Can we tax capitalism out of existence?
Thomas Piketty’s 1,000page Capital and Ideology (Harvard University Press) lands with a hefty thud on bookshelves next week.
Its predecessor, Capital in the Twenty-First Century, galvanised global debate on inequality and was hailed as one of the most important books of the decade, a work that revolutionised our thinking of economic history since the early 1800s.
In his ambitious follow-up, Piketty, a professor at the Paris School of Economics and at the Ecole des Hautes Etudes en Sciences Sociales, examines ideas that have sustained inequality for the past millennium and reveals why a shallow “left vs right” political dynamic is failing us.
So far, so good. But it’s his proposed solution — to basically tax capitalism out of existence —
that is going to raise eyebrows or, as Paul Mason put it in The Observer at the weekend, trigger “an avalanche of derision among the Davos-going crowd”. (Incidentally, Mason, a writer on economics and social justice, believes Piketty’s ideas are not radical enough.)
Piketty believes a “participatory socialism” will eventually do away with capitalism through a progressive income tax and a tax on inherited wealth that will be used to provide every citizen with both a basic income and a “capital endowment”.
He argues that it is entirely possible to finance a radically egalitarian economy if income tax and inheritance tax for the super wealthy were set at 60%70%. At the same time, enforced power sharing between workers and bosses would achieve “true social ownership of capital”. It is, if you will, a form of socialism that has done away with the need for a class struggle. And where, the social justice warriors among you may ask, is the fun in that?
Some critics are not impressed. Writing in The Times, Robert Colvile, the director of the Centre for Policy Studies, suggests that Piketty’s argument that inequality is the central flaw in modern economies doesn’t hold water.
Piketty, according to Colvile, barely discusses the concept of “growth”. Income inequality in the US may see ever greater chunks of that economy falling into the hands of a small elite, but the US does remain far wealthier than its main rivals, and is growing far more quickly.
“Some of us,” Colvile writes, “would suggest that the destruction and redistribution of every significant source of accumulated or inherited wealth across the West, combined with swingeing taxes on anyone who wants to become similarly wealthy in future, might not be entirely painless or productive. Piketty does not even hint at there being
IT IS, IF YOU WILL, A FORM OF SOCIALISM THAT HAS DONE AWAY WITH THE NEED FOR A CLASS STRUGGLE
any difficulties in implementing his ideas.”
Colvile says Piketty “despises America, almost on principle. He believes, instinctively, in more Europe — arguing for a new socialist ‘European Assembly’ to end ‘fiscal and social competition between member states’. He views inheritance of property as essentially illegitimate. He combines … unlimited distrust of the rich with unlimited trust in the state to redistribute their assets wisely. His political philosophy is built around resentment rather than aspiration. Which is probably why the Left love him so much.”