Piketty for Progressives Part 5 by Thomas Riggins

Fifth part of a review on the introduction to Capital in the 21st Century.

Piketty for Progressives -- Part 5

Thomas Riggins

This posting will cover sections 11 and 12 in Piketty's introduction to Capital in the 21st Century.

11. The Fundamental Force for Divergence: r > g

This formula, r is greater than g, where r is the  average annual rate of return on capital and g is the rate of annual economic growth “sums up the over all logic” of Piketty’s arguments regarding growing inequality under capitalism.

Piketty thinks the outlook for the 21st century is that r will be much greater than g and this means that inherited wealth will be greater than output or income. Under the rule of r > g it follows that people with wealth need save only a small fraction of their income and it will accumulate faster than the economy does thus increasing inequality. A real possibility exists that the increase in inequality will undermine the principles upon which bourgeois democracy is based. Billionaires, for example, could be able to sink so much money into elections and lobbying that they will basically control the electoral process and the government and people’s democratic rights will honored in name only if at all.

Piketty thinks that this scenario is a real possibility but it is not inevitable. Besides this powerful D-force there are also C-forces at work that could delay or even completely counteract it. He thinks, however, that the decrease of g in the coming decades is very likely.

His view is, he says, less “apocalyptic” than Marx’s view. But I think he mischaracterizes Marx’s outlook. He says Marx has a principle of “infinite accumulation and perpetual divergence” because he thinks g will be 0  due to 0 growth in productivity. Because of this there will be a revolution to overthrow capitalism (the Apocalypse). But this isn’t Marx’s view at all. His view, somewhat simplified, is that  capitalism will eventually run out of markets due to a crisis of over production and will breakdown because it won’t have the profits needed to sustain itself.

Piketty says his theory of r > g has nothing to do with any “Imperfections” in the market. It is not inevitable but is a likely occurrence and we should be aware of it. He stresses that the “more perfect” the capital market the more likely is r > g. Does this imply that the “better” the capitalist system is the more inequality it will create? This would make it incompatible with any kind of democracy and logically implies that some sort of fascist anti-democratic state is its natural outcome.

Piketty thinks the capitalist state will have to intervene and manipulate the outcome of the “more perfect” capitalist market to counteract the negative effects of r > g. He suggests “a progressive global tax on capital.” He doesn’t think this will be a real world solution to the problem and whatever the different nation states end up doing will be “less effective.” Does this mean that, after all, in the real world r > g is actually unstoppable? Is the Apocalypse destined to be our fate?

12. The Geographical and Historical Boundaries of Piketty’s Study

The upshot of this section is, that while Piketty will use information from many areas of the world to bolster and develop his views, he will rely “primarily on the historical experience of the leading historical countries: the United States, Japan, Germany, France, and Great Britain.”

He thinks the UK and France are particularly  important because they have the best economic records kept from the 19th century and they were the leading countries of the “first globalization” (1870-1914) of international trade and finance. This, by the way was the period analyzed by Lenin in his Imperialism: The Highest Stage of Capitalism. This first globalization was, Piketty says, “prodigiously inegalitarian.”

Piketty notes that the “first globalization,”  is “in many ways similar” to the second one which has been going on “since the 1970s.”  It is so similar that Lenin’s book on Imperialism is still largely relevant for understanding it. One of the weaknesses of Piketty’s book is that neither “Lenin” nor “Imperialism” appear in its index — a strange omission in a work trying to explain the origins of, and remedies for, inequality.

One of the similarities Piketty notes is the fact it was not until beginning of the 21st century that the leading imperialist countries attained the level of stock market capitalization  vis a vis GDP as the UK and France had at the beginning of the 20th century.

He next explains why he spends so much time on France. The first reason is that it has records going all the way back to the late 1700’s. The second reason is he thinks France is more typical than the US and its future will more likely be what most states will experience rather than that of the US. This is because the US population went from 3 million in 1776 to 300 million today. That quantitative leap has had its qualitative accompaniment  and the US “is no longer the same country it was.” France meanwhile has only doubled its population from 30 to 60 million over two hundred years not increased it a hundred fold. It is still basically the same country. Piketty doesn’t see the world population increasing 100 fold in the next two hundred years so French development is more likely representative to the future.

He means the trends in inequality seen in French history are more useful to predict future developments than are those seen in US history. This is another example of “American Exceptionalism" as the US experience “is in some sense not generalizable” and social class and inequality in the US are “so peculiar” when contrasted with other countries.

The third reason is that France is “interesting” because its revolution was more “bourgeois” than the English (1688) or the American (1776). The English kept their nobility and the Americans their slaves while the French actually established “ the ideal of legal equality [of men]  in relation to the market.”  This has important implications in discussing the growth and future development of inequality. Piketty also says that the concentration of wealth was  the same in Britain as in France so even though the French had legal equality for all and the British did not this was not enough to “ensure equality of rights tout court.”

We will finish the introduction to Piketty's book in the next posting.

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  • Tom
    I apologize for any misunderstanding. As E.E. W. Clay rightly says, I was going off on Pikkety, not on you. And of course I was dealing with the whole book, not the section which you were dealing with. I know that you are not now nor have you ever been a "Pikketyite" and I have no desire to establish an "unPikkety Activities Committee." As for your being "soft on Pikkety," which I put in quotes, I realize that that was unfair. But I would say that all of the fuss about Pikkety, along with Pikkety's work itself, is a distraction from a serious critique of contemporary capitalism which leads to policies that advance the interests of the working class.
    Who knows though. If Piketty leaves the transnational enterprise known as academia as Henry George left writing for organizing his single tax movement in the 1880s, he may continue to be in the general mass media. Henry George though ran for Mayor of New York with labor support in 1886(he got the support because he advocated using the land tax to fund policies that would provide jobs for the unemployed and improve the city's infrastructure) Maybe Piketty can run for Mayor of Paris on his transnational tax on capital plan, and pledge to use the revenues to improve public transportation and sponsor low cost restaurants

    Posted by norman markowitz, 11/28/2014 3:38pm (6 years ago)

  • There should be no question mark after the last appearance of the name "Marx" below.


    Posted by E.E.W. Clay, 11/25/2014 11:42am (6 years ago)

  • After Americans like W. E. B. Du Bois's economic work, and that at Marx's old school in Germany, after the commonly known Keynes, and his contributions, after multiple social and economic upheavals after additional series of social and economic upheavals, in Europe, not to mention North and South America, we can certainly understand Norman Markowitz's impatience with nit-wit "economists" and "philosophers" like Piketty (despite their "academic attention" and status in today's capitalist, self-centered intellectual milieu, or, with an "ignoramus" - as president Hugo Chavez of Venezuela called our president of the United States of America, Mr. Obama, handing him Eduardo Galeano's book, The Open Veins of South America) in today's rapidly changing world. It seems that Norman Markowitz was intent on baring and exposing the likes of Piketty, with good cause. His comment on Tom Piketty seem to have no connection critiquing Tom Riggins, who also helps expose Piketty's views, allowing them to be compared to authors like, as Thomas Riggins writes, V. I. Lenin and his Imperialism: the Highest Stage of Capitalism.
    Clearly, it is Lenin's book, along with Galeano's book, with Marx's book, Capital which, endlessly fly from humankind's bookshelves with consistency-while the question, "What will come of Piketty's view?" looms large, which Riggins writes, "mischaracterizes" Marx?
    It is also interesting that the W. E. B. Du Bois's most important book, Black Reconstruction, covers seven to ten years of the 1870-1914 years of Lenin's Imperialism.

    Posted by E.E.W. Clay, 11/25/2014 11:24am (6 years ago)

  • Thanks for the comment Norman-- as always full of useful historial background and Marxist insight. But I am a bit confused about your critique. Have I misrepresented Piketty's views or how was I soft? I did not think it fair to attack views expressed later in his book as this article's main purpose is to explicate what his views are and suggest that there may be reasons not to accept them based on what he says in the introduction. The French Revolution was "beaten back" indeed, but Piketty only claimed that the basic laws of France were more consistent with respect to "equality" before the law-- not treating Blacks differently than whites nor commoners than Nobles (everyone, of course, treats the rich differently than the poor). Anyway, thanks for the comment and if there is a particular sentence or comment you object to please let me know-- I want no sins of commission
    charged against me-- as for sins of omission I plead guilty to some venial but none mortal.

    Posted by Thomas Riggins, 11/22/2014 11:43am (6 years ago)

  • I don't know Tom. I regard many of his historical arguments as weak. As I said in my review, Piketty's use of history leaves a lot to be desired. I didn't go into the factual errors, especially as they pertain to the U.S. but the empty spaces where politics is concerned and where imperialism is concerned, not to mention mass movements and former and ongoing socialist states is really enormous. Sure the French revolution was more "advanced" as a political revolution than the American, but it was beaten back, and for most of the 19th century kings and a second empire , the Catholic Church, and sections of the aristocracy continued to wield great power. Capitalist political democracy has always been a question of manipulation and money, giving the workers as Marx said a chance every few years to vote for which section of the ruling class would govern them politically for the next few years. It also Marx saw, was a stepping stone to increased workers power in the formation of mass labor and socialist parties, in changing legislation. As for Piketty's emphasis on inherited wealth, his tax on capital would not necessarily change that even if it were possible and of the most effective way to deal with that would be through a revival of progressive income taxes and also the elimination of the world of trust funds through which the wealthy insure that their wealth will be passed on to their heirs. Piketty's population arguments are also fairly ridiculous in the sense that the U.S. was a settler immigrant country whose territory was transformed from 13 initial colonies in the North East and Southeast to the continental Republic, experiencing a revolutionary civil war which abolished slavery, a post civil war rapid industrialization which put it ahead of Britain and way ahead of France(which as an empire was never ahead of Britain) and of course after WWI saw it replace Britain as the leading power of finance capital(which France never never was) If you look at Thomas Jefferson, Jefferson Davis, William McKinley, Franklin Roosevelt, Ronald Reagan, and George W. Bush(in terms of social forces and policy) in regard to statistics as against the Napoleon, Napoleon III, Leon Blum, de Gaulle, Mitterand and Chirac, then you have no real sense of the history of either the U.S. or France, much less any real comparison.
    So Tom, I would say, in a friendly way of course, that in this section you are being "soft on Piketty" I am no philosopher as you are, but I wasn't impressed by his references such as they were to philosophy either.
    Norman Markowitz

    Posted by norman markowitz, 11/19/2014 5:53pm (6 years ago)

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