Few academics can aspire to transcend university boundaries, reach deep into a mainstream audience and find Westminster’s doors opening, inviting conversation with politicians. Thomas Piketty is now one of that happy band, but when it comes to how his ideas might be put to practical, and political, use the debate is still wide open.
The French economist and author of Capital in the Twenty-First Century was in conversation this week with Lord Stewart Wood, an ex-academic and senior adviser to Labour party leader Ed Miliband. Organised by the Centre for Labour and Social Studies (Class) the event was not just a conversation between a politician and an academic, but an intense 90 minutes of Q&A in which prominent journalists, politicians and academics had the chance to debate with Piketty about the political relevance of its work.
The tweets on the hashtag #PikettyClass are a good demonstration that Piketty has been officially elevated to the status of an “intellectual rockstar” by some of the most popular radical personalities in UK, such as Owen Jones and Russell Brand (who is unsure about the right spelling). Piketty himself seems to back off from people who over-interpret (or have never read) his work. He responded to Jones that, while ideas are powerful tools, one book cannot challenge the influence of neo-liberalism in current times.
Inequality for votes
Beyond the popular image, it does not take long to realise that Piketty is no socialist thinker – when asked: “What’s the matter with inequality”, he affirms that inequality per se is not a problem. The issue is rather in the way inequality is becoming blatantly inimical to how the economic system works and is impeding its recovery. I wasn’t sure that the audience at the Class event, filled with progressive thinkers, would agree with such statement – and it got me wondering.
I sense a disconnection between the political appeal of Piketty as a new socialist hero and Piketty’s real political ideas that transpire from his assumptions. I am not sure that the construction of a new Piketty-inspired socialist order would actually do much to hold back that elevation of economics to theology which has limited the political exploration of inequality as a problem in and of itself.
More coherent political solutions come from those are attuned to the electoral potential of Piketty’s work. Despite what one Labour former spin doctor thinks, it is often at the crossroads between politics and academia that new ideas emerge which are able to connect with voters (New Labour’s Third Way, for example). When asked about the position of the Labour Party vis-à-vis Piketty’s ideas, Wood states transparently that having a conversation with the economist is a part of Labour’s election-year tactics.
The party aims to frame tackling inequality as an appealing strategy for the broader electorate. Popular policies, such as bringing back the 50p top rate of income tax and pre-distribution, which tackles the distribution of wealth, are all part of it. In other words, Labour is trying to convince people outside of its natural base that inequality matters. This fits with the increasing popularity of policies that aim at reducing the gap between rich and poor, supported by 80% of people according to a recent survey and therefore more popular than cutting immigration or tax.
What is the use of Piketty’s policy proposals in this process? He has focused on two major areas. The first one is “rethinking of progressive taxation” which for Piketty means being more ambitious than a 50p top rate of income tax. Importantly, for Piketty rethinking taxation should also mean updating taxation to respond to the current issues in inequality of wealth. In particular, he believes wealth inequality should be limited by encouraging wealth formation for those in low- and middle-income groups.
The most obvious application of this idea would be having higher inheritance tax, but Piketty points out that it could take also the form of an annual tax on wealth. One example would be the so-called Mansion Tax, a Liberal Democrat proposal which has generated some positive noises at Labour HQ. But an annual taxation on wealth should take into account other dimensions of wealth inequality, including financial and other assets.
His ambitious proposals on taxation might reflect the different political viability of those reforms in continental Europe. In the flesh, though – as opposed to in print – Piketty seems aware of the political limitations of creating a global tax on capital and is realistic in accepting that his proposals will inevitably lead to different solutions in different countries. The debate at Class found him also proposing new solutions such as share ownership schemes, popular in Germany.
Education and opportunity
The second major policy solution proposed by Piketty concerns social investment and education, which ends up getting less attention. Piketty admits that investment is not enough and underlines the need of guaranteeing equal opportunities by limiting the costs of higher education. However, the link between social investment and inequality is never properly clarified by the scholar.
Social investment has been the mantra of the 90s and the supply-side focus of those policies left many paradoxes for European societies to deal with, such as the presence of a growing portion of unemployed graduates or skilled job-seekers. This week’s proposal by Miliband to link benefits for young people to training is another supply-side strategy that looks unlikely to create job opportunities for the most skilled and educated generation the UK has ever had.
The absent guest in the debate seems to be the first instrument developed to limit inequalities in Europe: the welfare state, in the broader sense, rather than just in relation to benefits. Miliband’s recent welfare state agenda, which aims to respond to short-term polls by defensively proposing more conditionality into welfare reforms underestimates how the crisis is softening negative attitudes on benefits and missing an important chance to put forward welfare state interventions that limit inequality.
So if those policy ideas are only partially convincing why should we still talk about Piketty? First of all, because, setting aside the ideologically driven attack from the Financial Times, his book contains an exceptional analysis of the evolution of inequality in Europe. His idea that growth does not itself challenge the patterns of wealth inequality (the famous r>g) will have a powerful influence in other social sciences too.
And crucially, the political conversation on Piketty’s work is leading to a robust debate about the political priorities of the Left. While the last European elections confirmed that social-democratic parties – still hitched to Third Way ideas – have been painfully timid about fighting inequality, the way that Piketty’s arguments have resonated have helped build a politically important theme for a large portion of the public. The way to exploit it and address it though, has not been written, and look ever more likely to overtake what Piketty has proposed.