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Brilliant Economist Thomas Piketty’s Plan to Save the World

To cool the planet, close the wealth gap. How? Look to Sweden.

Crawford Kilian 7 Oct 2024The Tyee

Crawford Kilian is a contributing editor of The Tyee.

The French economist Thomas Piketty is better known for writing enormous books like 2013’s Capital in the Twenty-First Century, which went all the way back to the 18th century to show that personal wealth will always increase faster than economic growth, making inequality almost inevitable.

But Piketty can also make a strong case in under 100 pages, as he does in Nature, Culture and Inequality, his latest book out this fall. It’s adapted from a lecture he gave in 2022, and Piketty’s conversational style makes the book highly readable. He offers two key proposals: even highly unequal societies can become more equal (and rich) without violence, and global heating will worsen unless we achieve global equality of wealth.

Piketty argues that “inequality” of income, wealth and social status occurs far more thanks to cultural reasons than to personal ability or character.

“It is culture in the broadest sense — and, more particularly, collective political mobilization — that provides an explanation for the diversity, degree and structure of the social inequalities we observe,” he writes.

Since 1789 and the French Revolution, he says, countries have been trying to escape inequality: “Each country follows its apprenticeship trajectory, which in the long term tends toward greater equality, even if the motion is hesitant and punctuated by retrograde phases.”

That’s a polite way to describe 250 years of social and international conflict, which can cause more or less equality.

But, Piketty tells us, “Social and political forms can change, sometimes much more quickly than contemporary observers think.”

A property-owning middle class

As in Capital in the Twenty-First Century, Piketty argues that capital grew enormously from the 18th to the early 20th century; the First World War consumed most of that capital and led to the redistribution of much of what was left.

In Germany, the United Kingdom, France and Sweden, something unusual happened between the start of the war in 1914 and its immediate aftermath: a property-owning middle class emerged.

“The 40 per cent, who are neither the richest 10 per cent nor the poorest 50 per cent, owned practically nothing until 1913 and were thus almost as poor as the poorest 50 per cent,” Piketty says. “There had been no middle class. Today, this group owns 40 per cent of the total wealth of Western Europe and represents 40 per cent of the total population: its average wealth is on the order of 200,000 euros per adult.”

That prosperity is arguably the result of having to fight two world wars and creating welfare states to ensure popular support. (British life expectancy actually went up during the First World War because workers at home were better paid and working in better conditions than they’d ever known before. Heavy taxes on the rich paid for those conditions.)

The rise of neo-liberalism in the 1970s and its entrenchment in the 1980s under Margaret Thatcher and Ronald Reagan ended three decades of British and North American middle-class prosperity, though mainland Europe was less affected.

The United States, and by implication Canada, are another story. “The propertied middle class in the United States is shrinking,” Piketty notes, “and whereas once it reached the European levels of 30 to 40 years ago, it is starting to drop closer to Europe’s pre-World War I levels.”

Property ownership now near impossible

Since middle-class wealth is almost entirely in residential property, we begin to understand the present housing crisis: those who were able to buy early have seen their wealth increase, but property ownership has become near impossible for their children.

Piketty says education played an important role in growing equality during the 20th century. Before the First World War, he writes, education “represented less than 0.5 per cent of national income.... Today, the average spending for education in our four Western European countries comes to six per cent of national income.”

If only Canada were part of western Europe! In 2022, Canada spent 4.14 per cent of its national income on public education, down from 4.59 per cent in 2021. In 1971, education spending peaked at 7.68 per cent; since then, our education spending has averaged about 5.84 per cent.

Piketty observes (and every retired teacher can confirm) that “education spending has stagnated since the 1980s and 1990s, quite paradoxically, since access to higher education has increased during this period: while barely 20 per cent of any age cohort went on to higher education in the 1980s, that figure has climbed to 60 per cent today.”

In Canada, according to Statistics Canada, half of all Canadians aged 18 to 24 are in some form of post-secondary or apprenticeship program, and 75 per cent of Canadians aged 25 to 34 have some kind of post-secondary credential.

So they’re doing quite well — except that they also carry a burden of education debt.

On average, recent grads carry $25,000 to $30,000 in debt, with professional degree holders often carrying far more than that.

Paying more for a worse education

In effect, students now pay far more for a worse education than did students in the early baby boom. Without the help of international students, universities would be still more underfunded, and Canadian students would have to take on even more debt.

Servicing that debt means postponing starting a family and purchasing a home — putting money into lenders’ pockets instead of buying consumer goods. Some young people can escape this fate through a timely loan from the Bank of Mom and Dad, or a simple transfer of wealth as a gift or inheritance. They have a chance to remain part of the propertied middle class while their recent classmates sink back into an educated but precarious working class.

This is clearly pushing Canadians into ever greater inequality. The propertied middle class — what Piketty has called the “Brahmin left” — is comfortably doing administrative and professional chores for the topmost 10 per cent, whether in the private or public sector. The unpropertied middle class lives with their parents or struggles in the gig economy.

A view of Sweden’s Södermalm district at sunset casts heritage buildings in a golden light. To the right of the frame is a road, docks and water.
Stockholm, capital of Sweden, which was politically and economically highly stratified until Social Democrats took power in 1932 and transformed society. ‘No credible solution to the challenge of global warming is imaginable without a drastic reduction in inequality,’ argues Piketty. Photo via Shutterstock.

As discouraging as this prospect may be, Piketty is not calling us to the barricades. Instead, he points us to Sweden, which has been a model of a prosperous, egalitarian social democracy. As such it’s been a serious annoyance to right-wingers.

But from 1865 to 1910, Sweden used to be highly unequal, Piketty says. “In Sweden, only the richest 20 per cent of men could vote. Yet the system was even more restrictive, because an elector from those richest 20 per cent might be entitled to anywhere from one to 100 votes, according to his degree of wealth. The richer you were, the greater voice you had. Better yet, while there was a ceiling of 100 votes for general elections, there was no ceiling at all for municipal elections!

“Consequently, Sweden had several dozen townships where a single voter cast more than 50 per cent of the vote, making him a dictator with total democratic legitimacy.”

Political and social pressure, not violence

The Swedish working class, however, was relatively more literate than its contemporaries elsewhere in Europe. Its trade unions and the new Social Democratic Party pushed until they got universal suffrage in 1920. In 1932 the Social Democrats took power and held it almost continuously until the 1990s.

As a result, Sweden has progressive taxation designed to support access to education and health care — thanks to political and social pressure, not violent overthrow of the government.

Progressive taxation was a popular idea in the United States as well; as Piketty observes, “For the half-century from 1932 to 1980, the income tax for the highest earners in the United States averaged 80 per cent, climbing as high as 91 per cent under Franklin Roosevelt. And these were just the federal income tax rates; there might be an additional state tax of five, 10 or 15 per cent.”

With that kind of revenue, the United States was able to win a global war, dominate the peace, fund education and provide a reasonable standard of living — at least for white males and their families. Canada prospered too, and even found the money for medicare.

But neo-liberalism ended the rise of the propertied middle class in both countries; two-income families were needed to sustain a good standard of living, and while schools and universities were more accessible, they became increasingly expensive.

The pandemic dealt neo-liberalism an almost mortal blow. In the United States, President Joe Biden launched the recovery from COVID-19 by junking much neo-liberal policy, raising taxes (slightly) on the rich and creating jobs while also forgiving much student debt.

Here in Canada, the Justin Trudeau Liberals pumped enormous amounts of money into the pandemic-crippled economy but didn’t follow through on the kind of reforms that might have helped workers and students.

Tax the rich, cool the planet

Piketty concludes with a startling assertion about climate change: “No credible solution to the challenge of global warming is imaginable without a drastic reduction in inequality and without new progress toward a great level of equality — first, because of the substantial disparities in carbon emissions between the countries of the Global North and South, and second because of the carbon emission inequalities within countries.”

Piketty estimates that global per capita average emissions are about six tons a year. But some countries have people who emit far more. Some rich people emit 54 tons or more per person, “equivalent to the top one per cent of individual emissions.”

“That one per cent by itself has higher carbon emissions than the 50 per cent of the planet’s population who produce the least emissions. More than 55 per cent of these high emissions come from North America, with Europe next highest, followed by China.”

That presents an interesting challenge. Thanks to our hydroelectric resources, we in B.C. now emit six tons of carbon dioxide per capita, so we need to reduce our emissions by just two or three tons to meet our emissions goals for 2030 or 2040.

“By contrast,” says Piketty, “the top 10 per cent [in Europe] are at 29 tons, 30 tons and even 35 tons per person. And if we were to look at only the top one per cent in Europe, we would find them emitting at rates of 60 to 70 tons. In the United States, the top 10 per cent are already emitting at a rate of more than 70 tons per person per year.”

Taxing the likes of Elon Musk and the Koch brothers at 90 per cent would certainly help to reduce their emissions, while we invest the proceeds in green technology and strengthening our infrastructure against fire, flood and drought.

But if they want to keep jetting around the world on a whim, or building ever more data centres needing ever more electricity, our goose will be cooked — and so will theirs.

Better to follow the Swedish model: relentless social and political pressure, until the wealthy are no more than five times richer than the poor, and we can all live with the security we need.  [Tyee]

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