Too much austerity is causing slow economic growth, says Thomas Piketty

James Nickerson
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Piketty said wealth inequality is an economic threat (Source: Getty)

Economic growth in developed countries has been slow due to too much austerity, rock-star economist Thomas Piketty has said.

He said that there has been an attempt, particularly in the eurozone, to reduce public deficits too fast, which has had a knock on effect on growth.

Speaking to BBC Radio 4's Today programme, Piketty said: "When you look at the growth trajectory of Europe as compared to the United States, I think it's very clear that we started a new recession in 2011, 2012, 2013 because we have tried to reduce the public deficit too fast."

"If we had taken our budgetary decision in a eurozone parliament in a democratic manner rather than through these automatic rules about budget deficit [we could have avoided] excessive austerity and the rise in unemployment and xenophobia right at the time when there was a true need for Europe to be more open with respect to the rest of the world, in particular regarding the refugee crisis."

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Speaking to Kamal Ahmed, Piketty added that he understands the rationale of the government in wanting to cut the deficit, but can't understand the "complete contradiction" of cutting the tax of higher income groups.

That ties into what the French economist sees as the biggest economic threat: rising inequality.

Looking at the longer-run, he said, there is no doubt that there has been rising inequality in Western societies.

"Also if you look at wealth inequality you will see a definite rise in concentration of property in a country like the UK. If you look at the real estate price in London it means access to property for working family with no initial family wealth is extremely difficult," he said.

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This inequality can lead to political instability, he warned.

"In some cases this can take the form of a rise in nationalism," he said. "When you don’t manage to solve your local domestic inequality or social problems in a peaceful manner, it’s always tempting to blame others. So you can blame foreign workers like the extreme right in in France, you can blame foreign countries, you can blame Europe, but this is not going to solve the problem."

Piketty also said that immigration is an economic good, and that Europe should allow net one million migrants in a year. "This is what we had between 2000 and 2010, and it was working," he said.

"The problem is - with the austerity policies and with the recession - now we are in a situation where it's very difficult in particular with southern Europe, with the terrible economic situation that we have created there in particular."

A total of 3.4m people immigrated to one of the EU-28 member states during 2013, while at least 2.8m emigrants were reported to have left an EU member state, according to Eurostat, meaning net migration was 600,000.

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