A harness for history
Thomas Piketty is haunted by the failures of social democracy, but his own ideas for fixing society are far from novel
“The study of history has convinced me that it is possible to transcend today’s capitalist system,” writes Thomas Piketty towards the end of this long book. Its 1,000 pages contain a message of hope for socialist dreamers everywhere. For them, it will provide an exhilarating answer to the plaintive question posed by the late Mark Fisher in Capitalist Realism: Is There No Alternative?
Capital and Ideology inverts the historical materialism of classic Marxism, arguing that the prevailing ideology is not the effect of economic circumstances but its cause. “I insist that the realm of ideas, the political-ideological sphere, is truly autonomous,” writes Piketty. “Change comes when the short-term logic of events intersects with the long-term evolution of ideas.”
He dubs these intersections “switch points,” and finds them in countries as different as Brazil and Iran, and in times as remote as the “ternary” societies (nobility, clergy, the rest) of the Middle Ages and as proximate as the collapse of the European empires. “Such political-ideological transformations should not be seen as deterministic,” he warns. “Multiple trajectories are always possible. The balance of power at any moment depends on the interaction of the short-term logic of events with long-term intellectual evolutions from which come a wide range of ideas that can be drawn on in moments of crisis.”
The purpose of the book is to ensure that, when the crisis occurs, socialists are intellectually equipped to bend the trajectory of history towards equality. For Piketty, who began as a liberal rather than a socialist, is haunted by the failure of social democracy—the dominant ideology of the Trente Glorieuses between 1945 and 1975—to devise an effective riposte to Thatcherism. “In the end social democrats almost entirely gave up even thinking about moving beyond private property,” he sneers.
Yet his own ideas are scarcely novel. Taxation of income, inheritance and wealth at steeply progressive rates of up to 90 per cent; a universal capital endowment; a higher minimum wage; a means-tested basic income; public registers of asset holders and their assets; full transparency into who is paying which taxes, and how much; and the dilution of constitutional protections for private property.
A bias to the poor in spending on schools and entrance to universities. Withdrawal of tax subsidies from private establishments, and the taxation of their endowments to fund their less fortunate counterparts. Workers as company directors and shareholders. The replacement of private financing of political parties with vouchers (he suggests €5, or about £4.20), which voters will pledge to the party of their choice. Public funding of the media, to restore balance. The re-imposition of exchange controls. All this would be familiar to followers of Tony Benn, circa 1980.
Even the most striking idea—the pursuit of “transnational democracy” through assemblies made up mainly of parliamentarians from different countries—is really no more than a call for the workers of the world to unite. Empowered by “co-development treaties,” these bodies would allocate transfers, tax multinationals and punish the recalcitrant with tariffs. For Piketty, they are the precursors of a global democracy dedicated to “quantified objectives of social, fiscal, and environmental justice”.
Counter-intuitively, given its embarrassing democratic deficit and symbiotic relationship with corporatised capitalism, the European Union is identified as the best starting-point for a series of transnational political federations. Piketty is well-aware of the shortcomings of the “feeble” EU, noting that it is “regularly accused of doing the bidding of more prosperous and more powerful economic actors”. He names and shames Jean-Claude Juncker, recently retired as president of the Commission, for the tax-cutting deals he used to agree with large companies to lure them to his native Luxembourg.
But, like another far-Left celebrity, the former Greek minister of finance Yanis Varoufakis, Piketty believes that the EU can be redeemed. A “profound democratisation” will transform the European Parliament into a proper legislature and install workers in the boardrooms of European corporations. Common and steeply progressive rates of taxation will then be applied throughout the Union, putting an end to “fiscal dumping” of the kind Juncker pursued, providing the EU with the means to endow every citizen with a capital sum and a university education. Once associated with such bounty, a common fiscal policy will become incontestable.
The alternative, argues Piketty, is bleak. For him, the “divorce between the less advantaged classes and the European project” is now so complete that, without a transformation of the kind he describes, the EU will either disintegrate or subside into some form of neo-fascism. It is certainly hard to dispute his conviction that the estrangement of the less advantaged from the (neatly labelled) “Brahmin Left” and “merchant Right” elites in every democracy is driving the retreat into “social nativist” and “identitarian” political movements throughout the EU.
A bombardment of numbers and charts is used to prove that, throughout Europe and North America, the educated now vote Left and the uneducated Right. Piketty dismisses racism as the cause (“The poor are no more spontaneously nationalistic than the rich”) in favour of abandonment of the left-behinds by an elite political consensus that is right on economics and left on culture.
This must be true. After all, a third of the Black, Asian and minority ethnic (BAME) electorate voted for Brexit and a third of registered Hispanics for Trump. And Piketty has to believe it is true, or else his prediction of an election-winning coalition built on “democratic, egalitarian and internationalist socialism” cannot be realised. But it is still more of a description than an explanation.
The real cause of “identitarianism” is economies growing at less than half the rate they grew in the Trente Glorieuses. The de-industrialised areas of Europe and North America are replete with people who lack not only good-quality jobs, but any hope that their children will be better off than they are. They are seeking respect in other ways.
Yet Capital and Ideology has nothing to say about economic growth, except that it was higher in the egalitarian past and will be higher still in a hyper-egalitarian future. It is not surprising that Piketty leaves the problem unexamined. He is obliged by the success of his earlier work, Capital in the 21st Century, to hold that the return on capital will always exceed the rate of economic growth (r>g), condemning the world to an endless spiral of worsening inequality.
The purpose of this book is simply to “impose meaning on social reality”. Yet Capital and Ideology does not restrict itself to ideological explication. Piketty makes as much use of numbers here as he does in Capital in the 21st Century, because numbers are what allow him to be ideological without being accused of dogmatism. But numbers are like sausages: it is best not to see them being made.
And the numbers in this text, like those in its predecessor, rest on heroic levels of assumption. It is impossible to make sweeping judgments across such vast expanses of time and space without multiplication, weighting, capitalisation and extrapolation from thin, patchy and often misleading sets of data.
It is telling that one of the main policy prescriptions in this book is “compulsory information sharing,” by which Piketty means mandatory disclosures by investors and their advisers and custodians of what they earn, inherit and own. In the absence of data, he claims no more for his results than that they are useful to establish “orders of magnitude” and “bear some resemblance to reality”.
The correspondence of r>g to everyday experience, if not reality, has allowed it to survive a number of assaults on points of detail. But a recent Bank of England paper, reviewing rates of interest on debt since 1311, concluded that the return on capital over time is stable in a downward direction only and is currently on course to turn negative for the first time since the Middle Ages.
This undermines the persuasive simplicity of r>g. It also suggests that the important problem to be addressed is not the excess return to capital in a slow-growing economy but why the economy is growing slowly. Growth depends on productivity, which stems from innovation, which relies on investment. An oligopolistic, monopsonistic, corporatised and financialised capitalism of the kind in place today is unlikely to deliver any of these three things.
A truly radical policy prescription would include an aggressive anti-trust policy to break up large corporations, the truncation or even abolition of limited liability, sharp increases in the equity ratios of banks, the replacement of accountants by data-gathering computers, and a massive reduction in the barriers to entry raised by regulation. But Piketty is not interested in rescuing capitalism; he wants to transcend it.
The policies advocated here are not commensurate with that ambition. Piketty advances them modestly too, arguing that his purpose is to stimulate debate, not end it. In that ambition he succeeds. The text is always lucid, never less than readable, and contains a great deal of fascinating information, but it is also long, repetitive (“I will come back to this” appears regularly in parentheses), incurably digressive and poorly organised.
It is an earnest book as well. What jokes there are require the English reader to believe a French economist is capable of irony. His assessments of the United States (“Apart from a few American nationalists, most people think there are ways in which the United States can be improved”) and of the lack of respect for democracy of the Chavez and Maduro governments in Venezuela (“not a satisfactory response”) are nevertheless funny.
Unlike many on the far Left Piketty does not believe his opponents are evil. Their works contain:
plausible and sincere elements from which we can derive useful lessons . . . On both sides one finds sophisticated intellectual and institutional constructs. To be sure, on the side of the dominant groups, these constructs are not always devoid of hypocrisy and reflect a determination to remain in power, but they still need to be studied closely . . . No one will ever possess the absolute truth about just ownership, just borders, just democracy, just taxes and education.
That said, the cloven hoof is not invisible. Piketty is delighted, for example, to find a cousin of David Cameron is descended from a slave-owner. But particular animus is reserved for Friedrich Hayek, for his links to Augusto Pinochet (still a bogeyman of the European Left) and his “authoritarian liberalism”. This judgment seems to be based on a reading of Hayek’s worst book, Law, Legislation and Liberty, a spatchcocked text systematic only in its ambition to constrain democratic despotism.
Oddly enough, Piketty sounds most sympathetic not in his tributes to the literature he uses to illustrate his points but when he gets in touch with his Hayekian side. He is alive to the “diversity of human aspirations, subjectivities, and personalities and the range of possible individual histories”. And he knows that Stalinism failed because it succumbed to the information fallacy.
“No state could ever gather enough relevant information about every individual,” he writes. “The mere attempt to do so would negatively affect the social process through which individuals come to know themselves.” It is to be hoped that the authors of The People’s Republic of Walmart and Fully Automated Luxury Communism will take that truth from Thomas Piketty, if not from Friedrich Hayek.
Capital and Ideology
By Thomas Piketty
Translated by Arthur Goldhammer
The Belknap Press, 1104pp, £31.95