„I am not crazy about money“

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Bestselling author Thomas Piketty about inequality which damages democracy, how China tries to control the concentration of wealth by jailing oligarchs, about Austria’s banking secrecy and about business class tickets.

profil: What turned you, a leftist professor from France, into an international celebrity rock star of economics?

Piketty: I don’t know if it has anything to do with me being French. I think I wrote about a subject that everyone is interested in and that is readable and for the first time we give a very broad historical and comparative perspective on the history of money. I tried to show in the book not only the technical economic facts, it is a literary, political cultural representation of inequality. And I think there is an interest in the democratization of knowledge.

profil: Is it not a simple calculation to reduce the world’s economic problems to a populist slogan like: „Tax the heirs!“

Piketty: We did not make it that easy for ourselves. This book is the work of generations of economists, not only me. We assembled the knowledge and the data of many countries into one concise history of money. It is not a French book, it is an international research project. I concluded out of all the data we collected that inherited capital grows faster than money earned through labour. This is a trend we need to turn around. I think we need strong institutions which put the market forces in the common interest and in the right direction. This is an universal objective. And for that we need high taxes on capital and wealth.

Profil: That’s why your critics like to call you a Marxist?

Piketty: I really think they should read my book. It is interesting to see that in fact in 1945 the US government decided to put a very progressive tax system with the top tax rate of 90 Percent in place in Germany and in Japan. They did not do that to punish Germany and Japan. They did the same at home in America. They did it because at that time there was a view that in order to create democratic institutions you need to build fiscal institutions to prevent democracies to turn into plutocracies. Excessive inequality underminds democracy. Some inequality is ok, it creates pressure to perform, produce, excel. But too much of it is counter productive for societies. So this concept of very high taxes at the end of the scale has not been invented by the Soviet Union but in America. People just forget so quickly. So this book is not about ideology it is about a fresh look at our common history.

profil: The man who became famous for inequality studies in the modern British history is Anthony Atkinson. He got an OBE from the queen but he did not get what you got in June in London: People lining up around the Peacock theatre at the LSE to hear you speak.

Piketty: One interesting side effect of the book is that many governments had to open access to fiscal data in their countries because people demand to have the same information than the countries we describe in my book. In Brazil for example journalists pressed for more information. All I can say that in this book I draw on the work of many people and in particular of Tony Atkinson. As you sad he is the godfather not only of poverty studies but modern income studies as well. He wrote a very beautiful book in 1978, the history of wealth in the United Kingdom. Our advantage now is that we can assemble data world wide digitally.

Profil: Even the International Monetary Fond sees the potential for property and wealth taxes.

Piketty: In Korea or China the extreme concentration of wealth is starting to be a real concern. So far in China they had big anti corruption campaigns. But now they are starting to realize that it is not enough. It is a little bit of a Russian type of solution. You have a few people who are very rich and then suddenly you put one in prison after he has gone into politics and has become too visible. They are starting to realize that this is not a very efficient way of regulating society. They are thinking of introducing some property tax and some kind of inheritance tax. So far in China there is no tax at all. Another issue for Korea and China is that people get very small numbers of children. In a family with only one child inheritance plays a big role - maybe in the future China or Korea it will play a bigger role than it did in the time of Balzac in France.

Profil: 200 years later France is still looking for a solution to control the rich at the top. Your president Francois Hollande introduced a 75 percent tax rate for millionaires. It does not work at all. Is this not the negation of your theory?
Piketty: I was never for the 75 % tax rate. It was useless to introduce it because only very few people in France earn so much. It was not this measure which killed the economy. The big tax increases where introduced both under Sarkozy and under Hollande. VAT was increased, income tax was increased. The deal with Germany was a very strict deficit target. And everyone promised to be very disciplined. But it did not work and it killed the economy.

profil: Your disciple Gabriel Zucman calls for closing down the last tax havens in his new book. He wants to ban Switzerland from the European Common market and throw Luxembourg out of the European Union, if these countries don’t comply with harmonizing tax rules. Is this approach justified?

Piketty: You cannot have free trade without an automatic exchange of information. How can you have cross border assets without some sort of fiscal cooperation? You know, if you want to live in autarky, you can choose to do so. You can eat your own carrots and potatoes from your garden and this is fine. I think in general it is a good idea to trade with you neighbors because I believe in free trade and globalization. But if you want to reach out and trade with your neighbors than you cannot go and steal the tax base of the neigbour. This is called pure theft.

profil: The only time you mention Austria in your book is when you explain we still have not totally given up on our banking secrecy. Do you think Austria also qualifies as tax haven and should be thrown out of the EU?

Piketty: I think every country in Europe is a small country compared to the size of the world. France and Germany sometimes believe they are big countries. But we are all small compared to the world. So we should better work together and not find excuses how to have our own little niche by attracting some foreign investments from Russia or the Middle East. Collectively it is a Zero sum game. In fact it has a negative impact. We end up over-taxing labour in our countries because our people are captives in the country - partly because we tax the multinationals less and less and we invite international capital unchecked into some of our banks in some member states. This is not good for employment in Europe. It is really not fair.

Profil: How would you propose to change this?

Piketty: In the long run the future of Austria lies in innovation, in investing in universities, in paying for schools. The future of Austria is not to be a tax haven because this will not pay for all the things Austria’s next generation will need. I don’t want to blame Austria or Switzerland or Luxembourg, I think in the end it is our institutions that are not working well.

profil: Until we have solved the crisis of European institutions we probably won’t discuss the Capital of the 21st century, but the Capital of the 22nd century.

Piketty: I am not as pessimistic as you. The only way to regulate this is by a stronger Political Union particularly between the Euro-zone countries. Otherwise every country will always play their own little game. This is not only the case in Austria. Look at France: We were still trying to sell weapons to Russia while Russia was fighting in the Ukraine. The amount in question was one billion Euro. The GDP of France is 2.000 billion. The GDP of the European Union is 15.000 billions. One billion is not so much. But it took months and months to stop it or at least to postpone it.

Profil: You are calling for stronger European Institutions. How realistic is this?

Piketty: We have no choice. We need a European Parliament for the Eurozone. To the European Eurozone Parliament we would only delegate issues the national parliaments are not able to deal with. This parliament would vote for different things than the EU council. A Eurozone parliament would have never voted for the austerity program the German and French governments forced upon the states in crisis. If the head of states still negotiate about the fate of the European peoples behind closed doors, it reminds me of Europe of the Congress of Vienna in the 19th century. In the 21st century it is not ok anymore to decide without consulting the people concerned.

profil: You were very critical of Jean-Claude Juncker as president of the EU-commission although he is also calling for further integration.

Piketty: I remember Juncker a couple of years ago being strongly opposed to the automatic transmission of information until the last minute. Maybe it will be easier for the Prime minister of Luxembourg to impose sanctions against his own country than for another country. But will he want to do it?

profil: But then he was prime minister of Luxemburg, he is now president of the commission.

Piketty: My main problem with Juncker is not that he is from Luxembourg but that when you are the president of an institution of 28 member states you will automatically believe in that institution. And especially people like him who is very pro-European. I just don’t think that we can reform the institutions when we wait for all 28 to join in. We need an initiative from some of the countries to push for a new institutional situation. This is the difficult part. For a very long time there will be two different circles. The Eurozone countries and the larger one with all member states. Juncker and others of his generation believe that the current structure of institutions is the right one. For Juncker and Angela Merkel it is still such a miracle that the European Union brought peace to the continent. But we already moved into a next century now and we need to adapt our institutions to the capital of the 21st century.

Profil: Is your theory even valid? The „Financial Times“ accused you of getting your numbers wrong.

Piketty: The „Financial times“ made a fool of itself. There was no mistake.

Profil: The economic editor Chris Giles claimed when he cleaned up and simplified your numbers the European states did not show any tendency towards rising wealth inequality after 1970. Were you wrong?

Piketty: I have tried to provide them with all the answers to their questions in a very detailed response. Anybody who reads this response will recognize that they have made a lot of noise out of nothing. I think at the end of the day it is sad for them. They should not worry about my book, they should worry a bit more about inequality. It is stupid to be in complete denial of inequality. Every wealth ranking including the one in Great Britain, and especially in London shows that the richest percent on the top get richer quicker than the middle class.

Profil: Wasn’t the attack useful for you in certain ways?

Piketty: At the end of it they have mostly offered a lot of free publicity for my book. Now they want to give me the FT prize for the best book.

profil: Would you accept the prize?

Piketty: I would have to check the dates. I am not so sure.

profil: Your Capital has often been compared to the Capital of Karl Marx. After his major work he still wrote down notes for a book which Friedrich Engels turned into a book. It was published under the titel „The origin of the Family, private property and the State“ which basically was a pamphlet for monogamy - after social classes would be dissolved by the revolution. Not only Francois Hollande will be able to confirm that this theory is absolute rubbish. Not every great thinker follows a success with another outstanding work. What will, if I may ask, your next book be about?

Piketty: I don't know, it is too early to say. Now I am still busy trying to extend my book to other countries outside of Europe and into Asia, especially China. And Latin America. I think that is going to keep me busy for a while.

Profil: The success made you rich. Does money corrupt those who have it no matter what?

Piketty: I don’t think so. Usually I fly Economy class. If someone wants to pay Business class when they invite me to China I let them do it. I am not crazy about money. I earned enough before the book. But I am very lucky, I don’t need more money.

http://www.profil.at/articles/1441/981/378125/thomas-piketty-mir-geld

 

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© 2018 Tessa Szyszkowitz