‘The EU has not addressed the fundamental problems that exist – that is that we have a monetary union without common fiscal policies,’ young French economist Gabriel Zucman tells Kathimerini.
He’s not even 34 and he’s already professor of economics at Stanford University in California. In 2018 he was awarded the prize for best young French economist.
A former student of Professor Thomas Piketty – who caused a stir when he published “Capital in the 21st Century” in 2013 – Zucman made his own claim to fame in 2015 with his book “The Hidden Wealth of Nations,” where he revealed that more than 7.6 trillion dollars (8% of global GDP) was squirreled away in tax havens.
In his new book, “The Triumph of Injustice,” which he co-wrote with Emmanuel Saez (published in Greek by Polis), he has focused on wider tax justice and particularly on the idea of a wealth tax, which was the central tenet in Bernie Sanders’ and Elizabeth Warren’s campaigns for the Democratic nominations.
In this interview, which we conducted via Skype, he speaks about the democratic deficit in the USA, the hypocrisy of billionaires and the hope of the European Union.
Since you wrote your latest book, we have seen Elizabeth Warren and Bernie Sanders, who endorsed your bold tax proposals, exit the race for the Democratic nomination. Was it really a triumph of injustice? Do you feel a bit let down?
No. I think that the ideas described in the book that were also part of the programs of Warren and Sanders are very popular in the electorate in the US. Wealth tax, end of tax competition, corporate tax. Opinion polls showed that the big majority of Democrats – 70% – supported it. It was also supported by the majority of Republican and independent voters. In the US and in Europe, when you ask if rich people and multinational corporations pay enough taxes, the majority replies “no.” There’s strong demand for tax justice and economic justice.
So why did they lose the nomination? Do you think that billionaires are creating a media landscape that is against people who advocate high taxes?
The bigger problem is that the participation of low income people in the electoral process is very low. The majority of low income, young minorities just don’t vote.
Do you feel a bit like you’re tilting at windmills or do you still believe that a change in economic and tax policy is feasible?
I am pretty sure it will be a change because if you take the history of taxation it is full of U-turns. In the book we show that in the US before 1930 income tax was unconstitutional, then the constitution was changed and it was increased up to 90% in the post-war years. Then it was reduced to 28% by [Ronald] Reagan. Now that we have Covid-19 we have seen that the pandemic accelerates change. Change might be possible even with a Biden administration. [Joe] Biden was seen as moderate but it might be possible to be radical given the post-Covid context. I remain optimistic that change could happen.
In the book you remind us that there was a quarrel in one of the last 2016 debates between Trump and Clinton and Trump said he didn’t pay taxes because he’s “smart.” Have you thought that this behavior hit a nerve because many in the US see it as an anti-establishment stance?
Yes, politically, perhaps it was a smart line, playing into the bias feeling and also more fundamentally it is part of the ideology: low tax, small government, Tea Party, extreme version of the neo-liberal ideology. That if you can avoid tax, you are actually contributing to the greater good of society by making yourself wealthier. That ideology is quite pervasive in the US and globally since the 1980s. But of course it has a paradox, because if everybody cheats on taxes and they maximize their own bottom line, there will be no society to take collective action. There’s this paradox that people refuse to see. What’s the reason to run for the higher office when at the same time you say that collective action is worthless and that there are only individuals seeking to maximize their own profits? It doesn’t make sense.
And also, it doesn’t make sense that most rich people now play the anti-establishment card. They are all against the establishment. Is this a kind of farce? Elon Musk is against the establishment. Trump is against the establishment. Most billionaires are against the establishment.
The reason they are billionaires is because they benefited from the low taxation and the legal system, properties rights protection and protection of monopolies. It is so hypocritical for them to say they are anti – especially when they derive from the establishment.
On the other hand, there is a philosophical approach that says that if you rob individuals of their billions you will not have powerful actors to counter state power. You will then have states, very powerful states, that would become authoritative.
When you have extreme concentration of wealth then you have instances of state capture. A good illustration of that is the US in the last few years. If you look at the Trump presidency, the one big legislative achievement was the tax law that was passed in December 2017. It’s a reform that reduces taxes for the big donors, dramatically reduces income tax rate, to 21%, and reduces estate tax for the wealthy. And all this came after rising inequality in the last 40 years. Can you see this differently than in that the very wealthy are controlling in a sense the US government? So, a more balanced distribution of wealth makes it less likely that you’ll see phenomena like the very wealthy capturing the government.
Five years ago, Greece almost left the eurozone. What did you think then and what do you think now?
Then and now I think the EU has not addressed the fundamental problems that exist – that is that we have a monetary union without common fiscal policies. We have one currency and 27 different interest rates. We have a deficit of democracy in the EU and in the eurozone.
But everybody in the EU is elected in different elections – from the leaders to the members of European Parliament.
To be a community is to pull resources together and the way to do that is by taxation. At the heart of this it should be a vote by elected representatives. There is a fundamental lack of democracy now and I think we should be more ambitious in the political community we want to create. That means a common budget and common taxes and people elected to debate and vote about these common taxes. We can’t only rely on the European Central Bank.
There was a first step with the announcement of an EU plan to borrow 750 billion euros to tackle the economic recovery following the coronavirus pandemic. Do you think it is really a first step?
I think it is a first step that goes in the right direction.
You have said that you were shocked when Jean-Marie Le Pen qualified for the second round of voting in the presidential elections of 2002. Fifteen years later, were you also shocked to see his daughter, Marine, secure nearly 34% in the second round of voting in 2017? Was it a bigger shock? And what about 2022? Do you fear we might see a Le Pen presidency?
Yes, I am very concerned about the rise of the far right in France, Germany, the US and Spain. There’s a global trend. What I am trying to do with my work is to say, “Yes, this is the problem and we can get constructive and better solutions than protectionism and nativism and leaving the euro, leaving the EU.” So, it’s on us, intellectuals, economists to explain, to demonstrate it is possible to reconcile globalization and economic justice and that people like Le Pen approach the case fundamentally wrong.
Are you still optimistic that the EU will remain united in 10 years’ time, in 2030?
I am by nature optimistic, but it is urgent that we democratize the EU and make a proper European Community with a budget, taxation and common debt. The EU must get to the next stage in terms of integration and democracy.