Piketty vs Waldenström

The recent appearance in Barcelona of Swedish economist Daniel Waldenström at a conference organized by the Fiscal Forum of the Barcelona Institute of Economics at the Círculo de Economía (Economic Circle) has stimulated debate on the measures needed to reduce inequality in developed market economies. Prominent in this debate was French economist Thomas Piketty, whose seminal work, Capital in the Twenty-First Century (2013), promoted the thesis that capitalism tends to generate extreme inequalities, such as those observed in the 19th century, and that the only way to avoid this situation is to implement a progressive global wealth tax along with higher taxes on higher incomes and inheritances. He also points out that the reduction in inequality observed in the 20th century was atypical, given that it could be explained by the influence of the wars that ravaged the world during that period and the Keynesian policies that emerged as a result.

Daniel Waldenström, in his recent book , Richer and More Equal (2024), without radically departing from Piketty's thesis, shares the goal of reducing inequality using a similar methodology. Both argue that accumulated wealth and the role of inheritances remain key to keeping wealth in the same families; despite all this, for Waldenström, capitalism in developed societies has increased the size of the middle class and its share of total society wealth, and that the key to this was the political and institutional change that allowed citizens to educate themselves, earn better salaries, and increase their wealth by saving for housing and pensions.

Coincidences They argue that accumulated wealth and the role of inheritances remain key to maintaining wealth in the same families.

His knowledge of Swedish tax policy, however, makes him more skeptical of wealth taxes due to the problems of evasion and capital flight (Sweden abolished the inheritance tax in 2005 and the wealth tax in 2007). He proposes better tax design through broader tax bases rather than simply raising tax rates. This is where the differences between Piketty and Waldenström are most pronounced. The former argues that wealth and inheritance taxes generate revenue and do not entail major distortions, while the latter maintains that capital should be taxed, but rather capital income rather than wealth and inheritance.

Waldenström emphasizes the importance of policies that improve social mobility, through investment in education and access to capital for entrepreneurs, which, she argues, also influence intergenerational mobility. Let us welcome this debate that vindicates the role of economists, especially when supported by detailed studies far removed from the prevailing trend, where frivolity and a lack of rigor characterize the decisions being made by the current US administration.