Piketty: We can't keep claiming that billionaires are good for the economy

Low interest rates

Historical interest rates are currently very low, but according to Piketty this does not directly affect his central statement that the return on capital is higher than economic growth. The low interest rates are more likely to be a symptom of the low growth and a lack of confidence in investment opportunities. This lack of confidence is particularly seen in the long turn, in which private investors are likely to invest less. Another factor is that much of the world’s savings are invested in countries which are considered as save havens. Growth is therefore low, but not necessarily the return on capital. As far as Piketty is concerned, we should see the low interest rate as an opportunity to invest in education and renewable energy.

The failure of billionaires

When talking about billionaires, Piketty does not dare to call them all a policy failure, but the promise that more billionaires would also bring more entrepreneurship and innovation has not come true. There are more billionaires in the 21st century than in the 1970s, 1980s or 1990s, while economic growth is a lot lower.

The Black Death

Stanford historian Walter Scheidel recently stated in Het Financieele Dagblad that the only way to reduce large inequalities is a great shock, such as a pandemic, war or other catastrophe. Piketty is not that cynical. According to him, you don't always need the Black Death, sometimes a crisis turns out to be enough. That's why it wasn't the First World War, but the Great Depression that led to the New Deal in the thirties. Yet a crisis is not always conclusive. Look at the financial crisis of 2008 for example. It won't solve problems such as inequality and climate change. It requires measures such as progressive taxation of assets and CO2 emissions, and more public investment. These measures cannot be introduced behind closed doors, argues Piketty.

Participatory economics 

In his book, he pleads for a transition towards participidm. This movement is trying to reduce the shortcomings of social democracy. The most important thing about this is that is concluded, with clearly quantified objectives, what is valued as fair. In the past two hundred years, we have determined from which income or capital level certain tax scales apply. But when it comes to education, we get stuck in fine words, instead of measuring how much the ten percent richest get in educational resources, and how much this is for the poorest fifty percent. In France for example, there is a huge inequality in the use of educational resources. We have to do something about this if we want to reduce the inequality in the long term, says Piketty.

Politics and ideology

In his research towards the historical succession of different economic systems, Piketty kept on coming across the link between politics and ideology. There are never purely economic principles. Every society has to find balance between different goals and certain ideas of justice. According to Piketty, you cannot organize society by saying ‘we are rich, you are poor, and that is that’. He finds that you have to be able to tell a story about why there are rich people, and most of all why that is a good thing for the poor.