Capital in the Twenty-First Century–Eternal Inequality?
No, I have not read all 577 pages of Thomas Piketty’s Capital in the Twenty-First Century. I don’t think I have the wherewithal to hike through such a dense scholarly forest. Besides, there are also seventy-eight pages of notes inconveniently placed at the end of the book–rather than at the bottom of each page–that drive me bat shit. So I’ll leave it to the saintly patient among us to assemble a more complete assessment. Here I’ll sketch out my preliminary thoughts.
I’ve read more about Thomas Piketty and his economic laws and formula for inequality ‘r>g’ (now immortalized on a t-shirt by Stephen Colbert) than I have read pages of his book. But after having read a hundred or so pages, Capital in the Twenty-First Century now occupies pride of place on my desk where it conceals a good number of bills I would rather not pay. So here’s my two-cents worth, which is all I have left after r>g.
Capital in the Twenty-First Century is primarily a study of economics, a discipline I generally hold in low regard, as phrenology or public relations. Despite this built-in handicap, Piketty has succeeded in producing a work of singular importance for anyone concerned with social equality and economic justice. What allows him to do so, unlike so many others before him, is two-fold: a multi-disciplinary approach to the problematic relationship between capitalism and social inequality; and a mastery of a mountain of data sets.
Piketty argues that a systematic rendering of the dynamics of inequality require the scholarly tools of the historian and the sociologist as much as, if not more than, the economist, in order to adequately explain what is at the core of this system of production, exchange and consumption that we all live with. Piketty also owes a great debt to a number of talented colleagues and to relatively recent technological advances (the internet, relational databases) that help with the heavy lifting necessary to manage mountains of data. Such talented coworkers and new widgets allowed for Piketty et. al. to slowly, over 15 years, sort through economic data spread out over a great deal of time (as much as 300 years) and across many different societies (at least 20 countries) and transform it into useful information and from there into a theory. Piketty even goes so far as to argue that his theory rests on laws. That’s pretty audacious, and just the sort of thing, when put forward by economists, I usually find so aggressively stupid–the kind of stuff that ‘naturalizes’ inequality and injustice, where the rich are rich because they work real hard and deserve what they get and, conversely, the poor deserve their lot. But Piketty is grinding a different axe here and although I am skeptical that he has uncovered any hidden ‘laws’ regarding the functioning of capitalism or economics more generally, he has valuable insights.
Captial in the Twenty-First Century provides a much needed re-periodization of the history of global capitalism that reminds us (as if we needed reminding) that as a system it is both unstable and unsustainable. As a political economy it involves a deeply contradictory relationship to democracy. Except for war, depression and revolution, social inequality increases both over time and across nations: regardless of where or when you live, the global rate of return on capital (r) tends to increase at a rate higher than that of the economy in general (g), the result being that the rich get richer and the poor get poorer. It’s a fairly straightforward equation, but it has far-reaching, profound implications. Piketty’s prescription to solve this problem is not, as revolutionary ideas go, audacious, but it is absolutely inconceivable within the thought world of elite opinion: a global tax on wealth and income. Even Piketty has described this modest proposal as ‘utopian’.
What Piketty and his colleagues effectively demonstrate is that instead of a steady forward march and upward trajectory, where the benefits of capitalist development steadily lift all boats, or trickle down onto the heads of the masses–choose your inept metaphor–the prevalence and persistence of inequality is a key feature of this economic system. The kicker here is that the rate of accumulation of wealth and income by the few is only interrupted when gross economic output (GDP at the national level) exceeds the rate of return on capital. The tendency towards increased inequality is mitigated by technological innovation and the diffusion of education to the masses–but only so much, and such developments can be offset by novel forms of accumulation at the top. Apparently this leveling out hasn’t happened very often over the past 300 years and when it has–during and after world wars, depressions and revolution–it is a by-product of the instability the economic system has itself produced. In other words, only after economic and political convulsions is the process of upwards accumulation slowed or halted; then, after a time, inequality is reasserted. Another way to look at this is that these spasms of extreme violence, capital destruction, and habitat obliteration are this system’s way of regulating itself.
This brings to mind a clever rhetorical Q & A: Why does capitalism triumph over all attempts to thwart it? Because when faced with a crisis, capital turns to socialism to rescue it every time.
Elsewhere Piketty notes the recent emergence of ‘super managers’ pulling away from everyone else and that we are returning to a form of ‘patrimonial capitalism’ that resembles the ‘Gilded Age’ that preceded the Great Depression.
It doesn’t take a Paul Krugman to see that.
But I am also ambivalent about Piketty and his tome. The author self-consciously adopts the accoutrements of radicalism without any of the elements of risk (imprisonment, exile, execution) that have commonly been associated with such ideas–sort of squatting on the shoulders of giants. Piketty’s radicalism is that of a ‘rock star’, the perfect emblem for the Society of the Spectacle (another apt French phrase). If I write dismissively of the hype surrounding Piketty it’s only to highlight an intellectual marketplace that functions to domesticate all manner of dissent and opposition, what others have described as Capital’s ability to assimilate and thereby neutralize red, yellow and black cells. In the process what is so obviously a scholarly work of some importance is being systematically sucked dry of any saliency by a commentariat enthralled with the image of scholarly rebellion but largely incapable of grappling with the most potent ideas at the center of this work. And that includes the gushing praise heaped by the likes of Paul Krugman as well as the absurd red-baiting coughed up by the Financial Times and other hack apologists for inequality.
It’s been inspiring to watch mainstream and especially libertarian economists go back on their heels in the face of a body of work that has exposed their epic failures: first, their inability to document and accept the instability that comes with inequality as an essential historical feature of global capitalism and, secondly, their failure to anticipate the obvious results this contradiction will produce (Crash of 2008). I delight in Piketty’s swipe at American orthodox economists as being numbers obsessed, a collection of blinkered bean counters and malignant technocrats consumed with more profit and novel ways of obtaining it. The essayist Thomas Frank in his review of Piketty’s book recounts an anecdote that neatly captures this point in a satirical manner reminiscent of a Family Guy cut-out skit: a group of American economists at an unnamed Mid-Western university took to sporting white lab coats so as to distinguish the ‘serious’ nature of their pursuits as distinct those of their colleagues in the ‘soft’ sciences of sociology, political science and anthropology. The hubris here tells us everything we need to know about the reining orthodoxy of that profession.
Piketty’s work neglects the role social forces (organized labor, civil rights movements, rural rebellions, etc) play in shaping income inequality–especially by reducing it. This reinforces a mechanistic view of economic forces as being somehow beyond our control, inexorable and inevitable–sort of like the orthodox historical materialism of another era. Piketty is a French structuralist, a school of thought that adds much to our understanding of the role social forces and institutions play in shaping our lives as much as it fails to apprehend human beings as subjects with conscious thought and agency. Such economic laws are said to exist outside us, perhaps above us, to be divined by econometricians with their modern alchemy of algorithms and spreadsheets, and salvation lies in uncovering the ‘laws’ that govern production, exchange and consumption. We need only understand them better and apply them more intelligently.
But the notion of perpetually increasing growth and profit is often presented as natural (immutable) or, worse still, moral (normative). But it is not any of those things (or shouldn’t be regarded as such) and our task is, again, to redistribute. There is no ‘law’–economic, political or moral–that can establish a fairer distribution of resources, income and wealth. Only struggle will achieve that. This is obvious to anyone who cares to look around at the abundance of natural resources that can sustain human life that are at our disposal. That those resources need be exploited by human intervention is a given, but that a market system based on greed and competition is the best way to achieve a sustainable distribution of those resources is an unsupported fairy tale: magical thinking without the sound moral teachings of a Gabriel Garcia Marquez novel to stoke our wonder and awe and help us engender change. There is really very little science here, just raw power.
Piketty distances his work from that point of view, arguing for interdisciplinary dependence and careful, sober fact-checking. Yet he reproduces that very dynamic elsewhere–at least more than he should–and it is this problem with his work that James K. Galbraith and Thomas Frank rightly point out.
Besides, no matter how many beans are counted, algorithms programmed or equations solved, I don’t consider economics a ‘science’ at all: at best it’s ‘mathematical sociology’, or ‘numerical anthropology’. We are, after all, still human and our ability to reflect on our world and change it means that efforts to quantify our activity should always be held up to rigorous examination and withering critique; that critical stance itself necessarily informed by how that bean counting, that widget, or innovative metric can help alleviate social inequality, how it serves the common good.
Given that Piketty and colleagues have been assembling, publishing and discussing their data for more than a decade and that the book was published last year in France (to mostly yawns) why the explosion in publicity over the past summer? It reminds me of the campaign orchestrated by Adbusters with the help of the PR firm ‘Workhorse’ around the Occupy Movement–some kind of prescient anticipation or luck combined with a ‘flash mob’ moment and technical prowess emerged to launch this book. I’m interested in seeing an analysis of the Harvard University Press public relations strategy on release of the book and other efforts, apparently wildly successful in a narrow economic sense, to sell the book and Piketty himself. My main concern, however, is what this book and the man who wrote it are saying about our world; how best do we evaluate the arguments put forth in the book and the discussion that has followed, and how it is useful (or not) in changing the world. At least it’s heft can be used against champions of the free market, or to help cover up those pesky bills I’d rather not pay.