What do the West Asia crisis and United States (US) President Donald Trump’s tariff war mean for global inequality and wealth distribution?
Piketty: This can push up the rising trend of inequality even faster and increase fossil-fuel extraction. This is all going in the wrong direction. The good news is that it’s not going to work. Electors in the US will not be happy at the end of the year, and I think world citizens in general realise that this sort of techno-nationalist model is not preparing the world to face environmental and social challenges that we face.
In this report, we have developed a counter-narrative because we believe there’s a sort of battle — cultural and intellectual, and also political — going on but it’s first an intellectual and cultural battle about what kind of development model we want and
Foreign portfolio investors have left India in droves in recent days, leading to a sharp depreciation in the rupee. Now the government is providing tax incentives to bring back foreign investors. Do you think that is the right approach?
Somanchi: I think there are deeper structural problems facing the economy, So, we need to find more creative ways of dealing with the situation.
Is it a good policy to incentivise foreign investors vis-à-vis domestic investors?
Piketty: No, I don’t think so. I don’t know enough about the specifics of this scheme, but that doesn’t seem like a promising avenue.
The report suggests that India could overtake China around 2060. How much of that outcome depends on demographics and how much on policy choices made over the next two decades?
Piketty: The biggest part is economic rather than demographic. We all know the demographics of China and India, but in the end what’s important is that India is projected to reach 60,000 euros (in purchasing power parity, or PPP) in per capita gross domestic product by the end of the century. And that’s our target for India, but that’s our target also for all countries for the end of the 21st century. However, for this the Global North has to stop growing, because we have to take seriously the aspirations of countries like India to reach the same level of prosperity as the Global North.
So, given this starting point, what we are trying to show is that we can reach 5,000 euros per month for all countries by 2100 (including India). This requires production systems different from the one in the United States. You have to go for decarbonisation of the energy system. It also involves a shift from immaterial to material sectors — more education and health, and also changing food habits so as to allow for reforestation.
Since you are looking at this in PPP terms and not in market-exchange terms, does that mean in per capita terms, India will overtake China?
Anmol Somanchi: When we talk about global convergence, it’s very much a concept of per capita income. India’s per capita income is expected to grow high and reach the levels of the United States. Every Indian would be roughly at the living standards of someone living in the United States in 2100.
Piketty: By 2060, India will have converged and made a long way in this process. So in 2100 there will be complete convergence, in 2080 it will be almost complete, and 2060 will already be very well advanced.
It requires growth in living standards in India and Sub-Saharan Africa in the coming decades comparable to what we had in East Asia between 1950 and 2025, first in Japan and then in China. It requires a lot of investment in construction, hospitals, schools and infrastructure.
That’s taken into account in the plan.
According to the report, India has experienced higher inequality but lower productivity growth than China. What is the cause of this?
Piketty: We believe — on the basis of comparative historical evidence, but also comparing all countries from all regions in the world — that high inequality is not useful for prosperity. And when we compare countries over time, what we find is that the countries that have huge income and wealth gaps don’t grow faster. The good news of the report — to summarise it from an economic and technical viewpoint — is that it is possible for a country like India to reach a high level of prosperity.
