Bernie Sanders may be just what U.S. capitalism needs, says top economist: Don Pittis

A recent visit to Cuba reminded me that Soviet-style state planning is no way to run a healthy economy. 

So it's safe to say the New Hampshire primary win by Democratic presidential candidate Bernie Sanders — who has variously referred to himself as a socialist and a democratic socialist — is not a request by voters for Cuba's crumbling buildings and shortages of consumer goods.

Socialism means different things to different people, and for many older North Americans conditioned by years of Cold War rhetoric, it is a trigger word for fears of creeping communism.

While there are plenty of economists who disdain Sanders, others who believe that capitalism is the hands-down winner in making ordinary people rich, healthy and happy are also convinced that right now U.S. capitalism needs someone like him.

Perhaps none have made that clearer than the French bestselling economist Thomas Piketty, currently doing the media rounds in advance of the English version of his newest book, Capital and Ideology.

Piketty himself was labelled a Marxist by opponents when he made a splash with his 2013 book Capital in the Twenty-First Century that some say accurately foreshadowed the populist win by U.S. President Donald Trump.

Piketty's case in that book was that unless capitalism was adjusted in favour of the poor, we should expect a nationalist backlash by those who were losing out and blamed global capitalism for all their problems.

To some critics, the movement in favour of Sanders is just a kind of populism from the other side, a sort of anti-Trumpism, to Make America Great by bringing down the evil rich.

The kind of ideology celebrated in books such as Winners Take All, by former New York Times columnist Anand Giridharadas, has become a key part of the U.S. political opposition that supports Sanders.

Sanders 'not radical'

There are plenty of credible U.S. economists who agree with the need for capitalist reform. But for dry, intellectual analysis of why capitalism needs the kind of metamorphosis that only someone like Sanders can provide, it is hard to find a better source than Piketty.

In advance of the English version of his new book, the economic historian did two fresh interviews this week, one on the business news service Bloomberg, and one by the Financial Times in the tweeted link below.

"I think, first, that [Democratic presidential candidate Elizabeth] Warren and Sanders are not radicals," said Piketty in response to one interviewer's question. "They are moderate social democrats by European standards."

Looked at in historical terms, said the French economist, even by the standards of the U.S. — a country that in another era was the world leader in progressive taxation — raising taxes on the rich from their current low levels is hardly radical. History is filled with examples of ideological shifts away from inequality far short of revolutions that made countries' economies stronger.

He offers the example of Sweden, which we now think of as a healthy social democracy. But as recently as the early 1900s the country was controlled by a wealthy elite, where only the richest 20 per cent had voting rights and where richer people got a greater number of votes. And he said the new Swedish ideology propelled the change with minimal economic disruption.

Piketty sees a parallel in the United States, where the poor and lower-middle class don't vote because they know the government will inevitably only represent the better off. Perhaps a new Sanders-led ideology could change that.

'Broad participation' needed

Like many other economists, Piketty insists that, as happened in Sweden, sharing wealth more broadly will make the U.S. economy stronger, not weaker, and richer overall. He says the evidence from the past 30 years shows that the low-tax ideology that made the rich richer as a way of boosting the economy is "not convincing."

"I think the level of inequality we have today is not only unfair but it is also not efficient for the working of the economy," he said. "We need broad participation by a very large group."

There is no question that Piketty is himself a socialist. He is also a believer in capitalist economics and sees no conflict between the two. But the type of socialism matters.

In Cuba, years of economic planning means everyone is now literate. Socialized medicine means life spans are equivalent to those in the United States at a tiny fraction of the cost. But it is increasingly clear that the only vigorous parts of the otherwise tattered economy are in places where market forces have been permitted to develop. 

There is a palpable feeling of ideological change in the air. Perhaps, as in China, Cuba's long period of relative equality will act as a platform for a market-based rebirth.

According to the Piketty model of economic history, a social democratic Sanders is also riding a wave of changing national ideology, one that will keep the capitalism motor running while sharing the wealth to make the entire country richer.

Whether a majority of U.S. voters will be comfortable with the kind of ideological shift that Sanders represents is yet to be seen.

Follow Don on Twitter @don_pittis