Thomas Piketty goes global | The New Yorker
Speaking in 1918, with Europe ravaged by the horrors of modern warfare and Russia in the hands of the Bolsheviks, Irving Fisher warned his colleagues at the American Economic Association’s annual meeting of a “great peril “. This peril, which risked “perverting the democracy for which we have just fought”, was extreme inequality. “We can be sure that there will be a bitter struggle over the distribution of wealth,” said Fisher, perhaps the most famous economist of his time. More than a century later, at another annual meeting of the American Economic Association, specters once again hovered over the discipline. “American capitalism and democracy don’t work for people without a college degree,” Princeton economist Anne Case said in January as she flipped through slides in a large, windowless conference room. On one screen, graphics showed a staggering increase in suicide, drug overdoses and alcoholism among less educated whites over the past two decades. These “deaths of despair,” as she and her husband-collaborator, Angus Deaton, call them, have their roots in the deep injustice of American society. When Fisher issued his warning, the richest ten percent of Americans pocketed forty-one percent of all national income. Today, they take forty-eight percent.
While inequalities have become the subject of intense public attention, much of the credit goes to French economist Thomas Piketty. In 2014, “Capital in the Twenty-first Century”, a dense volume published in English by an academic press, became an unlikely worldwide bestseller; there are over two million copies printed. Previously, Piketty, who teaches at the Paris School of Economics, had been an academic but not public authority; the object of his research, inequality, had long been a niche subject. Timing and talent catapulted him to glory. His book fit perfectly with the post-Occupy Wall Street philosophy, providing empirical rigor for rising anger. The wounds of the Great Recession had barely healed; the disillusionment of the rich and powerful bordered on Jacobinism. The time had come for a grand iconoclastic theory, and that is exactly what Piketty provided, with detailed numbers and lucid prose. In previous work, he and a frequent contributor, economist Emmanuel Saez, had the innovative idea of defining inequality in terms of the first percent share of everyone, avoiding the usual formula of the discipline of Gini coefficients, which have no meaning for the masses. , and identify a clear common enemy. The problem was inherent in capitalism itself. Over the past century, the rate of return on capital (r) and the existing wealth, held disproportionately by the rich, had exceeded the rate of growth of the economy (g) in general. It had created a chasm of inequality comparable to what existed in the Golden Age, before gilding was removed by two cataclysmic world wars and the Great Depression. You could distill the core of Piketty’s theory down to three characters (r> g) and emblazon the formula on a T-shirt, something the more old-fashioned subgroups of the population actually did.
The success propelled Piketty into the revered position of the French global intellectual, like Pierre Bourdieu, Michel Foucault and Claude Lévi-Strauss before him. The world hosts his blog; he was recruited as an advisor by a French presidential campaign in 2017 (from the Socialist Party candidate Benoît Hamon; he had already advised another such candidate, Ségolène Royal). And now, as if to secure his preeminence in this role, Piketty has published an even more ambitious book, “Capital and Ideology” (Harvard). It encompasses history, political science and political theory, and is even larger than its predecessor. This reviewer should point out that the eleven hundred page work broke a chart table (admittedly unstable) and then overshot the weight limit for hand luggage on a (admittedly stingy) European airline.
There is a reason for the weight. “Capital and Ideology” proposes not only to describe capitalism but also to help us to “transcend” it. Piketty both diagnoses and prescribes: he tries to expose the contradictions of the reigning ideology of “hypercapitalism” and its harmful consequences (including a populist-nativist reaction) and, to avoid disaster, recommends a series of breathtaking reforms. They include an income and wealth tax scale of up to ninety percent and the elimination of nation states in favor of a “vast transnational democracy”, which will guarantee “a universal right to freedom.” education and capital, free movement of people. , and the virtual de facto abolition of borders. Serious illness, according to Piketty, requires strong medicine.
“Capital and ideology” opens with a startling declaration: “Every human society must justify its inequalities: unless the reasons are found, the whole political and social edifice risks collapsing”. War, recession, religion – every facet of human existence has its roots in inequality, Piketty tells us. Indeed, he uses “society” and “regime of inequality” almost interchangeably. If there are uncertainties in such a monocausal narrative, it is perhaps a necessary simplification in the quest for the anatomy of social organization from the Middle Ages to modernity.
Adopting a theory by French philologist Georges Dumézil, Piketty writes that early societies were “trifunctional” – in a way largely determined by birth, you were a member of the clergy, warrior nobility, or peasantry. (Something similar, he notes, can be seen in “Planet of the Apes” and “Star Wars.”) During this period of limited mobility, inequality was justified by the idea that castes were interdependent. , like the members of the body. If someone becomes the brain, then someone else has to be the feet. After the development of the central state and subsequent disturbances such as the French Revolution, inequality was considered a necessary characteristic of “property societies”, founded on individual freedom but also on the “sacralization of private property” .
In the twentieth century, this model collapsed. “The ideology of the self-regulated market in the 19th century led to the destruction of European societies in the period 1914-1945 and ultimately to the death of economic liberalism,” writes Piketty. “We now know that this death was only temporary.” In the post-war era, societies drifted either towards social democracy, which Piketty believes to be imperfect but closest to his ideal society, or towards communism, which completely failed. What followed was the revenge of the property society. The dominant ideology of the modern era, according to Piketty, has been that of the “neo-ownership”, in which private property rights are revered above all, heralding another disaster.
Spenglerian in scope, Piketty’s critique goes way back in history and across the world: he explores the “regimes of inequality” in Mughal India, the slave colonies in the West Indies and the post-Soviet republics. It’s an admirable corrective to the usual Eurocentrism of Western economists, although most readers will feel the need to skip four hundred pages to discuss modern economies. Piketty has changed her way of thinking since her previous album. Rather than implying that increasing inequality is an inherent problem in capitalism, he now suggests that the levels of inequality we achieve are those we tolerate – that they are entirely a matter of political and ideological choices. His famous formula, r>g, has practically disappeared. In his account, the so-called Trente Glorieuses, the thirty years of relative equality between 1950 and 1980, were not the result of two world wars – which played “only a minor role in this collapse”, he determined – but rather, political decisions taken “to reduce the social influence of private property”.
And the policies we adopt certainly influence inequalities. Highly progressive income and inheritance taxes shaped income distributions during these Glorious Years. Consider, for that matter, how businesses and the very wealthy are being spoiled by the current tax system in the West. Tax collection agencies are resigned to the fact that the biggest fortunes also tend to be the most mobile. In the United States, there are many states competing to provide the rich with favorable tax rates, so they do not lose them. But whatever income is earned by clinging to certain fortunes, it is more than reduced by lower rates. Since Congress passed its 2017 tax cut package – which Republican sponsors justified on global competition grounds, and claimed they “would pay for themselves” – corporate tax collections have decreased by a third. The United States is now running multibillion-dollar deficits, during a period of sustained economic growth, without major military commitments and without increased social spending.
Additionally, when states start taxing mobile assets less, they also usually start taxing stationary assets more – and stationary assets, like homes, are usually the only ones workers have. Emmanuel Saez and Gabriel Zucman argued in a recent book, “The Triumph of Injustice,” that effective tax rates for the rich have fallen so much in the United States that the tax system is now flat, if not regressive. The Congressional Budget Office recently estimated that after-tax inequality will continue to increase, with the richest 1% in the country earning 3.1% more each year while the poorest 20% earning just one percent. more per year.
Meanwhile, Piketty estimates, ten percent of global financial assets are now hidden in tax havens. Ireland, a favorite haven for American business, has had to start releasing modified national economic statistics because of all the foreign assets it is home to. In theory, international taxation could be harmonized by treaties, like countries that have come together to ban certain types of ammunition or pollutants. So far there has been no will.