Piketty's latest bright idea - let's be like the Ottoman Empire
Thomas Piketty is back with his latest idea, that we should have a near total inheritance tax:
“What I’m proposing is not radical at all,” says rock star economist Thomas Piketty, who’s back on our bookshelves again six years after his first economic opus became a surprise best-seller.
Come again? The policy ideas unveiled in Capital and Ideology, the follow-up to his 2014 Capital in the 21st Century, are so extreme the most avowed Corbynite might whistle through his teeth and murmur about going a bit far.
His new work – released last year in French but launched in English shortly – sets out his stall for “participatory socialism”, but involves in practice wealth and inheritance taxes of up to 90pc.
That would help pay for an endowment for every 25-year-old of €120,000 (£101,000), a “public inheritance for all” for each to begin their personal and professional life.
There’s ever such a slight problem with such an idea. We’re had societies that do this. Have no transmission of accumulated wealth through the generations of a family. Where what wealth there is is allocated by the mechanisms of the State.
They’re societies in which long term investments in productive projects simply don’t happen.
As Alex Tabarrok is alluding to here, in India.
Under the Mansabdari system which governed the nobility, the Mughal Emperor didn’t give perpetual grants of land. On death, all land that had been granted to the noble reverted back to the Emperor, effectively a 100% estate tax. In other words, land titling for the Mughal nobility was not hereditary. Since land could not be handed down to the next generation, there was very little incentive for the Mughal nobility to build palaces or the kind of ancestral homes that are common in Europe. The one exception to the rule, however, was for tombs. Tombs would not revert back to the Emperor. Hence the many Mughal tombs
In the Ottoman system it was the Sultan who owned the freehold to all, Pashas merely having lifetime access to an asset.
Now, perhaps it’s true that people shouldn’t prefer passing on wealth to their own children rather than to the society more generally. But those experiments in societal organisation across history tell us that they do. Do to such an extent that they will curtail current consumption in order to invest for the long term where their children benefit and won’t when it’s society.
We do need to be organising matters to deal with the raw clay we have available - us humans - rather than whatever it is people might hope is true of those who don’t exist.
At least Piketty is right about one thing, his proposal isn’t radical at all. Returning to the inheritance - and thus investment - patterns of Istanbul circa 1750 AD really doesn’t sound anything other than distinctly conservative, reactionary even.