Full transcript: Denis Staunton's interview with Thomas Piketty


The full transcript of Denis Staunton's interview with Thomas Piketty

Thomas Piketty's Capital in the Twenty-First Century has been hailed as the most important economics book in decades. The product of more than a decade of study into the distribution of wealth over two centuries across the world by Piketty and an international team of researchers, it concludes that, if the market is left to its own devices, wealth inequality could return to levels not seen in Europe and the United States since before the first World War, producing a "patrimonial capitalism" where inherited wealth takes on an ever greater importance. The reason is that the return on capital has tended throughout history to be greater than the rate of economic growth, so the share of income earned by wealth tends to increase compared to that earned by labour. The trend was reversed during the middle of the 20th century, when economic growth outpaced the return earned by capital, partly because so much wealth had been destroyed by the two world wars, and inequality was reduced. This has been reversed since the 1980's, however, with inequality rapidly rising once again. Below is an edited transcript of an interview conducted in Paris on 10 June 2014.

Q. The reception of the book has been phenomenal, particularly in the United States but elsewhere too. What have you found most striking about it?

Different people in different parts of the world take different things from the book. In the United States, of course, right now there is a big concern about rising inequality. You know, in Europe, there are different concerns. In Latin America, you have readings of the book that are very different. 

In Chile, the president  Michelle Bachelet is doing a big tax reform, and she's saying that this is following my book. I'm not sure it is but it's related. They have very different problems. It's not about how to deal with a welfare state that represents 40 per cent of GDP, their problem is now to move from 16 per cent of GDP tax revenue to 18 or 19 per cent and how you pay for your public education system.

I think there are different possible readings of the book. I was very excited by the success of the book in North America but at the same time I am at least as much interested in the European debate as in the American debate and I'm very interested in the Chinese debate about wealth inequality. I guess different people can take different things from the book.

Q. Many progressives, disappointed both by revolutionary socialism and social democracy, have been seeking a new theoretical rallying point. Do you believe your book can provide it?

I certainly believe in the power of ideas and the power of books but I think it's too early to say what the impact of this book will be. In a way it has something in common with - even though it's a very different perspective - Milton Friedman with this book in 1963, which was also a book about economic history. It was a book about the monetary history of the US and the very powerful political conclusion was basically all that we need in order to regulate capitalism is a good central bank.

 If you have a good Federal Reserve, you're fine. You don't need a welfare state, you don't need progressive taxation. If you have a good Federal Reserve that prevents the financial system from collapsing when you are in the middle of a financial crisis, then the market forces will take care of the rest. And in a way we still live in the legacy of this book. 

I'm not saying everything that happened did so because of this book but I believe books can have an impact. I guess my own book is coming half a century after this one so we have a lot more historical experience to benefit from and also I'm not only concerned with the macroeconomic growth rate and the business cycle like Milton Friedman.

 I try to have a broader view of the distribution of income and wealth and my conclusion is yes, we have to try to rethink the kind of institutions we need on order to use market forces and capitalism in the most socially efficient way, for the benefit of the largest possible proportion of the population and society. 

It's true you certainly need a good central bank and that was useful after 2008 to have central banks but we also need a proper education system that aligns efficiency with equal opportunity. If you have very high tuition fees it's difficult for people from poorer backgrounds to access higher education and jobs and we also need progressive taxation, both progressive taxation of income and wealth. 

The Reagan years and the Thatcher years of the 1980's and 1990's, after the fall of the Berlin Wall, led to an almost complete dismissal of progressive taxation. I think, of course, there are limits to what progressive taxation can do and I believe much more in education than in progressive taxation to reduce inequality but there are also things that education cannot do and that progressive taxation can do. 

Is it useful to pay managers $10 million instead of $1 million or 50 million rather than ten?  I'm not sure. You know when you look at the data on company performance you don't really see the extra performance that would justify such extreme pay. Progressive taxation, if it’s applied so that very high marginal rates are only applied to very high managerial compensation, can be a good way to limit the extreme rise of inequality. It can also be useful in the regulation of wealth and the regulation of wealth dynamics.

Q. How big an issue is corporate tax where wealth inequality is concerned?

I think this is becoming a really important issue and it could become even more important in the future. Of course Ireland is an extremely interesting country from this point of view. I think the competition between European countries for corporate taxation is a process that is not over. 

We are not at zero per cent yet but we can move in this direction. It's very tempting for small countries - and let me say that every European country is soon going to be very small - just to compete with their neighbour and try to attract their corporate tax base but this is really a zero sum game. In fact, it's a negative sum game because if we all go to 10 per cent of zero per cent, we don't have corporate tax revenue in the long run. 

This is increasing the rate of return to capital and can also be bad for the growth rate or at least for job creation and labour income growth, because in order to compensate for the loss of tax revenue, you tend to overtax labour and in particular low-skilled labour and medium skilled labour. So in the United States the corporate tax rate at the federal level right now is 35 per cent and there is state corporate tax is between 5 and 10 per cent that you need to add to that. So if you make the addition, you see where you get. 

Now in Europe everybody agrees that 30 per cent is crazy, that we need to go to 20, maybe 15, maybe 10, maybe 5, maybe zero. Except that the total tax burden is higher in Europe than in the United States. So if you tax corporate profits a lot less, then you have to make up the revenue by taxing labour more, by taxing consumption more. 

I have nothing against consumption taxation but you have to see that it's not possible to have progressivity with consumption tax, or at least it's very difficult. It's typically a flat tax or even regressive in many ways because higher income groups tend to save more and consume less and also, the reason why we like Value Added Tax in Europe so much right now is that this is simply a way to tax the imports of our neighbours. 

It's very tempting as an individual country to cut corporate tax and tax the imports of your neighbour but if everybody does that, if we all have VAT at 25 per cent or if we all have VAT at 30 per cent, we all tax each other's imports and at the end of the day nobody has any extra competitiveness. Our competitiveness with respect to China is not going to be determined by an extra 5 per cent tax rate on their imports. It’s a negative sum game that we are playing in Europe.

Q. Officially, Ireland is not a tax haven, according to the OECD. Do you think it has the characteristics of a tax haven, if you look at the corporate tax structure?

Yes I think it does. Maybe less than the City of London or Luxembourg, but I think Ireland does have some characteristics of a tax haven. Or to put it this way, I think more and more European countries are behaving like tax havens as far as corporate taxation is concerned. Either they cut the tax rate or they create their own little tax scheme, in the definition of the tax base, so they get some of the tax base of their neighbours. 

It would be stupid to blame Ireland because everybody is doing the same. I think we need to put in common our corporate tax at the European Union level or at least at the level of the eurozone countries. If some countries don't want to enter into that, it's OK, it's their own right. But then they should not be allowed to make it impossible for the countries that want to do that to do it. 

For the countries that don't want to enter more cooperation, maybe it will not be possible to benefit from the same advantages. You cannot get rich through free trade and then steal your neighbour's tax base - this is not the market economy. This is just not working. 

The problem in Europe is that we have been accustomed for so long to have free trade in exchange for nothing at all that we feel that this is the normal way to go. But this is not the normal way to go. If you want free trade, you also need cooperation in the fiscal, social and environmental areas so that you have some equilibrium between wealth creation coming from free trade and the distribution of wealth.

Q. The problem for Ireland is that we have an economic model that's based on this, so that there are 1.9 million people working in Ireland and about a quarter of a million of them work for foreign-owned multinationals for whom the tax arrangement is a very important part of the reason they're there. 

I think I am more optimistic than you are about Ireland. In the long run, I don't think the Irish model relies on that. I think in the long run the Irish model, like other European models, relies on high productivity of the labour force and high innovation. 

You cannot have a development model that's just based on the fact that you have a lower tax rate than your neighbour and you attract some of the investment. And as you know, some of this investment is actually just in the books - it's not real investment. Irish and European authorities discovered a few years ago that part of what was in the books was actually not there. 

That’s the problem; this little game of tax optimisation is not only bad in terms of tax revenue but also in trying to get a balanced tax system between labour and capital and consumption. It can also be bad in terms of financial regulation and financial transparency and it tends to exacerbate financial opacity. 

Another characteristic of the European economic system is that we have relatively small countries with huge cross-border assets. So even when the net asset position of a country is close to zero, in countries like Italy and France and Britain, (Irelands net position is actually negative), the thing is that you have a huge gross asset position. This means that a very big part of the country's companies and real estate is owned by foreign wealth holders. At the same time a big part of the savings of the domestic householder is being invested abroad. 

This would be fine, except that if the financial regulation and taxation system is not organised at the same global level, then this creates a lot of fragility at the national level because suddenly you realise that the asset side of your balance sheet is worth less than you thought and your liability side is worth more and then you just fall in the negative side of the balance sheet much more than you thought. We would all benefit from more European cooperation and more financial transparency. 

Q. You've identified the eurozone as a unit within which you could start to do some of the work involved in creating a wealth tax. Except you've got centre-right governments and you’ve got strong nationalist forces. How can you conceive of getting from the political situation that we find ourselves in now to the kind of situation you're looking at which is not just a wealth tax but also some kind of democratic structure as well?

I'm not saying it's easy. I think there's no easy solution out of the crisis we are in. All solutions are complicated. Austerity is a complicated solution as well. So if we look in the history of public debt, in my book I try to show that we've already had large public debt in the past and that some of them were resolved through austerity but it can take a very, very long time. 

The best example is probably the British public debt in the 19th century where it took an entire century of austerity. So between 1815 and 1913 the British public debt went from 200 per cent of GDP to 20 per cent of GDP, just through austerity. But it took an entire century. So during an entire century you had a primary budget surplus of 1-2 per cent of GDP every single year, which was more than the British government was putting into its education system. 

Now was it a good way to prepare the country for the 20th century? You know, I'm not sure. Many people believe that actually the decline in labour productivity in Britain in the 20th century relative to Germany, France or even Italy comes from this low investment in education, and I don't want Europe to do the same today. Right now I can tell you in France the total budget for universities is about 0.5 per cent of GDP. We put a lot more money into our interest payment for public debt than our university system. 

If you want to get rid of public debt of 90 per cent of GDP just through austerity with zero growth and zero inflation, it’s very difficult. Inflation can make things faster. The problem is that inflation is like actually a tax on low-wealth and middle-wealth people. High-wealth people don't actually suffer so much from inflation because they typically have stock market portfolios and real estate assets and those values are going to increase as much as the consumer price index so they will not lose so much from inflation, whereas people who only have saving accounts which are just nominal assets will lose more. 

A progressive tax on wealth is just like a civilised form of inflation. Last November there were an IMF report and a Bundesbank report proposing progressive taxation of wealth as a way to reduce the extreme levels of public debt that we have today. To me this shows that thinking about these issues can move faster than we think.

Q You've a whole passage on Cyprus and this resonated with us in Ireland. At the time of the bank bailout in Ireland, many people called for burning the bondholders, administering a haircut on them. You think this is a bad idea. Why?

I prefer to have a progressive tax on net wealth than a haircut or inflation. A progressive tax on net wealth is a civilised form of inflation. It's also the civilised form of a haircut. It's the same in the sense that, at the end of the day, someone has to pay. 

When you want to reduce public debt or if you want to reduce a huge debt on some bankrupt financial institution, you will have to reduce private wealth somewhere. You know, it's not going to be paid by the other planets in the solar system. It will have to be paid by someone on our planet so it will have to be paid by some form of private wealth or another. There's nobody else to pay for it. 

The question is, do you do it in a civilised manner in the sense that you protect middle class people who have €100,000 or €300,000 and you ask a higher tax rate on people who have 1 million and an even higher tax rate on people who have 10 million. Or do you do it in a sort of blind way? Inflation is completely blind because you really don't know who's going to pay and typically lower wealth people pay a lot. 

The haircut looks fair to some people because in a way this is saying, OK the people who have taken a risk will pay. Except that this notion of justice is in fact I think an illusion, because very often some of the big guys actually manage to get rid of the bad assets early enough to reinvest in other assets so you really don't know who's going to pay in the end. For this reason I think it's much better and much more transparent to have a progressive tax on all forms of assets. 

In the case of Cyprus, I don't know what the Russian oligarchs did with the money they had in Cyprus but it's quite likely that they managed to reinvest some of it elsewhere. The Cyprus tax was almost a flat tax. It was almost the same tax rate of 6 or 7 per cent on anybody with a €10,000 savings account and someone with a €10 million portfolio. 

Wealth is so concentrated and the middle class and lower class have so little of it that you cannot tax them at the same rate. Protecting lower and middle class wealth is already what we do when we say that the first €100,000 in a bank account will be protected. The progressive tax on net wealth is just a generalised way of doing that. 

I think if, in the future, we have other banking crises like Cyprus but on a larger scale - Cyprus was small so it was not so bad but if it's in Ireland, in Spain, in Italy or in France - and with the kind of governance system that we've had in the eurozone, where finance ministers one night make a unanimous decisions in favour of a flat tax on bank accounts and then the next morning nobody wants to defend the decision,  basically they do that because there is so much financial opacity that they actually don't know.

Q. Should we mutualise euro zone public debt?

What I am pushing in the end of a book and what I have pushed in a manifesto for political union of the eurozone is first to have a eurozone parliament based on national parliaments. You can take members of finance committees of the Bundestag, of the French National Assembly, of the Irish parliament (that would be population based). The kind of decision we could put in common is basically the decision that we cannot take on our own any more. 

So typically taxing corporate profits is something that we are not able to do on our own any more in the sense that national sovereignty in this area has become an illusion. It is just the sovereignty of letting multinationals pay zero tax everywhere. It's not much of a sovereignty. Regarding the mutualisation of public debt what we propose in this manifesto is that we should mutualise the issuance of new public debt but we will keep separate accounts. 

There was a proposal made in Germany at the end of 2011 which was this redemption fund. Here the idea was that we put together a common public debt fund. All the debts that are in excess of 60 per cent of GDP. Of course some countries like Italy have 120 per cent so they will enter the redemption fund with a bigger initial stake than Germany or France and so we will keep separate accounts so that each country will reimburse its own share, so that Germany or France are not going to pay back for Italian debt. 

We have to keep separate accounts but what we put in common is the ability to reissue public debt in order to refinance this fund. In other words what we have in common is the interest rate. Instead of having 18 different interest rates in the euro zone there will be only one. What this implies is that we also put in common the choice of the deficit level. 

That's the difference between our proposal and the French government proposal which in fact is not really a proposal because Hollande has been saying for a long time that we should mutualise public debt but then he didn't make a proposal for more political union and a euro zone parliament to choose the deficit. It's as if he wanted to have a common public debt but then France and each country keeps choosing their deficit on their own which is not possible. 

We are trying to be more consistent in the sense that if we mutualise the possibility to issue debt then we have to mutualise the choice of the deficit level. Then if each country wants to have extra deficit, it will be like California or New York State, it will not be guaranteed at the federal level and then the interest rate will be a lot higher and each country will be on its own. But at least for the common component, which in my view should be the bigger component in the long run - like in the United States the federal debt is 100 per cent of GDP, state debt is 10 or 20 per cent of GDP, it's much smaller. 

This is the kind of equilibrium I have in mind in the long run and that will allow the European Central Bank to conduct its monetary and financial regulation policy in a much more efficient manner. If the Federal Reserve had to choose between the debt of California, the debt of Louisiana and Wyoming every morning it would be a big mess, like it is in Europe.

Q. Recent elections have seen the rise of parties critical of the EU, on the left and on the right. Do you think it's Europe they don't like or is it actually the political direction of the European Union?

I want to believe that it is the political direction that they don't like. At the end of the day I think this temptation for a nationalist response is partly due to the failure of our European institutions to deliver the right policies. Right now in the eurozone we have almost zero per cent growth rate, zero per cent inflation and initially we don't have any more public debt than the United States or Britain so it really means that we have transformed a public debt  crisis into a much more damaging economic and financial and confidence crisis. 

I think this lack of crisis in eurozone economies will last as long as we don't have a clear direction towards more political and budgetary union. Because at the end of the day, I think a common currency with 18 different tax systems, public debt, budgetary systems in competition with one another just doesn't work. This will never work, and as long as we stay with this system, there will always be some new speculation going on, on the particular interest rate of a particular country.

 I don't know when it will come back but it will come back. In a way it's even worse than the speculation that we used to have on exchange rates because at least when you have speculation on your exchange rate you can always choose to devalue your currency so that you export again. That's tough but at least you have a way out. But when you don't have your monetary policy anymore and you can't devalue your currency, you are stuck basically. 

We need to have in exchange for this, a common public debt, a common corporate tax base so that we, European institutions, must show public opinion that they can bring tax justice and social justice into the globalisation process. Otherwise, the European Union is perceived as defending the interests of financial institutions, of top income or top wealth groups.

Q.  You are speaking in a global sense about exercising more democratic control over the market, the financial system and wealth. In recent years, there seems to have been, among politicians but also among the public, a sense of powerlessness; that actually these forces are simply too powerful for any democratic government or group of governments even. Do you see any sign of that changing? Is it rational even?

It's rational to believe that small governments are too small but I believe that bigger governments can do better. So if we want to protect globalisation - and I am strongly attached to globalisation -because we want Erasmus students to go all over Europe and all over the world, we want to keep that, globalisation is a positive sum game. 

Our European governments are just too small. The good news is that if you put them together, then they are big. Basically, the map of the world in terms of GDP is very simple. The United States is one quarter of world GDP, the European Union is another quarter of world GDP, China is 20 per cent of world GDP but they will soon be a quarter and a third of worlds GDP, so you already have three quarters of world GDP. Then you have another quarter with Japan, it's 10 per cent and India, Russia, Latin America and Africa. 

The problem is that Europe is one quarter of world GDP but it's made up of 28 different countries so each is less that 1 per cent, that's all. That's why we had to wait for sanctions from the Unites States government on Swiss banks in order to make some progress in the direction of financial transparency.

What I take from this story is two things. In a way it is sad that European countries had to wait for America to act because France and Germany and other European countries are much more threatened by a tax haven in the middle of Europe than the United States. This shows the deficiencies of our common European institutions and I think the problem is that as long as we have the unanimity rule for this fiscal decision, there is just no way that we can make progress. 

That's why we need a more democratic Europe, a euro zone parliament to which we will dedicate policy decisions such as fighting tax havens and corporate tax havens. Our institutions are at fault, but the good news is that we can improve them. The main lesson I want to take from this is that if we have the proper sanctions at the proper level, we can make things change. 

Five years ago, many people would have said that bank secrecy in Switzerland was with us forever, that Switzerland was too strong, too powerful for the rest of the world but this is wrong. Switzerland is not powerful, just like tax havens in general are not powerful because these are very small territories and it's very easy if you put sanctions on their banks or trade to get where we want to go.

Q. The criticism has mainly taken two forms. One is to do with data but the other is essentially saying, so the world is becoming more unequal, so what? Why does inequality matter?

Inequality is not bad per se. Inequality up to a point can actually be useful for growth and innovation. The problem is that when inequality gets too extreme, it's not useful for growth any more. It can even have a negative impact on growth because extreme inequality often goes with limited mobility and perpetuation of inequality across generations which can be bad for growth. 

Extreme inequality can be a danger for our democratic institutions because it leads to extremely unequal access to political voice and political influence. I think it's more a problem for the United States right now than for Europe. The rise of inequality has been much more spectacular in the United States and also the influence of private money in politics is much bigger there than in Europe because most countries have laws for public financing of political parties and the rise in inequality has been less strong. 

I don't want to look apocalyptic. My book is mostly about the history of income and wealth distribution in over 20 countries over two centuries so you have forces going in different directions. I don't pretend that inequality always rises and has to rise. There are different forces. I'm just saying we should not just believe that natural market forces are going to be sufficient to prevent inequality from rising again to an extreme level. 

For instance the kind of extreme levels of concentration of wealth we had in most European countries prior to World War One were not useful for growth. They were destroyed by the war, then by the policies of the welfare state, the progressive taxation system, the education systems that were put in place after World War One and World War Two. These did not prevent growth from happening in the post-war period. In fact, if anything the decline in inequality made it possible for higher social mobility. 

One of the big lessons of the 20th century is that we don't need 19th century inequality to grow. Some inequality can be useful but not just any inequality. And it would be a mistake to believe that just market forces will get us exactly to the right place in terms of inequality. So the main conclusion of my book is not so much that I know how far inequality will go but rather that we need democratic institutions and more transparency about wealth dynamics so we can adapt our policies and institutions to whatever we observe. 

Maybe inequality will stop rising at a level that is acceptable and then I will be happy - but maybe not. I guess the biggest danger right now is that our ability to measure wealth dynamics and the evolution of the distribution of wealth in different countries is far from being perfect, and I think that this opacity is bad for democracy and it's also bad for financial regulation and solving financial crises,  and that's the biggest threat.

Q. You put your data online and you invited people to come and pore over them and they've accepted that invitation, notably the Financial Times. You've made a detailed response to them. Is there anything that you've seen from the Financial Times or elsewhere that has called into question any of the important findings?

At this stage, not really. You know I've responded to all the points raised by the Financial Times and I'm very glad that the data I've put online has been used for debate and to stimulate debate. I think the way the FT used my online data was not really very constructive and was not entirely honest because they were trying to pretend that there are mistakes and there were no mistakes as far as I know. They can make somewhat different choices about data construction but that's not going to change the long run evolutions I'm talking about and they tried to pretend that it would and it's not entirely fair. 

I think instead of being afraid of my book, they should be afraid of the reality. I don't know why people are so scared of my book. I think it's not a very reasonable reaction. If I was to rewrite the book now in fact the only country for which I would change a little bit would be the United States and if anything in the book I probably underestimate the rise in inequality of wealth. There was a more recent study by Emmanuel Saez and Gabriel Zucman which very strangely the FT chooses not to take into consideration.

For Britain, there are big limitations in our collective ability to measure wealth dynamics and I certainly agree with the Financial Times about this. It's not a reason for comparing apples and oranges and you know the FT uses some administrative tax data for the 80's and 90's and then compares this to self-reported survey data at the end of the period and they conclude that Britain has become much more equal. 

Now if they believe that Britain has become much more equal over the past 20 years, that's fine, but I don't know where they live because in London I think you can see the price of mansions and if you open any magazine and you look at the ranking of any large fortunes and large wealth I think anybody can see that the top is doing better than the average and that the top wealth holders are rising faster than middle class wealth. 

It's a bit sad when the Financial Times, who are supposed to be specialists for financial issues, don't see that. But at the same time let me say, I think we know for sure from the ranking of large fortunes that are published in magazines that the top is rising faster than the average. What we don't really know is whether this is at the very, very top, you know people above 1 billion or 100 million. We don't know what's really happening at the level of people who are rich but not hugely rich, people who have 10 million, five million, between five and 50, five and 100. 

Of course there are a lot more people there than there are billionaires, so in a way it matters much more in terms of share in total wealth. If I want to take this little controversy in a more positive and constructive way I think that yes, we know too little about this and yes, I would much prefer if people instead of buying magazines to learn about wealth could turn to Eurostat or IMF publications. But for this, we need a wealth tax or at least we need more financial transparency. 

To me, the primary objective of financial transparency and the policy proposal that I make in my book is not to say in advance what the tax rate should be but rather to produce knowledge, to produce statistics on how well different groups of people are doing and then we will adjust our policy to that.

Q Larry Summers suggests the return on capital is lower than you say and that you underestimate the impact of technology.

Regarding the rate of return I think that sometimes there is some confusion between the rate of return and the rate of interest on public debt. The rate of return on capital is a much broader concept than the rate of interest on public debt because the rate of return on capital includes all forms of capital income. This includes not only include interest but dividends, corporate profits, rental income, sometimes capital gains. It's a much broader concept. 

The capital share in GDP which measures all these elements - corporate profits, rent - has not been going to zero. So maybe the interest rate on public debt is zero right now for some countries, but for some other countries it's not zero at all. The public debt is a very particular asset and people buy it for its liquidity purposes and sometimes they accept to have a very low rate of interest because they know they can sell US debt or German debt very easily. 

For some other countries in which you have less confidence it can be a lot higher. We need to have a broader view and then we will see that the rate of return on capital, measured as the capital share of GDP divided by the capital stock, has been going down a little bit over the past 30 years as the capital to output ratio has been increasing. But it does come down less than the increase in the capital to output ratio. So the capital share, which by definition is the product of the two, has actually increased not decreased. 

Another way to see that is if you look at large wealth portfolios not only for large billionaires but actually for the kind of university endowment that Larry Summers was sitting on the top of when he was president of Harvard, where you can see rate of return of 6, 7, 8, 9 per cent per year above inflation rates over a ten, 20, 30-year period. So clearly, these large wealth endowments are not invested in Treasury bonds, they seem to have other assets. 

Larry Summers should know that because Harvard has not had US Treasury bonds for a long time. They have much more sophisticated financial assets and in fact it looks like financial deregulation if anything has increased the inequality in rate of return between large portfolios and small, middle class or lower class portfolios. If you have only €100,000 these days and you go to your bank, you're not going to get 7 or 8 per cent.

Q. Ireland is about to introduce a property tax - we don't have one right now. It will be based on the value of your house. You think this is a bad idea?

Well I think it's a good beginning but I think especially because Ireland is introducing it now in 2014 or 2015, Ireland will be well inspired to take into account mortgage and financial assets and financial liabilities as well. I think if you have a house that's worth €400,000 but you have a mortgage of €390,000, you know you're not really rich. Your net wealth is €10,000 and you are paying back in interest payments as much as a tenant will pay in rent. So there's no reason why you should pay as much property tax as someone who inherited his €400,000 house or who has finished reimbursing his mortgage 20 years ago. This is not fair. 

For the same tax revenue - I'm not talking about increasing the total tax revenue - that you will get from a proportional property tax, I would transfer it to a progressive tax on net wealth, meaning real estate property value plus financial assets, minus debt, minus mortgage and other financial debt. That would increase wealth mobility. That would make it easier for people who are trying to accumulate wealth but now have a lot of debt to actually enter the game. 

People who have no debt anymore because they have received their house through inheritance or they have other financial assets will pay more. In America during the mortgage crisis you had people whose mortgage was actually higher than the value of their property and they will keep paying the same property tax as someone with no mortgage. This makes their situation worse so it makes it more difficult to exit the real estate crisis. 

So I think both for fairness and efficiency reasons, it's better to have a progressive tax on net wealth. This is something that can be done at the national level. It's not as if the property is going to cross the Irish channel and go to Britain. For very top financial wealth it's more difficult but for normal people, people from €100,000 to €1 or 2 million - and this where 95 per cent or 97 per cent of the Irish population would be - you can have some progressivity based on net wealth and that's going to work. It's not as if the sky is going to fall because you do that. So please do it.

Q. Personally, what difference has all the fame and attention you've received in the past few months made to your life?

So far, not much of a difference. I'm just another academic and I'm trying to do my job as a scholar and a social scientist. I have no problem with the publicity as long as it induces more people to read my book. When you write a book you want people to read it. The problem of course is that with all the publicity you have some people who write about the book who have not even opened it so sometimes that gives some strange reviews or comments. But that's fine with me, as long as a fair number of people read it. I meet people in bookshops all over the world who have read my book and who had never read an economics book or a history book or academic books and who seem to enjoy it a lot and find it readable and this makes me very happy and very proud. Because ultimately I think these issues are too important to be left to economists and as long as the publicity helps me to find more readers, I'm happy.

Q. Are you planning Part II?

No, it's already quite long so I'll stop there for now.

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