About All Those Pandemic Billionaires

Thomas Piketty shows how government stoked wealth inequality.

WSJ Editorial.

"Christmas came early this year for economic progressives with the publication Tuesday of a fat report on global inequality. It’s the product of a Parisian think tank founded by economist Thomas Piketty, and despite praise from the usual suspects it’s a turkey.

The big conclusion is that 2020 was a great time to be a billionaire. The World Inequality Lab’s “World Inequality Report”—you know where this is going—finds that the pandemic year saw the steepest increase on record in global billionaires’ share of global wealth. The top 0.01%, a club with some 520,000 members worldwide, saw their share of global wealth increase to 11% from about 10%. The world’s remaining billionaires saw their share grow to 3.5% of all wealth from about 2% before the pandemic.

Setting aside data and methodology concerns that plague any attempt at measuring wealth, there's a lot less here than meets the eye. For example, the authors note that pandemic lockdowns weighed on incomes, especially among poorer households. Yes, that’s one reason we opposed lockdowns.

But they seem less interested in what triggered the putative spike in the wealth of the ultrarich. Monetary policies that have inflated asset prices are an obvious suspect, especially in the developed world where financial assets have soared in value. But lead author Lucas Chancel tells us via email “it’s too early for us to have a definitive take” on the impact of monetary or other policies on this trend.

That’s an important point to leave for later, because without a full understanding of what creates a level of inequality, it’s impossible to say if that inequality is a problem. Instead the authors assume any inequality is bad and focus on longer-term trends that supposedly show a persistence of colonial or imperialist patterns of wealth distribution, or something.

Despite the report’s best efforts to conceal it, there are hints of good news. A graph on page 61 titled “The elephant curve of global inequality” shows that since 1980 the bottom 50% of the world’s earners saw their incomes rise between 50% and 200%. A graph on page 15 shows that since 1995 the wealth of the poorest 50% globally has increased 3%-4% a year.

Largely missing from this analysis is any sense of absolute scale. Were such data included, they would show that the global pie has grown apace, especially in recent decades, leaving most people with a bigger piece. The proportion of people below the World Bank’s $1.90-per-day poverty line, at 9.3% in 2017, is the lowest it has ever been.

Instead of examining what causes the pie to expand, Mr. Piketty is building a career out of arguing over how politicians should slice and redistribute it. Tuesday’s report complains that governments have become much less “wealthy” lately, which may be true in net terms in some places as some capitals privatized state-owned assets and then borrowed during the pandemic. But privatization has generally been a boon for prosperity, and trying to reverse it via wealth taxation and more government control, as Mr. Piketty and the left have in mind, would leave less global wealth to distribute.

The real inequality news from the pandemic is how government policies stoked it. By all means let’s debate that. But then it’s passing strange to trust that government will somehow reverse the inequality it caused. Private economic growth will have to do that—some of it financed by, wait for it, billionaires."