7

DEMOCRACY, SOCIALISM, AND PROGRESSIVE TAXATION

Let us turn now toward the future. The “great redistribution” of the period between 1914 and 1980 was no piece of cake, much less a banquet, but from it we’ve gleaned some valuable lessons. The main lesson is the following: the welfare state and progressive taxation are powerful tools allowing us to transform capitalism. The movement toward equality can be resumed only if these institutions become the object of a vast movement and a collective appropriation. It is also crucial to gauge correctly the limits of what these institutions accomplished in the twentieth century and the factors that led to their weakening since 1980. I will emphasize in particular the damage done by financial liberalization and the free circulation of capital, as well as the strategic conclusions that will be required to escape this framework.

The Limits of Equality: The Hyperconcentration of Property

First, we must remember the limited extent of the march toward equality that took place in the course of the past century. The most striking fact is the persistence of a hyperconcentration of property (see Figure 27). Granted, in Europe we see the emergence, over the long term, of a patrimonial middle class. The 40 percent of the population between the poorest 50 percent and the richest 10 percent owned scarcely more than 10 percent of property in 1913; in 2020, they held 40 percent, especially in the form of real estate.1 It remains that in Europe in 2020 the poorest 50 percent still own nothing tangible (5 percent of the total), whereas the richest 10 percent own 55 percent. In other words, the average wealth of the former is 50 times smaller than the average wealth of the latter (their share in the total is more than ten times smaller, even though they are five times more numerous). In the United States, the situation is still more extreme: the poorest 50 percent owned barely 2 percent of the total in 2020, as opposed to 72 percent for the richest 10 percent, and 26 percent for the patrimonial middle class. In terms of the concentration of wealth, in 2020 the United States is in a position between Europe in 1913 and Europe in 2020, and is trending closer to the Europe of 1913.

FIGURE 27. The Persistence of Hyperconcentration of Property

The share of the richest 10 percent of total private property owners reached 89 percent in Europe (average of France, Sweden, and the United Kingdom) in 1913 (compared to 1 percent for the poorest 50 percent), 56 percent in Europe in 2020 (compared to 6 percent for the poorest 50 percent), and 72 percent in the United States in 2020 (compared to 2 percent for the poorest 50 percent). Sources and series: piketty.pse.ens.fr/equality

It is striking to note the extent to which the United States and Europe inverted their relative positions in terms of inequality over the course of the twentieth century (see Figure 28). European fortunes were based above all on colonial and international assets (United Kingdom and France) and on inegalitarian, censitary sociopolitical systems (Sweden). When they could, members of the European working class emigrated to the United States to find better wages there. After two world wars, however, European labor unions and political movements established new rules and transformed the face of the Continent. A more extensive and more ambitious welfare state emerged, and this made possible a greater reduction of inequalities than in the United States. In Figure 28, we see the curves cross between 1960 and 1970, reversing the positions of the United States and Europe. Since 1980, the gap has deepened in the other direction. In the United States, the patrimonial middle class, which in wealth was almost equal to its European counterpart at the beginning of the 1980s, was to see its share of the country’s total wealth reduced by more than a quarter between 1985 and 2020. The share of the poorest 50 percent fell to lower and lower levels. In Europe, the deepening of wealth inequality has been less marked, but we also see a gradual weakening of the position of the middle 40 percent and especially of the poorest 50 percent, who had little wealth at any time. No country, no continent is in a position to strut or to lecture others on this subject. Almost everywhere, the economic and financial deregulation at work since the 1980s has favored the largest financial portfolios and benefited hardly at all those in the poorest groups, who have often been saddled with debt.

We find similar developments in inequalities of income, which have also started growing again since 1980, with an appreciably more marked movement in the United States (see Figure 29). There again, all the available data suggest that these developments are explained by a set of political reversals on the social, fiscal, educational, and financial levels. In the United States, the virulence of politicians opposed to labor unions and the collapse of the federal minimum wage have been decisive in the fall of the lowest incomes. The US federal minimum wage has fallen, when adjusted for inflation, from almost 11 dollars per hour in 1970 to 7.25 dollars in 2020, although many Democratic officials would like to raise it. Taking into account transfers in kind connected especially with public health insurance (Medicare and Medicaid) attenuates this diagnosis only minimally.2 The very strong growth of the largest fortunes and the explosion of remunerations for top executives, which is particularly marked in the United States, are explained above all by the obstruction of progressive taxation. Progressive tax rates had climbed from 1932 to 1980 before reversing with the same vigor after 1980, during the “conservative revolution.” In Europe, the welfare state and the fiscal state made it possible to contain the resurgence of inequalities. The share of the richest 10 percent dropped from 52 percent of total income in 1910 to 28 percent in 1980, before climbing to 36 percent in 2020. The share going to the poorest 50 percent increased from 13 percent in 1910 to 24 percent in 1980, and then fell again to 21 percent in 2020. In the end, inequalities of income were thus appreciably smaller in 2020 than in 1910—all this with a considerable increase in the average income in the course of the past century. There again, this must not make us forget that inequalities still remained very great in absolute terms.

FIGURE 28. Property in Europe and the United States, 1900–2020: The Birth and Fragility of a Patrimonial Middle Class

In Europe as in the United States, we see between 1914 and 1980 a steep decline in the share of the richest 10 percent in total private property (real, occupational, and financial assets, net of debt), to the benefit principally of the middle 40 percent. This movement is partially reversed between 1980 and 2020, notably in the United States.

Note: “Europe” is an average of France, Germany, Sweden, and the United Kingdom. Sources and series: piketty.pse.ens.fr/equality

European societies have never ceased to be hierarchical, and the range of material disparities has again begun to broaden significantly over recent decades. Achievements to date must be used to spur future progress, not to fuel self-congratulation, which too often serves as an excuse to justify all kinds of hypocrisies and renunciations.

FIGURE 29. Income Inequality: Europe and the United States, 1900–2020

In Europe, income inequality has started rising again since 1980, although remaining at levels clearly lower than those of 1900–1910. The increase in inequality has been much greater in the United States. In both cases, inequality has remained high: the richest 10 percent, though five times fewer, still receive a share of total income much larger than the poorest 50 percent receive.

Note: “Europe” is an average of France, Germany, Sweden, and the United Kingdom. Sources and series: piketty.pse.ens.fr/equality

The Welfare State and Progressive Taxation: A Systemic Transformation of Capitalism

To continue the march toward equality, the most natural path seems to be already blazed: we have to deepen and generalize the institutions that made the movement toward equality, human progress, and prosperity possible over the course of the twentieth century, starting with the welfare state and progressive taxation. But to move forward on this path, it is essential to arrive at a better understanding of the limitations encountered by the institutions, as well as the factors that have weakened them since 1980. Between 1914 and 1980, it was social and political struggles that made institutional change possible. Without a powerful social and collective movement supporting further change, the latter will not happen. If the Reagan-Thatcher revolution had such an influence after 1980, it was not only because it benefited from broad support within the dominant classes and a powerful network of influence through the media, think tanks, and political financing (even if these factors obviously played a role). It was also because of the weaknesses of the egalitarian coalition, which failed to produce a convincing alternative narrative and nurture a sufficiently strong popular movement rallying around the welfare state and progressive taxation.

That is why it is vital to construct such a narrative and to show in what way the welfare state and progressive taxation do in fact constitute a systemic transformation of capitalism. When their logic is allowed to fully unfold, these institutions represent an essential stage on the way to a new form of democratic socialism, decentralized and self-managing, ecological and multicultural, making it possible to structure a different world that is far more emancipatory and egalitarian than the present one. Historically, the socialist and communist movements have been constructed around a significantly different platform, namely state ownership of the means of production and centralized planning, both of which have failed and have never really been replaced by an alternative. In comparison, the welfare state and especially progressive taxation have often appeared to be “soft” forms of socialism, incapable of challenging the deep logic of capitalism. Before World War I, progressive taxation was advocated in France by the Radical Party, which called for “social reform respecting private property.” The socialists were skeptical about a reform that was limited to retroactively reducing the inequalities produced by the capitalist system without really getting to the heart of the process of production, without questioning its social relationships—a process and relationships that might even halt workers’ advance toward proletarian revolution. These historical origins and debates continue to permeate representations of democratic socialism. It seems to me urgent to challenge them, for several reasons.

First of all, everything clearly depends on the degree of fiscal progressivity. A progressive tax with a maximal rate of 2 percent is not the same thing as a progressive tax with a rate of 90 percent. Our experience with progressive taxation in the twentieth century has shown us that it is possible to implement successfully almost confiscatory tax rates at the highest level of the wealth hierarchy, but this essential historical lesson remains largely unacknowledged. Second, the question of progressive taxation must be envisioned as inseparable from the question of the welfare state. As we have seen, in the course of the twentieth century the construction of the welfare state took the form of a powerful movement to socialize wealth, with tax receipts increasing from less than 10 percent of the national income before 1914 to about 40–50 percent since the 1980s and 1990s in the main European nations. It thereby demonstrated that it was completely possible to organize, beyond commercial logic, vast sectors of activity, notably in health care and education, but also in culture, transportation, energy, and so on. No one can decide in advance how far such a process will go, whether regarding the list of sectors concerned, the forms of decentralized and participatory organizations that will be developed in these different sectors—hospitals and clinics, schools and universities, associations and foundations, local and state administrations, cooperatives and local, state-owned companies—or how and to what extent they will be collectively financed (perhaps someday 60 or 70 percent of the national income, or even more).3 What seems certain, however, is that it is impossible to envisage a new stage in the socialization of wealth if we do not succeed in reestablishing the conviction that the system of collective financing is based on a rigorous conception of fiscal and social justice. Unless the highest incomes and fortunes are subjected to certified and verifiable levies, and thus unless there is a genuine renewal of progressive taxation, no new stage in the construction of the welfare state and in the historical process of decommodification is conceivable.

We must also remember that progressive taxation, as it functioned in the course of the twentieth century, enabled us not only to more fairly distribute taxes on wealth and income but also to impose narrow limits on inequalities before taxes. This role of predistribution and not just redistribution was absolutely central. It shows to what extent progressive taxation is also a form of intervention at the very heart of the process of production—together, of course, with other practices, such as labor law or the presence of employees on boards of directors. Let us stress that the drastic reduction of the salary scale that progressive taxation permits, particularly the 30–90 percent rates applied to the highest incomes, is also an indispensable tool for confronting the commercial sector on equal terms. If capitalist enterprises in the information technology sector pay extravagant remunerations in order to poach almost all the most expert computer scientists on the market, that can seriously complicate the task of the public agencies entrusted with regulating them (unless they choose to encourage the race toward ever greater differences in pay). The same holds true in finance or law. The fact that salaries have been reduced to a scale of one to five and no longer one to twenty, or even one to a hundred, is not only a matter of distributive justice. It is also a matter of efficiency for public regulation, and it contributes to the construction of alternative modes of economic organization.

Finally, we must take into account the limits of what the welfare state and progressive taxation have allowed us to accomplish in terms of reducing inequalities of income and especially of wealth, and to find ways of moving beyond them. Regarding differences in income, we have already noted that the increase in income inequality since 1980 was explained in part by the thwarting of progressivity. Such levels of inequality would be difficult to justify by considerations of incentives or efficiency. In fact, this development was accompanied by a 50 percent decline in growth. The return of greater fiscal progressivity would make it possible to narrow the range of salaries once again. This action would have to be accompanied by many other tools that would support equality of access to training and negotiating power for employees and their representatives. The basic income systems currently in place in most European countries suffer from multiple insufficiencies, notably regarding access for the youngest and for students, as well as for persons who are homeless or who do not have bank accounts. Moreover, it is essential that the basic income scheme also cover people with low wages and income from work, along with a system of automatic payment on pay stubs and the progressive income tax system, without forcing recipients to ask for a handout. In addition, we must emphasize that the modest amount envisaged for the basic income, generally between half and three-quarters of the minimum wage for full-time work, depending on the offers, can by construction be no more than a partial tool for combating inequalities. This enables us to set a floor, which is essential, but on the condition that we do not stop there.4

A more ambitious tool that could be used along with basic income is the system of guaranteed employment recently proposed in the context of discussions of the Green New Deal. The idea is to make available to all a full-time job at a minimum salary set at a decent level ($15 an hour in the United States). The financing would be provided by the federal government, and the jobs would be offered by public employment agencies in the public and nonprofit sectors. Following in the footsteps of the Economic Bill of Rights proposed by Franklin D. Roosevelt in 1944 and the March on Washington for Jobs and Freedom at which Martin Luther King Jr. spoke in 1963, such a system could contribute powerfully to the process of decommercialization and to the provision of public services, the transition to alternative energies, and the renovation of infrastructure.5

Property and Socialism: The Question of Decentralization

Let us now come to the question of wealth inequality and the property system. If we adopt a long-term perspective, we may be struck by the persistence of hyperconcentration of property. In particular, the poorest 50 percent have almost never had any substantial possessions. If it were possible to wait until growth diffuses wealth, we would have seen the effects long ago: that argument falls flat. The most natural way of escaping this situation would be to imagine a system of inheritance redistribution that enabled everyone to receive a minimal inheritance (see Figure 30). For example, this minimal inheritance could be equal to 60 percent of the average wealth per adult (120,000 euros if the average is on the order of 200,000 euros, as it currently is in France), paid to each person at the age of twenty-five. This capital endowment could be financed by a combination of a progressive tax on wealth and on inheritances, levying approximately 5 percent of the national income, whereas the financing of the welfare state and ecological programs (including basic income and guaranteed employment) would be financed by a unified system of progressive income taxes, including contributions for social welfare and a tax on carbon emissions, levying about 45 percent of the national income (see Table 2).

FIGURE 30. Redistribution of Inheritance

The share of the poorest 50 percent in total inheritance was 6 percent in Europe in 2020, as opposed to 39 percent for the middle 40 percent and 55 percent for the richest 10 percent. After implementing an “inheritance for all” (minimum wealth equal to 60 percent of the average inheritance, paid at the age of twenty-five), financed by a progressive tax on wealth and inheritance, it would be 36 percent (as opposed to 45 percent and 19 percent).

Note: “Europe” is an average of France, Sweden, and the United Kingdom. Sources and series: piketty.pse.ens.fr/equality

TABLE 2

Circulation of Property and Progressive Taxation

Progressive property tax (financing the capital endowment to each young adult)

Progressive income tax (financing basic income, guaranteed employment, and welfare and ecological benefits)

Multiple of average wealth

Annual property tax (effective rate)

Inheritance tax (effective rate)

Multiple of average income

Effective tax rate (including social taxes and carbon tax)

0.5

0.1%

5%

0.5

10%

2

1%

20%

2

40%

5

2%

50%

5

50%

10

5%

60%

10

60%

100

10%

70%

100

70%

1,000

60%

80%

1,000

80%

10,000

90%

90%

10,000

90%

Note: The proposed tax system includes a progressive tax on property (annual tax on net wealth and inheritance tax) financing a capital endowment for each young adult and a progressive income tax (including social contributions and a progressive tax on carbon emissions) financing basic income, social welfare, and ecological measures. These might include health care, education, retirement pensions, unemployment insurance, energy, and so on. This system of circulating property is one of the constituent elements of participatory socialism, with voting rights on corporate boards shared between workers and stockholders.

In the example shown here, the progressive tax on property brings in roughly 5 percent of national income (4 percent for the annual income tax and 1 percent for the inheritance tax, allowing a capital endowment equivalent to 60 percent of average wealth at age twenty-five) while the progressive income tax brings in roughly 45 percent of national income (allowing an annual basic income equivalent to 60 percent of average income after taxes—5 percent of national income) and the state’s welfare and ecological programs (40 percent of national income). Source: piketty.pse.ens.fr/equality

The primary objective of an inheritance for all is to increase the negotiating power of everyone who owns almost nothing (that is, about half the population). If you have nothing, or worse yet, if you have only debts, then you must accept whatever wages and working conditions you can get, or almost. Basic income and guaranteed employment are valuable tools for changing this situation and rebalancing power relationships, but unfortunately they do not suffice. Having 100,000 or 200,000 euros as a complement to basic income, guaranteed employment, and all the rights associated with the most extensive welfare state possible (free education and health care, retirement pensions and highly redistributive unemployment benefits, labor law, and so on) changes the situation substantially.6 Recipients could reject certain job offers, buy an apartment, engage in a personal project, or create a small business. This freedom, which is certain to delight some, may well frighten employers and property owners.

Several points must be clarified. First, the factors expressed in figures here are purely illustrative and might be set at more ambitious levels. With the parameters used here, those who currently inherit nothing (approximately, the poorest 50 percent) would receive 120,000 euros, while those who inherit a million euros (which corresponds to the average inheritance received by the richest 10 percent, with enormous disparities) would receive 600,000 euros after taxes and endowment. We see that we are still very far from equality of opportunity, a principle often defended at an abstract and theoretical level, but one which the privileged classes fear like the plague as soon as any concrete application is envisaged. In theory, it would be completely possible (and in my opinion, desirable) to increase much further the redistribution of inherited wealth.

It will be noted that the proposed system of financing is based on tax scales similar to those that were already used during the twentieth century, with rates ranging from a few percentage points for assets and income lower than average to 80–90 percent for the highest assets and income. The main novelty is the recourse to a similar scale for taxes for the annual wealth tax, and not solely for taxes on income and on inheritance.7 This is absolutely essential if we want to expand the redistribution of property beyond what was achieved during the twentieth century. Correctly applied and monitored, the annual wealth tax makes it possible to levy receipts far more substantial than those of the inheritance tax, and to improve redistribution in proportion to each individual’s ability to contribute.8 A specific tax scale should ideally be applied to endowments held by foundations and other nonprofit organizations as well, in order to avoid an excessive concentration of power within a small number of entities and to enable less wealthy entities to develop.9

We must also explain that redistribution of property alone does not suffice to transcend capitalism. If the objective were simply to replace large property owners with small and middle-sized property owners who are just as greedy and careless of the social and environmental consequences of their actions, then it would be of limited interest. The project described here is of a quite different nature. The redistribution of property is accompanied by very progressive tax scales that prevent individuals from accumulating or polluting without limits, and that can be made more demanding, if necessary.10 We could also imagine that the function of the inheritance for all might be regulated, for instance by limiting its use to housing purchases or the creation of an enterprise devoted to social or environmental goals. The debate is legitimate, as long as the same rules are applied equally to all inheritances and all heirs, and not only to the lower classes benefiting from a minimal inheritance.

In addition, I assert that the idea of an inheritance for all presented here is meaningful only if it is added to systems of basic income and guaranteed employment, which ought to be established first, and more generally, only if the inheritance for all is added to an existing welfare-state system whose objective is the gradual decommercialization of the economy. In particular, fundamental goods and services in domains such as education, health care, culture, transportation, or energy are by nature to be produced outside the commercial sphere, in the context of public, municipal, group, or nonprofit structures. This vast nonprofit sector is destined to grow, whereas the for-profit sector, in which the inheritance for all might be invested, would gradually be reduced to a limited number of activities, such as housing and small businesses (notably in the craft industry, commerce, hotels and restaurants, repairs, consulting, and so on).

Finally, we must emphasize that the small- and middle-sized properties involved in the inheritance for all must be designed more as social, temporary properties than as strictly private ones. Inheritance would take place within a legal framework based on sharing power with other users of capital, and within the framework of a tax that drastically limits opportunities for accumulation and perpetuation. Regarding power sharing in enterprises in the for-profit sector, as I have already said, I propose to apply the system of “participatory socialism” described above, with the individual voting rights divided 50–50 between employees and stockholders and strict limits on the voting rights of individual stockholders depending on the size of the enterprise, so that a single employee who is also a stockholder would retain the majority of votes in a very small company but would lose it as soon as the company had more than ten employees.11 It could also be imagined that the voting rights would depend on the seniority of the employees, in the same way that renters in an apartment building gradually accumulate rights that give them almost a permanent right of usage.12 The recent debates have also included a renewal of discussion of the proposals for “employee funds” imagined by Rudolf Meidner and his colleagues in the Swedish trade union federation, Landsorganisationen i Sverige (LO), in the 1970s and 1980s. According to this system, reserved mainly for the largest enterprises, employers would be expected to pay part of their annual profits into a fund that enables employees to gradually take control of 52 percent of the capital after twenty years.13 Intended to complete the system of comanagement (which guarantees that employees will have a share of voting rights, independently of any participation in the capital), this proposal aroused fierce opposition among Swedish capitalists, and could not be adopted. It has recently been put back on the agenda by some Democrats in the United States, notably Bernie Sanders and Alexandria Ocasio-Cortez, and included in the official program of the British Labour Party.14 Other innovative proposals have also been formulated to allow for the development of public investment funds at the local and communal levels.15 The objective is not to close the discussion but rather to widen it: the concrete forms of power and economic democracy still require reinvention, and always will.16

For a Democratic, Self-Managing, and Decentralized Socialism

Let us sum up. The welfare state and progressive taxation, pushed to their logical conclusions, allow us to lay the foundations for a new form of democratic socialism: self-managing, decentralized, and based on the continual circulation of power and property. This system differs entirely from the kind of centralized, authoritarian state socialism that was tried within the Soviet bloc during the twentieth century. It is situated mainly within ongoing social, fiscal, and legal transformations begun in many Western European countries in the past century, through a hard-earned history of changing power relations, popular movements, and multiple crises and moments of great tension.

The democratic socialism described here is only an outline. It includes many weaknesses and limitations. For example, some readers may think that by allowing the continued existence of a limited form of private ownership of the means of production (at the level of small businesses) and housing, we are taking the risk that these changes will be ephemeral, and that the strict limitation of differences in wealth will not last, given the considerable efforts that some people will deploy to ensure that the tax scales are modified and to reject all limits. This fear is legitimate, but must not be instrumentalized: it was this fear that led the Soviet authorities, who at the time talked about “capitalist gangrene,” to criminalize in the 1920s any form of property, including property for very small businesses with a tiny number of employees, and to descend into now well-known authoritarian and bureaucratic excesses. The proper response is to consider a deeper conception of democracy: when we redistribute property, we must also adopt a system of egalitarian financing for political campaigns, the media, and think tanks, in order to prevent electoral democracy from being co-opted by those who are better off. More generally, we have already noted that the system of redistributing property outlined here would require substantial constitutional revisions.17 A supplementary protection would be to assign these collected taxes to a fund that manages the inheritance for all, in the same way that social security contributions are managed by specific social security funds in most countries. Historical experience has shown that strengthening administrative structures makes it difficult for politicians to renege on these choices (for example, by promising decreases in taxes or contributions), because it forces them to make explicit the withdrawal of benefits granted.

Moreover, nothing forbids us to reflect on systems that reject any form of private property, including social and temporary property like the one envisaged here. I am thinking, for example, of the system of “salarial socialism” defended by Bernard Friot.18 To simplify, Friot proposes to extend the model of the social security funds set up in 1945 in France to other socioeconomic arenas, especially those of retirement and health insurance. That would involve in particular the creation of a “salary fund” and an “investment fund,” the former entrusted with classifying people, according to their qualifications, in different levels of “salary for life” (with a scale ranging from one to four), and the latter entrusted with attributing investment credits and rights to use real and business capital in the various units of production and in multiple individual and collective projects. Insofar as these funds would be managed in a participatory and democratic way, in precise forms that would have to be, however, made more explicit (which Friot does not do), such a proposal is full of potential. Generally speaking, the development of new organizational forms based on common property and Friot’s category of “property for use” is to be encouraged, for it complements the system of social and temporary property defended here.19

I simply want to draw attention to this point: the salary and investment funds Friot imagines (or their equivalent in other proposals depriving small private property, social and temporary, of any role) would hold a considerable power over millions of lives and everyday decisions, bearing notably on salary levels and the use of capital with regard to housing and small businesses. The internal organization of these quasi-state, hypercentralized authorities is not at all clear, in particular how they might function in a truly democratic and emancipatory way. It would be premature, to say the least, to assume in advance that this question has been settled and that any risk of bureaucratic and authoritarian excess can be ruled out. Explanations must be given for the systems of voting and power-sharing that might be applied in such institutions and comparisons made with better-known sociohistorical experiences (parliaments, parties, labor unions, social welfare funds, public banks, etc.) and the potential for learning and improvements they may contain.20 In the current state of our knowledge and experience, it seems to me more appropriate to recognize a lasting role for small private properties, particularly in the sector of housing and small businesses, while at the same time encouraging the development of collective and cooperative structures when they correspond to the needs of the actors concerned. Generally speaking, the sometimes excessive faith in the ability of large, centralized organizations to handle internal deliberation and democratic decision-making can lead us to underestimate the emancipatory potential of institutional systems such as small private property, properly supervised and limited in its scope and the rights it confers. The same goes for progressive taxation. If all the major organizational decisions regarding the distribution of salaries and investments are made within a salarial fund and an investment fund at the national level, then the form of the tax matters little: its base and its progressivity have hardly any importance because in any case the distribution of value will be defined collectively at the centralized level.21 Conversely, if we accept the principle of a permanently decentralized socioeconomic organization involving a great diversity of actors, collectivities, and mixed structures, then the concrete forms of taxation are important: they help determine the distribution of value, alongside, of course, other institutional mechanisms such as the systems of voting rights within the different structures.

The Free Circulation of Capital: The New Censitary Power

We now come to an absolutely essential point. The challenge to the welfare state and progressive taxation since the 1980s was not based solely on talk. It was also materialized in a set of rules and international treaties seeking to make the change as irreversible as possible. The heart of the new rules is the free circulation of capital, without any compensation in the form of regulation or common taxation. In sum, states have instituted a legal system in which economic actors have won a quasi-sacred right to enrich themselves by using a country’s public infrastructures and social institutions (such as the educational and health-care systems), and then, with the stroke of a pen or the click of a mouse, to move their assets to another jurisdiction, without any arrangement to follow the wealth in question and to tax it in a way that is fair and coherent with the rest of the tax system. This is, de facto, a new form of censitary power, in the sense that the states that have signed such treaties can, from the moment that they refuse to reconsider the commitments made by earlier governments, wind up explaining in all sincerity to their people that it is strictly impossible to tax the first beneficiaries of international integration (billionaires, multinationals, those with high incomes), and that consequently they must turn once again to taxpayers in the lower and middle classes who have had the good taste to remain quietly where they were. The logic claims to be unanswerable. The reaction of the classes that don’t move their assets around is just as unanswerable: all this leads to a feeling of abandonment and a hatred of globalization.

It is natural to wonder how we got into this situation. Research has revealed a long period of preparatory work by banking lobbies after the war, the role played generally by employers’ groups, banks, and wealth managers in the co-production of the law, and finally implementation of the law in the most advantageous means possible, including evasions and optimizations.22 This level of control exerted over the economy by financiers and investors and the deregulation of financial flows must also be analyzed in the context of a stockholders’ strategy, seeking to restore managers’ control (or rather, to align their interests with those of the stockholders) and to allow more rapid and more profitable reconfigurations of the major units of production (mergers and acquisitions, transfer of assets).23 The idea of using international treaties to depoliticize the economy, to protect property, and to prevent redistribution was, moreover, one of the Hayekian and ordoliberal theses formulated as early as 1940 with a view to structuring the postwar world, theses that ended up being adopted in 1980–1990, thanks to private lobbyists.24 We must also emphasize the central and sometimes paradoxical role played by European governments at the end of the 1980s in the movement to liberalize capital flows. Having had their fingers burned by their economic difficulties, starting in 1984–1985 French socialists decided to stake everything on the construction of Europe. In order to accelerate the implementation of the common currency, they agreed to the demands of the German Christian Democrats, who sought a complete liberalization of capital flows. This demand materialized in a European directive of 1988 that was retranscribed in the Maastricht Treaty of 1992. The terms of this treaty were then adopted by the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) and were to serve as the new global standard. One of the motivations of the actors of that time was also to lower the cost of public borrowing by means of a call for international investments, without there having really been time to explain and discuss these different objectives.25

What is certain is that it seems impossible to resume the movement toward equality without leaving this framework behind. Concretely, each state that wants to do that must free itself from these obligations and set explicit conditions in terms of fiscal and social justice for the circulation of capital and for free trade. The process has already begun, in part. In 2012, at the urging of the Obama administration, Switzerland rewrote its banking laws to require transmission of information about US taxpayers who had accounts in Swiss banks; if they did not, the banks in question would immediately lose their licenses to operate in the United States. In 2021, the Biden administration announced its intention to levy direct taxes on profits in countries with low taxes, billing the enterprises and subsidiaries concerned for the difference between a minimal tax rate set by the United States and the one practiced in the country in question (for example, in Ireland or Luxembourg). In both cases, these unilateral decisions made by the United States openly violated all the earlier rules, and especially intra-European rules: if France or Germany had made similar decisions, the targeted states would easily have had them invalidated by European courts, in the name, precisely, of treaties signed in the past by the French and German states.26 But the fact is that it appears to be the only way to move forward. The problem is twofold. On the one hand, the steps taken up to this point by administrations in the United States are in reality minuscule in comparison with what would be necessary, and it would be completely illusory to wait for the solution to come from the United States alone, given how political life is financed in that country.27 On the other hand, the European states continue to do nothing and to rely on a hypothetical, unrealistic future unanimity to change the rules within the European Union or the OECD. By legalism, or else out of fear of being blacklisted by other countries, financial lobbies, or the media and the think tanks that they influence, they refuse to withdraw unilaterally from the existing framework and to impose anti-dumping sanctions on public and private actors who are making it possible to perpetuate this new censitary power.

There is no other way of escaping this dead end, however. The redefinition of international rules is critical not only for the global North, but also for the global South and the entire planet. The current economic system, based on the uncontrolled circulation of capital, goods, and services, without social or environmental objectives, is akin to a neocolonialism that benefits the wealthiest. We will see that only a project of global transformation, to which each country can make its contribution by practicing a new form of sovereignism with a universalist vocation, that is, by relying on explicit indicators of social justice, can make it possible to overcome these contradictions.

  1. 1. See Chapter 2, Figure 5.

  2. 2. T. Piketty, Capital and Ideology (Cambridge, MA: Belknap Press of Harvard University Press, 2020), 522–535, figs. 11.5–11.10.

  3. 3. The debates on organizational forms that make it possible to reconcile centralization and regulation optimally in the various sectors of the welfare state are endless and can be only touched upon here. In health care, it is often thought that the French system constitutes a better compromise than the British model. That may be true in part, but on the condition that access to care and physician incomes be genuinely regulated. In higher education, the autonomy of individual institutions and decentralization is probably a good thing, if they are accompanied by an appropriate system of public financing. In the realm of culture and show business, the status of casual workers includes interesting elements, again on the condition that financing is adequate and accepted as cultural policy. In the domain of water, energy, or transportation, much is to be learned from the new forms of municipal management developed in several cities in Europe and other parts of the world.

  4. 4. Taking into account its limited, minimalist amount, it seems to me more appropriate to speak of “basic income” rather than a “universal income.” On the automatic payment of the basic income on pay slips, see P.-A. Muet, Un impôt juste, c’est possible! (Paris: Seuil, 2018). In addition, this system makes it possible to defend the salaried status and to oppose the fragmentation of labor.

  5. 5. P. Tcherneva, The Case for a Job Guarantee (Cambridge: Polity Press, 2020). Compare the system of guaranteed employment proposed by A. B. Atkinson, Inequality: What Can Be Done (Cambridge, MA: Harvard University Press, 2015).

  6. 6. Regarding retirement pensions, the extension of life expectancy and the challenge of dependency render even more obsolete the idea that pensions must be limited to reproducing unto the last breath the inequalities characterizing a person’s working life. On the contrary, a unified and renovated retirement system ought to do all it can to guarantee a better rate of replacement for the lowest salaries than for average and high salaries, while at the same time being financed by a progressive tax on all incomes. This subject, among others, also shows that the egalitarian coalition needs to formulate new, more ambitious programs, and must not continue to limit itself to defensive postures.

  7. 7. Very progressive tax scales have already been applied to property during major historical episodes (in postwar Germany or Japan, or at the time of agrarian reforms in numerous countries), but not as a permanent system. Most of the long-lasting annual taxes on assets have been strictly proportional or slightly progressive. Strictly proportional taxes like the US property tax or the French taxe foncière have remained virtually unchanged since the end of the eighteenth century. These are applied to both moveable and immoveable property without any progressivity and without taking into account financial assets and liabilities. Their rather heavy receipts—about 2 percent of the national income—are very unfairly distributed. Slightly progressive taxes include the annual wealth taxes applied in Germanic and Nordic Europe during most of the twentieth century, or in France intermittently since 1981. They feature rates not exceeding 2–3 percent, multiple exemptions, and virtually no fiscal auditing, and so result in low receipts. See Piketty, Capital and Ideology, 558–571.

  8. 8. Concretely, if a person has become a billionaire at the age of thirty or forty, it is hard to understand why we have to wait until that individual is eighty or ninety to tax that wealth. In addition, prioritizing the annual wealth tax (more popular than the inheritance tax, because it is better able to target the largest fortunes) would enable us to ensure more efficiently that the middle classes benefited from the reform.

  9. 9. If the foundation is only an instrument in the service of a private person, then its endowment must naturally be taxed as such. If it is a nonprofit structure pursuing a general interest, a specific scale must be provided. The available data show that the largest endowments (for example, those of the richest universities in the United States) have grown at a pace on the order of 7–8 percent per annum (over and above inflation) between 1980 and 2018, figures close to those seen for the largest private fortunes, but incommensurate with the growth of the world economy or smaller endowments (like those of other universities or small associations). See T. Piketty, Capital in the Twenty-First Century (Cambridge, MA: Belknap Press of Harvard University Press, 2017), 447–450; and Piketty, Capital and Ideology, 685–686.

  10. 10. In particular, the carbon card for individuals, a credit card that tracks one’s carbon footprint, is supposed to enable us to enforce respect for the limits on the amount of global emissions set collectively, while at the same time concentrating our efforts on the largest emissions and the richest taxpayers. It is crucial that the carbon credit card be structurally connected with the scale of the progressive income tax, so as to be able to neutralize automatically, for the lower and middle classes, the negative impact on purchasing power of the measures occasioned by more restrictive emissions targets. See Piketty, Capital and Ideology, 1004–1007.

  11. 11. See Chapter 5, Figure 18. The parameters can be adjusted, of course.

  12. 12. This is partly the case in the numerous legal systems that grant particular protection to longtime renters or give them a preferential purchase right, sometimes with a discount or subsidy. Furthermore, whatever the status of the housing, it is indispensable to apply strict, verifiable, and sanctionable rules of social mixture that prevent ghettoization.

  13. 13. One might also imagine that the progressive tax on property described in Table 2 might be paid in part in the form of stocks put into the employee fund.

  14. 14. R. Meidner, Employee Investment Funds: An Approach to Collective Capital Formation (London: Allen and Unwin, 1978); G. Olsen, The Struggle for Economic Democracy in Sweden (Farnham, UK: Ashgate, 1992); J. Guinan, “Socialising Capital: Looking Back on the Meidner Plan,” International Journal of Public Policy 15, no. 1–2 (2019): 38–58.

  15. 15. J. Guinan and M. O’Neill, The Case for Community Wealth Building (Cambridge: Polity Press, 2020).

  16. 16. For an imaginative discussion of a society based on “melting” property, defined as property whose value for the owner is gradually reduced until end of life, at which point it is returned to a common fund and resold, and the equalization of all powers, rather close in certain ways to the “participatory socialism” outlined here, see E. Dockès, Voyage en misarchie. Essai pour tout reconstruire (Paris: Editions du Détour, 2017).

  17. 17. A constitutional formulation allowing for the redistribution of property and protecting progressivity might be: “The law determines the conditions for the exercise of the right of property and takes care to promote its diffusion and its role in the service of the common interest, if necessary through a system of progressive taxes on property, capital endowment, and voting rights for employees. If total direct and indirect taxes are paid in proportion to the goods of all kinds held by taxpayers, this proportion cannot be lower for the richest taxpayer than for the poorest. It may be higher, depending on the terms set by law.”

  18. 18. See in particular B. Friot, Puissances du salariat, new enlarged ed. (Paris: La Dispute, 2012). The expression “salarial socialism” is not used by Friot, but it seems to me apt to express his (justified) insistence on the emancipatory potential of the “déjà-là,” i.e., a “salary for life” and the extension of social security.

  19. 19. On the diversity of the forms of organization developed in history to make common use of natural, material, or cognitive resources, see D. H. Cole and E. Ostrom, eds., Property in Land and Other Resources (Cambridge, MA: Lincoln Institute of Land Policy, 2012); B. Coriat, ed., Le Retour des communs (Paris: Les Liens qui Libèrent, 2015); T. Boccon-Gibod and P. Cretois, État social, propriété publique et biens communs (Lormont: Le Bord de l’eau, 2015).

  20. 20. Friot says that the salary and investment funds will be managed by authorities who are elected or chosen by lots, without indicating his opinion as to which is preferable, and without specifying the connection with state authorities, whose identities are left vague. See B. Friot and J. Bernard, Un désir de communisme (Paris: Textuel, 2020), 32. Compare F. Lordon, Figures du communisme (Paris: La Fabrique, 2021), who supports the system proposed by Friot but proposes to rename the “salary for life” the “general economic guarantee.” Lordon says nothing more than Friot about the system of governance (elections, parties, labor unions, media, etc.).

  21. 21. This explains why Friot is not interested in the question of taxation and fiscal progressivity. But that does not prevent him from adopting, at times, more gradualist proposals, such as the idea of a food security program that would be financed by a new welfare contribution and would grant everyone a monthly subsidy to buy food from certified producers, a proposal that could certainly be included in the decentralized framework defended here.

  22. 22. S. Weeks, “Collective Effort, Private Accumulation: Constructing the Luxembourg Investment Fund, 1956–2019,” in Accumulating Capital Today: Contemporary Strategies of Profit and Dispossessive Policies, ed. M. Benquet and T. Bourgeron (London: Routledge, 2021). Compare C. Herlin-Giret, Rester riche. Enquête sur les gestionnaires de fortune et leurs clients (Lormont: Le Bord de l’eau, 2019); S. Guex, “L’emergence du paradis fiscal suisse,” in Pour une histoire sociale et politique de l’économie, ed. D. Fraboulet and P. Verheyde (Paris: Editions de la Sorbonne, 2020).

  23. 23. P. Francois and C. Lemercier, Sociologie historique du capitalisme (Paris: La Decouverte, 2021). On the way, the themes of agility and flexible, reactive structures have been used to make old public and private bureaucracies seem obsolete and to reconfigure the ideology of capitalism in the 1970s and 1980s; see L. Boltanski and E. Chiapello, The New Spirit of Capitalism, trans. G. Elliott (London: Verso, 2006). The generalized financialization has also resulted in a multiplication of cross-ownerships between companies and between countries: the total of private financial assets and liabilities held by banks, enterprises, and households has risen from 200 percent of GDP in 1970 to 1,000 percent of GDP in 2020 (without even including derivatives), whereas real wealth (that is, the net value of enterprises’ immoveable assets) rose from 300 percent to 500 percent of GDP.

  24. 24. O. Rosenboim, The Emergence of Globalism (Princeton, NJ: Princeton University Press, 2017), shows that other theses were formulated in the 1940s, like those of Barbara Wooton and William Beveridge regarding a future European federation based on social protection, progressive federal taxation, and democratic socialism.

  25. 25. R. Abdelal, Capital Rules: The Construction of Global Finance (Cambridge, MA: Harvard University Press, 2007). The inquiry is based especially on the testimony of officials of the time (in particular, J. Delors and P. Lamy). Compare B. Lemoine, L’Ordre de la dette. Enquête sur les infortunes de l’État et la prospérité du marché (Paris: La Découverte, 2016).

  26. 26. The European Court of Justice (ECJ) has gone particularly far in defending the absolutely free circulation of capital (including via the creation of offshore structures making it possible to evade de facto any regulation), but this development would not have been possible had the Maastricht Treaty correctly taken into account the right of the states to set rules and to levy taxes. See K. Pistor, The Code of Capital: How the Law Creates Wealth and Inequality (Princeton, NJ: Princeton University Press, 2019).

  27. 27. For example, the minimal rate of 21 percent envisaged by the Biden administration (as opposed to the current 12 percent rate in Ireland) could play a useful role if it were merely a first step in initiating a global financial register, one that would reestablish fiscal progressivity (with rates potentially reaching 80–90 percent on the highest incomes from capital and labor). Things are very different if it is a final rate (which could, moreover, be further lowered to about 15 percent, to judge by OECD-level discussions).