Thomas Piketty, the famous economist known for his book Capital in the Twenty-First Century, and Zied Bahaa Eldin, former deputy prime minister and founder of the Egyptian Social Democratic Party, discussed solutions to domestic and regional wealth inequality on Thursday at a lecture held at the American University in Cairo.
Piketty has been branded a “rock star economist” and, more controversially, “the new Karl Marx” due to his book, which maps global wealth inequality and its destabilising influence on society. The author has called for institutionalising a global progressive tax rate to decentralise wealth from the top 10%, which he claims has become an “obstacle to sustainable growth and stability in all countries of the world”.
Despite a desired movement towards greater social justice, Piketty said the world is returning to the type of wealth-based society that Marx commented on in the 19th century, and that to avoid similar international turmoil that gripped the early and mid-1900s we must work towards increased transparency in order to maintain a peaceful level of debate on the issue, avoid economic and social collapse, and not descend towards undemocratic trends.
To this end, the author has been active in the compilation of a database that tracks trends on a domestic and international level in the concentration of wealth to the top 20% of the world’s population in The World Wealth and Income Database.
“In Egypt, this is especially relevant,” said Eldin, as there is “no doubt that at the heart of that upheaval [2011 and 2013 protests] was the injustice of wealth inequality.”
While Egypt is not yet featured in the global database, Piketty and Zied Eldin spoke a great deal on Egypt’s inequality, which currently lacks credible information or absolute data.
Eldin said that a “freedom of information act would change the face of Egypt”. Piketty stated that without transparency in Egypt there is a “serious concern in who’s benefitting” from wealth.
Official economic figures are often distorted to appear more equal than reality. For instance Egypt calculates the unemployment rate by looking at those who have no source of income counter to the international standard. According to the Al-Ahram Centre for Strategic and Political Studies report for 2005, real unemployment was around 30% while official figures put it at 7.4%.
Piketty said that tax reform provides transparency to inform the debate. He stated one reform could be the inclusion of financial wealth in existing property tax. Property tax laws were written in both the US and Egypt at a time when large-scale land owners were the principle source of wealth and need to be adapted to the 21st century. Eldin said an inheritance tax in Egypt does not even exist.
Despite the lack of information on Egypt specifically, Piketty states that the Middle East is the most unequal region in the world due to concentration of oil wealth in a few, small countries. 10% of the population in the Middle East has access to 60% of total wealth in society.
Thus there is a real need for “political and economic integration to pool resources” if the Middle East expects to compete as equals in the global economy. He states that this inequality in resources is the root cause for both Islamic extremism and political instability and that the “need to invest in Egypt is a regional priority” due to the large segment of the population that is living in poverty.
He stated in the case of the European Union and Egypt, the problem is not the increase in refugees or a high population but too much austerity and neo-liberal reforms which has put in place an increasing burden to pay back its debts too fast, which leads to further destabilisation and depressed growth.