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12 February 2020updated 04 Sep 2021 1:51pm

Thomas Piketty: “There will be another economic crash”

The French economist and author of Capital and Ideology on Brexit, Labour’s defeat and the next crisis.    

By George Eaton

In an era of stagnant productivity, Thomas Piketty is a notable outlier. In 2013, the French economist released Capital in the Twenty-First Century, a 696-page critique of wealth and income inequality, which sold 2.5 million copies. Having acquired a global audience, Piketty has now produced a still larger sequel, the 1,150-page Capital and Ideology.

In contrast to its equation-heavy predecessor, the new book shifts its focus to the realm of ideas. Piketty rejects the orthodox Marxist view of class struggle as “the motor force of history”, instead emphasising the role of ideology in preserving and challenging capitalism.

“The key point is that there are no deterministic economic, technological or cultural forces that make societies more unequal or more equal than others,” Piketty, a youthful and handsome 48-year-old, told me when we met recently at the New Statesman office.

As part of what he calls “participatory socialism”, Piketty advocates policies including income and property tax rates of up to 90 per cent, a public inheritance of €120,000 (£102,000) for every 25-year-old, and a cap of 10 per cent on shareholder voting power.

In the postwar Keynesian era, Piketty writes, when the US and the UK levied tax rates of up to 98 per cent, economic growth was higher and income inequality lower. Are such policies feasible in an age of globalisation and hypermobile capital? Piketty’s response was to reject the status quo. “Well, that’s a choice, whether we organise capital controls or not. Some governments, including in the US and the UK, propose to control the movement of people, to control immigration. I prefer to control capital than to control people.”

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He added: “The view that you can make a fortune in a country by using the public education system and the public infrastructure, and then you have a sacralised right to click a button and transfer the wealth somewhere else, and nobody can track you down, there is nothing natural in this process. It’s a very sophisticated legal system that made this possible.”

Thomas Piketty was born in 1971 in the Parisian suburb of Clichy to left-leaning parents, who were once members of the Trotskyist party Lutte Ouvrière. Piketty has never identified with the revolutionary left. A visit to the Soviet Union in 1991, where he was struck by the sight of food queues, helped persuade him of the necessity of a market economy and private property.

After completing his PhD on wealth redistribution at the age of just 22, having studied at the London School of Economics, Piketty became an assistant professor at the Massachusetts Institute of Technology. He was an intellectual presence on the French and European political scene, serving as an economic adviser to Socialist Party presidential candidate Ségolène Royal in 2007. Piketty later joined Labour shadow chancellor John McDonnell’s economic advisory committee in September 2015, only to resign in June 2016, citing a lack of time and concerns over Labour’s “weak campaign” during the EU referendum.

Why does he think Labour lost the 2019 general election? “This was an election about Brexit primarily. I’m not saying the Labour leadership handled the situation in the best possible way, but it goes beyond the issue of the Labour Party and Jeremy Corbyn. The problem is Brexit and the problem is globalisation: how you organise globalisation. I would have liked the Labour Party to make much more constructive proposals on how to change Europe.”

He warned that unless the EU broke with an economic model “biased in favour of highly mobile social groups” and “against the disadvantaged”, other member states would vote to leave. “If we don’t change the way the EU is organised, we’ll have another Brexit.”

Is the problem that politicians such as Boris Johnson and Donald Trump have a simpler and clearer proposition than the left? “The nativist message, basically blaming foreigners and foreign workers, is simple enough, whereas the social federalist project that I present is a more complicated message,” Piketty conceded. But, he said: “in the end, the nativist message will not solve the problem of inequality, it will not work. We’ll have to get to the more complicated message, the more internationalist and socialist message, at some point.”

On the day we met, coronavirus had darkened the global economic mood. Does Piketty fear another crash? “There will be another economic crash, I think it’s clear with all the quantitative easing, all the money creation we’ve had, and the inflated balance sheet in the financial sector. The history of financial crashes is not over, that’s for sure.”

In spite of this and the multiple defeats endured by the left, Piketty insisted that he is more optimistic now than when he wrote Capital. His historical research has renewed his faith in the power of human agency. “Sweden was an extremely unequal society until the beginning of the 20th century,” he noted. “They transformed themselves very fast with a peaceful social mobilisation.”

Piketty is also consoled by the widening of “the Overton window” – the spectrum of policies deemed acceptable by voters and the political class. Only four years ago, he was struggling to persuade Democratic presidential candidate Elizabeth Warren of the merits of a wealth tax during a debate in Boston (Warren now supports an 8 per cent rate).

“Well, now I propose 90 per cent, so I’m still far ahead,” Piketty quipped. “But things can change fast.”

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This article appears in the 12 Feb 2020 issue of the New Statesman, Power without purpose