Thomas Piketty has come a long way. He first captured public attention in 2014 with his wildly ambitious, 704-page updating of Marx’s Das Kapital, entitled Capital in the Twenty-First Century. Part of its appeal – it became both an international bestseller and an academic sensation – was the simplicity of its basic thesis. Although packed with history and statistics, its fundamental proposition, that if the return on capital exceeds the growth rate of the economy, wealth will become increasingly concentrated, could be reduced to one simple equation: r>g.
Piketty’s latest book is almost exactly the opposite. Not only is it much shorter, based on a lecture given to the Société d’Ethnologie in his native France, its key message is: “It’s a lot more complicated than that.” Like Capital, it discusses the evolution of income and wealth inequality over history. But it emphasises historical contingency and, most of all, the role of politics and of collective mobilisation.
Piketty rejects the thesis – implicit in the way economics is often taught in our universities, and explicit in the way some economists and many conservative politicians and commentators discuss policy issues – that very large inequalities are the inevitable outcome of a well-functioning market economy. That idea – that great disparities are somehow “natural”, because ability or entrepreneurialism is unevenly distributed across individuals (or countries, or ethnic groups) – is also used to argue that efforts to reduce inequality will either be ineffective or reduce growth and prosperity, or both.
Piketty points to familiar counterexamples: Sweden, where social democratic policies led to a country that had been highly unequal as recently as the interwar period becoming one of the most equal in the world, while at the same time becoming one of the richest. And the US, where very large tax cuts during the Reagan era led to spiralling inequality, but without any commensurate improvement in economic performance. In both cases, the key drivers were political and historically contingent.
So if inequality is neither inevitable nor beneficial, what should we do about it? In Capital, Piketty placed a great deal of emphasis on one potential policy tool: a global wealth tax – simple enough in theory if incredibly complex and politically problematic in practice. He hasn’t backed off from his view that taxation – of income, capital and inheritance – should be more progressive, here extending that idea to carbon reduction mechanisms. Many economists would agree, at least in principle, and even more would endorse his view that over the medium to long-term the best way to reduce inequality is to invest much more money, more equitably, in education.
But Piketty goes further, arguing that what is required is a broader rejection of market mechanisms: developing the welfare state involves more than redistributing money equally; “above all it requires taking certain goods and services out of the marketplace”. While this is uncontroversial for education and healthcare, Piketty doesn’t stop there: “In the long run this could potentially represent the near totality of a country’s economic activity.” Just the collective ownership of the means of production, then. How would this work? Well, he does give an example: the Guardian’s Scott Trust.
And there the chapter ends, unconvincingly. For those of us who share Piketty’s general outlook and much of his analysis, this will be more than a little frustrating. If it is collective political mobilisation that drives policy change, where does that come from and how does it relate to the current state of the global economy? Perhaps the most glaring omission is any mention of the tech sector, which is behind much of the recent concentration of both wealth and political power in the US, and threatens to play the same role elsewhere. Piketty ends with a challenge to social science researchers of all disciplines to engage with the economic and political issues arising from the unequal distribution of wealth and power. Indeed, I would argue that this is where they should start.
• Nature, Culture, and Inequality: A Comparative and Historical Perspective is published by Scribe UK (£12.99). To support the Guardian and the Observer go guardianbookshop.com. Delivery charges may apply.
