Dr. Thomas Piketty’s (2019/2020)“Capital & Ideology,” 1093 pp., published through Harvard University Press is heroically thorough and extremely factually based with copious footnotes and with extensive on-line forums. (http://piketty.pse.ens.fr/fr/ideology and https://wid.world/. Piketty entertained us once before with “Capital in the 21st Century (2013).” The books main thrust was that a global capital gains tax and a few other tinkerings divulged in its 816 pages focused on mostly Western democracies, would severely help with global inequalities. His current opus is enormous in scope and provides descriptions of over 500 years’ worth of written history that includes Western democracies, and most notably, histories of Indian, Chinese, Japanese, and Brazilian economies. The purpose of his book is complex and at times redundant. His final chapter which focuses on what to “do” about our current situation is what he calls a “participatory socialism,” This tenant states that a circulation of funds vis-à-vis the USA and the world. To the say that is it far left pipe-dream economically would be the understatement of the century. Though the book seems a bit Francophile, (it was translated), he does an excellent job of describing many societies from their beginnings to their current iterations. To the point, his solution is to hand every person about $130,000 at the age of 25 or so, so they can either apply it to school loans, start a business, buy property, et cetera. To fund this ambitious plan of redistribute, taxes are going to go up A LOT on the people who CAN afford it. There would be steep, progressive taxation on income, inheritance, and property. Although, I think he deletes the concept propagated by Warren/Sanders of a wealth tax, this accordingly should be included here. He also envisions a carbon tax scheme that would also raise money. On its face, I think the tax increases would be a very good thing. In my personal opinion, inheritance taxes should be 100%, no one should inherit anything; if you did not earn it, and it is not yours for the taking. As for income, we have had top tax rates on or around 40% to 90% for decades until Mr. Reagan dropped the top rate from 70% to 28% in 1982. That is when inequality took off in the US. Additionally, property taxes are inherently cruel and regressive. Under his scheme, if I had an $800,000 house and owe, say, $600,000, I would owe an appraised tax on that $200,000 of equity (Instead of a tax on the 800k). If I were some millionaire or billionaire, my tax rate would be the same no matter what I owned at that time. That is why people like Warren Buffett, or the heir to the L’Oréal fortune pays a small rate of taxes even though both of those people are worth billions. If you are worth $50 billion, you should NOT be skating by and paying only 1% or so a year in property taxes, it should be much much higher. Seriously, how much money is enough?
Dr. Piketty does go down the road of the “concept” of temporary ownership of property, but there is no real clear meaning on what that exactly means, so with that point I am skeptical. He additionally advocates for shared voting rights in firms, which is done very successfully in German and other Nordic countries with great effect. Workers have say on salaries and “how things are done,” on the cooperate boards instead of multiple voting rights by shareholders or voting by other out of touch individuals who speculate their next yacht purchase. Transparency is the most important tenant to be created. As such, this scheme would have to be enshrined in our Constitution since we cannot trust anything propagated by US lawmakers when it comes to power or money. An Amendment would have to state that incomes and monies would be fairly (not equally) distributed. Yes, this is a bit generalized, but something along these lines must be done to push forward with an agenda to make sure that everyone gets to enjoy the “great American success story,” that old maxim is always thrown around during election time. Obviously, universal health care, universal income, and schooling is placed in this equation. The concept of promoting transparency and doing away with the myth of meritocracy is also a given. University endowment funds need to be transparent and taxed at a very high rate. The concept of privilege needs to be exposed and dealt with from the university level all the way to the primary school level. The author goes even further in espousing open borders and the clear circulation of wealth between countries. Although I do agree with this concept at this time, it is something to consider in the future.
As for chapters, Dr. Piketty expands a great deal on a variety of subjects. In the first five chapters he discusses the basic notion of inequality of cultures in the historical construct. After human’s hunting and gathering phase, we morphed into what he calls a “trifunctional society,” that still lasts to this day. The trifunctional class is the clergy, nobility, and the third estate. As we know in past history, the Catholic Church had enormous power, as did many other religions in their respective areas. Nobility could be landowners or anyone with a title sanction by the State or region. As for the third estate, these were just “people.” These workers are pretty much everyone else. This was about 90% of the population. They could have included workers, small time farmers, slaves, or serfs. Another main tenant of the book is the concept of private property and the rights that are guaranteed of it because of strong state power. If the state is not powerful enough, laws that protect private property are muted considerably. Thus, the invention of ownership societies, stratified societies into those who could live and function with ease versus those who could not. As we all know, it wasn’t until the early 20th century that most people without property could vote in any election in any area of the world. This was followed by the ending of suffrage for women (mostly) and for those that were slaves, serfs, or indigenous peoples in colonized area, probably universally around the 1960’s. In essence, the concept of the “why” was because of security of these institutions and also the “meaning,” behind them. The clergy and the nobility gave the reason for those to live (spirituality, ordained from God, etc.). Piketty posits that this is what led to ownership societies of land (especially Agrarian land) which provided for so much value and security. As we learn throughout history, it is the POWER OF THE STATE that guarantees such things and offers its protection of private property rights. If you need to garner anything from this book it is that concept right there. In great detail, Piketty expounds on the Ancien Regime and the Belle Époque, two times in history from the 1600’s to the late 1800’s when these society’s justified there inequality regimes with the premise of the “meaning and protection,” approach that I alluded to earlier. These type of regimes sprouted after the Roman Empire and used the conception framework of free work vis-à-vis slavery demarcated through colonialization (thank you, England and France) and serfdom. Piketty serves hundreds of pages and many chapters to these concepts alone. Trust me; you will know almost every faucet and financial angle of slavery and colonialism after reading these chapters. Piketty gave five chapters of this iteration not just from the Anglo-angle but also from Brazilian and Indian, (for India, which the British thoroughly exploited and made the caste system even worse due to a myriad of reasons). In essence, the concept of trifunctional turned into ternary societies that encompassed China and Japan as well. Basically there were stratification of society, albeit with different names but all basically did the same thing but perhaps with different percentages. The top two classes controlled 90% to 100% of everything and the rest of the population (which was the grand majority) didn’t own anything.
Then something went horribly wrong. It was called World War I and World War II (1914-1945). Never in the history of time have States of the world become so close to equality or equalitarianism. That is because countries imploded and buildings and property were bombed or confiscated. Moreover, the concept of inheritance tax, income tax (especially the concept of progressive income tax) entered the foray and dramatically cut down the huge swaths of money and property that a small fraction of the world owned. In retrospect, Communism failed dramatically because it just switched the chairs on the Titanic. Private property was nonexistent, which gave all the power and control to the top elites; in this case, they were members of the higher echelon of the Communist party instead of nobility and the religious order. Again, nothing changed except for the names. What lead to Communists quick fall was that there was another option, democratic socialism that was propagated throughout the rest of Europe and the US. Debt forgiveness and the United States providing a progressive tax system, a balanced society financially, and high union rates, that ensured that society remain relatively egalitarian instead of what it was for the history of the world until now, basically skewed toward the very wealthy.
To this end, this is where transparency is the most needed. In the explanation of countries in the Middle East, many are as inegalitarian as you can get with the very top percentages owning an extreme proportion of wealth. Equivalent to how Russia is after the disastrous fall of Communism. Alas, it could have leaned toward West European style socialism, but instead turned into the worst fringes of neoliberal capitalism. As eluded to earlier that Piketty focuses on France quite a bit, he explains the concept of a near 4-party system (that I will explain later) versus the US’s two-party system that has led the changing of party identification in Europe and especially in the US. What Piketty FAILS to bring into this argument is the extreme effect of slavery, racism, and systematic racism that has percolated through the US, after the civil war ending in 1865. No other country has felt it as extreme as the US. Slave owning President Thomas Jefferson wanted to send slaves BACK to Africa while slavery was a much-discussed mess in the early 1800’s. That is why the country of Liberia was formed. Again, Piketty, fails to factor into the equation all of the US’s atrocities of post-Civil War actions towards blacks after 1865 until the present. The US had guns and we didn’t compromise; clear and simple. As for England and France, they actually PAID the slaveholders as compensation to free the slaves. Yes, I know, provocative since the slave person himself didn’t get ANYTHING. This conversations above alone, can open up a can of worms and foment a large debate, but not warranted for this review.
Interestingly, politically, many countries in Europe, and especially the US have changed its Republican and Democratic profile since the Civil War. The Democratic Party was the slave party, then jumped on the Irish and Italian bandwagon to procure votes to stay in power. The Republican Party that “did the right thing,” turned into the party of Goldwater (nee 1964) and Reagan, which in essence flipped roles. After Lyndon Johnson signed the Civil Rights Act of 1964, he allegedly said he “wrote off the South for a generation.” Yes, he was correct. Liberal Democrats put up with Southern Democrats to stay in power, but Goldwater, George Wallace, and the presidential attempt by Strom Thurmond in 1948, were are markings of conservative Southern Democrats turning into conservative Republicans. At that time, Piketty posits that the US turned into the Brahmin Left and Merchant Right that were pro-elite schools, mostly pro-immigration and shared the common desire of those two classes to control their respective countries. As a side note, in the past 40 years, the more educated you are the more Democratic you vote, as such, the more rich you are, the more Republican you vote. Many times, these complexities merge. In 2016, Mrs. Clinton received 75% of all voters who had doctorates in the US—which were about 2% at that time. The Democratic party abandoned the unionized households with their penchant for geopolitical free trade agreements and infatuation of Neoliberal economic structures postulated by the Chicago School (Milton Friedman), who wanted to turn most everything controlled by the State into cooperate or private hands (since they know best-not). This led to the proverbial screwing over of the middle and lower classes. This thinking really took off with Thatcher in 1979 and Reagan in 1981. The rest, as we should say, is history. Inequality and inegalitarianism is as high as it has ever been in the US.
For me the most interesting aspect of the book can be found on page 791. Piketty explains the 4-way divide in French’s politics that is happening here in our two party system. There is the (1) Egalitarian internationalists (pro-immigrant, pro-labor)-thus the new Democratic party in the last 5 to 10 years. (2) The Inegalitarian nativists (anti-immigrant, pro-rich), the new Republican party in the last 5 to 10 years. (3) The Inegalitarian internationalists (pro-immigration, pro-rich) the party of Reagan, the Bushes, and Milton Friedman, the “old” Republican Party, and finally, (4) the Egalitarian nativists (anti-immigrant, pro-poor), I feel the “new-new” Republican Party. This party has many aspects of Trumpism that he is exploiting to a tee, along with the siphoning off of the other 3 branches. With the “browning” of American, I feel that number 4; will play a huge role in the Republican Party in the years to come.
Piketty has a number of little nuggets that pop out. Something you would expect from a lengthy book. Such as China flailing for hundreds of years since they didn’t tax their citizens high enough and didn’t have a strong enough State. Ergo, they kept getting their butt beaten by the British again and again. In addition, during the conclusion, Piketty generally thinks that it is sad and not useful that we, as a society, always defer to economist when anything has to do with the economy. On its face, it may seem relevant, but this is why we have out of control capitalism. For that fact alone. Other disciplines are not taken into account! Again, this is just a short synopsis of the book itself. If you find a review that is shorter than this, they did not read the book cover to cover. I have seen some reviews by other distinguished authors and I will critique them lightly. As such, in one review, someone states that Dr. Piketty has an affinity for the Gini co-efficient. Although this is a broad scale measure of inequality, it has some factual inaccuracies and doesn’t measure the full inequality. In his book, on pages, 26, 657, and 659, he consistently states that he is not a fan of that measure. I will not deal with Amazon reviews since they are mostly political hacks with an agenda
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Mr. Subramanian critique (Foreign Affairs-July/Aug 2020) is bland and predictable. I’m sorry. If someone has handed you an 1100 page opus and you think you can knit pick it down to a few pages, you’re a dullard. I’m sorry Mr. Subramanian, there is no “U-turn” between Dr. Piketty’s books. The latter is postulating that history had a choice at every turn to get it right, but their inherent greed and self-serving has always won the day. It may have taken 7 years for his books to enlighten this point. The critique bemoans that Piketty rattles on about the “sacralization of property,” Well of course he does, there was the root of the problem. Property conferred certain protection, moneymaking schemes, and voting rights, and those who had it wanted to limit it for others at every turn. It doesn’t take someone with a PhD to point this out—just watch any Netflix story. Trust me, it REALLY is that simple to realize human motivation. To continue, Mr. Subramanian continues to glorify billionaires (as if they discovered the holy grail) and feels that high tax rates are anathema to the world economy. Well, OF COURSE they are to the very rich. Between the two World Wars, the world never saw such equality. In addition, we had very very high tax rates. In fact, multiple studies show that economies of scale can withstand and thrive on high tax rates and margins on all profits and properties. Does he think the current situation is fair, equitable, and sustainable? I think not. Finally, and most atrociously, the author’s critique points to the “success” of China, India, and other prior fourth world economies that have severely cut their poverty rates amongst their populations. Oh yes, we have done the noble thing of making sure that the vast majority of people of the world make more than $1.90 a day, what an accomplishment! Inequalities are shrinking worldwide to a point, but it’s just like saying well, I’ve been stabbed and I’m bleeding, but I got the knife out and I’m bleeding a little less, only because I’m applying extreme pressure to the wound. Ergo, a Band-Aid approach.
As for Fazi’s critique (American Affairs-Summer 2020), I would consider it spot on with appropriate language except for one possible issue I take issue with on page 166. Per him: “ Piketty is unable to resolve this constant tension between pragmatism and globalist idealism, which blinds him to the fact that transnational democracy, let alone transitional socialism is absolute unworkable…” That is Fazi’s strongest and most difficult argument to break. Fazi goes further stating that a transitional assembly would have to be formulated, along the line of the European Union (and we all know how that is working out), there would need to be some one-world government. Obviously, Mr. Fazi hasn’t watched science fiction, where in the Star Trek series that this is a real possibility, but I digress.
Although I believe that Mr. Fazi is incorrect that a one-state world economy could not work. He states that since there is democracy or “demos,” it would be impossible to accept legitimacy and majority rule with so many different cultures. Ergo, a nation-state would have to be present (I presume he means multiple) and that collective decision-making would be impossible in a democracy. In a controlled environment with a King, I would presume so. Again, to proverbially throw your hands in the air , per Fazi, and state that nothing can be accomplished is nihilist and disingenuous at best. Of course, the world could do something if WE REALLY NEEDED TO.
As a direct cut and paste from Wikipedia: In Paul Krugman’s review, he raises two questions: “whether Piketty knows enough about the areas he writes about to have constructed valid claims about the dozens of societies he discusses, and whether all of the case studies presented strengthen Piketty's core argument that rising inequality is fundamentally due to political choices.” I should hope that Dr. Krugman has a more thorough and respectable debunk somewhere in the literature, as such I have an enormous amount of respect for him, but this one paragraph actually made me spit out my morning coffee. Dr. Piketty DOES know enough about the areas to which he writes. It is backed up by copious notes and an on-line repository. Please, Dr. Krugman, let’s see you match that. As for rising inequality being fundamentally due to political choices, I think there is a strong argument that this IS the case. Does he have a competing theory? I’m anxiously holding my breath.
Thank you, Dr. Piketty for educating and enlightening me on the world stage of inequality. This is clearly a 5 star review and clearly, the BEST economic book I have ever read. (Well, maybe besides Keynes and Polanyi).
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TEFL Teacher
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