(NB…I did not notice my error in the title of the post until today. I wrote “Capitalism” and not “Capital” for the title of the book. Shoot!)
I am slowly approaching the end of Thomas Piketty‘s outstanding book Capital in the Twenty-First Century. I would be much further along, but there is so much being written about the book that I find myself following the rich meta-discourse the book generates. It’s exciting!
In short, Capital in the Twenty-First Century is a solid study of wealth and capital that is written in many layers. If you want the wonkish, esoteric stuff behind the author’s study, it’s there, although understanding the arguments in the book really do not rely on heavy doses of it.
Instead the book takes decades — even to some extent centuries — of data, including current wealth and economic growth data, to argue convincingly that the accrual of great wealth in a tiny minority of fortunate individuals does not deliver the best economic outcomes.
Even sober, conservative-leaning publications like The Economist line up behind the overall thesis. (The worst criticism they seem to come up with over at The Economist is an observation that the book isn’t such a big deal in France, where the book was first published, compared with elsewhere.)
But all the data, common sense, and expert support behind Piketty’s study won’t convince people ideologically inclined to believe otherwise because…well, I don’t know why. Some people might argue that the book’s conclusions recommend higher taxes (it does) or more regulation (it does that, too), but to condemn the book for those reasons is putting the cart before the horse or otherwise missing the point.
The real problem with capital — if “problem” is what we’re talking about — is a systematic and political one which favors an unsustainable transfer of accumulated wealth to a small segment of the economy. Capital is not targeted as a problem, however; there is nothing personal here, no sweeping condemnation of wealth. Quite the opposite. Economic growth and the wealth that comes with it has benefited billions of people, rich and poor alike, but that era of shared benefit appears to be short-lived. Piketty’s book merely describes and explains that reality.
In fact, when you do read essays critical of Piketty, people are likely to complain that Piketty does not go far enough to condemn the specifics of economic inequality; he isn’t political enough. But that only makes this study more authoritative. (There are critical reviews of Piketty’s book. See links below.)
Besides…we can figure out the problems arising from an economics of growing inequality, especially in terms of capital, without having the details laid out, can’t we?
On the micro economic level, most people — both prosperous and otherwise — have seen a decline in economic power. If we don’t, let’s stop complaining about the economy, jobs, and government debt. The economy indeed is growing, but that growth no longer fosters the shared prosperity that it once did for a few brief decades when that growth did not accumulate in enormous, unbalanced capital reserves for a very fortunate few.
If you’re good with that, you don’t have reason to go stomping around barking at scapegoats about our economic woes. They exist in large part by choice, they exist by design. If you are unhappy with the economic status quo and its troubling trends, stop supporting the policies that favor inequality.
There is no simple single answer to restoring both balance and growth. The world is different today than it was in 1950 or 1980 A lot of that difference is the result of policy choices, but much of it is the result of progress and prosperity. Overall the world has become more equal on a macro scale. So-called emerging markets compete with increasing efficiency. The nation-state is yielding power to multinational finance and corporations, but that doesn’t mean that the nation-state and people do not have the means to more evenly balance the prosperity growth creates.
But it is a myth to believe that economic gains cannot be shared — cannot be “redistributed” — without harming the economic. In fact the laissez faire approach to economics has proven to be a gross mismanagement of our better economic future.
At the very least it is sheer madness to embrace policies that fail to generate middle- and working-class prosperity and expect that they somehow will produce different results. I think that’s value of Piketty’s study. He shows historical examples of what happens as wealth accrues to a small percentage of individuals and he shows how that trend is recurring now.
Indeed in some situations the availability of capital to invest in unmet opportunities does lead to a sort of “trickle down” prosperity. But when the majority of economic gains accrue to already enormous fortunes there is no inherent incentive — no economic need — for that wealth to be reinvested in a relatively poor majority anymore than a person would invest in a new factory to manufacture buggy whips just because he had the money to do so. When most of the wealth is held by a few, there isn’t the mass economic power to create demand. Capital isn’t scarce, demand is and the cycle begins to feed itself. That’s the risk of capitalism as it is trending now in the twenty-first century.