Rising Inequality Tough to Tackle in a Divided Society, Piketty Says

The rise of globalism and the expansion of education have created new rifts in societies that make it difficult for low-income, low-education voters to unite under one platform, said Thomas Piketty, professor at EHESS and the Paris School of Economics, who spoke as part of the Rethinking Open Society series at CEU on April 18.

“Inequality is a deep puzzle for open societies," CEU President and Rector Michael Ignatieff, said in introducing Piketty.

“No one has used the tools of social science more effectively to shape public opinion in one of the vital questions facing the democratic societies in our time [than Thomas Piketty.]”

Piketty’s lecture, titled “Rising Inequality, Globalization and the Changing Structure of Political Conflict,” addressed how a new political landscape formed where low-income voters struggle to find representation.

“What I will talk about today is very much connected to the rise of identity-based politics, and xenophobic attitudes that are not only evidenced here, but other parts of Europe, too,” Piketty said. “I am very moved to be here at CEU, and I’d like to express my support to what you are doing,” he added.

Piketty said that the reduction of inequality during the last century did not come naturally or gradually, but was a result of a series of cataclysmic events such as the two world wars and the Great Depression.

Thomas Piketty provided a historic overview of the changes in inequality during the last century in the first part of his lecture. Image credit: CEU / Daniel Vegel
Thomas Piketty provided a historic overview of the changes in inequality during the last century in the first part of his lecture. Image credit: CEU / Daniel Vegel

“Progressive taxation and welfare state policies were largely opposed before World War I, and their large-scale implementation started only after World War II,” Piketty said. The system of government did not significantly affect the adoption of such policies. Piketty found that the concentration of wealth was largely the same in late 19th-century France as in England.

“The argument was that France is a republic, so everybody is equal. In reality, France was the last country in Europe to introduce the personal income tax in 1914, and only to finance the war,” Piketty said, who added that finding this discrepancy between rhetoric and reality was an inspiration for him to write “Capital in the Twenty-First Century”.

Welfare states were introduced in most of the West after World War II, but inequalities started to grow again in the late 70’s, accelerating from the late 80’s. This change is not even across the globe, though. Europe is doing relatively well, while the income share of those receiving the bottom 50% of incomes in the United States have “collapsed”.

“This doesn’t mean that Europe should rest on its laurels, because we could have much lower inequality here, too,” said Piketty.

The U.S. and the U.K. had the highest tax rates in the world for those with the highest incomes from the 30’s till the 80’s, but “it obviously did not destroy American capitalism, and productivity growth was actually higher than it is now,” he said.

“But amidst this rise in inequality, why are we seeing more identity-based politics instead of more class-based politics?” asked Piketty. To find an answer, he analyzed the results of post-electoral surveys in the U.S., the U.K., and France, concluding that from 1945, the vote for left-wing, labour, socialist and democratic parties has shifted from the lower-education and lower-income voters to the high-education elite, while high-income and high-wealth elites vote for the right.

Piketty describes this as the formation of a new “multiple-elite” system. Comparing the elites to Indian castes, he calls them the Brahmin Left and the Merchant Right, in his essay on the topic: “Brahmin Left vs Merchant Right: Rising Inequality and the Changing Structure of Political Conflict.”

An important factor affecting voting preferences is the expansion of education. According to Piketty there is a new rift reflected in the multiple elite system between those who value “education effort” and those who value “business effort.” Another significant cleavage has opened separating the pro-globalists, or internationalists, and the "nativists."

Thomas Piketty spoke about the rise of a multiple-elite system in Western politics. Image credit: CEU / Daniel Vegel
Thomas Piketty spoke about the rise of a multiple-elite system in Western politics. Image credit: CEU / Daniel Vegel

In the U.S., Piketty sees a possible shift towards a high-education, high-income, “globalist party” and a low-education, low-income “nativist” bloc. In France all the combinations of these were represented during the presidential elections of 2017; the internationalist-egalitarians by Jean-Luc Mélenchon, the internationalist-inegalitarians by Emmanuel Macron, the nativist-inegalitarians by François Fillon and the nativist-egalitarians by Marine Le Pen.

In the U.K., Piketty sees a chance that a class-based party system might return with the rise of a socialist-international Labour party and a business-oriented nationalist Conservative party. He warns that the marriage of egalitarian politics to internationalism is not a “normal” phenomenon, and its earlier emergence was caused by historic events such as the rise of communism, or the end of colonialism.

Piketty concluded that the new cleavages have created multi-dimensional conflicts about inequality and redistribution that make it hard for low-income voters to form a common platform where they can successfully compete for their interests on the political playing field.