Mesocosm

In A Brief History of Equality, Thomas Piketty reviews the distribution of wealth over the last few centuries and draws practical lessons that we can use to shape an agenda for moving toward a more just and equitable world. 

Piketty called his Capital in the Twenty-First Century “as much a work of history as of economics,” and this shorter volume is also deeply informed by historical research. This focus helps explain the author’s surprising popularity – unlike many economists who trade in esoteric equations, he keeps both feet firmly on the ground. 

One danger of ignoring history, he argues, lies in taking our particular forms of economic and political life as timeless and unchangeable. This can lead to the feeling that we’re trapped in a situation of spiraling inequality from which there is no escape. But in his survey of the last few centuries, he shows just how much progress has already been made. 

This is not to deny there is more work to do – far from it. As shown in his Capital, current levels of wealth and income inequality are bad and are getting worse, largely because the historical returns from investment always outpace the growth of an economy. This sets up a feedback loop where the people who have money to invest earn more money more quickly than those who don’t. In the absence of counter-balancing forces like effective progressive taxation and inheritance taxes, wealth tends to accumulate into larger and larger fortunes. 

This may be a natural tendency of growth, but we have more options for dealing with problems like this than we may think, and this is where Piketty kicks into high gear.

The nature of property ownership is not delivered from on high as a kind of natural law, even if that’s how it’s sometimes characterized in legal codes. For example, the Declaration of the Rights of Man, which is the basis for the French legal understanding of property, states: 

The goal of any political association is the conservation of the natural and imprescriptible rights of man. These rights are liberty, property, safety and resistance against oppression.

The French definition naturalizes its conception of property, declaring ownership to be a universal right that is beyond the reach of political deliberation. Following this definition, French legislatures and courts have tended to favor a strong, expansive reading of property rights, which has limited the reach of redistributive policies.

But not all societies see it this way. For example, Article 14 of the German constitution declares: 

Property and the right of inheritance shall be guaranteed. Their content and limits shall be defined by the laws. Property entails obligations. Its use shall also serve the public good.

This formulation explicitly sets a context and limits for property ownership – it is not an intrinsic, inalienable right, but is legitimate only insofar as it serves the public good. This has shaped the German conception of ownership, sometimes in profound ways. For example, it forms the constitutional basis for laws requiring medium- and large-sized companies to set up a Betriebsrat, or worker’s council, which shares governance rights with shareholders. Imagine how Elon Musk’s acquisition of Twitter would have been dealt with in a world where that company had such a council that looked after the interest of the company and the workers, and not just the shareholders.

As a matter of history, it is plainly true that “property” is not absolute. Ideas of ownership do not exist in the abstract, but consist in the historically-determined and changing frameworks of laws, norms, and power relationships without which the term has no meaning. How could we otherwise account for the fact that soon after the the Declaration was written and then for many decades, women did not have the right to inheritance or to open a bank account in France?

He doesn’t use the term, but I believe his thinking here is informed by the Marxist critical concept of reification, which refers to the distortions that occur when we view social relations or manufactured objects as though they have no history. It generally serves the interest of the status quo to naturalize certain fundamental conceptions – that is, to treat them as timeless truths, like the law of gravity. That is, of course, why people whose interests are served by the status quo tend to describe property rights as sacrosanct. But a study of history opens up a range of actual possibilities for reshaping these principles when it’s in the greatest common good to do so.

When Piketty looks at the last few centuries of inequality, a lot of the news he finds is good. This is why he called this book a history of “equality.” As he said in a recent New York Times interview, “I’ve always viewed my work and conclusion as relatively optimistic. And I was a bit sad to see that some people had a different reading.” 

I think relatively optimistic is a good way to put it – you could perhaps say, based on his findings, that the global story of equality has gone from “terrible” to “pretty bad.” If we go back to the period beginning with the earliest useful financial records that we have, the eighteenth and early nineteenth centuries, we find that the vast majority of people all over the world owned almost nothing. In Europe during this time, for example, the majority of the population did nearly all of the productive work, had no real political power, and paid most of the taxes. 

But progress has been made. Today, a far greater share of the world’s wealth is owned by a middle class, though the bottom half of the world’s property owners still collectively own virtually nothing, and wealth is still largely owned based on gender and national origin. But the key lesson of the past is that real change is possible. Sometimes even policies that were considered impossible for a long time can be achieved, like the progressive federal income tax in the United States.

A useful illustration that Piketty examines is Sweden, which showed extremely high political and economic inequality for all of the nineteenth century. But in the early twentieth century, the situation reversed, and Sweden built a successful welfare state. It in fact became one of the most egalitarian countries in Europe for the next century, and a number of related positive outcomes followed. If you had lived in Europe in 1900, you might well have believed that inequality in Sweden was simply a historical fact that would probably never change. But things did change, and they can change now. 

Piketty is under no illusions that a policy will save us. The major changes that have brought real progress have rarely come about by the smooth operation of the system. Progress is largely associated with the major shocks that create windows of opportunity. Some of the key shocks in our recent past have included the Great Depression and the World Wars. Ultimately, the role of the kind of policies he proposes is to inform public debate and to help shape the strategy of political actors. This is the focus of the second half of his book. 

The two primary problems he wants us to take on are economic inequality and sustainable development, both products of our newly-global economy. Under the current regime, both problems are extremely difficult to get a handle on, because our economic tools are not set up to address them.

With respect to inequality, the chief culprit Piketty focus on in this book is the lack of monitoring and controls on money moving across borders, which has dramatically increased since the triumph of neoliberal policies in the 1980s and 90s. Similarly, our ability to handle climate change effectively is limited by the fact that our economic systems are not set up to capture or reflect the social and economic costs of climate damage in any meaningful way. For example, climate-polluting industries like steel and cement manufacturing, which create more greenhouse gases per year than any other sector, themselves pay no direct costs for any adaptation or mitigation efforts that societies make.

Dealing with these issues will take novel solutions which may very well require that we fundamentally rethink our current economic framework, but we have good reason to do so. Unlocking our borders to capital flight has led to a situation in which many developed countries are wealthy but their governments are poor. Many of the largest fortunes evade representative taxation by shady dodges such as incorporating offshore. Companies like Apple or Facebook are able to benefit profoundly from the technical and human infrastructure of the United States, such as its major investments in education, while giving little or nothing back by way of taxes, preferring the favorable tax rates of havens like Ireland.

At the same time, individual fortunes are amassed and cached overseas in offshore accounts, allowing the wealthiest individuals and families to put enormous fortunes beyond the reach of taxation. As he discussed in his Capital, the economist Gabriel Zucman conservatively estimated that 10% of the global GDP is currently stashed away in such havens – this amount is greater than the total official foreign debt of all wealthy countries. 

In order to address such abuses, countries must be able to to effectively monitor and control money flowing out of its borders. This would allow for measures like the exit tax recently proposed by Bernie Sanders, which would assess a tax on assets moved out of the country.

In Capital, Piketty suggested creating an international framework for implementing a nominal global tax on wealth, which would require that we set up a standardized international accounting scheme to monitor such flows. A step like this would go a long way toward cutting down on flagrant abuse.

In this book, he develops a similar idea, but from a national, rather than an international, perspective. He recommends that each country insist on its sovereign rights to manage money as it comes and goes, and to create their own systems for dealing with the problem.  

PIketty suggests a number of additional strategies for dealing with these issues, but his goal is not to provide a manifesto, but to consider a variety of options and to offer them up to feed the conversation. It is ultimately a matter for for democratic deliberation to determine which options to try. He broadly characterizes his framework as democratic socialism, with a strong redistributive welfare system, but without the state ownership and controls found in communist countries, which led directly to terrible authoritarian abuses. 

There is a lot more in this book than I can meaningfully cover in a short review, but this at least suggests some of the major arguments. I found it extremely useful and persuasive, and, like his other works, very well written.

If you’ve been thinking about reading Piketty but were daunted by the subject matter or length of Capital in the Twenty-First Century, this might be a better way to check out his thinking. It is written with the layperson in mind in articulate, accessible prose. And if you’re daunted by the scope of challenges facing the world, it is refreshing to get a sense of how far we’ve already come, and to take stock of what we’ve already managed to do. 

As a final personal note, I’ll say that the challenges posed by inequality and sustainability are severe, but they’re the right problems for our historical moment, because ultimately they are problems about how we exist together, for the first time, as a global community. In a very real way, these problems amount to how we are going to treat each other and the world we live in. There is an opportunity here for us to collectively create an unprecedented framework for co-existence with an emphasis on fairness and stewardship. And if that sounds impossible, well, the progressive income tax was once thought impossible, too.