Thomas Piketty
was on the radio yesterday lunchtime, interviewed by a good economic and
business journalist, Hedwige Chevrillon, about his new book, “Capital et
Ideologie”, published a month ago in French. As the translators into English and other
languages beaver away over the 1232 pages of text, charts and graphs, the least
of their worries will be the straightforward title!
After the
considerable interest in his last work “Capitalism
in the 21st century”, not only in France but throughout the
world – so far 2.5 million copies have been sold in over 40 languages, (“only a small portion in English”, Piketty revealed)
- this second book will undoubtedly also be widely read and commented on.
Starting the
interview on a provocative note, the journalist asked Piketty if he considered
himself a latter day Karl Marx, “Certainly
not”, Piketty answered, “Karl Marx did not have the benefit, as I did, of 150
years of economic history from which to draw his conclusions and he was also
unaware of the abject failure of Soviet style communism”. He then went on to give
20th century western style capitalism credit for having raised
standards of living and reduced inequalities through progressive taxation, even
in the United States, but blamed it for
reducing taxes and preferring ownership and rent seeking to redistribution,
starting with the “Reagan revolution” of the 1980s, making it clear that in his
view, the policy stances of both Roosevelt and Reagan were based on ideological
rather than economic choices. Interestingly, he admitted that after being
liberally inclined when studying economics in the 1980s, he had changed his economic
philosophy on the evidence of the collapse of the Soviet Union but also what he
sees as the objective failure of Reagan’s economic policies, and those that
followed his lead, to generate growth and investment. The publicly stated justification at the time
for drastically lowering taxes was the assertion that it would lead to greater
investment, and therefore growth that would benefit the whole of society. This turned
out, according to Piketty, to be false: the evidence he has gathered shows that
since the 1990s, in the major developed countries, the rich have grown richer, growth
rates of the post-war years have stalled and inequalities have worsened. He
admitted sympathy for the main planks of the democratic platform for the 2020
election and scorned those who claim, once again on the basis of ideological
convictions, that they are tantamount to socialism or communism by the back
door.
Continuing the
theme of his first book, Piketty also stated that progressive taxes should not
only be levied on income but also on capital accumulated during a lifetime. A
young entrepreneur, however brilliant his idea, however beneficial it may be to
society and however big his ensuing business may become, has no right to be
immune from the progressive taxation of income and accumulated wealth, both during
his lifetime and when he dies. Turning from the US and Europe to Asia, he pointed
to the paradox that inherited wealth is taxed at 55% in Japan, that runs a western
style capitalist economy, whereas in China, ruled by a purportedly egalitarian
Communist party, it is taxed at 0%.
All this of
course is of more than just passing interest in France, given the continuing debate
about the wealth tax that Emmanuel Macron controversially abolished soon after taking
power in 2017. His publicly stated economic argument for doing so was very similar
to that of Ronald Reagan in the 1980s: wealthy people will invest the money
they haven’t been obliged to pay in taxes and therefore generate growth. A recently released report produced by a panel
of French economists, who were given the task of evaluating the impact of the
measure, concluded that it is still too early to tell. It’s only tangible
impact that they could point to for the time being is a considerable reduction
in the number of tax exiles from France in 2017 compared to 2014. And while it is
true that the trend growth of the French economy is a little higher than that of comparable countries, in particular Germany, many commentators put this down
to the boost to consumer demand after the injection of more than €11 billion
into the economy as a result of the gilets jaunes protests last autumn.
Will Macron’s
more structural measures, like those in favour of vocational training or reducing
unemployment benefits, add momentum to economic and wage growth in one or two
years time? Again, it is too early to tell, but a lot of Macron’s credibility and
therefore his chances of being re-elected in 2022, will be riding on their results.
Macron has also
gone on record as saying that one of the greatest factors of inequality in
France today is not having a job. This ties in with another of Piketty’s
findings, that education and training are fundamental to reducing inequality
and that the state should therefore encourage massive investment in education at all levels.
One
imagines, although he didn’t say so, that Piketty would therefore give Macron
credit for the measures that his government has taken to boost apprenticeships and
vocational training, as well as focusing more resources on primary education,
but that he would not be so complimentary about the abolition of the wealth tax!
Nor can he be expected to have great sympathy for Macron’s championing of
France as the “start-up nation” together with his frequently repeated encouragement
to young entrepreneurs “to become millionaires”.
Towards the
end, the interview degenerated into hubbub and confusion as both interviewer
and interviewee spoke across each other and at cross purposes - too many
questions to ask and too much information to impart. Radio interviews often,
disappointingly, end this way for lack of time.
To find out
more, there is no alternative therefore but to plough through the 1232 pages of
Piketty’s book!
