My Lent reading this year has been nothing explicitly “religious”: it was Thomas Piketty’s new book “Capitalism and Ideology”, published in French last Autumn and translated into English earlier this year. Though not religious or “spiritual” I would argue that it is at least as theological as some other books I was urged to read. Desmond Tutu is reputed to have said “When people say that religion and politics do not mix, I wonder which Bible they have been reading.”- the truth, of course, is usually no Bible at all, even though we must recognise that reading the Bible can lead to a variety of political conclusions, depending on how we select and interpret the texts.
No doubt I have the coronavirus to thank that during Lent I was able to read almost the whole of Piketty’s massive four-part, seventeen chapter, 1044 page work (it spilled over into Easter Week). Some of you will know of his earlier (2013) book “Capital in the Twenty-first Century” which persuasively argued that the owners of capital, if left without political and economic restraint, would inexorably get richer and richer by comparison with others in society. Piketty does not make the point, but that seems to be a good illustration of Jesus’ comment: “To all those who have more will be given; but from those who have nothing, even what they have will be taken away” (Luke 19, verse 26 and other places). In the time of Jesus that was the way the world worked, and, if Piketty is right, it is still the case today.
However, in this new book, Piketty argues that the ways societies develop are not dictated by some “economic determinism” but can take many different tracks. What is often crucial, he says, are the ideas and culture (the “ideology”) of powerful and influential people, often very skilled at defending society’s inequalities as being for the “benefit and good” of the whole community.
He delves back into history to describe how many societies in the past had a three-fold structure. A “priestly” class was responsible not only for religious ceremonies, but also for preserving ancient wisdom, keeping historical and family records and many “social” tasks. A class of “nobles” were the warriors, charged with military defence and the maintenance of law and order. These two classes together might constitute ten percent of the population and be maintained by the rents, dues and services of the third class, the labourers, the majority of the population. In some societies there was a further, fourth class of slaves. These distinctions were usually inherited, but not necessarily in a rigid and unchangeable fashion.
One characteristic of those societies was the lack of a centralised state. Most functions were local, and centralised state taxation was low, amounting to no more than one or two percent of the total wealth of the community. But in Europe profound changes were underway. The collapse of any stable and long-lasting “empire” allowed rival states to develop, frequently at war with one another. This forced them to develop far more centralised state structures, demanding and receiving tax revenues of some ten percent of national wealth, half of which was typically spend on military power. Armed with this strength European nations could expand throughout the world, conquering vast areas of the globe, dominating even those civilisations (such as China) they did not conquer, and capturing trade (often by destroying others’ manufactures) to build an industrial revolution at home.
Thus in Europe the ancient three-fold structure of society was transformed into what Piketty calls an ”ownership” society, where wealth and property were (in theory) thrown open to everyone with the “talent” to make their way in the world, while the state was exclusively responsible for maintaining law and order, including defending property rights deemed so “sacred” that even slaves could not be set free without their owners being fully compensated. The 19th century saw a great increase of material wealth, but its distribution was grossly unequal, at least as unequal as anything seen in the old three-fold structure. By 1900 in the United Kingdom the richest tenth of the population owned over ninety percent of all property (land, factories, investments, government securities etc), and received more than half the total national income, while the richest one percent owned 70 percent of property and received a quarter of the income. France was almost as unequal, and the United States not far behind, reaching similar levels by the late 1920s.
But in the twentieth century the share of the wealthiest people fell drastically. In the UK by the 1980s the property owned by the richest ten percent had fallen to less than half, and for the richest one percent to 15 percent of the total national wealth. The richest ten percent then had a quarter of the income and the richest one percent around 6 percent. Most European countries saw similar levels (Sweden was even more equal), and although the United States was more unequal, even there the same process had gone on.
How did this happen? One obvious reason was the catastrophic impact of two devastating world wars in the first half of the century. But there was more to it than that. Expropriation and nationalisation played their part, as did inflation (though this hit more modest fortunes as much as the largest). The rebalancing of the relative power of owners and workers in industry was also significant, through trades union bargaining and (in some countries) the curtailing of the exclusive power and authority of shareholder owners. But more significant was the advent of progressive taxation on income and estates (particularly through inheritance taxes)- throughout that period in the United States the highest segments of incomes were taxed on average at eighty percent and in the UK at ninety percent, while taxes on the largest estates were seventy-five percent in the US and 72% in the UK (Europe’s taxes were somewhat lower).
In the 1980s everything changed. “Expert” opinion rebelled against such a regime, arguing that it discouraged initiative, enterprise and productivity (though improvements in those qualities have not been very evident since). Tax rates on both income and wealth fell steeply, down to around forty percent in the case of income. Inevitably inequality has increased- in the United Kingdom the richest ten percent had increased their share of wealth to more than fifty percent by 2010/15, and the richest one percent to a fifth. The share of income for the richest tenth of the population has increased to forty percent, and for the richest one percent it has more than doubled to 14%. But that is modest compared to the United States, where the richest ten percent now have nearly three-quarters of the wealth and nearly half the income, while the richest 1 percent have nearly 40 percent of the wealth and a fifth of the income. The same trend has happened in European countries, though not to the same extent. And now the most unequal countries have been joined by Russia and China, which have abandoned all semblance of any effort to build greater equality. Added to which has come far greater secrecy about the largest incomes and estates which world-wide digital recording, tax havens, and ever more sophisticated schemes for tax avoidance have enabled, making efforts to recover adequate taxes far more difficult.
Who allowed this to happen? Piketty argues that it was the so-called “left-wing” parties, socialist and social-democrat alike, who lost faith in the policies that had brought much greater productivity and more equal prosperity in the decades after 1945, were unable to find solutions to the problems that inevitably result from any economic system, and in particular failed to deal effectively with the globalised “free” economy that appeared to be triumphant after the collapse of Soviet Communism. The people who succeeded in this new international economy- mainly the well-educated and highly skilled people who benefitted from the massive expansion of education from the 1960s onwards- continued to vote for those parties, while those who found their jobs (in manufacturing industries especially) swept away in the tide of global competition, increasingly felt abandoned by the politicians that had once been on “their” side. Some ceased to vote altogether, others turned to parties who promised to defend their interests against “foreigners”, many concluded that their best option was simply to join the competitive struggle like everyone else (except the “losers and scroungers”, of course).
Does any of this matter? If Piketty is right, it certainly does. Inequality will continue to grow if nothing is done to halt present trends, conceivably reaching even the extremes seen in 1900 (and perhaps already evident in Russia, the Gulf Monarchies and some other places). Even if this global competitiveness does not lead to open international conflict (as it did in 1914), it will increase social tensions to breaking point and probably lead to increased repression, as those who feel under threat seek to defend what they possess. Piketty’s final chapter spells out his proposals (some of them tentative, others worked out in some detail) for a more constructive and safer future. And that we must leave for another month’s mailing.