{ SEVENTEEN }

Elements for a Participatory Socialism for the Twenty-First Century

In this book I have tried to present a reasoned history of inequality regimes from early trifunctional and slave societies to modern hypercapitalist and postcolonial ones. All human societies need to justify their inequalities. Their histories are organized around the ideologies they develop to regulate, by means of complex and changing institutional arrangements, social relations, property rights, and borders. The search for a just inequality is of course not exempt from hypocrisy on the part of dominant groups, but every ideology contains plausible and sincere elements from which we can derive useful lessons.

In the last few chapters, I have tried to highlight the significant dangers posed by the rise of socioeconomic inequality since 1980. In a period marked by internationalization of trade and rapid expansion of higher education, social-democratic parties failed to adapt quickly enough, and the left-right cleavage that had made possible the mid-twentieth-century reduction of inequality gradually fell apart. The conservative revolution of the 1980s, the collapse of Soviet communism, and the development of neo-proprietarian ideology vastly increased the concentration of income and wealth in the first two decades of the twenty-first century. Inequality has in turn heightened social tensions almost everywhere. For want of a constructive egalitarian and universal political outlet, these tensions have fostered the kinds of nationalist identity cleavages that we see today in practically every part of the world: in the United States and Europe, India and Brazil, China and the Middle East. When people are told that there is no credible alternative to the socioeconomic organization and class inequality that exist today, it is not surprising that they invest their hopes in defending their borders and identities instead.

Yet the new hyper-inegalitarian narrative that has taken hold since the 1980s is not ordained by fate. While it is partly a product of history and of the communist debacle, it is also a consequence of the failure to disseminate knowledge, of disciplinary barriers that are too rigid, and of insufficient citizen appropriation of economic and financial issues, which are too often left to others. The study of history has convinced me that it is possible to transcend today’s capitalist system and to outline the contours of a new participatory socialism for the twenty-first century—a new universalist egalitarian perspective based on social ownership, education, and shared knowledge and power. In this final chapter, I will attempt to gather up some of the elements that I believe will help us to progress toward this goal, based on the lessons of the past highlighted in previous chapters. I will begin by looking at the conditions of just ownership. New forms of social ownership will need to be developed, along with new ways of apportioning voting rights and decision-making powers within firms. The notion of permanent private ownership will need to be replaced by temporary private ownership, which will require steeply progressive taxes on large concentrations of property. The proceeds of the wealth tax will then be parceled out to every citizen in the form of a universal capital endowment, thus ensuring permanent circulation of property and wealth. I will also consider the role of progressive income taxes, universal basic incomes, and educational justice. Finally, I will look at the issue of democracy and borders and ask how it might be possible to reorganize the global economy so as to favor a transnational democratic system aimed at achieving social, fiscal, and environmental justice.

To be perfectly frank, it would be absurd for anyone to claim to have perfectly satisfactory and convincing answers to such complex questions or to present ready-made, easily applicable solutions. That is obviously not the purpose of the pages that follow. The whole history of inequality regimes shows that what makes historical change possible is above all the existence of social and political mobilizations for change and concrete experimentation with alternative arrangements. History is the product of crises; it never unfolds as textbooks might lead one to expect. Nevertheless, it seems useful to devote this final chapter to the lessons one can draw from the available sources and to the positions I would be inclined to defend if I had all the time in the world to deliberate. I have no idea what the crises to come might look like or what ideas will be drawn upon to propose new paths forward. But there is no doubt that ideology will continue to play a central role, for better and for worse.

Justice as Participation and Deliberation

What is a just society? For the purposes of this book, I propose the following imperfect definition. A just society is one that allows all of its members access to the widest possible range of fundamental goods. Fundamental goods include education, health, the right to vote, and more generally to participate as fully as possible in the various forms of social, cultural, economic, civic, and political life. A just society organizes socioeconomic relations, property rights, and the distribution of income and wealth in such a way as to allow its least advantaged members to enjoy the highest possible life conditions. A just society in no way requires absolute uniformity or equality. To the extent that income and wealth inequalities are the result of different aspirations and distinct life choices or permit improvement of the standard of living and expansion of the opportunities available to the disadvantaged, they may be considered just. But this must be demonstrated, not assumed, and this argument cannot be invoked to justify any degree of inequality whatsoever, as it too often is.

This imprecise definition of the just society does not resolve all issues—far from it. But to go further requires collective deliberation on the basis of each citizen’s historical and individual experience with participation by all members of society. That is why deliberation is both an end and a means. The definition is nevertheless useful because it allows us to lay down certain principles. In particular, equality of access to fundamental goods must be absolute: one cannot offer greater political participation, extended education, or higher income to certain groups while depriving others of the right to vote, attend school, or receive health care. Where do fundamental goods such as education, health, housing, culture, and so on end? That is obviously a matter for debate and cannot be decided outside the framework of a particular society in a particular historical context.

To my way of thinking, the interesting questions arise when one begins to look at the idea of justice in particular historical societies and to analyze how conflicts over justice are embodied in discourse, institutions, and specific social, fiscal, and educational arrangements. Some readers may find that the principles of justice I set forth here are similar to those formulated by John Rawls in 1971.1 There is some truth to this, provided one adds that similar principles can be found in much earlier forms in many civilizations: for instance, in Article I of the Declaration of the Rights of Man and the Citizen of 1789.² Nevertheless, grand declarations of principle like those formulated during the French Revolution or in the US’s Declaration of Independence did nothing to prevent the persistence and exacerbation of large social inequalities in both countries throughout the nineteenth and into the twentieth centuries, nor did they prevent the establishment of systems of colonial domination, slavery, and racial segregation that endured until the 1960s. Hence it is wise to be wary of abstract and general principles of social justice and to concentrate instead on the way in which those principles are embodied in specific societies and concrete policies and institutions.³

The elements of a participatory socialism that I will present below are based primarily on the historical lessons presented in this book—especially the lessons that can be drawn from the major transformations of inequality regimes that took place in the twentieth century. In reflecting on how to apply those lessons, I have had in mind today’s societies, the societies of the early twenty-first century. Some of the items discussed below demand significant state, administrative, and fiscal capacities if they are to be implemented, and in that sense they are most directly applicable to Western societies and to the more developed non-Western ones. But I have tried to think about them in a universal perspective, and they may gradually become applicable to poor and emerging countries as well. The proposals I examine here derive from the democratic socialist tradition, notably in the emphasis I place on transcending private ownership and involving workers and their representatives in corporate governance (a practice that has already played an important role in German and Nordic social democracy). I prefer to speak of “participatory socialism” to emphasize the goal of participation and decentralization and to sharply distinguish this project from the hypercentralized state socialism that was tried in the twentieth century in the Soviet Union and other communist states (and is still widely practiced in the Chinese public sector). I also envision a central role for the educational system and emphasize the themes of temporary ownership and progressive taxation (bearing in mind that progressive taxes played an important role in British and American progressivism and were widely debated though never implemented during the French Revolution).

In view of the largely positive results of democratic socialism and social democracy in the twentieth century, especially in Western Europe, I think that the word “socialism” still deserves to be used in the twenty-first century to evoke that tradition even as we seek to move beyond it. And move beyond it we must if we are to overcome the most glaring deficiencies of the social-democratic response of the past four decades. In any case, the substance of the proposals we will discuss matters more than any label one might attach to them. It is perfectly comprehensible that for some readers the word “socialism” will have been permanently tarnished by the Soviet experience (or by the actions of more recent governments that were “socialist” in name only). Therefore, they would prefer a different word. Nevertheless, I hope that such readers will at least follow my argument and the propositions that flow from it, which in fact draw on experiences and traditions of many kinds.⁴

Note, finally, that the options defended here reflect the following thought experiment. Suppose that we have unlimited time for debate in an immense global agora. The subject of debate is how best to organize the property regime, fiscal and educational systems, borders, and the democratic regime itself. The choices I make below are the ones I would defend in such a setting on the basis of the historical knowledge I acquired to write this book and in the hope of persuading the largest possible number of people that these are the policies that should be implemented. However useful such a thought experiment might be, it is clearly artificial in several respects. First, no one has unlimited time for debate. In particular, political movements and parties often have very little time to communicate their ideas and proposals to citizens, who in turn have limited patience for hearing them (often for good reasons, because people have other priorities in life besides listening to their political arguments).

Last but not least, if this endless deliberation were ever to take place in reality, I would no doubt have reason to revise the positions I am about to defend, which inevitably reflect the limited range of arguments, data, and historical sources to which I have been exposed to date. Each new discussion further enriches the fund of material on which I base my reflections. I have already revised my positions profoundly as a result of the readings, encounters, and debates in which I have been fortunate to participate, and I will continue to revise my views in the future. In other words, justice must always be conceived as the result of ongoing collective deliberation. No book and no single human being can ever define the ideal property regime, the perfect voting system, or the miraculous tax schedule. Progress toward justice can occur only as the result of a vast collective experiment. As history unfolds, the experience of each individual must be brought to bear in the widest possible deliberation. The elements I will explore here are meant merely to indicate possible paths for experimentation, derived from analysis of the histories recounted in the preceding chapters.

On the Transcendence of Capitalism and Private Property

What is just ownership? This is the most complex and central question we must try to answer if the goal is to define participatory socialism and imagine the transcendence of capitalism. For the purposes of this book, I have defined proprietarianism as a political ideology based on the absolute defense of private property; capitalism is the extension of proprietarianism to the age of large-scale industry, international finance, and more recently to the digital economy. At bottom capitalism rests on the concentration of economic power in the hands of the owners of capital. In principle, the owners of real estate capital can decide to whom they wish to rent and at what price while the owners of financial and professional capital govern corporations according to the principle of “one share, one vote,” which entitles them, among other things, to decide by themselves whom to hire and at what wage.

In practice, this strict capitalist model has been altered and modified in various ways, and the notion of private property has therefore evolved since the nineteenth century, owing to changes in the legal and social system and the tax system. Changes in the legal and social system limited the power of the owners of property: for instance, renters were given long-term guarantees against evictions and rent increases, and some were even granted the right to purchase at a low price apartments or land that they had occupied for a sufficiently long period of time—a veritable redistribution of wealth. Similarly, the power of shareholders in firms was strictly limited by labor codes and social legislation; in some countries, worker representatives were granted seats and voting rights alongside shareholders on boards of directors, a move that if carried to its logical conclusion would amount to a veritable redefinition of property rights.

The tax system also curtailed the rights of property owners. Progressive inheritance taxes, which attained rates as high as 30–40 percent in most developed countries in the twentieth century (and 70–80 percent in the United States and United Kingdom for many decades) amounted in practice to transforming permanent ownership into temporary ownership. In other words, each generation is allowed to accumulate considerable wealth, but part of that wealth must be returned to the community at that generation’s passing or shared with other potential heirs, who thus get a fresh start in life. Furthermore, progressive income taxes, assessed at rates comparable to the inheritance tax (or even higher in the United Kingdom and United States), which historically were directed at high capital incomes, also made it increasingly difficult to perpetuate large fortunes across generations (without a significant reduction in expenditure).

In order to transcend capitalism and private property and bring participatory socialism into being, I propose to rely on and improve these two instruments. Briefly, much more can be done with the legal and fiscal systems than has been done thus far: first, we can establish true social ownership of capital by more extensive power sharing within firms, and second, we can make ownership of capital temporary by establishing progressive taxes on large fortunes and using the proceeds to finance a universal capital endowment, thus promoting permanent circulation of property.

Sharing Power in Firms: An Experimentation Strategy

Begin with social ownership. Systems for sharing voting rights within firms have existed in Germanic and Nordic Europe since the late 1940s and early 1950s. Workers’ representatives hold half the seats on boards of directors in German companies and a third of the seats in Sweden (including small business in the Swedish case), regardless of whether they own any capital.5 These so-called co-management (or codetermination) arrangements were the result of hard-fought battles waged by unions and their political allies. The struggle began in the late nineteenth century. The balance of power began to shift after World War I and changed decisively after World War II. Substantial changes in the law went hand in hand with major constitutional innovations. Specifically, the German constitutions of 1919 and 1949 adopted a social definition of the rights of ownership, which took into account the general interest and the good of the community. Property rights ceased to be held sacred. Though shareholders initially fought these changes tooth and nail, the new rules have now been in force for more than half a century and enjoy widespread public approval.

All available evidence shows that co-management has been a great success. It has encouraged greater worker involvement in shaping the long-term strategies of employers and counterbalanced the often harmful short-term focus of shareholders and financial interests. It has helped the Germanic and Nordic countries to develop an economic and social model that is more productive and less inegalitarian than other models. It should therefore be adopted without delay in other countries in its maximal version, with half the board seats in all private firms, large or small, given to workers.⁶

As promising as Germano-Nordic co-management is, it suffers from numerous limitations, starting with the fact that shareholders have the decisive vote in case of a tie. Two possible improvements are worth considering. First, if wealth inequality is reduced by way of progressive taxation, capital endowments, and circulation of property, which I will discuss in due course, workers may be able to acquire shares in their firm and thus shift the balance of power by adding shareholder votes to the half they already hold as members of the board. Second, the rules apportioning votes on the basis of capital invested should also be rethought. As noted earlier, it would not be in the general interest to entirely eliminate the link between capital invested and economic power in the firm, at least in the smallest companies. If a person invests all her savings in a project of passionate interest, there is nothing wrong with her being able to cast more votes than a worker hired the day before, who may be setting aside his earnings to develop a project of his own.⁷

Might it not be justifiable, however, to place a ceiling on the votes of large shareholders in major corporations? One recent proposal along these lines concerns “nonprofit media organizations”: investments beyond 10 percent of a firm’s capital would obtain voting rights corresponding to one-third of the amount invested, with the voting rights of smaller investors (including journalists, readers, crowd funders, and so on) augmented accordingly.⁸ Initially conceived for nonprofit media organizations, this proposal could be extended to other sectors, including profit-making ones. A good formula might be to apply a similar vote ceiling to investments above 10 percent of capital in firms above a certain size.⁹ The justification for this is that there is no reason why a large firm should leave power concentrated in the hands of a single individual and deprive itself of the benefits of collective deliberation.

Note in passing that many organizations in both the private and public sector function perfectly well without shareholders. For instance, most private universities are organized as foundations. The generous donors who contribute to their capital may derive some benefit from their contributions (such as preferential admission for their children or even a seat on the board), which incidentally should be regulated more strictly. There are other problems with this model, which ought to be corrected.¹⁰ Nevertheless, donors are in a much weaker position than shareholders. Their contributions become part of the university’s capital, and compensation such as seats on the board can be withdrawn at any time; with shareholders and their heirs this is not possible. Yet contributors continue to give, and private universities continue to function. To be sure, attempts have been made to organize universities as profit-making corporations (think of Trump University), but the results have been so disastrous that the practice has virtually disappeared.¹¹ This clearly shows that it is not only possible to drastically limit the influence of investors but also that organizations often work better when investor power is limited. Similar observations could be made about the health, culture, transportation, and environmental sectors, which will likely play a central role in the future. In general, the idea that the “one share, one vote” model of corporate organization is indisputably the best cannot withstand close scrutiny.

Reducing wealth inequality and capping large shareholder voting rights are the two most natural ways of extending the Germano-Nordic co-management model. There are others, such as a recent British proposal to have some board members elected by a mixed assembly of shareholders and workers.¹² This could allow novel deliberations to unfold and new coalitions to emerge, breaking out of the stereotypical roles that co-management sometimes forces on participants. But the debate does not end there: concrete experimentation is the only way to develop new organizational forms and social relations. What is certain is that there are many ways to improve on co-management as it currently exists so that social ownership and corporate power sharing can contribute to the goal of transcending capitalism.

Progressive Wealth Taxes and Circulation of Capital

Social ownership and shared voting rights in firms are important tools for transcending capitalism, but by themselves they are not enough. Once one accepts the idea that private property will continue to play a role in a just society, especially in small and medium firms, it becomes essential to find institutional arrangements that will prevent unlimited concentration of ownership which does not serve the general interest, regardless of the reasons for such concentration. In this respect, the lessons of history are quite clear: the extreme concentration of wealth that we observe in nearly all societies (and especially in Europe) up to the early twentieth century, when the wealthiest 10 percent owned 80–90 percent of all property (and the wealthiest 1 percent owned 60–70 percent), did not serve the general interest at all. The clearest proof of this assertion is that the very significant reduction of inequality that followed the shocks and political-ideological changes of the period 1914–1945 did not inhibit economic development. The concentration of wealth was significantly lower after World War II (with the top decile reduced to owning around 50–60 percent and the top centile 20–30 percent) than before 1914, yet growth accelerated.13 Whatever the wealthy of the Belle Époque (1880–1914) may have thought to the contrary, extreme inequality was not the necessary price of prosperity and industrial development. Indeed, all signs are that the excessive concentration of wealth exacerbated social and nationalist tensions while blocking the social and educational investments that made the balanced postwar development model possible. Furthermore, the increased concentration of wealth that we have seen since the 1980s in the United States, Russia, India, and China and to a lesser extent in Europe shows that extreme wealth inequality can reconstitute itself for many different reasons, from profiteering on privatizations to the fact that large portfolios earn higher returns than small ones, without necessarily yielding higher growth for the majority of the population—far from it.¹⁴

To prevent a return to such extreme wealth concentration, progressive taxes on inheritances and income must again play the role that they used to play in the twentieth century when rates in the United States and United Kingdom ran as high as 70–90 percent on the highest incomes and largest fortunes for decades—decades in which growth rose to unprecedented levels.¹⁵ Historical experience shows, however, that inheritance and income taxes alone are not enough; they need to be complemented by a progressive annual tax on wealth, which I see as the central tool for achieving true circulation of capital.

There are several reasons for this. First, the wealth tax is more difficult to manipulate than the income tax, particularly for the very wealthy, whose taxable income is often a small fraction of their wealth, while their actual economic income accumulates in family holdings or special-purpose vehicles. If a progressive income tax is the only available tool, it is almost inevitable that wealthy individuals will pay risibly small taxes compared to the size of their fortunes.¹⁶

Note, moreover, that wealth is in itself an indicator of capacity to contribute to common expenditures—an indicator at least as relevant and consistent as annual income, which can vary for all sorts of reasons (some of which are irrelevant to deciding what a just tax should be). For example, if a person owns important properties (such as houses, apartments, warehouses, and factories) that for one reason or another legitimately generate no significant income, perhaps because they have been set aside for some purpose or have not been maintained, he should still be required to pay taxes. In fact, in all countries where there is a tax on real estate (whether housing or offices or professional equipment of any kind), such as the property tax in the United States or the taxe foncière (real estate tax) in France, no one would think of exempting large owners (whether private individuals or firms) on the grounds that they derive no income from their property.¹⁷ But these taxes date from the eighteenth or nineteenth centuries, and for historical reasons many types of assets are exempt (such as intangible and financial assets). What is more, the tax is strictly proportional: the same tax rate is applied to all assets, no matter how large the portfolio to which they belong. Hence the redistributive effect is much smaller than it would be if total assets of all kinds (net of debt) were taxed at progressive rates.¹⁸

Compared with the progressive inheritance tax, which is also a tax on wealth (in that it depends solely on ownership and not on income), the advantage of the annual wealth tax is that it can adapt much more quickly to changes in wealth and in the ability of each taxpayer to pay. There is no need to wait for Mark Zuckerberg or Jeff Bezos to turn 90 years old and pass their wealth to their heirs in order to collect taxes. The inheritance tax is by its very nature not a good tool for taxing newly amassed fortunes. The annual wealth tax is better suited to the task, especially in view of today’s longer life expectancy. Note, moreover, that current wealth taxes (such as the property or real estate tax), for all their limitations, have always generated more revenues than inheritance taxes, yet they are less unpopular. Indeed, it is striking to see how unpopular inheritance taxes are in all surveys, while property and income taxes are relatively well tolerated. Progressive wealth taxes (such as the ISF in France or the “millionaire tax” mentioned in US polling on the subject) are very popular.¹⁹ In other words, taxpayers would prefer to pay an annual tax on the order of 1–2 percent of the value of their property over a period of decades rather than having to pay 20–30 percent when they pass their estate on to their heirs.

Of course, the hostility of some lower- and middle-class taxpayers to the inheritance tax may be due to a misperception of the actual incidence of that tax (a misperception that those hostile to progressive taxation naturally do what they can to sustain). But it also reflects a comprehensible fear on the part of people who have recently purchased property and who may have limited cash reserves and financial assets that their children will be obliged to pay a lump-sum tax so large that they may be forced to sell the property (be it a home, a vacation house, or a small business) in order to pay the tax.²⁰ In fact, when one considers all these aspects of the issue, it seems reasonable that the annual property tax should play a larger role than the inheritance tax (in terms of tax revenue), provided that the annual tax is made progressive.²¹

The Diffusion of Wealth and the Universal Capital Endowment

Last but not least, a progressive wealth tax is an indispensable tool for ensuring a greater circulation of wealth and broader diffusion of property than in the past. To be sure, the progressive inheritance and income taxes that were developed in the twentieth century significantly reduced income and wealth inequality in Europe, the United States, and Japan. Despite the historical importance of this change, it is important not to lose sight of the fact that wealth nevertheless remained extremely concentrated. In Europe, the top decile’s share of private wealth decreased from 80–90 percent in 1900–1910 to 50–60 percent in 2010–2020. Not only is that still a considerable share for just 10 percent of the population, but the fact is that the beneficiaries of this reduction of wealth inequality were almost exclusively people in the fiftieth to ninetieth percentile (whose share rose from barely 10 percent to 30–40 percent of the total). By contrast, the diffusion of wealth never really touched the bottom 50 percent, whose share of total private wealth has always been around 5–10 percent (or even lower) in all countries and periods for which data are available.22 Since the 1980s, moreover, the share of private wealth held by the disadvantaged classes (the bottom 50 percent of the distribution) and by the patrimonial middle class (as I call the next, or “middle,” 40 percent—the fiftieth to ninetieth percentile of the distribution) has shrunk nearly everywhere. This is true in particular in the United States, where the share of wealth owned by the well-to-do (the top decile) has risen above 70 percent in the 2010s. It is also the case in Europe, though to a lesser degree, as well as in India, China, and Russia, where the concentration of wealth is rapidly approaching that of the United States (or surpassing it, in the case of Russia).²³

This limited diffusion of wealth implies that the bottom 50 percent have minimal opportunity to participate in economic life by creating and running a business. This is not the ideal of participation that a just society should strive to achieve. Many attempts have been made to diffuse wealth more broadly, including agrarian reform intended to break up large farms of hundreds or thousands of acres to allow more modest farmers to work their own land and reap the fruits thereof instead of paying rent to landlords. The French Revolution witnessed a number of more or less ambitious efforts of land reform, although poor peasants were not always the primary beneficiaries.²⁴ More ambitious agrarian reforms have been carried out in other countries over the past two centuries: in Ireland and Spain in the late nineteenth and early twentieth centuries, in Mexico after the revolution of 1910, in Japan and Korea after World War II, and in certain Indian states (such as West Bengal or Kerala) in the 1970s and 1980s.²⁵

Agrarian reform has thus played a significant role in diffusing wealth in a variety of contexts. Yet if faces a number of structural problems. First, there is no obvious reason why wealth redistribution should be limited to property in land (other than simplicity, especially in largely rural societies). In practice, different forms of capital are complementary, and the hyperconcentration of other assets (such as equipment, tools, warehouses, offices, buildings, cash, and financial assets of all kinds) poses similar problems to the concentration of landed wealth. In particular, it leads to hyperconcentration of economic power in the hands of a few. Furthermore, agrarian reformers tend to assume that it will suffice to redistribute property once and for all, after which economic development will proceed harmoniously forever after. Historical experience shows, however, that extreme inequality of wealth tends to reproduce itself in other forms as the agrarian societies of the past give way to societies based on industrial and financial wealth and real estate. Wealth can become reconcentrated for many reasons, including economic upheavals that benefit a minority (such as profitable privatizations or technological revolutions) and various cumulative mechanisms that allow the largest initial stakes to grow more rapidly than smaller fortunes (by achieving higher yields, using market power, or pursuing strategies of legal and fiscal optimization).

If one truly wants to diffuse wealth so as to allow the bottom 50 percent to acquire significant assets and participate fully in economic and social life, it is therefore essential to generalize and transform agrarian reform into a permanent process affecting the whole panoply of private capital. The most logical was to proceed would be to establish a capital endowment to be given to each young adult (at age 25, say), financed by a progressive tax on private wealth. By design, such a system would diffuse wealth at the base while limiting concentration at the summit.

The Progressive Tax Triptych: Property, Inheritance, Income

To clarify these ideas, I have indicated in Table 17.1 what a tax system capable of financing such a universal endowment might look like. In the broadest terms, the tax system of the just society would rest on three principal progressive taxes: a progressive annual tax on property, a progressive tax on inheritances, and a progressive tax on income.²⁶ As indicated here, the annual property tax and the inheritance tax would together yield about 5 percent of national income,²⁷ all of which would be used to finance the capital endowment. The progressive income tax, which would include social security taxes and a progressive carbon tax, would yield about 45 percent of national income, which would be used to finance all other public expenditures, including the basic income and, above all, the welfare state (which would cover health, education, pensions, and so on).²⁸ I will begin by discussing the wealth component—that is, the progressive taxes on property and inheritances and the universal capital endowment. I defer discussion of the income and welfare state component until later.

TABLE 17.1
Circulation of property and progressive taxation
Progressive property tax (financing the capital endowment to each young adult)						Progressive income tax (financing the basic income scheme and the social and ecological state)
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%
Interpretation: The proposed tax system includes a progressive tax on property (annual tax + 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 the basic income and the social and ecological state (health, education, pensions, unemployment, energy, etc.). This system of circulating property is one of the constituent elements of participatory socialism, with voting rights on corporate boards shared fifty-fifty between workers and stockholders. Note: In the example shown here, the progressive tax on property brings in roughly 5 percent of national income (allowing a capital endowment equivalent to 60 percent of the average wealth at age 25) 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 social and ecological state (40 percent of national income).

Several points call for further comment. The figures given here are for illustrative purposes only. Setting precise parameters will require extensive discussion and broad democratic deliberation; it is not my intention to end all debate with this book.²⁹ Note, too, that the wealth component includes a relatively ambitious version of the capital endowment. Specifically, with revenues on the order of 5 percent of national income from the property and inheritance taxes, it is possible to pay for an endowment of approximately 60 percent of average adult wealth to be given to each young adult at age 25.³⁰

Consider an example. In the rich countries (Western Europe, United States, Japan), average private wealth in the late 2010s was roughly 200,000 euros per adult.³¹ Thus, the capital endowment would amount to 120,000 euros. In essence, this system would provide every individual with the equivalent of an inheritance. Today, owing to the extreme concentration of wealth, the poorest 50 percent receive virtually nothing (barely 5–10 percent of average wealth); the richest 10 percent of young adults inherit several hundreds of thousands of euros, while others receive millions or tens of millions. With the system proposed here, every young adult could begin his or her personal and professional life with a fortune equal to 60 percent of the national average, which would open up new possibilities such as purchasing a house or starting a business. Note that this system of public inheritance for all would guarantee every individual a sum of capital at the age of 25, whereas private inheritance entails considerable uncertainty as to the age at which children will inherit from their parents (owing to wide variance in age of death and age at which parents have children). In practice, this means that children are inheriting later and later in life. Note, too, that the system proposed here would greatly reduce the average age of wealth holders, which could infuse new energy into society and the economy.³²

The system I am proposing has a long pedigree. In 1795, Thomas Paine, in his book Agrarian Justice, proposed an inheritance tax to finance a basic income.³³ More recently, Anthony Atkinson proposed using the receipts from a progressive inheritance tax to finance a capital endowment for every young adult.³⁴ The principal novelty of my proposal is to use the proceeds of both an inheritance tax and an annual property tax to pay for the capital endowment; this would make much larger endowments possible and ensure permanent circulation of wealth.³⁵ Note that the sums I am proposing to mobilize to finance the capital endowment are substantial (5 percent of national income) and would entail a significant increase of both the property and inheritance taxes for the wealthiest individuals.³⁶ Still, this is a small amount compared with the total tax bill (here set at 50 percent of national income). In the abstract, there is nothing to prevent an even more ambitious system of capital endowment than I am proposing here; for example, one might consider a transfer equal to the average wealth per adult in any given society.³⁷

In my view, this system should be used together with the new rules for power sharing on corporate boards and caps on the influence of large shareholders, which I discussed earlier. That way, the diffusion and rejuvenation of wealth will have an even greater effect on the distribution of economic power.

On the Return to Fiscal Progressivity and Permanent Land Reform

I turn now to the progressive tax rates and schedules needed to finance all of these innovations. I propose that the rates to be assessed on the largest inheritances and highest incomes should be on the order of 60–70 percent on fortunes or incomes greater than ten times the average wealth or income and on the order of 80–90 percent for those above one hundred times the average (Table 17.1).³⁸ These rates are consistent with those assessed in the twentieth century in a number of countries (including the United States and United Kingdom in the period 1930–1980). In retrospect, we can see that those decades witnessed some of the strongest growth ever observed.³⁹ It therefore seems reasonable to try such high rates again.⁴⁰ To do so would indicate a clear determination to reduce inequality and break with Reaganism, which could have an important effect on transforming the structure of electoral and political conflict.

The most innovative aspect of the new taxes I am proposing, which of course call for further discussion, relates to the annual progressive wealth tax. Looking to the past, we find that wealth taxes tended to be rather haphazardly designed. Taxes like the property tax in the United States or the real estate tax in France, which originated in the nineteenth century, generally have effective rates today of about 1 percent. They generally do not factor in financial assets (which constitute the bulk of large fortunes) or debt (which is of course a heavier burden on the less wealthy). Hence they are in fact steeply regressive wealth taxes, with much higher effective rates on the smallest fortunes than on the largest ones.⁴¹ As for the wealth taxes that were tested in the twentieth century, especially in Germanic and Nordic Europe as well as in France in recent decades with the ISF, rates have generally varied from 0 percent for the smallest fortunes to 2–3 percent for the largest.⁴²

Where land reform was implemented, implicit tax rates on the largest estates were sometimes a great deal higher. For example, if agrarian reformers decide that all farms of 500 acres or more must be redistributed to landless peasants, then the effective tax rate on a 2,000-acre property works out to 75 percent.⁴³ Hypothetically, one might imagine that all of Ireland belonged to one person or that a single individual possessed a formula of infinite value to all mankind, in which case common sense would clearly dictate a redistribution rate close to 100 percent.⁴⁴ When one-time taxes were levied on real estate and financial capital at the end of World War II, rates as high as 40–50 percent (or even higher) were applied to the largest fortunes.⁴⁵

The tax schedule shown in Table 17.1 for the progressive property tax tries to combine these previous experiments in a consistent way. The tax rate is 0.1 percent for wealth below the national average, rising gradually to 1 percent at twice the national average, 10 percent at one hundred times the national average, 60 percent at 1,000 times the national average (or 200 million euros if the average wealth per adult is 200,000 euros), and 90 percent at 10,000 times the national average (which would be 2 billion euros). Compared with the current system of taxing property at a flat rate, which is in use in a number of countries, this schedule would result in a substantial tax decrease for the 80–90 percent of least wealthy people and would therefore make it easier for them to acquire property. By contrast, the wealthiest people would face very heavy tax increases. The 90 percent tax on billionaires would immediately reduce their wealth to one-tenth of what it was and reduce the share of national wealth held by billionaires to a level below what it was in the period 1950–1980.⁴⁶

I want to emphasize once again that the tax rates indicated here are for illustrative purposes only; they should be subject to collective deliberation and extensive experimentation. One of the virtues of the progressive property tax is to promote transparency in regard to wealth. In other words, establishing such a tax, possibly with lower rates than those indicated here, would yield more information about the rate of growth of fortunes of different sizes, and rates could then be adjusted as necessary to achieve whatever goal of wealth deconcentration society chooses to set. The evidence available at this stage shows that the largest fortunes have been growing at rates on the order of 6–8 percent a year since the 1980s.⁴⁷ This suggests that tax rates of at least 5–10 percent are necessary to reduce the concentration of wealth at the top of the distribution or at least to stabilize it.⁴⁸ Note, too, that it is not strictly necessary (absent some special emergency) to tax the largest fortunes immediately at rates of 60 to 90 percent: rates of 10–20 percent would achieve the same result within a few years. The rates indicated in Table 17.1 are intended to show the range of possibilities and stimulate debate.

Note, finally, that it is in any case essential that the progressive property and inheritance taxes proposed here apply to overall wealth—that is, the total value of real estate and business and financial assets (net of debt) held or received by a given individual, without exception.⁴⁹ Similarly, the progressive income tax should apply to total income, including income from both labor (wages, pensions, nonwage income, etc.) and capital (dividends, interest, profits, rents, etc.).⁵⁰ History shows that if different types of assets and different forms of income are not treated identically by the tax code, taxpayers will respond by optimizing, creating a sense of injustice that can undermine the system, not only technically but also by making it less democratically acceptable.⁵¹ In particular, it would make little sense to exempt specific types of assets from the property or inheritance tax, because to do so would only encourage tax avoidance.⁵²

Toward Social and Temporary Ownership

To recapitulate: the model of participatory socialism proposed here rests on two key pillars: first, social ownership and shared voting rights in firms, and second, temporary ownership and circulation of capital. These are the essential tools for transcending the current system of private ownership. By combining them, we can achieve a system of ownership that has little in common with today’s private capitalism; indeed, it amounts to a genuine transcendence of capitalism.

These proposals may seem radical. In fact, they are the culmination of an evolution that began in the late nineteenth and early twentieth centuries. Both power sharing in firms and progressive taxation originated in that period. In recent decades, this evolution has come to a halt, in part because social democrats failed to innovate and internationalize their project and in part because the dramatic collapse of Soviet-style communism plunged the world into a phase of unlimited deregulation and abandonment of all egalitarian ambitions in the 1980s (Russia and its oligarchs are no doubt the most glaring illustration of this change).53 The skill with which the resulting political-ideological vacuum was filled by the promoters of the conservative revolution of the 1980s and of the nationalist anti-immigrant line in more recent times did the rest. Since the crisis of 2008, however, the first glimmers of a new movement have become visible, and many proposals for new forms of power sharing and progressive taxation have emerged and are being debated widely.⁵⁴ Of course, neo-proprietarian ideology remains tenacious, and nativist retreat remains tempting, but there has been clear change. The proposals I am making here merely add to that movement, which I have tried to set in a broad historical perspective.

In particular, the notion of temporary ownership embodied in the progressive property tax described above is ultimately just an extension of forms of temporary ownership implicit in the progressive inheritance and income taxes that were tried in the twentieth century. In general, these fiscal institutions looked at property as a social relation, which therefore had to be regulated as such. The idea that strictly private property exists and that certain people have an inviolable natural right to it cannot withstand analysis. The accumulation of wealth is always the fruit of a social process, which depends, among other things, on public infrastructures (such as legal, fiscal, and educational systems), the social division of labor, and the knowledge accumulated by humanity over centuries. Under such conditions, it is perfectly logical that people who have accumulated large amounts of wealth should return a fraction of it to the community every year: ownership thus becomes temporary rather than permanent. Ultimately, the only real argument against this logic is the “Pandora’s box argument” to which I have alluded several times: namely, that any challenge to private property will inevitably unleash uncontrollable chaos so that it is better never to open the box. But the experience of the twentieth century showed that this argument is bogus: not only are steeply progressive taxes compatible with rapid growth; more than that, they are an important component of a developmental strategy based on relatively equal access to education and an overall reduction in inequality.

Once again, I want to stress that the purpose of citing the lessons of history is to suggest possible avenues of experimentation, not ready-made solutions. On issues like power sharing in corporations, progressive taxation, and permanent circulation of wealth, thinking will not change until successful experiments show that the innovations I am proposing can work. This is the way it has always been when it comes to changing inequality regimes.⁵⁵

On Transparency of Wealth in One Country

Ideally, the return to social progressivity and the implementation of a progressive property tax should take place in as broad an international setting as possible. It would be best to establish a public financial register that would allow governments and tax authorities to exchange all pertinent information about the ultimate owners of the financial assets issued in various countries. Such registers exist already, but they are largely in the hands of private intermediaries. However, there is no reason why governments in Europe, the United States, and elsewhere could not agree to change the terms of certain treaties to require the recording of assets in a public register; there is no technical obstacle to doing so.56

I will say more later about how one might think about transforming the legal foundations of the global economy and rewriting the treaties that regulate commercial and financial exchanges to foster a form of social federalism at the global level. At this stage, I simply want to point out that governments have considerable freedom to maneuver. They can make progress toward reducing inequality and establishing more just forms of ownership without waiting for international cooperation to be achieved. This is obvious for very large states such as the United States and China (and soon for India). In the United States there is no doubt whatsoever that the federal government, if it has the will to do so, has the means to enforce any decisions it makes in regard to taxes. I alluded earlier to the threat of US sanctions on Swiss banks in 2010, which led immediately to changes in Swiss banking laws.⁵⁷ This could be done much more systematically.

Note, too, that much of US tax law applies to US citizens no matter where they live. In other words, anyone wishing to escape the US tax authorities would have to give up US citizenship or even in some cases give up doing business in the United States (or even doing business in dollars, directly or indirectly, anywhere in the world). This can become very costly for an individual or business.⁵⁸ To sum up: whether the United States will or will not move to a more progressive tax structure (possibly including a progressive property tax leading to circulation of capital as described above) is a purely political and ideological question; there is no technical reason why it cannot be done.

It is also important to note that while smaller states, such as France, obviously have more to gain from international cooperation, they, too, have a great deal of room to maneuver if they wish to pursue new policies at the national level. Not only can they adopt new rules concerning power sharing and voting rights in firms (as countries such as Germany and Sweden did decades ago, without waiting for other countries to move); they can also adopt progressive property taxes and take other steps to reduce inequality of income and wealth. This is important, especially since it runs counter to the fatalistic view, common in recent decades, that globalization imposes one unique policy on everyone (which just happens to be the policy that proponents of this view favor). Such fatalism is largely responsible for the abandonment of ambitious economic reforms and the retreat into nativism and nationalism. In practice, however, receipts from the French wealth tax (ISF) more than quadrupled between 1990 and 2018, growing more than twice as fast as gross domestic product (GDP), which is a fairly clearly sign that it is possible to levy such a tax in one country and derive significant revenues from it.⁵⁹ This was true, moreover, even though enforcement of the wealth tax was always notoriously lax. Audits were woefully inadequate, and successive governments chose to allow individuals to declare their own assets without systematic checks, although they could have instituted a system based on pre-filled wealth declarations using information about financial assets supplied by banks and other financial institutions (while relying on the existing real estate register, with valuations updated to reflect recent transactions). Such pre-filled declarations are already standard practice in the case of the income tax. Had this been done, receipts from the ISF would have grown even more rapidly.

More generally, there is no reason why a medium-sized state (such as France) cannot move toward greater wealth transparency even in the absence of international cooperation. This is obviously true for real estate located inside the country, whether it is housing or business real estate (offices, factories, warehouses, shops, restaurants, etc.). More generally, it is also true for all firms doing business in the country or having economic interests there. Take the case of the French real estate tax (taxe foncière). Like the US property tax and similar levies in other countries, this tax must be paid by anyone who owns real estate (residential or business) on French soil.

Note that the real estate tax must be paid by property owners (individuals and firms) whether they themselves are based in France or abroad (or are held by individuals based in France or abroad). Currently, the amount of the real estate tax does not depend on the identity of the owner or the owner’s total wealth (since it is a strictly proportional tax) so that the tax authorities have no need of additional information (other than the name of the owner or entity to whom the bill should be sent). But the authorities could easily require corporations, holding companies, foundations, and other legal entities listed as owners to submit the names of their shareholders and the number of shares owned by each, failing which punitive sanctions would be applied.⁶⁰ With this information, coupled with information on financial assets submitted by banks and other financial institutions, tax authorities could easily transform the real estate tax into a progressive tax on individual net wealth, automatically accounting for all residential and business property in France, whether owned directly or by way of stock, partnership shares, or other types of financial intermediation. The tax authorities could also require all firms doing business in France or having economic interests in the country to submit information about their owners if such information would be useful for enforcing fiscal legislation.⁶¹

Such wealth transparency would make it possible to establish a uniform progressive tax on property (a direct descendant of the existing real estate tax and former wealth tax) while sharply decreasing taxes on people of modest means or without property and increasing taxes on those who already own large amounts.⁶² For example, a person who owned a home or business valued at 300,000 euros but with a debt of 250,000 euros would be taxed on the basis of her net wealth of only 50,000 euros, which with a progressive schedule such as the one shown in Table 17.1 would result in a tax close to zero and therefore a significant tax cut compared with the current real estate tax. By contrast, another person who owned a similar property worth 300,000 euros together with a financial portfolio worth 2 million euros, who currently pays the same real estate tax as the former (which says a great deal about the absurdity, injustice, and archaic nature of the current fiscal system, which dates all the way back to the turn of the nineteenth century), would face a sharp increase in his wealth tax.⁶³

With such a system, the only tax avoidance strategy available to the owners of residential or business property in France would be to sell the assets and leave the country. To combat that, an exit tax could be put in place.⁶⁴ In any case, such a tax avoidance strategy would imply selling the property (residence or business), which would decrease the corresponding price and lead to purchase by people remaining in the country (presumably much larger in number, including millions of highly competent individuals). Indeed, the possible decrease in asset prices would be an excellent thing, at least up to a point. In France and elsewhere, skyrocketing real estate prices (especially in large cities) have been driven in part by French and foreign buyers acquiring property they have no use for, which could usefully be purchased by less wealthy individuals. The important point is that, even without agreement with other countries, a country like France could easily impose new transparency rules on firms (and other “moral persons”) owning property on French soil.⁶⁵

On Writing Fiscal Justice into the Constitution

Finally, it is important to add that developing new forms of fiscal progressivity in order to move from private ownership to social and temporary ownership may require constitutional changes. This is not new. In 1913, the US Constitution had to be amended to allow the creation of a federal income tax and, later, a federal inheritance tax. The development of co-management and the inclusion of unions in corporate governance structures led to a new social and collective definition of property being written into the German constitutions of 1919 and 1949.66 Similarly, to institute the power sharing in corporations and progressive wealth and income taxes described above, it may be necessary to amend existing constitutions in some countries.

Broadly speaking, the constitutions and declarations of rights that emerged in the late eighteenth century or the following century were steeped in the proprietarian ideology of the era. Existing property rights enjoyed veritable constitutional protection, which could not be challenged for any reason, no matter what the politics of the government in power. It was also in this climate that the United Kingdom and France chose to compensate slaveowners when slavery was abolished in 1833 and 1848. In the mind of the ruling class at the time, it was simply unthinkable to deprive anyone of property without just compensation. By contrast, no one considered it useful to compensate the slaves for the wrongs they had suffered.⁶⁷ Respect for property owners continues to permeate any number of constitutions around the world today. These will need to be amended before circulation of property and universal capital endowments can become a reality. It would also be a good idea to constitutionally enshrine an explicit principle of fiscal justice based on progressive taxation so that it will be impossible for the rich to pay proportionately less in taxes than the poor (and possible for them to pay more, if legislators so decide; no constitutional judge should be allowed to obstruct the will of the majority in this regard).⁶⁸

In the same spirit, the constitution (or other fundamental law) should require the government to publish accurate annual estimates of the amounts of tax actually paid by different classes of income and wealth so that citizens can participate in informed debates on tax issues and their representatives can have reliable figures on which to base adjustments to the parameters of the tax system. This is especially important because the lack of sufficiently detailed information is one of the major factors preventing citizens from mobilizing and monitoring government action on these issues. This is true not only in capitalist democracies (where the lack of fiscal transparency is manifest, for example, in Europe, the United States, and India) but also in other political systems, such as Russia and communist China, where official rhetoric about combating corruption stands in stark contrast to the paucity of published fiscal data.⁶⁹

Recall, moreover, that the US Supreme Court and other constitutional tribunals that have the last word on constitutional issues in the various Western countries have often shown themselves to be extremely conservative on social and economic issues. Wherever the constitution leaves a crack through which they can inject their partisan views, justices are quick to pass their opinions off as law. Hence it is essential for the constitution to define fiscal justice and the principle of progressivity as precisely as possible while leaving it up to elected legislative bodies to determine how much progressivity there should be, allowing no room for judges to insert themselves into the process. Any number of episodes in constitutional history from the nineteenth century to the present show the need to be cautious and wary of the power of judges in economic and social matters. In 1895, the US Supreme Court chose to interpret the ambiguous terms of the constitution in a clearly conservative manner when they decided that a federal income tax would be unconstitutional (initiating a lengthy process that led to the Sixteenth Amendment in 1913). The following year, the same judges held in the sinister Plessy v. Ferguson case that it was perfectly legal for the southern states to practice racial segregation.⁷⁰

During the 1930s, the Supreme Court once again distinguished itself by striking down New Deal social and fiscal legislation on the grounds that certain new regulations unconstitutionally infringed on freedom of enterprise and private contract.⁷¹ Reelected in November 1936 with 61 percent of the vote and furious at having to delay implementation of his program, President Franklin D. Roosevelt announced in early 1937 that he intended to submit a bill that would allow him to appoint additional justices to the Supreme Court to end the stalemate.⁷² Ultimately, under pressure from the political branches, the court approved a key minimum wage law that it had previously struck down, ending the crisis.⁷³

Since the 1970s, thanks to justices appointed by Republican presidents, the Supreme Court has taken an increasingly conservative turn, striking down all legislation aimed at limiting the influence of private money in politics and campaign financing, all in the name of “free speech” as interpreted by the justices.⁷⁴ If the Democrats should decide in the future to legislate in this area, they will need to begin by amending the constitution (which is difficult, but it has been done many times in the past and should be kept in mind as a possible option when needed), or else they must change the composition of the Supreme Court, which is easier but generally viewed with suspicion.⁷⁵

Examples of abuse of judicial power are unfortunately not limited to the US Supreme Court. The Kirchhof affair in Germany is a particularly egregious case in point. A tax lawyer clearly angry about the tax system, Paul Kirchhof was presented as the person who would be named Angela Merkel’s finance minister if her party won the 2005 elections. He proposed limiting the tax rate on top earners to 25 percent. In politics, everyone is of course entitled to an opinion, but German voters were not impressed by Kirchhof’s ideas: his flat tax proposal significantly reduced the Christian Democratic Union’s margin of victory so that Merkel was eventually forced to form a coalition with the Social Democratic Party and jettison her would-be adviser. But the interesting point is that in 1995, when Kirchhof acted as a judge on the German constitutional court, he was able to condemn any tax above 50 percent as unconstitutional. This caused a scandal, and the decision was eventually overturned by other judges in 1999, who confirmed in 2006 that it was not within the power of judges to set quantitative limits on taxes.

In France, a former president of the Constitutional Council who served in several ministerial posts under conservative governments recently explained that the decision he was most proud of was a 2012 judgment declaring that a marginal tax rate of 75 percent on income above 1 million euros was unconstitutional. The decision was justified, he argued, because under the French constitution a tax is a “contribution” and cannot be “confiscatory.”⁷⁶ But nowhere does the constitution mention any specific figure, so this judgment rested on a purely personal interpretation by the judge.⁷⁷ Like any citizen, the former president of the Constitutional Council is obviously entitled to regard tax rates of 70–90 percent, which were assessed for decades on top incomes and inheritances in many countries in the twentieth century (including the United States and United Kingdom), as having failed to yield the desired results or as poor policy.⁷⁸ He is free to publish his arguments in the press, deliver them in speeches, share them with his friends, or even write a book. But to use his position as a constitutional judge to enforce his opinion without the slightest argument to support it represents a clear abuse of power.

To round out this discussion, let me add that constitutional courts are invaluable but fragile institutions. It is important to limit the ability of elected governments to instrumentalize them for their own purposes. Yet precisely because these institutions are so invaluable and fragile, it is also important to prevent judges to whom such eminent functions are entrusted from instrumentalizing them for their own purposes. It is therefore crucial to be clear about what belongs to the juridical realm and what to the political. In my view, the wisest course would be to write into the constitution a minimal principle of fiscal justice based on nonregressivity (that is, the proportionate burden of the wealth or income tax on the wealthiest segment of the population should not be lower than the proportionate burden on the poorest segment) and requiring the government to publish adequate information on how the tax is apportioned so that citizens can judge whether the principle of nonregressivity has been respected. It is essential to leave it to elected parliaments to set the desirable degree of progressivity after public deliberation and on the basis of historical and personal experience; judges should not be allowed to intervene.

Basic Income and Just Wage: The Role of the Progressive Income Tax

I have thus far concentrated on the question of diffusion of wealth. As important as this is, it is far from the only goal of inequality reduction. Under the tax system shown in Table 17.1, the progressive property tax (combining both the annual tax and the inheritance tax) would yield annual revenues equivalent to 5 percent of national income, compared with the 45 percent of national income generated by the progressive income tax. Of course, this does not mean that the wealth tax is only one-ninth as important as the income tax. The wealth component of my plan, which consists of the progressive property tax plus the universal capital endowment, will have a long-term structural effect on the distribution of wealth and economic power, which far outweighs its purely fiscal significance. Nevertheless, the progressive income tax remains, in my view, the principal source of financing of the welfare state and of public expenses in general (education, health, pensions, etc.). To simplify matters, I have included under the head of income tax not just the income tax in the strict sense but also social security and other payroll and self-employment taxes and compulsory social contributions that are based on labor income (and in some instances on capital income).

These social taxes are in fact a form of income tax, in the sense that their amount depends on income, in some cases with rates that vary with income. The key difference is that the revenues from social taxes usually flow not to the state treasury but to special funds created to finance health insurance, pensions, unemployment insurance, and so on. It is essential, I believe, that such special funds continue as the repository for social taxes. In view of the very high level of total taxation (set here at 50 percent of national income, but which could be even higher if justified by need), it is important to ensure that citizens have a better idea of how their money is being used and in particular of the social purposes to which it is being put. Having separate funds for different types of expenditure might be one way of achieving that goal. In general, we need the greatest possible transparency as to the source and destination of all tax monies.

In practice, we find great diversity in sources of tax revenues from country to country. In Western Europe, where revenues have stabilized at 40–50 percent of national income in the period 1990–2020, we find that the income tax (including the corporate income tax) brings in 10–15 percent of national income⁷⁹ while social contributions amount to 15–20 percent of national income; indirect taxes (such as the value-added tax, or VAT, and other consumption taxes) yield 10–15 percent of national income.⁸⁰ Broadly speaking, indirect taxes (especially customs duties) were dominant until the nineteenth century in all countries but were gradually replaced by income taxes and social contributions as the main sources of revenue. In my view, there is no real justification for indirect taxes (except when necessary to correct an externality,⁸¹ as in the case of the carbon tax, about which I will say more later); they should therefore be replaced by taxes on income or wealth. Indirect taxes such as the VAT do not allow taxes to be apportioned as a function of income or wealth, which is a major limitation in terms of both economic and democratic transparency.⁸²

Detailed analysis of the best way to organize public expenditure and the many components of the social state (universal health insurance, unified pension system, etc.) would take us far beyond the scope of this book. I will say more later about allocating spending on education, which plays a central role in generating and perpetuating inequality. Here, I will focus on the role of the basic income as an element of the social state and the just society. The fact that a basic (or minimum guaranteed) income exists in many countries and in particular in most Western European countries is an excellent thing. Basic income systems can and should be improved specifically by making them more automatic and universal, especially for the homeless, many of whom face great difficulty in obtaining access to the basic income, housing, and, more generally, the help they need to find work and secure a place for themselves in society. It is also essential to extend the basic income to people earning very low wages or receiving activity bonuses (that is, welfare-to-work supplements); the basic stipend should be automatically added to their wages without requiring them to apply for it (this can be linked to the progressive income tax, which is already withheld on paychecks).

Consider, for example, the relatively ambitious basic income shown in Table 17.1. We set the minimum basic income for individuals with no other resources at 60 percent of average after-tax income; this amount would decline as other income increased. It would apply to about 30 percent of the population for a total cost of about 5 percent of national income.⁸³ Once again, these figures are given for illustrative purposes only; any decision would come only after wide deliberation, and it is not the purpose of this book to say what the exact outcome of that debate should be.⁸⁴

The point I want to emphasize here is that even after the basic income is established, much more needs to be done to achieve social justice. In the example shown in Table 17.1, public spending on the social state represents about 40 percent of national income (covering health, education, pensions, unemployment insurance, family benefits, etc.), compared with just 5 percent for the basic income and 5 percent of the capital endowment. These orders of magnitude are important. They express the fact that a just society must be based on universal access to fundamental goods, foremost among which are health, education, employment, the wage relation, and deferred wages for the elderly and unemployed. The goal should be to transform the entire distribution of income and wealth and, beyond that, the distribution of power and opportunities; it goes far beyond just setting a floor on income. The ambition must be to create a society based on just remuneration of labor—in other words, a just wage. The basic income can contribute to that goal by raising the income of individuals who are otherwise poorly paid. More than that, however, justice also requires a thorough reconsideration of a whole range of mutually complementary institutional arrangements.

One of those institutions is the educational system. If every individual is to have a chance of finding decently remunerated employment, we must put an end to the hypocritical practice of investing more in elitist educational programs and institutions than in institutions that cater to the disadvantaged. The labor code and, more generally, the entire legal system need to be overhauled. New systems of wage bargaining, a higher minimum wage, a fairer wage scale, and sharing of voting rights within firms between workers and shareholders can all contribute to the establishment of a just wage, a more equal distribution of economic power, and a deeper involvement of workers in shaping the strategy of their employers.

The other important institution I want to discuss is the fiscal system itself. In addition to the progressive property tax and the universal capital endowment, which encourages worker participation, the progressive income tax can help to achieve a just wage by reducing the income gap to a level consistent with a just society. History shows that marginal rates on the order of 70–90 percent on the highest incomes made it possible to eliminate pointless high salaries, much to the great benefit of workers lower down in the distribution, while at the same time increasing overall economic and social efficiency.⁸⁵ Indeed, all signs are that a tax schedule like the one shown in Table 17.1 would compress the pay scale and increase the pay of people at the bottom and in the middle of the distribution.⁸⁶ Note, moreover, that the proposed schedule rises quickly to fairly high levels, with an effective overall rate on the order of 40 percent (including social contributions) on incomes twice the national average. Such high rates are necessary to pay for an ambitious universal social state and especially for health care and pensions. Note, however, that in the absence of such public systems, workers would have to pay large sums to private pension funds and health insurance companies, which in practice can prove to be more costly than public equivalents.⁸⁷

To sum up, one should avoid looking at the basic income as a sort of miraculous solution that would make all these other institutions unnecessary. In the past, the idea of a basic income was sometimes instrumentalized as a form of “payment in full” of all social obligations and invoked to justify cuts to other social programs.⁸⁸ Hence it is important to think of the basic income as one component of a more ambitious package, which should include progressive taxes on wealth and income, a universal capital endowment, and an ambitious social state.

On Progressive Taxation of Carbon Emissions

I turn now to the carbon tax. As I said earlier, along with rising inequality, global warming is the greatest challenge the planet faces today. There are several reasons to believe that these two challenges are intimately related and can be resolved only if dealt with simultaneously. First, carbon emissions are strongly concentrated among a small group of people, primarily individuals with high incomes and large fortunes living in the wealthiest countries in the world (especially in the United States).89 Second, the magnitude of the lifestyle changes required to cope with the climate crisis is so great that it is hard to imagine how to make those changes socially and politically acceptable without establishing stringent and verifiable norms of justice. In other words, it is hard to see why the lower and middle classes in the rich countries would be willing to make a major effort to curtail emissions if they feel that the upper class is free to go on living and emitting greenhouse gases as before.

The inequality reduction measures I discussed earlier, including a sharp increase in the progressivity of taxes on high incomes and large fortunes, are therefore a necessary condition for combating climate change. They are not a sufficient condition, however. Among the other tools that have been widely discussed is a tax on carbon emissions. Several conditions have to be met, however, for such a solution to become viable. First, the carbon tax must not be seen as the only approach to dealing with the problem. Often, the most effective way to reduce emissions is to establish norms; prohibit certain practices; and agree on strict standards for automobile emissions, heating equipment, building insulation, and so on. In many cases these are more effective choices than just placing a high tax on carbon.

Second, no carbon tax will be fully accepted and effective unless all of the revenue it generates is used to compensate lower- and middle-class households affected by the tax and to pay for the transition to renewable sources of energy. The most natural way to do this would be to integrate the carbon tax into the progressive income tax, as I have done in Table 17.1. With each increase in the carbon tax, one has to calculate the average impact on people at different income levels as a function of the structure of average expenditures; one can then automatically adjust the income tax schedule and basic income transfer system to neutralize the effect. That way, one would preserve the price signal (because consuming items with high carbon content would cost more than consuming items low in carbon, thus giving consumers incentives to change their behavior) but without diminishing the purchasing power of people of modest means.⁹⁰ By contrast, the method used in France in 2017–2018 consists in increasing carbon taxes on people of modest means to pay for tax cuts for the rich, leading to the so-called Yellow Vests uprising and the breakdown of the whole French carbon tax system. This is the method to avoid at all costs.⁹¹

Finally, it is legitimate to ask whether it would be a good idea to implement a progressive tax on carbon emissions. To date, carbon taxes have been basically proportional. All emissions are taxed at the same rate, whether the person or persons responsible emit five to ten tons of carbon (CO₂ equivalent) per year, which is roughly the world average, or 100–150 tons, which is the amount emitted by the top 1 percent of individual emitters globally. The problem with such a system is that if the heaviest emitters have the means, they can avoid making any effort to reduce their emissions, which is not necessarily the best way to establish a norm of environmental justice acceptable to the majority. Reducing overall levels of wealth and income inequality through progressive taxation can diminish these disparities and make them more acceptable, but by itself that might still not be enough. One proposed solution is to issue every individual a “carbon card” authorizing an annual quota of emissions (of, say, five to ten tons); each person would then be entitled to sell all or part of this quota. The problem is that anyone with modest resources or low emissions would then have a financial interest in allowing the wealthy and heavier polluters to emit more, which once again would mean that those with sufficient financial resources would be able to emit as much carbon as they pleased. What is more, experience with businesses purchasing the right to pollute on the open market suggests that if that market were extended to private individuals, it would likely prove to be extremely volatile and easy to manipulate, giving rise to waves of speculation and allowing some to reap enormous profits at the expense of others; meanwhile, the price signal emanating from such a market would be a particularly noisy one.

A better solution might be a true progressive tax on carbon emissions at the level of individual consumers. For example, the first five tons of individual emissions might be taxed little if at all, the next ten tons somewhat more, and so on up to some maximum level beyond which all emissions would be prohibited, with violations subject to fines (such as a confiscatory tax on income and/or wealth).⁹² Like the “carbon card,” this solution assumes that one can measure emissions at the individual level. This raises complex issues, which could nevertheless be overcome (for example, by using credit card information) if the issue were deemed important enough for the future of the planet.⁹³ Carbon content is already measured for certain types of consumption, such as electricity (it is reflected in electric bills). Initially, it might be possible to approximate a progressive carbon tax by setting higher tax rates on goods and services associated with high carbon emissions, such as jet fuel or, better yet, business class airline tickets. What is certain is that the development of a sustainable climate policy will require new norms of environmental and fiscal justice that the majority can accept, which is definitely not the case today.⁹⁴

On Constructing a Norm of Educational Justice

I turn next to the question of educational justice. Emancipation through education and diffusion of knowledge must be at the heart of any project to build a just society and participatory socialism. History shows that economic development and human progress depend on education and not on the sacralization of inequality and property.95 In previous chapters we saw how the expansion of education and the development of higher education coincided with a complete reversal of political cleavages. In the period 1950–1980, the Democratic Party, the Labour Party, and various socialist and social-democratic parties realized their best scores among voters with the least education. This cleavage gradually reversed, and by the period 1990–2020, the same parties were achieving their best results among voters with the most education. In sum, the political forces that constituted workers’ parties in the years after World War II gradually turned into parties of the highly educated in the late twentieth and early twenty-first centuries. The most natural explanation is that less educated voters felt that these parties had abandoned them by shifting their attention and priorities to the winners of the educational system and to some extent of globalization. This political-ideological transformation is crucially important for our study. It is especially important for understanding the collapse of the postwar left-right system and the rise of inequality since the 1980s.⁹⁶

I have already discussed at some length the very significant inequality of access to higher education in the United States, where the likelihood of attending college is linked to the parents’ standing in the income distribution and where the system is highly stratified, with a wide gap separating the best universities from the rest.⁹⁷ If the Democratic Party wants to win back the voters it has lost, it will no doubt need to offer tangible proof that it is more concerned with the children of the lower and middle classes and somewhat less focused on the children of parents who are themselves graduates of the most elitist schools and universities. I also noted that educational inequality and hypocritical talk about meritocracy is common also in countries where the educational system is mainly public and supposedly egalitarian, such as France, even if the mechanisms of discrimination are different.⁹⁸

Before delving further into this point, I want to call attention to Fig. 17.1, which shows the current distribution of educational investment in France. If one looks at the entire cohort of young people turning 20 in 2018, one can estimate (using available data and trends) that each of them will have benefited on average from about 120,000 euros in educational investment (from preschool to university), which corresponds to fifteen years of schooling at an average cost of approximately 8,000 euros per year. But this average conceals enormous disparities within the group related primarily to the age when schooling ends and to course selection in high school and above all in the higher education system.⁹⁹ Within this cohort, the 10 percent of students in whom public investment was smallest received 65,000–70,000 euros each, while the 10 percent in whom most was invested received 200,000–300,000 euros each. The first group consists of people who left school at age 16 (the minimum legal age) after just ten years of schooling for an average cost of 6,000–7,000 euros per year. By contrast, the second group consists of students who took advanced degrees and in some cases remained in school until age 25 for a total of twenty years or more of education. Apart from the length of study, the other distinctive feature of this group is that its members followed highly selective tracks, usually passing through the preparatory classes for the grandes écoles, where students receive much more intense instruction than in the nonselective university tracks.¹⁰⁰

FIG. 17.1.  Inequality of educational investment in France, 2018

Interpretation: The total public educational investment per student over the course of an educational career (preschool to university) for the generation of students turning 20 in 2018 averages out to around 120,000 euros (or about 8,000 euros per year over fifteen years). Within this generation, the 10 percent of students receiving the smallest public investment received 65,000–70,000 euros, while the 10 percent receiving the most received 200,000–300,000 euros. Note: The average cost per track per year of schooling in 2015–2018 works out to 5,000–6,000 euros in preschool and primary school, 8,000–10,000 euros in secondary school, 9,000–10,000 euros in university, and 15,000–16,000 euros in preparatory classes for the grandes écoles. Sources and series: piketty.pse.ens.fr/ideology.

Ultimately, these disparities are quite substantial: the inequality of public expenditure per student is 150,000 euros if one compares students in the top decile to those in the bottom decile and more than 200,000 euros if one compares students in the top centile to those in the bottom decile—the equivalent of the average wealth per adult in France today. It is as if some children receive an additional inheritance compared with others, and inheritances are already very unequally distributed.101 Furthermore, although the students who stay in school for the shortest time are not systematically those from disadvantaged families and students who stay in school longest are not always the most advantaged, there is of course a significant positive correlation between these two dimensions so that in many cases the effect of public educational investment combines with the effect of private inheritance.¹⁰² Finally, note that the assumptions we made to calculate these estimates probably lead to seriously understating the actual size of these spending disparities. Specifically, the official estimates of the cost of selective and nonselective tracks that we use here likely strongly understate the actual gap.¹⁰³

Let me now ask what principles might be invoked to define a just distribution of the educational investment. Once again, as with the question of the just wealth and income taxes, the goal is obviously not to provide a closed solution, which I am incapable of doing, but simply to propose some possible avenues for collective deliberation. First, private educational investment clearly needs to be considered, which would widen the educational spending gap even more. In a country like France, where the educational system is primarily public, the effect of this would be limited. But in the United States it would be hugely important because investment per student there can attain extremely high levels for those who attend the richest and most expensive private universities, whose resources greatly surpass those of public universities and community colleges.¹⁰⁴

How should one think about a just distribution of public educational investment in a country like France? A relatively natural norm would be that every child should have the right to the same educational funding, which could be used for either schooling or other training. In other words, a person who quit school at age 16 or 18, who would thus have consumed only 70,000–100,000 euros during her public schooling (which is the case for 40 percent of each age cohort) could then draw on educational capital worth 100,000 to 150,000 euros before reaching the level of the best funded 10 percent of her cohort (Fig. 17.1).¹⁰⁵ With this capital she could acquire additional training at age 25 or 35 or at any point in her life.¹⁰⁶ Indeed, one could also think of allowing such individuals, under certain conditions, to use part of this sum as financial capital, which could be added to the universal capital endowment. Nevertheless, the priority should be to use these funds to improve educational opportunities for everyone, especially young people from disadvantaged classes.¹⁰⁷ Of course, many people would probably not take advantage of the opportunity to go back to school, so more should be invested in primary and secondary education in order to foster emancipation through education during the normal years of schooling.

The truth is that there is a great deal of hypocrisy in this area. In France and many other countries, extra funding is supposedly earmarked for socially disadvantaged neighborhoods and schools. In fact, as we saw earlier, it is the socially advantaged schools that benefit from the most experienced, best trained, and highest paid teachers, and this clearly counts for more than the meager extra funds provided to the novice and contract teachers who work in the disadvantaged schools.¹⁰⁸ If there were any real increase in the resources allocated to the least advantaged primary and secondary schools, this would show up in Fig. 17.1 as an increase in educational investment at the lower end of the distribution, signaling that educational spending had become more egalitarian and more just.

Renouncing Educational Hypocrisy, Promoting Transparency

If the goal is really to develop acceptable norms of educational justice, then there is no choice but to demand greater transparency in the allocation of educational resources. In most countries today, the procedures for apportioning educational spending are quite opaque, and it is not easy for citizens or communities to understand them. We find ourselves with average teacher pay greater in socially advantaged schools; public educational investment is four times higher for certain groups (who also happen to be among the most favored) than for others in the same cohort. Yet no one has ever made a conscious decision that things should be this way, and the results are never examined or debated or challenged. I am not saying that educational justice is easy to define, and this book is certainly not going to end all debate. But if there is to be a real debate, data of the type I am providing here needs to be made public; indeed, there should be a law (or constitutional obligation) that the facts about educational investment should be available to everyone. Only then can goals be set and progress verified year after to see how close we come to achieving them.

Two goals strike me as reasonable: first, average teacher pay should no longer be an increasing function of the percentage of better off students in the schools, and second, the amounts invested in the least advantaged primary and secondary schools should be substantially increased to make the overall distribution of educational investment by age cohort more equal (see Fig. 17.1). These changes, which would be significant, need to be publicly verifiable. They should noticeably increase the likelihood that students from disadvantaged backgrounds attend university. All studies show that early intervention, particularly in primary and middle school, is the best way to correct scholastic inequality between students of different social backgrounds.

That said, the allocation of additional resources to less advantaged schools needs to be complemented by admissions procedures at lycées and universities that take the student’s social origins into account. This can be done in two ways: social origins can be considered at the individual level (for example, by assigning points according to parental income or adopting social quotas by track, which is probably preferable), or the neighborhood in which the student resides or the school is located can be used as a criterion (for instance, the best students from each middle school or lycée in designated districts could be admitted automatically to specific programs). Again, it is not up to me to give answers to such delicate questions. Choices like these will require complex social and political compromises, which can come only after sophisticated experiments have been carried out and there has been broad debate with full citizen involvement. Any such choices will need to be reviewed constantly, improved, and adapted as the situation evolves. It is important to stress, however, that coming up with a norm of justice acceptable to all or, more modestly, capable of inspiring a minimum degree of collective confidence in the system is an extremely delicate and fragile process. Great transparency is essential, and transparency is often foreign to the habits of political officials and school administrators.

Some countries, such as India, have more experience than others in applying quotas and “reservations” to university admissions for specific social categories. In India, quotas were first applied in the 1950s to groups that had been discriminated against in the past; in 1990 they were extended to all socially disadvantaged classes, which played a major role in reshaping the contours of political-ideological conflict in the country.¹⁰⁹ While these experiences are instructive, they obviously cannot be directly copied in different context. Many countries in Europe have recently begun to take family background into account in admissions procedures, unfortunately with very little transparency. In France, the algorithms used for admissions to lycées (Affelnet) and higher education (first Admission Post-Bac and then, since 2018, Parcoursup) remain essentially state secrets.¹¹⁰ Furthermore, the way family background and parental income are taken into account establish sharp social discontinuities, which make it more difficult to reach any social consensus about the procedures.¹¹¹ In the United States, the court-ordered ban on the use of racial criteria in admissions procedures is coupled with a similar ban on the use of parental income (which is much more debatable); therefore, social quotas usually rely on neighborhood.¹¹² Unfortunately, this criterion cannot achieve the desired level of social diversity because the beneficiaries are often the most advantaged residents of the least advantaged neighborhoods. Hence as a general rule it is better to rely on individual characteristics such as parental income. In the United Kingdom, there is a proposal to allow students who score above a certain level on exams to draw lots so as to democratize access to the most elitist institutions, in effect applying social quotas. Such randomization has the advantage of discouraging parents from overinvesting financially and emotionally in seeking ways for their children to achieve ever higher test scores, such as paying for extra coaching at earlier and earlier ages. This of course excludes parents who lack the necessary means to pay for extra help and very likely would not know where to find it if they did have the means.¹¹³ A good compromise might be to take grades into account to a limited extent (above a certain threshold) while retaining a high level of social mixing as a priority goal. There is little doubt that these kinds of debates, which in many ways have only just begun, will play a central role in decades to come. Their politicization is still in the early stages. Ultimately, it could once again transform the educational cleavage structure.¹¹⁴

To conclude, let me mention the specific problem posed by the coexistence of public and private schools, not only at the tertiary level but also at the primary and secondary levels. In practice, private schools generally benefit from direct or indirect public financing because they enjoy special legal and fiscal status. They participate in the provision of an essential public service: disseminating knowledge to the young. Hence they should be subject to the same regulations as public schools with respect to both available resources and admissions procedures. Otherwise, the effort to construct acceptable norms of justice in the public sector will be undermined by flight to the private sector. In France, private primary and middle schools and lycées receive substantial public funding, which is combined with additional resources provided by parents; they also enjoy the right to select students from whatever social background they choose.¹¹⁵ It is hard to see how these advantages can be made compatible with the principles of educational justice. In the United States, private universities refuse to make their admissions procedures and algorithms public and insist on being taken at their word when they claim that preferential admissions for the children of graduates and important donors are used sparingly.¹¹⁶ Once again, this does not facilitate the task of elaborating a norm of justice acceptable to all.

In recent decades, the dizzying increase in the capital endowments of the wealthiest private universities, especially in the United States, owing to the high returns their portfolios have yielded on international markets, has also posed specific problems.¹¹⁷ To prevent these endowments from growing without limit, one proposal is to raise the portion of the endowment that must be spent annually from the current 4–5 percent (depending on the university) to 10 or 15 percent. The problem is that the wealthiest universities already have trouble figuring out how to spend their money while public colleges and universities open to the disadvantaged cruelly lack resources.¹¹⁸ Under such conditions it would be logical to impose a progressive tax on university endowments to finance an endowment fund for the poorest universities. There is no reason why the schedule of this tax should be the same as that applied to the wealth of private individuals because the socioeconomic context is different. While it is not up to me to say what it should be, I do think that the question is worth pondering. Indeed, it is very hard to imagine any scenario leading to a just educational policy in the United States if one allows the disparities between elitist and poor universities to grow without limit. The same question could also be raised about foundations and other nonprofit entities in other sectors such as culture, health, and the media. In each case the answer should depend on how one defines the general interest.¹¹⁹

Just Democracy: Democratic Equality Vouchers

All the historical trajectories we have looked at in this book show how intimately the structure of inequality is related to the nature of the political regime. Whether we were looking at premodern trifunctional societies or nineteenth-century proprietarian societies or slave societies or colonial societies, it was the way political power was organized that allowed a certain type of inequality regime to persist. People sometimes think that the political institutions of Western society achieved a kind of unsurpassable perfection in the parliamentary democracy of the mid-twentieth century. In fact, one can certainly improve on the parliamentary democratic model, which is increasingly contested.

Among the most obvious limitations of the parliamentary model today is its inability to stem the tide of rising inequality. In this book I have tried to show how today’s difficulties need to be seen in the context of a long and complex political and ideological history—the history of inequality regimes. Our present problems cannot be solved without major changes to existing political rules. For example, I noted earlier that to establish social and temporary ownership through corporate power sharing and progressive taxation of wealth, constitutional and legal changes may be needed. This was also true in the past when similar questions arose: for example, the German Constitution of 1949 had to be written in such a way as to allow co-management and social ownership of corporations, and the US Constitution had to be amended in 1913 to authorize federal income and inheritance taxes, which were subsequently made progressive. Other changes of political rules played equally important roles in reducing inequality in other countries. In the United Kingdom, the House of Lords had to be stripped of its veto in the constitutional crisis of 1910–1911 in order for progressive taxation to see the light of day. In France, the social and fiscal reforms of 1945 and 1981 would have been much harder to achieve if the Senate had retained the veto power it enjoyed under the Third Republic—a power that the Socialists and Communists fought hard to eliminate in 1945–1946. It would be a mistake to think that things will be different in the future: transformation of the structure of inequality will continue to go hand in hand with transformation of the political regime. To shrink from changing the rules because it is too complicated is to ignore the lessons of history and forgo any possibility of real change. In Chapter 16 I discussed the EU’s unanimity rule on fiscal matters and the need to rebuild Europe on a social-federalist foundation. I will say more in a moment about the need to change the rules and treaties that govern social and economic relations between states.

Another aspect of the political regime is also in need of urgent attention: the financing of political campaigns and of political life more generally. In theory, universal suffrage is based on a simple principle: one woman (or man), one vote. In practice, financial and economic interests can exert an outsized influence on the political process, either directly by financing parties and campaigns or indirectly through the media, think tanks, or universities. Earlier, I discussed the case of nonprofit media organizations, which could become the standard for producing news, affording newspaper and other media companies much greater independence from their financiers (including major shareholders, owing to the ceiling on voting rights within the company).¹²⁰ Direct financing of political campaigns and parties can obviously influence the priorities of political parties and complicate the adoption of measures to combat inequality, owing for instance to the radical hostility of many wealthy donors to more steeply progressive taxes.

The question of political financing has never really been considered in a comprehensive way. To be sure, many countries have passed laws limiting the influence of private money in politics. Some countries have engaged in timid efforts of public financing, such as Germany in the 1950s, the United States and Italy in the 1970s and 1980s, and France in the 1990s. But it is striking to see how fragmented and incomplete those efforts have been and how little they have built on one another. In other areas of lawmaking, governments are quick to copy one another (as in the case of progressive taxation, for better and for worse), but when it comes to regulating the influence of money in politics, each country seems to act almost completely independently of the others. Recent work by Julia Cagé has shown, however, that meticulous examination of this complicated history can be highly instructive. In particular, analysis of the various measures that have been tried so far suggests that “democratic equality vouchers” offer an especially promising avenue for exploration.¹²¹

In a nutshell, the idea would be to provide every citizen with an annual voucher worth, say, 5 euros, which could be assigned to the political party or movement of his or her choosing. The choice would be made online, for instance, when validating one’s income or wealth declaration. Only movements supported by some minimal percentage of the population (which might be set at, say, 1 percent) would be eligible. If an individual chooses not to support any party (or if support for the chosen party falls below the threshold), the value of his or her voucher would be allocated in proportion to the choices made by other citizens.¹²² This last point is important because the absence of a rule of this type led to the collapse of the public financing experiment in the United States, where many citizens chose not to participate in public financing of political parties of any kind. But democracy is not an option: if some people do not wish to participate, that should not reduce the level of public financing (which in any case is not enormous). Apart from the democratic equality vouchers, political contributions by firms and other “moral persons” would be totally prohibited (as is already the case in many European countries, such as France since 1995), and there would be a strict ceiling on private individual donations (which Julia Cagé proposes to limit to 200 euros per year). This new political financing regime would include very strict requirements for parties and movements that want to sponsor candidates; they would be required not only to publish their accounts but also to be totally transparent about their internal statutes and rules of governance, which at present are often extremely opaque.

Toward a Participatory and Egalitarian Democracy

The central goal of democratic equality vouchers is to promote participatory and egalitarian democracy. Currently, the prevalence of private financing significantly biases the political process. This is particularly true of the United States where campaign finance laws (always inadequate) have been set aside by recent decisions of the Supreme Court. But it is also true in emerging democracies such as India and Brazil as well as in Europe, where current laws are equally inadequate and in some cases totally scandalous. Take France, for example: political contributions by private individuals are permitted up to 7,500 euros per year per taxpayer, two-thirds of which may be deducting from one’s income tax (yielding a 5,000 euro deduction for a 7,500 euro contribution). It will come as no surprise that the contributors who come close to the ceiling are mainly quite wealthy, from the top centile of the income distribution. In other words, the political preferences of the rich are directly and explicitly subsidized by the rest of the population. The sums in question are far from negligible: total income-tax deductions for political contributions amount to 60–70 million euros per year, roughly equivalent to the total official public financing of French parties (which is proportionate to votes received and seats won in the most recent legislative elections).123 Concretely, the current French system earmarks 2–3 euros per year per citizen for official funding of parties, plus up to 5,000 euros a year to subsidize the preferences of each rich donor. Democratic equality vouchers would make it possible to totally eliminate tax deductions for political contributions; the increase in tax revenues could then be distributed in an egalitarian fashion. Compared with the current system, which is based on the results of the most recent legislative elections, this proposal would also encourage more responsive citizen participation and more rapid renewal of political parties and movements.

As Cagé points out, the logic of democratic equality vouchers could also be applied to issues other than political financing. Indeed, vouchers could replace the existing system of tax deductions for charitable contributions, which in reality is just another way of subsidizing the cultural and philanthropic preferences of the rich. One could start with the sums currently lost to tax deductions and benefits of various kinds and reallocate those amounts in the form of vouchers distributed to each taxpayer. What organizations and foundations in which sectors would be eligible to receive these vouchers? Candidates might include health, culture, the fight against poverty, education, the media, and so on. All these suggestions are worthy of further debate. A similar procedure might also figure in thinking about the thorny issue of financing religious activities.¹²⁴

The question of how much money can be justly allocated this way is also central, and I do not propose to resolve it here. If the sums involved represented a significant fraction of total tax receipts, this would be a highly elaborate form of direct democracy, which would allow citizens to decide themselves how a large portion of the public budget should be spent. This is a promising avenue for promoting greater citizen participation in a democratic process that often seems unresponsive to the desires of ordinary people.¹²⁵ In practice, the system of parliamentary deliberation is nevertheless indispensable for deciding how to allocate the vast majority of public funds. Budget decisions call for extensive public deliberation with an opportunity for all sides to be heard and with oversight by media and ordinary citizens. The scope of direct democracy should be expanded through participatory budgeting, egalitarian vouchers, and referenda.¹²⁶ But direct democracy is unlikely to replace the deliberative setting afforded by parliamentary democracy. The spirit of the democratic equality voucher is rather to make parliamentary democracy more dynamic and participatory by encouraging all citizens, regardless of their social background or financial means, to participate regularly in the renewal of political movements and parties. They can thus shape new ideas and platforms, which can then become the subject of deliberations and decisions by elected assemblies.¹²⁷

Just Borders: Rethinking Social Federalism on a Global Scale

We come now to what is undoubtedly the most delicate question in defining the just society: the question of just borders. We are so accustomed to the principles by which the world is currently organized that they seem impossible to supersede, but in reality they stem from a very specific type of political-ideological regime. On the one hand, goods, services, and capital are supposed to flow freely across borders; to reject this principle is tantamount to seceding from the civilized world. On the other hand, political choices made within a country’s borders, especially in regard to fiscal, social, and legal systems, are matters of strict national sovereignty; no other country is supposed to have a say in them. The problem is that these two principles lead directly to contradictions that have only grown worse in recent decades; these contradictions threaten to blow up the global system as it currently exists. The solution is to organize the system differently: existing trade agreements should be replaced with much more ambitious treaties that seek to promote equitable and sustainable development, which will require setting verifiable common goals in regard to matters such as just taxation and carbon emissions. If necessary, appropriate democratic deliberation procedures can be developed for us in transnational assemblies. I call this new type of international accord a “treaty for codevelopment.” Codevelopment treaties may include measures to facilitate trade, but liberalization of commercial and financial flows should no longer constitute the heart of the global system. Trade and finance would then become what they always should have been: means in the service of higher ends.

One of the most obvious contradictions of the current system is that the free circulation of goods and capital is organized in such a way that it significantly limits the ability of states to choose their fiscal and social policies. In other words, current international rules do not establish the neutral framework they purport to create but rather compel countries to adopt certain policies and directly restrict national sovereignty. More specifically, we saw earlier that the agreements of the 1980s that liberalized capital flows included no mechanism for fiscal cooperation or automatic transmission of information about cross-border asset flows and the identity of asset owners.128 In this realm Europe led the world by adopting rules that de facto prevented governments from combating strategies of tax and regulatory avoidance involving offshore structures (or at the very least forced states to abrogate treaties if they wished to impose adequate sanctions).¹²⁹ The choice of this specific legal regime to some extent reflects the conscious will of certain actors to promote fiscal competition among European states (deemed to be spendthrifts). It was also a consequence of a certain improvisation around decisions whose consequences had not been fully anticipated in the 1980s, specifically having to do with the growth of tax havens and offshore finance. In short, these agreements were signed in a different era before inequality, the excesses of financial capitalism, and the dangers of identitarian and nationalist retreat were as worrisome as they have become today.

Furthermore, the fiction of strictly national sovereignty over social and fiscal choices has been demolished by the fact that representations of justice are increasingly transnational. Why do wealthy countries aid poor ones (notwithstanding the fact that the aid supplied is insufficient and often ill adapted to its purpose)? It is not solely for self-interested reasons, such as stanching the flow of immigrants. It is also because residents of the wealthy countries (or at least part of them) believe that it is unjust for people born in the poor countries to have opportunities so much more limited than their own. They want, to a degree at least, to correct this unjust inequality and are willing to sacrifice to that end, provided that the cost is not too high. Exactly how much they are willing to spend depends on complex and changing perceptions, which are shaped by what limited information they possess about the volume of aid and the success or failure of various strategies of development. Today, the norm is the following: a country should devote 1 percent of its GDP to developmental assistance. Although this is not an extraordinarily generous amount, it is nevertheless substantial compared with other forms of international transfer.¹³⁰

Furthermore, perceptions regarding transnational and global justice play an increasing role in debates about the environment, the Anthropocene, biodiversity, and climate change. Of course, efforts to limit global warming have been notoriously insufficient. But the very fact that certain countries and regions of the world are reducing their emissions without waiting for the rest of the world to follow would be hard to explain in a world where it was every man for himself or every country for itself. Nevertheless, there is a great deal of hypocrisy in these debates and much inconsistency. In December 2015, 196 countries met in Paris and agreed on a theoretical goal of limiting global warming to less than 1.5 degrees above preindustrial levels, which would require leaving in the ground a great deal of hydrocarbon, such as that extracted from the tar sands of Alberta, which Canada wants to resume exploiting. That did not prevent the European Union from signing a new trade agreement with Canada in 2016—the Comprehensive Economic and Trade Agreement, or CETA, which includes all sorts of binding decisions regarding the liberalization of trade and investment flows but none concerning environmental or fiscal issues. It would have been possible, however, to add carbon emission targets or specify minimum common rates of corporate taxation, together with verification mechanisms and sanctions to ensure enforcement, as was done for trade and financial issues.¹³¹

Of course, the most conspicuous contradiction between the way globalization is organized today and ideas of transnational justice has to do with the free circulation of persons. Under the dominant paradigm, civilized states are required to allow free circulation of goods, services, and capital but are perfectly free to block the free movement of people as they see fit. Hence this becomes in a sense the only issue of legitimate political confrontation. The European Union is defined by having achieved free circulation within its borders while maintaining much more restrictive policies with respect to individuals arriving from Africa or the Middle East, including those fleeing poverty and war. Since the refugee crisis of 2015, most European leaders have supported the idea that the migrant influx must be stopped, no matter what the cost, even if it means allowing tens of thousands of people to drown in the Mediterranean to discourage anyone who might be tempted to follow.¹³² Part of the European public opposes this policy, but another part evinces great hostility to non-European migrants and supports one or another of the nativist political movements that have cropped up in Europe since the 1980s–1990s to exploit identity issues. This has greatly changed political cleavage structures. As we saw earlier, however, the change began well before the immigration issue became central. Waning support for policies that would redistribute wealth and income and reduce inequality was just as important as hostility to immigrants in bringing about this change.¹³³

In sum, ideas of justice are important at the transnational as well as the national level in regard to developmental aid, the environment, and free circulation of persons, but those ideas are often confused and contradictory. The important point is that they are not set in stone: they are historically and politically constructed.

Toward a Transnational Justice

With these preliminaries in mind, how should transnational justice be defined? It is easiest to begin by discussing countries at approximately the same level of development, such as the countries of Europe. In the previous chapter, we saw how social federalism might work at the European level.134 The general principle was to delegate to a transnational assembly (in this instance the European Assembly) responsibility for decisions concerning global public goods, such as protecting the environment and promoting research, and for global fiscal justice, including the possibility of imposing common taxes on income and property, large firms, and carbon emissions (Table 17.2). This transnational assembly could be composed of members of the national parliaments of member states or of transnational deputies expressly elected to serve in this capacity, or of a mixture of the two. In the European case I stressed the importance of developing a European parliamentary sovereignty that would rest primarily on the sovereignty of national parliaments so as to involve national deputies in the political process and prevent them from shifting blame for unpopular policies to the federal level, which could doom the whole project. But clearly there are many ways to organize a transnational assembly, and it is reasonable to experiment with different solutions in different contexts.

We also saw that the question of transfer payments was highly sensitive in the European context, even between countries with virtually identical average incomes, such as Germany and France. Establishing trust will take time, and meanwhile it makes sense to impose strict limits on transfers for as long as necessary. The hope is that the importance of joint projects and shared goals, especially in the areas of environmental protection, basic research, justice, and inequality reduction, will ultimately overshadow petty bookkeeping concerns. In general, there is no essential reason why there should be more solidarity between Bavarians and Lower Saxons or between Greater Parisians and Bretons than between all four and Piedmontese or Catalans. None of these solidarities exist spontaneously: they are historically and politically constructed and come into being when people see that the advantages of belonging to the same community outweigh the advantages of maintaining borders.¹³⁵

TABLE 17.2
A new organization of globalization: Transnational democracy
Transnational Assembly In charge of global public goods (climate, research, etc.) and global fiscal justice (common taxes on the largest fortunes and highest incomes, largest firms, carbon taxes)
National Assembly Country A		National Assembly Country B		National Assembly Country C		National Assembly Country D		…
Interpretation: Under the proposed organization, the treaties regulating globalization (circulation of goods, capital, and people) will henceforth provide for the states and regional unions concerned to create a transnational assembly in charge of global public goods (climate, research, etc.) and global fiscal justice (common taxes on the largest fortunes, highest incomes, largest firms, and carbon taxes). Note: Countries A, B, C, and D may be states like France, Germany, Italy, Spain, and so on, in which case the transnational assembly would be the European Assembly, or they could be regional unions like the European Union, the African Union, and so on, in which case the transnational assembly would be the Euro-African Assembly. The transnational assembly may consist of deputies of national assemblies and/or transnational deputies specially elected for the purpose, as the case may be.

This model of transnational democracy on a European scale could also be extended more broadly. Owing to bonds of proximity stemming from more intense human and economic exchanges, the most logical next step would be to foster collaboration between regional entities: for example, between the European Union and the African Union,¹³⁶ between the European Union and the United States, and so on. When decisions can be taken directly within the framework of an intergovernmental treaty, there is no reason to delegate them to a transnational assembly. But the fact is there are many decisions that stand in need of constant revision and updating and should be subject to open public deliberation in a parliamentary setting where all points of view can be heard. Legislators need to hear the diversity of opinions within each member state. This would totally change the nature of the debate compared with the present procedure under which decisions are taken in closed-door meetings of heads of state, where discussion is defined by the clash of national interests (or what the heads of state take their national interests to be). For instance, a Euro-African Assembly might be responsible for deciding how to tax European multinationals investing in Africa (or, someday, African companies operating in Europe), how to combat global warming with compensatory measures, or how to regulate the flow of migrants.

As for transfers, it is important to set limits on their size at the outset without precluding modifications to those limits in the future. Compared with present-day developmental aid, much of which goes to paying Western consultants, the general principle might be that transfers should go directly to the treasuries of the states concerned once certain conditions are met, including respect for individual rights and fair voting procedures (which should be spelled out in detail). Circumvention of state institutions in Africa (and, more generally, in poor countries) by both governmental and nongovernmental organizations has been a factor slowing the process of state formation in recent decades. So has the loss of revenue due to the very rapid elimination of tariffs by the rich countries, which have not generally assisted the poor countries in developing more just taxes to replace them—namely, taxes on profits, income, and wealth.¹³⁷ If developmental aid money were paid directly to African governments, those governments would have significantly greater resources to pay for better schools and health services. No one can say in advance where such transnational democratic deliberations and procedures would lead, but it is not out of the question that a norm of educational equality (according to which all children, whether born in Europe or Africa, would be entitled to equal investment in their education) might gradually take hold, along with ultimately an equal capital endowment for everyone as well.¹³⁸

Hypothetically, transnational assemblies could decide to approve rules to move toward free circulation of people. On this point, it is worth noting that there are some important restrictions on free circulation even within the European Union. In practice, citizens of member states have the right to travel and work in other members states without special authorization, which is a significant right, especially when compared with the problems that citizens of other countries (and their prospective employers) face in obtaining work visas. Nevertheless, if they do not find employment, their residency in another member state is generally limited to three months. Furthermore, they must wait up to five years before becoming eligible for social assistance or permanent resident status.¹³⁹ In the abstract, there is no reason why European treaties could not be amended to eliminate the waiting period for social assistance. But in that case, there would have to be agreement on mutualizing the corresponding social costs. This example shows why it is important to treat fundamental rights (such as free circulation of people) together with fiscal and budgetary questions. Unless simultaneous progress is made on both fronts, the result will be unbalanced and fragile.¹⁴⁰

University tuition fees are another case in point. In 2019, the French government decided that only students from the European Union would continue paying the current fees, which are fairly modest (170 euros per year for the licence, 240 euros for the master). Non-European students would be charged much higher amounts (2,800 euros and 3,800 euros, respectively). The government’s order does allow for exceptions but on the express condition that they apply to no more than 10 percent of all students. In other words, in the vast majority of cases, students from Mali or Sudan will have to pay ten to twenty times as much as students from Luxembourg or Norway, even if the parents of the latter earn ten to twenty times as much as the parents of the former.¹⁴¹ Quite understandably, many French students and academics have a hard time understanding the logic of this new standard—one more brainchild of the current government.

The case is interesting because it shows once again the need to link the question of free circulation to that of mutualized financing of public services and therefore common taxes. In this case, the principle that all European students should be allowed to study in the country of their choosing and pay the same fees as nationals is an excellent thing. But the principle would be make more sense if there were common financing, which could come from a federal tax levied at the European level on the highest earners, with progressive rates and a schedule that would be subject to debate and approval by the European Assembly. Creating rights without worrying about their financing is not a good idea, and the problem becomes even more difficult when common taxes are excluded and fiscal competition is intensified. Under these conditions it becomes more difficult to pay for higher education and for public education in general. Furthermore, if common financing existed, at least among those European states willing to agree to it, it would be possible to find a solution for non-European students as well. Specifically, if Germany and France financed their universities with a common progressive tax based on parental income, it would make sense to propose a similar arrangement for Malian students. Germany, France, and Mali could sign a codevelopment treaty under which Malian students would pay the same tuition as German and French students, provided that the wealthiest Malian parents pay the same progressive tax into a common fund for university financing.¹⁴² This would be one possible standard of justice. Open public democratic deliberation seems to me the logical way to get there.

Between Cooperation and Retreat: The Evolution of the Transnational Inequality Regime

What I have just described is a cooperative and ideal (not to say idyllic) scenario that would lead via concentric circles to a vast transnational democracy, ultimately resulting in just common taxes, a universal right to education and a capital endowment, free circulation of people, and de facto virtual abolition of borders.143 I am aware that other scenarios are possible. As we saw in Chapter 16, there is no assurance that EU member states (or any subset of them) will be able to agree anytime soon on a democratic procedure for levying common taxes. Meanwhile, the Indian Union with its 1.3 billion people has adopted a progressive income tax on all its citizens together with common rules that give the disadvantaged classes access to universities. The Indian model has other problems, however. Still, it shows that democratic federalism can take forms that people in France, Switzerland, or Luxembourg might never imagine. Establishing mutual confidence and norms of transnational justice is a delicate, highly fragile exercise, and no one can predict how cooperative arrangements might evolve,

Between the ideal path to global federalism and the path of generalized nationalist and identitarian retreat, many trajectories are of course possible, with multiple switch points. To make progress toward a more just globalization, two principles should be kept in mind. First, although it is clear that many of the rules and treaties that currently govern international trade and finance must be profoundly reformed, it is important to propose a new international legal framework before dismantling the old one. As we saw in the discussion of European institutional reforms in Chapter 16, political leaders may be tempted to renounce existing treaties without specifying what new ones they would like to put in their place. This is what happened with Brexit. British Conservatives chose to ask voters to decide by referendum whether or not they wished to exit the European Union but did not indicate how they planned to organize their future relations with the European Union in case of exit. Without returning to autarky (which no one wants), there are many ways of regulating these relations; the postreferendum debate has shown how difficult it is to agree on any of them.¹⁴⁴

Second, while it is essential to propose a new framework for cooperation before abandoning the old one, it is impossible to wait for the entire world to agree before moving ahead. It is therefore crucial to think of solutions that will allow a few countries to move toward social federalism by signing codevelopment treaties among themselves while remaining open to others who might eventually wish to join them. This is true not only at the European level but at the international level more generally. For example, if one or more countries abrogate one of the treaties that currently mandate the free flow of capital, they must first create a new arrangement that would still allow for international investment and cross-border ownership; then they must invite others to join them, but only on condition that any country joining the agreement abide by the rules for transmitting information about asset ownership. This is necessary to allow proper assessment of taxes based on each person’s ability to contribute (as measured by wealth and income).

Similarly, sanctions imposed on noncooperating states must be reversible; it should be made clear that the goal is to establish a cooperative, egalitarian, and inclusive system and not to heighten international tensions. Ideally, all states, in Europe and elsewhere, would end harmful competition and establish new forms of cooperation. Profits earned by large multinational corporations should be apportioned among states in a transparent manner, with minimal tax rates compatible with the general level of taxation and financing consistent with the social state. In practice, if agreement on apportionment cannot be reached, any group of countries (or even a single country) could act on its own, imposing its share of the global tax on a company in proportion to that company’s sales of goods and services on its territory.¹⁴⁵ Some may denounce this system as a return to protectionism, but in reality it is something quite different: corporate profits are the target, not trade, which simply serves as a verifiable index for apportioning profits (in the absence of adequate cooperation). Once adequate cooperation is achieved, the transitional system can be replaced by a better one.

Corporate taxes are especially important because the current race to the bottom, which could end in exempting corporate profits from all taxation, is undoubtedly the biggest risk currently facing the global fiscal system. Ultimately, if nothing is done to stop it, the very possibility of a progressive income tax will be in jeopardy.¹⁴⁶ The same logic can be applied to other taxes. Earlier I discussed the progressive property tax. Companies that refuse to cooperate by supplying information about their stockholders may have to pay the forgone property tax revenues, again in proportion to their sales of goods and services in a given country. The same goes for the carbon tax. In the absence of an adequate coordinated policy for reduction of emissions, it will be imperative to impose a carbon tax based on sales of goods and services in each country. Once again, it is important to be clear that the desired cooperative solution is different (for instance, it could take the form of coordinated progressive taxation of individual emissions) and to indicate a route for reaching that goal.

To recapitulate: The current ideology of globalization, which first developed in the 1980s, is in crisis and entering a transitional phase. The frustrations created by rising inequality have little by little made the lower and middle classes of the rich countries wary of international integration and unlimited economic liberalism. The resulting tensions have contributed to the emergence of nationalist and identitarian movements, which could unleash unpredictable challenges to the current trade regime. Nationalist ideology could (and probably will) intensify competition between states, leading to further fiscal and social dumping at the expense of rival states while encouraging authoritarian and anti-immigrant policies at home so as to unite the native-born population against its supposed foreign enemies. This has already begun to happen not only in Europe and the United States but also in India and Brazil and in some ways in China (in its attitude toward dissidents). In view of the impending collapse of both liberal and nationalist ideologies, the only way to overcome these contradictions is to move toward a true participatory and internationalist socialism based on social-federalist political structures and a new cooperative organization of the world economy. Given the magnitude of the challenges, I have tried to outline solutions that could gradually make progress toward that goal possible. These proposals are not intended to answer every question. Their only purpose is to show that human societies have yet to exhaust their capacity to imagine new ideological and institutional solutions. As the histories of the various inequality regimes we have studied in this book show, the political-ideological repertoire is vast. 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. The future will be no different, but from now on the scale will be transnational.

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1.     1.  Especially his “difference principle”: “Social and economic inequalities are to be to the greatest benefit of the least advantaged members of society.” This formula, taken from J. Rawls, Theory of Justice (1971), was repeated in J. Rawls’s Political Liberalism (1993). The theory is sometimes summarized as “maximin” (the ultimate social objective is to maximize minimum well-being), even though it also insists on absolute equality of fundamental rights.

2.     2.  “Men are born and remain free and equal in rights. Social distinctions can only be based on common social utility.” The second part of this proposition has often been interpreted as opening the way to just inequality. See T. Piketty, Capital in the Twenty-First Century, trans. A. Goldhammer (Harvard University Press, 2014), pp. 479–481.

3.     3.  The principal limitation of the Rawlsian approach is that it remains fairly abstract and says nothing precise about the levels of inequality and fiscal progressivity the principles imply. Thus Friedrich A. von Hayek was able to write in the preface to Law, Legislation, and Liberty (1982) that he felt close to Rawls and his “difference principle,” which in practice has often been used to justify high levels of inequality to act as a useful incentive (on the basis of little evidence).

4.     4.  Some of the ideas presented here, in particular on the subject of circulation of property and taxation of inheritances and wealth, are similar in spirit to the ideas of authors in the French Solidarist Socialist tradition such as Léon Bourgeois and Émile Durkheim (see Chap. 11). Note, too, the proximity to the notion of “property-owning democracy” developed by James Meade. The problem is that this notion (like Rawls’s concepts) has at times been invoked for conservative purposes. See, for example, B. Jackson, “Property-Owning Democracy: A Short History,” in Property-Owning Democracy: Rawls and Beyond, ed. M. O’Neill and T. Williamson (Blackwell, 2012). By design, the options defended here are based on the historical experience of many countries since the nineteenth century and therefore combine a number of intellectual traditions.

5.     5.  See Chap. 11 for a more detailed analysis.

6.     6.  Depending on the country, the legal system, and the size of a firm, the body responsible for setting the overall direction of the company may by a simple oversight committee or management council rather than a board of directors in the usual sense.

7.     7.  See Chaps. 11 and 12.

8.     8.  See J. Cagé, Saving the Media, trans. Arthur Goldhammer (Harvard University Press, 2016). Profit taking would not be allowed (nor could shares beyond a certain threshold be sold). In exchange, investors in the media could be granted tax deductions similar to those granted to contributors to nonprofit organization in education and the arts. I will say more later about taxing contributions.

9.     9.  For example, the investment threshold above which vote reductions apply could be set at 90 percent for small firms (fewer than ten employees), decreasingly gradually to 10 percent for larger firms (more than one hundred employees). Obviously, these thresholds are open to debate and experimentation, and the numbers given here should not be taken as definitive.

10.   10.  This educational model has given rise to growing inequalities in the university system, which should be corrected. I will come back to this.

11.   11.  Why have such attempts failed? Perhaps because the profit motive tends to undermine the values of disinterestedness and intrinsic motivation that are essential to the educational enterprise. For similar reasons, experiments with offering students monetary bonuses based on exam results have generally produced very negative results (with intensive cramming on frequently posed questions and accelerated loss of competence in other areas). See the online appendix (piketty.pse.ens.fr/ideology).

12.   12.  See Chap. 11.

13.   13.  See Figs. 10.4–10.5 and Figs. 11.12–11.15.

14.   14.  See Figs. 13.8–13.9 and Table 13.1.

15.   15.  See Figs. 10.11–10.12.

16.   16.  For instance, Warren Buffett paid $1.8 million in federal income tax in 2015 on a fortune estimated at $65 billion or a tax rate of 0.003 percent of his wealth. See E. Saez and G. Zucman, The Triumph of Injustice (Norton, 2019), pp. 155–156. Public data on billionaires in other countries, such as Liliane Bettencourt in France in the early 2010s, paint a similar picture: taxable income of a few million euros compared with a fortune of several billion. One possibility would be to apply the income tax schedule to an “economic income” estimated on the basis of wealth (for example, by assuming a realistic yield), but this would require accurate declaration and registration of wealth (and not simply of income).

17.   17.  Except where the property owned is of little value. But no one would think of giving a property tax exemption to the owner of numerous apartment buildings, warehouses, or offices on the grounds that she was not deriving significant income from them when it would suffice to sell a small portion of the property to pay the tax. What is more, this would contribute to circulating wealth into the hands of more dynamic owners. This is the classic argument in favor of the property tax, independent of income, and it is relevant here to a certain extent. If the whole system depended on capital owned, then a firm making temporary losses would pay as much tax as another making enormous profits (on equivalent capital), which could push the first firm into bankruptcy for the wrong reasons. That is why an ideal tax system should always strike a balance between taxing property and taxing income.

18.   18.  On the history of property taxes in the eighteenth and nineteenth centuries and debates surrounding them, see Chaps. 4 and 11.

19.   19.  On this subject, see A. Spire, Résistance à l’impôt, attachement à l’Etat (La Découverte, 2018). This survey also shows that lower- and middle-class taxpayers have a fairly accurate understanding of the overall low progressivity of the tax system and of the regressivity at the top (given the weight of indirect taxes such as value-added taxes, gas taxes, and so on and of social security taxes on low and medium wages as well as opportunities for tax avoidance and manipulation at the top of the hierarchy) as well as the inequality of access to certain public expenditures (such as education and health). See also M. Forse and M. Parodi, “Les Français et la justice fiscale,” Revue de l’OFCE, 2015. On the tax structure and the issue of progressivity, see Fig. 11.19.

20.   20.  On the composition of small, medium, and large fortunes, see Fig. 11.17.

21.   21.  In theoretical terms, when one introduces credit constraints or future variations in asset values and yields (unpredictable at the moment of transmission), it becomes preferable to collect a large share of the inheritance tax in the form of an annual wealth tax. See E. Saez and T. Piketty, “A Theory of Optimal Inheritance Taxation,” Econometrica, 2013.

22.   22.  See Figs. 4.1–4.2 and Figs. 5.4–5.5. Furthermore, we find the same low share (around 5–10 percent) for the bottom 50 percent of each age cohort. See the online appendix, Fig. S11.18.

23.   23.  See Figs. 10.4–10.5 and Figs. 13.8–13.10.

24.   24.  See Chaps. 3 and 4.

25.   25.  See Chaps. 5 and 11. By contrast, in the United States and South Africa, no land was redistributed to former slaves (despite their having worked for centuries without pay and despite promises of “forty acres and a mule” made to encourage the slaves to rise up against the confederacy at the end of the Civil War) or to victims of apartheid (about which debate continues). See Chap. 6.

26.   26.  Over the course of history, annual property taxes (based on property owned) have gone by a variety of names, such as property tax, wealth tax, capital tax, tax on fortune, real estate tax, and so on. See Chap. 11. I prefer to speak of a property tax (impôt sur la propriété) because it emphasizes the importance of property as a social relation. The progressive property tax that I envision is based on all forms of property (real estate, business and financial assets, net of debt). Later, I will also say more about the role of corporate taxes, which are included here under the head of the progressive tax on income.

27.   27.  Of which roughly 4 percent would come from the annual property tax and 1 percent from the inheritance tax.

28.   28.  In the tax system presented here, there are no indirect taxes (except when needed to correct an externality, as with the carbon tax, which I will discuss later). Broadly speaking, indirect taxes (such as the VAT) are extremely regressive, and I prefer to replace them eventually with progressive taxes on property, inheritance, and income.

29.   29.  The thresholds, rates, and revenues indicated in Table 17.1 are calculated on the basis of average income and wealth distributions observed in the United States and Europe in the 2010s. Because the thresholds are expressed in multiples of average wealth and average income and because wealth and income distributions are fairly similar in India, China, and Russia (to a first approximation), the tax schedules that would need to be applied in those countries to yield equivalent revenues (in proportion to national income) would also be fairly similar. The goal here is to fix orders of magnitude, not to provided definitive results. In countries where wealth and income are more concentrated (like the United States), the highest rates could be reduced slightly and still yield the same revenues. By contrast, they would have to be increased slightly in countries where concentration is lower (as in Europe). See the online appendix.

30.   30.  The size of a generation (that is, the number of persons reaching age 25 every year) is approximately 1.5 percent of the adult population in Europe, the United States, and China and slightly higher in India (where life expectancy is lower). For example, in France, each generation represents 750,000–800,000 individuals out of an adult population of roughly 50 million (and a total population of 67 million in 2018). Total private wealth is on the order of five to six years of national income in these countries. A capital endowment of 60 percent of average wealth per adult is therefore equivalent to 3–3.5 years of average national income per adult for a total cost on the order of 5 percent of national income if that sum is distributed every year to 1.5 percent of the adult population.

31.   31.  For an average national income on the order of 35,000–40,000 euros per year per adult (for a wealth/income ratio on the order of five to six). On the distribution and composition of wealth by type of asset and resources, see Figs. 11.16–11.17.

32.   32.  Currently, average wealth at age 25 is barely 30 percent of average wealth per adult (and very unequally distributed). See the online appendix. Note that the public inheritance system proposed here would still be of interest in a society where wealth was perfectly egalitarian within generations, in the sense that it would equalize inheritance ages and the average age of wealth holders and therefore the distribution of economic power.

33.   33.  See Chap. 3. See also the stimulating book by P. Van Parijs and Y. Vanderborght, Basic Income: A Radical Proposal for a Free Society and a Sane Economy (Harvard University Press, 2017).

34.   34.  See A. Atkinson, Inequality (Harvard University Press, 2015). The originality of Atkinson’s proposal, which I draw on and extend here, is that the capital endowment should be coupled to an ambitious basic income plan (rather than be seen as a substitute for one). For interesting proposals regarding both the basic income and capital endowment, see Van Parijs and Vanderborght, Basic Income, and B. Ackerman and A. Alstott, The Stakeholder Society (Yale University Press, 1999).

35.   35.  In Atkinson’s proposal, the capital endowment finance by the inheritance tax, even after that tax was increased, would amount to barely 5–10 percent of average wealth (10,000–20,000 euros in the United Kingdom or France), a sum close to the average inheritance received today by the poorest 50 percent, which would be a significant boost. Under my proposal, an endowment financed by both an inheritance tax and an annual wealth tax would come to 60 percent of average wealth (or 120,000 euros in the United Kingdom or France today).

36.   36.  Currently, wealth taxes in the form of the US property tax or the French real estate tax yield 2–3 percent of national income while the inheritance tax yields less than 0.5 percent. On average in the European Union, the various types of wealth tax (whether collected annually or at the time of death or on transactions) yield nearly 3 percent of national income. See European Commission, Taxation Trends in the EU, 2018 ed. (Publications Office of the European Union, 2018), p. 41, Graph 22. In the system proposed here, the annual property tax would yield roughly 4 percent of national income and the inheritance tax 1 percent for a total of 5 percent but with much greater progressivity than existing taxes, which would make it possible to reduce taxes on the lower and middle classes.

37.   37.  In particular, even if the inheritance tax will never be as important as the annual property tax and even if it is carefully explained and made especially transparent, it is natural to think of increasing it somewhat in the future in view of the growing share of inherited wealth in total wealth in recent years. See F. Alvaredo, B. Garbiti, and T. Piketty, “On the Share of Inheritance in Aggregate Wealth: Europe and the USA, 1900–2010,” Economica, 2017.

38.   38.  One might want to set tax brackets in terms of the median rather than the average. The problem is that the median income is often very close to zero, so this wouldn’t make much sense. Furthermore, measuring income and wealth relative to the average gives a better idea of the amount of revenue and extent of redistribution involved.

39.   39.  See Figs. 11.12–11.15.

40.   40.  Furthermore, if one tries to model that various effects at work (on equality, mobility, and incentives to work and save) with all the caution and rigor appropriate to such exercises, one can show that the ideal inheritance tax (for a Rawlsian type of social objective) should assess very high rates (70–80 percent or more) on the largest inheritances. See Saez and Piketty, “A Theory of Optimal Inheritance Taxation.” Similarly, the optimal rate on the highest incomes is above 80 percent. See T. Piketty, E. Saez, and S. Stantcheva, “Optimal Taxation of Top Labour Incomes: A Tale of Three Elasticities,” American Economic Journal, 2014.

41.   41.  Note that a proportional tax of 1 percent on all private wealth (including financial assets, which amounts to 500–600 percent of national income) would bring in 5–6 percent of national income in revenue, which shows that there is nothing extravagant about the revenues I am anticipating from the progressive property tax.

42.   42.  See Figs. 11.12–11.15.

43.   43.  Note that the tax rates shown in Table 17.1 are expressed in terms of effective rates directly applicable at the level of wealth or income considered (with a linear progression of the effective rate between the indicated levels). For implicit marginal rates corresponding to each bracket, see the online appendix.

44.   44.  See Chap. 11. The metaphor of a treasure of infinite value was explored in the film Black Panther (dir. R. Coogler, Marvel Studios, 2018). The small African country of Wakanda decides in the end to allow the planet to share in its wealth (which consists of vibranium, a substance that the nation was able to profit from thanks to its research and wise organization) in contrast to Norway with its polluting hydrocarbons.

45.   45.  See Chap. 11.

46.   46.  See the online appendix. In the United States, the share of top 0.001 percent of the wealth distribution (around 2,300 people out of a total adult population of 230 million) was 6 percent of total wealth in the late 2010s (or roughly 6,000 times the average wealth for each member of this group), compared with about 1 percent in the period 1950–1980 (roughly 1,000 times the average). The share of the top centile (roughly 2.3 million people) reached 40 percent in the late 2010s (around forty times the average) compared with 20–25 percent in 1950–1980 (twenty to twenty-five times the national average). The proposed tax schedule would immediately reduce the share of the top 0.001 percent to its previous level and would have the same effect on the top 1 percent after ten to fifteen years.

47.   47.  See Table 13.1.

48.   48.  See Saez and Zucman, The Triumph of Injustice, pp. 204–208 for simulations analyzing how much wealth concentration in the United States would be decreased by rates of 5 percent on wealth about $1 billion and 8 percent above $100 billion.

49.   49.  In general, inheritances can be taxed either on the basis of the amount received by each heir or of the total value of the estate bequeathed by the deceased. I prefer the first method, and it is the one I have chosen here: progressive rates are applied on the basis of total transfers throughout an individual’s life, including both gifts and inheritances. A person who receives during the course of his life the equivalent of 0.5 times the average wealth (100,000 euros) would pay an inheritance tax of 5 percent (5,000 euros) and would thus receive a total inheritance of 215,000 euros (including the capital endowment of 120,000 euros). A person receiving twice the average wealth (400,000 euros in France currently) would pay a tax of 20 percent (80,000 euros) for a total inheritance of 440,000 euros when the endowment is added. By contrast, a person receiving five times the national average (1 million euros) would pay a tax of 50 percent (500,000 euros), leaving a total inheritance of 620,000 euros when the endowment is factored in. The rates indicated in Table 17.1 are for illustrative purposes only and call for extensive discussion.

50.   50.  When applying the tax schedules indicated here, the joint income of couples can be divided in half since the brackets are defined in terms of individual income and wealth. In my view, compensation for children is best handled by adopting a system of basic income plus family allotments rather than by tax deductions.

51.   51.  For instance, setting lower rates on capital income than on labor income (as Sweden did in 1991) led to totally fictitious and economically useless shifting of income between different categories; for example, from salaries to dividends. On this subject, see Saez and Zucman, The Triumph of Injustice; they propose to tax all capital income (including undistributed corporate profits and capital gains) at the same rates as labor income.

52.   52.  In particular, the idea of granting exemptions to “productive” capital is undercut by the fact that capital is always productive in one way or another, just as labor is: for instance, having a roof over one’s head is at least as useful as having offices or warehouses for producing goods and services. If one begins by exempting this or that type of capital or labor on the grounds that it is productive, one risks ending up very quickly with nothing left to tax.

53.   53.  See Chap. 12.

54.   54.  See Chap. 11.

55.   55.  I am thinking here of large-scale experimentation to be undertaken after new governments have come to power. I am not neglecting the importance of local experimentation in producing new knowledge, but my view is that only truly large-scale experiments can bring about decisive changes in perceptions.

56.   56.  See Chap. 13.

57.   57.  See Chap. 11.

58.   58.  The ability of the US federal government to enforce its decisions is often used on behalf of business interests or in the geopolitical interest of the United States (sometimes in ways that come close to exacting what in the past would have been called military tributes). An instance of this is the use of sanctions to punish European firms accused of circumventing US embargos on Iran and other countries. This state capacity could easily be used on behalf of more universal objectives, such as enforcing a steeply progressive tax on the highest incomes and largest fortunes.

59.   59.  See Chap. 14, and the online appendix, Fig. S14.20. Recall, too, that large holdings of financial assets added value more rapidly than real estate, which itself grew faster than GDP.

60.   60.  The most obvious sanction to apply to a firm or other legal entity is the progressive rates applicable to individual owners, as if the firm were owned entirely by a single individual (in the absence of further information).

61.   61.  Stockholders in publicly listed firms are recorded by (private) custodial banks and other institutions. Any company that refused to take the steps necessary to transmit adequate information about their stockholders to the fiscal authorities would be subject to sanctions proportional to the damage done (which could be based on available estimates of the international wealth structure or on sales and services invoiced in France, as in the case of the corporate tax; see Chap. 16). Stockholders in unlisted companies are generally known to the companies themselves, but other problems may arise, such as the difficulty of evaluating the share price (which could be estimated on the basis of company books or on the valuations of comparable listed companies).

62.   62.  The general principle could be to apply the tax to the global wealth of all people residing in France and all owners of wealth part of which is situated in France (residents and businesses), who would be obliged to declare their wealth (under penalty of punitive sanctions). Agreements could be worked out to avoid double taxation if it can be proven that the owner in question pays a wealth tax equal to or greater than the French tax in some other country (with the understanding that what we want to avoid is the current situation where transborder wealth is not taxed at all).

63.   63.  Such a reform could be done without reducing tax revenues, given that the real estate tax currently yields about 40 billion euros in France (nearly 2 percent of GDP), while the ISF yielded about 5 billion euros (less than 0.3 percent of GDP) before it was transformed into the IFI in 2018–2019. Given the concentration of wealth, the top centile (which holds about 20–25 percent of total wealth) would yield revenues of at least 10–15 billion euros. This reform could also be made to yield greater revenues if coupled with an increase in the progressivity of the inheritance tax, in order to finance a universal capital endowment of the type I described earlier (Table 17.1).

64.   64.  The justification for an exit tax is that there is no natural right to enrich oneself by taking advantage of a country’s legal and educational systems, and so on, and then extracting the wealth without returning part of it to the community. The exit tax system established in 2008, although much less rigorous than the one currently under debate in the United States (because it dealt solely with latent capital gains and not with total wealth and allowed for numerous exemptions) was almost totally rescinded in 2018–2019 as revenues from the wealth tax were cut by 80 percent.

65.   65.  Although it would obviously be preferable to move toward wealth transparency in an international social-federalist framework, as we will see in a moment.

66.   66.  See Chap. 11 for more on this.

67.   67.  See Chap. 6.

68.   68.  Here is possible wording: “The law sets the conditions of ownership and seeks to encourage the diffusion of property if need be through a system of progressive taxation of wealth coupled with capital endowments. In general, the tax should be apportioned among all citizens in proportion to their ability to pay. If one expresses the amount of tax actually paid as a proportion of property owned or income received by each citizen, that proportion may not be smaller for wealthier citizens than for poorer ones. It may be higher, under terms to be set by law.”

69.   69.  See Chaps. 12 and 13.

70.   70.  In Plessy (1896), the Supreme Court by a seven-to-one vote found in favor of Ferguson, a Louisiana judge, against Plessy, the plaintiff, a person of mixed race (specifically, an “octoroon,” that is, a person whose ancestors were seven-eighths European and one-eighth African). Plessy had challenged an 1890 Louisiana law banning any person with black blood from entering a train car reserved for whites. This decision had the force of law and served as the legal foundation of the segregationist order in the United States until Brown v. Board of Education in 1954 and the civil rights laws of 1964–1965.

71.   71.  Note, however, that the Supreme Court could not block the steeply progressive tax that Roosevelt put in place, notably his 1935 “wealth tax” setting a 75 percent rate on top incomes. Since the Sixteenth Amendment of 1913 and the strong push for progressivity in the late 1910s, it was established that the government was free to set tax rates.

72.   72.  Since the US Constitution says nothing about the number of Supreme Court justices, it was only by statute and tradition that that number was set at nine, nominated for life, with no age limit (like the Pope or the Supreme Leader in Iran). The Judicial Procedures Reform Bill of 1937 (commonly referred to as the “court-packing plan”) allowed Roosevelt to appoint up to six new justices (for each justice over the age of 70) and thus to change the majority in his favor.

73.   73.  This key 1937 decision is generally considered to mark the beginning of a new era in the history of the Supreme Court, which became more amenable to government intervention in the economy. Note, however, that the Democratic majority in the Congress refused to approve Roosevelt’s “court-packing plan,” preventing the president from appointing new justices. The Democrats did this both because of constitutional conservatism and because the Supreme Court changed its attitude in the face of pressure.

74.   74.  Specifically, the Buckley decision of 1976 struck down the principle of a ceiling on total campaign contributions while the Citizens United decision of 2010 struck down contribution limits on corporations and the McCutcheon decision of 2014 abolished all limits on individual gifts. See J. Cagé, The Price of Democracy (Harvard University Press, 2020). See also T. Kuhner, Capitalism v. Democracy: Money in Politics and the Free Market Constitution (Stanford University Press, 2014); J. Attanasio, Politics and Capital. Auctioning the American Dream (Oxford University Press, 2018).

75.   75.  As a general rule, intellectuals in the United States who are close to the Democrats have become fairly conservative on constitutional issues. In regard to the Supreme Court, many think that the best one can do is to restore the previous equilibrium by allowing each president to appoint the justices of his choosing (an equilibrium disrupted in 2016 when the Republican Senate refused to consider President Barack Obama’s appointment of the centrist Merrick Garland in order to allow Trump to appoint the next justice). See, for example, S. Levitsky and D. Ziblatt, How Democracies Die (Penguin, 2018), pp. 118–119, which delivers a very harsh judgment of FDR’s “court-packing plan.” Yet there was nothing particularly virtuous or rational about the status quo prior to 2016. Depending on the health of elderly judges and the dates of presidential elections, the composition of the Court can change quickly and block the political process for decades.

76.   76.  See interview with J.-L. Debré on France Inter, February 16, 2019.

77.   77.  In this instance, there was an additional problem: the François Hollande government did not really want to enact this last-minute campaign promise by candidate Hollande and specifically refused to apply it to all incomes as a permanent new income tax bracket. Ultimately, the measure was applied in 2013–2014 as an exceptional tax on firms paying salaries above 1 million euros.

78.   78.  See Figs. 10.11–10.12.

79.   79.  I am including the corporate tax in the progressive income tax system because it is better to analyze the two taxes together. Ideally, the corporate tax could be a sort of deduction from the income tax to be paid by stockholders on their dividends. In practice, owing to the lack of international cooperation and transparency regarding the ultimate ownership of firms, some taxpayers escape paying any taxes on their capital income so that it is crucial to maintain a direct tax on corporations. I will say more later about this issue.

80.   80.  See Chaps. 10–11 (and especially Figs. 10.15–10.15 and 11.9) for a more detailed analysis of the various types of taxes and expenditures. In some countries, such as Denmark, social contributions are formally integrated into the income tax so that the income tax alone yields about 35 percent of national income. See European Commission, Taxation Trends in the EU, 2018 ed., pp. 76–77, Table DK.1.

81.   81.  An externality occurs when the consumption of a good or service by an individual imposes undesirable costs on other individuals, typically by way of pollution or greenhouse gas emission.

82.   82.  With the VAT and other indirect taxes, it is of course possible to tax some goods at a lower rate than others, but this is a cruder way to target specific social groups than a direct tax on income or wealth. The other argument in favor of the VAT has to do with the ability to tax imports while exempting exports, but there is no real reason for this, and in any case it is more a sign of lack of international fiscal coordination (particularly where intra-European tax competition is concerned). I will say more later about the possible use of an import tax to compensate for the lack of international cooperation. Finally, note that the VAT in practice exempts many goods and services (such as financial services and investment goods) for unclear distributive reasons. A VAT that truly taxed all value added would be equivalent to a proportional tax on all income (profits and total wages) and could be seen as the first component of an income tax system. See Saez and Zucman, The Triumph of Injustice and the discussion of the “national income tax.”

83.   83.  The average amount paid would be on the order of 30 percent of average after-tax income, or about 16.5 percent of average national income per adult (given an average income tax of 45 percent, counting social contributions and carbon taxes), for a total cost of 5 percent of national income if that amount is paid out to 30 percent of the population. See the online appendix.

84.   84.  For a more detailed description of such a system in the French case, including automatic inclusion of the basic income on pay stubs, see for example P. A. Muet, Un impôt juste, c’est possible! (Seuil, 2018). In the United States, an ambitious proposal to increase the Earned Income Tax Credit (EITC) (which is in effect a boost to low wages) was recently put forward by L. Kenworthy, Social Democratic Capitalism (Oxford University Press, 2019), p. 210, Fig. 7.15. One important difference is that the EITC would continue to be paid separately. In general, the advantage of automatic payment is that it links the basic income idea to a vision of the just society based on the wage relation and the right to work and unionize. By contrast, a system based on separate payment of the basic income (as proposed, for example, by Van Parijs and Vanderborght, Basic Income, who envisage a payment to each adult, independent of wages) risks weakening that link and might be instrumentalized to favor hyper-flexibilization and the fragmentation of labor. This could lead to an artificial inflation of the tax level, with the danger of decreasing resources available for the social state.

85.   85.  See Chap. 11.

86.   86.  Obviously, I do not mean to imply that the purely illustrative figures given in Table 17.1 completely settle the question of just inequality. How much the pay scale needs to be compressed for the benefit of the disadvantaged remains an open question; the only way to make progress is to engage in realistic experiments.

87.   87.  In the United States, if one counts the cost of private insurance as though it were tax, the schedule of payments becomes highly regressive to the detriment of the lower and middle classes. See Saez and Zucman, The Triumph of Injustice, p. 213.

88.   88.  This was the spirit in which Milton Friedman proposed a basic income and negative income tax in his book with R. D. Friedman, Free to Choose (Harcourt, 1980).

89.   89.  See Fig. 13.7.

90.   90.  In some cases, the calculation of compensatory transfers will need to consider not only income but also type and place of residence, existence of public transportation, and so on.

91.   91.  See Chap. 14.

92.   92.  This carbon tax schedule is intended for illustrative purposes only and may be taken as a starting point, given that the average emission level worldwide is around five to six tons per person. It should be rapidly increased, however, if one wants to meet the goal of limiting global warming to 1.5–2 degrees (which according to estimates will require reducing carbon emissions to one to two tons per person by the end of the century).

93.   93.  In the past, every new tax has been accused of being impractical, impossibly complex, and inquisitorial. This was true, for instance, of the income tax in the nineteenth century and beyond. That said, the idea of using credit card data does raise serious privacy issues. In my view, however, it is strange not to consider the possibility of developing procedures for making use of such information in a controlled way, just as we have learned to trust private banks not to use the same information for nefarious purposes.

94.   94.  Another question is whether the progressive carbon tax should apply only to individual consumption (which might seem logical given the need to make consumers behave responsibly, especially in the rich countries) or whether one should also look into the possible of a progressive tax on individual production (based on individual income—wages and profits—generated by the production of goods and services responsible for the emission of carbon), which might be more effective in some cases. The two types of taxes (on consumption and production) are in principle equivalent when the tax is proportional. This is no longer the case when the tax is progressive.

95.   95.  See Chaps. 11 and 12. On the central role of achieving equality through education and knowledge in a Durkheimian (rather than Marxist) perspective, see B. Karsenti and C. Lemieux, Socialisme et sociologie (EHESS, 2017), pp. 43–48.

96.   96.  See Chaps. 14–16.

97.   97.  See Fig. I.8 and Chap. 15.

98.   98.  See Chap. 14.

99.   99.  Variations in preschool attendance are also significant. Preschool is available to children aged 3 to 6 but is not compulsory; in some years and some places it has been available as early as age 2. In any case, its role in creating disparities is far less than the factors mentioned in the text. The estimates given here are based on household surveys that allow us to estimate the distribution of educational choices in each age cohort. The method is to assign a constant cost per year depending on the type of education (primary, middle school, lycée, etc.). All details on the construction of the data set are available online. See also S. Zuber, L’inégalité de la dépense publique d’éducation en France: 1900–2000 (EHESS, working paper, 2003), and C. Bonneau, The Concentration of Educational Investment in the US (1970–2018), with a Comparison to France (EHESS and PSE, working paper, 2019).

100. 100.  According to official data, the cost per student in the preparatory classes is 15,000–16,000 euros per year, compared with 9,000–10,000 euros in the universities. Note, moreover, that real investment per student in higher education decreased by about 10 percent between 2010 and 2018 because budgets did not increase as rapidly as the number of students. See Ministère de l’éducation nationale, Repères et références statistiques 2018 (2019), p. 325, section 10.5. See also the online appendix, Fig. S14.11e.

101. 101.  Recall that the 50 percent of individuals inheriting the least receive virtually nothing (barely 10,000–20,000 euros on average), while the 10 percent inheriting the most receive hundreds of thousands of euros and in some cases millions or even tens of millions of euros.

102. 102.  Available data show that the link between parental income and access to higher education is less extreme in France than in the United States but still high. See the online appendix.

103. 103.  Official estimates (15,000–16,000 euros per year for preparatory classes and 9,000–10,000 euros for university classes) include the cost of university research laboratories, which do not necessarily benefit students, at least in the early years of university. In the preparatory classes, teachers are not engaged in research and concentrate on the objective of training students, which seriously biases the comparison. If one were to subtract research expenses and focus on university students in the first two years, the cost per year of study would be less than 5,000 euros. See the online appendix.

104. 104.  In fact, the concentration of total educational expenditure (public and private) is significantly higher in the United States than in France and has risen sharply in recent years. Note that the available data do not allow us to measure these inequalities perfectly at the primary, secondary, or tertiary level (in the United States, primary and secondary education is largely financed by local taxes). See Bonneau, The Concentration of Educational Investment in the US.

105. 105.  Another solution might be to charge high tuition fees to those students fortunate enough to continue their higher education (and who are on average socially advantaged), as New Labour did in the United Kingdom (see Chap. 15). The problem is that this presents a hardship to students of modest background, who may be discouraged from pursuing their studies or find themselves indebted for a long period of time, while students from wealthier backgrounds enjoy financial support from their parents. It seems preferable to require the latter to pay more for everyone’s children and not just their own.

106. 106.  One might also use part of the educational capital as an allotment during years of study, even before age 25 (the age at which basic income becomes available in France), and not simply for free access to classes.

107. 107.  If spending on the bottom 90 percent of students in France today were raised to the level of spending on the top 10 percent (currently 200,000 euros a year), the additional cost would be on the order of 2.5–3 percent of national income (compared with a total current educational budget of 5.5–6 percent of national income). This cost would be significant but not insurmountable and justified in view of the stakes and the dangerous stagnation of educational investment in the wealthy countries since the 1980s. See Fig. 10.15.

108. 108.  See Chap. 14 and the research by A. Benhenda. Disadvantaged schools have fewer students per class, but this merely compensates for the effect of teacher pay, which goes in the opposite direction.

109. 109.  See Chaps. 8 and 16.

110. 110.  In particular, the quotas of scholarship students who must be accepted into different programs (especially preparatory classes) are not made public.

111. 111.  Specifically, scholarship students (roughly the 15–20 percent of students with lowest parental income) receive extra points in Affelnet (or benefit from social quotas in Parcoursup), which increases social diversity to their advantage but is unfair to groups with just slightly higher parental income. A system that adjusted for parental income in a more continuous way would clearly be preferable. See S. T. Ly, E. Maurin, and A. Riegert, La mixité sociale et scolaire dans les lycées d’Ile-de-France (Institut des Politiques Publiques, Working Paper No. 4, June 2014).

112. 112.  See, for example, the study of Chicago public schools by G. Ellison and P. Pathak, The Efficiency of Race-Neutral Alternatives to Race-Based Affirmative Action: Evidence from Chicago’s Exam Schools (National Bureau of Economic Research, NBER Working Paper No. 22589, 2016).

113. 113.  See L. E. Major and S. Machin, Social Mobility: And Its Enemies (Pelican Books, 2018).

114. 114.  Let us hope that things evolve in a more peaceful way than Michael Young envisioned in The Rise of Meritocracy (1958). See Chap. 14.

115. 115.  See Chap. 14.

116. 116.  See Chaps. 11 and 15.

117. 117.  On this point, see Chap. 11, and Piketty, Capital in the Twenty-First Century, chap. 12, table 12.2.

118. 118.  To get an idea of the problem, recall that the thirty most elitist US universities admit more students from the wealthiest 1 percent than from the poorest 60 percent of the income distribution. See Chap. 15.

119. 119.  In the case of foundations serving the interests of families or private individuals, it is obvious that they should be taxed as private property. The boundary line is not always easy to draw, however, and that is why we need precise rules concerning the governance of foundations (which should not be controlled solely by their generous donor) to determine what foundations deserve special tax treatment.

120. 120.  See Cagé, Saving the Media. In addition to supporting new participatory citizen-controlled media, the public should take control of (or at least strongly regulate) digital platforms in quasi-monopolistic situations and should impose very strict rules to combat sponsored content and unlimited extension of advertising (which today pollutes even the facades of historic monuments). Egalitarian democratic deliberation should be promoted.

121. 121.  See Cagé, The Price of Democracy. Full disclosure: Julia Cagé is my partner, which does not prevent her from writing excellent books, nor does it prevent me from reading those books in a critical spirit.

122. 122.  To encourage the emergence of new movements, one might also imagine citizens making two choices: one to apply if the chosen movement makes it above the 1 percent threshold, the other in case it does not.

123. 123.  See Cagé, The Price of Democracy. In general, it is striking to see how each country has cobbled together an inconsistent set of rules for dealing with political contributions without seeking to learn from others. For example, France prohibited gifts by “moral persons” but came up with an improbable system for directly subsidizing the political preferences of the wealthy (other countries also allow tax deductions for political contributions but generally less extreme). By contrast, after World War II, Germany pioneered an innovative system for public financing of parties and foundations attached to the parties and devoted to producing political ideas and programs. But Germany also failed to prohibit contributions by moral persons so that all large German firms subsidize all the parties; this may not be without influence on German government positions on exports and trade surpluses.

124. 124.  Currently, countries like Italy have a system in which taxpayers can indicate which religion they would like a portion of their taxes to go to (currently 0.8 percent), while in other countries, such as Germany, the tax authorities collect a religion tax (taxpayers who declare affiliation with a religious group pay a tax supplement). In contrast to the Italian system, this raises their tax bill. Note that Islam is excluded in both cases (and in Italy, Muslims pay de facto to subsidize other religions). Officially, the reason for this is that the government has not identified a proper Muslim organization to receive public funds. See F. Messner, ed., Public Funding of Religions in Europe (Ashgate, 2015). See also Cagé, The Price of Democracy, pp. 77–78. In France, the system is particularly hypocritical: religions receive no official public financing other than for religious edifices built prior to 1905 (most of which are Catholic churches) and existing private schools and lycées (the vast majority of which are Catholic). Note, moreover, that the special regime for financing religion in Alsace and Moselle also excludes Islam, just like the rest of the system.

125. 125.  The current system of tax deductions for political and charitable gifts amounts to granting the rich greater say in defining the public good. In this respect it resembles the censitary voting system. The transition to an egalitarian voucher would represent a decisive improvement. Taxpaying citizens who do not wish to choose a philanthropic cause could choose to have their voucher allocated in proportion to the wishes of those who do choose, or in accordance with the average allocation of public funds established by parliament.

126. 126.  As noted earlier, however, in the case of Brexit and other complex and crucial issues such as debt cancellation, referenda are useful only if precise alternatives are formulated and presented to the voters. This calls for extensive deliberation in an appropriate setting. In practice, the illusion of direct spontaneous democracy without a parliament or intermediary bodies can easily lead to a usurpation of power more extreme than the power imbalance one is seeking to remedy. Hence rules governing the financing of referendum campaigns are essential, failing which the vote may be captured by lobbies and financial interests. All these issues can be dealt with but must be carefully thought through.

127. 127.  Cagé’s proposal also includes the creation of social quotas (based on the Indian model) to ensure better representation of people of different social backgrounds in parliamentary assemblies. See Cagé, The Price of Democracy. Greater social diversity in representative bodies could also be achieved by drawing lots, which would avoid the possible social stigma associated with quotas. But this would mean giving up our collective ability to choose the people we believe best qualified to represent us (including within a given social group), which would be rather nihilistic if applied on a large scale.

128. 128.  See Chaps. 11 and 13.

129. 129.  For example, the requirement I described earlier for owners of residences or businesses located in France to declare their ownership might be challenged on the grounds that they would impinge on the free circulation of capital. It is nevertheless urgent that all entities that own assets (under any legal regime whatsoever) be subject to very strict rules of transparency. It should be almost impossible to register a corporation in a territory or jurisdiction where it does virtually no actual business. Currently, the rules governing “conflict of laws” (the situation that arises when two or more jurisdictions apply to the same entity) are very favorable to companies that have the means to circumvent the law in the sense that countries often allow firms to organize their business through entities over which they have no jurisdiction. In a number of cases, the Court of Justice of the European Union has enforced a very strict reading of the capital mobility rules (some of which are imprecisely codified in the Maastricht Treaty), finding, for example, that Germany had to suspend use of the “real seat theory” under which it did not recognize an entity based in the Netherlands as a “moral person.” See K. Pistor, The Code of Capital (Princeton University Press, 2019).

130. 130.  Developmental aid is about 1 percent of gross national income in Sweden, 0.7 percent in the United Kingdom, and 0.4 percent in Germany and France. The official objective set by the Organisation for Economic Co-operation and Development is 0.7 percent, but the Swedish figure is often taken as the implicit new goal. These amounts are greater than net transfers within the European Union (roughly 0.2–0.3 percent of gross national income), attacks on which played a nonnegligible role in the Brexit debates. See Chaps. 12 and 15. This suggests that such flows are seen differently depending on the level of development of the receiving country and are perhaps more readily accepted when seen as aiding countries perceived to be especially poor.

131. 131.  The very name “Comprehensive Economic and Trade Agreement” signifies that this is not a standard trade agreement but an accord that includes measures aimed at “comprehensive” transformation of the economy, which in practice means additional measures of “investor protection” (which allow investors to avoid ordinary courts of law and rely on private arbitrators to settle their disputes with governments). Clearly, there are different conceptions of how treaties should be understood.

132. 132.  The International Organization for Migration officially counts 19,000 migrants as having drowned in the Mediterranean between 2014 and 2018 (see their website at www.iom.int).

133. 133.  See Chaps. 14–15.

134. 134.  See Chap. 16.

135. 135.  On the construction of common images as the basis of nation-states linked to the diffusion of printing, see the classic work by B. Anderson, Imagined Communities. Reflection on the Origins and Spread of Modern Nationalism (Verso, 1983; new ed., 2006). Despite the success of the ideology of the national state, more or less decentralized imperial or federal polities have actually never ceased to play a central role. See J. Burbank and F. Cooper, Empires in World History (Princeton University Press, 2010); “Un monde d’empires,” in P. Boucheron and N. Delalande, Pour une histoire-monde (Presses Universitaires de France, 2013), pp. 37–48. See also Chap. 7 on the work of F. Cooper on federalist debates in the French empire and Africa in 1945–1960 and Chap. 11 on H. Arendt’s analysis of imperial and federal ideologies. See also U. Beck and E. Grande, Das kosmopolitische Europa (Suhrkamp, 2004).

136. 136.  In 2002 the African Union (AU) replaced the Organization for African Unity. During the AU summit meeting in Addis Ababa in 2018, the principles of a trade union and possible common taxes were approved along with a protocol on free circulation of persons within the AU.

137. 137.  See Fig. 13.12.

138. 138.  This norm of transnational justice should take price differences into account (that is, the universal capital endowment should be expressed in terms of purchasing power parity). Nevertheless, such a norm at the Euro-African or global level would clearly result in a significant decrease in the capital endowment for young adults in the rich countries (which would be cut roughly in half). Such a norm would be much more satisfactory than the international and intergenerational reparations discussed in the case of relations between France and Haiti (see Chap. 6). But if there were no such norm and reparations would have a similar effect, it would be difficult to oppose them.

139. 139.  See D. Chalmers, G. Davies, and G. Monti, European Union Law: Text and Materials, 3rd ed. (Cambridge University Press, 2014), pp. 475–491.

140. 140.  The development of free circulation in Britain in the eighteenth and nineteenth centuries, which Karl Polanyi analyzed, illustrates this danger. For Polanyi, the limited mobility of the poorest English workers prior to the late eighteenth century was linked to local financing of benefits available under the so-called Poor Laws. Polanyi, who has no intention of idealizing this authoritarian and stingy system, shows how the constitution of a unified national labor market in the nineteenth century coincided with a social disembedding of economic forces and aggravation of inequality.

141. 141.  European tuition rates also apply to citizens of states associated with the European Union, such as Norway and Switzerland.

142. 142.  Because Malian incomes are low (even after adjusting the tax schedule to reflect purchasing power parity), it is likely that the Malian contribution to the common fund would be quite low and no doubt significantly lower than developmental funds paid to Mali.

143. 143.  To be clear, under the scenario described here, most decisions would continue to be taken and administered by national, regional, or local assemblies, which would also approve most financing. In many cases it is better to organize deliberation at this level (for example, on curricula in different languages, local infrastructure and transportation, health systems, etc.), within the logic of the decentralized participatory socialism I am advocating. Only global public goods and taxing of transnational economic actors are to be regulated directly at the transnational level.

144. 144.  Among the solutions considered was the possibility that the United Kingdom would continue to abide by the same trade rules that applied before Brexit despite having relinquished the right to participate in the elaboration of those rules. Whatever solution is finally adopted, it is likely that relations between the British Isles and the continent will continue to be the subject of debate for decades to come, depending on what new forms of fiscal, social, and environment union EU member states establish (or not) and on their ability to impose new rules of co-development linked to free circulation of goods and capital.

145. 145.  See Chap. 16 and Saez and Zucman, The Triumph of Injustice. In other words, if a company earns $100 billion in profits throughout the world and 10 percent of its sales occur in a given country, and that country levies a 30 percent tax on corporate profits, then that company would have to pay $3 billion to the country in question. A company’s global profits can be estimated from various sources, and each country can impose sanctions on companies that fail to provide required information. Recall that this is how taxable profits are allocated among the several states of the United States.

146. 146.  In a perfectly cooperative and transparent system, the tax on corporate profits would play only a limited role: it would simply amount to a prepayment of the income tax due by the stockholder receiving dividends and other income from the company. But in a noncooperative and nontransparent environment, the corporate tax plays a much more important role because this prepayment is often the only tax that the ultimate owners of the company will pay unless the individuals to whom the profits are ultimately distributed can be identified. Furthermore, it is easy to disguise any kind of income as corporate profits. Income from consulting or author royalties can be sheltered in a corporate structure with the active assistance of financial advisers, who take such strategies for granted, or by payment of taxes in another country. That is why it is essential to develop a strategy to end the race to the bottom, which will end in avoidance of all taxes by those with the means to pay for such tax avoidance strategies.