The Thomas Piketty doctrine is already here

Academics need to get out a bit more. That, at least, is the impression one might form from the recently-released report of the Global Justice Project, the fruit of a research team led by the star economist Thomas Piketty, whose monumental study of global inequality Capital in the 21st Century made him a household name.

A handsome and detailed study, the report offers a set of ambitious proposals that could only have from the minds of people enjoying the comfort of tenured positions: cap the growth of western economies at current levels; raise investment by rich countries in poor ones to 10% of GDP (a 25-fold increase over current aid levels); ensure per capita incomes converge to a common average across the world by 2100; reduce the consumption of material goods; cut the working week in half; tax the rich to equalise incomes across the globe; create a new international currency regime. Have these people spent any time canvassing in a by-election? Do they have any idea how this will sell in Peoria, Illinois?

In short, it seems difficult to picture this supposed action plan making it into the daily grind of retail politics. Not surprisingly, mainstream economists have been quick to pounce, the widely-read blogger Noah Smith calling it “total nonsense”, the taxation expert Dan Neidle dismissing it as “potty.”

And yet: step back and reflect on the document, and you see that Piketty and his co-authors might just be onto something. However impractical their solutions may appear, the authors have channelled an emerging zeitgeist in this age of polycrisis. The old neoliberal orthodoxy has fallen from grace but, like a zombie that keeps coming at you no matter how many times you kill it, it still dominates policy. The document at least offers an alternative vision of where things might be going.

One striking thing, missed in the rush to dismiss this as fantasy, is the fact many of the things the report calls for in the future have already begun to happen. Cap economic growth in the developed economies at current levels? Check. Western economies have been slowing for decades and several have now approached virtual stasis. Indeed, there are signs that growth ultimately produces degrowth, regardless of what governments do. As I found in my recent book , economic growth triggers a cycle of behavioural and social changes whose effect, when aggregated, is to progressively inhibit a society’s economic dynamism while imposing new costs on that society, with the strength of these effects rising as a country grows richer. Western economies are now close to peak productivity. The one principal exception to the broadly-based slowdown of the rich countries is the US — but it has continued expanding thanks not to some internal dynamism, as is often supposed, but because of a massive run of debt-fuelled stimulus. Take that added input out of the economy and the US too would be no outlier at all. In fact, real per capita income is already going backwards for all but the wealthiest Americans.

Raise investment in developing countries? Check. It’s not nearly at the scale that the authors call for, but investors have been pouring money into developing countries for decades , lured by the higher average returns on offer in comparatively low-wage economies. Although the business story of the last couple of years has been about the “American exceptionalism” that has powered the boom in New York’s stock markets, the really exceptional performers have been in the developing world . Turkey’s stock market is up 40% over the last year, Taiwan’s has doubled, and Ghana’s has increased by over 130%. Forget AI, the big money’s in the Global South.

Bring about a global convergence of per capita income? Also check. This mirrors the investment wave in the ascendant global periphery. While incomes within rich economies have diverged in recent years, the gap between rich and poor countries , which peaked at the turn of the millennium, has been steadily narrowing . For a while this finding was skewed by the extraordinary rise of China, but in recent years other countries have begun rising rapidly as well. Whether incomes could converge on a common level is another matter, and some war-torn countries have got stuck on the banks of the development stream. But all told, the old distinction between First and Third Worlds looks set to grow less relevant with time.

Reduce the consumption of material goods? Check. Consumers in Western countries have been substituting experiences for things for decades, with the result that the material intensity of developed economies has steadily declined. That is to say, the material component of each dollar’s worth of economic consumption is falling as people buy less stuff and spend more money on things like health and beauty, dining out, streaming videos and taking holidays. With most of the world economy’s future economic growth coming from developing countries, rising incomes are already causing a shift away…