Reasons to be optimistic

A Brief History of Equality

Author: Thomas Piketty

Publisher: The Belknap Press of Harvard University Press

Year: 2022

Pages: 274

Nobel Prize winner Thomas Piketty is a French economist who is Professor of Economics at the School for Advanced Studies in the Social Sciences and Associate Chair at the Paris School of Economics.

In his best-selling book Capital in the Twenty-first Century (2013) he argues that the rate of capital returns in developed countries is persistently greater than the rate of economic growth, and that this will cause wealth inequality to increase in the future.

In 2019 his book Capital and Ideology focused on income inequality in various societies in history.

The book being reviewed today is a much shorter book about wealth redistribution intended for a target audience of citizens, not economists.

In his first book he claimed that there is a “central contradiction in capitalism”.

He maintained that the average return on capital exceeds the rate of economic growth, so without countervailing factors – such as World Wars I and II, the Great Depression of the 1930s or specific government action – inherited wealth will grow faster than earned wealth, leading to unsustainable levels of economic inequality that could threaten democracy.

Unchecked, this contradiction will ultimately bring a return to what he calls “patrimonial capitalism” of the 19th century as shown in the novels of such authors as Jane Austen and Honore de Balzac, where the preferred path to wealth is inheritance or marriage rather than labour.

He based his conclusions on 200 years of tax records from the United States and Europe, especially France.

Nevertheless, human progress exists. On average, life expectancy at birth has risen from about 26 years in 1820 to 72 years in 2020. At the beginning of the 19th century, about 20% of newborns died in the course of their first year, as compared with less than 1% today. As for those who have reached age one, life expectancy at birth has risen from about 32 years in 1820 to 73 years in 2020. Two centuries ago, only a small minority of the population could hope to live to be 50 or 60 years old; today, that privilege has become the norm.

At the beginning of the 19th century, hardly 10% of the world population over the age of 15 could read and write, whereas today more than 85% is literate. In 2020, more than half of the young generation in wealthy countries attended a university.

Nevertheless, this great leap forward merely shifted inequalities to another level. It always works like this: the march toward equality passes through successive stages. As access to certain fundamental rights and goods (such as literacy or elementary health care) is gradually extended to the whole population, new inequalities appear at higher levels and require new responses. This is an ongoing process that will never be completed.

Piketty’s prescription for the crisis of inequality is a change of taxation policies, including an annual progressive global tax on financial assets of as much as 2% on fortunes above $6.6m.

Because he realised that this goal was “utopian”, he recommended regional wealth taxes, a tax of 80% on incomes above $500,000 (or, alternatively, $1m), and a 50-60% tax on incomes of $200,000 or more.

I don’t think the world is moving along these lines, which tells me that the road to further equality will be harder in the future.