Arvid Posse, when prime minister of Sweden, cast the majority of votes in his home town. This was due to the Posse family owning a vast estate, which multiplied his voting entitlement.
That this happened in the late 19th century might not be a surprise. That it happened in a country renowned for a deep contemporary commitment to democracy and equality might be.
At that point in Swedish history a complex formula – the fyrkar – assigned a weighting of votes based on the tax payments, wealth and income of each voter. Corporations also had the right to vote in local elections.
In 1871, there were 54 rural towns in Sweden in which one voter cast more than half of the votes. Why was this justified and why did it change?
Ireland is accused of 'fiscal dumping' through our corporate tax policy. The author believes there is only one way to deal with us
These are the questions to which Capital and Ideology by Thomas Piketty is devoted. A weighty tome in many respects, not least physically, with the book extending to more than 1,000 pages of history and dense political and economic argument.
It is the sequel to the deeply significant Capital in the Twenty-First Century. Sales of that work now exceed 2.5 million copies.
C21 (yes, the fame of the book required an abbreviation for the title) has provided a new intellectual scaffolding to understanding the economic causes of inequality and its consequences.
Capital and Ideology looks at why inequality is justified, at how “inequality regimes” are created and sustained. His conclusion is clear: “what made economic development and human progress possible was the struggle for equality and education and not the sanctification of property, stability, or inequality”.
As a frequent proponent of the value of political and economic stability, there is ample cause for me to reflect on this claim.
The book begins with a history of inequality regimes. Some of this will be familiar to readers of the prequel. Between 1880 and 1914, 85-90 per cent of European wealth was held by the wealthiest 10 per cent, with only 1-2 per cent of wealth held by the poorest sections of Europe. This book differs from his earlier work through a more global perspective. Passages that compare, for example, the scale of the clergy class in Poland, Spain and India between the 16th and 18th centuries are truly awesome in their learning.
There are many very good books inside this single volume . . But this weakens the claim to greatness
This points to a strength and weakness of Capital and Ideology. The detail was similarly ample in C21, but there was a narrative energy that propelled the reader. I can remember reading that book, on my phone, waiting in a passport queue on a family holiday. That may, alas, say as much about me as the book.
But that singular clarity is absent in this book. Too often this book feels like a work of reference, albeit of extraordinary scholarship.
The density of this scholarship does set up the critical conclusion: “Change comes when the short-term logic of events intersects with the long-term evolution of ideas. Every ideology has its weaknesses, but no human society can live without an ideology to make sense of its inequalities.”
This is demonstrated in the third section of the book, which looks at how the 20th century profoundly disrupted structures of inequality. Decisions made by democracies with regard to the ownership or influence of private property, the levels of public debt and the introduction of progressive taxation all decreased income and wealth inequality.
The demise of colonialism, the impact of the Bolshevik Revolution and the rise of communism globally changed levels of private property and wealth.
However, this led to an “incomplete inequality”. Social democracies were established, but “they did not have a good answer to one pressing question: how to provide equal access to education and knowledge, particularly higher education”.
This was compounded by the inability of these democracies to forge adequate forms of international cooperation to deal with the consequences of the movement of capital.
The breadth of example in this argument is continually extraordinary. From levels of inequality in eastern Europe, to comparing the financial balance sheets of all major central banks to the study of public debt – an abundance of data is used to chart growing levels of inequality.
But mere analysis is not enough. Understanding must lead to change.
Piketty proposes a “progressive tax triptych”, consisting of higher annual taxes on property, inheritance and income. His, growingly famous, contention is that tax rates should begin at 60-70 per cent on incomes and wealth 10-times greater than the average. These rates should grow to 80-90 per cent for incomes 100 times the average.
The evidence for this, according to Piketty, is that Europe and America enjoyed consistently high growth rates between 1950 and 1980 despite high progressive taxes. However, many other factors played a role in such growth that are not present now, thankfully, including the reconstruction of cities and industries after a world war. These decades also saw significant changes in employment that are unlikely to happen again.
The second strand of this solution is enhanced international competition. Piketty is savagely critical of the European Union. These pages also raise troubling questions regarding his attitude to smaller countries.
Ireland is accused of “fiscal dumping” through our corporate tax policy. The author believes there is only one way to deal with us: “the will to play hardball is indispensable” and the larger countries of the Eurozone should impose sanctions on us as we “would quickly yield”.
Solidarity, it seems, is only for larger countries.
This leads to advocacy for transnational assemblies in charge of global public goods and worldwide fiscal justice. How such a project could avoid the legitimacy challenges that the EU has contended with is not explained.
There are many very good books inside this single volume. From the study of changing voting patterns, to debating the compensation policies due to the abolition of slavery and analysing the impact of higher education on social mobility. All this and more is contained in these pages.
But this weakens the claim to greatness, a mantle that C21 justifiably deserves. It can overwhelm – too much runs the risk of offering too little.
The impact of very high marginal tax rates on investment and job creation is not considered. The difficulties in building public support for stronger forms of international co-operation are not analysed. The consequences of worker ownership of modern and, at times, huge companies are not teased through.
The doubt lingers that an abundance of historical example squeezes out the consideration of these contemporary issues.
However, that the benchmark is greatness, not mere excellence, shows why Piketty is now so vital. It is not just the elevation of equality to the centre of his extraordinary inquiry that makes him so important.
His contribution is a glorious tribute to the power of argument based on the granular and considered study of evidence. In the last page of this work he concludes that “. . . this book has only one goal: to enable citizens to reclaim possession of economic and historical knowledge”.
In our era, this is now among the most vital of tasks. On that test, Piketty triumphs.
Paschal Donohoe is Minister for Finance, Public Expenditure and Reform
