Interview with economist Thomas Piketty: capital and ideology I FT

Summary

In this interview, economist Thomas Piketty discusses his new book *Capital and Ideology*, expanding on his previous work *Capital in the 21st Century*. He explores how inequality is shaped by ideology and how societies' choices about inequality regimes have evolved across time and nations. Drawing from examples in countries like Sweden, India, and Germany, Piketty argues that inequality is not inevitable but shaped by political mobilization and changing ideas. He advocates for progressive taxation and workers' rights in corporations, proposing bold measures such as wealth taxes to reduce inequality and improve economic participation.

Takeaways

• 😀 Thomas Piketty's book *Capital and Ideology* expands on his previous work, *Capital in the 21st Century*, focusing on how ideology shapes inequality and vice versa.
• 😀 Piketty argues that inequality is not a natural outcome but rather the result of political choices, ideology, and societal narratives over time.
• 😀 Unlike his previous focus on Western countries, Piketty now examines global inequality, exploring countries like India, Brazil, and South Africa to understand diverse inequality regimes.
• 😀 Piketty highlights that countries, like Sweden, have historically had deeply unequal systems, but have shifted due to changing political ideologies and movements.
• 😀 The book stresses that inequality can be reshaped by changing public imagination and political mobilization, offering hope for the future if the right narratives are adopted.
• 😀 Ideas can diffuse globally, as seen with progressive taxation, which rapidly spread across countries in the early 20th century after World War I.
• 😀 The rise of progressive taxation, such as the income and inheritance tax rates, was driven by political mobilization in the early 20th century, often following large social crises like wars.
• 😀 The system of co-management in Germany, where workers have a say in corporate governance, is presented as an example of a successful policy that could be expanded globally.
• 😀 Piketty's wealth tax proposal includes steep taxes on large fortunes to finance universal inheritance at age 25, providing everyone a starting financial boost to promote social mobility.
• 😀 Piketty criticizes the ideology that concentrated wealth and power lead to greater innovation and economic growth, arguing that inequality reduces overall economic efficiency.

Q & A

What is the main difference between Thomas Piketty's previous book, *Capital in the 21st Century*, and his new book, *Capital and Ideology*?

The main difference is that while *Capital in the 21st Century* focuses on inequality in Western countries, especially in the 20th century, *Capital and Ideology* expands the analysis to a broader international perspective. It examines inequality regimes across countries like India, Brazil, South Africa, China, and Latin America, emphasizing how changing ideologies, rather than just material forces, drive inequality.

How does Piketty argue that ideologies shape inequality regimes?

Piketty argues that ideologies play a central role in shaping inequality. He explains that societies can choose to be unequal in how they organize property relations, and the political mobilization around inequality can change the structure of inequality over time. He highlights that inequality is not a natural outcome but a product of ideological choices and political struggle.

What is Piketty's view on the relationship between inequality and political mobilization?

Piketty believes that political mobilization around inequality can lead to significant changes in the economic structure. By changing the collective imagination of a society, political movements can influence the organization of wealth and power, leading to more egalitarian systems. He argues that if enough people mobilize, economic inequalities can be reduced.

What historical example does Piketty use to show the role of changing ideologies in reducing inequality?

Piketty uses the example of Sweden, where, between 1865 and 1911, voting rights were concentrated in the hands of the top 20% of the population. However, over time, Sweden became one of the most egalitarian countries, showing that inequality regimes can change as political ideologies and mobilizations evolve.

How does Piketty describe the role of World Wars in reducing inequality in the 20th century?

Piketty explains that World War I and World War II played a significant role in reducing inequality in Western countries. These wars led to major economic and political shifts that helped to lower the concentration of wealth and power in the hands of a few. The wars were catalysts for changes in taxation, social policy, and wealth distribution.

What does Piketty say about the diffusion of progressive taxation ideas globally?

Piketty notes that ideas like progressive taxation spread rapidly in the early 20th century. For example, after World War I, many countries adopted high top income and inheritance tax rates, influenced by the US and other countries. The adoption of these taxes became widespread, with top rates reaching 60-80% in several countries, marking a shift toward more progressive tax systems.

Why does Piketty argue that wealth inequality has become more entrenched in recent decades?

Piketty argues that the ideology of financial deregulation and globalization, which gained prominence in the 1980s, has contributed to widening inequality. He notes that despite claims of more growth and innovation from this ideology, the growth rate in countries like the US has slowed, and workers have not seen significant improvements in their living standards.

How does Piketty respond to critics who argue that high wealth taxes will reduce productivity and growth?

Piketty counters that wealth taxes, even at high rates, can still allow individuals to retain a significant portion of their wealth. He argues that extreme concentrations of wealth are unfair and inefficient, and that taxing the super-wealthy could lead to more equitable opportunities for others. He also points out that higher taxes in the past have coincided with periods of higher productivity and economic growth.

What is Piketty's proposal for a wealth tax, and how would it work?

Piketty proposes a progressive wealth tax where the highest wealth holders are taxed at very high rates, up to 90%. He suggests using the proceeds from this tax to fund a universal inheritance program, where individuals would receive a one-time payment of 120,000 euros at age 25. This is intended to provide everyone with an opportunity to participate in the economy, reduce inequality, and create a fairer distribution of wealth.

Can a single country implement a progressive wealth tax, or does it require global cooperation?

While Piketty acknowledges the challenges of global implementation, he believes that individual countries can take unilateral action to address wealth inequality. He points to examples like the US's billionaire tax proposal and the potential for countries to regulate capital flows and implement taxes on the wealthiest individuals, even if not all countries cooperate.