The following is a slightly abridged review of Thomas Piketty's Capital in the 21st Century, which I  for Social Sciende Docket, a fine publication sponsored  ajnd published by the New York and  New Jersey Councils for the Social Studies.  The Journal, edited by Professor Alan Singer, who has done very important work in New York State on curriculum reform as it relates to the history of slavery and racism in New York, is read by teachers in New York and New Jersey.  Alan initially asked me to do the review.  This version has a few added sentences and clarifications,(the original was lsubject to a stricter word limit) but it does not have any major content revisions.  The references to Marxism and Socialism are the same.  I also put in a positive reference, a  commercial of sorts, for the website Socialist Economics, as a source for readers to continue to examine these and other issues

Norman Markowitz

“Social distinctions can only be based on common Utility.”

With that quote from the Declaration of the Rights of Man and the Citizen, which was to the French Revolution what the Declaration of Independence was to the American Revolution, French economist Thomas Piketty begins Capital In the Twenty-First Century. It is a work that has been both hailed and denounced for some things that it is and many more things that it is not.

Capital is of course the title of one of the most influential works in all  history, Karl Marx multi-volume study of capitalism as a system/mode of production written during his long exile in Britain when as a scholar activist he sought to both understand and change the world. For Marx, economics was political economy. History was central (his overall theory was historical materialism) to Marx’s  understanding of economics. Relationships in historical time were understood in terms of dynamic interactions between established forces and forces struggling for change; what he considered dialectical interactions. According to Marx, a social system can be understood by employing the economic laws that determined what and how goods/wealth were produced and the social/class relationships that determined in whose interests and for what purposes goods and wealth were produced.

For Thomas Piketty, however, economics is largely data. It is compiled in historical time, but he lacks a framework that permits him to interpret that data in terms of political economy and class social relations, not necessarily a Marxist framework  but any framework..

 The strength of Piketty’s book is his application of an enormous amount of historical data taken from a wide variety of official sources. His use of statistical data to connect economic inequality with the development of capitalism over centuries is perhaps his most impressive achievement

However, if Karl Marx were alive today, he might say of Piketty what he said of  an ante-bellum U.S. economist  Henry C. Carey. Carey, Mannx contended, and he thought better of Carey than the European champions of laissez-faire, stopped with the data as if it was self-explanatory as a guide to policy.

 John Maynard Keynes is curiously absent from Piketty’s study, which includes an enormous amount of quotes from academic economists However,  his basic argument resembles Keynes. The present economic system given the structure and function of inequality  is not sustainable.   

Piketty  though has little interest in Keynes important  insight that “over-saving” or the hoarding of wealth by the rich and powerful is producing a stagnation crisis that is characterized by the lack of effective mass purchasing power to sustain  the consumption necessary to foster overall economic growth and prevent depression. While Piketty’s emphasis on the negative impact of wealth inequality on economic growth seems to many commentators to make him more radical than Keynes, he lacks a clear policy on questions of employment, purchasing power, the relationship of public to private investment.  

Piketty’s work has drawn a lot of attention because of the great international stock market crash of 2008 and what traditional economists have euphemistically called the “long recession” that has dominated western industrial economies since then. Rich countries seem to be trapped in a time loop, where Herbert Hoover’s old axiom “the economy is fundamentally sound,” dominates discourse and upturns in employment are used as examples that “prosperity is just around the corner. “

In the U.S., Barack Obama’s administration   for example has failed  so far after six years to become the new Franklin Roosevelt  many hoped he would become and lead a “new” New Deal by restoring the social welfare, labor and regulatory legislation that were eviscerated over the last four decades. And EU countries, pursuing more conservative  “austerity” policies, have seen an even greater erosion of what previously were much more advanced labor and social welfare policies

 The increase in economic inequality at the statistical heart of Piketty’s study has been noted for decades, but has had little real effect on policy either before or  after the great crash led to the loss of hundreds of billions in pension funds, home foreclosures on the level of the Great Depression, and multi-trillion dollar state subsidies to finance capital, a bail out that greatly exacerbated a long-term government debt crisis.

The pattern of inequality that Piketty describes is not a new phenomenon. During the Gilded Age, in the U.S., the last decades of the 19th century, the top 1% of income earners controlled 25% of the national wealth. In 2010, much better statistical analysis showed the top 1% controlling 37% of the national wealth.

 The general response to inequality through the whole period by both ruling groups and their academic and media servants in the U.S. and the rest of the developed capitalist world  has been “so what’”?

Obama and American policy makers for example  have failed to listen seriously to left Keynesian capitalist economists like Paul Krugman and Joseph Stieglitz who have challenged neo-liberal “free market” capitalist assumptions about the road to recovery  on the unrepentant right and the   pre New Deal “austerity” policies forced on E.U. countries by  Germany, the most powerful economy in the EU

While John Maynard Keynes was no socialist, which he made clear over and over again, his advocacy of government investment/spending to sustain mass purchasing power and employment to prevent depressions, along with regulating the worst abuses of capital,  were used to support policies of public housing, public transportation, wages and hours legislation, a mixed economy, and what came to be known as a Welfare State.

 New Deal labor oriented policy planners were also able to make great use of Keynesian economics to advance a blueprint for a full employment and a post-WWII economic “second bill of rights” in the United States and non Tory   British planners  for the British Welfare State, which was advanced by the British Labor Party and to a considerable degree implemented, unlike the U.S. program.

But even if the trade union movement and center-left political parties were as strong today in Britain and the U.S.  as they were in 1945, it is not clear what Piketty offers them.   Certainly not socialism by any serious definition

Piketty is accused  by rightists of being a “Marxist” and a socialist for questioning the efficacy of “free market,” “laissez-faire” capitalism, but given the limits of his policy recommendations, these charges are absurd.

If Piketty were a socialist or even a labor-liberal in the American sense of the word, he would see class conflict or at the very least specific economic interests behind the policies that determine the distribution of wealth

But class conflict simply does not exist for Piketty. Even the threat of revolution and socialism, which played an important role in Keynes’ push for economic reform, is missing from Piketty’s work.

 Piketty  for example notes the huge increase in the incomes of capitalist managers compared to the general population, but does not directly challenge “managerial revolution” arguments that contend capitalist corporations are run by collegial planning-oriented entrepreneurs rather than Robber Baron adventurers, speculators, and swindlers who bribe politicians and constantly take advantage of legal loop-holes to enhance their profits.

Essentially politics and the political power of the capitalist class are missing from his analysis. One might say of Piketty’s work what the great British historian E.P. Thompson said of  early 19th century British Utopian reformer; there was an empty space in their heads where politics should be.

 The book might have been different if Piketty paid at least some attention to 20th century communist and socialist experiments. He  also seems to have no sympathy for the nationalization of industry of the kind what was carried forward in Western Europe and Britain immediately after WWII.

So why all the fuss from all sides of the economic debate about Piketty’s work? I think it is because of Piketty’s concept of a “social state” for the twentieth first century, a state that would employ an international “tax on capital” to check inequality and stabilize capitalism leading to new periods of stability.

 Piketty admits that this idea of a global tax on capital  is presently utopian, but he sees it has a “positive utopianism.” He believes it can be enacted at the regional level by the European Union and possibly in the future in international economic zones.

 Piketty’s idea of a transnational tax on capital is not in itself a bad idea, but it would take an enormously powerful working class/labor movement and significant political victories in many countries to be enacted, and if there were such a movement, it is not clear why this plan to stabilize capitalism would be at the top of their agenda. 

 For both criticisms and some defenses  of Piketty's work and important analyses of contemporary issues, readers should consult the valuable website, Socialist Economics 

I would conclude  that an updating of   the “welfare state” model has much more substance and sense in regard to political economy than Piketty’s   very vague “Social State.” sustained by a wholly unrealistic if not politically impossible transnational tax  on capital That tax, even with its obvious popularity, rather like Henry George’s famous 19^th century “Single Tax” on land  to save capitalism from parasitic landlords and real estate speculators, is more a distraction from the real causes and cures of the present crisis

 How can we  revive today the “welfare state” model as at best a stepping stone to a socialist political economy or at least a reclaiming of the lost incomes and benefits suffered by working people everywhere. ?

  Here the United Nations though  new versions of organizations like the post WWII  Relief and Rehabilitation Agency(UNRRA)  existing UN agencies,   and governments could institute wages and hours policies, environmental and energy policies, income and business taxation policies, and productive public sector projects(such as public ownership of energy resources, advanced technology sectors of economies]on a regional basis within the context of a  larger global developmental policy      These policies offer a far better solution to the crisis facing not capitla per se but society in the 21st century.