Thomas Piketty: ‘Economists are no different from other social scientists’

As the monumental follow-up to his best-selling Capital in the Twenty-First Century is published, the celebrated French economist speaks to Matthew Reisz about why a detailed historical analysis of inequality boosts the case for redistribution – and why academics should join the public debate

February 27, 2020
Thomas Piketty
Source: Getty

“Probably the main reason for the slowdown of economic growth since the 1980s,” says Thomas Piketty, “is the stagnation of educational investment.”

His vast new book, Capital and Ideology – a sequel to his 2014 best-seller Capital in the Twenty-First Century – ranges widely across continents and centuries in its analysis of economic inequality and the ways it is justified. Yet an argument about higher education forms one of its central strands.

Although Piketty himself is particularly pleased with earlier sections examining “trifunctional societies” and “the relative size of the clergy, the nobility and the third estate [everyone else]”, most readers will probably be more interested in the chapters considering developments within living memory. One of those explores the successes and failures of “the golden age of social democracy”, from roughly 1950 to 1980, which witnessed “nationalizations, public education, health and pension reforms, and progressive taxation of the highest incomes and largest fortunes”. Another considers the succeeding era of “hypercapitalism”, in which inequality has “increased sharply” virtually everywhere – though with “no obvious justification” given that it has “coincided with a decrease in the growth rate”.

It is here that the book turns to politics and voting patterns, and it is also here that higher education becomes central to the argument. The Democrats in the US, we read, have largely become “the party of the educated in a country where the university system is highly stratified and inegalitarian”. Similarly, the accession to power of the UK's New Labour in 1997 and the French Socialist Party in 1988 and 1997 “coincided with a particularly sharp drop in the [electoral] turnout of the less advantaged classes”.

“In the 1950s, 1960s and 1970s,” Piketty tells Times Higher Education, “social democratic parties mostly attracted voters from less educated social groups – it was a systematic pattern. There was a complete reversal by the 1990s in France, Germany, Sweden, the UK and the US…Such parties became more and more the parties of the winners of the education game, and were more and more perceived as such.”

This is part of the reason, Piketty suspects, that there has been “a lack of redistributive ambition in social democratic parties in recent decades”, not least in relation to education. Total public investment in education increased through the 20th century up to the 1980s, since when it has stabilised at between 5 and 6 per cent of national spending even though “the fraction of the population going into higher education has increased”. Increasing public investment again, Piketty believes, could well lead not only to greater equality, as well as “individual emancipation and access to culture”, but also to “more economic prosperity”.

Nor are we talking about vast sums. “Reforms to the [French] wealth tax at the start of the Macron administration, which benefited mainly the very old as well as the very rich,” reports Piketty, deprived the public purse of “the equivalent of about 40 per cent of the total higher education budget in France”. He has few doubts about where the money would have been better spent.

As part of his research for the book, Piketty studied the return on endowment investments for 800 US universities since the 1980s. The data reveal that “bigger endowments did much better, so the gap [in wealth between universities] increased enormously. Other universities need the money far more and we need to redistribute some of it – we cannot just let the financial markets decide. We need publicly organised redistribution between the endowments: I don’t see any other solution.”

Piketty also describes the French system as “very unequal” and accompanied by “lots of hypocrisy” about meritocracy given the existence of highly selective grandes écoles outside the egalitarian university system. He is himself a director of studies at the École des Hautes Etudes en Sciences Sociales and a professor at the Paris School of Economics. The latter was created in 2006 by the former, in partnership with the École des Ponts ParisTech and the École Normale Superiéure, which Piketty describes as “one of the oldest grandes é [the PSE] is very much part of the elitist French higher education system”.

Although he regards his institution as an excellent place to work, he concedes that “lots of students and academics have been left behind elsewhere, as investment per student has declined very significantly, particularly over the last 10 years”. Perhaps unsurprisingly, however, his suggested solution is not to “take resources away from the elite institutions but to put much more into the rest of the system”.

But aren’t universities always going to be generators of a certain degree of social inequality given that not everyone attends one? In the past, Piketty admits, achieving greater educational justice was relatively clear cut, with progressive politicians setting targets for all children to complete their primary and then their secondary schooling. But “we cannot just say we want 100 per cent of a generation to complete PhDs! You have a diversity of curricula and educational tracks in higher education, which makes the very notion of educational justice harder to define…We have to find a way to quantify the objective of educational justice, how much investment different groups benefit from, and come up with algorithms to open up access to the best high schools and HE institutions taking into account parental origins. These are difficult questions, for which no country has perfect answers, but we need to address them.”

Thomas Piketty

Despite more detailed coverage of France, the US and the UK, the almost extraordinary scale of his book’s ambition is reflected in its use of material assembled for the World Inequality Database, which Piketty co-founded with other economists in 2015. This allows him to reflect on the experience of a wide variety of countries, including India and Brazil. Furthermore, in addition to the dozens of graphs in the book, readers are directed to an online appendix for “many [more] graphs and data series not included in the text due to space limitations”.

Piketty contends that his exhaustive analysis, dating back centuries, reveals “a long-term trend towards equality”. Be that as it may, he paints a bleak picture of the current state of affairs. He interprets contemporary politics in the West as divided on two main orthogonal axes: these are borders and property – or, in other words, immigration and redistribution. Even action about climate change is closely related to questions of redistribution, since it will be far easier to convince electors to make any necessary sacrifices if they feel that the burden is fairly shared. And Piketty laments the fact that the 20th century’s great cross-border project, the European Union, has been prevented from devising a more progressive, harmonised tax system by member states’ insistence on a veto on tax policy, preferring to compete with each other to lower taxes.

The 2017 presidential election showed France to be split roughly equally between the four quadrants of the border-property schema, with a further fifth not voting at all. Capital and Ideology even points to what Piketty sees as a “real...risk of France’s falling into a social-nativist trap” under a politician such as Rassemblement National leader Marine Le Pen, whose rhetoric focused on hostility to immigrants and aspirations to redistribute wealth, “as a result of the Macron government’s uninhibited pursuit of policies favourable to the wealthy”. And this is not even to mention Trump and Brexit.

But while these may be sobering times for “egalitarian internationalists” such as Piketty, his book of more than 1,000 pages concludes with a 17th and final chapter setting out some bold proposals about “co-management” (the involvement of workers in corporate governance), carbon taxes and redistribution of income and wealth – not to mention “permanent circulation of property”, “a genuine transcendence of capitalism” and “de facto virtual abolition of borders”.

Although he believes that these proposals are “the most logical conclusion” to his analysis, Piketty concedes that “it would be ridiculous to say that there is only one thing we could do [in response]. Other people can come up with their own Chapter 17. I have no problem if people like my book until Chapter 16 and then want to write a different Chapter 17. I am pushing further some of the lessons about what has worked in the 20th century, in terms of progressive taxation, co-management in the Nordic and German-speaking countries, and so on.”

But however logical they might be from a certain standpoint, is it remotely likely that Piketty’s ideas might be adopted by any politician with serious designs on the highest office? That, he says, “depends on the time frame that you take”. Recent decades have witnessed a number of setbacks, partly because the collapse of the Soviet Union turned people against socialist ideals, but we could easily witness a reversal: “Going from Nazism to social democracy in the 1950s was quite a leap too – on the basis of what we’ve seen in the past, things can change pretty fast.”

Moreover, Piketty believes that “some of the evolution is already going on”. When he was involved in a public debate with Elizabeth Warren in 2014, he recalls, the US senator “didn’t want to hear about the wealth tax”. Yet today Warren is competing with fellow progressive Democratic presidential contender Bernie Sanders “about whether to tax billionaires at 6 or 8 per cent per year: three times higher than was ever tried in France or Sweden when there was a wealth tax. It’s not the kind of policy discussion that would have happened under Blair and Clinton.”

Piketty’s debate with Warren is an example of the large amount of public outreach that he has done on the back of Capital in the Twenty-First Century’s extraordinary success (a success that is reflected in the interest in its sequel; Piketty’s interview with THE is shoehorned into two solid days of interviews with the British media). He also writes shorter books, as well as monthly op-eds in Le Monde, and advised Socialist Party candidate Benoît Hamon’s campaign in the 2017 French presidential election (which garnered just 6 per cent of the first-round vote), having previously advised Socialist candidate Ségolène Royal in the 2007 election.

Hence, he is dismissive of the suggestion that preceding his policy proposals with 900 pages of dense historical analysis will ensure that busy politicians and activists will never become aware of them. Moreover, he believes that it is “useful to have these big books and for social scientists to take positions on the present and the future that are as consistent as possible with the historical research”.

In discussions about “Europe and globalisation, including the current debt crisis in the eurozone”, for example, “we need more historians, sociologists and political scientists to step in, because we need long-run historical perspectives. History shows how debt crises…were solved in the past. Germany in 1948-52 imposed an exceptional wealth tax on real estate and financial portfolios, up to 80-90 per cent, and this was a huge success. In France, there was a lot of inflation to get rid of the public debt, but that was less smart because it hit poor people, while the rich were able to escape...We’ll have a very conservative perspective if we only talk about the last 10 years. I’m trying to bring historians and political scientists to the debate.”

Committed to such dialogue, Piketty – who also signed up in 2015 to advise Jeremy Corbyn’s Labour Party, before quitting in the wake of its “weak” campaigning during the 2016 EU referendum – is impatient with the way that “economists have wasted a lot of time trying to pretend they are different from other social scientists and have specific scientific paradigms. It’s an easy way to look scientific and try to impress others, though I’m not sure they impress mathematicians and physicists with their maths. It is better to have a more open discussion using insights from different disciplines.”

But Piketty concedes that it is much easier for someone of his stature to make an attempt to “change economics from the inside” than it would be for a younger scholar: “When you’re doing a PhD or just beyond, you can’t say ‘I’m at the intersection of everything.’ So I’m careful about how I advise students,” he says. Nonetheless, as soon as it is realistic, he “encourages them to be more innovative. There is a danger of getting so involved in technicalities that they are no longer interested in the big picture: the historical processes, societies, social groups and human beings involved in the story. This sometimes makes young researchers a lot less curious than they were a few years before.”

In Capital and Ideology, Piketty describes how wealthy parents in the US use financial contributions to win admission to elite universities for those of their children “who would not otherwise qualify”. From the universities’ point of view, such policies are “effective in raising funds from the generous billionaires who finance their research and teaching”, but the secrecy in which the practice is shrouded is also emblematic of the lack of transparency about modern wealth flows.

In many areas of economic life, Piketty claims, “there is less public data available today than a few decades ago”. Although this can partly be explained by “unintended side-effects of the rise of digital technology”, other factors are “more political in nature...the liberalisation of capital flows starting in the 1980s was partly a political process whose aim was to make private wealth impossible to track by public administrators. We created a system whereby you can transfer your wealth from France to Luxembourg, for example, without the public administration, never mind the statistical authorities, following who owns what where. We end with a situation where the European Central Bank creates billions of euros and is unable to measure the distribution of assets in the eurozone.”

That is very convenient for those who “anticipate that if we had that centralised information there would be a temptation to redistribute wealth more than [they] would like to see”. However, this somewhat paradoxical lack of information in a supposed age of big data is “a strong limitation on our collective ability to discuss the proper level of taxation”.

“As far as public data on income and wealth is concerned, we live more in an age of big opacity,” Piketty laments. While obviously bad news for researchers, it also has major implications for the ability of academics like him to bring their insights to bear on crucial political debates.

On the other hand, those brave readers determined to read all the way to Capital and Ideology's conclusions may feel grateful that its author was unable to get hold of yet more figures to support them.

Capital and Ideology is published by Harvard University Press on 10 March.


Print headline: Big book, big ideas

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