A Brief History of Equality; Thomas Piketty, 2022
From the War Between Capitalisms to the Battle between Socialisms
For these different reasons, it is very possible that future ideological confrontations will be more similar to battles between forms of socialism than to the war between forms of capitalism that people often talk about. More generally, we must insist above all on the very great diversity of economic models observed around the world and throughout history, including systems that claim to adhere to capitalism or to socialism.
In this book, I have defended the possibility of a democratic and federal socialism, decentralized and participatory, ecological and multicultural, based on the extension of the welfare state and progressive taxation, power-sharing in business enterprises, postcolonial reparations, the battle against discrimination, educational equality, the carbon card, the gradual de commodification of the economy, guaranteed employment and an inheritance for all, the drastic reduction of monetary inequalities, and finally an electoral and media system that cannot be controlled by money. These are only a few of the options: above all, I have sought to show the diversity of possible systems and the way in which mobilizations around alternative systems have made a powerful contribution to shaping historical trajectories in the past. The debates on alternative systems and the multiple forms of socialism, which had died out for a time in the 1990s following the collapse of Soviet communism, have been revived since the crisis of 2008, and as the inegalitarian and climatic dead ends of the current system were gradually recognized. These debates and these struggles are not about to stop.
I would like to repeat that democratic socialism , though it may seem very distant from the present world, is in reality embedded in a stream of considerable transformations achieved in the past, some within a few decades. Except for a few formal similarities, the social, legal, fiscal, educational, electoral, and international institutions characterizing the authoritarian and colonial capitalism of 1920 and mixed social-democratic economy of 1980 have little in common. If the democratic, participatory socialism described here were to be realized between now and 2050, it would be in direct continuity with this movement, and would probably not be any more different from the second model than the latter is from the first one. This reflection on economic systems is also indispensable for nourishing the dialogue between models. If Western countries, or some other, were to abandon their habitual capitalist and nationalist postures and adopt a discourse founded on democratic socialism and an exit from neocolonialism, with major steps toward fiscal justice and sharing the tax receipts of the multinationals and billionaires all over the world, that wold make it possible not only to regain credibility with regard to the global South, but also to drive Chinese authoritarian socialism into a corner in matters of transparency and democracy. On central question such as ecology, patriarchy, and xenophobia, the truth is that at this point none of the present regimes has any particularly convincing lesson to teach others. Only a dialogue between systems and a healthy emulation might allow us to hope for some progress.
Will Money Creation Save Us?
No matter which economic model we adopt, we must finally insist on the essential role that will be played by the monetary and financial system in the coming decades. The central banks and monetary policy have assume a decisive importance following the financial crisis of 2008, and the pandemic crisis of 2020-2021. Specifically, the balance sheet of the world’s main banks, that is, the whole of the loans they have granted and the securities they hold, has regained in a little more than ten years a level seen during the historic postwar peak. In theory, nothing forbids us to go further. Today, no currency is defined in relationship to gold, or to a material referent. Currency is above all an electronic sign on computers, which the central banks can create without limits. There are even plans to set up central bank digital currencies in the near future. Individuals would have digital accounts at their country’s central bank, which would permit banks to directly credit individuals’ accounts, rather than routing through private banks and enterprises, as is now usually the case.
The spectacular increase in monetary creation since 2008 illustrates once again to what point economic institutions are not unchanging. They are constantly redefined according to crises and power relationships, within unstable and precarious compromises. This new ease in increasing the money supply has nonetheless led to a confusion that it is important to clarify here. In short, money is an indispensable tool of economic, social, and climate policy, on the condition, however, that it is not made sacred and is put back in its place in a coherent institutional framework based especially on the welfare state, progressive taxation, parliamentary deliberation, and democratic supervision.
Let us recall first of all that the only true limit to monetary policy is inflation. So long as there is no substantial increase in consumer prices, there is no solid reason not to increase the money supply if it enables us to finance useful policies such as the struggle for full employment, a guaranteed job, the thermal insulation of buildings, or public investments in health care, education, and renewable energy. Inversely, if inflation flares up in the long term, then that means that the limits of monetary creation have been reached and that it is time to rely on other tools to mobilize resources (beginning with taxes).
We must also emphasize the fact that in the event of a rapid collapse of the economy connected with a financial crisis, a pandemic, or a natural or climate catastrophe, the central banks are the only pubic institutions capable of reacting fast enough to avoid a spate of bankruptcies or an explosion poverty. Fortunately, this role as lender of last resort, which had been rejected in the name of financial orthodoxy during the crisis of 1929 and led the world to the edge of the abyss, is now the object of a positive consensus. which shows that we can learn from history. The problem is that the monetary policies put in place in 2008 and 2020 continue to be inserted into a relatively conservative schema. In conclusion, the monetary weapon has been used frequently to save banks and bankers, but there is much more hesitation when it is a question of saving the planet, reducing inequalities, or relieving the public authority of the considerable debts accumulated as a result of crises and diverse bailouts and plans to jump-start the private sector.
Regarding public debts, the balance in force in the early 2020s is relatively precarious. The central banks have bought back an ever larger share of state loans, at an interest rate that is almost zero. If the rates start to climb again, or rather when they begin to climb again, the interest burden will be unbearable for citizen taxpayers, and it will be necessary to implement other solutions, like the exceptional levies on private wealth that were applied after World War II. Moreover, current monetary policy poses other problems. For small savers, zero or negative interest rates are not necessarily good news. On the other hand, for those who have the means to borrow at low interest rates and to find good investments, it is possible to obtain excellent yields. In all, monetary creation and the purchase of financial securities have helped boost prices on the stock and real estate markets, and to further enrich the rich. We must add that zero interest rates, constitute in large measure a new privilege for rich countries. Investors everywhere are prepared to be content with a small reward for investing their capital in safe currencies and in the debt securities of the principal Western countries (if they are not partly forced to do so by the new banking regulations), but inversely they demand high interest rates when it is a question of lending to southern countries. Rather than marveling at this miracle of zero interest rates, the rich countries would be wise to take a look into international financial cooperation, which might allow all countries to finance themselves at low rates in a time of crisis.
Generally speaking, the emergence of a new monetary tool recognized as such is a powerful factor for change: it makes it very difficult to explain to the public at large that a return to economic and financial orthodoxy is the only possible option. This tool. however, must be placed under democratic supervision. A Consensus is not emerging regarding the central banks’ obligation to make their balance sheets greener, indeed, to lead the movement toward durable and equitable development. This is excellent news in itself, except that this new mission will require vast democratic deliberations, in parliamentary precincts and in public forums, on the basis of detailed assessments, pro and con, that will allow us to judge the effects of the different possible monetary policies on multiple social and environmental indicators. However, the current model of the central banks is absolutely not that one; after being appointed by governments and promptly confirmed by parliaments, their leaders limit themselves to meeting behind closed doors and deciding among themselves the best way to use immense amounts of public resources. Among the many highly political decisions that will have to be made, we can also mention the question of whether to postpone the repayment of certain long-term debts. You can bet that many battles will have to be fought before the central banks become a genuinely democratic tool in the service of equality.
For a Universalist Sovereignism
It is time to close our inquiry. The march toward equality is a battle whose outcome is uncertain, and not a road laid out in advance. Since the end of the eighteenth century, equality has made its way by overturning the rules established by the regimes in power. The same will be true in the future. It would be an illusion to imagine that decisive transformations could take place if we adopt the unanimity of the countries or or the social groups concerned as an untouchable principle. Each political community must be able to set the conditions for the pursuit of trade with the rest of the world, without waiting until it has reached agreement with all its partners. That is always how it have been in history: each government must, if it deems it useful, free itself from its predecessors’ commitments, especially if these commitments put social harmony and the survival of the planet in danger. However, it is essential that this form of sovereignism be defined on the basis of universalist and internationalist objectives, that is, by making explicit the criteria of social, fiscal, and environmental justice that can be applied to all countries in the same way.
It would be absurd to claim that such a path is easy to follow and clearly marked out: nearly everything remains to be invented. In practice, this universalist sovereignism will not always be easy to distinguish from nationalist sovereignism, which is founded on the defense of a particular civilizational identity and interests that are supposed to be homogeneous within it. In order to clearly distinguish the two approaches, we have to adhere to several strict principles. Before committing to unilateral measures, it is critical to propose to other countries a model of cooperative development based on universal values and on objective, verifiable social and environmental indicators that make it possible to publicly state the extent to which difference classes of income and wealth contribute to public and climatic burdens. We must also describe precisely the transnational assemblies that would ideally be entrusted with global public goods and common policies of fiscal and environmental justice. If these social-federalist proposals are not immediately adopted, the unilateral approach must still remain incentivizing and reversible. Finally, the sovereignist-univeralist path loses all credibility if it is not based on a constant search for credible internal coalitions capable of accelerating the transition toward socialist, democratic federalism, which should remain the ultimate objective.
This kind of universalist sovereignism will also require active citizens. The social sciences can contribute to this, but it goes without saying that they will not suffice. Only powerful social mobilizations supported by collective movements and organizations, will allow us to define common objectives and transform power relationships. By what we ask of our friends, our networks, our elected officials, our preferred media, our labor union representatives, and by our own actions and participation in collective deliberation and social movements, each of us can make socioeconomic phenomenon more comprehensible and help grasp the changes that are occurring. Economic question are too important to be left to others. Citizens’ reappropriation of this knowledge is an essential stage in the battle for equality. If this book has given readers new weapons for this battle, my goal will have been fully realized.
The book is accompanied by many figures and charts. See this PDF link that shows all these figures. There is also an MP3 audiobook for those who prefer to listen.