Thomas Piketty: ‘The left has been a victim of its own success’
The economist on populism, fiscal debt and the long-term trend of economic equality
Joel Suss
© Leonie WoodsIt has been just over a decade since Thomas Piketty rose to academic superstardom with the release of his bestselling book, Capital in the Twenty First Century, and the world now looks decidedly different.
Back in 2014, western countries mostly faced subdued inflation while yields on government debt were, in real terms, zero or negative.
Governments were led by centrists and populism — in the form of Brexit and Donald Trump — had yet to rear its head.
The situation has since undergone a profound change.
In Piketty’s native France, political deadlock is coupled with a rapidly growing fiscal deficit, with interest rates on government debt having jumped from around 1 per cent in 2015 to around 3.5 per cent today in nominal terms.
Meanwhile, the far-right Rassemblement National is leading comfortably in the polls with President Emmanuel Macron’s centrist party relegated to a distant third place.
What has not changed, however, is the campaign against rising economic inequalities that Piketty and his academic collaborators are waging.
(While the extent of the rise of economic inequalities in the US is disputed, for both income and wealth, the upwards trend across a number of dimensions and countries is widely established.)
However, as Piketty’s 2022 book A Brief History of Equality emphasised, the longer sweep of history shows that equality is growing.
The more recent increase in income and wealth concentration in many countries, the focus of his earlier work, is a blip that he argues will inevitably revert to the longer term trend.
I met Piketty at the London School of Economics to talk about the rise of populism — a term he despises — wealth taxation, fiscal debt, intergenerational inequality and artificial intelligence.
The pro-business, liberal side has been weakened by rising inequality and stagnating median income
Joel Suss: We are living in a time of rising populism.
Regardless of how populism is defined, the data suggests the trend is up.
Is there a link between rising economic inequality that you and others have been documenting and populism?
Thomas Piketty: I don’t think the term “populism” is very useful to understand the situation because if you start labelling Trump — the extractivist, hyper-capitalist, nationalist — with the same term as Bernie Sanders — the democratic socialist — then you lose sense of what we’re talking about.
This is too often a strategy of the very socially privileged, self-proclaimed pro-business centre to disqualify everybody that’s not like them.
I think it’s a big mistake because in the end you cannot make democracy work by putting aside all the people who are not like you and call them populist.
I think it’s been a disaster.
So, if I may, let’s just stop using this term.
Let’s be precise in what we’re talking about.
To me there are three big ideological families since the industrial revolution, which are: nationalism, liberalism and socialism.
The nationalist side is what you see with all the anti-migrant movements in France, in Britain, etcetera.
Trump is certainly a nationalist, both on the anti-migrant, ethnocentric dimensions, but also in his sort of extractivist discourse with respect to the rest of the world.
The pure liberal, pro-business camp has been weakened considerably by rising inequality and stagnating middle class income.
These days, I think you cannot be re-elected anymore with a basic pro-business agenda.
Look at the Conservative party in Britain — the electoral base that’s going to be happy with this is so narrow that you will never be re-elected.
This is why the right-wing party [Reform UK] and even sometimes a billionaire like Elon Musk are turning to the sort of nationalist, anti-migrant, anti-left discourse because they feel this is the only way — to put it in a very cynical manner — to try to get the popular vote.
Then you have the democratic socialist side, you can call it the left-wing or more egalitarian side.
This political family has been incredibly successful historically.
It has built the welfare state and brought prosperity and equality to an extent that nobody could have imagined a hundred years ago.
But they have sort of stopped thinking about the future.
They have become in some cases just a force of conservation, of defending the welfare state, defending the social system, and I think they need to rethink, to have a new agenda for the future — more internationalist and also more egalitarian.
This will have to come with a very strong compression of inequality and power and wealth distribution.
I’m not saying it’s going to be easy, but the alternative is the nationalist side right now, because the pro-business, liberal side has been weakened by rising inequality and stagnating median income.
JS: On what you call the democratic socialist side, couldn’t you call some politicians left-wing populists purely due to the “us-versus-them” rhetoric, which is a standard political science definition of populism, the “them” being the “wealthy elite” — as opposed to “immigrants” for right-wing populists — and wealth redistribution being the defining associated policy?
TP: It’s a typical strategy of people who want to keep their power and wealth to say this is about me.
This is not a question of individuals.
It’s just a question about money.
It is as simple as that.
It’s not the dignity of a person, it is not whether people are good people.
There are good people in every social class.
There is nothing against individuals.
It’s just a practical, rational question of how you share the wealth, how you share the tax burden, how to share power.
And I think, historically, the building of the welfare state system, progressive taxation — this is not a populist achievement, this has been a rational, socialist, democratic achievement, which now nobody is questioning.
Let me remind you that it’s not always been like that.
When [Friedrich] Hayek, in 1944, writes The Road to Serfdom he’s talking about the British Labour party and the Swedish Social Democratic party, and he’s telling his British friends and Swedish friends: “Don’t vote for these people, they will get you to the Bolsheviks and to the Soviet Union.
They are populists, they hate the elite.”
Even people like [John Maynard] Keynes, who was not on the same side as Hayek at the time, didn’t want to vote for Labour because he thought in a way they were populists.
He thought: “these people, they don’t have good economists, they don’t have good academics.
I will vote for the Liberals until the end of my life.”
I think if he had stayed [alive] a bit longer, probably he would have turned to Labour.
Today this makes us laugh because the Labour party or the Swedish Social Democrats don’t look very revolutionary anymore and are not frightening for anyone.
It’s sort of funny that someone like Hayek, who went on to support [Augusto] Pinochet, is afraid of the authoritarian tendency of Labour and Swedish Social Democrats.
But this is what these parties inspired because they were working class parties.
Every time you have a party that is trying to push for equality and redistribution you also always have some elite who try to portray this party as populist.
JS: What is puzzling is the idea that inequality is rising and leading to discontent, but this discontent is being channelled into what you would call the nationalist parties like Trump, Farage, [Marine] Le Pen, et cetera, and not the parties which are typically and historically associated with addressing inequality [through redistribution and the welfare state].
Why is that?
TP: I think the left has not been very good at redefining its agenda for several reasons.
The main reason is that the left has been a victim of its own success.
The welfare state has become a reality — nobody really wants to return to a situation before [the] first world war where total tax revenue and public spending will be less than 10 per cent of GDP.
Now the only question is: do we stabilise it at 40 or 50 per cent in some European countries or do we keep going up?
I think we need to keep going up, because if we don’t put public resources into health, education, energy, and transportation, then private resources will go into them instead, because these sectors need to grow.
And I don’t think this will be more efficient or more equitable.
If you think of health in the US — 20 per cent of GDP is spent on health versus 10 per cent in Europe.
If you compare health indicators [which generally show better outcomes in Europe] — what are you doing with this money?
The other reason is educational expansion.
Because it was successful, it has built a new class of highly educated people voting for the left.
The left has been pushing for educational expansion throughout the 20th century, and so the people who have been most successful, who have become the winners of the education game are in a way grateful to the left for having made this possible.
But if you grew up in a small city or small village, it’s just more difficult to access universities than if you grow up in a large conurbation, for a given parental income, given social characteristics.
For all sorts of reasons, some people are lagging behind in the education game, some people have been at the top, and the allegiance to the left in this process of educational expansion has turned around completely — it used to be the case that the less educated would vote for the left.
Back in the 1960s, when [French sociologist Pierre] Bourdieu was writing Les Héritiers about inheritance in higher education, a fraction of each generation was going into higher education in France . . .
Now it’s 60 per cent.
It’s a completely different world, so the left has to redefine equality in access to education which makes people with lower social class origins, and particularly people in the smaller cities, feel more respected.
It’s not just about education; it’s also access to hospitals, access to public transportation.
It’s easy to criticise people who use their car when you have the metro in London.
The entire movement of educational expansion, health expansion and also ecological concern has created a new educational divide and territorial divide.
This is where the left has been in difficulties.
One thing that we observe today throughout western democracies is that you have this disconnection between the income cleavage and the education cleavage.
For a given income, when you move up in education you actually get more left in terms of vote.
And for a given education, when you go up in income you turn to the right.
The two dimensions used to go together but they don’t anymore.
The other big transformation is this territorial gap [inequality between regions] which has returned to levels we have not seen since the early 20th century.
JS: Is another important gap now an intergenerational gap, between over-65-year-olds and the rest?
In the UK and France, gains in income have been much stronger for ages 65 and over versus working age, and pension policies have been very generous.
The FT’s John Burn-Murdoch has also recently highlighted that in France the average income of over-65-year-olds is now for the first time higher than those of working age.
TP: I think this generational divide at the end of the day is less important than the social class divide within each age group.
If you look at wealth inequality, it’s almost as big within each age group than for the population taken as a whole.
Look at people above 65, people 25 to 35, or 35 to 45 — in each of these age groups, the bottom 50 per cent owns 5 per cent of the total, and the top 10 per cent, 50 or 60 per cent.
So in the end, if you think only in generational terms, I think you’re missing the biggest part of the divide.
JS: France is currently in a political deadlock, divided around fiscal policy and its large budget deficit.
How can they break this deadlock and get the country on to a more sustainable fiscal basis?
TP: There’s a political side and a more economic side.
On the political side, I think France is in the same situation as many other countries, including Britain and the US, which is that the pro-business centre has to choose between the nationalist side and the socialist side.
And if you don’t want to choose, the pro-business centre will disappear.
I mean, they are disappearing.
If there were new elections now, they would shrink in numbers in the [French] National Assembly and that’s why they are resisting this.
But they have to choose.
There’s a clear proposal on the left to have a minimum wealth tax of 2 per cent for wealth above €100mn, which to me is really the very minimum you can do given the increase in top wealth.
In France, the top 500 wealth holders used to collectively own €200bn in 2010.
Now they collectively own €1,200bn — it’s been multiplied almost by six.
Of course, GDP per capita, average wage or even average wealth has not been multiplied by six over this period.
If you cannot accept this wealth tax, it means you are really telling the population: “the middle class has to pay, we don’t know how the rich can pay.”
Then you have the other, nationalist, anti-migrant discourse, which is saying: “we’re going to make the foreigners pay”, or they suggest that there is a lot of waste in public spending, some going to undeserving poor, especially when they are foreigners, but also when they’re locals getting too much.
Let’s see when the nationalists are in power how they are going to cut spending, because in practice, even if you cut everything you’re giving to migrants, that’s not that much.
That’s not going to get you money for the health service and universities.
This nationalist discourse will become a more right-wing, anti-public spending discourse.
That will contribute to making the political system return to a left-right system, which to me is the most promising way to make social and economic progress.
Not because the left is always right and the right is always wrong — both sides have different viewpoints and different economic experiences to bring to the democratic table.
I think we need the right-wing viewpoint of saying: “we work hard, we deserve our wealth”.
There’s always some truth to that claim.
The question is where you choose to draw the line.
In order to have a discussion about this, you need the bi-polarisation of left and right.
The problem we have in France right now is this tripartition, where there’s a centrist block excluding everybody too much on the left and too much on the right, and the camp of reason remains in power forever.
This is a disaster.
People need clear democratic intervention.
On the more economic side?
We have a long history of public debt in France and Britain.
Britain had more than 200 per cent of GDP of public debt in the 19th century.
In the case of France . . . after each of the world wars, it was between 200 per cent and 300 per cent.
The good news is that we’ve always found ways to get rid of it, and in each of the three instances I’m referring to, through different mechanisms, it went down to very little — less than 20 or 30 per cent GDP in a few years.
It was never repaid, in effect, as opposed to the British solution in the 19th century, where it took basically one century of budget surplus between 1820 and 1914 to reduce the public debt coming from the Napoleonic War period.
So, first lesson from history: there are different ways to reduce this large public debt.
Which way is the best?
The British approach of the 19th century corresponded with a very aristocratic political system where basically one tier was in power and they wanted taxpayers to reimburse them.
Was it the best way to prepare the country for the 20th century?
I’m not completely sure, because in effect there was more money put into interest payments than money invested in education.
And Britain lagging behind in education with respect to the US or even with respect to Germany or France in the 20th century is the number one explanation for a British decline.
I would not recommend doing the same in the future.
What are the other ways?
The most successful experience with large public debt is probably Germany after [the] second world war, where they had this exceptional tax on private wealth which raises a lot of money.
This contributes a lot to the reduction of the public debt without any inflation.
Of course they were traumatised by inflation in the 1920s, so they didn’t want inflation anymore.
The other way, of course, is through inflation, which is a wealth tax on the poor, typically.
In the end, it will take time.
There are conflicts of interest between different social groups.
The idea that you have in economics textbooks, that you have a representative agent, representative of each generation, that’s not the choice we have.
The choice we have is, again, different social classes and different ways to distribute the burden.
Nobody wants to pay.
When you talk about taxing private wealth, people who own one million don’t want to pay, especially if the billionaires are not paying.
So they are very afraid when you talk about this kind of solution.
And they should be afraid — I can understand this.
That’s why you have to start with billionaires.
JS: How do you see advances in AI affecting economic inequality?
TP: It’s entirely a question of ownership and government.
What I find really striking is the ability of the new AI actors to convince public authorities that they should be allowed to basically grab everybody else’s intellectual property without even mentioning whose intellectual property they have been using.
And then to produce their own sort of knowledge or answer to questions where they basically have the right not to say who they’ve been using and copying.
They have the right not to say how the algorithm is producing this.
To me this is a complete dystopia — it is really crazy.
This is a sort of extractivist, hyper-capitalist side of the most brutal kind, which in a way is consistent also with nationalist ideology, which has a sense of hierarchy based on socio-ethnic origin, which also fits together well with a sense of hierarchy involving a few geniuses who are going to save us if we give them all the power.
If the left, let’s say in the US, if the Democratic party keeps being captured by pro-business interests, then the Trump group will keep power.
The really negative scenario is where you get a complete reversal of the political cleavage structure, where in the end you have a sort of conflict of the elite.
It’s the nationalist elite versus the internationalist business elite, but in fact both are business elite and both are sort of the best possible enemies for each other, because they can easily hope to win the fight and the less favoured group is completely left behind.
I don’t think this is going to happen because in the end, the social demand for democracy, for just solving concrete problems in terms of housing, access to digital technology and access to protection of privacy, is going to be very strong.
JS: We often talk about what fiscal policy and government regulation can do to affect economic inequality.
What about the role of monetary policy, which is relatively neglected?
How do you see, for instance, quantitative easing, and now quantitative tightening?
TP: That’s a very big topic.
It’s clear that we’ve entered a completely new era in central banking and monetary policy after 2008 and after 2020.
We realised what we should never have forgotten, which is that monetary policy and money creation is the only way to very quickly confront major crises.
Changing the tax code, changing the budget, takes time and in the urgency of a major financial crisis or epidemic the only policy tool you can mobilise to create resources the next morning is of course monetary policy.
People have started talking about conditioning monetary policy and loans to large businesses depending on a green target, on a climate target.
All of this has not gone very far for now.
I think this is going to come back, but if we really want to have this kind of discussion, we need some collective and democratic expertise on these issues.
Basically all the European institutions except the European Central Bank have very limited expertise to just be able to look at a green type of quantitative easing and ask: is this efficient?
Is this working?
What are the pros and cons?
We need to have a democratic discussion about this.
One very big issue to me is the international monetary system.
When we look at interest rates today, what I find really striking is the gap between [global] north and south.
We are complaining in France that interest rates [on government debt] are going up, but they are about 3.5 per cent.
Inflation is at 2 per cent, so the real rate is 1.5 per cent — this is the lowest level in 200 years basically, and this is partly the counterpart of the fact that public and private actors in the global south are paying 5 or 10 per cent.
I’ve done some research with Gastón Nievas showing that what we used to call the exorbitant privilege of the [US] dollar, in terms of differential between the rate of return on foreign assets and foreign liabilities with a dollar portfolio, has actually spread to become a rich world privilege, including for the Eurozone and but also for Japan and Britain to a lesser extent.
In a way this was the purpose of creating the euro, to try to have some financial advantage comparable to the dollar.
In some ways it worked, but the people who lose from that are to some extent the countries in the global south.
I am, as usual, a very idealistic optimist, so I want to have a discussion about the international trade and monetary system.
Taking into account climate reparations, taking into account sustainable development objectives.
And I think realism now is actually to think about major transformation in these areas.
And the status quo is not a realist option.
JS: In terms of the policies that you have proposed, are you optimistic that these can be actually implemented?
TP: I think we were very close in 2020 with the wealth tax that Bernie Sanders and Elizabeth Warren were proposing — a 6 per cent per year top wealth tax rate.
This could have happened and this could still happen in the future.
In France right now there’s sort of 90 per cent public opinion support for the minimal wealth tax that Gabriel Zucman has been pushing, also at the G20 summit, and it’s going to be very difficult to oppose this forever.
The other possible discourse is to say, “OK we’re going to kick out all the migrants, the undeserving poor and that’s going to do the job.”
But that’s a very nihilistic discourse because it’s a discourse that’s saying, “OK, we cannot ask the richest to contribute because they are just too strong, they can escape, so we are going to eat the poorest.”
In fact, it’s not going to be OK because there’s just less money at the bottom than at the top.
JS: There’s a conversation about wealth taxation in the UK at the moment.
There have been changes [by the government] on inheritance tax already, and there have been some questions about whether the government might raise capital gains tax to address the tight current fiscal situation.
TP: I think if [Keir] Starmer doesn’t move in this direction [towards greater taxation of wealth], it looks as if he’s going to destroy the Labour party even more successfully than [François] Hollande destroyed the French Socialist party, which is setting the standard at a very high level.
The Hollande mandate was basically catastrophic, and he managed to get his party almost replaced by a party led by [Jean-Luc] Mélenchon with lots of limitations in their platform, in their lack of democratic organisations, the way they support Hugo Chávez or China, lots of problems — I don’t feel close to them at all.
But at the same time, I can see the responsibility of Hollande for sort of destroying his own party.
From the outside, it looks as if Starmer is going to have a performance that is comparable to that of Hollande, and to me this is very sad because I believe in the Labour party.
They have to move left in terms of economic and fiscal policies because the UK has so many parties on the right already.
You cannot compete with the Conservative and Reform parties on the right.
JS: You’ve said your recent book, A Brief History of Equality, is an optimistic book . . .
TP: It is optimistic and I strongly recommend it to everyone, especially people who feel depressed about the [current] political situation.
Also because it’s a short book — I’m sorry that I wrote such long books previously.
If people want to read one book of mine they should read this. In the end, this is what I really believe: that there’s a historical movement towards more equality, not just monetary equality — it’s equality of participation, equality of status, of dignity across genders, across origin.
When monetary inequalities are too extreme, it’s also a question of participation and dignity, and it just makes democratic exchange very complicated.
I think this movement towards equality is very strong.
It’s been there for more than 200 years.
And it’s gone through ups and downs.
It’s never been linear.
But I think in the long run, it will continue.
The above transcript has been edited for brevity and clarity
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