GLOBAL INEQUALITY: Thomas Piketty think-tank unveils a global wealth shake-up plan

The World Inequality Lab is calling for taxes targeting billionaires and fossil fuel dependency.

As Elon Musk blasts off into trillionaire status with his SpaceX initial public offering and plans to leave Earth behind, Thomas Piketty’s Paris-based World Inequality Lab (WIL) has produced a blueprint to reduce inequality on this planet while dousing the flames of climate change blazing across it.

Piketty is a renowned economic historian and public intellectual known for his pioneering books on inequality such as Capital in the Twenty-First Century, and his views – like those laid out in the Global Justice Report – are provocative.

The report, pointedly subtitled A Plan for Equality & Prosperity Within Planetary Boundaries – a stark contrast to Musk’s extra-planetary vision – lays out plans to raise the bottom half’s share of global wealth from 2% to 30%, while slashing the billionaire class’s share from 6.0% to 0.05% and addressing the global economy’s addiction to carbon-emitting fossil fuels.

“What we are trying to put on the table is a scenario that we believe in the end is more realistic.

“Some people may say it’s utopian, but at the end of the day it’s more realistic than Mars colonisation or the Donald Trump strategy of grabbing every fossil fuel on the planet.”

The centrepiece of the plan is a Global Justice Fund financed through a global wealth tax, a world sovereign wealth fund, and a global income tax targeting the world’s richest individuals.

The aim is to support global investment averaging 10.3% of GDP annually between 2030 and 2060 – compared with the less than 0.4% that is currently allocated for development aid – to be directed to climate and the energy transition, infrastructure, education and health.

As a measure for redistribution, a wealth tax – even among commentators who are open to the idea – is often criticised on the grounds that asset wealth is not liquid like income.

“We want to use the revenue not for current public expenditure but rather to put the assets into a sove­reign fund.”

And while a global income tax for the ultra-wealthy is in the mix, the focus is on the wealth tax, with both targeting the top 1%.

The Global Justice Fund is the pivot for collection and distribution, including in the form of dividends allocated to each country on an equal per-capita basis.

The report also calls for reforming the global financial system, and the Global Justice Fund is also key in this regard.

“All inhabitants of the world have equal political voice in the Global Justice Fund and the new international order. Currently, Europe and North America/Oceania have 4x as many votes at the [International Monetary Fund] and World Bank as their population share, while Sub-Saharan Africa and South & South-East Asia have 4x fewer votes than their population share,” the Global Justice Report notes.

It also calls for an International Clearing Union and an international currency “…to put an end to exorbitant privileges, i.e. the fact that rich countries benefit from higher returns on their foreign assets than what they pay on their foreign debt, thereby receiving a financial transfer from poor countries”.

On the climate front, it aims to limit global warming to 1.8°C above pre-industrial levels through “…rapid decarbonisation with a major shift toward sufficiency, including reduced labour hours and material ­consumption, as well as profound changes in consumption patterns, food systems, land use, and forest cover – compared with more than 4.5°C under current policies.”

Much of this echoes G20 initiatives led by Brazil and South Africa on global inequality and the reba­lancing of wealth and power.

Of course, launching such proposals in the face of current global political headwinds will be a daunting task, to say the least. Many will conclude that it is impossible and questionable – if not unjust.

Why, for example, should a wealthy person be obliged to transfer a portion of their asset portfolio to such a fund, or pay massive income taxes for this cause? That will be seen by many as a blow to personal liberty and a disincentive to investment, which could lead to the concealment of assets and tax avoidance on a grander scale than what already exists.

The notion of a global fund and currency will also strike many as an affront to national sovereignty and such views are not confined to rabid nationalists. And any concrete moves in such a direction would almost certainly provoke a political backlash from a resurgent right.

The other side of this coin is the link between widening inequality and the rise of the extreme right and authoritarian movements that have exploited discontent over this state of affairs to undermine democracy.

There are also mounting public concerns about climate change, rising inequality, the growing power of billionaires – and now trillionaires, a term still rejected by many computer spell-checkers – and the uncertainties about the unfolding AI revolution, which could conceivably shatter livelihoods on an unprecedented and terrifying scale.

Another school of thought holds that the productivity gains that AI will unlock will bring prosperity to all and reduced working hours without the need for heavy-handed measures. But that scenario is hardly a given – uncertainties abound in this regard.

The WIL’s vision may seem utopian. But the alternative is fraught with uncertainty and carries the whiff of dystopia.

The bottom line is that such ideas are worthy of debate and scrutiny, and their appeal is likely to find a growing audience if inequality trends maintain their current trajectory. DM