Now’s the time to spread the wealth, says Thomas Piketty

Financial Times, by Simon Kuper

Thomas Piketty’s new book, Capital and Ideology, appears in English translation next March. But I got a sneak preview by walking into my local Parisian bookshop and handing over €25 for the French edition. My conclusion: the 1,200-page tome might become even more politically influential than the French economist’s 2013 overview of inequality, Capital in the Twenty-First Century.

Helped a little by that book, inequality has soared up the left’s agenda, especially in the particularly unequal US and UK. Now Elizabeth Warren has a shot at becoming the most redistributionist US president since Franklin D Roosevelt, while an electable post-Corbyn Labour leader could achieve similar in Britain.

Piketty explains why this could be the moment for a turn to equality, and which policies could make that happen.

His premise is that inequality is a political choice. It’s something societies opt for, not an inevitable result of technology and globalisation. Whereas Marx saw history as class struggle, Piketty sees it as a battle of ideologies.

Every unequal society, he says, creates an ideology to justify inequality. That allows the rich to fall asleep in their town houses while the homeless freeze outside.

In his overambitious history of ­inequality from ancient India to today’s US, Piketty recounts the justifications that recur throughout time: “Rich people deserve their wealth.” “It will trickle down.” “They give it back through philanthropy.” “Property is liberty.” “The poor are undeserving.” “Once you start redistributing wealth, you won’t know where to stop and there’ll be chaos” — a favourite argument after the French Revolution. “Communism failed.” “The money will go to black people” — an argument that, Piketty says, explains why inequality remains highest in countries with historic racial divides such as Brazil, South Africa and the US.

Another common justification, which he doesn’t mention, is “High taxes are punitive” — as if the main issue were the supposed psychology behind redistribution rather than its actual effects.

All these justifications add up to what he calls the “sacralisation of property”. But today, he writes, the “propriétariste and meritocratic narrative” is getting fragile. There’s a growing understanding that so-called meritocracy has been captured by the rich, who get their kids into the top universities, buy political parties and hide their money from taxation.

Moreover, notes Piketty, the wealthy are overwhelmingly male and their lifestyles tend to be particularly environmentally damaging. Donald Trump — a climate-change-denying sexist heir who got elected president without releasing his tax returns — embodies the problem.

In fact, support for redistribution is growing even faster than Piketty acknowledges, especially in the US. Twice as many Americans now feel more distrust than admiration for billionaires, according to a HuffPost/YouGov poll. Millennials are especially suspicious of success.

More American adults under 30 say they believe in “socialism” than “capitalism”, report the pollsters Gallup. This generation owns too little property to sacralise it.

Centre-right parties across the west have taken up populism because their low-tax, small-state story wasn’t selling any more. Rightwing populism speaks to today’s anti-elitist, anti-meritocratic mood.

However, it deliberately refocuses debate from property to what Piketty calls “the frontier” (and others would call borders). That leaves a gap in the political market for redistributionist ideas. We’re now at a juncture much like around 1900, when extreme inequality helped launch social democratic and communist parties.

Piketty lays out a new redistributionist agenda. He calls for “educational justice” — essentially, spending the same amount on each person’s education. He favours giving workers a major say over how their companies are run, as in Germany and Sweden. But his main proposal is for wealth taxes.

Far from abolishing property, he wants to spread it to the bottom half of the population, who even in rich countries have never owned much. To do this, he says, requires redefining private property as “temporary” and limited: you can enjoy it during your lifetime, in moderate quantities.

He proposes wealth taxes of 90 per cent on billionaires. From the proceeds, a country such as France could give each citizen a trust fund worth about €120,000 at age 25. Very high tax rates, he notes, didn’t impede fast growth in the 1950-80 period.

Warren (advised by economists who work with Piketty) is proposing annual taxes of 2 per cent on household fortunes over $50m, and 3 per cent on billionaires. She projects that this would affect 75,000 households, and yield revenues of $2.75tn over 10 years. Polls suggest most Americans like the idea.

Paradoxically, the plutocratic US may be ideal terrain for a wealth tax. Mark Stabile, economist at Insead, points out that, first, rich Americans now have so much wealth that even if Warren captures just a small proportion, it could add up to a lot; second, Americans are taxed on their passports, so moving wealth abroad won’t save them (and Warren would slap hefty exit taxes on anyone giving up citizenship); last, thanks to SwissLeaks and the Panama Papers, we’ve learnt a lot about how the rich hide money.

Advocates of inequality will come up with the usual justifications. But now is the redistributionists’ best chance.

‘Capital et idéologie’ is published in France by Seuil

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