Relatively few economists use Balzac and Austen as primary sources. Thomas Piketty is an exception. In his discussion of income and wealth inequality in 19th-century France, he points to the story of Père Goriot as an example of wealth accumulation and decumulation. Having made a small fortune in the pasta trade, Goriot lost it all attempting to propel his daughters up the social ladder.
Austen is cited a little later. While Balzac’s characters ‘dream of pasta and perfume factories’, Austen’s ‘attest to a world in which various forms of wealth have entered into communion’. But both authors ‘describe ownership societies characterized by very steep hierarchies, in which it seems quite difficult to live with a modicum of dignity and elegance unless one’s income is at least twenty or thirty times the average’. Austen readers will probably recognise that description, but they might be surprised to find that her work is discussed in a section entitled ‘the United Kingdom and Ternary-Proprietarian Gradualism’. For the benefit of those for whom that term is not part of everyday vocabulary, I should explain that Piketty uses it to describe society in 18th-century England, which he sees as being composed of three classes: a social and religious class, a noble and warrior class, and a common and labouring class.
Piketty, a man of engagingly wide interests, is not principally a literary critic. The first, long section of this door-stopping volume is devoted to a survey of inequality in a wide range of societies across a long period. These include medieval Europe, India and a number of colonial and slave societies. The purpose is to explore the ways in which unequal ownership of property has been described and rationalised over time. The breadth of Piketty’s learning is extraordinary, and though he is never tempted to use three words where ten will do, the prose is nonetheless clear and a pleasure to read in Arthur Goldhammer’s excellent translation.
But this new opus, like his previous Capital in the Twenty-First Century, will divide the economics profession. Indeed, in France, where it was published last year, it has already done so. There are those who resent the size of Piketty’s royalty cheques and his rock star status on campuses across the globe. Others of a purer Marxist persuasion think Piketty’s attempts to work with the grain of capitalist societies are some kind of betrayal. Still others are repelled by his fully paid-up membership of the French longue durée school, which is an affront to the micro-game theorists who dominate economics departments in the Anglophone world.
Setting aside these internecine disputes, after the very long durée of his historical exegesis, what is Piketty’s main thesis? It is that the sharp growth in inequality of income and, especially, wealth we have seen in most Western societies in recent years is unsustainable. Furthermore, our traditional political parties find it impossible to engage with the problem. Taking the UK as an example, he argues that the two main parties are now led by the ‘Brahmin Left’, with Labour having become the party of the highly educated, its working-class roots withered, and the ‘Merchant Right’, who cling to the belief that loosely regulated free markets will deliver prosperity for all, one day. He argues that the trickle-down theory on which that latter assumption is based has given way to a trickle-up phenomenon, with the rich getting richer and the incomes of the middling sort stagnating.
So, as Lenin asked, what is to be done? The last section of the book presents a detailed manifesto for change, under the slightly clunky heading ‘Elements for a Participatory Socialism for the Twenty-First Century’. He wants more open access to higher education for poorer people, and other slices of motherhood pie. But the core of the case is more hard-edged. Essentially, he argues that property and capital (he adopts a very broad definition of capital, including within it a workman’s tools, for example) should be seen as temporary, not permanent. So an entrepreneur can legitimately accumulate capital during her lifetime, but eventually much of that capital should return to society as social property. The mechanisms for achieving this transfer involve the aggressive use of income, wealth and inheritance taxes. Income tax, he claims, should be much more progressive than it is today in Europe and the USA, reaching 90 per cent for the highest earners. He argues that we have experienced similar rates in the past and that in such times economic growth was higher than it is today. Wealth taxes should be introduced where they are not in use (Piketty sees the wealth tax in France as far too low to achieve his purposes). Perhaps most importantly, inheritance tax on the largest family fortunes should also be 90 per cent. Piketty plays down the potentially disruptive effects of this programme. After all, he argues, many wealthy folk have far more property than they need.
How would all these additional tax receipts be used? He favours a version of universal basic income, guaranteeing every citizen an income of 60 per cent of the median wage, rain or shine, work or play. And each person reaching the age of twenty-five would be given a capital endowment to use as they wish (he proposes a sum of around £100,000).
At a time when the major political parties in the UK and elsewhere in Europe go into election campaigns with firm commitments not to increase the basic rate of tax, and a couple of months after a far less radical programme than that put forward by Piketty was roundly dismissed by the UK electorate, it is tempting to cry ‘forget it’ and move on. But there is a problem, and the first nine hundred pages of his book cannot be so easily ignored. Politicians who hope for more than a short durée in power would do well to digest the main thesis. There are signs that some have implicitly done so, and indeed the new UK government’s rhetoric carries echoes of it, though the ‘levelling up’ narrative is couched in geographical rather than class terms – something rather more acceptable to Conservative voters.
It will be intriguing to see whether building high-speed railways and running more buses will do the trick and begin to reduce wealth inequalities. And it will be fascinating to see whether the political forces that led to Brexit and have contributed to the growth of what Piketty likes to call nativist parties elsewhere in Europe can be rechannelled. Either way, the members of the Brahmin Left look stranded, watching glossy period reconstructions of Jane Austen novels as the capital value of their ternary-proprietarian Islington villas gradually declines.