Wednesday, March 25, 2020

Piketty: Social-Federalism and Catalan Syndrome

(This is the English translation of my review of Piketty's book, which was originally published in Catalan in Política & Prosa, and then translated into Spanish in the blog of Federalistes d'Esquerres)

If “Capital in the 21st Century” waited until the last part to make reform proposals that totally exceeded the logic of national sovereignty, in “Capital and Ideology”, the new book by Thomas Piketty (similar to the previous one in ambition and extension), the overcoming of methodological nationalism takes place from the first page. It is a social-federalist (this is the adjective used by the author) manifesto from beginning to end. Where, in addition, Catalonia plays an important role as a symbol of a more generalized evil: what Piketty calls “Catalan syndrome”.

The main argument of the book is that throughout the history of humanity, and throughout the globe, a key aspect of the organization of societies is formed by the ideological justifications for inequality. If in the past justification took place through religion, colonialism or racism, now it takes place through the meritocratic discourse and identity withdrawal.

In the current phase, which Piketty describes as hyper-capitalism, democracy supports high levels of inequality (growing within many developed countries) because there are a series of "traps", which are quite similar to those described by Branko Milanovic in his new book "Capitalism, Alone". The main traps are the growing segregation and educational inequality, and the capture of the democratic process by the elites, through a series of mechanisms, including the unequal financing of parties and campaigns. Piketty proposes in this regard a series of radical mechanisms to equalize education and politics, among them a system of political “bonds” (similar to the “vouchers” of education) that are distributed equally among the entire voting population so that you can finance with them the party that you like the most.

Other elements of what he calls social-federalism, combined with a "participatory socialism", are the mitigation of the benefits that private property confers, facilitating the shared use of property, trade agreements with social and regulatory clauses, statistical systems of global transparency, and climate justice that stops the environmental catastrophe in an equitable way. None of these reforms can be carried out at the level of the nation-state, which is why Piketty proposes institutions to reinforce European federalism, and especially the euro zone, as well as to build global federalism, through a world democratic assembly making decisions about big issues like climate change. The author regrets that federalizing efforts in the past, such as those he describes that took place on the occasion of French decolonization in Africa, or around the Federal Union group in Great Britain in the 1930s, did not materialize at the time.

Pikettian proposals reflect the idea, expressed in the past by the American economist Samuel Bowles, that existing institutions are only a small fraction of all possible institutions that could exist with existing means, but we are stuck in the current ones for evolutionary reasons of lock-in and feedback loops. One way out of these traps is the social-federalist leap.

In a book on the ambition and global perspective of “Capital and Ideology”, it is inevitable that some imperfections will arise when analyzing concrete realities, or that some doubts will be raised about some of the judgments expressed by the French economist.

One of the aspects in which Piketty is not particularly convincing is in rejecting the category of "populist" when describing some political behavior. According to him, the use of this concept hides an inability to understand the social and redistributive background of the crisis in our democracies. To be more convincing, he should demonstrate that he is familiar with the already substantial political and historical literature on the subject, developed by authors such as Müller, Mounk, Finchelstein, Snyder, and others. These authors (despite acknowledging that the populist concept, like other political concepts, is vague) warn about political leaders who speak on behalf of the people looking for scapegoats and eroding the role of the rule of law and democratic institutions, although they use the instruments that democracy places at their service, and in particular electoral institutions. Although these phenomena have different local variants, it is difficult not to see the commonalities between Trump, Salvini, Johnson, Orban, Bolsonaro (and the Catalan couple Torra / Puigdemont), and how their behavior endangers democratic stability and  harmony in societies, distorting the functioning of democracy itself and preventing the foundations that give stability to many of these societies from working. The fact that inequality trends have not been contained in the last two or three decades, according to Piketty, possibly with good reason, due to the inability of the social democracy to develop an international strategy, which causes it to lose support among its bases (despite having been able to maintain a mínimum level of well-being), it cannot justify turning a blind eye to movements that generate great polarization, making transnational egalitarian coalitions impossible. They are movements that in the end impede the normal functioning of governments and therefore leave social problems unattended and, combined with identitarianism, prevent organizing reactions to the great problems of humanity. National-populism is a key component of the justification (conscious or unconscious) of inequalities in societies that must maintain a democratic appearance.

The most prominent rivals of social-federalism are market identitarianism and left-wing sovereignism. This is discussed extensively in Chapter 16 of the book. This chapter is dedicated to "social-nativism and the post-colonial identity trap," and contains a section titled "The Separatist Trap and the Catalan Syndrome." In the following two sections, Catalonia is also discussed, which is therefore a key place for Piketty to understand the social issues surrounding identity. Speaking of "syndrome", Piketty makes it clear that the problem goes beyond Catalonia.

The French author considers two sets of data on Catalonia to be fundamental, although he does not explain the relationship between the two very well: the data on the degree of fiscal decentralization in Spain on the one hand, and on the other the data on the positive correlation between the level of per capita income and support for independence. In particular, he believes that the decentralization of income tax in Spain is already excessive compared to federations such as the United States or Germany, and that it reflects the weight of the Catalan demand to maintain its own resources in
Catalonia. In reality, this comparison between Spain and some federations denotes one of the risks of carrying out a work with the ambition of “Capital and Ideology”. Using international comparative data hides many details, which suggests that this risk may affect other sections of the book where different regions of the planet are discussed over the centuries. Although the comparative figures show a great decentralization of income tax, these data hide specific historical processes that, seen in detail, can give rise to different messages. The partial decentralization of income tax in Spain does
not have a comparable level of regulatory capacity behind the autonomous regions, such as Catalonia, and the final system is disfigured by the little transparent equalization transfers in Spain. Piketty perhaps ignores the fact that there are two autonomous communities that receive 100% of the income tax in their territories, and that in these conditions it is difficult to deny the other communities the partial management of any of the large taxes.
Furthermore, the idea of ​​decentralizing sections of the income tax had been an idea shared in Catalonia by the progressive opposition to the nationalist right, thinking that the responsibility of collecting a large tax could be a good counterweight to the propaganda effects of controlling large items of spending from regional power (although in practice the surveys show that people do not know to which administration each tax corresponds or in which part).

More unquestionable is Piketty's use of the other dataset on Catalonia that he uses: the high correlation between level of income per capita and support for independence, with evidence that comes from post-electoral surveys, but that coincides with detailed electoral data by specific cities where the relevant unit is the census section (such as Sabadell or Mataró), or with the simple inspection of electoral results in general, where it is easily found that support for independence parties is minimal in the neighborhoods where the popular and working classes concentrate.

This correctly suggests, in my opinion, a fiscal motivation (among others) of the independence revolt, which then becomes a form of social separatism (such as the attempt of the wealthy neighborhoods of poor countries to have large condominiums with private security). Still, Piketty's reasons for the positive correlation between per capita income and support for independence are incomplete. The author only attributes it to the fact that the wealthy bear a higher weight of solidarity with the rest of Spain due to the progressiveness of taxes, while the poorest do not support and therefore do not complain about this supposed burden. However, there is a complementary and fairly simple explanation, obvious to anyone who knows the Catalan society, but not especially commented on, as if it were a taboo. I mean that the Catalan identity (based on Catalan as the first language) is more present in the middle and upper-middle class sectors, and the Catalan-Spanish identity (based on the
Spanish language as the first language) is more present in the lower-middle and lower-class sectors. This is a key aspect without which it is difficult to understand the Catalan independence process. But when it is combined with works such as those by the American political scientists Achen and Bartels (collected in the book “Democracy for realists”), which defend the importance of group identity when forming political preferences, and how this identity permeates all kinds of biases in political decisions, one realizes the importance of these factors in Catalonia. The great visibility and power of Catalan independence does not lie in the support of a majority, but in the support of the socially and culturally dominant classes. Class interests and cultural identity combine evolutionarily to give a moral alibi to those who have adopted independence, where cultural and fiscal claims (these more or less camouflaged) are inseparable.

The last objective of the Catalan elites who promote independence would be for Piketty to create a tax haven, like the Brexit supporters in England, in a context of increasing capital mobility. The “Catalan syndrome”, then, would result from the inability of the political forces, especially  social democracy, to transfer the fight for equality to the transnational level. Without the ability to build large solidarity aggregates that can offer powerful projects to the entire society, elites find it easier to offer a project based on fiscal selfishness. The local identity left serves as their ally, thinking that they will be able to apply redistributive projects in a single small country. But this is totally illusory without international redistributive policies that coordinate and manage international taxes, starting at the European level. Piketty has no doubts: if the alliance of liberal-identitarians and social-identitarians that form the independence coalition achieved their objectives, supporters of making Catalonia a tax haven would prevail.

The author believes that Catalan independence (or other social separatisms) would not have been as strong with a more powerful Europe in its distributive elements, and thus points out the way to overcome syndromes like ours with the consent, if not the enthusiasm, of a great majority. To overcome the Catalan syndrome, an ambitious project promoted from different parts (and not, a "Madrid offer") is needed, which can be shared by a large majority of Catalan society, not just the middle classes who may feel more or less Catalan. Piketty's social-federalism points the way.

Tuesday, March 24, 2020

Writing again

As everybody tries to adapt to the coronavirus crisis (in Barcelona, staying home), I have decided to reopen my blog to better communicate with… well, anybody who cares. In the next few weeks, I expect to post the English version of an interview I published in Catalan with Branko Milanovic, and also the translation of my book review in Catalan of Piketty's last book (with a special emphasis on what he had to say about Catalonia). I will also post some notes I took for a roundtable I could finally not attend (and was canceled) in London about regulation and institutions for climate change. For the time being, here is a selection of recent writings about the economics of the current pandemic.
I especially recommend this site put up by CEPR:

-Vox/CEPR coronavirus policy portal:

Some prestigious economists have published short articles asking for massive public intervention both to stop the disease, to alleviate the social consequences, and to revive the economy:

-De Grauwe:



-Marimon et al., “A Proposal for a COVID credit line”:

There are also very interesting articles with lessons from history:

-Coping with disasters: two centuries of international response:

-Torsten Bell about previous warnings:

-Previous epidemics:

And I have spotted at least three manifestos by economists and social scientists asking for a variety of instruments of public intervention:

-Manifesto in favor of Eurobonds:,488994,en.html

-Manifesto for a Universal Basic Income:

-US economists’ manifesto:

All these contributions have a variety of ideas. Not all of them will survive, in a climate of high uncertainty. But they have something in common: massive public intervention will be needed, at a very large scale. 
Stay safe, and be in touch.