Thomas Piketty on the Politics of Equality (Ep. 148)

The history of equality or inequality cannot just be an economic history. It has to be a political history.”

When it comes to the enormous reduction of income inequality during the 20th century, Thomas Piketty sees politics everywhere. In his new book, A Brief History of Equality, he argues the rising equality during the 19th and 20th centuries has its roots not in deterministic economic forces but in the movements to end aristocratic and colonial societies starting at the end of the 18th century. Drawing this line forward, Piketty also contends we must rectify past injustices before attempting to create new institutions.

He joined Tyler to discuss just how egalitarian France actually is, the beginning of the end of aristocratic society, where he places himself within French intellectual history, why he’s skeptical of data from before the late 18th century, how public education drives economic development, why Georgism isn’t sufficient to address wealth inequality, the relationship between wealth and cultural capital, his proposal for a minimum inheritance, why he turned down the Legion of Honor, why France should give reparations to Haiti despite the logistical difficulties of doing so, his vision for European federalism, why more immigration won’t be a panacea for inequality, his thoughts on Michel Houellebecq’s Submission, and more.

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TYLER COWEN: Hello, everyone. Welcome back to Conversations with Tyler. Today, I’m here with Thomas Piketty, and he has a new book out, A Brief History of Equality, which, in my opinion, is the very best introduction to his overall views. Thomas, welcome.

THOMAS PIKETTY: Thank you for your invitation.

COWEN: Let me start with some questions about France. Now, as you’ve pointed out yourself, France adopted a progressive income tax relatively late in its history. Just how egalitarian, as a country, do you think France actually is?

PIKETTY: Well, as I stress in my new book, A Brief History of Equality, there’s been a long-run movement toward more equality in history, together with a movement toward more economic prosperity, and I argue that the two movements really came together. France is part of this movement. Each country has its own limitations and its own hypocrisies with equality and inequality.

France has lots of limitations, lots of hypocrisy in the way to deal with very unequal access to funds and different funding in higher education, or a lot of discrimination that is not well addressed. But by and large, if I take a big picture and look in the long run, there’s been a movement toward more equality of income, more equality of wealth, more equality in access to political power, more equality in access to education and health over the long run.

Now, this has not been a steady process. This is a revolution toward more equality that has taken place through political mobilization, social struggles. The story I’m telling is really a story where the movement toward more equality starts at the end of the 18th century, typically — in the case of France, with the French Revolution, the abolition of aristocratic privileges, also the slave revolt in Saint-Domingue.

These two events — the abolition of aristocratic privileges and the slave revolt in Saint-Domingue — are the beginning of the end of aristocratic society, societies based on privileges, and slave and colonial societies on the other hand. But you can see very well how these two movements, these two evolutions toward more equality, are not over.

They continue during the 19th century, 20th century, with the end of slavery, the end of colonialism, the rise of social security, the rise of progressive taxation. But in France, just like in the US, there is still a lot of discrimination today. There is still a lot of gender inequality today. There is still a lot of political inequality in access to voice, access to participation, political power.

There’s still enormous concentration of wealth. To some extent, it has increased, especially in the US in recent decades, less so in France or in Europe. In the long run, there’s a movement toward more equality, but I’m not saying this to conclude that everything is great, and we should just stay like we are. I’m saying this in order to suggest that this movement could and should continue. I think it will continue because in the end, this is a way to address some of the biggest challenges that we have to address.

COWEN: Let me ask you just a very specific question. It’s a common American perception of France, and maybe Paris in particular, that there are relatively few dimensions of status competition. One is supposed to dress a certain way or have particular habits of cultural consumption, and thus, along the dimension of cultural status, France and Paris are especially inegalitarian. Now, as someone from France and nearby Paris, just what’s your impression of that portrait of your own country? Is it misleading?

PIKETTY: Oh, you have to tell me that again. What exactly is the comparison you’re making between Paris and New York, for instance?

COWEN: If you compared Paris to New York, or even Paris to Berlin, an impression that many outsiders have is, there are relatively few dimensions of status competition. There’s the civil service, there’s a certain notion of doing well in business, the number of ways you could be expected to dress and be considered well dressed. That seems fairly circumscribed in Paris, but somewhere like Berlin — there seem to be many more open dimensions of status competition, or in New York City. Do you think, in this particular way, Parisian life is especially inegalitarian?

PIKETTY: I have never thought about this, but maybe you’re right. I have never heard of this before, but you’re saying the diversity of dress codes is less extensive in Paris than Berlin or New York.

COWEN: Not just dress. You could look at cuisine. You could look at the status, say, of tech nerds in Berlin or New York relative to France.

PIKETTY: Maybe that’s right. Maybe that’s wrong. I don’t know what’s the metric for this. I’m not sure. Frankly, I have never thought of that before.

COWEN: Let me try another question. For someone trying to place you in French intellectual history — let’s say they’re not an economist, and they want to know, which traditions from the French Left are you closest to? Would it be utopian socialists, critical theorists, objective Marxists, 1968 crowd? Where do you place yourself in your own country’s history?

PIKETTY: Okay, this I can answer more precisely. I will say, first, none of the above. I would put myself more in the tradition of the Annales school. I don’t know if this rings a bell for you or not.

COWEN: Of course.

PIKETTY: There’s a tradition of research in social and economic history that was particularly active in France, I would say, between the 1930s and 1980s, with people like Braudel or Labrousse. These are people who started working on the history of the distribution of wages, for instance, during the 18th century, in the period going to the French Revolution. Is the French Revolution due to the fact that wages were lagging behind land rent? That was one of the big questions that these people were asking.

In a way, what I’ve been doing is to try to pursue this tradition in social and economic history, with also a strong influence from Anglo-Saxon research in this area: Kuznets, Atkinson. There’s a long tradition also of British and US historians and economists and social scientists trying to collect this kind of income and history. That’s what I’ve been doing.

I don’t feel very close to the philosophical or political sort of tradition you are referring to because my work has mostly consisted of trying to collect these historical data sources and then, of course, to propose some interpretation of these data sources. But I feel I’ve always been very close to my sources. This is what has kept me busy 95 percent of my time for the past 25 years or so.

COWEN: When I read Braudel, it strikes me there’s something quite conservative about the argument. I don’t mean politically conservative, but I mean literally conservative — the sense of long structures stretching through decades or even centuries. Do you share that with him? Or do you think, in some way, you deviate that makes you more politically radical?

PIKETTY: You’re right. I don’t know if this makes me more politically radical. You’re perfectly right that one big difference between the work I’ve been doing and the work people like Braudel or Labrousse were doing is that I had to deal a lot with the 20th century, whereas these people were working a lot on previous centuries — 18th century, 19th century, or even before in the case of Braudel.

Working on 20th-century data and, in particular, the enormous reduction of income inequality during the 20th century led me to a different kind of perspective and a different kind of thinking and issue. To be very precise, the political dimension is so much more important and, in a way, unavoidable and impossible to escape when you study the 20th century. When you study the 18th century or 19th century, or maybe you can have this Marxist or economic perspective stressing the long-run evolution, these deterministic economic forces.

When you study the 20th century, politics is everywhere: World War I and World War II, the Great Depression, the creation of social security systems, the development of progressive taxation, decolonization, end of apartheid. Politics is everywhere if you want to understand the evolution of inequality. I would say it’s also, to some extent, the same for the 19th century and the end of the 18th century. I talk about the French Revolution and the slave revolt in Saint-Domingue.

I think the history of equality or inequality cannot just be an economic history. It has to be a political history because, if you want to account for what you see, if you want to explain what you see, it’s political processes — sometimes revolution, sometimes tax reform, sometimes political confrontation of all sorts — play a major role. I had to develop this perspective, and indeed, this is a big difference with the Annales school.

You know, the Annales school, in a way, did not disappear before reaching the 20th century. They were not confronted with the same kind of issues that I was confronted with just because I write later than them with data covering the more recent period, so I had to develop a different perspective and a different kind of interpretation. Yes, tracing the role of politics and political institution, fiscal institution, social institution, and the like.

COWEN: As you know, there’s a competing longue durée tradition — if you look at the work of Greg Clark and Neil Cummins — on surnames. They take data from England, from Sweden. There’s one paper where they have almost eight centuries of data, I think, and social status is more heritable than height. A given status relationship has persistence for 15 or 20 generations.

What do you think of that work? Do you think it’s a perspective that contrasts to yours and shows it’s really very hard to redistribute what really matters in society?

PIKETTY: Well, this is very interesting. Every time there is a lot of historical data collection, I am very interested, and so, this is very interesting work. Now, that being said, I find the perspective a bit too conservative in a way, maybe because it’s very long run.

Again, if I look, my period of study is the period ranging from the end of the 18th century until today. This is 1780 to 2020, if you want. Over these two centuries and a half, what I see is a movement to have more equality, both in terms of political rights but also in terms of social and economic equality.

What I argue is that this process is very much related to political development, political revolution, slave revolt, wars of independence, tax reform, changing balance of power between capital and labor, development of social security, development of a public school system, of public health system. And over this period, this has led to a very strong movement to have more equality in all these dimensions, and also toward more economic prosperity, and I stress this.

Now, before this period, I’m aware that there are people like Greg Clark and others who stress the continuity across eight centuries of the perpetration of status inequality. There are also historians like Scheidel, going back to the Neolithic period or to ancient history, who stress a relatively pessimistic perspective in the sense that they say, “Okay, without major destruction or war, you’d never have a reduction of inequality.”

All this work is very interesting, but the perspective I stress is a bit different. I think it’s more optimistic in a way. I think, if you look at this shorter period, but which is still very long — two centuries and a half, 1780–2020 — you see this political movement towards more equality.

To be honest, I must admit, I must confess that I am always a bit skeptical about some of the data sources before the late 18th century, partly because I know them less well, so I’m less confident with them. Partly because, when I don’t have a census, when I don’t have a tax administration, when I don’t even know the population that is out there and how it is changing over time, I find it very, very difficult to say, okay, did the concentration of wealth increase in Europe between 1500 and 1750? Let alone the question of did it increase between the end of the Roman Empire and 1500?

I don’t know the answer to these questions. I would suspect concentration of forced inequality was always pretty large in this pre-18th-century period. But from what I read — and I try to read carefully — most of what is written on this topic, I’m not sure we have the data sources to really answer these questions, unfortunately. This is why I try to focus on the more recent period, which is still very long.

COWEN: If I look at France in the early 1960s, as you know, the rate of finishing or even starting higher education is extremely low, but France basically is doing fine. Do you view that as evidence for the view that it’s really the continuity of cultural capital that matters and not so much policy?

PIKETTY: No, because there’s been a huge educational expansion since then. Between 1950 and 1990 and until today, educational expansion in France — and throughout Europe and in most of the world — has been considerable. It is true, in the 1950s, France — but to a large extent, Western Europe — is lagging behind the US in terms of educational achievement. To me, it’s clear that the key reason why the US has been an economic leader at the world level for most of the 20th century is because it was an educational leader.

In the 1950s, as you know very well, you have 90 percent of a generation going to high school in the US, whereas in France or in Germany, it’s 20 percent to 30 percent of a generation. You need to wait until the 1980s or ’90s to reach the same kind of 90 percent of growth going to high school and to have universal access to it.

It was the same also in the 19th century. The US reached 90 percent primary school attendance rate almost a century before Europe, or at least half a century or two-thirds of a century before Europe. I think that was a key explanation why also economic productivity was so much higher in the United States.

I think policy may be a bit different. Especially after World War II, there was an enormous educational push, not only in France and Germany but also, of course, in Japan. Then other countries in Asia also followed this push, and this has completely transformed the economic geography and the geography of productivity. And the huge advantage the US had in the middle of the 20th century, to a large extent, has disappeared today. I think policies, institutions played a major role in these dynamics with specific political and social history in the different countries.

Of course, politics is also the product of the belief system and the perceptions that families have about education, about the culture of education. So all these different dimensions have to be studied together, obviously.

COWEN: As you know, Matt Rognlie and a number of other researchers have argued the relevant increase in wealth inequality really is centered in real estate and housing wealth. Do you agree? If so, isn’t it enough just to be a Georgist? Can’t we just do the redistribution there?

PIKETTY: If you look at the top of the wealth distribution, I don’t see a lot of real estate. I don’t think Matt Rognlie or anyone is saying that the huge rise in billionaire wealth in the US has anything to do with real estate. As far as I know, nobody has ever tried to put this theory on the table.

I’m not saying real estate is not important. I think for middle-class assets and lower-middle-class and upper-middle-class assets — for the middle of the distribution — real estate is, of course, very important. The movement in real estate prices explains a lot of what’s going on, both in terms of aggregate value and distribution. I’m not saying it’s not important. It is very important.

If you go back to our paper with Gabriel Zucman, which was published, now, almost 10 years ago in the Quarterly Journal of Economics in 2014, called “Capital is Back: Wealth-Income Ratios in Rich Countries, 1700–2010,” you will see, we have complete decomposition about the role of real estate in aggregate wealth accumulation, and it’s absolutely central for many countries over many periods of time.

We cannot have any disagreement of that because this is our data. This is what we did almost 10 years ago. That’s not going to explain, for example, what happens at the top of the distribution because real estate is absolutely ineligible when you look at the billionaire wealth. Here, you need other stories. Yes?

COWEN: For the distribution overall, it seems there are a lot of papers, quite recent, like Odran Bonnet, Jordà, the Rognlie work, Knoll, Pfeffer and Waitkus. They seem to think it’s primarily about real estate, if not 100 percent, predominantly real estate. You don’t agree with their estimates? Or you just think you’re addressing a separate problem of billionaire inequality at the top?

PIKETTY: No, I think, again, it depends whether you look at aggregate wealth or you look at the distribution of wealth. If you look at aggregate wealth, then real estate is a really big part of the increase in aggregate wealth-to-income ratio, especially in Europe, less so in the US. In the US, the aggregate wealth-to-income ratio increased much less than in Europe. For the aggregate wealth-to-income ratio, especially in Europe or Japan, real estate is the sum total explanation. There’s no doubt about this.

Now, if you look at the distribution, it’s a very different story. In fact, the increase of the relative price of real estate asset relative to, say, stock market prices or financial assets is actually relatively good overall for the middle class as compared to the very top because the middle class owns mostly real estate, whereas the top owns mostly financial and business assets.

If the only force at play was the big increase in real estate price, in fact, wealth inequality should have declined, or at least top wealth share should have declined relative to the middle, which obviously is not what we see and is a recent disagreement with many traders increase in top wealth shares. But nobody is saying that top wealth shares have been declining in recent decades in any country.

By definition, the real estate argument is not going to explain what we see for the wealth distribution. It depends what segment of the distribution you’re interested in. If you’re interested in the top share, if you’re interested in the very top billionaire wealth — which is interesting in its own sake and is a non-negligible fraction of total wealth — I think, again, nobody’s saying that real estate is explaining this. If you see a paper saying that, please send it to me.

COWEN: If I look at nominal income data for the US or, for that matter, Switzerland, those two countries measure as being wealthier than either France or Germany. Do you think citizens in US and Switzerland are happier than the French and Germans?

PIKETTY: If you’re interested in welfare, you need to look at productivity. That’s the first thing. You need to look at GDP per hours of work or income per hours of work. You probably know very well, if you look at OECD data or Bureau of Labor Statistics series in the US — which are almost similar for Eurostat series — everywhere you go to, you will see the GDP per hours of work is virtually the same in US, Germany, France. It’s a few percent different. I’m sure you know these things.

COWEN: Sure. Of course.

PIKETTY: In terms of welfare, of course, as economists, you know what matters is productivity, not income per se because if you have a higher income just because you work longer hours, the effect on welfare is ambiguous. It depends how you value leisure versus work, et cetera. Presumably, European countries decided to have more vacation and a bigger reduction of working times than the US in the 20th century.

It was not the case a century ago. In the early 20th century, working hours were actually shorter in the US than Europe, partly because productivity was higher, so you can afford working less. Anyway, today and in the past century, the decline in working hours has been bigger in Germany and France. Presumably, this was a choice. This was a complicated political process, but nobody in Germany or France today is proposing to divide by two the number of weeks of vacation and go to the US federal law in that respect.

In terms of welfare, my own view, as you can imagine, is that when you multiply your productivity by 10 over the past century, it actually makes sense to take some of this increase in productivity to have more vacation, to spend more time with your children and family, to spend more time traveling around the world.

For me, like for many Europeans, the idea of taking only two weeks’ vacation over the summer when you are so rich looks like one of the most stupid things you can do in life. But look, different people can make different choices, of course, about this.

COWEN: If the relationship between wealth and happiness is so diffuse, and I would agree it may be — so I’m happier than some billionaires I know — why worry so much about wealth inequality? Why not focus on inequality of well-being, which could be something quite different?

PIKETTY: Oh, yes. Ultimately, what I care about is access to fundamental goods like education, health, participation in the political life, participation in economic life. Ultimately, this is what I care about. Income and wealth per se are just a mechanism and tools and ways to go in this direction. But in the end, what’s really important for me is to have the highest possible opportunities and rights to access fundamental goods for everybody. This is all that matters.

COWEN: I see that in Paris, and I tend to think it’s cultural capital. Rents are very high. There are people who are not huge earners. They live in Paris. They enjoy Paris immensely, as they should. They have incredible cultural capital, amenities, smart people they can talk to. They’re partaking in those goods, yet there’s very high wealth inequality in Paris. You teach in London — super-high wealth inequality in London. You can live there very well if you do it smartly. Again, why not focus on cultural capital for individuals rather than the wealth?

PIKETTY: First, I only teach in Paris. I was in London a long time ago as a student, but I’m not teaching there.

Cultural capital is part of what I am interested in. When I look at the inequalities in education and access to education, this is about cultural capital. I try to understand the changing structure of political cleavages and who votes for whom and which party and coalition, which is a topic on which I’ve been working quite a bit in recent years. Cultural inequality and different access to education, reversal of educational cleavage over time, certainly is very important.

But maybe I don’t get exactly your question. Maybe you should tell me again.

COWEN: Well, if we want to make people better off, the world we live in — it has plenty of wealth, and we observe many people who are not rich who have very high standards of living because they, in the broad sense, are well educated, can enjoy amenities, can live in Paris or London on a limited income, take in what the city has to offer. Doesn’t that suggest that wealth inequality shouldn’t really be the focus? It should be inequality of cultural capital.

PIKETTY: Yes. I think all of this is important because if you only have high cultural capital, living in Paris or London is going be difficult, given the rent level. I think you want to care about both, and so I care a lot about making access to education more egalitarian. As I told you, in France, there’s a lot of inequality and a lot of hypocrisy everywhere in terms of access to education in France.

In the US, you have all this work by Raj Chetty and Emmanuel Saez showing the relation between the parental income percentile and access to higher education, the level of hypocrisy about the claims that are being made about equal opportunity and blah, blah, blah. When you look at what you see in the data, we are very far from that, but there’s a lot of hypocrisy everywhere in terms of unequal access to education.

In my country, in France, we put three times more public resources in the elite schools, where more socially advantaged students go to, than in the normal university scheme, where more socially disadvantaged students tend to go to. Through public funding, sometimes you actually magnify initial inequalities of resources and reduce them. There’s enormous hypocrisy everywhere. And to me, making more effective equality in access to education is absolutely central.

That being said, I also want to redistribute wealth and inheritance and property because, if you only have high education but you have no wealth at all, it’s more complicated. It’s more complicated to buy a home for your family, or it’s more complicated to start up a business.

In the long run, there’s been a movement to have more equality of labor income through educational expansion, through more labor rights. But if you look at the distribution of wealth, what’s very striking is that the top 10 percent wealth share has declined in the long run. It used to be 80 percent, 90 percent of the total in the 19th century in Europe. Today it’s more 50 percent, 60 percent in Europe. In the US, it would be more 60 percent, 70 percent.

People can disagree about the details, but these are really details as compared to this order of magnitude. Now, this decline in the very top 10 percent wealth share has been mostly to the benefit of the next 40 percent, which is already good. But if you look at the bottom 50 percent of the distribution — they have 2 percent of total wealth in the US.

They have 4 percent in Europe or in a country like France. It’s a bit better than 2 percent, but basically, they have nothing. So if you take, in particular, the bottom 50 percent children generation in France today or in the US today, they basically receive nothing at all in inheritance. Whereas, the top 10 percent children will receive 60 percent, 70 percent of the total.

We are very far, to say the least, from equality of opportunity. This is the least you can say, which is interesting because equality of opportunity is a theoretical concept that people very often say they are in favor of. But if you try to move in a concrete manner to have more equality of opportunity, for instance, by distributing inheritance, people get completely crazy and say, “Oh, how could you do that?”

I’m making a proposal about this in my recent book, saying, okay, maybe everybody at age 25 should receive a minimum inheritance. Let’s say it could be 60 percent of average wealth. In France today, that would be €120,000 if the average wealth is €200,000 euros per adult, so everybody, say, would receive €120,000 euros at age 25. People who today receive zero would receive €120,000 at age 25. People who today receive €1 million will still receive €600,000 after the progressive taxation of inheritance and wealth that’s paying for that, so we would still be very, very far from equality of opportunity.

If you want my opinion, I think we could and we should go beyond that. But just doing that would increase the share of the bottom 50 percent children in total inheritance, which today is between 2 percent in the US and 4 percent in France. It would be 20 percent to 25 percent, which is still much less than 50 percent because after all, they are the poorest 50 percent children. But I think it will make a big difference in terms of real opportunity to start a business. But also, more generally, wealth has a big impact on your bargaining power in life.

When you don’t own anything, when you just own zero or when you only have debt, you have to accept everything. You have to accept any working condition, any wage, any job because you need to pay your bills. You need to pay your rent. If you have a family, you need to do something, so you have to accept this. For people with millions or billions, maybe 100 is like zero. They don’t make the difference. But for people who are at zero, having 100, 200 puts you in a position in terms of bargaining power vis-à-vis the rest of society. It is very different.

I think it’s very complementary to control capital and human capital because €100,000, €200,000 — okay, that’s not going to make you buy an apartment in Paris. That’s not enough. But there are many other cities which, for many people, are more enjoyable, where you can actually buy an apartment or house. You can start a business. It makes a real difference for the bottom 50 percent people.

COWEN: If I visit every major country in Europe, what I observe is the highest living standard is arguably in Switzerland — Norway and Luxembourg aside. Switzerland has one of the smallest governments, and they attempt relatively little redistribution. What is your understanding of Switzerland? What if someone said, “Well, Europe should try to be more like Switzerland. They’re doing great.” Why is that wrong?

PIKETTY: Oh, Switzerland. It’s a very small country, so it’s about the size. . . . Actually, it’s smaller than Île-de-France, which is a Paris region. Now, if you were to make a separate country out of Île-de-France, GDP per capita, I think, would actually be higher than Switzerland. Of course, you can take a wealthy region in your country and say, “Okay, I don’t want to share anything with the rest of the country. I’m going to keep my tax revenue for me. I’m going to be a tax haven based on bank secrecy.” That’s going to make you 10 percent or 20 percent richer. I’m not saying —

COWEN: It’s been a long time since Switzerland relied on bank secrecy, right? Following 9/11, that Swiss advantage largely went away.

PIKETTY: Oh, that’s wrong. Oh, you’re wrong on this.

COWEN: It’s the US that’s the secrecy haven.

PIKETTY: No, it still brings . . . No, no, I can tell you in terms of the banking sector and the status as a tax haven still brings an additional income of at least 10 percent or 20 percent to Switzerland. But I agree with you, Switzerland would still be rich even without this. But they would be a bit poorer, and they will certainly not be richer than if you compare to, say, the Paris region GDP per capita or the London region, if you take the wealthiest region. It’s important to compare countries of comparable size, regions of comparable size.

You mentioned Norway. Again, Norway without the oil would be more comparable to Sweden or Denmark in terms of GDP per capita. Now, the oil is making them richer, but I think this oil should actually remain in the ground.

I don’t know if you’ve seen this incredible TV series, Occupied, which today, with what’s happening in Ukraine . . . This is a series where Russia invades Norway in order to restart the oil production in order to make the European Commission happy. And the European Commission looks as ugly as it can possibly look, which unfortunately is sometimes an accurate description where oil production is so important that you’re ready, in effect, to tolerate things that, in fact, you should not tolerate.

This was just a side note about Norway, but anyway, all explaining an important role. Luxembourg. Okay, look, Luxembourg benefits a lot from its —

COWEN: But Switzerland is a real country with a diversified economy.

PIKETTY: Yes, sure.

COWEN: Very little of it is poor.

PIKETTY: The Paris region is a real region.

COWEN: But that’s a clustering effect within France. France is much poorer than Switzerland. Could not France bring Swiss prosperity to —

PIKETTY: This is not comparable in size. I don’t think it makes sense. Again, if you want to compare a region of about 5 million,10 million inhabitants — which is the size of Switzerland — you find many other regions with comparable GDP per capita all across Europe.

There are many good things with Switzerland, by the way. I think the local democratic system has lots of good aspects to it. The education system has . . . I think there’s a lot to learn from each of these experiments.

The US has a much smaller government than Sweden or Denmark or France, but I think there’s a lot to learn historically from the US, including in terms of equality. And I think the enormous educational advance that was there in the US in the 19th century and the middle of the 20th century is key to understanding many of the issues I refer to.

The case of Norway shows that you can also have a very generous welfare state, and that certainly does not prevent you from being prosperous. Look, at the level of Europe, we have 27 countries in the European Union. If you look in terms of tax-to-GDP ratio, the countries with the lowest tax-to-GDP ratio are Bulgaria and Romania. The countries with the highest tax-to-GDP ratio are Denmark and Sweden.

If it was enough, in order to become rich, to have a small government, Bulgaria and Romania would be richer than Denmark and Sweden. We know that things are more complicated, and it depends on what you do with your tax revenue. If you use it well, then it’s of use from this evidence that this is complementary with high prosperity.

COWEN: You’ve been awarded a Legion of Honor. You turned that down, if I understand correctly, on the grounds that you don’t trust, or don’t want, government handing out status. If you do not entirely trust governments to hand out status, why trust them so much to redistribute all this wealth? What’s the political economy constraint on that wealth redistribution process where you say, “Look, this isn’t going to go the way I want it to go”?

PIKETTY: No, I believe in anonymous rules. It’s not a belief; it’s not a religious belief or religious faith. I study history, and I see that governments, under certain conditions, have been able to develop a public education system, public health system, tax administration, following anonymous rules, which have been working pretty well and which we can improve — we should improve.

Whereas deciding on an individual basis who is honorable, who is not honorable — it’s a very different business. And I think, indeed, that governments are not elected to do these kinds of things. This is not what —

COWEN: How do you keep the anonymous rules anonymous? There’s slippage. It’s not something you can easily write into a constitution.

PIKETTY: Yes, but again, if I look at the history of state construction and welfare state development in Sweden or France or Germany, I don’t see what episode you have in mind exactly. What would be the —

COWEN: In the United States, France — for that matter, most countries — there’s plenty of corruption. There are people, companies that get privileges due to tariffs, due to policy, due to —

PIKETTY: Oh yes, sure.

COWEN: And it doesn’t stay anonymous. Why trust the government so much to redistribute wealth?

PIKETTY: The corruption you have in mind — is it in the government of Sweden or France or Germany? Or is it in the private companies, or is it —

COWEN: I think it’s both. It’s maybe higher in France and America than in Sweden. It’s relatively high in Germany, actually. You have Schröder — he’s put on the board of Gazprom, but you can’t say Germany isn’t corrupt, right?

PIKETTY: But this is when he joined the private sector. It was not when he was in government.

COWEN: Clearly, they were buying the services of people in German government, right?

PIKETTY: Yes — actually, no. The example you mentioned is very important because it’s exactly the example where, in fact, I don’t think any of these people, when they were in government, took money. The problem is if you let them go in the private sector and join this completely insane level of remunerations that you observe in the private sector — this is the problem.

But I don’t think, in any of these countries . . . Give me an example of a political leader who became a billionaire by taking money when he was in office. I don’t know —

COWEN: I think they sell their votes much more cheaply than that. Most of US Congress is quite happy to pass special interest–favoring legislation. They don’t get a billion dollars for their vote. Maybe that’s an economic puzzle.

PIKETTY: I think here, the perversity and the bad incentives come from the private sectors in all these examples, not the public sector, where you have salary scale, which in some cases could be reduced further, but which are, in general, much more reasonable than in the private sector, as far as I can see.

COWEN: You’ve argued France should pay reparations to Haiti. As I understand it, Haiti does not now really have a well-functioning government. Should France still pay? Should France wait? What’s your view?

PIKETTY: Yes, I think France should pay. Let me just summarize the story very quickly. This is an example where, when Haiti became independent and when the French state recognized — finally, in 1825 — the independence of Haiti, the French state said, “We are going to recognize your independence only if you pay us a huge amount of money,” which was the equivalent of 300 percent of GDP of Haiti of 1825, “in order to compensate the French slave owners for their loss of property.”

This of course was impossible to repay in one year or in a few years, so French bankers came and refinanced the debt. And in the end, the debt was repaid until the 1950s. You have payment to the bank of France until 1957. There were many renegotiations. The US was involved in the process at some point. Some of the debt was sold by the French bankers to a consortium of US bankers.

Anyway, to make a long story short, Haiti effectively repaid between 1825 and 1957 — almost a century and a half — and then almost public debt in order, in effect, to compensate the French slave owners for their loss of property.

I think it is impossible to say today, “This is too old, we don’t care,” because there are reparations that are being made today for expropriation and values, injustices that took place during World War II, or sometimes even during World War I. So, if you say, “For Haiti, this is too late, and for this other reparation or expropriation during World War II, we can still do reparation,” I think you have a problem because then, it makes it very difficult to develop a language of neutrality, of justice upon which we can build future institutional —

COWEN: I wouldn’t say it’s too late, but won’t the money just go into private bank accounts, and it will increase wealth inequality in precisely the way you object to?

PIKETTY: Oh, that’s certainly not what I am proposing. What I am proposing is, of course, that whenever there is a transfer for reparation or for development aid or whatever you want, we need to have a very strict monitoring of individuals who might get rich or get the money about this. Whether they are in the public sector, in the private sector — wherever they are — we should be very strict about that. That’s for sure.

COWEN: But isn’t that re-imposing a kind of colonialism on Haitian government? If the French are going to monitor where all the money flows within Haitian government, that would require establishing quite a bit of sovereignty over Haiti.

PIKETTY: I think Haiti should be part of that. I think there are lots of people in Haiti who would like to monitor how this money is being used. Look, I’m not saying this is simple, but reparations are never simple. I can tell you, in my country you had to wait until 1999–2000 — only 20 years ago — for an official commission to look seriously at post–World War II reparation and Jewish expropriation during World War II, so this process takes time.

If you look in the US, remember, you have to wait until 1988 to see a law adopted by US Congress to have reparation for the Japanese Americans which, as you know, were interred during World War II. During many decades people were saying, “Oh that’s impossible. That’s too complicated. Where are we going to draw the line? Where are we going to stop? How can you decide the amount?”

I understand these are complicated decisions to be made. Is this a reason to forget about it and say we don’t care anymore? I don’t think so. I think this would be the worst answer. I fully recognize the complexity of the task. I’m certainly not trying to say this is easy, et cetera, but I reiterate my claim that if you abandon any attempt for justice, then you are in a very difficult situation to prepare for the future. Because then, people will tell you, “You care about this kind of expropriation and injustices, but you don’t care about this other kind.”

You have to try to develop some universal approach to justice in terms of objective criteria, including the distribution of income, the distribution of wealth, access to education. I don’t know any other approach.

COWEN: I know you’re very much a European federalist. In at least one interview, you argued that the major countries in the current European Union should, in a sense, secede and set up their own arrangements, part of which would redistribute more wealth. Would the net actual effect of that not be to greatly weaken the European Union we have now? You would have multiple tiers, or how is that going to work?

PIKETTY: First of all, I have been involved in writing this manifesto for the democratization of Europe. We have made a very large group of scholars from all over Europe — lawyers, political scientists, economists. We have been proposing concrete changes in the treaties that organize the European Union. We are making very concrete proposals on improving the working of the European Union.

Indeed, I am a European federalist. I am a European, what I call, social federalist in the sense that I want federalism to be able to deliver more social justice, to deliver more popular support to Europe, which today is not exactly the case. If you look at the Brexit vote, the lower-income groups voted to exit. Upper-income groups and upper-education groups voted to stay. I think there’s something wrong going on.

I think we need a different kind of Europe which brings more social justice, fiscal justice. One of the solutions — certainly not the only one — is to be able to make a majority-rule decision-making over taxation.

The problem today is that, if Luxembourg wants to put their veto on taxation of multinationals or taxation of billionaires in Europe, then you cannot do anything together, in spite of the fact that Luxembourg, with 300,000 inhabitants, is less than 0.1 percent of the population of the European Union, which is 500 million. It’s even less than the nobility in France in 1789, where the nobility was about 1 percent of the population, and they had veto power about taxation.

I’m saying this cannot continue for very long. In the proposal we’ve been making, it’s not . . . what I want to say regarding your question is that it’s not open only to large countries. It’s also open to every country in the European Union, or even outside the European Union which may want to join at some point.

I’m just saying that if you take Germany, France, Italy, Spain — these four countries make almost 80 percent of the population and GDP of the eurozone. If these four countries are ready to go, I think they should go. They should try to convince as many other countries as possible. I think the current arrangement where, officially, we have the unanimity rule for all fiscal and budgetary matters . . .

Remember what happened last year with the post-COVID recovery plan. In effect, France and Germany put so much pressure on the Netherlands, Sweden, et cetera, that in the end there was unanimity to have common borrowing and a recovery plan. But in a way, this was a fake unanimity. There’s a risk that in the end, you make everybody unhappy because people are forced to agree.

In effect, what happened is that France and Germany told Netherlands and Sweden, “If you don’t want to come in, we’re going to have a separate arrangement between us, and we will do it without you.” So they said, “Okay, we will do it with you.” I don’t think this is the right way to organize political decisions. I think we should have majority-rule decision-making, and not based on country against country.

That’s why the proposal we are making in the manifesto for the democratization of Europe is to have a European assembly, where members of national parliament will come and be in front of each other. They will be there in proportion to the population of each country and in proportion to the size of each political group in each country, so that it’s not just country against country.

When you have the head of state of Germany, the head of state of France, the head of state of Sweden, or the minister of finance of Germany, France, and Sweden — when you have only one individual to represent the supposed interest of 18 million Germans or 65 million French, it’s a machinery to make national interests against national interests.

Whereas, in fact, within Germany or within France or within the Netherlands, people disagree, obviously. They have different political leanings. I think the current European parliament is not enough because in the end, it’s really the national parliament — the German Bundestag, the French Assemblée nationale — who have the political legitimacy to make their taxpayer pay more or less tax and to take budgetary decisions.

Today, we are in this strange situation where each national parliament has, in effect, a veto power on all budgetary and fiscal decisions. Indeed, I think, one way to go beyond that is to actually put these national parliament members together, maybe one week per month, in the European assembly, to vote over budgetary decisions.

What will come out of this, I don’t know, but I trust democracy. I think it could bring more social justice and fiscal justice. If I just take one example, which is corporate taxation, remember that the US, until Trump, had a federal corporate tax rate of 35 percent in addition to the state corporate tax rate. Whereas in Europe, corporate tax competition had led corporate tax rate to grow to 20 [percent], 10 [percent], et cetera — which is very paradoxical in a way, the fact that Europe has led the movement towards more tax competition and corporate taxation, because Europe has a bigger welfare state to pay for than the US.

I think this shows that political institution — the fact that you have federal corporate tax and income tax in the US but not in Europe — makes a difference. Anyway, we could talk a lot more about this, but that’s basically my view.

COWEN: If we really want to limit wealth inequality, why shouldn’t the European Union let in — as immigrants — many, many more non-Europeans? Won’t that just limit wealth inequality almost overnight? Is that a good idea? I don’t think you endorse it in your book, but that seems to me, by far, the easiest and most direct way to limit wealth inequality.

PIKETTY: Sorry, we should do what?

COWEN: Take in more non-European immigrants on a very large scale. Why not do that?

PIKETTY: You mean to reduce wealth inequality at the world level?

COWEN: Sure. There’s poor people all over the world, including in former French colonies, and take many more into the EU.

PIKETTY: Yes, I am in favor of more migration and more open borders. Roughly speaking, I am in favor of more control of capital and capital flows and less control of labor flows — whereas today, we do the opposite. We have completely free capital flows and no fiscal coordination about corporate taxation or capital taxation, and we have strong restriction of labor flows.

I think it’s important to address the two issues together because, if you only open labor flows without changing the regulation of capital and wealth taxation, then you’re going to reduce inequality in the sense that many people from the south might benefit, but you’re going to increase inequality within the populations that today live in the north. And the big winners may be top people in the north, also top people in the south, but bottom people in the north will lose.

I think if you want a fair solution, you need to do exactly what you say, but together with redistribution of wealth and income, not only in the north but also in the south. It seems that’s perfectly complementary with what I am saying.

COWEN: Last question: what do you think of Michel Houellebecq and his book Submission?

PIKETTY: This is too nihilistic for me. He has some talent. He makes me think a lot of Céline. I don’t know if you know Céline, but —

COWEN: Of course.

PIKETTY: — Céline is a novelist of the interwar period in France who wrote this incredible novel, Voyage au bout de la nuit, where, basically, he tells us his experience during World War I. And then, after World War I, he goes to Africa. Then he goes to Detroit. Basically, he’s completely desperate about the world. He’s desperate about World War I, of course. He’s desperate about colonialism. He’s desperate about capitalism in Detroit. He’s completely nihilistic, but he has a lot of talent.

I think Houellebecq is a nihilist. He has a lot of talent. I think he’s — but in terms of political views, to me, he’s just very nihilistic. I had the opportunity to debate with him and have a public discussion with him. He’s too nihilistic for me.

I believe we can make the world better. The problem is with institutions, not with people. I think human beings are basically good, so to speak, and the institutions are not always at the level of the human beings — partly because it’s difficult, of course, to set up the right institution. But we can learn from history. I’m trying, with my work, to contribute to this collective process of learning from history on how to build better institutions to have a better world.

COWEN: Thomas, thank you very much. Again, everyone, the new book is A Brief History of Equality.

PIKETTY: Thanks a lot, Tyler.