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A review by trentwoodbury
Capital and Ideology by Thomas Piketty
5.0
A fantastic analysis of the history of inequality and some proposals on how society can restructure politically and economically to overcome the inequality based challenges of today.
The history of inequality: Piketty frames slavery as the ultimate form of inequality along a spectrum. The history of the end of slavery was fascinating. For example, in the UK, because the government was so beholden to property owners, owning slaves was seen as an investment like any other, and when slavery was overturned, slaveowners/investors were remunerated extensively, at a massive cost to the UK government. We also see echos of this as colonialism was rolled back: The colonizers would extensively charge the colonized as a (often crippling) fee for their freedom.
Proprietarianism: I don't know if this is a term that Piketty made up, but it's the philosophical stance that private property is a sacred right. Piketty goes through multiple examples that show the philosophical absurdity of the reification of private property. Remunerating slaveowners is one example. Another is the example of land as private property: at some arbitrary point someone stuck a stick in the ground and said "this is my land" and we've somehow all agreed to that claim ever since.
Highly progressive taxes and economic growth: on multiple occasions, Piketty points toward the UK and US during the 1950s-1980s when the highest marginal tax rates were 80-90%. During these periods, both countries saw their highest GDP growth rates. Piketty fails to acknowledge that other factors were likely at play here (such as the beginning phases of globalization), but I think the fact that Sweden's GDP growth over the past decade has been comparable to the US's at least proves that higher marginal tax rates don't negatively impact GDP growth.
Taxing Capital: Piketty picks up where he left off in Capital in the 21st century and provides more detail on how a capital tax could practically be implemented. This would require trans-national treaties to avoid the current "race to the bottom" of small European states (e.g. Ireland and Luxembourg). It would also require a ledger of individuals' capital, including through financial instruments like investments. Piketty proposes redistributing this money to younger citizens to give them more economic opportunities, which is relevant as we're seeing a growing income and wealth gap between ages today.
Carbon Taxes: Piketty briefly discusses creating marginal tax rates on carbon emissions, with a potential ceiling to individual emission allotment. His historical analysis shows that current attempts to implement carbon taxes reflect initial attempts (in the early 20th century) to introduce income tax: they are highly regressive. This is why we saw the yellow vest protests in France. Taxes were introduced on petrol and diesel, but not on airplane travel which the wealthy disproportionately consume.
Populism, immigration, and inequality: Piketty opines that increased inequality since the 1980's is the primary cause of the modern rise in populism and anti-immigration sentiment. I disagree with him less here. Take, for example, the rising tide against immigrants in Canada. This stems primarily from an emerging housing shortage, not inequality per-se. Sweden is another good example: it has one of the lowest post-tax income inequalities, but anti-immigrant sentiment exploded in the country after the refugee influx of 2015. I don't fully agree that decreasing inequality would directly contribute to pro-immigration sentiment, or even necessarily decrease nationalism, but I don't have strong evidence for this stance, so Piketty could be right.
As he notes, it's impossible to agree with all his points in this book, but this is definitely an interesting set of ideas and historical analyses that serve as a great starting point on how to restructure the world economy in the years to come.
The history of inequality: Piketty frames slavery as the ultimate form of inequality along a spectrum. The history of the end of slavery was fascinating. For example, in the UK, because the government was so beholden to property owners, owning slaves was seen as an investment like any other, and when slavery was overturned, slaveowners/investors were remunerated extensively, at a massive cost to the UK government. We also see echos of this as colonialism was rolled back: The colonizers would extensively charge the colonized as a (often crippling) fee for their freedom.
Proprietarianism: I don't know if this is a term that Piketty made up, but it's the philosophical stance that private property is a sacred right. Piketty goes through multiple examples that show the philosophical absurdity of the reification of private property. Remunerating slaveowners is one example. Another is the example of land as private property: at some arbitrary point someone stuck a stick in the ground and said "this is my land" and we've somehow all agreed to that claim ever since.
Highly progressive taxes and economic growth: on multiple occasions, Piketty points toward the UK and US during the 1950s-1980s when the highest marginal tax rates were 80-90%. During these periods, both countries saw their highest GDP growth rates. Piketty fails to acknowledge that other factors were likely at play here (such as the beginning phases of globalization), but I think the fact that Sweden's GDP growth over the past decade has been comparable to the US's at least proves that higher marginal tax rates don't negatively impact GDP growth.
Taxing Capital: Piketty picks up where he left off in Capital in the 21st century and provides more detail on how a capital tax could practically be implemented. This would require trans-national treaties to avoid the current "race to the bottom" of small European states (e.g. Ireland and Luxembourg). It would also require a ledger of individuals' capital, including through financial instruments like investments. Piketty proposes redistributing this money to younger citizens to give them more economic opportunities, which is relevant as we're seeing a growing income and wealth gap between ages today.
Carbon Taxes: Piketty briefly discusses creating marginal tax rates on carbon emissions, with a potential ceiling to individual emission allotment. His historical analysis shows that current attempts to implement carbon taxes reflect initial attempts (in the early 20th century) to introduce income tax: they are highly regressive. This is why we saw the yellow vest protests in France. Taxes were introduced on petrol and diesel, but not on airplane travel which the wealthy disproportionately consume.
Populism, immigration, and inequality: Piketty opines that increased inequality since the 1980's is the primary cause of the modern rise in populism and anti-immigration sentiment. I disagree with him less here. Take, for example, the rising tide against immigrants in Canada. This stems primarily from an emerging housing shortage, not inequality per-se. Sweden is another good example: it has one of the lowest post-tax income inequalities, but anti-immigrant sentiment exploded in the country after the refugee influx of 2015. I don't fully agree that decreasing inequality would directly contribute to pro-immigration sentiment, or even necessarily decrease nationalism, but I don't have strong evidence for this stance, so Piketty could be right.
As he notes, it's impossible to agree with all his points in this book, but this is definitely an interesting set of ideas and historical analyses that serve as a great starting point on how to restructure the world economy in the years to come.