“Every human society must justify its inequalities … in today’s societies, those justificatory narratives comprise theories of property, entrepreneurship, and meritocracy.” So begins Thomas Piketty’s Capital and Ideology, a 1,000-page-plus tome. Piketty’s new book has faded a bit into obscurity, in part the victim of bad timing. Early reviews appeared in the Guardian, the New York Times, and the New Yorker in March 2020, just in time to be overshadowed by the coronavirus pandemic.

Piketty’s 2020 tome is, at any rate, hardly the bestseller his 2013 book, Capital in the Twenty-First Century was. That book, just shy of 700 pages, examined why inequality has tended to rise over time in capitalism. (To grossly oversimplify, this is the result of returns to capital typically exceeding economic growth).

For Piketty, the 30 years after World War II when economic inequality fell was the product of an unusual period marked by strong labor unions and social democracy (or the New Deal in the US); the Great Depression; and two world wars. These developments created political space for higher taxes on the wealthy that paid for what became known as the welfare state.

The last four decades, however, saw the tax burden shift away from the wealthy to the working class, with wealth inequality reaching astronomical levels. To prevent further wealth concentration, Piketty proposed a global wealth tax. Coming on the heels of Occupy Wall Street, Capital in the Twenty-First Century helped provide an intellectual foundation for, among other things, the presidential campaign of Bernie Sanders in 2016.

Piketty’s 2020 book might not be a blockbuster, but it merits attention. Capital and Ideology traces the evolution of economic inequality across the centuries and across national borders, while offering a policy framework for a more equitable society. The book’s scope is ambitious and broad, including long chapters on India and post-Communist societies that I will not even attempt to cover here.

It is fair to say that Piketty falls short of his lofty goal to set the foundations for what he labels “a new participatory socialism for the twenty-first century.” Nonetheless, his book offers a comprehensive examination of economic inequality, including detailed data that informs both our historical understanding of inequality and contemporary policy debates around economic policy, ownership, and reparations.


Unmasking the Myth of Liberal Equality

The French Revolution of 1789 was made in the name of liberty, equality, and social solidarity (liberté, égalité, fraternité). Before the French Revolution, Piketty estimates that in 1780 the top one percent owned 50 percent of property in French society. It did drop a little at first; by 1800, the top one percent’s holdings in France had fallen to about 45 percent of property.

Yet by 1900, the top one percent owned 55 percent of property (p. 128). Great Britain and Sweden had even greater inequality than France—in Great Britain, the top one percent in 1900 had 70 percent of property (p. 195); the United States had high, but relatively less inequality at the time, with the top one percent’s holdings peaking at roughly 45 percent of all wealth as of 1910. To get a sense of how extreme these numbers are, today the top one percent in the US own roughly 40 percent of all wealth (p. 423)—a level that marks the highest in US history since the Great Depression.

The French Revolution, in short, might have reduced the land holdings of the nobility and clergy, but in the end it reinforced inequality. As Piketty observes, “On the key question of ownership … the failure of the French Revolution is clear” (p. 113). The pre-World War I so-called belle époche, he notes, “was belle primarily for those who owned property … especially if they were white males” (p. 2).

One factor behind this failure is what Piketty calls “proprietarian ideology”—proprietarian being Piketty’s choice of language to describe 19th-century liberalism and present-day neoliberalism. As Piketty points out, this ideology bestows “quasi-sacred status on existing property rights, regardless of origin or extent,” with potential “inegalitarian and authoritarian” consequences” (p. 120). A great weakness of this sacralization of property rights, Piketty observes, is that property rights’ establishment, often by force, raise “serious questions of legitimacy” (p. 124).


Slavery and Colonialism: Engines of Extraction

It is hard to overstate the historical significance for the development of Western economies of the colonial extraction of resources, including through genocide and theft of land from Indigenous peoples, and the enslavement of Africans in Brazil, the Caribbean, and what would become the United States. Piketty observes that, “The most extreme case of inequality for which we have evidence is that of the French and British slave islands in the late eighteenth century” (p. 258). As of 1790, Piketty notes that seven percent of French gross domestic product (GDP) was from its colonies, three percent of GDP from Haiti alone (p. 276).

The 19th century was the century when slavery worldwide ended, but abolition did not reduce wealth inequality. As Great Britain and France ended slavery, “reparations” were on the agenda—but not for the enslaved, but rather for former enslavers. In Great Britain, for instance, when slavery was abolished between 1833 and 1843, the government paid 4,000 enslavers the modern-day equivalent of €30 million (about $35 million) each (p. 208). This, Piketty explains, amounted to about five percent of British GDP—roughly 10 times what was being spent annually on public education at the time.

France’s most remunerative colony in the 18th century was Haiti. A revolt among the enslaved in 1791 led by François-Dominique Toussaint Louverture led to Haitian independence in 1804. But France refused to accept this, until Haiti signed a compensation agreement with France in 1825. The cost of the settlement was 150 million gold francs or the equivalent of €40 billion euros ($46 billion) today. The effect was “to extract an average of five percent of Haiti’s national income between 1849 to 1915,” and Haiti’s “bill” for French recognition of independence was not fully paid until the 1950s. The logic of slavery and colonialism is “related to the logic of proprietarianism,” Piketty observes (p. 219).

Around mid-century, France followed Britain, abolishing slavery in its island colonies of Martinique, Guadalupe, and Réunion. Once again, at issue was how to compensate the enslavers. Some contended that payment should come from the public treasury. Others argued that people freed from slavery should contribute their labor to compensate their former enslavers.

Alexis de Tocqueville, a “moderate” best known in the US for his book Democracy in America, offered a compromise solution. Specifically, as Piketty explains, Tocqueville proposed that “half the indemnity be paid to [enslavers] in the form of government annuities …and the other half by the [formerly enslaved] themselves, who would work for the state for ten years at low wages.” Such a solution, Tocqueville argued, would be “fair to all participating parties.” Effectively, when the French parliament passed an abolition law in 1853, the law largely followed the structure of what Tocqueville had advocated a decade earlier (pp. 221-223).

Later in the 19th century, while slavery was gone from the colonies of the leading European imperial powers, a new round of colonization commenced, with Britain and France seizing large parts of the African continent as territories. The wealth extracted was astonishing. Piketty writes that at the eve of World War I, net British foreign assets totaled 190 percent of GDP, while net French foreign assets totaled 120 percent of GDP. In 1912, more than one franc in five of Parisian elite wealth was held in the form of foreign (meaning primarily colonial) assets (p. 277).


Great Depression, War, and the Rise of Social Democracy

As noted above, prior to the Great Depression, economic inequality, especially in Europe, had hit extraordinary levels. The “middle class”—at least as the term is conventionally used in the US today—was at best a sliver of society. But in the first two thirds of the twentieth century, this changed. As Piketty explains, the top one percent, “which in 1900-1910 owned 55 percent of all private property in France, 60 percent in Sweden, and 70 percent in the United Kingdom, owned no more than 15-20 percent in any of these countries by the 1980s before rising to 20-25 percent (and perhaps, in reality, a little higher) in 2000-2010.”

What caused this shift? Piketty leans heavily on the work of Karl Polanyi, author of The Great Transformation, published in 1944. Polanyi examined how crises within capitalism generated social movements (especially the labor movement), which in turn led to the rise of a social welfare state. The policies advocated by labor unions and left-of-center political parties—the New Deal in the US, for example—made a marked difference.

Critically, however, two other factors combined were responsible for about two thirds of the decline in inequality. One, writes Piketty, involved “expropriations and nationalizations and, more generally, policies aimed explicitly at reducing the value of private property and the powers of property owners over the rest of society (for example, rent control and power sharing with worker representatives of firms).” The other, Piketty notes, had to do with the mechanics of war financing. As Piketty puts it, between 1914 and 1950 returns to capital fell “largely because much of private saving was lent to government to pay for the wars, in return for bonds which lost most of their value due to inflation and other forces” (pp. 432-433).

In short, much as Piketty wants to emphasize social democracy (p. 468), the impact of two world wars in facilitating its rise is hard to ignore. Beforehand, the US had less economic inequality than Europe; afterward, even as inequality fell in both places, the US had far more. Surely this had something to do with the disproportionate impact of the two world wars in Europe.


The Rise of Inequality Today

Piketty is less clear on why economic inequality is rising today. Effectively, he offers three driving factors (p. 486), summarized below:

  • The weakness of codetermination (worker representation on corporate boards) and its limited reach to just a few countries (notably Sweden and Germany).
  • The persistence of unequal access to higher education even as such access becomes increasingly vital to livelihoods.
  • The failure to design “transnational federal forms of shared sovereignty” to constrain the impact of globalization.

To these he adds, as a fourth, the demise of the Soviet Union in 1991, which “inaugurated a new period of unlimited faith in private poverty from which we have not yet completely emerged” (p. 513). Colorfully, Piketty remarks that present-day ideology acts as if “Bill Gates, Jeff Bezos, and Mark Zuckerberg single-handedly invented computers, books, and friends” (p. 713).

How have left-of-center parties responded to these changes? Piketty spends many pages demonstrating that left-of-center parties have shifted from representing working-class voters to highly educated, often higher income, voters. The result, Piketty contends, is that “the structure of political conflict in the Western democracies in 1990-2020 no longer has much to do with that of the period 1950-1980” (p. 869).

For example, over 60 percent of US voters among the poorest 50 percent voted for Democrats in 1948, while less than 20 percent of the top one percent did. In 2016, low-income voters still voted majority Democratic, but so did 59 percent of voters in the top one percent, with middle-income voters backing Republicans (pp. 811-812). Class, in short, no longer is the main dividing line. Education levels are. For example, in the 2020 elections in the US, voters with a postgraduate education favored Joe Biden over Donald Trump by a two-to-one margin (67 percent vs. 32 percent); by contrast, voters with a high school education or less favored Trump over Biden by a 56 percent to 41 percent margin. Similar patterns prevail in Europe too.

The shift’s existence is undeniable. The causal mechanisms are less clear. Piketty contends that party elites abandoned working-class voters, rather than working-class voters abandoned left-of-center parties. At best, this explanation is partial. It doesn’t explain, for example, why left-of-center party elites shift their preferences to seek the votes of college-educated voters.


Piketty’s Vision for a “New Participatory Socialism”

Piketty writes of “transcending” (p. 972) capitalism. Yet his “participatory socialism” looks a lot like a revived social democracy, leaving a corporate market structure in place. Discussion of the climate emergency is also limited. In this regard, Piketty endorses a variant of a “cap-and-dividend” scheme to redistribute carbon tax proceeds to protect people with limited incomes (pp. 1004-1007). Little, however, is said about crucial public planning questions—such as how to shift resources to dramatically reduce carbon emissions.

Perhaps the most important contribution here, however, is Piketty’s notion of three tracks for shifting ownership. One is public ownership—a strategy used heavily after the second world war. The two other paths are what Piketty labels “social ownership” and “temporary ownership.”

By social ownership, Piketty means changing firm governance, both by giving workers half of board seats and limiting the shares held by any single owner of firms with over 100 employees to 10 percent (pp. 973-974).

By “temporary ownership,” Piketty refers to measures that tax the wealthy (via income, inheritance, and wealth taxes) and recirculates that wealth to ordinary citizens. Piketty notes that “with revenues on the order of five percent of national income from the property and inheritance taxes, it’s possible to pay for an endowment of approximately 60 percent of average adult wealth to be given to each young adult at age 25” (p. 983). Piketty also calls for an income-tax-funded guaranteed minimum income level of 60 percent of average after-tax income (p. 1002). Piketty estimates these payments would support about 30 percent of citizens and cost about five percent of GDP annually.

Piketty also advocates other measures—including education funding (pp. 1007-1012); an idea similar to “democracy dollars,” where political campaigns would be financed by vouchers that each citizen would get to allocate to the political party of their choosing (p. 1018); and the creation of transnational democratic institutions to address global issues such as the climate emergency (pp. 1025-1026).

Oddly, after making a powerful case for reparations, Piketty fails in Capital and Ideology to follow his own argument to its logical conclusion. In the wake of George Floyd’s murder, however, Piketty wrote in Le Monde that “Haiti is now requesting that France refund this iniquitous tribute (30 billion Euros today, which does not include the interest) and it is difficult not to agree with them.”


How Does Transformation Occur?  

For an economist, Piketty has remarkably little to say about how the overall economy would look if his proposals were adopted. He offers even less on his theory of change, noting only that change is likely to involve a combination of short-term crises and ideological struggle—or, as Piketty puts it, “the interaction of the short-term logic of events with long-term intellectual evolution from which come a wide range of ideas that can be drawn on in moments of crisis.” This is surely correct, but also deeply unsatisfactory. Few social movement activists are likely to use Piketty as their guide.

Despite the flaws, however, Piketty’s deep dive into inequality is invaluable. We face, Piketty writes, an “inequality trap.” Until World War I, Piketty notes, British and French elites refused to address inequality, a refusal that “rested on sophisticated ideological constructs, as is also the case in the United States today.” It is, Piketty observes, “only when social and political struggle converges with ideological revival,” when liberation becomes possible (pp. 546-547).