The Guardian, by Laura Spinney
12th May 2020
Economist discusses the effects of pandemic on economies, societies and globalisation.
The French economist Thomas Piketty is the bestselling author of Capital in the Twenty-First Century (2013) and its follow-up, Capital and Ideology (2019), a sweep through 1,000 years of the history of inequality.
Speaking to the Guardian, he said he had been thinking about the opportunities this pandemic may present to build fairer, more equal societies.
How does this pandemic measure up to historical ones?
The most pessimistic modelling estimates of the eventual death toll of this pandemic – that is, without any intervention – are about 40 million people globally. That corresponds to about a third of the death toll of the 1918 flu pandemic, adjusted for population. But what’s missing from the models is inequality – the fact that not all social groups are hit in the same way, and importantly, neither are rich and poor countries.
Are western societies more unequal than they were in 1918?
The levels of inequality we see today are much, much lower than what they were a century ago. In a way that is my message. I’m an optimist. The story I tell is a story of learning, of progress in the long term. That progress happened because of political and intellectual movements that set out to build social security and progressive taxation systems, and to transform our system of property. Property was sacrosanct in the 19th century, but it was gradually de-sanctified. Today we have a much better balance of the rights of owners, workers, consumers and local government. That represents a complete transformation in our notion of property, and it was combined with increased access to health and education.
But inequality is greater now than it was in the 1980s. So a correction is needed?
Yes. The right response to this crisis would be to revive the social state in the global north, and to accelerate its development in the global south. This new social state would demand a fair tax system and create an international financial register that would enable it to bring in the largest and richest firms to that system. The present regime of free circulation of capital, set up in the 1980s and 90s under the influence of the richest countries – especially in Europe – encourages evasion by millionaires and multinationals. It prevents poor countries from developing a fair tax system, which in turn undermines their ability to build a social state.
I think there is something to that, yes. In the book I argued that the two world wars were largely the result of the extreme inequality that existed in pre-first world war European societies – both within those societies and internationally, due to their accumulation of colonial assets. That inequality was not sustainable, and it caused those societies to erupt, but they did so in different ways – the first world war, the Russian revolutions, the 1918 pandemic. The pandemic preyed on the poorer sectors of society, with their poor access to healthcare, and it was exacerbated by the war. The result of these cumulative shocks was a compression of inequality over the next half-century.
The main example you give in the book, of a pandemic driving a correction, is the Black Death of the 14th century. What happened after that?
There has long been a theory that the end of serfdom was more or less a consequence of the Black Death. The idea was that with up to 50% of the population wiped out in some regions, labour became scarce and labourers were therefore able to secure better rights and status for themselves, but it turns out to be more complicated than that. In some places, the Black Death actually reinforced serfdom. Precisely because labour was scarce, it became more valuable to landowners who were therefore more motivated to coerce it.
The bottom line, which is relevant today too, is that powerful shocks like pandemics, wars or financial crashes have an impact on society, but the nature of that impact depends on the theories people hold about history, society, the balance of power – in a word, ideology – which varies from place to place. It always takes major social and political mobilisation to move societies in the direction of equality.
Could this pandemic tip us towards the kind of participatory socialism that you recommend?
It’s too early to say, precisely because pandemics can have such contradictory effects on political mobilisation and thinking. At the very least, I think, it will reinforce the legitimacy of public investment in healthcare. But it could also have a completely different kind of impact. Historically, for example, pandemics have triggered xenophobia and nations turning inward. In France, the far-right politician Marine Le Pen is saying that we should not return too quickly to free movement in the European Union. Especially if the final death toll is very high in Europe, as compared to other regions, there is a risk that the anti-European narrative of Trump and Le Pen could gain traction.
Q: What about public debt, which is soaring as a result of this pandemic – won’t governments be forced to act to rein that in?
Yes, that’s likely. When you get to a very high level of public debt, as our European nations and the US have, you need to find unorthodox solutions because repayment is simply too crippling and slow. History offers us plenty of examples of this. In the 19th century, when Britain had to repay its debts from the Napoleonic period, it essentially taxed the lower and middle classes to repay upper-class bondholders. This worked because, at least at the beginning of the 19th century, only rich people could vote.
Today, I don’t think it would work … Following the second world war, on the other hand, Germany and Japan found a different and, to my mind, better solution. They temporarily taxed the wealthy. It worked very well, allowing them to start reconstruction from the mid-1950s without any public debt. Necessity makes you inventive. It could be that to save the eurozone, for example, the European Central Bank will need to take responsibility for a bigger share of member states’ debt. We’ll see.
We shouldn’t rely on a crisis to solve the problems that we need to solve, but it could be a stimulus to change. The EU began to fragment with Brexit. It’s a weak explanation of Brexit to say the poor are nationalist. The problem is that if you have free trade and a single currency without social objectives, you end up in a situation in which free mobility of capital benefits the most mobile, high-wealth citizens, and you alienate the middle and lower classes. If you want to keep free movement, it needs to be married to common taxation and common social policies, which could include common investment in health and education. History is instructive here too. Building a welfare state within a nation state was already a huge challenge. It required rich and poor to come to an agreement and a big political fight. Doing it at a transnational level is possible, I think, but it will probably have to be done in a small number of countries first. Others can join later if they buy into the ideology. I hope it can be done without breaking the current EU, and I hope Britain comes back, eventually.
There has been talk of de-globalisation after this crisis. Will it happen?
I think it will happen in some strategic areas, such as medical supplies, just because we need to be better prepared for the next pandemic. There’s more work to be done for it to happen across the board. At the moment, our ideological choice is to have 0% tariffs on international trade, because the fear is that if we start raising tariffs, where will it stop? It’s similar to the 19th-century discussion over the redistribution of property. People preferred to defend even extreme inequality in property ownership – even slave ownership – rather than accept some redistribution, because they were afraid that once unleashed it would end in the expropriation of all property. It’s the slippery slope argument – the classic argument of conservatives throughout history. Today I think we have to get out of this zero-tariff mindset, if only to pay for global threats such as climate change and pandemics, but that means inventing a new narrative about where we stop with tariffs. And again, as history shows us, there is never just one solution.