So, a couple of days ago I finished reading Thomas Piketty’s Capital in the Twenty-First Century. I’m reliably informed that this means I’m now allowed to have an opinion on the book.
That said, there are still plenty of more learned opinions on Piketty’s book out there, so there is a limit to what I can usefully add here. It probably won’t come as a shock to hear that I enjoyed it and found it persuasive: I was firmly #TeamPiketty before I’d even read the first page, so to some extent the book was just confirming my prejudices.
What did surprise me was how well written and readable it is: helped by an excellent translation, but principally down to Piketty’s own clarity of argument and use of illuminating literary illustrations (principally Balzac and Austen, but with James Cameron’s Titanic occasionally thrown in for light relief).
Some of Piketty’s more enthusiastic supporters initially hailed his book as providing the final, devastating, data-driven, evidence-based proof that social democracy is RIGHT and neoliberal economics is WRONG. Piketty himself disclaims any such ambition, making it clear that arguments over socially sustainable (or morally appropriate) levels of inequality will always remain a matter of politics rather than science, and that:
It is not the purpose of social science research to produce mathematical certainties that can substitute for open, democratic debate in which all shades of opinion are represented. (p.571)
He also acknowledges that his proposals for combating the growth of inequality in the coming decades – such as a global, progressive tax on capital, and a return to confiscatory levels of income tax for the highest earners – are politically unfeasible, an “ideal” against which to measure any proposals that can be made into a reality. (Though he also observes that the idea of a progressive income tax once seemed similarly far-fetched and idealistic.)
However, what Piketty does is to clarify the terms of that debate, and the challenge he places before those who disagree with him – particularly on his recommendations for policies to combat inequality – is for them to be honest about the consequences of their position. Probably the fundamental claim he makes in Capital is that:
it is an illusion to think that something about the nature of modern growth or the laws of the market economy ensures that inequality of wealth will decrease and harmonious stability will be achieved. (p.376)
Yes, you may be “intensely relaxed about people getting filthy rich” (or at least, see no cure for this that isn’t worse than the disease). Yes, you may regard it as counterproductive, even immoral, to return to the era of 80%+ top income tax rates (pioneered, counterintuitively, by the USA and Britain). Yes, you may be similarly opposed to a global tax on capital, especially one based on the automatic sharing of financial information between governments.
But in that case, Piketty says, be honest about what the consequences are, especially the consequences of continuing on the current path of a “race to the bottom” in taxation: a return to a world in which concentrations of wealth and income start to approach those of the “Old Europe” whose “suicide” between 1914 and 1945 created the illusion (which still lingers with us) that inequality had been conquered during the years of postwar growth.
Why would such a world be a problem? Partly because of the power that it would give the wealthiest to influence and control the lives of everyone else, subverting democracy. But Piketty is clearly aware that making a moral case against such levels of inequality is not enough. On a number of occasions through the book, he rather drily observes what the long term practical consequences are likely to be of allowing such inequality to flourish:
If, for example, the top decile appropriates 90 percent of each year’s output (and the top centile took 50 percent just for itself, as in the case of wealth), a revolution will likely occur, unless some peculiarly effective repressive apparatus exists to keep it from happening. When it comes to the ownership of capital, such a high degree of concentration is already a source of powerful political tensions, which are often difficult to reconcile with universal suffrage. […] [I]f the same level of inequality applies to the totality of national income, it is hard to imagine that those at the bottom will accept the situation permanently. (p.263)
And not just those at the bottom:
Even if the top thousandth’s capital returned only 4 percent a year, their share would still practically double in thirty years to nearly 40 percent. Once again, the force for divergence at the top of the wealth hierarchy would win out over the global forces of catch-up and convergence, so that the shares of the top decile and centile would increase significantly, with a large upward redistribution from the middle and upper-middle classes to the very rich. Such an impoverishment of the middle class would very likely trigger a violent political reaction. (p.439)
So, in the end, the question that Piketty poses to the “1%” (and, even more, to the “0.1%” of the hyper-wealthy top thousandth), as they calmly contemplate a century that promises to deliver them an ever greater share of global wealth and income, is: do you feel lucky, punk?
Well, do you?