[Piketty’s new book, “A Brief History of Equality,” is
perhaps his most optimistic work. Piketty proposes a truly radical
policy agenda — a universal minimum inheritance, worker control over
the boards of corporations and “confiscatory” levels of wealth and
income taxation — that he calls “participatory socialism.”]
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THOMAS PIKETTY’S CASE FOR ‘PARTICIPATORY SOCIALISM’  
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Ezra Klein
June 7, 2022
New York Times
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_ Piketty’s new book, “A Brief History of Equality,” is perhaps
his most optimistic work. Piketty proposes a truly radical policy
agenda — a universal minimum inheritance, worker control over the
boards of corporations and “confiscatory” levels of wealth and
income taxation — that he calls “participatory socialism.” _

,

 

EZRA KLEIN: I’m Ezra Klein. This is “The Ezra Klein Show.”

So before we begin today, a bit of job creation. We are looking for a
researcher on the show. This job is exactly what it sounds like,
somebody who’s going to work with us on researching the guests, the
episodes, the work, help write questions, help shepherd the episodes
through. But this is the central thing that makes a show go. If that
sounds like you, sounds like your skill set, sounds like something you
want to be doing, have done, can show us that you’d be amazing at
doing it and that you really get the show on a deep level, we have put
the link to the job description in the show notes.

But for today’s episode, Thomas Piketty — finally, Thomas Piketty,
I think one of our most requested guests. If you don’t know Piketty,
he’s arguably the world’s greatest chronicler of economic
inequality. Across a series of papers now, working with a wide range
of co-authors, he’s put together these painstaking cross-national
data sets, showing the extraordinary amount of income and wealth that
has flowed to the top 1, and even 0.1, and even 0.01 percent of the
population.

His book detailing the way capitalism rewards wealth over work,
detailing why those trends actually happen, “Capital in the 21st
Century,” was a huge international bestseller, which was a real
rarity for a book like it. It’s a long, dense, complicated work of
economics. But Piketty is one of those people who, through empirical
work, through theory, has genuinely reshaped the way we think about
central dynamics of the economy. He’s really a transformational
intellectual figure.

And he’s got more to say. His new book, “A Brief History of
Equality,” isn’t just detailing our continued descent into
economic dystopia. It’s a book that is much more optimistic about
our past than people associate with him. He argues that we’ve seen a
march towards equality that many of us still underrate. And then
it’s much more optimistic about the future we could have, because
Piketty thinks that we can have much more radical policies than most
economists or politicians buy into, that could really build a far more
equal world. I mean, we’re talking here a universal minimum
inheritance of around $150,000 per person, worker control over the
boards of corporations, massive levels of wealth taxation. He’s
really putting forward solutions proportionate to the size of the
inequality problem. And so it’s bracing stuff to read.

Piketty, I should note, is French. His English is so much better than
my French. But if there’s anything here you have trouble
understanding, we will have a transcript up at The New York Times a
couple of hours after the show comes out. As always, my email,
[email protected].

[MUSIC PLAYING]

Thomas Piketty, welcome to the show.

THOMAS PIKETTY: Thanks for inviting me.

EZRA KLEIN: So I’m thrilled to have you here. I think you’re
arguably the world’s leading chronicler of economic inequality. And
so, what then led you to write a book chronicling equality, a sort of
more fundamentally optimistic work, I think, than many of your past
pieces?

THOMAS PIKETTY: You know, 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. So I thought it was time to reframe
everything, to clarify maybe some of my thinking. One of the problems
that my past two books, “Capital in the 21st Century,” and
“Capital and Ideology,” were really long. And so people can get
lost into the argument. And I really wanted to write a much shorter
book.

And by doing that, I think maybe I was able to clarify my thinking.
And also, maybe to clarify the fact that, yes, in the long run, there
is a movement toward more equality. So when I talk about the long run,
I’m looking at the two centuries — two centuries and around
starting at the end of the 18th century, with the French Revolution,
the U.S. revolution, to some extent. And I look at the broad evolution
of political equality, social equality, economic inequality over this
period. And yes, I see a long-run movement toward more equality, that
did not come naturally or smoothly. It came out of major political
mobilization, social struggles in some cases, sometimes major crises.

But in the end, this is the construction of new institution, of new
legal, educational, fiscal, social rules of the game, that have
transformed our societies in, I would say, a very positive manner,
that have made them both more equal and more prosperous. And this is
the story I wanted to focus upon. Because I think in the end, this is
a major lesson from all this body of historical sources and data that
I have been gathering for a number of years now.

EZRA KLEIN: Let’s work through the argument of this book. And an
important move you make, right at the start, is, particularly in
America when we think about inequality, we tend to focus on income
statistics. And you argue that wealth inequality is the more important
measure to focus on. Why?

THOMAS PIKETTY: Well, I think wealth is, in a way, a better indicator
of opportunity, of power than income. And more generally, what I care
about is really the equality or inequality of capabilities as Amartya
Sen would have said. So what you can do with your life, the kind of
choice you can make, the bargaining power you have, vis-à-vis the
rest of society and vis-à-vis your own life. And from this viewpoint,
wealth is quite important.

Because when you have no wealth at all, or even worse, when you have
negative wealth, when you have only debt, you need to accept
everything, basically. You need to accept any working condition, any
wage. Because you need to pay for your rent, you need to take care of
your family or relatives. And you cannot really make choices.Whereas,
if you have just — even just $100,000, $200,000, or $300,000, or
euros, this can seem very small to someone who has millions or
billions, but in fact, this makes a big difference, as compared to
having zero or negative wealth. Because then you can — so if you are
being proposed a job and you don’t like it, you don’t need to
accept it right away. You can wait a little bit. You can try to create
your own business. You can build your own home so that you don’t
need to bring in a wage and rent every month. And you can start
different kinds of projects in your life.

So this puts you — it’s much more than money. It’s really a
question of bargaining power with respect to the rest of society and
basically deciding the kind of life you want to have. So it goes well
beyond just economics, in a way. It’s much more important than that.
And indeed, this movement toward more equality that I describe in the
book is primarily a movement where more and more people acquire more
and more control, agency, power, opportunity with respect to their own
life.

And from this viewpoint, yes, wealth indeed is a better indicator than
income. Generally speaking, we need to have a multidimensional
approach to inequality and to the kind of social and economic
indicators that can help us to monitor this long journey toward
equality. So income is important, wealth is important, but there are
many other indicators, including access to political participation, to
participation to decision making in companies. And so we need this
multidimensional approach. And I think I am also clearer in this book
about this maybe than I was in my previous two books.

EZRA KLEIN: It’s something I really appreciate in your thought, the
attention to power in all directions. That wealth is a form of power,
bargaining power, vis-à-vis society, as you put it. That it is often
gained through power. It is not an automatic story of economic policy
or markets or technology. But you’re not just storytelling here,
you’re also tracking data, and tracking data over a quite long
period of time. You’re tracking wealth distribution across society,
across multiple countries, over more than 200 years. What kind of data
are you using for that? Why should I believe that the data we have on
wealth in France or the U.K. or the U.S. from more than 150 years ago
is good enough data to build the kind of story, and draw the kind of
conclusions, and run the kind of analysis that you do?

THOMAS PIKETTY: Right, so I think the data we have on wealth and
property for the late 18th century and the 19th century is probably
better than what we have today. First, because at the time, you
didn’t have tax havens, you didn’t have progressive taxation. So
people did not have a strong incentive to try to hide their wealth.
And in fact, it was quite the opposite. Wealth and property was very
often at that time a way to establish your political rights. And
indeed, you have a political system which are very often based on
property in order to grant you voting rights.

So the data is pretty good. In a way, the problem with the data is
more — today, where we need to make a lot of effort, try to use
values, data sources in an imaginative manner, in order to make sure
we can correct for all the tax evasion, for all the wealth and tax
havens. We do our best to do that. We’ve made progress, but
certainly there’s still a lot of progress to be made.

Sometimes we imagine we live today in a world of big data and big
transparency, but in fact, some private companies accumulate a lot of
big data, which sometimes we would like them not to accumulate on
ourselves. But in terms of public statistics, and public information
about who owns what and how this is changing over time, we actually
live in an age of big opacity. And it takes a lot of energy to try to
combine the relevant information for the recent period.

And this is the kind of work that historians started to do a long time
ago. I should say, all my work is really in the continuation of a
large body of historical research on income, and wealth, and wages,
and prices, which started in the late 19th century. But for us, when I
started working on this, in the late 1990s and in the post-2000
period, we’ve been able to process a much larger quantity of data,
to increase drastically the number of countries.

And by having 10, 20, 50, 100 countries, rather than one of two, you
can make comparisons. You can start asking, OK, what kind of impact
did it have for this country to have a rise in inequality or a decline
in inequality as compared to this other country. We’re still very
uncertain about a lot of conclusion. Let me say, we are in the social
sciences, we are not going to have a mathematical formula.

EZRA KLEIN: So when you track all this data, when you run the trends,
in the U.S. and in France and the U.K., other parts of Europe,
there’s obviously a lot that emerges. But what are the three things
you feel you’ve learned from looking at these trends over time, that
people might not expect? Once you’ve immersed yourself in the data,
how does the story of equality change from maybe what our folk wisdom
or intuitions about it would be over this multi-century time period?

THOMAS PIKETTY: OK, the three most striking conclusions, maybe, to me
will be, first, there’s been a long-run movement toward more
equality, both of income and wealth. And I’m going to be more
specific about this in a minute. So go on, main finding, this movement
toward more equality in terms of income and wealth really starts only
after World War I and World War II, during the 1940-1945 period.
There’s really not much going on in the 19th century and pretty much
until World War I.

And three, the third finding is that this movement to have more
equality, although it’s still there, if you compare the situation
today with the situation in 1910, 1914, we live in a more equal world,
in terms of equality of wealth, and especially equality of income.
This movement has been of limited magnitude, in the terms of the
concentration of wealth is still very large.

So let me maybe be a bit more specific about the numbers that people
should have in mind, so that they can understand what I mean with
these three findings. If you look at the distribution of wealth today
in the United States or in Europe, what’s really striking is that
the bottom 50 percent of the population basically owns almost nothing
at all. So, what I mean — nothing at all, in the U.S. it’s going
to be 2 percent of total wealth owned by the bottom 50 percent. In
Europe, it’s going to be 4 percent, so that’s better than 2
percent, but it’s still very small.

The top 10 percent would own over 70 percent of total wealth in the US
and around 60 percent in Europe. And so the rest will be owned by the
40 percent of the population that are in between the top 10 percent
and the bottom 50 percent, by definition. So this illustrates my point
number three, which is we still have a lot of inequality. This looks
like a very large concentration of wealth. And indeed, if we are
looking at income, it will look less extreme, much less extreme than
this. The bottom 50 percent maybe would have 20 percent of total
income, rather than 2 or 4 percent. So this is much less extreme for
income than full wealth.

Now, although inequality of wealth today looks very large, one century
ago it was even more extreme. So if you look at Europe in 1900 or
1910, the top 10 percent would own 90 percent of wealth, rather than
60 percent today. So that, in the end, this middle 40 percent who are
in between the top 10 percent and the bottom 50 percent, at the time
were almost as poor as the bottom 50 percent. They would own between 5
percent and 10 percent of total wealth. And the bottom 50 percent
would own 1 percent or 2 percent. It’s as if you have no middle
class in the sense that what middle class — it’s always a bit
richer than the bottom 50 percent, but they really did not own much.

So there has been some significant improvement in the long run, in the
sense that this middle 40 percent group, who used to be almost as
poor, in terms of share of total wealth a century ago, now owns up to
40 percent, almost 40 percent of total wealth in Europe and bit less
than 30 percent the US. So this is a significant improvement.

A striking fact, which I didn’t know before looking at the
historical data, is that this movement, while limited diffusion of
wealth to the benefit of this middle 40 percent, did not start really
before World War I. So in the 19th century, and in the early 20th
century, until 1914, you have more concentration of wealth or the
stabilization at a very, very high level of wealth concentration, but
the movement toward less inequality really starts after World War I,
World War II, following large transformation of the social systems,
the fiscal system, the rise of progressive taxation, the rise of
Social Security. So some of this political movement, of course,
started before World War I.

And it’s very difficult to rewrite history about what would have
happened without World War I and World War II. You can certainly make
the case that in the U.S., the Great Depression was an even bigger
impact on the political landscape and social landscape than the war.
You have countries like Sweden, which World War I, World War II did
not have such big impact on, such a large importance as in other
countries, and which still had this movement toward more equality, and
to some extent, even more so than the others.

So I don’t mean to say it’s really the war itself. It’s more
this entire process during the first half of the 20th century is going
to lead to a transformation of the political, social and fiscal system
in such a manner that this is going to lead to a limited diffusion of
wealth and a limited rise of more equality.

EZRA KLEIN: Well, let me get to that emergence of a wealthy middle
class. So, I think the story you tell there is incredibly striking,
for a couple of reasons. One, of course, the punctuated nature of it.
While we can’t know exactly how much of a driver war was —
there’s another book about moments in time when inequality really
changed, “The Great Leveler.” And I would say the takeaway of that
book is the only force is stronger than those protecting great
inequality of wealth are wars, plagues and total societal collapse.
And it’s a pretty grim conclusion.

But I also find your story here surprisingly grim in a way. Because on
the one hand, you’re telling a story of dramatically rising equality
over a long period of time. But that story is actually really a story
of change in inequality, wealth transfer, almost entirely among the
top 50 percent of the income distribution. So the bottom 50 percent
goes from — depending on the country, but roughly two points of the
total wealth distribution in the 1800s, early 1800s, to around five
today.

And I can then hear my conservative friends saying, well, doesn’t
this suggest something is wrong with your data? If wealth is power, if
this is a measure of inequality, would you really rather be in the top
10 percent in 1800 or the bottom 20 percent today? Is it really not
true that the bottom 50 percent of the distribution has a lot of
political power today, and just a lot of power they didn’t have in
the early 1800s? So how do you respond to conservatives who say, this
is actually missing how much the economic changes in this era over
this period did to diffuse the fruits of economic growth, of
technological change, of riches, such that the wealth distribution is
obscuring more than it reveals.

THOMAS PIKETTY: Right, so what I would respond is that they should
start reading chapter one of my book, and in particular Figure 1 and
Figure 2, where I start by analyzing the fact that average income per
capita has been multiplied by 10 over the past two centuries. So,
that’s the first. Together, with the big rise — so Figure 1 is
about the enormous rise in life expectancy and the enormous rise in
literacy rates. And Figure 2 is about this enormous rise in income per
capita.

And so this is, of course, the first way — you ask me about what was
the most surprising finding. So this, I did not invent the big rise in
per capita income or life expectancy. So that’s why I did not start
with this. But in the book, this is, of course, where I start. Because
this is the first way in which there’s been an enormous increase in
opportunities, in power, in equality. So the fact that you can live
your life until age 60, 70, 80, rather than dying at 20 or 30, is a
major positive transformation. The same thing about access to culture
and literacy. The same thing, to some extent, about access to
purchasing power.

And the second thing in which I insist immediately at the beginning of
my brief history of equality is that this historical rise of modern
economic prosperity — and there is this multiplication by 10 of
average income — came together with more equality, and in particular
with more equality in education. So to summarize, the true source of
economic prosperity is equality, or at least a relative equality in
education. And a big part of this very large rise in purchasing power,
which is one of the first form of the rise of power in general —
this big rise in purchasing power happened in the 20th century, which
is a time when you have big reduction of inequality. In some cases,
very high progressive taxation.

So in the United States, the time when the United States has a maximum
economic prosperity and maximum economic dominance over the rest of
the world is also the time between 1930 and 1980, when the top income
tax rate, as we know, on average was about 80 percent. It was some
times 91 percent, sometimes 70 percent. On average, it was of the
order of 80 percent.

Not only this did not damage American prosperity, but in fact, this
was a period of time with the maximum U.S. prosperity with respect to
the rest of the world, with the biggest gap in terms of productivity
between the United States and the rest of the world. Why is it so?
Because the US at the time was the educational leader. And you need to
wait until the 1980s, ’90s, to get convergence of other Western
countries on the U.S. educational level and also convergence in
productivity level.

So the big lesson from history and from this big picture analysis is
that the historical is a true source of increased prosperity,
increased productivity, increased income and purchasing power, is the
rise of education, and relative equality in education, in the sense
that you want to have broad access to education. I mean, you don’t
want to have everybody going exactly through the same education, but
you want to have 100 percent of the population going to primary school
and then 100 percent going to secondary school. You need this very
broad access to education. And this has been the true source of
prosperity.

So you see that this movement toward more equality is a movement that
needs to be put into a perspective that is much broader than just the
evolution of wealth, concentration and wealth shares during the 20th
century, which is also important, but in a way, maybe it’s less
important than first this big long-run rise in prosperity, and also
the big long-run rise in political participation.

EZRA KLEIN: I want to get to political participation here, because I
think it raises the very puzzling question from the other side. A
conservative might look at this and say, how can you not track a rise
in wealth, despite the fact that the lives of people at the 25th
percentile are so much better today than in 1800? I think the way
somebody more on the left, or certainly somebody who’s more liberal,
who believes more deeply in democracy, might look at this, is to say
there’s a puzzle here.

The longtime view, certainly the longtime fear of democracy was that
if you give people the opportunity to vote, that 50 percent at the
bottom of the distribution, that 50 percent, plus one — that 60
percent, which has so much less wealth than the top 10 percent, but so
many more people, are just going to vote the wealth of the top 10
percent over to them. And ambitious politicians, who want to win votes
in a system that more or less, not perfectly, but more or less runs on
votes, is just going to go to those people and say, if you vote for
me, I’m going to have a huge wealth tax and I’m going to take all
these people’s wealth and I’m going to give it right to you.

And the fact that there is such unbelievable stability in the wealth
distribution over this period, where these countries do become vastly
more small-d democratic is really puzzling. It’s really very
puzzling. Like, how did it not happen? How did this fear and this
seemingly logical outcome not come to pass, that the bottom 55 percent
didn’t vote themselves a much larger share of the top 10 percent’s
wealth? How do you understand that?

THOMAS PIKETTY: Well, there are several explanations. The first factor
I want to stress is that it took a long time to extend the right to
vote. And even in the late 19th century, early 20th century, you still
have lots of countries where the right to vote is very unequally
distributed. So the first answer to your question is, well, in some
countries, it took a long time to actually get equal voting rights.

The second answer is that equal voting rights is not enough. If you
have very unequal funding of political campaigns, and typically,
that’s one of the key problems you have in the U.S. today, but also,
it was the same situation in countries, like in France, in 1900 or
1910, where you already have universal suffrage for men. So it was
more advanced than Sweden in a certain manner. Or in Britain, there
were several extension of the suffrage. It was still not universal in
1900 and 1910, but it was getting close.

But the problem is that in France and Britain, at the time, you still
had very unequal power in terms of influence into the political
process, financing political parties, campaign financing, the media.
In the U.S., it was maybe less entrenched at the time than in Europe.
I think it has become more entrenched today. So in a way, the U.S.
becomes a new old Europe of the world and has a form of inequality
today, which I think is close, in a way, to Europe, during the Belle
Epoque period, which very entrenched economic elite and political
system, where there’s a private financing of political campaigns and
political action committee. Makes it really difficult to change the
system, and particularly the economic and tax policy. I mean, I think
things can still change through political mobilization, but this makes
things more complicated.

And finally, the third reason why things are complicated is also
because it’s not so obvious to determine for the majority of the
voters what’s the right level of equality or inequality. I’m
certainly not saying that full equality is the ideal, because you can
have very good reason why different people want to conduct different
lives, make different choices. You may want to have some incentives.
So even if you don’t have this problem of unequal political right
and unequal political influence, it’s a matter of learning over
history about the right institutions, the right level of equality and
inequality.

So just to take an example. Before very highly progressive taxation
was experimented historically, in particular in the United States,
between 1930 and 1980, it was difficult to know how it would work. And
so the way I write about this today is very different from what people
could have written in 1910 or 1920, before it was experimented, where
people could say, this is going to be a disaster, this is going to
destroy the economy.

Now, of course, some of these arguments were sort of self-serving
argument. But partly, they were also plausible arguments. So I think
there’s a process of large-scale experimentation and learning about
the right institutions in history that is still going on, of course.
And that is much more complex than simply, OK, the poor are going to
expropriate the rich and et cetera.

[MUSIC PLAYING]

EZRA KLEIN: One thing about this book that I really appreciated about
it is that it isn’t just a dry recitation of trends, but it is a
proposal for a series of fairly transformative policies that I think
is, as you see it, would bring liberalism closer to many of its
long-term claims, that it does not tend to achieve. So tell me about
what you call participatory socialism. What makes participatory
socialism different from conventional social democracy?

THOMAS PIKETTY: In my view, this is really the continuation of social
democracy into the 21st century. So what does the limits — there’s
a great limitation of social democracy. I see three main limitations.
One is that in terms of wealth concentration, there has been limited
progress. So the bottom 50 percent today, in spite of the rise in
incomes, or rise in the welfare state, of course, they have a much
better life today than one century ago. That’s quite obvious in
terms of access to education, to health, to pension, to income.
That’s a huge progress.

But still, in terms of wealth, as we’ve said at the beginning, they
own 2 percent of total wealth, 4 percent of the total wealth. So
there’s been very limited progress. So how can we make progress in
this direction? And what I argue in the book is that one way to move
in this direction will be to have a minimum inheritance for all. So
that’s not instead of Social Security, basic income, a free
education, free health. This comes on the top of all of this. And this
is maybe the final step or one of the final step in this long process.

So I give concrete example. I say, OK, maybe you want to have
everybody at age 25 who should receive, say, 120,000 euros, which in
the European context will be about 60 percent of average wealth, which
is currently about 200,000 euros per adult. So in the U.S., maybe it
will be a bit more, say, $150,000. I don’t know, something like
this. I should say, we will still be very far from equality of
opportunity, in the sense that the bottom 50 percent, who now receive
close to zero, they would receive, say, 120,000 euros. People who are
in the top 10 percent, who today receive an average about one million
euro, will still receive 600,000 euros after the progressive tax on
inheritance and wealth that’s paying for all of this. So you will
still have substantial inequality of opportunity between these two
broad groups.

And if you want my opinion, I think we could go much further away in
this direction. But this will already make a big difference, because
this will give more power and more opportunities for the bottom 50
percent. And I’m always very surprised by the fact that people often
claim that they are in favor of equality of opportunity at a
theoretical level and then when you propose concrete policies to move
in this direction, many people, especially people from the top of the
distribution, get completely crazy, and say, oh, what you’re going
to give money to these poor children, that they’re going to do
terrible things with the money, as if wealthy children always made
good choices with the money they receive.

So if people want to put limits on what people could do with the
minimum inheritance, I have no problem with this, as long as you put
the same limits on all inheritors, including wealthy children. But
otherwise, this looks like a very illiberal and authoritarian approach
to opportunities in society.

EZRA KLEIN: A couple of places I want to dig into this policy, because
I think it’s genuinely fascinating. And I could not agree with you
more — it drives me crazy, the trope in American politics, where
even conservatives will say, well, I don’t agree about equality of
outcome, what I believe in is equality of opportunity. And equality of
opportunity is unbelievably difficult to achieve and nobody’s even
really trying.

I have a couple of questions about this policy. The idea that you
could impose a wealth tax of sufficient size, that people who are
wealthy now would not lose everything they have, but you could be
giving every member of society around $200,000 in perpetuity, not just
for a year or two, as you do the front end of that wealth tax, but in
perpetuity, I think people are going to wonder about the math of that.
Is that really true or is that a fantasy? So can you say a bit about
why you’re confident the numbers of this net out, that you could
make such a big guarantee to such a large population going forward
without needing to do something — without doing something that would
destroy the economy?

THOMAS PIKETTY: One way you could do it is you could just redistribute
the flow of inheritance each year. So each year, the average
inheritance that is transmitted to the new generation, it will be of
the order of 200,000 euros in Europe, or $250,000 or $300,000 in the
U.S. So you could just replace this by a lump-sum payment to everybody
in the generation. And you did not — you don’t need to tax wealth,
you just do it through the redistribution of inheritance. Now this is
not the way —

EZRA KLEIN: So just to clarify that, so you’re saying that every
year the amount of money that is passed on an inheritance in, say, the
U.S., is so large that if you divided it by the denominator of all the
people, I guess, who would turn 25 that year in the U.S., you would
get — it’s like $250,000, $300,000 per person?

THOMAS PIKETTY: Yeah, because this is exactly the average wealth of
decedents in the U.S. today. So on average, decedents leave $250,000
— $300,000 per individual decedent every year. So it means that on
average, because families have about two children on average, every
children is going to receive on average $250,000, $300,000. Now, this
is an average.

Then if you look at the distribution, the bottom 50 percent of
children actually receive close to zero. And the top 10 percent of top
1 percent are going to receive millions. But the average is about
$250,000, $300,000. So you could just redistribute these equally and
by definition, everybody will get this same amount. And by the way,
you could have it at 25 for everybody instead of having some time at
15, some time at 45, sometimes at 60, depending on at what time people
die, et cetera.

So that would be one way to do it. This is not the way I propose to do
it. Because I think you actually want to let people leave different
levels of inheritance for all sorts of good reason. And so, the way I
propose to finance this minimum inheritance, which in my proposal will
be closer to 120,000 euros or $150,000, which could be paid for by a
tax of around 60 percent of all inheritance. But this is not the way I
propose to do it. I propose to pay it partly by progressive tax on
inheritance, but mostly by progressive tax on wealth.

Why is it so? Because I think, generally speaking, the progressive
wealth tax is a better instrument than the progressive inheritance
tax. Both are useful, but the progressive wealth tax is more useful
because it allows you to adjust the contribution to public finance, to
your current situation, basically. Life is long. Life has always been
long, but life is particularly long today. So when you have a life
expectancy of 80 or 90, if you make a large fortune at age 30 or 40,
we are not going to wait until you are 80 or 90 before you contribute
to the public finance of your country. So it’s much better to have
an annual wealth tax to contribute to redistribution.

And so just to give you orders of magnitude. This minimum inheritance
for all, if this is set at the level of 60 percent of average wealth,
so everybody would receive, at age 25, 60 percent of average wealth,
the total cost for our country will be of the order of 5 percent of
national income each year, which is significant, of course. But as
compared to a large modern welfare state, which in Europe will raise
40 percent to 50 percent of national income, this will only be a
component of 5 percent of national income. So that’s significant,
but it will be smaller, for instance, than the cost of a total health
care system or total education system or pension system.

So it would just be an extra component to the social state or to the
welfare state in general. But let me make very clear that this is not
a component that is hugely costly. I mean, it is costly, but it’s
not more costly than these other components that have been developed
in the past. And generally speaking, everything I’m trying to
propose is very much in the continuation quantitatively and
politically and economically with some evolution that have actually
been taking place in the past century. So I’m not dreaming about
things which have nothing to do with what happened in the past. I’m
really trying to look, OK, what happened in the past, what will be a
logical next step if we just continue the evolution of what we’ve
seen in the past.

EZRA KLEIN: And the argument you’ll hear in response, and this is an
argument you heard against progressive taxation, income taxation, an
argument that got made against things like Medicare and Social
Security, but is, particularly at this scale, that you will wreck the
economy. And in particular, for something like this, that you will do
is that you will destroy the incentive — and here, I’m just making
the argument — of the most innovative, creative, productive people,
the people whose efforts do the most to push forward the total
societal standard of living. Such that by doing this, it will look
arithmetically like you are making people in the bottom 50 percent
better off, but in fact, you’re making everybody worse off. Because
you’re robbing people of the incentive to innovate. How do you
respond to that argument?

THOMAS PIKETTY: Yeah, that’s an interesting argument at a purely
theoretical level. But again, if I look back at my historical
comparative evidence, I see very little support — or in fact, no
support at all for this argument, for a couple of reasons. First of
all, if you look at the long-run evolution, we’ve seen less
concentration of wealth. So the top 10 percent of the wealth
distribution today would have 60 percent in Europe, 70 percent in the
U.S., as compared to 90 percent before World War I in Europe. This did
not destroy the economy. If anything, this decline in the share of
total wealth going to top 10 percent and the corresponding increase in
the share going to the next 40 percent has contributed to a much
faster economic growth in the 20th century than in previous centuries.

I think partly because it allowed more people to participate, to the
economy. And also partly because it came also with the rise of
education. And this was the true source of productivity in the long
run, rather than the enormous level of inequality that we had before
World War I. This theoretical discourse that more inequality, more
concentration of wealth is always better for economic growth was made,
of course, throughout history by people who had large concentration of
wealth, certainly in Europe before World War I.

And this is a discourse that, in the 1980s, Ronald Reagan tried to
tell Americans, basically tried to tell them, look we’ve gone too
far with the New Deal, with Roosevelt, in terms of progressive
taxation or wealth redistribution. We are going to cut top tax rate by
two, where they’re going to go down to 28 percent or 30 percent, as
compared to the 80 percent, 90 percent top tax rate under Roosevelt.
So the promise that was made by Reagan during the 1980s was that
cutting top tax rate might lead to more inequality, but will also lead
to so much more innovation, more economic growth. And the incomes of
average Americans are going to grow much faster than they used to
grow.

Except that this is not what we’ve seen at all. So if you look at
the three decades after Reagan, 1990 to 2020, the growth rate of
national income per capita in the U.S. was only 1.1 — 1.2 percent as
compared to 2 percent, 2.5 percent in the period of 1950 to 1980, or
1950 to 1990, which itself was not particularly exceptional. It was
the same — 1910 to 1950, it was about 2 —2.5 percent. 1870 to
1910, around 2 percent. So in fact, the post-Reagan period, 1990-2020
has been particularly bad in terms of growth rate of national income
per capita, which at the end of the day is the best economic measure
we have of the increase in productivity and this should reflect
innovation, et cetera.

So this policy experiment has been a failure, in the sense that
we’ve not seen this enormous increase in the size of the pie that
was supposed to justify this policy. Certainly, we’ve seen the
increase in inequality. Billionaires today are hugely richer than what
they were 30 or 40 years ago. But for the average American, we’ve
not seen the increase in purchasing power. And I think this
disappointment, to say the least, following the Reagan decade, is at
the origin of many of the political troubles that we’ve seen in the
U.S. in the past 10 to 15 years. And in particular, the fact that the
Republican Party, which at the time of Reagan was sort of very
optimistic about the power of the market, and the power of
globalization, and the power of economic incentives, and of trickle
down economics, well, 30 years later, had to come with a different
story.

Because since the incomes of average Americans were actually not
growing as was told before, then people like Donald Trump had to come
with a different narrative, typically saying, OK, this is the fault of
the Mexican, of the Chinese, of the rest of the world, that has been
stealing the hard work of Americans. And this has become more and more
frightening in a way. And I think this is partly the consequence of
this failure of Reaganism.

So to summarize, this theoretical claim that richer billionaire or
more inequality leads to faster economic growth, it’s a very
interesting theoretical claim from a purely abstract and theoretical
perspective. But we are talking about serious issues, which have
serious consequences on our society. So we cannot just do theoretical
claims. We need to look at actual data, actual facts. And again, if
you look at the big picture, you compare growth rate, you compare
level of inequality across periods, across countries, the conclusion
is that we don’t need this kind of level of extreme inequality in
order to grow.

I’m not saying you want complete equality. I think you need income
gaps of maybe 1 to 10. Some people would say 1 to 20. My reading of
the historical evidence I have is that 1 to 10 or even 1 to 5 is
probably sufficient to get the right incentives. But certainly, 1 to
100, or 1 to 200, or 1 to 1,000, this is completely useless. If I
compare different historical period, the different societies, it’s
very hard to make the case that we need such extreme level of
inequality.

[MUSIC PLAYING]

EZRA KLEIN: So to stay on the idea of participation, because I really
like that line in your idea of participatory socialism, so this kind
of wealth redistribution would give people a lot more bargaining power
to participate in society on more equal ground, to chase
opportunities, to follow passions and ambitions. But you also push for
something else, which I think is very interesting, and was something
that was, in various ways, proposed by some Democrats in 2020, which
is worker co-determination. Can you talk through what co-determination
is and why you think it’s so important?

THOMAS PIKETTY: Right, so here again I am trying to start from what
has been successful during the 20th century and to see how we can push
it further. So in the 20th century, an interesting policy innovation,
together with progressive taxation, which happened in the U.S. and in
many European countries, another interesting policy innovation, which
took place in Sweden, in Germany, and more generally Nordic Europe,
was what is sometimes called co-determination or co-management, which
is the fact that workers’ representatives have a significant voting
rights in the board of companies, even if they don’t hold any share
in the capital stock of the company.

So the way it works in Germany is that worker representatives can have
up to 50 percent of voting rights in the board of large corporation,
in the case of Germany. So shareholders still have 50 percent plus 1.
So if there is a tie, they can make the difference. But still, this
means that if, in addition, the workers have a small capital share in
the stock of the company, say 10 percent or 20 percent of the capital,
or if a local or regional government has 10 percent or 20 percent of
the capital, which sometime happen in Germany, then this can shift the
majority. And basically, you can get the majority of the vote, even in
front of a shareholder who has 80 percent or 90 percent of the stock.

So I can tell you that from the point of view of a shareholder, this
is like communism. And shareholders in my country, in France, or
shareholders in Britain or in the U.S. will not like at all this
system. Except that this was applied, not in some tiny, obscure
countries, this was actually applied in Sweden, in Germany. And this
has been like that since the early 1950s. At the time, shareholders
did not want to hear about that. But the balance of power in the
specific context of after World War II in these countries led to this
institutional transformation. And 70 years later, nobody wants to
change that in Germany and Sweden. Nobody could change that.

Because what people have seen is that not only this has not destroyed
the capitalist system, the economy, otherwise we would have noticed
it, just like for progressive taxation under Roosevelt, but in fact,
this allowed for better involvement of workers in defining the
long-run strategy of the company. And workers, in a way, are investors
in labor in the company. And sometimes, they are more serious and
committed long-run investors than many of the short-term financial
investors that we see. And so getting them to be involved in defining
the long-run investment strategy of the company can be good.

So how can we move further in this direction? Well, in my book, I
discuss various options, but I say first it should be extended to
other countries. This should be extended to firms of smaller size. And
in addition, if you want to go further in this direction, what we
could do is to say, OK, you have 50 percent of voting rights for a
worker representative, 50 percent of voting rights for shareholders.
And within the 50 percent of voting rights going to shareholders,
maybe there should be a maximum, maybe 10 percent or 5 percent of
voting rights, that a single shareholder could have in a very large
corporation.

We live in a very educated society, where millions of engineers,
technicians, managers have something to contribute. The idea that you
should have these monarchical organization of power in companies is in
a way completely at odds with the current reality.

EZRA KLEIN: So I agree with this. I’m a very — a very big
supporter of co-determination. But one thing I think about
co-determination is that the experience we’ve seen with it in
Germany, it both undermines the right wing argument against it,
because Germany has grown great. It’s a very innovative economy.
They have a great manufacturing sector. In many ways, a model. And
also, I think should probably want to moderate how much you think
it’ll do for the economy.

If I look at — I’m looking at income inequality here, which is not
as good as what you’re looking at with wealth inequality, but I
forgot to bring the right chart with me. But Germany looks about
France, and the Netherlands, and Canada, a little bit lower, but not
much. And growth is not super different in Germany than some of these
other cases. So why do you think co-determination would do all that
much? Why do you feel that it’s more than a marginal change in how
the economy works?

THOMAS PIKETTY: Well, first of all, I’m not saying this is a magic
bullet. I think it has to come together with a whole other set of
policy, including the redistribution of wealth itself. So that’s why
the minimum inheritance and the progressive tax on wealth, which you
don’t have in Germany, is so important. Because if you don’t
redistribute wealth itself, co-determination moves are not going to be
sufficient. It also has to come with a system of true real access to
high-quality education, which we don’t have in any country.

And finally, don’t forget that the co-determination rules in
Germany, so far, only apply to very large companies. Basically, it’s
over 1,000 or 2,000 workers. If you are in a company of 100, 200, 300,
let alone a company of 10 or 20 workers, this is not — so despite
all of its limitations, I think co-determination rules have
contributed both in Germany and Sweden to limit the huge rise of very
top compensation, as compared to, in particular, the U.S. and Britain.
But, yeah, the idea is to go further in this direction by first
extending this 50 percent of voting rights to all firms, small and
large, and also to put a limit on the power of individual
shareholders.

Because in some cases, with the current co-determination rule, at the
end of the day, the shareholders have the decisive vote. So it
doesn’t have as much impact as it could have.

EZRA KLEIN: I think your vision for the future deserves to stand on
its own, so I don’t want to tie you up in what’s happening in
economics right now. But I do want to ask one question I think will be
in people’s minds, which is these are big proposals, they would move
a lot of money around. And at the same time, we’re living through a
really quite unusual, although maybe not historically so, surge in
inflation. There’s been a dominant view, particularly in the U.S.,
pushed by Larry Summers and others, that some of it has come from too
much redistribution, too much stimulus.

How do you understand inflation and prices as part of this? How do you
understand either the inflation rise at the moment? And how do you
understand the dangers of inflation, either for the politics — it
would produce these kinds of policies, or as an outcome of these kinds
of policies?

THOMAS PIKETTY: So the short answer is that I want to finance
redistribution through progressive taxation, not through money
creation. So money creation and issuing public debt can be justified
in some context, but clearly, in the long run that’s not going to
work. We know that. So my view of redistribution is that this should
be paid for by progressive taxation and the wealthy. And the good news
is that the wealthy are very wealthy.

And you look at the billionaires today, the wealthiest people have
$200 billion or so. 10 years ago, they had 30 or 40 billion or so. And
10 years before, they had only $10 billion or so. You can see
immediately that the rise of these very top wealth people has nothing
to do with the rise of the size of the world economy. Because they are
rising a lot faster. There have been some — there’s been some
rises in the size of U.S. economy or world economy in the past 10
years, but it has not been multiplied by three or four.

So you cannot continue like this. And that’s — of course, that’s
the way to pay for the redistribution. And I’m not saying everything
is going to come from billionaires. Millionaires also will have to
pay. But if you don’t start by asking your fair share to
billionaire, it’s going to be very hard to convince millionaires
that they also have to pay.

EZRA KLEIN: And so I think that’s a good place to end. So always our
final question, what are three books that have influenced you that you
would recommend to the audience?

THOMAS PIKETTY: There are so many books, it’s hard to say. To go
back through time, there’s an excellent book on the French
Revolution written by a Rafe Blaufarb, called “The Great
Demarcation,” which I really recommend. I think it’s a great book
about the invention of the modern property system during the French
Revolution and how complex the discussion was at the time. And I think
it’s fantastic.

Another book, talking about the much more recent period, at least
about the 20th century, is the book by Or Rosenboim, which is about
the history of globalization, which is “The Emergence of Globalism:
Visions of World Order in Britain and the United States, 1939-1950.”
It also talks about Europe.

I think it’s very interesting because it talks about this moment
just before World War II and just after World War II where people
realize that we are shifting to a new world system and they are
starting to think about new forms of federal organization of the world
system, with lots of deceptions in the end, lots of failures, but also
lots of hope and lots of achievement. And I think it’s a very useful
book to think about also the situation in which we are and in which we
could end up in the future.

And third book I would recommend, which I was also very impressed by,
actually rereading a book by Hannah Arendt, “The Rise of
Totalitarianism,” which I did not realize how much she was also
talking about the issue of federalism and democratic federalism. And
the fact that in the interwar period, the failure of social democracy
and social democratic parties is that they were — I mean, they
pretended to be internationalists, of course, in their general
ideology. But in their actual political projects and political
practice, they were maybe the only players around that did not take
seriously the fact that with the world economic system, you need some
kind of world politics.

And you need to have some form of democratic federalism to think about
global regulation of capitalism, global taxation. In a way, it’s one
of the biggest challenge ahead which we have, which is that if the
lower income groups voted for Brexit or also voted against Europe in
every single referendum we’ve had in Europe, including in France in
2005 and 1992, you cannot just say, oh, OK, this is because these
people are nationalists or racists or whatever.

I think we have to — I am a strong federalist, not only at the
European level, but at the broader international level. But we have to
make federalism something like social federalism. It must be to the
service of a better redistribution of wealth, of a more equitable
distribution of income, of common progressive taxation of the
multinationals, high wealth individuals.

And if we don’t transform not only Europe, but more generally the
organization of our world economic system in this more equitable
manner, I think we will confront enormous difficulties, especially as
developing countries in the South are going to have to pay partly for
the damage that we have created with global warming in North America
and in Europe. And I think there’s a serious risk also that China
will be, in the end, able to propose to countries in the South
alternative ways to finance for their development strategy.

And I think we are really at a time where if we don’t think of
another form of organization for the world economic system, things can
turn really bad. And rereading some of this work and some of the
thinking on mid-20th century globalism I think is a useful reading for
that.

EZRA KLEIN: I think there’s a lot of wisdom in that. And I will say,
if people are interested in the Arendt book, “The Origins of
Totalitarianism,” a couple of weeks ago on the show I had on Anne
Applebaum for discussion all about that book and what it teaches us
today. So you might be interested in that. Thomas Piketty, thank you
very much.

THOMAS PIKETTY: Thanks a lot, Ezra.

[MUSIC PLAYING]

EZRA KLEIN: The Ezra Klein Show is produced by Annie Galvin, Jeff
Geld, and Roge Karma, fact-checking by Michelle Harris and Kate
Sinclair. Original music by Isaac Jones. Mixing and engineering by
Jeff Geld. Audience strategy by Shannon Busta. Our executive producer
is Irene Noguchi. Special thanks to Kristin Lin and Kristina
Samulewski.

[MUSIC PLAYING]

Real conversations. Ideas that matter. So many book recommendations.

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