Bernie Sanders will be good for American economy, top economist says after Goldman Sachs attack

Thomas Piketty says that history has many examples of extreme inequality fostering healthy social democracies

Oliver O'Connell
New York
Friday 14 February 2020 08:02
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Bernie Sanders dismisses criticism from former Goldman CEO

Bernie Sanders’ economic policies would be good for the American economy, according to a new book by a renowned economist.

French economist Thomas Piketty said history has many examples of extreme inequality fostering healthy social democracies. His comments come days after a former Goldman Sachs chief executive, Lloyd Blankfein, said on Twitter that Sanders would “ruin our economy.”

In an interview with Bloomberg, Piketty cited Sweden as an example. At the start of the 20th century, Sweden — now held up as an egalitarian country — was entirely controlled by wealthy elites and voting rights were determined by property. Within a very short space of time, and with little economic disruption, it became the social democratic nation that we now know.

This precedent bodes well for Mr Sanders' policy goals of reforming American capitalism, Piketty suggested.

In his new book Capital and Ideology, Piketty examines the relationship between inequality and ideology, and how they shape each other.

The Sanders campaign has promised systemic change through economic policy to tackle inequality — higher taxes of the rich, a wealth tax, a minimum wage, and “workplace democracy”.

Piketty, like Mr Sanders, advocates a progressive tax on wealth. “Remember that the US is actually the country that invented progressive taxation of income and wealth in the 20th century,” he said.

Citing 30 years of data showing that US workers have not seen any real per capita growth in that period, Piketty also said no country has a national determinism about economics and the US is not necessarily wed to its current system. Things can change very quickly.

“Warren and Sanders are not radicals, they are moderate social democrats by European standards … and the ideology of the US is changing,” he said.

Piketty’s first book, 2014’s best-selling Capital in the Twenty-First Century, is said to have foreseen the Trump presidency — predicting that voters who felt marginalised by globalisation would turn to radical solutions outside of the realms of traditional politics.

Could there be parallels in support for the Sanders campaign? A portion of the electorate that again feels left behind in a highly unequal society, who could turn away from "business as usual" solutions, and wants real structural change.

In a discussion with the Financial Times, Piketty described the two different policy reactions to this scenario — the first wants to regulate the movement of goods and people, the other wants to regulate the movement of capital. One focuses on external factors (immigrants, unfair trade deals), the other on internal factors (inequality, education, health) advocating structural change at home.

At this early stage of the primary campaign it is still unclear whether the American voter will opt for the latter, and embrace Mr Sanders.

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