Debating on subjects from wealth tax to tech giant taxes, the two economists provide us a perspective on the pandemic as well as on the presidential elections in the United States and on their potential consequences in Europe.
On Thursday, September 10, Le Monde organized a joint interview with Thomas Piketty and Joseph Stiglitz. Thomas Piketty is a French economist who specializes in economic inequalities. In his best-seller, Le Capital au XXIème siècle, he studied inequalities from a historical perspective to support his critique of capitalism. Winner of a Nobel Prize in Economics for his work on asymmetric information, Joseph Stiglitz is a professor at Columbia and author of Globalization and its discontents. In his book, he criticizes the IMF as an institution serving only the interests of the United States and promoting policies which had disastrous social repercussions.
What does the pandemic reveal about the malfunctions of the American system?
According to J. Stiglitz, the economic situation in the United States is worrying, especially as the level of unemployment has stabilized around 15%. In addition to that, the number of COVID cases is increasingly high. These facts reveal the mismanagement of an administration which failed to anticipate the pandemic and to offer an economic recovery plan in line with the duration of the crisis.
Stiglitz thinks that they underline major preexisting issues such as the weakness of the healthcare system, i.e. the absence of universal access to healthcare. In the United States, 50% of the population is underinsured and 30 million Americans do not have any insurance – a worrying observation for a population facing a disease outbreak. Moreover, figures reveal that close to one in two Americans are insured through their employer, a very insecure situation at a time of rising unemployment.
On the topic, Piketty underlines the fact that the United States is facing a decline of life expectancy, a very unusual trend in peace time for a developed nation like the US.
What is at stake for the European Union with this pandemic?
T. Piketty applauds the European collective debt initiative. Indeed, by borrowing 750 billion of euros, the European Commission bypasses the rule of budget balance and strikes a further move towards federalism. The fact that more than half of the 750 billion will be redistributed in the form of subventions to the needy states will reinforce the economic strength of the European Union.
Despite this, T. Piketty assesses that the changing political landscape should not be overestimated as one of the major obstacles to a more federal European Union, as the principle of unanimity is still in the balance. In the European Union, reforms have always been postponed, he says, and we should not fail to seize this opportunity.
What impacts does COVID have on globalization?
In spite of the tumultuous relations between China and the United States, J. Stiglitz thinks that COVID had a positive impact on globalization by fostering multilateralism. The efforts of the World Health Organization, and the support it received to develop a vaccine has “never been seen before” and is “very impressive”. Nevertheless, the current crisis also revealed the flaws of the liberal economic system we have constructed. When the United States is no longer able to produce masks and ventilators by themselves, it should be due time to call the resilience of our supply chains into question.
If both economists recognize that it is a unique opportunity for change, T. Piketty is very skeptical about the will of decision-makers to achieve it. The money that has been allocated is likely to be used to boost stock market and real estate prices, as was the case in 2008, and therefore widen inequalities while not contributing to the protection of the environment. The conflict about gas in the Mediterranean Sea and France’s recent step backward on some pesticides attest that our view on money policy needs to change.
For T. Piketty, globalization should not prevent countries from imposing taxes to guarantee that engagements such as the Paris agreement are fulfilled.
An economic perspective on the United States’ elections
J. Stiglitz appears enthusiastic about Joe Biden’s economic program as it has the objective of “making the economy work better”. Stiglitz particularly refers to the plans of implementing stronger competition laws, enhancing worker’s rights and preventing the exploitation of the environment – part of Sanders’s Green New Deal.
Moreover, by recognizing that the American dream has become a myth, Joe Biden is addressing issues such as minimum wage, access to healthcare and university. All of this without forgetting the care workers that have been at the frontline since the beginning of the COVID crisis.
Another hot spot of the debate, especially during the primaries, has been the wealth tax proposed by Elizabeth Warren and Bernie Sanders. T. Piketty is in favor as he thinks the income tax is not enough regarding inequalities in the United States. J. Stiglitz shares this view but he explained that a lot of income sources, especially finance revenues, can bypass the income tax.
Should we tax tech giants? And what would that say about the European model of regulation?
In spite of being generally in favor of the French initiative for taxing tech giants, T. Piketty denounces its unilateral aspect. By focusing on a specific sector and targeting one country, the United States, France inevitably prompted a retaliation. The result, an escalation of imposed taxes, is far from helping the initial cause. Instead, the country should design a broader answer which would embrace several countries and sectors.
J. Stiglitz strongly supports T. Piketty’s opinion that there is currently a consensus inside the Democratic party about the need for regulations to guarantee competition and avoid cartelization.
The question of taxing tech giants refers more broadly to the one of the function of companies. J. Stiglitz believes that the general opinion has evolved since Friedman’s point of view – maximizing stock market’s values – to something closer to his stance, which includes social and environmental concerns to their agenda. That is progressive capitalism.
T. Piketty goes one step further as he advocates for a reorganization of companies’ boards in favor of the workers. This model called democratic socialism is strongly inspired by the German model where half of the seats of the company are occupied by the workers. According to him, it would be a way of defending other objectives than maximizing profits.
Picture: @Columbia University Maison Française, Le Monde Media Group, and Columbia Global Centers | Paris.
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