There is no doubt that Thomas Piketty’s best-seller, Capital in the Twenty-First Century, has done a great deal of good in highlighting the urgency of tackling spiralling levels of global inequality. But could his main policy prescription – an annual global tax on capital – lead to a genuine sharing of wealth within and across societies?
The Guardian columnist George Monbiot is one of the latest commentators to add his voice to the debate, outlining the importance of Piketty’s analysis and conclusions. Central to these conclusions is Piketty’s critique of the Kuznets curve graph, which in the 1950s appeared to show that inequality automatically declines as a society advances through increased economic growth and industrialisation.
Far from creating ‘a rising tide that lifts all boats’, however, Piketty’s update of the Kuznets curve shows that a capitalist economy driven by market forces was not the reason behind the reduction in inequality in the post-war period. Rather, this was due to the peculiar circumstances of the era, such as the destruction of wealth following the great depression and two world wars, alongside strong government intervention in the market and broad-based redistributive policies (including, for example, top income tax rates of well over 90 per cent in both the US and Britain).
Monbiot argues that this is why “the neoliberals hate Piketty with such a passion” – because he has helped to destroy “the apparatus of justification” that enables the elite to defend and rationalise their seizure of a nation’s wealth. Only by the means of justifications such as trickle-down economics can the obvious lack of sharing in our societies be viewed as inevitable, and perhaps even necessary.
Hence Piketty’s analysis has done a great service for progressives, in that it uses comprehensive data sets to discredit the prevailing economic ideology of our time. It is no longer just common sense to presume that extreme wealth is not good for everyone, and that the invisible hand of the free market will never lead to a fairer sharing of wealth among the population.
So Piketty deserves the accolades and attention that have followed his consummate investigation into the realities of inequality over several centuries. But many questions remain about his blanket solution of a global wealth tax, which Monbiot endorses. While such a tax may constitute a rational response to the continuing upward redistribution of wealth and income in advanced capitalist economies (even if it is a “usefully utopian idea”, as Piketty himself admits), it is by no means the best or only answer for creating a more just and equal world.
Many commentators have pointed out that the surest path to reversing inequality within countries is through strategies that create a better distribution of capital in the first instance, rather than relying on top-down, quick-fix and state-centric strategies afterwards. In other words, it’s more effective to address the distribution of wealth at its source, well before it is already stashed away in the bosses’ bank accounts.
This will inevitably require the collective organisation of labour, the protection of workers’ rights, and new ways for capital to be owned broadly by the populace – such as a dramatic ramping up of participatory ownership through cooperatives. These people-driven solutions point towards the shifts in power, values and personal behaviour that are needed to create truly egalitarian societies, though this is a subject that Piketty leaves largely unaddressed.
Another blind side of Piketty’s analysis is his failure to take seriously the ecological limits to growth. It is clear that he defends the free market and the idea of perpetual economic growth, since his proposal for a global wealth tax assumes that a global growth rate of 2-5 percent is sustainable over the long run. Nowhere in the book does he admit that limitless growth is unsustainable on a finite planet, a position which is now conventional wisdom for many scientists, environmental activists and civil society organisations. As often repeated, humanity is currently consuming natural resources at a rate 50 per cent faster than the planet can replenish, and we already require one and a half planets to support today’s consumption levels.
If de-growth on a global level is inevitable sooner or later – and there is enough evidence to suggest that it is – then the implications are dramatic for how we achieve a just and sustainable world for as many as nine billion people by 2050. When the pie cannot be grown any larger to share out, much more serious questions of distribution arise given the planetary boundaries that economies are already hitting hard.
As succinctly put by Dr Rupert Read, a Green politician and Chair of the Green House think-tank, the truth is “that growth is an alternative to egalitarian redistribution, an alternative to any serious effort to create a more equal society. The promise of growth is a replacement for the need to share.”
Clearly, we cannot grow our way into a vision of prosperity for all that replicates the North American or Western European standard of living worldwide. Which leaves us with only one solution: to share the world’s wealth and resources more equitably among everyone, within the constraints of ‘one planet living’. But unfortunately, this is not the conversation that has been spurred by Piketty’s analysis, and public opinion still seems far away from discussing the radical transformations that will be required in the transition to a post-growth world.
There is much cause for optimism, however, as more and more activists, academics and engaged citizens are participating in the crucial debate over how to truly share wealth and resources for the benefit of present and future generations. This is particularly evident in the vibrant discussions around the revived concept of the commons, which is increasingly being embraced as a place to start envisioning a democratic alternative to neoliberal capitalism that can liberate us from structural inequities.
At the same time, many in the sharing economy movement are coming to terms with the problem of profit-driven enterprise that is geared to commercialisation rather than sharing, and are now questioning how an economy built on authentic forms of sharing can reduce inequality and help to save the environment. Furthermore, in September the fourth international conference will take place on “Degrowth for Ecological Sustainability and Social Equity”, which will bring together hundreds of activists and economic pioneers to discuss how societies can be restructured to enhance ecological conditions and equity on the planet.
Many other examples could be cited to show how this urgent conversation on global sharing is gradually entering the mainstream. Although there is still a long way to go, the great Piketty debate is at least an indication that the conversation is slowly moving in the right direction. But it surely won’t be long before public opinion is forced to consider a post-growth, and thus post-Piketty vision of how to create a more equal, balanced and sustainable future for all.
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