Piketty delivers another economics blockbuster

Capital and Ideology
By Thomas Piketty
Translated by Arthur Goldhammer
Harvard University Press 2020

French economist Thomas Piketty became something of a global phenomenon when Capital in the Twenty-First Century topped The New York Times’ Best Seller list in 2014. He has now produced a follow-up work, Capital and Ideology.

The main theme of both works is inequality and, in particular, the role of capital in producing that inequality. His central contention is that ownership of capital, rather than merit, is primarily, and to historically varying degrees, responsible for inequality.

Although the books’ titles encouraged comparisons to Marx’s Capital – and Piketty obviously shares similar ethical concerns with Marx – they are not based on Marxist economic theory.

Notably, Piketty’s very concept of capital differs.

Marx specifically conceived of capital as a process — rather than a thing — in which people enter into historically specific class-based relations of production. Where Piketty talks about “capital”, Marx would have used a more generic term, like “wealth”.

Piketty, unlike Marx, would count non-productive assets, such as a family home, as capital. He also merges different social relations of production – such as slavery, feudalism and capitalism – together as different forms of capital (meaning wealth) perpetuating inequality.

While Piketty’s more generic concept of capital would lose much as a means of analysing the dynamics of various historical economic systems, it is enough to help marshal together a wealth of information about patterns of wealth ownership and inequality.

Piketty has rightly received widespread praise for assembling an unprecedented trove of data about wealth and income inequality from centuries of tax records and other sources. Apart from the many graphs and facts and figures in his books, he has also made valuable information available online through the World Inequality Database and online technical appendices.

As the title suggests, Capital and Ideology focuses more than the earlier work on the ideas, political debates and laws that shaped various regimes of inequality. In this it can again be compared, somewhat unfavourably, to Marx’s work.

Piketty writes that: “Inequality is neither economic nor technological; it is ideological and political” and that his approach “differs from approaches sometimes characterized as ‘Marxist’, according to which the state of the economic forces and relations of production determines a society’s ideological ‘superstructure’ in an almost mechanical fashion.”

While it is true that Marx emphasised that economic relations primarily shape ideology, rather than vice versa, he didn’t hold the crass view that this was a simple one-way street, as per the view that Piketty opposes.

In one of his contributions to understanding the relation of capital and ideology, Marx noted that capitalist relations of production are distinguished by the fact that workers sell their labour-power as a commodity: “[The worker] and the owner of money meet in the market, and enter into relations with each other on a footing of equality as owners of commodities … both are equal in the eyes of the law”. From this “equal” relation emerges an ideology of equality and equal rights.

Of course the worker, who has the choice of selling their labour-power or starving, is not equal to the capitalist, but Marx is able to show that an ideology of equality emerges from the economic interaction of people who are not equal. The relations of production themselves contribute to an ideological inversion of what lies beneath their surface.

By comparison, Piketty’s notion of ideology, as emanating purely from the plane of ideas, is rather shallow. It focuses on the more familiar, if less profound, level of debate about equality, ownership and taxation. Even so, like his earlier work, it still contains a wealth of valuable information.

Part of Capital and Ideology draws out the same historical pattern of inequality as that described in Capital in the Twenty-First Century.

An already high degree of wealth and income inequality gradually increased during the 19th century, reaching an apogee around the turn of the century. From around the time of World War I, inequality began to decline significantly, even more so following World War II.

However, since the 1970s, this has changed again. Inequality, while yet to reach the levels of the early 20th century, has been on the rise since then.

The period prior to WWI was dominated by a proprietarian ideology, based on the sacralisation of property rights. In the following period there was far less reverence for property rights. “In the period 1932–80, the top marginal income rate averaged 81 percent in the United States and 89 percent in the United Kingdom compared with ‘only’ 58 percent in Germany and 60 percent in France.”

Following WWII, both in Europe and in countries newly liberated from colonialism, there were significant expropriations of major companies.

But in the era of Ronald Reagan and Margaret Thatcher and the fall of the Soviet Union, a neo-proprietarian ideology began to rise. Taxes on the wealthy were slashed and assets privatised.

Piketty maps out the voting patterns in Western countries over this period. The social democratic parties, which had a golden era in the post-WWII period, evolved into what he calls the “Brahmin left”. Rather than their vote being tied to class, as it previously had been, it became much more strongly correlated with education. The left parties became much more the choice of the well-educated than of the less wealthy.

During this period, there has also been a rise in the importance of “social nativism” (based around nationality, race or religion) as a political-ideological cleavage, typified by France’s National Front.

Piketty divides this cleavage into two blocs: an “egalitarian nativist” and an “inegalitarian nativist”. The latter describes the conventional right-wing conservative bloc. The former describes parties, such as the National Front, which has come to take over much of the vote that might once have belonged to left and social democratic parties.

While Piketty’s earlier work concentrated on Europe and North America from the late 18th century on, Capital and Ideology is broader in geographical and historical scope. Being more than 1000 pages, it is not possible for a review to do justice to its breadth.

Particular attention is given to the role of colonialism and its aftermath in shaping inequality, especially its examination of India from pre-colonial times through to the post-colonial era up to the current Hindu chauvinist Modi regime.

The book also goes back to look at inequality in feudal times, the ideological debates of the French Revolution and those around slavery and its abolition. Extended discussion is also devoted to China and Brazil.

It concludes with a large section on political remedies. Piketty argues there is much to learn from the post-war golden age of social democracy, though it also had its limits.

He advocates various measures which, he describes as “participatory socialism”, although they could probably be more accurately described as radical social democracy, based on a rejection of the proprietarian ideology that private property is inviolable.

Central to this, he suggests steeply progressive taxation, not just on incomes but also on inheritance and wealth.

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