, these countries are catching up.
"Something needs to change. What could we change?
"Ah, it's because of the welfare state
"that was put in place following the New Deal.
"That's what's made us soft.
"And so we must return to the mythical capitalism
"of the 19th century. That's how we're going to re-energise.”
When you have too strong a concentration of capital
it leads to excessive influence over the media,
and also financing of political campaigns and political parties
that are in their own best interests.
But this logic of 'one dollar, one vote' is completely opposed
to the democratic logic of 'one person, one vote'.
In 2015, Google Alphabet reported making $15.5 billion
profit in Bermuda.
But nothing actually happens in Bermuda.
This is the first way countries
steal the tax base from each other.
The other way is through the industry of wealth management,
which has developed in many countries.
This industry sells shell companies and numbered accounts
protected by bank secrecy to wealthy families.
You can't tax what you can't measure.
And so we live in an incredible statistical fog
about who owns wealth, who owns real estate in New York,
who owns real estate in Paris.
We check the records and we see shell companies.
The key to effectively fighting tax havens is pretty simple.
We need sanctions against territories
that enable tax evasion.
And we have to change the way we calculate
taxable profits in each country.
Let's take Apple.
Imagine Apple made $50 billion in global profits last year
and 10% of its worldwide sales were in France.
Then France could say, "10% of Apple's global profit,
"so $5 billion, should be taxed in France.”
The beauty of this system is that
multinationals can manipulate the location of their profits,
but they cannot manipulate the location of their customers.
Their customers are in France, in Germany,
in England, in the United States.
You cannot send them to Bermuda.
The average income in China since the late 1970s
has increased by 800%.
800% is huge.
But the income of the richest 1% increased by 2000%.
So it is a country that is growing,
but this growth is highly unequal.
It's very likely that in the 21st century
inheritance will return to playing a role
as significant as in 19th century England and France.
Inheritance allows a small portion of the population
to lead a very opulent lifestyle
because inherited wealth produces an income.
In fact, the rate of return on capital throughout history
has almost always been higher
than the rate of economic growth.
If we look back to 1700,
which is the very beginning of Industrial Revolution,
until today, 2018, the growth rate of the world economy
is 1.6% per year over three centuries.
This is much less than the rate of return on capital,
which is around 4% to 5% a year over the same period.
But is it catastrophic? No, not necessarily.
If everyone owned a portion of the capital,
so if everyone owned an apartment
and shares in a pension fund,
it wouldn't be so bad that the return on capital
is higher than the growth rate.
The problem is concentration of ownership
and therefore also of power within society,
which leads to a reproduction of social hierarchies
and rising tensions among the working and middle classes.
Disperse yourselves or we will have to use force.
Behind mass immigration is Islamism.
Behind mass immigration is terrorism.
There are always politicians
tempted to exploit the rising inequality.
And you could see this very clearly
in the world before 1914.
And I'm very afraid at the beginning of the 21st century
that because we feel we cannot
regulate international capitalism,
we cannot properly tax multinationals and billionaires,
instead we vent our anger on immigrants.
It's safer than attacking multinationals.
But the truth is,
to solve the rise and persistence of inequality,
we need a progressive tax on capital.
And also, ownership rights cannot be eternal.
The moment capital is inherited by the next generation,
and also each year if you own a lot of capital,
you have to return to the community 1%, 2%, 3%,
or why not 5% or 10% if you own billions and billions?
And if you continue to invest your capital usefully,
with high returns, you can continue to prosper.
But if financial markets allow you to have a high return
without doing anything,
then tax rates are set to erode this mechanism.
This means we'll be able to control
some of the concentration of capital,
and therefore political power,
and also access to property for the middle class.
A lot of people are not ready to discuss the merits
of strong taxation rates on revenue and inheritance.
But without this to regulate capitalism,
there will be disastrous consequences for everyone.
The challenges today of creating a more equal society
are obviously different from the 20th century.
But the important point I want to stress is that
it's not technically impossible;
it's primarily a political and intellectual challenge.
And the good news is that
we can also find reasons from history to be optimistic.
History shows us that if we want society to be cohesive
in a peaceful and harmonious way,
we must prevent inequality from becoming too high.
I am for controlling capital to go beyond capitalism,
with ways that are more democratic, more inclusive,
and finally allow us to project ourselves into the 21st century.