One challenge for academic economists in writing about aspects of what has been called "the dismal science" is to make their work accessible to an audience greater and wider than their peers. French economist Thomas Piketty has done so with remarkable success. He has written an encyclopaedic tome, almost 700 pages, in which he charts the history of change in global income and wealth since the 18th century. And he also outlines how rising inequality in the 21st century, a potential threat to economic and political stability, can be reversed by various policy measures. Remarkably, he has become a bestselling author, acquiring overnight the status of celebrity economist – eagerly sought for his views around the world. Today he will address the TASC annual conference in Dublin, where his analysis of global inequality is certain to generate much public debate.
His book Capital in the Twenty-First Century is based on more than ten years of research into how the distribution of income and wealth have altered in the major developed economies – mainly France, Britain and the United States. There, he has identified the recurrence of an old 19th century pattern, where once again wealth is increasingly concentrated among the few, as the income gap has steadily widened and to the great benefit of high earners. In the US, where real wages for most workers have barely increased since the early 1970s, those for the top one per cent have soared by 165 per cent.
Prof Piketty's policy proposals to check and reverse the rise in inequality, which unless checked could – many people fear – lead to economic instability, include a global wealth tax. Ireland, introduced a 1 per cent wealth tax in 1974, which raised little revenue and was later abolished. And TASC, a centre-left think tank, last year estimated that such a tax could now raise €150million, levied at 0.6 per cent on net assets over €1million. Prof Piketty acknowledges that in the short term a global wealth tax is unlikely, but points to successful international pressure on Switzerland to change its secrecy laws as an illustration of what may be possible in future. Certainly, it has raised the matter for wider public debate – a subject Labour's leadership contenders might well choose to address.
Likewise the French economist’s criticism of the form of property tax introduced by the Government, which is based purely on the value of the asset, without regard to the mortgage debt related to its purchase. In a house worth €400,000 with an outstanding mortgage of €390,000, the owner pays the same property tax as one who may have inherited his or her €400,000 house or who has already paid off the mortgage. While Prof Piketty argues this is unfair, he also accepts that, in a country where property accounts for most wealth, it is also better than no property tax at all.
