Interview with Thomas Piketty; Professor of Economics, bestselling author and French economist.
When it comes to the enormous reduction of income inequality during the 20th century, Thomas Piketty sees politics everywhere. We must rectify past injustices before attempting to create new institutions.
Your latest book argues that the history of equality is not a peaceful history. How have revolts, revolutions, social struggles, and crises helped and hindered the history of equality?
The movement towards more equality is not without setbacks. It’s not a linear or a deterministic process. In every period, you have some kind of setback phenomenon, which often comes from a nationalist identity crisis, and sometimes it involves a lot of violence, destruction, and even new forms of inequality too.
There’s still enormous concentration of wealth. To some extent, it has increased, especially in the US in recent decades, less so in France or in Europe. In the long run, there’s a movement toward more equality, but I’m not saying this to conclude that everything is great, and we should just stay like we are. I’m saying this in order to suggest that this movement could and should continue. I think it will continue because in the end, this is a way to address some of the biggest challenges that we have to address.
Russia’s war against Ukraine has triggered the ‘greatest supply shock’ in 50 years. Are there any historical roots of this war: the breakup of the Soviet Union in 1991?
Well, it was a miracle that the split of the Soviet Union in 1991 did not happen with more drama. One form that social justice and more equality takes, in the long term, is the construction of democratic spaces and a large democratic federation, belonging to a large political community, rather than a small tribe. This helps construct better institutions, and more equal access to infrastructure, and education. But when these large political entities disappear, like the Soviet Union, or, say, the former Yugoslavia, they turn into a crisis. Rebuilding this large political fracture is never an easy process. In the Soviet Union it looked initially as if this happened peacefully. But we can now say that the frontier between Ukraine and Russia, in fact, was not settled.
Look, collectively, we could have done better as a global community. Russia’s political development since the fall of the Soviet Union is a big drama. The Russian Federation has been subjected to a level of oligarchic and kleptocratic transformation. This was the country that pretended to abolish private property during the 20th century. And then it suddenly became the world capital of tax oligarchs and kleptocrats. The war in Ukraine that we see today is, to some extent, a way to make Russian people forget about all of these lies. Namely: that people close to Putin have been stealing resources away from Russians for a very long time. It’s very sad. The human consequences are absolutely terrible.
How will the western imposed sanctions hitting the Russian economy influence the war in the medium to long term? Also, what consequences will it have for the Putin regime?
I’m not sure the sanctions that we in the west claim to take against wealthy Russian oligarchs really have much impact. We’re not putting enough effort to actually target the oligarchs. In the west we have largely taken symbolic measures, which only target a few wealthy Russians. Whereas it should actually be tens of thousands of Russians. According to the data we have in the World Inequality Database Russian Federation – WID – World Inequality Database, you have about 20,000, Russians who own more than 10 million euro in net wealth. It’s still a very small group. But it’s much, much bigger than a few hundred individuals.
“No hypocrisy is too great when economic and financial elites are obliged to defend their interest.”
If the west really wanted to target the oligarchic class that has benefited from the Putin regime in Russia, they would need to target tens of thousands of wealthy individuals, rather than just a few hundred. Targeting those kinds of numbers could make a big difference to put pressure on the regime. It would show the Russian people, and international public opinion, that we are serious about social justice, democracy, and transparency.
Is there a Western hypocrisy on this issue? They took dirty Russian money into their respective economies for many years?
Indeed, there’s a lot of hypocrisy. Because most of this money was stolen from the Russian people. It was then invested in western financial institutions, and into real estate markets in Paris, London, and New York. Then suddenly we say, there is a war: oh, we need to do something about this.
We really need to change the way assets are registered globally and need a lot more transparency about who owns what. Everywhere. This war in Ukraine is crazy, and a human disaster, but it should, ideally, accelerate the movement towards more transparency in asset ownership around the globe. I’m not sure if we will do it. So far, our governments in the west threaten the oligarchs, but they only do it for a few hundred. It’s completely symbolic.
And the legal systems of many European countries have protected Russian oligarchs for many years?
We have designed legal systems in the west which are protecting the oligarchs from all countries: from Russia, from the west, and from China. If you are a normal Russian and lose half of your pension, or half of your wage, because of the depreciation of the ruble, and because of inflation coming from western sanctions, there’s nothing you can do. There is no court or tribunal to which you can turn to and complain. But if you own a 100 million euros, in London, or Paris, and we try to take away half of your wealth, then you can go to court for months, and nothing will be taken away from you for many years. We think this legal protection for the super-rich is normal, but it’s not. We have built a legal system in the west that is designed to protect the wealthy rather than to protect ordinary people. This war in Ukraine and the sanctions that have followed exemplifies these contradictions. Ideally, we could learn from this crisis. But I don’t know. We’ll see.
What is meant by inequality is a social construct?
I believe that, in the long run, there is generally a move towards more equality.
Particularly in Europe between the end of the 18th century and today. It’s largely a social construct in the sense that it was the result of a large number of political mobilizations and transformations, including revolutions, and social struggles. The move towards equality is not a natural phenomenon. It’s a long run trend, grounded in history.
Can we say crises and revolution inevitably lead to more equality and more emancipation?
It would be naif to think that all you need is a big crisis, and a revolution and equality will inevitably follow. Think of all the unproductive and negative revolutions that happened during the 20th century. What I do belief, however, is that you need to have big mobilization to break the resistance of the elite. Because they will always try to protect their position. This is as true with a billionaire today as it was with the aristocratic class during the French Revolution. You always need mobilization, and sometimes a crisis to sort of challenge this balance of power. But this is not enough. It’s really important to think about how to build better institutions. During the 20th century, this was a mixture of welfare state construction, progressive taxation, and gradual decommodification of bigger and bigger segments of the economy. The economic systems that we have today have very little to do with capitalism of, say, 100 years ago. The entire legal, social, and fiscal system has gone through enormous transformation over the past century. Even more so if you go back to the end of the 18th century. This long-running revolution is going to continue. I try to focus on the long run perspective.
So globally you remain optimistic that we are heading towards more equality and social progress?
We need to be optimistic. We tend to forget that all these great achievements of the past. Because in the end, it’s in our hands: it’s not something that’s going to happen just out of nowhere. It really depends on our collective organization and capacity to fight in order to make these transformations happen.
You frequently discuss two radical concepts: basic income and inheritance for all?
If you look at the distribution of wealth from the 19th century until today, what’s really striking is that income distribution has become relatively more important. But wealth distribution is still very, very unequal. Let me give one example. If you look at the bottom 50 percent of the population, in a country like, say, France, Britain, or Ireland, less than five percent owns almost all of the total wealth. Whereas the top 10 percent own 60 percent of the wealth. In the US it’s about 70percent, and about 75 percent in Latin America and Sub-Saharan Africa. The question is: what can you do about it?
“It’s not Utopian to believe that we can create a global registry of financial assets so we know who own what in different countries.”
One possibility would be to say: okay, we just need to wait for market competition to spread the wealth around. But it’s so slow. And we’re going to have to wait forever if we want to see an improvement. Another possibility would be to say at the age of 25 every individual could receive a minimum level of inheritance. So let’s say the inheritance was 60 percent of average wealth in the society of each respective country. The average wealth in France today is 200,000 euros. So imagine every individual receives, say, 120,000, euros from the state at the age of 25. That would be the bottom 50 percent of society each receiving that sum. And people in the top 10percent, who today receive, on average, 1 million euro, in inheritance wealth, after tax they would potentially in this proposal still receive about 600,000 euros. But let me make it clear: even after this proposal we would still be very far from complete equality. But nevertheless, we could go much further in that direction.
But would it be feasible to implement? It sounds rather utopian.
It would not be easy, certainly. But what I find a bit paradoxical is that everybody claims to be very attached to the principle of equal opportunity, equal rights, etc. But if you try to move more concretely in the direction of equal opportunity, like, say, having a minimum inheritance for the bottom 50 percent, then people at the top get completely mad, and say, it’s not possible.
Do you think giving a 25-old year such large sums of money would really benefit them?
We could, of course, put limitations on what people would do with the money. But then you also need to apply the limitations to rich children too. Because the idea that rich children always make good choices with the money is crazy. This is not going to happen easily. But nothing in the past happened easily. In the beginning of the 20th century if you had told most people in Britain about the NHS they would have said: this is communism, it cannot happen. But today in Britain, even the Conservative Party is raising taxation to put more money into the NHS.
What is the best solution to tackling climate change as a global community in the coming years ahead?
So far the two proposals for the Green New Deal are not sufficiently ambitious. To reduce global warming, we will need much more than is being currently discussed. People in the bottom 50 percent will never accept a carbon tax, or any major change in their lifestyle if you don’t start convincing them that the people at the top have made drastic efforts too. Because there is still huge inequality with respect to carbon emissions. So, for instance, if you take the bottom 50 percent in Europe today, their average carbon emission is okay. But if you take ten the top percent, they emit much higher amounts of carbon emission. Trying to get everyone to reduce their carbon emissions, together, in the same way, is not going to work. Unfortunately, we may need to see much more catastrophes in our daily life for people to change their minds about this. If, and when, this political crisis comes, political attitudes to equality can change very fast.
How do you see the rise of China changing the global geopolitical and economic landscape in the coming years ahead?
China is already a real challenge for the west. The proper response to the Chinese challenge is to continue the movement towards social democracy, a more equal distribution of power in society, a more decentralized political system, and more workers rights. If we don’t move in this direction in the west, there is a serious risk that China will become more influential in Africa, Asia, and all over the world.
In the west we tend to be very proud of our achievements in equality, like the welfare state and so on. But we forget that much of it came from exploitation of the rest of the world. China is very good at pointing out how their country did not develop through colonialism. The historical record, so far, it is that it is the west that has been incredibly greedy, in terms of exploiting the rest of the world.
Let me conclude with one example.
When we talk about international tax reform, we need to split and share the tax revenues, not only between the rich countries. But with respect to the global south too. Right now, rich countries try to take away some of the profits in tax havens, including, for instance, Ireland. And they split the profits between themselves.
“Wealth is so concentrated that a large segment of society is virtually unaware of its existence.”
If you look at countries in the global south, especially countries in sub–Saharan Africa, they get almost zero out of this. We should have at least a fraction of the tax revenues coming from the most powerful economic actors in the world, going towards the global south, which should then be divided according to population. If we don’t do something like this, it will be China who will come with their money to pay for the investments for many countries across the globe. If this happens, the world will become less transparent and less democratic. The Chinese challenge, together with the fight for more global economic justice, and the fight against global warming, should help move the world towards more equality in the decades to come.
Have you seen any structural or ideological changes that you think make our moment different from historically comparable ones?
Well, the dominant ideology has been moving toward the view that we’ve gone too far in terms of market liberalization, in terms of globalization without regulation and the superrich getting richer. The problem is that we’re still stuck with institutions that were set up in the ’80s and ’90s in terms of limited tax progressivity, free capital flows without any common collective regulation. Meaning the ability of the wealthy and of corporations to move capital across borders in an effort to minimize — i.e., evade — taxation. without financial cadastre. A term for an official register of real estate property, value and ownership, often used in determining taxation. so that you can track who owns what where — which is a big problem when you want to impose sanctions on oligarchs.
In the United States, this institutional setup has been reinforced because of Trump’s big tax cut on corporations. There are many dramas we associated with Trump, but part of the drama is that he has been able to tell the middle class and lower middle class, “Look, we are going to continue with tax dumping, but I’m going to protect you in another way by protecting you against Chinese and Mexicans, the Muslims.” He was able to be elected on an ideology where you don’t redistribute between the rich and the poor but rather you protect Americans, especially white male Americans, against anybody who looks foreign. The risk is that neoliberalism is replaced by this form of neo-nationalism in order to avoid redistribution. Sometimes people like Trump can be successful with this strategy because it’s a much clearer message than saying, “Let’s look at the history of progressive taxation.”
After 40 years of worsening inequality, give me a reason to feel as optimistic as you do?
By looking at my historical evidence, by thinking about the big picture, I have become more optimistic. I was a bit puzzled that many people looking at “Capital in the Twenty-First Century” came away with a pessimistic conclusion. I’m trying to show that the key in history is not the big catastrophes but the positive political construction of an alternative, and this process started with the French Revolution, the U.S. revolution. This process toward more equality is more deeply rooted in our modern ethos and modern political cultures than most people believe. I remember in 2014 having a public discussion with Elizabeth Warren in Boston. I was talking about a progressive wealth tax with a rate of 5 percent per year or 10 percent per year on billionaires. She looked at me like, Wow, that’s too much. Joe Biden today, a centrist Democrat — who voted for the Tax Reform Act of 1986. A key priority of Reagan’s second term, which lowered federal income-tax rates. — is coming in with a wealth tax. Things can change pretty fast.
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