Capital in the Twenty-First Century
About ten years ago, the French economist Thomas Piketty published the book Capital in the Twenty-First Century. What was newsworthy about it was that here was a boring economist, a professor at one of the leading institutes in Paris, who claimed that hypercapitalism was leading to such huge inequality that society was being undermined. Such a claim would be expected in economists who rely on Marxist theory.
What was unusual about Piketty is that his research is deeply empirical. He had combed back into tax records, both in France and in the UK, for nearly 200 years. In a nutshell, he has shown that the best decades of growth in France were the 30-year period, ‘la Trente Glorieuses’, between 1950 and 1980, when taxation was at its highest. But since then, neoliberalism has succeeded in cutting the taxes of the super-rich, and growth has declined.
Time for Socialism
In Piketty’s new book Time for Socialism, subtitled ‘Dispatches from a World on Fire 2016-2021’, he gives his personal history:
‘Born in 1971, I belong to a generation that did not have time to be tempted by communism, and which became adult when the absolute failure of sovietism was already obvious. Like many, I was more liberal than socialist in the 1990s … I could not stand those who obstinately refused to see that the market economy and private property were part of the solution.’
Then, he explains that 30 years later, he now thinks hypercapitalism has gone too far, and we need a new form of socialism: ‘participative and decentralized, federal and democratic, ecological, multiracial and feminist’.
Property ownership in France
In an early chapter, Piketty gives a sweeping historical survey of French property ownership (both estates and investment). In 1780 the richest 10% owned more than 80%, while the bottom 50% scraped along at around 2%. Surprisingly, this did not change with the French Revolution. It only began to change in the 20th century once there was more public investment in pensions, health and education. The share owned by the middle classes increased to 40% by 2000 (the bottom 50% still stick at around 10%). He makes an argument here for a yearly tax on property, inheritance tax, and ‘a minimum inheritance for all’ of €120,000 to be bestowed on everyone at age 26.
Capital in Russia
Many of the subsequent chapters consist of the re-publishing of his monthly articles in Le Monde. With titles like ‘The French Right and European Budgetary Rules’ or ‘Budget 2018: French Youth Sacrificed’, the temptation is to skim over these if you are not a close follower of French politics. But watch it as you skim: the article on Capital in Russia hits the spot of current affairs. Piketty points out that between 1993 and 2018 Russia had massive trade surpluses, a total of 250% of GDP, and an amount similar to Norway’s sovereign fund. But now, it is 25 times lower. So, where has all this money gone? (See earlier reviews on Moneyland by Oliver Bullough and Putin’s People by Catherine Belton.)
‘[T]he natural wealth of the country … has been massively exported abroad to sustain opaque structures enabling a minority to hold huge Russian and international financial assets. These rich Russians live between London, Monaco and Moscow … and control their country via off-shore entities.’
What to do? Piketty recommends: ‘[R]ather than apply commercial sanctions, Europe would do better to finally go for these assets and to address Russian public opinion. Today communism has become the worst ally of hyper capitalism.’
Fiscal justice in Europe
The third section of the book is entitled ‘To Love Europe Is to Change It 2018–2020’. The article of that title is actually about a (failed) meeting between France and Germany to harmonise company taxation. Piketty recommends that such meetings should include more EU countries. He laments that France and Germany continue to put up with tax competition (where companies shift their tax reporting status according to how they can save money in lower-tax states like Luxembourg or Ireland). This issue is once again in the news with startling new evidence about how much tax the UK is losing to countries like Ireland and the ‘treasure islands’. Piketty closes with the statement: ‘If Europe does not stand for fiscal justice, then the nationalists win the day.’
Brexit and Trump
In February 2020, Piketty wrote an article on the causes of Brexit (and Trumpism in the USA). ‘The free circulation of capital, goods, and services with no collective regulation or joint fiscal or social policy functions primarily to the benefit of the richest and undermines the most disadvantaged.’ What the Brexiters were seeking was control over free movement and not contributing to a joint budget. Piketty recommends a socialist-federalist approach. ‘[T]o sum up: the nationalists attack free circulation of people; social federalism must deal with the circulation of capital and the fiscal impunity of the wealthiest.’
Finance and climate change
Piketty also touches on how to finance the fight against climate change. He asserts that GDP calculations should include natural wealth assets. It is urgent to multiply indicators from the environment (bio-diversity, breathable air, etc.). In discussing how to deal with the huge Covid debts countries have incurred, he points out that it is unwise just to assume that central banks can shoulder them (thus taking them off the balance sheets of national governments). This is a form of money creation that leads to increased prices for property and goods. In fact, this the inflation we see in 2023, exacerbated by the energy crisis caused by Putin’s war. Piketty declares firmly that new money must be used for green and social purposes rather than to increase inequality.
To sum up: Piketty’s writings are worth following, and it is good that they are translated into English fairly quickly. His views are internationalist and also pan-European. It is also good to note that some of his formative postgraduate years, where he learned empirical economics, were at the LSE in London. This is great evidence for arguments for ensuring the flow of international students across UK borders.
