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Thursday, September 29, 2022

Review: A Brief History of Equality

 I really enjoyed Piketty's book on Capital in the 21st Century, so when I heard about his follow up, A Brief History of Equality, I had to check it out from the library and read it. Unlike that other book, this book is a lot shorter. Also, it has a different translator, someone much worse at turning academic prose into readable English, so unlike the former book, this book reads a lot more awkwardly, which is a pity, because the ideas in this book are well worth thinking about.

Piketty in his interview with Ezra Klein calls his book optimistic. I actually had to struggle to see what he meant. For instance, very early on, Piketty acknowledges that the inegalitarian nature of human society has historically only been changed by violent reprisals from the oppressed:

the most fundamental transformations seen in the history of inegalitarian regimes involve social conflicts and large-scale political crises. It was the peasant revolts of 1788–1789 and the events of the French Revolution that led to the abolition of the nobility’s privileges. Similarly, it was not muted discussions in Paris salons but the slave revolt in Saint-Domingue in 1791 that led to the beginning of the end of the Atlantic slavery system...The experiment of Soviet communism (1917–1991), a major event that runs through and to a certain extent defines the twentieth century, perfectly illustrates these two pitfalls. On the one hand, it was in fact power relationships and intense social struggles that allowed the Bolshevik revolutionaries to replace the czarist regime with the first “proletarian state” in history, a state that initially achieved considerable advances in education, public health, and industry, while at the same time making a major contribution to the victory over Nazism. Without the pressure of the Soviet Union and the international communist movement, it is not at all certain that the Western property-owning classes would have accepted Social Security and progressive income taxes, decolonization and civil rights. On the other hand, the sanctification of power relationships and the Bolsheviks’ certainty that they knew the ultimate truth concerning equitable institutions led to the totalitarian disaster we witnessed. The institutional arrangements put in place (a single political party, bureaucratic centralization, hegemonic state property, and a rejection of cooperative property, elections, labor unions, and so on) claimed to be more emancipatory than bourgeois or social-democratic institutions. They led to levels of oppression and imprisonment that completely discredited this regime and ultimately caused its fall, while at the same time contributing to the emergence of a new form of hypercapitalism. That is how, after being in the twentieth century the country that had entirely abolished private property, Russia became at the beginning of the twenty-first century the world capital of the oligarchs, financial opacity, and tax havens. (kindle loc 278)

This is indeed a view of history I'd never heard expressed before --- that the only reason the West actually has a welfare state and reduced inequality was the explicit competition with the communist system and ideas expressed by Russia, which promised a better life than those in the West who lived in a harsh capitalistic system. I will note that by the time FDR took office, capitalism had effectively failed the majority of people living under the system --- the great depression was neither self-correcting nor humane.

I learned many fascinating pieces of history in the book I'd never encountered anywhere else, not least because Piketty with his French background is much more versant with French colonialism than I ever was, and willing to criticize the European past:

According to a rather widespread fairy tale, legal equality has been definitively established in Western countries since the Enlightenment and the “Atlantic revolutions.” In this narrative, the French Revolution and the abolition of aristocratic privileges during the night of August 4, 1789, appear to be foundational events. The reality is obviously more complex. The republics of France and the United States were in essence slaveholding, colonial, and legally discriminatory until the 1960s. The same was true of the British and Dutch monarchies. Almost everywhere, the equality of rights proclaimed at the end of the eighteenth century is above all an equality of White men, and especially of property-owning White men. (kindle loc 1791)

And here, we come to the optimistic part of the book. He explains how Sweden came from a state of inequality to becoming one of the most egalitarian societies in the world:

On the eve of World War I, the concentration of property was just as extreme in Sweden as it was in France or the United Kingdom (see Figure 17), and Sweden was incontestably the European country that had gone furthest in the constitutional and electoral codification of its inequality.14 Then, during the interwar period, the Social Democrats took control of the Swedish government and put their country’s state power in the service of a completely different political project. Instead of using property registers and incomes to distribute the right to vote, they began to use them to make the richest people pay progressively heavier taxes, all in order to finance public services. These services allowed relatively egalitarian (here again, in comparison to other countries) access to health care and education for the whole of the population. This experiment shows how little anything is fixed. People sometimes imagine that there are cultures or civilizations that tend by nature toward equality or inequality: Sweden is supposed to have always been egalitarian, perhaps because of an ancient passion proceeding from the Vikings, whereas India and its castes are eternally inegalitarian, no doubt for reasons just as mystical that proceed from the Aryans. In truth, everything depends on the institutions and rules that each human community gives itself, contingent on power relationships, mobilizations, and social struggles, within unstable trajectories that would merit close examination. (kindle loc 1943)

He then goes on to show how easily we accepted certain premises about how, for instance, public companies are managed. For instance, the German model has workers/employees have an equal stake in the enterprise at the boardroom level. The fact that we only typically imagine the American/British model of shareholder supremacy means that we've had lack of exposure to alternative methods of management:

nothing guarantees that stockholders are more competent to manage an enterprise than a company’s employees, or that they are more invested in its success over the long term. Often, the opposite is true: an investment fund can put capital into an enterprise and withdraw it again in a short period of time, whereas employees generally invest a major part of their lives, their energy, and their skills. In many respects, employees constitute the company’s first long-term investors. If we look at the big picture, we can only be surprised by this persistence of plutocracy in economic matters.  (kindle loc 2034)

He counters the common conservative criticism of government intervention, that government is inefficient. We all too often forget that schools and elementary education was once a largely private affair:

Vast sectors of the economy, starting with education and health care, and to a considerable extent transportation and energy as well, have been organized outside commercial logic, with various systems of public employment, mutualist or nonprofit structures, subsidies and investments financed by tax revenues. Not only has this worked, but it has worked much more efficiently than in the private capitalist sector. Even if some lobbyists in the United States continue to claim the contrary (for obvious reasons, and unfortunately sometimes with a certain efficacy), everyone who cares about facts now knows that public health-care systems on the European model are both less expensive and more efficient, in terms of well-being and life expectancy, than the private companies in the United States.8 In the education sector, hardly anyone is proposing to replace elementary schools, secondary schools, or higher education with corporations governed by the logic of capitalism (kindle loc 2391)

Piketty goes on to dismantle the myth that nobody ever paid the 90% marginal tax rate introduced by FDR as part of the new deal:

 What were the real economic effects of fiscal progressivity? Here we must put an end to a widely accepted notion, that the highest tax rates were never applied to anyone and had no substantial effect. It is true that the 70 percent or 80 percent tax rates affected only a small minority, generally the richest 1 percent (or even 0.1 percent).16 But the fact is that at the beginning of the twentieth century, the distribution of incomes and especially of properties was extremely concentrated: the richest 1 percent held more than half the total wealth in France, and almost two-thirds in the United Kingdom. The richest .01 percent held more than a quarter of the wealth in France, and more than a third in the United Kingdom. If we exclude housing and focus on the ownership of the means of production, the concentration appears even greater. In other words, even if the 70 and 80 percent tax rates concerned only the top hundredth or thousandth, these very restricted groups had considerable weight in the inegalitarian regime that characterized the property-owning societies of the Belle Époque. (kindle loc 2497)

 He notes also that there is no evidence that innovation or productivity is hurt by highly progressive tax rates:

 the rise in power of strongly progressive taxation seems in no way to have discouraged innovation or productivity. In the United States, the national income per inhabitant rose at a rate of 1.8 percent per annum between 1870 and 1910 without an income tax, and then at 2.1 percent between 1910 and 1950 after its introduction, and at a rate of 2.2 percent between 1950 and 1990, when the top tax rate reached, on average, 72 percent. The top rate was then cut in half, with the announced objective of boosting growth. But in fact, growth fell by half, reaching 1.1 percent per annum between 1990 and 2020 (see Figure 23). Beyond a certain level of inequality, repeatedly increasing differences in income and wealth has clearly had no positive effect on economic dynamism. (kindle loc 2560)

He further points out that the increased disparity in how much private companies with excess profits can pay versus what government can pay also makes it harder to attract people to government:

If capitalist enterprises in the information technology sector pay extravagant remunerations in order to poach almost all the most expert computer scientists on the market, that can seriously complicate the task of the public agencies entrusted with regulating them (unless they choose to encourage the race toward ever greater differences in pay). The same holds true in finance or law. The fact that salaries have been reduced to a scale of one to five and no longer one to twenty, or even one to a hundred, is not only a matter of distributive justice. It is also a matter of efficiency for public regulation, and it contributes to the construction of alternative modes of economic organization. (kindle loc 2937)

All this is to say that a strongly progressive tax rate is a big deal, and helps much more than it can hurt. The last part of the book proposes many ideas, some of which are very radical but interesting to contemplate. For instance, you could tax wealth estates to redistribute the wealth more equally:

 With the parameters used here, those who currently inherit nothing (approximately, the poorest 50 percent) would receive 120,000 euros, while those who inherit a million euros (which corresponds to the average inheritance received by the richest 10 percent, with enormous disparities) would receive 600,000 euros after taxes and endowment. We see that we are still very far from equality of opportunity, a principle often defended at an abstract and theoretical level, but one which the privileged classes fear like the plague as soon as any concrete application is envisaged. In theory, it would be completely possible (and in my opinion, desirable) to increase much further the redistribution of inherited wealth. It will be noted that the proposed system of financing is based on tax scales similar to those that were already used during the twentieth century, with rates ranging from a few percentage points for assets and income lower than average to 80–90 percent for the highest assets and income. (kindle loc 3030)

The book points out that the current state of the world excessively benefits capital and investment, rather than people who cannot as easily flow across borders untaxed. The results are that people do not trust globalization: 

The heart of the new rules is the free circulation of capital, without any compensation in the form of regulation or common taxation. In sum, states have instituted a legal system in which economic actors have won a quasi-sacred right to enrich themselves by using a country’s public infrastructures and social institutions (such as the educational and health-care systems), and then, with the stroke of a pen or the click of a mouse, to move their assets to another jurisdiction, without any arrangement to follow the wealth in question and to tax it in a way that is fair and coherent with the rest of the tax system. This is, de facto, a new form of censitary power, in the sense that the states that have signed such treaties can, from the moment that they refuse to reconsider the commitments made by earlier governments, wind up explaining in all sincerity to their people that it is strictly impossible to tax the first beneficiaries of international integration (billionaires, multinationals, those with high incomes), and that consequently they must turn once again to taxpayers in the lower and middle classes who have had the good taste to remain quietly where they were. The logic claims to be unanswerable. The reaction of the classes that don’t move their assets around is just as unanswerable: all this leads to a feeling of abandonment and a hatred of globalization (kindle loc 3137)

The scope of the book is incredible. He covers education as well, attacking legacy admissions, and asking the question of why private universities that benefit from being tax-advantaged then have the luxury of hiding their admissions policy behind vague assertions, and allowing legacy admissions, to the point where faculty and academics in those institutions see nothing wrong with the approach:

Although these universities have benefited from multiple sources of governmental financing, they have succeeded in convincing powerful political figures that it is normal to let them do as they please with their admissions algorithms, including giving priority for admission to “legacy students” (that is, the children of alumni or rich donors). In other words, not only do fabulously high tuition fees put the best universities out of reach for the least well-off students (unless they have exceptional grades granting them access to scholarships), but the richest parents can pay a kind of supplement to make up for their offspring’s insufficient grades. Universities explain that the rate of legacy admissions is minimal, even as they deny access to this information and to the formulas used to assess grades and donations...It is striking to see the number of academics in the United States who have become used to this reality: after all, if it provides supplementary funds from generous billionaires who want to have their offspring admitted, why not? It would be simpler, however, to make them pay the same amount in the form of taxes intended to finance education for all, and principally those most disadvantaged (and not the contrary). In any event, these delicate questions should be decided democratically, after transparent discussion of the pros and cons, and not in the smoke-filled rooms of governing boards dominated by donors. (kindle loc 3337-3350)

Ultimately, Piketty expresses hope that because all these deficiencies and inequitable outcomes are a result of human systems and history, he thinks that they can change. In particular, he believes that the West in response to a new competing political system in the form of China, will have to change to become more equitable just as competition with Russia led to the modern welfare state. This is the part of the book I don't buy, since as he stated early in the book, it usually takes violent revolution to get the rich to agree to part with even a tiny bit of their wealth in order to preserve their heads. The result after all that might be a more equitable and moral society (and maybe one capable of tackling climate change --- though there is no guarantee --- Piketty himself provides many examples of historical instances where the result of a violent revolution was an even more corrupt and inequitable set of institutions), but having to live through that period of history can't possibly be comfortable.

In any case, the quality of the ideas in the book make it well worth wading through the frequently turgid prose that the translator failed to alleviate. You should read this book. 

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