Thomas Piketty is director of studies at the École des hautes études en sciences sociales (EHESS) and professor at the Paris School of Economics. He is the author of “Capital in the Twenty-First Century” and “Capital and Ideology.”
If someone had told me in 1990 that I would one day publish a collection of articles entitled “Time for Socialism,” I would have thought it was a bad joke.
As an 18-year-old, I spent the autumn of 1989 listening to the collapse of communist dictatorships and “real socialism” in Eastern Europe on the radio. In February 1990, I took part in a French student trip to support the young people in Romania who had just gotten rid of the regime of Nicolae Ceauşescu. We arrived in the middle of the night at the Bucharest airport, then went by bus to the rather sad and snowy city of Braşov, nestled in the arc of the Carpathian Mountains. The young Romanians proudly showed us the impact of bullets on the walls, witnesses of their revolution.
In March 1992, I made my first trip to Moscow, where I saw the same empty shops and the same gray avenues. I was participating in a Franco-Russian conference entitled “Psychoanalysis and Social Sciences,” and it was with a group of French academics, who were a bit lost, that I visited the Lenin Mausoleum and Red Square, the shrine of the Russian Revolution where the Russian flag had just replaced the Soviet flag.
Born in 1971, I belong to a generation that did not have time to be tempted by communism, and which came into adulthood when the absolute failure of Sovietism was already obvious. Like many, I was more liberal than socialist in the 1990s, as proud as a peacock of my judicious observations, suspicious of my elders and all those who were nostalgic. I could not stand those who obstinately refused to see that the market economy and private property were part of the solution. But now, more than 30 years later, hypercapitalism has gone much too far, and we need to think about a new way of going beyond capitalism. We need a new form of socialism, participative and decentralized, federal and democratic, ecological, multiracial and feminist.
History will decide whether the word “socialism” is definitively dead and must be replaced. For my part, I think that it can be saved, and it remains the most appropriate term to describe the idea of an alternative economic system to capitalism.
In any case, one cannot just be “against” capitalism or neoliberalism; one must above all be “for” something else, which requires precisely designating the ideal economic system that one wishes to set up, the just society that one has in mind, whatever name one finally decides to give it. It has become commonplace to say that the current capitalist system has no future, as it deepens inequalities and exhausts the planet. This is not false, except that in the absence of a clearly explained alternative, the current system still has many days ahead of it.
The Long March Toward Equality And Participatory Socialism
Let’s start with a statement that some may find surprising. If we take a long-term perspective, then the long march toward equality and participatory socialism is already well under way. No technical impossibility prevents us from continuing along this already open path, as long as we all get on with it. History shows that inequality is essentially ideological and political, not economic or technological.
This optimistic point of view may certainly seem paradoxical in these times of gloom, yet it corresponds to reality. Inequalities have been sharply reduced over the past few centuries, in particular due to new social and fiscal policies introduced during the 20th century. Much remains to be done, but it is possible to go much further by drawing on the lessons of history.
Consider, for example, the evolution of property concentration in France over the past 200 years. First of all, we can see that the richest 1% held an astronomical share of total property (the total real estate, financial, and professional assets, net of debt) throughout the 19th century and until the beginning of the 20th century — which shows, by the way, that the French Revolution’s promise of equality was more theoretical than real, at least as far as the redistribution of property is concerned. It can then be observed that this share fell sharply during the 20th century: it was around 55% of total wealth in France on the eve of World War I and is now close to 25%.
However, it should be noted that this share is still about five times higher than that held by the poorest 50%, who currently own just over 5% of France’s total wealth (despite the fact that they are by definition 50 times more numerous than the richest 1%). According to my research, this low share has also been declining since the 1980s and 1990s, a trend that can also be observed in the United States, Germany and the rest of Europe, as well as in India, Russia and China.
The concentration of ownership (and therefore economic power) has clearly decreased over the past century, but it is still extremely high. The reduction of property inequalities has mainly benefited the “property-owning middle class” (the 40% of the population between the top 10% and the bottom 50%) but has benefited very little the poorest half of the population. In the end, the share of wealth of the richest 10% has fallen significantly, from 80-90% to around 50-60% (which is still considerable).
But the share of the poorest 50% has never stopped being tiny. The situation of the poorest 50% has improved more in terms of income than in terms of wealth (their share of total income has grown from barely 10% to around 20% in Europe), although here again the improvement is limited and potentially reversible (the share of the poorest 50% has fallen to just over 10% in the United States since the 1980s). The poorest 50% of the world’s population is still the poorest 50% of the world’s population.
The Social State As A Vehicle For Equal Rights
How can we account for these complex and contradictory developments and, in particular, how can we explain the reduction in inequalities observed over the past century, particularly in Europe? In addition to the destruction of private assets as a result of the two World Wars, the positive role played by the considerable changes in the legal, social and tax systems introduced in many European countries during the 20th century must be emphasized.
One of the most decisive factors was the rise of the welfare state between 1910-1920 and 1980-1990, with the development of investment in education, health, retirement and disability pensions, and social insurance (unemployment, family, housing, etc.). At the beginning of the 1910s, total public expenditure in Western Europe amounted to barely 10% of national income, and a large part of it was regalian/public expenditure related to policing, the army and colonial expansion. Total public expenditure reached 40-50% of national income in the 1980s and 1990s before stabilizing at this level and was mainly expenditure on education, health, pensions and social transfers.
This development has led to a certain equality of access to the basic goods of education, health, and economic and social security in Europe during the 20th century, or at least a greater equality of access to these basic goods than had been available to all previous societies. However, the stagnation of the welfare state since the 1980s and 1990s — even though needs have continued to increase, particularly as a result of longer life expectancy and higher levels of schooling — shows that nothing can ever be taken for granted.
In the health sector, we have just bitterly noted with the COVID-19 health crisis the inadequacy of the hospital and human resources available. One of the major issues at stake in the current epidemic crisis is precisely whether the march toward the social state will resume in rich countries and will finally be accelerated in poor countries.
Take the case of investment in education. At the beginning of the 20th century, public spending on education at all levels was less than 0.5% of national income in Western Europe (and slightly higher in the United States, which at the time was ahead of Europe). In practice, this meant extremely elitist and restrictive education systems: the mass of the population had to make do with overcrowded and poorly funded primary schools, and only a small minority had access to secondary and higher education.
Investment in education increased more than tenfold over the 20th century, reaching 5-6% of France’s national income in the 1980s and 1990s, allowing for a very high level of educational expansion. This development has been a powerful factor driving both greater equality and greater prosperity over the past century.
Conversely, stagnation in total educational investment observed in recent decades, despite the sharp increase in the proportion of an age group moving to higher education, has contributed both to the rise in inequality and to the slowdown in the rate of growth of average income. It should also be pointed out that extremely high social inequalities in terms of access to education persist.
This is obviously the case in the United States, where the probability of access to higher education (largely private and fee-paying) is powerfully determined by parental income. But it is also the case in a country such as France, where total public investment in education at all levels is very unevenly distributed within an age group, particularly in view of the huge inequalities between the resources allocated to selective and non-selective courses of study.
In general, the number of university students in France has risen sharply since the middle of the 2000s (from just over 2 million to almost 3 million today), but public investment has not followed suit — especially in general university courses and short technical courses, so that investment per student has fallen sharply. This is a considerable social and human waste.
Toward Participatory Socialism: Enabling Greater Circulation Of Power And Ownership
Educational equality and the welfare state are not enough. To achieve real equality, the whole range of relationships of power and domination must be rethought. This requires, in particular, a better sharing of power in companies.
In many European countries, particularly in Germany and Sweden, the trade union movement and social democratic parties succeeded in imposing a new division of power on shareholders in the middle of the 20th century, in the form of co-management systems: elected employee representatives have up to half of the seats on the boards of directors of large companies, even without any share in ownership.
The point is not to idealize this system (in the event of a tie, it is always the shareholders who have the decisive vote), but simply to note that this is a considerable transformation of the classic shareholder logic. This implies that if employees also hold a minority stake of 10% or 20% in the capital, or if a local authority holds such a stake, then the majority can be tipped, even in the face of an ultra-majority shareholder in the capital. But the fact is that such a system — which gave rise to loud cries from shareholders in the countries concerned when it was set up and which required intense social, political, and legal struggles — has in no way harmed economic development. Quite the contrary — there is every indication that this greater equality of rights has led to greater employee involvement in the long-term strategy of companies.
Unfortunately, shareholder resistance has so far prevented a wider dissemination of these rules. In France, the United Kingdom and the United States, shareholders continue to hold almost all the power of the company. It is interesting to note that French Socialists, like British Labour, favored a nationalization-centered approach until the 1980s, often finding the Swedish and German Social Democrats’ strategies of power-sharing and voting rights for employees too timid.
The nationalization agenda then disappeared after the collapse of Soviet communism, and both French Socialists and British Labour almost abandoned in the 1990s and 2000s any prospect of a transformation of the ownership regime. Discussions on Nordic-German co-management have been going on for about 10 years now, and it is high time to generalize these rules to all countries.
Next, and more importantly, it is possible to extend and amplify this movement toward a better sharing of power. For example, in addition to the fact that employee representatives should have 50% of the votes in all companies (including the smallest), it is conceivable that within the 50% of voting rights going to shareholders, the share of voting rights held by an individual shareholder may not exceed a certain threshold in sufficiently large companies. In this way, a single shareholder who is also an employee of his company would continue to have the majority of votes in a very small company, but would have to rely more and more on collective deliberation once the company becomes more significant in size.
Important as it is, this transformation of the legal system will not be enough. In order to ensure a genuine circulation of power, the tax and inheritance system must also be mobilized to encourage a greater circulation of property itself. As we have seen above, the poorest 50% own almost nothing, and their share in total wealth has barely improved since the 19th century. The idea that it would be enough to wait for the general increase in wealth to spread ownership is not very meaningful; if this were the case, we would have seen such a development long ago.
This is why I support a more proactive solution in the form of a minimum inheritance for all, which could be on the order of 120,000 euros (about 60% of average wealth per adult in France today) or $180,000 (about 60% of the average wealth per adult in the United States today) paid out at the age of 25. Such an inheritance for all would represent an annual expenditure of around 5% of national income, which could be financed by a mixture of an annual progressive property tax (on real estate, financial, and professional assets, net of debts) and a progressive inheritance tax.
What I have in mind is that this minimum inheritance for all (which can also be referred to as a “universal capital endowment”) should be financed by a combination of annual wealth taxes and inheritance taxes and would constitute a relatively small part of total public expenditure. One can indeed envisage, in the context of the ideal tax system, revenues of a total of around 50% of national income — close to the current level in Western Europe, but this would be more fairly distributed, which would allow for possible future increases.
These would be composed of, on the one hand, a system of progressive property and inheritance taxes, which would bring in around 5% of national income and finance the universal capital endowment. On the other, we would have an integrated system of progressive income tax, social contributions and carbon tax — with an individual carbon card to protect low incomes and responsible behavior and to concentrate efforts on the highest individual emissions, which would be heavily taxed.
This would bring in a total of about 45% of national income and finance all other public expenditure. It would in particular articulate all social expenditure (education, health, pensions, social transfers, basic income, etc.) and environment-related measures (transport infrastructure, energy transition, thermal renovation, etc.).
Several points deserve to be clarified here. First of all, no valid environmental policy can be carried out if it is not part of a global socialist project based on the reduction of inequalities, the permanent circulation of power and property and the redefinition of economic indicators. I insist on this last point: there is no point in circulating power if we keep the same economic objectives. We therefore need to change the framework, both at the individual and local level (in particular with the introduction of an individual carbon card) and at the national level.
Gross domestic product must be replaced by the notion of national income, which implies deducting all capital consumption, including natural capital. Attention must focus on distributions and not on averages, and these indicators in terms of income (essential for building a collective standard of justice) must be complemented by environmental indicators (in particular regarding carbon emissions).
I would also stress that the “universal capital endowment” represents only a small share of total public spending, because the just society as I see it here is based above all on universal access to a set of fundamental goods — education, health, retirement, housing, environment, etc. — that enable people to participate fully in social and economic life and cannot be reduced to monetary capital endowment.
However, as long as access to these other fundamental goods is guaranteed, including of course access to a basic income system, then the minimum inheritance for all represents an important additional component of a just society. The fact of owning 100,000 or 200,000 euros or dollars in wealth indeed changes a lot compared to owning nothing at all (or only debts). When you own nothing, you have to accept everything — any salary, any working conditions, almost anything — because you have to be able to pay your rent and provide for your family.
Once you have a small property, you have access to more choices: you can afford to refuse certain proposals before accepting the right one, you can consider setting up a business, you can buy a home and no longer need to pay rent every month. By thus redistributing property, we can help to redefine the whole set of relations of power and social domination.
I would also like to point out that the rates and amounts given here are for illustrative purposes only. Some people will consider excessive the tax rates in the 80-90% range that I propose to apply to the highest incomes, estates and assets. This is a complex debate, which obviously deserves extensive deliberation. I would simply like to recall that such rates have been applied in many countries during the 20th century (notably in the United States from 1930 to 1980) and that all the historical elements at my disposal lead me to conclude that the record of this experience is excellent.
This policy has not hindered innovation in any way, quite the contrary: growth in national income per capita in the United States was twice as low between 1990 and 2020 (after fiscal progressivity was halved under Reagan in the 1980s) as it had been in the preceding decades. American prosperity in the 20th century (and more generally, economic prosperity in history) has been based on a clear educational lead and certainly not on an inequality lead.
On the basis of the historical elements at my disposal, the ideal society seems to me to be one where everyone would own a few hundred thousand euros, where a few people would perhaps own a few million, but where the higher holdings (several tens or hundreds of millions and a fortiori several billions) would only be temporary and would quickly be brought down by the tax system to more rational and socially more useful levels.
Others will find the rates and amounts too timid. In fact, under the tax and inheritance system outlined here, young adults from modest backgrounds who currently inherit nothing at all would receive 120,000 euros, while wealthy young adults who currently inherit 1 million would receive 600,000 euros (after operation of the inheritance tax and the universal endowment). We are therefore a long way from the complete equalization of chances and opportunities, a theoretical principle that is often proclaimed but rarely applied consistently. In my opinion, it is possible and desirable to go much further.
In any case, the rates and amounts indicated here are for illustrative purposes only and are part of an exercise of reflection and deliberation on the ideal system that one wishes to build in the long-term. All of this does not prejudge the gradualist strategies that may be chosen here and there, depending on the particular historical and political contexts. For example, in the current French context, it can be considered that the first priority is to reintroduce a modernized wealth tax based on preprepared wealth declarations and much stricter control than in the past. This would at the same time reduce the property tax, which is a particularly burdensome and unfair wealth tax, especially for all indebted households in the process of becoming homeowners.
Social Federalism: Toward A Different Organization Of Globalization
Let’s say it again clearly: it is quite possible to move gradually toward participatory socialism by changing the legal, fiscal and social system in this or that country, without waiting for the unanimity of the planet. This is how the construction of the social state and the reduction of inequalities took place during the 20th century.
Educational equality and the social state can now be relaunched country by country. Germany and Sweden did not wait for authorization from the European Union or the United Nations to set up co-management, and other countries could do the same now. France’s wealth tax revenues were growing at a brisk pace before it was abolished in 2017, which shows the extent to which the argument of widespread tax exile was a myth and confirms that it is possible to reintroduce a modernized wealth tax without delay.
In the United States, given the size of the country, governments can be even more ambitious. The new Democratic administration which took office in January 2021 will need to reconcile the country, especially after the events at Capitol Hill, and this will require taking decisive steps in the direction of social justice and redistribution. I continue to believe that President Joe Biden’s team would do well to take up some of the key proposals made by Bernie Sanders and Elizabeth Warren during the U.S. presidential primary campaign, for instance, regarding the wealth tax on top billionaires. The U.S. federal government has the capability to effectively enforce such a tax, whose proceeds could help upgrade the modest U.S. welfare state.
Having said that, it is quite clear that it is possible to go even further and faster by adopting an internationalist perspective and trying to rebuild the international system on a better basis. In general, to give internationalism a chance again, we need to turn our backs on the ideology of absolute free trade that has guided globalization in recent decades and put in place an alternative economic system, a model of development based on explicit and verifiable principles of economic, fiscal and environmental justice.
The important point is that this new model must be internationalist in its ultimate objectives but sovereigntist in its practical modalities, in the sense that each country, each political community, must be able to set conditions for the pursuit of trade with the rest of the world, without waiting for the unanimous agreement of its partners. The difficulty is that this universalist sovereignty will not always be easy to distinguish from the nationalist type of sovereignty that is currently gaining momentum.
I would like to emphasize once again here how the different approaches can be distinguished, which seems to me to be a central issue for the future. In particular, before considering possible unilateral sanctions against countries practicing social, fiscal and climate dumping (sanctions in any case must remain incentive-based and reversible), it is essential to propose to other countries a cooperative model based on universal values of social justice, reduction of inequalities and preservation of the planet.
This requires indicating precisely which transnational assemblies should be in charge of global public goods (climate, medical research, etc.) and common fiscal and climate justice measures (common taxes on the profits of large companies, the highest incomes, wealth and carbon emissions). This applies in particular at the European level, where there is an urgent need to move away from the unanimity rule and meetings behind closed doors. The proposals contained in the Manifesto for the Democratization of Europe make it possible to move in this direction, and the creation in 2019 of a Franco-German Parliamentary Assembly (unfortunately without real powers) shows that it is perfectly possible for a subgroup of countries to build new institutions without waiting for the unanimity of the other countries.
Beyond the European case, these discussions on social federalism also have a much broader scope. For example, the countries of West Africa are currently trying to redefine their common currency and definitively break away from colonial rule. This is an opportunity to put the West African currency at the service of a development project that is based on investment in youth and infrastructure, and not only for the mobility of capital and the richest.
Moreover, it is too often forgotten in Europe that the West African Economic and Monetary Union is in some ways more advanced than the eurozone. For example, in 2008 it introduced a directive establishing a common corporate tax base and obliging each country to apply a tax rate of between 25% and 30%, which the European Union has so far been unable to agree on. More generally, the new monetary policies set up at the global level over the past 10 years require a rethinking of the balance between monetary and fiscal approaches, and a comparative, historical and transnational perspective is again essential.
At the global level, I believe that social-federalism and transnational parliamentary assemblies will also be necessary to regulate international economic relations and design adequate financial, fiscal and environmental regulations (e.g., between the United States, Canada and Mexico; between the United States and Europe; between Europe and Africa and so on).
For A Feminist, Multiracial And Universalist Socialism
The participatory socialism I am calling for is based on several pillars: educational equality and the social state, the permanent circulation of power and property, social federalism and sustainable and fair globalization. On each of these points, it is essential to take stock without concession of the inadequacies of the various forms of socialism and social democracy experienced in the 20th century.
Among the many limitations of the multiple socialist and social-democratic experiences of the past century, it must also be emphasized that the issues of patriarchy and postcolonialism have not been sufficiently taken into account. The important point is that these different issues cannot be thought of in isolation from one another. They have to be dealt with within the framework of a comprehensive socialist project based on the real equality of social, economic and political rights.
Nearly all human societies up to the present day have been patriarchal societies in one way or another. Male domination has played a central and explicit role in all the inegalitarian ideologies that succeeded one another until the beginning of the 20th century, whether ternary, proprietarist or colonialist. Over the course of the 20th century, the mechanisms of domination became more subtle but no less real: formal equality of rights has gradually been established, but the ideology that a woman’s place is in the home reached its apogee in the prosperous 1945-1975 period, known as the “30 glorious years” in France. In the early 1970s, almost 80% of wage earners were men.
Here again, the question of indicators and their politicization is crucial. All too often, we are simply informed that the gender difference in pay for the same job is 15% or 20%. The problem is that women are not getting the same jobs at the top of their fields that men do. At the end of their careers, the average pay gap (which will then continue throughout retirement, not including career breaks) is actually 64%. If we look at access to the best-paid jobs, we can see that things change only very slowly: at the current rate, it would take until the year 2102 to reach parity.
In order to truly move away from patriarchy, it is essential to put in place binding, verifiable and sanctioned measures for positions of responsibility in companies, administrations, universities and political assemblies. Recent work has shown that this improved representation of women could go hand in hand with an improvement in the representation of disadvantaged social categories, which are currently virtually absent from assemblies. In other words, gender parity must advance in tandem with social parity.
The issue of gender discrimination must also be considered in relation to the fight against ethno-racial discrimination, particularly in terms of access to employment. This also involves the necessary collective and civic reappropriation of colonial and postcolonial history. Some people are surprised today to see demonstrators of all origins attacking the statues of slave traders that still adorn many European and American cities. Yet it is essential to consider the extent of this shared history.
In France, it is all too often ignored that Haiti had to pay back a considerable debt to the French state between 1825 and 1947, all in order to have the right to be free and to provide financial compensation to slave owners (according to the ideology of the time, they were unjustly deprived of their property). Today Haiti is seeking reparations from France for this iniquitous tribute; it is difficult not to agree with Haiti, and this issue should no longer be postponed, particularly when today restitution is still being organized for spoliations that took place during the two World Wars.
More generally, it is easy to forget that the abolition of slavery in France and the United Kingdom was always accompanied by the payment of compensation to the owners and never to the slaves themselves. Compensation to former slaves had been mentioned at the end of the U.S. Civil War (the famous “40 acres and a mule”), but nothing was ever paid out, not in 1865 or a century later, when legal segregation ended. In 1988, however, $20,000 in compensation was awarded to Japanese Americans unjustly interned during World War II. Compensation of the same type paid today to African Americans who were victims of segregation would have a strong symbolic value.
However, this legitimate and complex debate on reparations, which is essential to build confidence in a common standard of deliberation and justice, must be framed within a universalist perspective. In order to repair society from the damage of racism and colonialism, one cannot be satisfied with a logic based on eternal intergenerational compensation. Above all, we must also look to the future and change the economic system, based on the reduction of inequalities and equal access for all to education, employment and property. This should include a minimum inheritance for all regardless of their origins, in addition to compensation. The two perspectives, that of reparations and that of universal rights, should complement, not oppose, each other.
The same is true at the international level. The legitimate debate on reparations must take place in conjunction with a necessary reflection on a new universal system of international transfers. The pandemic can be an opportunity to reflect on a minimum health and education allocation for all the world’s inhabitants, financed by a universal right for all countries to a share of the tax revenues paid by the most prosperous economic actors around the world: large companies and households with high incomes and assets. This prosperity is, after all, based on a global economic system — and, incidentally, on the unbridled exploitation of the world’s natural and human resources for centuries. It therefore now requires global regulation to ensure its social and ecological sustainability.
Let’s conclude by insisting on the fact that the participatory socialism I’m calling for will not come from the top: it is useless to wait for a new proletarian vanguard to come and impose its solutions. The devices mentioned here aim to open the debate, never to close it. Real change can only come from the reappropriation by citizens of socioeconomic questions and indicators that allow us to organize collective deliberation. I hope that these words can contribute to this.
This is a modified excerpt from “Time For Socialism: Dispatches from a World on Fire, 2016-2021” (Yale University Press, Oct. 26, 2021).