Review of Thomas Piketty's "Brief History of Equality"

Thomas Piketty’s first two books were too long. His most famous tome, Capital in the Twenty-First Century, exceeded 800 pages. His follow-up book, Capital and Ideology, was even longer, topping out at 1100 pages. I’m delighted to note that his new book, A Brief History of Equality, is blissfully short. And with that shortness comes a crystal-clear focus on both the history and future of inequality. It’s his best book.

Piketty’s main thesis is straightforward - over the past two centuries, and especially since the Second World War, we have seen a clear trend towards greater income and wealth equality. To explain this, he credits such factors as more equality before the law, the arrival of universal suffrage and parliamentary democracy, the advent of free and universal education, the development of universal health insurance, higher progressive taxes on income and wealth, and a step towards joint management of firms between employers and workers. These reforms flowed from changing power relations in society, often driven by bottom-up pressure from labor and social movements. Particularly decisive was the experience of the world wars and the Great Depression, which paved the way for the widespread adoption of social democracy.

One advantage of Piketty’s new book is that he focuses on the developing world, including the monstrous injustices of slavery and colonialism. He notes that slaveholding and colonial societies tended to be the most unequal in history. From his French vantage point, he recounts the shocking story of slavery and its aftermath in Haiti. After a successful slave revolt in 1791, France imposed on Haiti a commitment to compensate the slave owners for their lost “property” in the amount of 300 percent of Haiti’s national income in 1825 - this was still being paid off as late as 1950. For Piketty, this is a clear case of France owing reparations. He also raises the question of whether reparations are owed more generally by colonial masters to their former colonies. This would be a matter of justice, nor charity.

The main part of the narrative, though, focuses on the developed world, with particular attention to the “great redistribution” that took place between 1914 and 1980. Here, Piketty points to the enormous rise in the welfare state, accelerated by two world wars and the Great Depression. This went hand-in-hand with the development of highly progressive taxes on income and inheritances, which enabled governments to reduce the concentration of wealth and economic power. Between 1914-1980, the tax burden tripled in the United States and quadrupled in Europe, and this was used to fund social welfare expenditures such as health care, education, and social insurance schemes. This gave rise to very high tax rates on top incomes - in the United States, the average top income tax rate was 81 percent between 1932 and 1980 (before Reagan lowered it substantially). It should be pointed out that tax rates at this level only affected a very small number of very rich people. They had the benefit of discouraging businesses from granting high remunerations to top management, which led to more funds for investment and for ordinary workers. Piketty also points out that this tax policy did little to dampen innovation or productivity. On the contrary, the highest growth rates coincided with the highest tax rates. Piketty concludes that these “confiscatory” tax rates were a great success in discouraging large fortunes and reducing inequality.

Piketty then turns his attention to the future, pondering which policies would best serve the march towards further equality. It is clear that he favors a continued expansion of the welfare state, funded by a return to highly progressive income taxes, perhaps at confiscatory rates. He also suggests a scheme of guaranteed employment, although he never really draws this out.

But Piketty focuses most of his analysis on reducing the concentration of wealth, which remains stubbornly high. He does point to a slow deconcentration of power and property over time. One consequence of this was the rise of a “patrimonial middle class” - the 40 percent between the poorest 50 percent and the top ten percent - which saw its wealth share increase over the course of the twentieth century. But the bottom 50 percent still owns next to nothing.

To fix this problem, Piketty’s main proposal is to implement a minimum inheritance. Specifically, he lays out a plan for a capital endowment equal to 60 percent of the average wealth per adult, to be paid at age 25, financed by a progressive tax on wealth and inheritances. As well as dramatically reducing wealth inequality, this would increase the bargaining power of the bottom 50 percent.

Another proposal he puts on the table is what he calls “participatory socialism.” This is an extension of the German system of codetermination, whereby workers have representatives on a company’s board of directors and supervisory board. In Germany, where this system is most advanced, workers have the right to appoint half the seats in companies with more than 2000 employees. Yet this model is pretty much limited to Germany and a small number of northern European countries (Austria, Sweden, Denmark, and Norway). Piketty notes that the German approach flows from its constitution, which asserts that the right to private property is legitimate to the extent that it serves the public good. This is a clear application of the Catholic principle of the universal destination of goods. Piketty would like to see this system strengthened and extended to more countries.

Piketty also offers some proposals to achieve greater justice in the realm of education. He notes that educational inequalities run deep, especially when it comes to higher education, where parental income predicts a child’s chances of going to university. He suggests some form of affirmative action based on class and social criteria. He suggests similar options to combat gender inequality.

For Piketty, a major challenge on the road to greater equality lies in the need to escape what he calls neocolonialism, founded on the “uncontrolled circulation of capital lacking either a social or an environmental objective.” Here, he criticizes the “Washington consensus” for its emphasis on paring back the state, budget austerity, commercial liberalization, and deregulation. He claims that this liberal orthodoxy still has an outsized influence over the global south. In consequence, low-income countries lack the fiscal resources to invest in social security systems. He (rightly) lays much of the blame on tax havens, which swallow up resources that could otherwise be devoted to development. At the same time, the outflows from capital flight and multinational profits dwarf inflows from foreign aid. To rectify this problem, Piketty proposes a global tax of 2 percent on fortunes exceeding ten million euros - this would raise 1 percent of global GDP, which could be allocated to development in low-income countries. He also thinks that these countries should also have the right to receive part of the tax on multinational profits. This would be an example of global solidarity in action.

Piketty also reflects on the most urgent challenge of the 21st century - climate change. He notes that this is another example of inequality, as richer countries account for the vast majority of the cumulative carbon emissions that choke our planet. Strangely, he doesn’t offer much in the way of proposals here, merely calling once again for a transformation of the distribution of wealth and the economic system. One intriguing possibility, confined to a footnote, is what he calls a “carbon card” - a credit card that would track a person’s carbon footprint, designed to concentrate emission limits on the richest taxpayers. But he never really draws this out.

At the end of the day, Piketty is proposing what he calls “democratic and federal socialism, decentralized and participatory, ecological and multicultural, based on the extension of the welfare state and progressive taxation, power-sharing in business enterprises, postcolonial reparations, the battle against discrimination, educational equality, the carbon card, the gradual decommodification of the economy, guaranteed employment and an inheritance for all, the drastic reduction in monetary inequalities, and finally, and electoral and media system that cannot be controlled by money.”

This is a tall order, and it leans radical. Piketty sees it as a robust alternative not only to neoliberalism and neocolonialism, but also to the Chinese system of statist, authoritarian capitalism. There is much here that is resonant with Catholic social teaching. His proposals might be far-reaching, but they are also humane.

Piketty recognizes that much of what he proposes has no hope of being implemented anytime soon. But he is optimistic about the continued march towards equality. This is what surprised me most about this book. In his earlier work, Piketty leaned much more pessimistic, pointing towards continued inequality of wealth as almost hardwired into the economic structure. This book, in contrast, shows that political change is possible, especially when driven by labor and social movements. In this at least, Piketty is aligned with Pope Francis.