Thomas Piketty’s 753-page book Capital in the Twenty-First Century, published in 2013, sold 2.5 million copies worldwide and helped put inequality on the global agenda. Piketty is a French economist. His latest, Capital and Ideology, may prove still more influential. The book is on global history of inequality and the stories that societies tell to justify it, from pre-modern India to Donald Trump’s US.
Thomas Piketty
Source: https://cdn.britannica.com
Capital and Ideology builds on Piketty’s long-standing argument that inequality has soared across the world since 1980. It proposes strong remedies. Piketty wants to slap wealth taxes of 90 per cent on any assets over $1 billion. He is nostalgic about the postwar decades when British and American top marginal income-tax rates were over 80 per cent.
Much of Piketty’s information comes from the World Inequality Database (WID), which he created with colleagues. A free website, to which over 100 researchers have contributed, it claims to include “series on income inequality for more than 30 countries, spanning most of the 20th and early 21st centuries, with over 40 additional countries now under study.” The WID’s coverage keeps getting more international, as more material from Asia, Africa and Latin America is added. The site is now trying to expand its focus from income to the even harder-to-chart terrain of wealth.
In an era when technology platforms are arguably concentrating wealth in the hands of a diminishing number of people in the Valley, Piketty’s advocacy of much higher taxes has attracted the attention of both progressives and radicals around the world.
Capital and Ideology starts from the premise that inequality is a political choice. It is something societies opt for, not the inevitable outcome of technology and globalisation. To Piketty, history is a battle of ideas.
Every unequal society, he says, creates an ideology to justify inequality – that allows the rich to fall asleep in their townhouses while the homeless freeze outside. He recounts the justifications that recur throughout history: “The wealth will trickle down”. “The rich will give it back through philanthropy”. “Property is liberty”. “The poor are undeserving”. “Once you start redistributing wealth, you won’t know where to stop”. “Communism failed”. “The money will go to black people” – an argument that explains, Piketty says, why inequality is extreme in countries with historic racial divides such as Brazil, South Africa and the US.
Another common justification is that the rich deserve their wealth. Piketty, who describes entrepreneurs such as Jeff Bezos and Mark Zuckerberg as “oligarchs”, disagrees. He points out that both men benefited from public infrastructure, public education, decades of computer science and the invention of the internet.
All these justifications for inequality add up to what Piketty calls “sacralisation of property”. But today, he writes, these justifications have frayed. Ever fewer people believe them. There’s growing belief that so-called meritocracy has been subverted by the rich, who get their children into the best universities, buy politicians and dodge taxes.
Even in relatively equal Europe, the concentration of wealth is “stunning” and growing: The bottom 40 per cent owns barely five per cent of the wealth, while the top ten per cent owns 50-60 per cent.
The top 1 per cent of Americans now earn a total of over 20 per cent of national income; the bottom 50 per cent has just 12 per cent. The average income of an American top one-percenter in 2015 was $1.3 million. For those in the bottom half, it was $15,000, a figure almost unchanged in 40 years. Five years later, it’s about $16,000.
Piketty concludes that, however you measure it, global inequality, even in Europe, looks hideous. His proposed remedies are drastic. He calls for “educational justice” – essentially, spending the same amount on each person’s education. He favours giving workers a big say over how their companies are run, as in Germany and Sweden. But his main proposal is for wealth taxes.
Far from wanting to abolish property, he proposes spreading it to the bottom half of the population who, even in rich countries, have never owned much. Spreading wealth, says Piketty, requires redefining private property as “temporary” and limited: you can enjoy it in moderation, but you can’t pass it on to your children. He notes that very high tax rates didn’t prevent fast growth in the 1950-1980 period. However, no leading politician anywhere today is pushing Piketty’s proposed 90 per cent tax on wealth over $1 billion. Even Sanders, who favours a wealth tax on the US’s top 0.1 per cent (meaning every married couple with $32 million and up) only suggests a top rate of eight per cent on wealth over $10 billion.
In Malaysia, with Gini co-efficient at 0.4 for several years, inequality seems entrenched. Unless the rich (earnings above RM5 million per year) are taxed higher, corporates with “super-profits” (owing to adverse events in the world) are taxed via windfall tax and opportunities are created in education and employment, inequalities will remain for decades.
Reference:
This economist has a radical plan to solve wealth inequality, Simon Kuper, WIRED, 14 April 2020
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