When all the mainstream and conservative columnists in the bosses’ press go out of their way to tell you a new book on economics — one that most people won’t even read — is no good and full of lies and all wrong and please pay no attention to the man behind the curtain … well, you know the book must have something going for it. And in this case, it does. The French economist Thomas Piketty’s Capital in the 21st Century shows that capitalism can never end poverty because capitalism needs poverty. Unfortunately, the author’s idea is to put reins on capitalism, not to end it.
Piketty has angered the ruling class and gotten an astounding amount of space in the business press for a 700-page book dense with statistics. The Wall Street Journal labeled it a “bizarre ideological screed” (4/21). Fox News claimed it was “based on economic lies” (4/15). Bloomberg’s Megan McArdle panned it after admitting, “I have not read it yet” (4/22). Forbes’ Keith Weiner proudly stated, “I didn’t read this book, though you don’t have to in order to understand why it’s mostly wrong” (5/31).
London’s Financial Times has gone the furthest to try to discredit Piketty’s work. In a long feature article (5/23), they claimed to find flaws in the French economist’s assertion that capitalism creates wealth inequality. Soon, however, it was revealed that Financial Times editor Chris Giles had deceptively compared old wealth estimates based on taxes with new estimates based on surveys that understate the wealth of the capitalist class. This data manipulation naturally underestimated the growth of capitalist inequality over time (New York Times, 6/1). Despite this exposure, the business press has continued to cite the Financial Times’ fabrication as if it were true!
The assertion that has so upset the bosses’ press is that the past 250 years of capitalism in the West has led to a concentration of the world’s wealth in fewer and fewer hands. Only state intervention in the form of progressive taxation and other redistributive policies — a phenomenon that Piketty says starts in 1910, at the beginning of the Progressive Era, and ends with the rise of neoliberalism in the 1970s — has ever been able to curb this widening inequality, even temporarily. In order to prove his thesis, Piketty marshals an unprecedented mountain of statistical evidence, dating back to the 18th century. His conclusion seems irrefutable.
Capital in the 21st Century exposes the lie promoted by neoliberal market fundamentalists, who have long claimed that deregulation and “free” markets — free for capital while enslaving labor — would lift the living standards of workers everywhere. Of course, most people are aware that the reality of capitalist development has been quite the opposite. Today the poverty rate is growing faster than the population. Millions of workers fall into the ranks of the poor every year.
Piketty’s book has its own problems, however. While many have rushed to call it a replacement for Marx’s Capital, Capital in the 21st Century is anything but Marxist (Economist, 5/3; Time, 5/8; Forbes 5/31). Piketty has actually denied having read Marx’s Capital, although that has not stopped him from disparaging it and thereby pass as a “responsible” academic (New Republic, 5/5).
It turns out that Piketty is most accurately described as a Keynesian, one who believes in increased spending to stimulate the economy during recessions — much like Paul Krugman, Joseph Stiglitz and others who have published similar works. At the end of his book he offers ways to fix capitalism, not transcend it. For Piketty, the problem with capitalism is one of inefficiency; its tendency toward wealth inequality creates low growth rates. His solution — which he fairly describes as “utopian”— is for the state to manage capitalism to ensure that workers can buy enough of the product of their own labor to maintain a desirable rate of economic growth, which most economists put at 3 percent per year.
What Piketty misses is the question of politics. Along with pro-capitalist thinkers like Adam Smith and David Ricardo, Marx belonged to the 19th-century tradition of political economy, where politics and economics were understood to be intertwined. Piketty considers the period of relatively greater social democracy, roughly 1910 to 1970, as the capitalist ideal. He ignores, or is ignorant of, what brought about reformist policies like progressive taxation and the welfare state in the first place, namely working-class movements.
The early- and mid-20th century had certain particularities. In the U.S. and Europe, in the face of a massive and militant labor movement, highly influential communist parties, and the threat of spreading Soviet communism, the capitalist class was willing to give back some wealth in order to avert what seemed like imminent revolution. But from the beginning, the welfare state was undermined by the capitalist ideologies of racism, sexism and, above all, anti-communism. In the U.S., the New Deal framework was rooted in the maintenance of racial apartheid. The wages of white workers were increased at the expense of black workers. By the 1970s, with the Soviet Union on the capitalist road and communist politics collapsing at home, the U.S. bosses found it easy to pit white and black workers against one another and dismantle the U.S. welfare state. Piketty misses this point because he is interested in reforming capitalism, not destroying it.
Ultimately, Piketty’s work is positive in that it once and for all disproves the myth that capitalism can end poverty. But while Piketty reveals one aspect of capitalism — its intrinsic tendency toward growing inequality — he fails to examine how the system actually works. His book is an interesting piece of the puzzle. But if you want to understand the fundamental dynamics of capitalism as a political-economic process, Marx’s Capital remains required reading. And the struggle Marx called for, a communist-led revolution of the world’s working class, remains what we in Progressive Labor Party are fighting for.