Bocconi welcomes Piketty: Lessons from Capital and Ideology

Reading time: 5 minutes

On 25 November 2020, world-renowned economist Thomas Piketty presented his new book Capital and Ideology and gave a lecture on the history of inequality to the Bocconi community. The event was part of IGIER (Innocenzo Gasparini Institute for Economic Research) Policy Seminars, which are conducted online this semester due to the COVID-19 pandemic. 

Piketty began his presentation by comparing his new work to the book that gave him worldwide recognition in 2013, Capital in the 21st Century. He stated that Capital and Ideology differed from the latter with its broader, less western-centered approach to inequality. Another difference, as pointed out by the author himself, is that he examines inequality from a more political and ideological perspective in his new book, acknowledging that at any given level of economic and technological development, there are different ways to structure a society, and the choice is usually made on political grounds. 

He continued by outlining the content of Capital and Ideology, which consists of four parts. The first part focuses mainly on the transition from trifunctional societies, namely societies divided into three major classes, to ownership societies in Europe. In the second part, Piketty looks into inequality in post-slavery and post-colonial societies, such as Haiti and India. The third part investigates the rise of social democracy as a result of the crisis of ownership societies. It also examines communist and post-communist societies, especially how they transformed into highly proprietarian tax havens after the collapse of the communist ideology. The last part is about political conflict around inequality, and the book ends with the description of a different type of social democracy that could rise, called “participatory socialism” by Piketty. 

After introducing his book, Piketty delivered a lecture on its central theme: the history of inequality from an international perspective. He stressed “the importance of slave and colonial legacy in the overall evolution of inequality and the structure of inequality today”. He stated that “many of these issues had been neglected for too long”, referring to the statues of slave traders present in the UK and France which did not draw public attention until very recently, during Black Lives Matter protests. He said “it is important to put these issues at the centre of attention” and “that’s part of what [he is] trying to do in the book”. 

Briefly talking about the pattern of inequality in the world, Piketty moved back in time to look into inequality in slave and post-slave societies. Taking a non-deterministic approach, he stated that slavery played a huge role in the path to the Industrial Revolution, while it could possibly take place through other trajectories. As an example of a post-slave society, he focused on Saint-Domingue (now Haiti), which, for its liberation from being a slave society, had to pay about 300% of its annual GDP in a year to compensate former French slave owners. Since it was impossible to pay this amount within the allocated time frame, the debt was later restructured by a consortium of French bankers, and it was 1947 by the time Haiti could pay all the interest associated with this debt. Even though it stands as a horrendous idea today, in those days many French and British “liberals” were in favor of compensating former slave owners when a slave society was liberated. While there were also thinkers like Condorcet who advocated full compensation to slaves and none to slave owners, the fact that the polar opposite of his idea had many supporters makes one think about how much property and property owners were valued at the time. 

Piketty then talked about inequality in colonial and post-colonial societies, focusing on French Algeria as an example. He drew similarities between French Algeria and the United States in the times of racial segregation: the locals in Algeria, like the black population in the US, had very limited political rights until the decolonization in 1962.  

According to him, the reason why French Algeria was more unequal than today’s South Africa in the 1930s is the social and state policy, and education policy in particular. Looking at Algeria’s education budget in 1950, we can see that the top 10% wealthiest people in the population, who were mostly French settlers, could benefit from 82% of total education spending and a completely different school system. While there was also much inequality regarding educational spending in France in 1910, and considerable inequality even in 2018, Algeria in 1950 was, in Piketty’s words, “another planet”. 

The next topic was property in Europe, particularly in France, Britain, and Sweden. Piketty pointed out that during La Belle Epoque (The Beautiful Era), namely a period of French history (1880-1914) characterized by prosperity, regional peace, innovation, and optimism, a huge portion of all private property belonged to a privileged group. As can be seen from the graph below, there was basically no middle class in these three at the time; the “middle class” was almost as poor as the poor in terms of property.  

Piketty’s research at inheritance archives showed that foreign assets made up a considerable portion of the wealth of the rich in these countries. Moreover, the level of net foreign assets in France and Britain was increasing at an extreme pace in this period. This, Piketty believes, was probably the central contradiction that ended this highly unequal proprietarian and colonial regime. The forces that effected change were independence movements in the colonial world outside Europe and the competition from Germany and Italy for colonial assets inside Europe. 

In Britain and France, inequality mainly stemmed from the distribution of colonial assets, while this was much less important for countries like Sweden. What Piketty finds interesting about Sweden is that although it is a highly egalitarian society today, until recently it was marked by quite an unequal political system. In Europe, back in time, the standard was that only property owners could vote, yet, in Sweden, this system was designed in a much more sophisticated way: the top 20% wealthiest male property owners could cast between 1 and 100 votes, depending on how much property they possessed. In municipal elections, there was no limit to how many votes a property owner could cast; he could increase the number of votes he had proportional to the amount of property he owned. There were several dozen municipalities in which one person had 50% of all votes, and even corporations could vote in municipal elections. The change in the balance of power was brought by huge social mobilization led by trade unions and the Swedish Social Democratic Party, thanks to whose efforts universal suffrage was introduced in 1919.  

Looking into the history of Sweden, we can see that the egalitarian society we observe today in Sweden cannot be attributed to culture as some people believe. Piketty believes that the balance of power is more related to politics than to culture. He concludes that while material benefits can also be an incentive, it is ideas and ideologies that play a key role in how a society is organized, and therefore determine how egalitarian it is. I believe this opinion is justified by the fact that some countries with similar per capita income levels and levels of development, such as France and the UK, have different welfare and tax policies and consequently different Gini coefficients. In my view, it is also an opinion that inspires hope, because it implies that even in countries that have traditionally been very unequal, the situation can be changed for the better through social movements and consequent policy decisions.

---

Cover image by Sue Gardner, CC BY-SA 3.0, via Wikimedia Commons.