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Trump, Macron: same fight

Summary:
It is customary to contrast Trump and Macron: on one hand the vulgar American businessman with his xenophobic tweets and global warming scepticism; and on the other, the well-educated, enlightened European with his concern for dialogue between different cultures and sustainable development. All this is not entirely false and rather pleasing to French ears. But if we take a closer look at the policies being implemented, one is struck by the similarities. In particular, Trump, like Macron, has just had very similar tax reforms adopted. In both cases, these constitute an incredible flight in the direction of fiscal dumping in favour of the richest and most mobile. Let me recap recent events. In the United States, the Senate has approved the main lines of the Trump plan ; the rate of

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Trump, Macron: same fight

It is customary to contrast Trump and Macron: on one hand the vulgar American businessman with his xenophobic tweets and global warming scepticism; and on the other, the well-educated, enlightened European with his concern for dialogue between different cultures and sustainable development. All this is not entirely false and rather pleasing to French ears. But if we take a closer look at the policies being implemented, one is struck by the similarities.

In particular, Trump, like Macron, has just had very similar tax reforms adopted. In both cases, these constitute an incredible flight in the direction of fiscal dumping in favour of the richest and most mobile.

Let me recap recent events. In the United States, the Senate has approved the main lines of the Trump plan ; the rate of federal tax on corporate profits will be reduced from 35% to 20% (with moreover an almost total amnesty for the profits repatriated by multi-nationals); a reduced tax of approximately 25% will be instituted for the pass-through income of company owners (as an alternative to the higher rate of income tax at 40% applicable to the highest salaries); and inheritance tax will be considerably reduced for the richest (and even totally eliminated in the version adopted by the House).

Now, here is what Macron has proposed in France. The rate of corporation tax will gradually be reduced from 33% to 25%; a lower rate of 30% will be introduced for dividends and interest (as an alternative to the 55% income tax rate applicable to the highest salaries); the wealth tax will be abolished for the largest financial and business wealth holders holders (while the real estate tax has never been as high for the less wealthy).

For the first time since the Ancien Régime it has thus been decided in both countries to set up an explicitly derogatory system of taxation for the benefit the categories of income and wealth held by the most affluent social groups. In each case the argument is presumed to be irrefutable; the bulk of taxpayers are neither free nor mobile and have no other option than to treat the rich with respect, otherwise the rich will up and leave the country and they will no longer be able to share in their benefits (jobs, investments and other wonderful ideas which ordinary people cannot easily access). Trump refers to them as ‘Job creators’, while Macron refers to ‘Lead climbers’: the terms used to describe these new benefactors which the masses should cherish vary, but basically they are similar.

Both Trump and Macron are probably sincere. The fact remains that they both reveal a profound lack of understanding of the inegalitarian challenges posed by globalisation. They refuse to take into account facts which are now well established, namely that the groups to which they give preference are those who have already acquired a disproportionate share of the growth in recent decades.

By denying this reality, they expose us to three major risks. Within the richest countries, the working classses have a feeling of abandonment which sustains an attitude of rejection towards globalisation and immigration in particular. Trump deals with this by flattering the xenophobia of his electors, while Macron hopes to remain in power by counting on the attachment of the majority of French public opinion to tolerance and open-mindedness and by rejecting his critics as being anti-globalisation. But in reality this development is a threat to the future, in Ohio and Louisiana, as it is also in France and in Sweden.

Secondly, the refusal to tackle inequalities complicates considerably the challenge of addressing climate change. As Lucas Chancel has clearly demonstrated (Insoutenables inégalités, Les petits matins, Paris, 2017) the considerable adjustment in lifestyles to deal with global warming will only be acceptable if a fair distribution of the effort is guaranteed. If the richest continue to pollute the planet with their SUVs and their yachts registered in Malta (tax-free, including no VAT, as the Paradise Papers has just revealed), then why should the poor accept the rise in the carbon tax, which is likely to be inevitable ?

Finally the refusal to correct the inequalitarian tendencies of globalisation has extremely negative consequences on our capacity to reduce global poverty. The new perspectives, which will be published on 14 December in the World Inequality Report are clear: the pursuit of the inegalitarian policies and trajectories chosen will result in the standards of living of the most disadvantaged half of the planet developing in a totally different manner between now and 2050.

Let’s end on a more optimistic note: on paper, Macron defends an approach of international and European cooperation which is obviously more promising than Trump’s unilateralism. The question is to know when we will leave theory and hypocrisy behind. For example, the CETA (Comprehensive Economic Trade Agreement) treaty between the EU and Canada a few months after the UN Paris Climate Change Conference has no legally binding measures on climate and fair taxation. As to the French proposals purporting to reform Europe which are as music to our proud French ears, the truth is that they are extremely vague. We still do not know how the Euro Zone Parliament will be formed nor what its powers will be (doubtless these are considered mere details). There is a real risk of all this leading to nothing. If Macron’s dream is not to lead to a Trump nightmare, it is time to abandon minor nationalist satisfactions and to face the facts.

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Thomas Piketty
Thomas Piketty (7 May 1971) is a French economist who works on wealth and income inequality. He is a professor (directeur d'études) at the École des hautes études en sciences sociales (EHESS), associate chair at the Paris School of Economics and Centennial professor at the London School of Economics new International Inequalities Institute.

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