Redistributing wealth to save the planet | Thomas Piketty

[The following post appeared on November 8 2022 on Thomas Piketty’s Blog ]

Let’s say it straight out: it is impossible to seriously fight global warming without a profound redistribution of wealth, both within countries and internationally. Those who claim otherwise are lying to the world. And those who claim that redistribution is certainly desirable, sympathetic, etc., but unfortunately technically or politically impossible, are lying just as much. They would be better off defending what they believe in (if they still believe in anything) rather than getting lost in conservative posturing.

Lula’s victory over the agribusiness camp certainly gives some hope. But it should not obscure the fact that so many voters remain sceptical of the social-ecological left and prefer to rely on the nationalist, anti-migrant right, both in the South and in the North, as the elections in Sweden and Italy have shown. For one simple reason: without a fundamental transformation of the economic system and the distribution of wealth, the social-ecological programme risks turning against the middle and working classes. The good news (so to speak) is that wealth is so concentrated at the top that it is possible to improve the living conditions of the vast majority of the population while combating climate change, provided that we give ourselves the means for an ambitious redistribution. In other words, everyone will naturally have to change their lifestyle profoundly, but the fact is that it is possible to compensate the working and middle classes for these changes, both financially and by giving access to goods and services that are less energy-consuming and more compatible with the survival of the planet (education, health, housing, transport, etc.). This requires a drastic reduction in the level of wealth and income of the richest, and this is the only way to build political majorities to save the planet.

The facts and figures are stubborn. The world’s billionaires have continued their stratospheric rise since the 2008 crisis and during Covid and have reached unprecedented levels. As the Global Inequality Report 2022 [1] has shown, the richest 0.1% of the world’s population now own some €80 trillion in financial and real estate assets, or more than 19% of the world’s wealth (equivalent to one year of global GDP). The share of the world’s wealth held by the richest 10% accounts for 77% of the total, compared to only 2% for the poorest 50%. In Europe, which the economic elites like to present as a haven of equality, the share of the richest 10% is 61% of total wealth, compared to 4% for the poorest 50%.

In France, the 500 richest people alone have increased between 2010 and 2022 from 200 billion to 1000 billion, i.e. from 10% of GDP to almost 50% of GDP (i.e. twice as much as the poorest 50%). According to the available data, the total income tax paid by these 500 wealthy individuals over this period was equivalent to less than 5% of this 800 billion enrichment. This is consistent with the tax returns of US billionaires revealed last year by ProPublica, which show an average tax rate in the same range. By instituting a one-off 50% tax on this enrichment, which would not be excessive at a time when small, hard-earned savings are paying an inflationary tax of 10% per year, the French government could raise 400 billion Euros. One can imagine other formulas, but the fact is that the amounts are dizzying: those who claim that there is nothing substantial to be recovered from this simply cannot count. For the record, the governement just vetoed this week a decision by the National Assembly to increase investment in the thermal renovation of buildings (12 billion euros) and in the rail networks (3 billion), explaining that we could not afford such largesse. This begs the question: does the government know how to count, or is it putting the interests of a small class ahead of those of the planet and the population, which is in dire need of renovated housing and trains that arrive on time?

Beyond this exceptional taxation of the 500 largest fortunes, it is obviously the entire tax system that needs to be reviewed, in France as in all countries of the world. During the 20th century, progressive income tax was a huge historical success. The 80-90% tax rates applied to the highest incomes under Roosevelt and for half a century (81% on average from 1930 to 1980) coincided with the period of maximum prosperity, innovation and growth in the US. For a simple reason: prosperity depends first and foremost on education (and the US was far ahead of the world at that time) and has no need for stratospheric inequality. In the 21st century, we need to extend this legacy to a progressive wealth tax, with rates of 80-90% on billionaires, and put the top 10% of wealth on the tax rolls. Above all, a substantial part of the revenue from the richest should be paid directly to the poorest countries, in proportion to their population and their exposure to climate change. The countries of the South can no longer wait each year for the North to deign to meet its commitments. It is time to think of the world in the making, or it will be a nightmare.

[The above article has been reproduced here for educational and non commercial use]