Thomas Piketty's New Book Is About a Lot More Than Capitalism

you might want to listen in. You'll remember the fuss about his first book, Capital in the twenty first Century, with its sweeping analysis of the rise and fall and rise again of global inequality. That best selling book was over seven hundred pages long. A lot of people only pretended to have read it, but it did inspire an enormous amount of debate about wealth and inequality and the causes of our economic discontent. And that was six years ago,

before Brexit, before the election of Donald Trump. Now this new book from Pecketty is even longer, nearly eleven d pages. I started by asking him what else was different about it?

First of all, thanks for your invitation. I have learned a lot from all the discussion after the publication of Capital in the twenty first Century, and I have come to realize, you know, some of the many limitations that that that that this previous book of mine had, and probably the mental limitation was that my previous book was too much centered on western countries, Western Europe, North America, a little bit in Japan. But this new book has

take so much broader global view and inequality regime. I I talked about India, I talk about Brazil, I talk about China, and I put the entire history of inequality regime into a much broader historical comparative perspective, the impact of of colonialism, and I this is something that was

really missing from my previous book. And in relation to this, I put much more on phases to ideology, political discourse, and systems of justification of different level of inequality and equality, because I think in the end this is really the key driving force behind changes in inequality region, which is something I did not perceive as clearly at the time I wrote The Capital in the twenty first century. And I think this is what makes this book more interesting, better,

I think, more enjoyable to read. And so if you read any one, please reads the first. Get well, and everybody read the first. But for those who you know did not read the first, I think you know please pick this one. And what is interesting, I think there was a lot some of the criticism of the of the other book was that you had you focused on the mechanics of inequality and then you also looked at a lot of history. But maybe there was that some

of the politics was was missing. And I guess what's most striking about this is that you are making an argument that it's not just say, World War One and World War Two that gave us that moment of where society has became more equal after many, many years of becoming less equal. That there were other things going on. So I guess that's interesting. We were just talking earlier

about the Sweden example. I think the idea that um that ideology has helped change countries make them more egalitarian, and it's not just that Sweden is in itself a

very egalitarian sort of kind of country. Yes, exactly. So if you take the example of Sweden, actually the example of the United States, you know, world War One was not so important in delivering changes, and what was most important was more the political mobilization in the case of Sweden, and how those you know, the social democrats, managed to completely change the very ideological and institutional structure of Swedish society, which until nineteen eleven was was based on a very

extreme form of sacralization of property rights with voting rights. At the time we're rising very strongly with the size of your property. You could have up to one hundred votes for very rich people. And and in several dozen Swedish municipalities you even had this situation where one individual at more than half of the vote and so was

perfectly legal dictator. And and so this is an example illustrating both that the ideology of property and its constitutionalization can go very far in history and also that these things can change through peaceful means. And in the case of reader and it was mostly a political mobilization and and the you know, social democrats winning power in nineteen thirty two and putting the state capacity of the country

to the service of a completely different political project. In the case of the US, the Great Depression played a major role in inbertingment. It's more than that. It's it's well, first financial crisis will happen again. So it's not World War world and World War two. It's you know, the Great Depression played a bigger role, I think to transform the perception into Westerns than than the world of of World War One, which was mostly of European world, and I did not have so much impact on and he

was much lesser in Europe. There was a gradual intellectual and political process which already before World War One led the US to create a federal in contax and a federal state tax and the view that you need to control the level of concentration of power, which and you see a similar kind of movement today in the US with a bigger fraction and parts of the young generation who are talking about socialism or want to hear about how your book limits to the power of billionaires and

the concentration of wealth. And I think in order to understand this kind of historical episode that we see today in the US, which sometimes people have a surprised to hear that, but if you put it in this broader historical and ideological perspective, you realize that you know, you have this ideological cycle. There is also a process of overall learning in history about justice, so that this book,

you know, I'm trying. Maybe I'm a bit naive, but I think, you know, I think today's societies are even those has been rising in equality in recent decades are much more equal than what they were century ago, and themselves were more lical to some expense than one or two cent tries before. So there is a long term process of going towards equality, towards the form of learning ad justice, and and this has been tremendously successful in

your twentieth centuries. A reduction of equality in the long run not only is a reality, but is we allowed for increased social mobility, increased economic prosperity, access to education and culture. And you know, I think this process in the longer run can continue if we draw as the right lessons from his story. And it's interesting when you

look at the U S election. I mean, because if people think that everything is going seriously wrong, and there's people on the right and the left who think, I think the world has gone to hell, then you have to have as a politician, you have to have answers that seem radical enough to respond to that. So potentially you've had Elizabeth Warren or Bernie Sanders actually have quite

a radical platform. Um. But that very radicalism then means maybe that people step back from it in the polls and say, well, I'm a bit frightened of this because it's so different. So I'm just interested. Do you think the path, the best path, is going to be through sort of gradual change, you know, slightly more progressive taxes, a few more wealth taxes, or do you think it will take a more fundamental questioning, at least in one

country or another. I think first that Wherever and Sanders are not radical, they are moderate social democrats, you know, by European stands in their own within the ideology of the US. But the ideology of the US is itself changing, and you know, has been different in the in the past. You know, remember that the US is actually the country which invented very sickly progressive taxation of income and inherited

wells in the twentieth century. So it's not there's no national determinism which makes the country you know, in love with inequality and love with equalities. These things can change very quickly in the case of the US. You Know, what I find very striking is a very low electoral participation of the lower and lower middle social economic group. You know, we just don't participate in elections. And this

is true for the irrespective of race or color. You know, the white public political don't just don't vote so wise that they don't vote well, maybe partly because they feel that what is being proposed and what has been proposed in recent decades, both by the Republican and the Democrat,

is not really changing anything for them. And I think that having policies on the minimum wage, on public universities, and the funding of education reducing inequality that are you know, a bit clearer than the policy advocated by by Clinton or Biden or you know, can be a way to get people to to vote. And you know, when you have such a law participation by the by the lower aconemy groups, you know, pretending that we should just stay in you know, keep business as usual and keep proposing

what we've been proposing in recent decades. As the nebus, your political strategy does not strike me as a as as very very community. You have a lot of criticism of the social democratic parties for UM, I guess for many things, but I think particularly for coming up not being inventive enough in sort of thinking of alternatives to the free market ideology and the emphasis on property that came through in the eighties. UM. And you also you sort of say that they became more elitist, they had

less and less support from the working class. They abandoned the working class. Some would say they abandoned it because they also abandoned sort of national identity in favor of a sort of multiculturalism and as sort of a more internationalist politics. Is that a risk in some of the things that you're talking about that you're you're just you're allowing the whole concept of nationalism to be taken by the other side, and you're still talking about being more

internationalists and putting having a more ploybal album. Well, I'm talking about the different kind of internationalism that what we've had so far. You know, I think the nation state has of course been a very powerful force, you know, to build national solidarity, to build a system of social insurance, to build system of progressive taxation, and you know, this is where this is a political arena in which we've built more equality in the twentieth century and we've also

built through more equality, more prosperity or mobility. So this, you know, this construction have been very very successful, in particular with the rise of the social state social national state in in in Europe, in Germany, in return, France, and in particular. So what I'm saying to the social democrats is okay, if you want to go beyond that.

In particular, if you think we need international economic relation, which I think we need because we also can benefit from trading with each other and not living in a tarchy within this nation state, then that's fine, of course, But then you need to think hard about how you organize this economic relation, and you cannot just organize them through free trade, free capital flows without any common regulation,

which is what has been done. And so that's why I propose a different form of international organization in the in the group, which I could social federalism, in the sense that I see any group of countries, you know, even two countries, or you know, France and Belgium, or France and Britain signing a treaty to organize a trade

relation between them. Uh, you know, this trade relation and the flow of capital or investment should come after some common objectives have been set in terms of social goals and reduction of inequality and common taxation if needed, a common uh you know, labor or common on fila mental goals. Otherwise, but the European Union, well not naurally, you know, there's never been any common taxation founder in the European Union.

So in effect, the big winners of the of the European Union have been, you know, the most mobile economic groups, you know, a large corporation, uh, individuals with with high human capital or high financial capital who can easily benefit from a mobility and by putting the different governments in competition. So I think this has been a wrong model, so

so that there's a need for complete resinking of this. Otherwise, you know, I think that what I describe as the nationalist discourse, which is more the nativist discourse in in this case, will propose something else, which is basically, okay, we we we're gonna be very tough on migrants. I don't city, we don't need to have any restributions through a progressive taxation between you know, the reach and the

poor and just a sort of gardening. The pure cultural conflict and identity conflict is going to be our answer. And if there is no you know other, you know other answer on the table, you know, I'm afraid this is indeed, you can win the day. It can win the day for a short while because in the end, and you know, I don't think it will solve the prime in the long run, you know, the problem we

have to solve. Global warming, rising inequality are not problems you're going to solve with pure nationalism, retreat and more and more competition between countries and no intentional correnation that you know, if anything, that's going to exacerbate the problem.

A lot of people felt that your proposals and the old book were kind of unrealistic, particularly when it comes to the taxation of wealth and inheritance, because, as we know, economists have throughout the decades have always said that a wealth tax has made sense and that's not very distortionary for various reasons, and yet it's something that has always come up against political realities of people wanting to pass to help their own children as a very kind of

instinctive thing, and that has translated into lower and lower inheritance taxes, even just within countries, even if you're not trying to if you're not managing to solve all of the sort of global problems of of where wealth goes and people not paying tax, do you see any scope There are very few countries where you can see a real support for inheritance taxes. And if you don't have that. I don't see how you can do any other things you're talking about. So I preferil well stacks of re

done stacks. And in fact, when stax and your well stas are much more popular, you know, in every country you can see a large masority support in favor of billionaire DAGs or you always tax. And I think there are good reasons why people prefer annual wealth stax or property tax on large property owners rather than inheritance stax. I think we need both, but I think the annual

weal stax will always be more important. And in fact, it's always been more important if you get property tax revenue are well stax revenue, you know in the US or fronts and other countries, it's always been a lot bigger than than inheritance stex because the problem with inheritance stax is that in the end you need to pay tax out of your annual income, or if you don't have enough anal income, then need to sell some of the property to pay the tax, which for you know,

many people is pretty frightening. Well for people who would have a lot of wealth billions, you know, you can sell part of it to pay the tax. For people who have only limited assets and inequid assets, they actually prefer to pay a small annual tax of one or two percent per year for twenty years rather than big inheritance sex of search or ptuxam right away. So I think it's there are no reason why people perceive it

this way. And you know, the focus on inheritent stacks rather than annual weal stacks, I think is a is a is a major mistake which has sometimes been made, but which I don't think I've made it the same that I really stressed the annual well stacks much more. And and you will see if you look at the opinion polls about the billionaire attack. Like in the US, you know even Republican voters are in favor of it. In France, Macon never had a majority of the public

opinion to repeat the well sta. This was the decision of Maccon. You certainly it's well still downers were in favor of it, but if you look at the opinion

polls and it never got a majority for that. And I think it's a part of the reason why he got into into travels, which is that he gave up a lot of money to a small group of the population at the same time raise the attacks on the you know, normal people being energy at tax to to go to work every morning and basically the two sum of money work comparable money will get from the ax when you gave it to the winds tax payer then and this is a big part of the explanation of

the troubles, which is un into talk. Yeah, I think there's a demand for physical justice, which takes different from different countries, but I think progress were tax is part of the solution. Finally, I'm just I'm fascinated when you talk about we started by talking about whether or not how important the World War One and World War two or big events the depression was in changing the way

that people think and the assumptions people make. Um, do you think that the urgent environmental challenge has the potential to cause that kind of you know, throwing up of ordinary relations um in your direction or is there a risk actually when you think of the steps that have to be taken, you know, increasing the cost of energy to households, many of whom are more spent a lot of their income on energy. Do you worry that actually the tackling climate change with the current system is actually

going to make it less bad. Well, I think you know, there are many different types of crises that can that can lead to a very rapid change in the way we perceive the economic system. So I think, you know, climate change is one of them, and and but there are you know, you can have also more you know, social conflict in the future. You can have other financial crisis. You know, the two tho eight financial crisis itself, you led to a complete change in a few years about

the common views about monetary policy. And you know, suddenly the size of something for long balanche. It went all the way to the World War to World warwer level or even higher in the basis, just in a space of a few years. So you have reactions to crises which are not always in the right direction. In this particular case, I'm not sure this was the right reaction. Artists only designable reaction. But what I mean is that you know there will be other crisis in the future.

The problem is that crisis in themselves are not you know, can be necessary to deliver change, but are never sufficient to deliver the white kind of change. And so in the claques of climate change, there's a risk that we don't think enough about the change in the economic systems that we need to put in place to solve both

the climate problem and the inequality problems. So to be concrete, and I don't see anyway we can go to our lower carbon emission with the level of inequality we have today, because you know, as I show in my in my book, you know, the top one person in the world where the highest level of carbon emissions, you know, emit more carbons, and the bottom fifty percent of the world population. So if you don't start by tackling this, and you're missing

a big part of the overall problem. And also you make it very difficult politically, you know, to make change in the lifestyle and and way we use energy acceptable for the middle class and and and the poor. So you know, it could be that as the consequences of climate change become more and more visible in Australia and California in different parts of the world, the young generation in particular, you know, put a strong pressure on the

politipal system to change the economic system. Um and you know, there's a reason that it takes a long time before the consequences are sufficiently visible and striking that this itself is sufficient is enough to deliver the change in perception. So I guess would be that the social crisis and financial crisis are more likely to be the driver of change, but you know, it's it can be a combination of all of this. In any case, we're gonna just count

and crisis to deliver the right change. We need collectively to think about the change, you know, the structural change we want to bring to the system of properties or system of education, system of taxation, so that we don't rely at the last minute after the crazies and you know, wrong solution or superficial solution like printing moneto solidity program funds. Tomasey, thank you very much. Thank you. Well, that's all from this bonus edition of Stephanomics, which was edited and produced

by Magnus Hendrickson and Scott Lamb. Scott is also the executive producer of Stephonomics, and Francesco Levy is the head of Bloomberg Podcast. We will all be back in a