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Thomas Piketty’s Plan to Fix the Economy

His new book diagnoses a society obsessed with property rights.


You might say that, in 1788, the weather conspired against France’s feudal system of property ownership. Drought in the spring, hail in the summer, and a cruel winter crushed the agrarian economy. By the spring of 1789, the country was in turmoil. Displaced, unemployed workers “choked the roads and threatened reprisals against householders who refused to give them shelter or a crust of bread,” historian Georges Lefebvre has written. This was the prelude to the Great Fear, a legendary wave of riots that spread across the country in July, bringing widespread destruction of property.

CAPITAL AND IDEOLOGY by Thomas Piketty, translated by Arthur Goldhammer

Belknap Press/Harvard University Press, 1,104 pp., $39.95

In the Dauphiné, rioters destroyed and burned chateaux for five days straight. Some historians tantalizingly suggest that peasants might have been crazed from eating grain tainted with ergot (the fungus that LSD is derived from), but it is more likely that hunger, a 10-year economic slump, and wild rumors of the monarchy’s militias on the march set the country ablaze. Underlying this was the fact that France was a wildly unequal society. At the time, 1.5 percent of the population owned 45 percent of all property.

On August 4, the members of the National Assembly voted to abolish the “privileges” of the monarchy and church. Yet they struggled to define exactly what a “privilege” was. Broadly, it seemed to refer to the right to property ownership, something the monarchy and church had monopolized for centuries. But this got complicated at the local level. “It proved very difficult,” the economist Thomas Piketty writes in his new book, Capital and Ideology, “to decide which existing claims deserved to be preserved as new property rights and which should simply be suppressed.”

The ecclesiastical tithe, a tax levied by the Roman Catholic Church on the French people, was abolished, and most of the church’s land was appropriated. But most landlords were allowed to continue to own and collect rent from farmers. Landownership would be legitimized, not by divine rights or lineage, but by a supposedly rational system of contracts (deeds, titles, mortgages, etc.) administered by a central government. At the time, you might have thought that if the National Assembly stayed true to its stated goals of radical equality, it would likely need to distribute land equally among all people, including the peasants. But this didn’t happen. Revolutionary France chose stability, and turned the country over to landlords. Property, the foundation of France’s agrarian economy, remained in the hands of the few.

This episode in history encapsulates what Piketty sees as a fundamental question for human societies: How do they justify their inequities? “Every society, every inequality regime,” he writes, “is characterized by a set of more or less coherent and persistent answers to the questions about its political and property regimes.” Why do some people have more than others? Over the last 300 years, many governments, especially that of the United States, have pointed to the importance of defending the right to private property. One of Piketty’s theses is that the persistent failure to challenge this “quasi-sacralization” of property rights in “ownership societies” leads to unjust disparities in income, wealth, and political power.

Piketty became famous with his blockbuster Capital in the Twenty-First Century, which, unbelievably for a book about economics, had sold over 1.5 million copies by January 2015. The book described the extent and dynamics of wealth and income inequalities. It theorized that when the returns on capital exceed the growth of the economy, inequality grows exponentially. It’s not hard to see how the book and its rapturous reception were spurred by the experience of the financial collapse of 2008: As the crash exposed long-running inequities, Piketty’s book gave theoretical weight and form to a problem many could see, but didn’t yet have the words to describe. Today, his observations are ubiquitous, and it is almost mandatory for any book about economics to have the word “inequality” somewhere in the title.

Piketty’s new book is a sequel. It ventures to trace the origin of inequalities and propose methods of eradication that the first book only hinted at. Unlike Capital, the new book lands on the world’s doorstep in the midst of an unfolding economic crisis, when the shutdown required to prevent the spread of the coronavirus is sending the world into a spiraling recession, with the wealthy fleeing to secluded second homes, while millions are thrown out of work or forced to do dangerous jobs. To come out the other side better off, the world will need new ideas. The path to a more durable, more tolerably arranged society, Piketty argues, lies in rethinking private ownership.

Individual property rights were not always at the heart of society. Up to the eighteenth century, many were what Piketty calls “trifunctional.” In these cultures, there were effectively three classes: the clergy, the nobility, and the people who worked. The clergy were the intellectual and spiritual leaders, while the nobility were the military power and the agrarian landlords. These two classes, to varying degrees, shared power and owned all cultivable land, which was the root of power in societies dependent on agriculture. The masters of the land were masters of the people, whether they were, as Piketty lists, “French seigneurs, English landlords, Spanish bishops, Indian Brahmins or Rajputs.”

Medieval texts often divided society into these three groups and emphasized that this was a stable political order, preordained and inevitable. Books spoke of the harshness of toil but also of its necessity, often highlighting the brutality of the landowners. An eleventh-century monk describes how after an attempted revolt, a nobleman “immediately took all the peasants into custody, had their hands and feet cut off, and returned them, powerless, to their families.” After that, everyone behaved.

These relations were always in flux. The clergy, dissatisfied with the nobles, often talked of taking up arms. And the ruling classes often thought of unleashing their forces on the people to put down unrest. But throughout the eighteenth century, it was the toilers who began mounting vigorous revolutions, hoping to take ownership over the land that they cultivated.

The French Revolution is important in this regard. It was, one could say, the invention of private property or what Piketty calls the “proprietarian” regime. The French Declaration of the Rights of Man specifically mentions property as a fundamental right. This new proprietarianism, Piketty notes, had “an emancipatory dimension, which is real and should never be forgotten.” But it also had the effect of making property a be-all and end-all, bestowing “quasi-sacred status on existing property rights, regardless of origin or extent.” The supposedly rational system of property rights soon turned out to undermine democracy in France: After the revolution, the vote was granted only to citizens who paid over a certain amount in property tax. In choosing to protect landowners, the revolution simply reconfigured parts of the system it had aimed to knock over.

“The sacralization of property,” Piketty writes, “was in some ways a response to the end of religion as an explicit political ideology.” If religion wasn’t around to keep the wretches in their place, something else would.

Between 1789 and 1914 across Europe and America, private property ownership consolidated, wealth inequality surged, and both reached levels rarely seen in human history. Private landownership and the agrarian economies consolidated under a relatively small group of people in Europe, and the spoils of colonialism flowed to just a few. The financial economics of slavery in the United States privileged whites with inherited wealth, crushed small farmers in the South, and kept black Americans destitute. Later, the ownership structure of the industrial trusts, like those created by Jay Gould and John D. Rockefeller, ensured the gains of productivity went to a tiny coterie of financiers. By the late 1920s, the top 10 percent of Americans took half of all income. Wherever proprietarianism went, inequality quickly followed.

In the years leading up to World War I, many believed that the fiercely unequal proprietarian regimes were unchangeable. But for many European countries, growing political turmoil, the devastation of the World War I, and the threat raised by the Bolshevik Revolution caused a quick turn to the redistribution of wealth. Political unrest in the United Kingdom from 1909 to 1911 gave rise to a progressive income and estate tax; France levied its first income tax to pay for the war. Further redistribution and a turn to more expansive social democracy would come later.

In the United States, however, it took the calamity of the stock market crash and the ensuing Great Depression to begin a reversal of ideology. The justifications for inequalities that made sense at the beginning of the century, like Andrew Carnegie’s assertion that “the surplus wealth of the few will become, in the best sense, the property of the many,” seemed hilariously untrue. The Great Depression spurred the New Deal, with its work programs, encouragement of cooperative businesses, and supportive labor laws. This period was one of both prosperity and some of the lowest wealth inequality in American history. Private wealth and corporate power were curtailed by a growing government prone to active intervention and by a strong labor movement; but ownership of property, management of corporations, and—most important for the twentieth century—wealth and capital continued to reside in private hands. It’s why Piketty somewhat disparagingly refers to the New Deal as a “bargain-basement version of social democracy.”

What happened next, we all know. Beginning in the 1970s, the New Deal welfare state crumbled under pressure from some combination of strong global competition, stagnating growth, and concerted attacks from a mobilized right wing. Piketty blames the lack of durable tools—like, say, constitutionally inscribed progressive taxation on wealth—for failing to maintain the low inequality of the postwar period. It was all too easy to slide back into a world owned by the few, instead of the many.

Today, Piketty proposes, we live in a neo-proprietarian inequality regime, which takes the logic of the inviolable right to property and extends it to wealth and income (which was, by the way, Carnegie’s argument in 1889). The extraordinarily high incomes of tech executives, corporate lawyers, and unicorn entrepreneurs, their defenders argue, are theirs to keep, because they are earned in a dispassionate meritocratic system, largely emanating from our country’s higher-education institutions. Of course, we know now the dispassionate meritocracy is a lie; it’s a system that allows people with a head start to stay ahead. The ruling class is defined and legitimized by educational credentials; our last five presidents have all had Ivy League degrees, a fact that shows only a weak correlation between education and competence. The meritocracy, in fact, is quite similar to the purportedly dispassionate system of contracts and rational government that legitimized the concentrated wealth in France and the United States after their revolutions.

Piketty’s solution is that we move beyond private ownership to some blend of private, public, and temporary ownership. (Total abolition of private property, à la Soviet Union, for Piketty, was an ill-advised failure.) Since many societal goods are often already owned publicly, like electrical grids, highways, or parks, and some are owned communally, like worker cooperatives, it is easy to imagine this realm expanding. Temporary ownership is different, and would require permanently high levels of taxation (perhaps written into a country’s constitution) to ensure that any number of temporarily private goods return to the community on a regular basis. Homes, wealth, real estate, patents, and financial assets like stocks and bonds would all benefit the community if they were owned only temporarily.

A steep wealth tax could also pay for a onetime “capital grant” that everyone would receive in their twenties, at 60 percent of the national average wealth (something like $120,000 if the average wealth is $200,000). Piketty also believes that a singular faith in the power of central government to bring big business under control, whether through nationalization or regulation, is mistaken. The reliance on state ownership of major industries—like that in France and Britain up to the 1980s—leads to a neglect of taxes on private enterprise. Taxes, Piketty stresses, are some of the only tools that can perpetually protect the society against developing unconscionable inequalities of wealth and incomes.

The weakest parts of Capital and Ideology rail against identity politics, which Piketty believes have stymied the project of egalitarian reform, by splintering the larger coalition that is required to make egalitarian change. Yet with both sides of the political divide practicing some form of identity politics—often along the lines of race, gender, or religion—it’s not convincing to dismiss this trend in politics out of hand. In the United States, history has proved how difficult it is to redistribute wealth and property when confronted by sexism, xenophobia, and extreme racism, along with the legacies of slavery and Jim Crow. Which should we resolve first? Redistribution through reparations for slavery? Land grants to Native Americans whose lands were stolen? Or what about unpaid wages for care work? Piketty has little to say about the order in which we approach these problems, crucial for a country struggling to come to terms with its past.

The greatest lie of our political system and the essence of proprietarian thought is that investment is somehow neutral. That somehow it makes sense that people with capital get to make all the decisions in our society: where an apartment gets built, where a sports team plays, what a museum shows, what technology gets researched. Yet the truth is that access to capital, to real estate, to assets, to education, and to any number of advantages has long been unequal. If we are ever going to resolve persistent, entrenched inequality, we are going to need shared social ownership in many areas of public life.

The alternative is dire. Without serious reform, the current economic shutdown will extend the inequality regime that currently rules the United States, making the divide between those who wield economic and political power and those who do not even harsher. While the shutdown is an exceptional event, it is also an amplification of the problems Piketty noted in 2014 and ventures to resolve today. The propertied, wealthy classes will weather the storm; everyone else will get drenched. Our dependence on the primacy of private property left the country exceedingly vulnerable to an economic shock: Among other things, an obsession with the legitimacy of private wealth and low taxes has stranded cities, states, and the nation without the resources to respond in an emergency. While states like New York might be able to provide some assistance to unemployed workers, small businesses, and hospitals, it will likely come at a cost of steep budget cuts to education and public transit subsidies. The federal government, of course, can run unlimited deficits if it wants to, but there are few mechanisms in place for getting that deficit spending in the hands of people, no free public banks to disburse cash into, or dedicated Federal Reserve discount lending windows for small businesses. (By contrast, the Fed has plenty of ways to quickly divert spending toward financial institutions and big corporations.)

In Capital and Ideology, Piketty has put forward proposals for long-term, permanent change, but impressively, they would also be immediately useful in speeding along the recovery. Taxing corporate profits and private wealth would free up cash for workers who have been furloughed or whose employers were bankrupted. Placing a significant number of workers on the board of every corporation could make sure the low-interest, government guaranteed loans are put to good use.

While inequality is deep-rooted and persistent, Piketty is an optimist: He points out that we often think things are unchangeable, when a careful study of history reveals otherwise. In the beginning of the book, he warns that we should be wary of anyone who naturalizes inequality or asserts that alternatives cannot exist, because he finds that humans have routinely “demonstrated an astonishing capacity to imagine new institutions and develop new forms of cooperation.” Piketty’s own imagination of new worlds is grounded in a rigorous and detailed analysis of the institutions that have existed in the real world. His proposals, he insists, are limited to those based “primarily on the historical lessons presented in this book.” He is uncovering ideas that have worked before. They could work again.