Capital and Ideology by Thomas Piketty

 

Thomas Piketty’s Capital and Ideology is a monumental achievement. Its scope is vast, its size is daunting, its scholarship and vision both quite breath-taking on every one of its 1000-plus pages. Ostensibly, it claims to be an analysis of the origins, politics and economics of inequality, but it goes considerably deeper and further than its brief. This work is nothing less than a snapshot of global economic history and politics taken at the time of writing. Though the historical element might be seen in different forms via the lenses of centuries and assumed perspectives, the book’s analysis of current political issues was always going to be subject to faster change.  I doubt whether Thomas Piketty himself would have predicted that, just a few months after his work’s publication, the global economic and political landscape would be redrawn by a new, microscopic virus. But that is exactly what has happened. And, given the effects on wealth and asset distribution the author attributes to the capital-destroying wars that dictated the history of the twentieth century, one wonders what a post-Covid analysis of the mechanisms that create and maintain inequality might look like. One suspects that the political prescriptions in the book’s last chapter may just, out of sheer necessity, have been rendered more likely.

Capital in the Twenty-First Century charted the origins and extent of inequality in human societies. Capital and Ideology follows on by examining current and historical circumstances and mechanisms that determine its extent and influence its propagation. The book charts comparisons of inequality across countries, continents, cultures and eras. In doing so, its author uses much more than statistical comparisons. Historical and cultural perspectives are offered. Economic analyses are suggested. Crucially, societal structures are analysed, especially those of triumvirate societies, where the ownership of religious, scientific and military power provide the justification and the means of establishing and maintaining skewed ownership of assets. Though the book covers much ground, many different civilizations, locations and eras, the overall analytical focus is never lost.

A criticism of such an achievement may seem petty, but the book could have profitably dealt with one of its weaknesses much earlier. A constantly aired opinion of Thomas Piketty’s work is that, like all socialists, he wants everyone to be the same, to compress all to the same lowest common denominator. This, the criticism continues, would stifle creativity and drive in any society that tried to implement his recommended policies or even tried to address the obvious and growing inequality caused by market capitalism. Readers of Capital and Ideology, however, will have to wait until the book’s last chapter before reading this passage.

“A just society is one that allows all of its members access to the widest possible range of fundamental goods. Fundamental goods include education, health, the right to vote, and more generally to participate as fully as possible in the various forms of social, cultural, economic, civic, and political life. A just society organizes socioeconomic relations, property rights, and the distribution of income and wealth in such a way as to allow its least advantaged members to enjoy the highest possible life conditions. A just society in no way requires absolute uniformity or equality. To the extent that income and wealth inequalities are the result of different aspirations and distinct life choices or permit improvement of the standard of living and expansion of the opportunities available to the disadvantaged, they may be considered just. But this must be demonstrated, not assumed, and this argument cannot be invoked to justify any degree of inequality whatsoever, as it too often is.”

Let’s juxtapose this quote from page 967 of Thomas Piketty’s book with the following: “Above all, we will listen to the people who have felt left behind by the last few decades of economic growth and want to have control of their future. (We) will give the public services the resources they need, supporting our hospitals, our schools and our police. We will help people and families throughout their lives…” This latter passage is quoted verbatim from the webpage of the British Conservative Party, from the manifesto upon which they fought their successful campaign for the 2019 election, an election where an unprecedented number of voters from disadvantaged communities (largely as a result of previous Conservative governments’ priorities) opted to vote for the party in the hope they would honour a promise to “level up” the country. There seems to be electoral kudos in levelling, despite the opinion of right-wing politicians who extol the need for libertarian individualism married to economically deregulated separatism. Thomas Piketty analyses such tendencies and offers a paradigm to explain these shifting political alliances.

Capital and Ideology is the perfect text for anyone needing an update on the world. It has so many succinct and pertinent analyses that even a list of its insights would be a tome in itself. Some examples will suffice.

For instance, if anyone finds it hard to understand why certain elite groups from Western democracies might now be sympathetic towards Putin’s Russia, Thomas Piketty can enlighten.

“It is important to note that it is very difficult to measure and analyse income and wealth in postcommunist Russia because the society is so opaque. This is due in large part to decisions taken first by the government headed by Boris Yeltsin and later by Vladimir Putin to permit unprecedented evasion of Russian law through the use of offshore entities and tax havens. In addition, the postcommunist regime abandoned not only any ambition to redistribute property but also any effort to record income or wealth. For example, there is no inheritance tax in postcommunist Russia, so there are no data on the size of inheritances. There is an income tax, but it is strictly proportional, and its rate since 2001 has been just 13 percent, whether the income being taxed is 1000 rubles or 100 billion rubles.”

When this is placed alongside the fact that Europe in general and the European Union in particular is a global outlier in the extent of its greater equality of wealth and income and we can see immediately why the libertarian, individualists of the political right, who for example favour Brexit for the United Kingdom, might also cast an envious glance towards Russia’s largely unregulated treatment of wealth, no matter how it was amassed.

Thomas Piketty offers numerous such insights. He analyses India’s castes, charts the French Revolution, analyses politics in the USA and takes long hard looks at colonialism and empires. And what is more, all of this is accomplished with transparency and fluidity, so that at no stage does a reader feel presented with a mere list. The analysis of current political strands is particularly enlightening.

Piketty rejects the term “populism” as meaningless. He prefers to use “identitarian” to describe the tendency for many voters in democracies to retreat behind promised protectionism and fortified borders to exclude foreigners. In doing so, he sums up both cause and effect in a single idea, a summary that is both more accurate and more enlightening than “populism” in terms of understanding the political direction being followed. But he goes beyond description and offers analysis of motives. He cites, for example, evidence relating to Poland and Hungary, both of whom currently have governments that have displayed tendencies to restrict freedom or roll back liberalism, even to the extent that they are at odds with a European Union they were once eager to join. Many observers are perplexed by this phenomenon, noting that both countries have benefitted hugely from European development aid and inward investment. Piketty’s analysis, however, examines net transfers and finds that for both countries, capital flow has consistently been out of the country and towards Europe’s epicentres of wealth. And electorates are aware of this bloodletting. The only solution, he maintains, is greater political integration, not less.

He analyses politics in the USA, though obviously not in great depth. He does, however, make enlightening points about race to illustrate how the Democrats became transformed from the party of southern slavery to the natural home of the “ethnic” vote. It is a process that happened over a century, from the Civil War, when the Republicans were the champions of opposition to slavery through the New Deal and into the late 1960s, when it was the Democrats who espoused civil rights.

The author spends much of the early part of the book identifying the structure of triumvirate societies, where a peasant majority is ruled by an alliance between warrior and priestly classes who, combined, rarely accounted for more than ten percent of the population. He then shows how this structure developed into proprietarianism, which preserved the right of the ruling classes to own property. This later evolved into capitalism when the owners of property increased the scale of operations and created industrialization. He makes a convincing case in relation to the political control claimed by an alliance of religion and sword that was used to justify and then preserve property ownership of the ruling minority. Piketty offers the following, again late in the book:

“I have defined proprietarianism as a political ideology based on the absolute defense of private property; capitalism as the extension of proprietarianism into the age of large-scale industry, international finance, and more recently to the digital economy. At bottom capitalism rests on the concentration of economic power in the hands of the owners of capital. In principle, the owners of real estate capital can decide to whom they wish to rent and at what price while the owners of financial and professional capital govern corporations according to the principle of “one share one vote”, which entitles them, among other things, to decide by themselves whom to hire and at what wage.”

And then there arose democracy and later war. It was not that wars had been unknown in the pre-modern era, but he suggests that the industrialization of war after the dawn of the modern era rendered it more thoroughly and extensively destructive than it had previously been. Because of its destruction of property and the creation of debt via interruption of economic life, war threatened proprietarian societies in a way they had never before experienced. Democracy also threatened ownership directly unless it could be manipulated, of course, and both of these threats to the classes born to own had to be managed. Ownership had previously coped with war losses, the twice national income debt in Britain after the Napoleonic Wars, for instance, having been turned to the owners’ advantage by the issuing of bonds their capital bought and a century of poor people’s contributions rendered lucrative to their owners via interest and redemptions.

Democracy posed a new type of challenge to the owners of assets, and still does. So, to explain how systems of inequality can be maintained after everyone, at least in theory, has an equal say, Thomas Piketty needs to examine in detail how politics have changed over the last century. He now finds there exist four almost equally popular political ideologies. He writes:

“In 2017, 21 percent of voters could be classified as “egalitarian internationalists” (pro-immigrant, pro-poor); 26 percent are “inegalitarian nativists” (anti-immigrant, pro-rich); 23 percent are “inegalitarian internationalists” (pro-immigrant, pro-rich), and 30 percent are “egalitarian nativists” (anti-immigrant, pro-poor).”

Furthermore, he finds that there is now a tendency for there to develop an alliance between the two factions of nativism, an alliance that does not challenge property rights.

And, crucially, he finds that the social democrat model that made significant inroads into inequality in the middle of the twentieth century has now been transformed into an ideology of a Brahmin-like educated elite, leaving the votes of the losers in the distribution of wealth to be hoovered into an identitarian trap by the owners of an increasing share of property. This, in essence, is not dissimilar in character to the concept of false consciousness that Marxists find they have to apply in order to explain why masses of people regularly vote or act against their own interests. Here, Thomas Piketty offers a rational mechanism and a convincing argument by which false consciousness can be cultivated and exploited, an approach which does not fall into the distasteful trap of branding poorer people merely stupid.

There is so much in Capital and Ideology that it is almost impossible to review. Reading it comes close to a life-changing experience. Please do read it. Do persevere with its length. Take it at a steady pace and read something else, something contrasting, alongside. Readers will immediately and repeatedly find themselves amazed at the scholarship, the revelations and the rationality of the book’s argument. Anyone interested in our own times should regard it as essential reading. The presence of a virus, however, probably demands a companion volume, since the political and economic landscape is now surely transformed, just like war ripped up its design a century ago.

Eventually, Thomas Piketty champions the politics of social democracy as the solution to growing inequality and, eventually, environmental degradation. He cites the example of Sweden, in that:

“it shows that inequality is not the product of some essential cultural predisposition: in the space of a few years Sweden moved from the most extreme hyper-inegalitarian proprietarian system, which survived until 1909-11, to a quintessential egalitarian social-democratic society once SAP came to power in the 1920s and then ruled almost continuously from 1932 to 2006.”

With the right policies and crucially an end to the retreat into identitarian separatism, the author sees a future where, during an individual lifetime, people can be as entrepreneurial and as successful as they like, but where tax systems and inheritance management ensure the recirculation of wealth and capital to ensure it does not become the permanent property of an ever-smaller elite. A still far from perfect Europe is the example, while the libertarian, identitarian deregulators pose the threat.

Capital and Ideology by Thomas Piketty

 

Thomas Piketty’s Capital and Ideology is a monumental achievement. Its scope is vast, its size is daunting, its scholarship and vision both quite breath-taking on every one of its 1000-plus pages. Ostensibly, it claims to be an analysis of the origins, politics and economics of inequality, but it goes considerably deeper and further than its brief. This work is nothing less than a snapshot of global economic history and politics taken at the time of writing. Though the historical element might be seen in different forms via the lenses of centuries and assumed perspectives, the book’s analysis of current political issues was always going to be subject to faster change.  I doubt whether Thomas Piketty himself would have predicted that, just a few months after his work’s publication, the global economic and political landscape would be redrawn by a new, microscopic virus. But that is exactly what has happened. And, given the effects on wealth and asset distribution the author attributes to the capital-destroying wars that dictated the history of the twentieth century, one wonders what a post-Covid analysis of the mechanisms that create and maintain inequality might look like. One suspects that the political prescriptions in the book’s last chapter may just, out of sheer necessity, have been rendered more likely.

Capital in the Twenty-First Century charted the origins and extent of inequality in human societies. Capital and Ideology follows on by examining current and historical circumstances and mechanisms that determine its extent and influence its propagation. The book charts comparisons of inequality across countries, continents, cultures and eras. In doing so, its author uses much more than statistical comparisons. Historical and cultural perspectives are offered. Economic analyses are suggested. Crucially, societal structures are analysed, especially those of triumvirate societies, where the ownership of religious, scientific and military power provide the justification and the means of establishing and maintaining skewed ownership of assets. Though the book covers much ground, many different civilizations, locations and eras, the overall analytical focus is never lost.

A criticism of such an achievement may seem petty, but the book could have profitably dealt with one of its weaknesses much earlier. A constantly aired opinion of Thomas Piketty’s work is that, like all socialists, he wants everyone to be the same, to compress all to the same lowest common denominator. This, the criticism continues, would stifle creativity and drive in any society that tried to implement his recommended policies or even tried to address the obvious and growing inequality caused by market capitalism. Readers of Capital and Ideology, however, will have to wait until the book’s last chapter before reading this passage.

“A just society is one that allows all of its members access to the widest possible range of fundamental goods. Fundamental goods include education, health, the right to vote, and more generally to participate as fully as possible in the various forms of social, cultural, economic, civic, and political life. A just society organizes socioeconomic relations, property rights, and the distribution of income and wealth in such a way as to allow its least advantaged members to enjoy the highest possible life conditions. A just society in no way requires absolute uniformity or equality. To the extent that income and wealth inequalities are the result of different aspirations and distinct life choices or permit improvement of the standard of living and expansion of the opportunities available to the disadvantaged, they may be considered just. But this must be demonstrated, not assumed, and this argument cannot be invoked to justify any degree of inequality whatsoever, as it too often is.”

Let’s juxtapose this quote from page 967 of Thomas Piketty’s book with the following: “Above all, we will listen to the people who have felt left behind by the last few decades of economic growth and want to have control of their future. (We) will give the public services the resources they need, supporting our hospitals, our schools and our police. We will help people and families throughout their lives…” This latter passage is quoted verbatim from the webpage of the British Conservative Party, from the manifesto upon which they fought their successful campaign for the 2019 election, an election where an unprecedented number of voters from disadvantaged communities (largely as a result of previous Conservative governments’ priorities) opted to vote for the party in the hope they would honour a promise to “level up” the country. There seems to be electoral kudos in levelling, despite the opinion of right-wing politicians who extol the need for libertarian individualism married to economically deregulated separatism. Thomas Piketty analyses such tendencies and offers a paradigm to explain these shifting political alliances.

Capital and Ideology is the perfect text for anyone needing an update on the world. It has so many succinct and pertinent analyses that even a list of its insights would be a tome in itself. Some examples will suffice.

For instance, if anyone finds it hard to understand why certain elite groups from Western democracies might now be sympathetic towards Putin’s Russia, Thomas Piketty can enlighten.

“It is important to note that it is very difficult to measure and analyse income and wealth in postcommunist Russia because the society is so opaque. This is due in large part to decisions taken first by the government headed by Boris Yeltsin and later by Vladimir Putin to permit unprecedented evasion of Russian law through the use of offshore entities and tax havens. In addition, the postcommunist regime abandoned not only any ambition to redistribute property but also any effort to record income or wealth. For example, there is no inheritance tax in postcommunist Russia, so there are no data on the size of inheritances. There is an income tax, but it is strictly proportional, and its rate since 2001 has been just 13 percent, whether the income being taxed is 1000 rubles or 100 billion rubles.”

When this is placed alongside the fact that Europe in general and the European Union in particular is a global outlier in the extent of its greater equality of wealth and income and we can see immediately why the libertarian, individualists of the political right, who for example favour Brexit for the United Kingdom, might also cast an envious glance towards Russia’s largely unregulated treatment of wealth, no matter how it was amassed.

Thomas Piketty offers numerous such insights. He analyses India’s castes, charts the French Revolution, analyses politics in the USA and takes long hard looks at colonialism and empires. And what is more, all of this is accomplished with transparency and fluidity, so that at no stage does a reader feel presented with a mere list. The analysis of current political strands is particularly enlightening.

Piketty rejects the term “populism” as meaningless. He prefers to use “identitarian” to describe the tendency for many voters in democracies to retreat behind promised protectionism and fortified borders to exclude foreigners. In doing so, he sums up both cause and effect in a single idea, a summary that is both more accurate and more enlightening than “populism” in terms of understanding the political direction being followed. But he goes beyond description and offers analysis of motives. He cites, for example, evidence relating to Poland and Hungary, both of whom currently have governments that have displayed tendencies to restrict freedom or roll back liberalism, even to the extent that they are at odds with a European Union they were once eager to join. Many observers are perplexed by this phenomenon, noting that both countries have benefitted hugely from European development aid and inward investment. Piketty’s analysis, however, examines net transfers and finds that for both countries, capital flow has consistently been out of the country and towards Europe’s epicentres of wealth. And electorates are aware of this bloodletting. The only solution, he maintains, is greater political integration, not less.

He analyses politics in the USA, though obviously not in great depth. He does, however, make enlightening points about race to illustrate how the Democrats became transformed from the party of southern slavery to the natural home of the “ethnic” vote. It is a process that happened over a century, from the Civil War, when the Republicans were the champions of opposition to slavery through the New Deal and into the late 1960s, when it was the Democrats who espoused civil rights.

The author spends much of the early part of the book identifying the structure of triumvirate societies, where a peasant majority is ruled by an alliance between warrior and priestly classes who, combined, rarely accounted for more than ten percent of the population. He then shows how this structure developed into proprietarianism, which preserved the right of the ruling classes to own property. This later evolved into capitalism when the owners of property increased the scale of operations and created industrialization. He makes a convincing case in relation to the political control claimed by an alliance of religion and sword that was used to justify and then preserve property ownership of the ruling minority. Piketty offers the following, again late in the book:

“I have defined proprietarianism as a political ideology based on the absolute defense of private property; capitalism as the extension of proprietarianism into the age of large-scale industry, international finance, and more recently to the digital economy. At bottom capitalism rests on the concentration of economic power in the hands of the owners of capital. In principle, the owners of real estate capital can decide to whom they wish to rent and at what price while the owners of financial and professional capital govern corporations according to the principle of “one share one vote”, which entitles them, among other things, to decide by themselves whom to hire and at what wage.”

And then there arose democracy and later war. It was not that wars had been unknown in the pre-modern era, but he suggests that the industrialization of war after the dawn of the modern era rendered it more thoroughly and extensively destructive than it had previously been. Because of its destruction of property and the creation of debt via interruption of economic life, war threatened proprietarian societies in a way they had never before experienced. Democracy also threatened ownership directly unless it could be manipulated, of course, and both of these threats to the classes born to own had to be managed. Ownership had previously coped with war losses, the twice national income debt in Britain after the Napoleonic Wars, for instance, having been turned to the owners’ advantage by the issuing of bonds their capital bought and a century of poor people’s contributions rendered lucrative to their owners via interest and redemptions.

Democracy posed a new type of challenge to the owners of assets, and still does. So, to explain how systems of inequality can be maintained after everyone, at least in theory, has an equal say, Thomas Piketty needs to examine in detail how politics have changed over the last century. He now finds there exist four almost equally popular political ideologies. He writes:

“In 2017, 21 percent of voters could be classified as “egalitarian internationalists” (pro-immigrant, pro-poor); 26 percent are “inegalitarian nativists” (anti-immigrant, pro-rich); 23 percent are “inegalitarian internationalists” (pro-immigrant, pro-rich), and 30 percent are “egalitarian nativists” (anti-immigrant, pro-poor).”

Furthermore, he finds that there is now a tendency for there to develop an alliance between the two factions of nativism, an alliance that does not challenge property rights.

And, crucially, he finds that the social democrat model that made significant inroads into inequality in the middle of the twentieth century has now been transformed into an ideology of a Brahmin-like educated elite, leaving the votes of the losers in the distribution of wealth to be hoovered into an identitarian trap by the owners of an increasing share of property. This, in essence, is not dissimilar in character to the concept of false consciousness that Marxists find they have to apply in order to explain why masses of people regularly vote or act against their own interests. Here, Thomas Picketty offers a rational mechanism and a convincing argument by which false consciousness can be cultivated and exploited, an approach which does not fall into the distasteful trap of branding poorer people merely stupid.

There is so much in Capital and Ideology that it is almost impossible to review. Reading it comes close to a life-changing experience. Please do read it. Do persevere with its length. Take it at a steady pace and read something else, something contrasting, alongside. Readers will immediately and repeatedly find themselves amazed at the scholarship, the revelations and the rationality of the book’s argument. Anyone interested in our own times should regard it as essential reading. The presence of a virus, however, probably demands a companion volume, since the political and economic landscape is now surely transformed, just like war ripped up its design a century ago.

Eventually, Thomas Piketty champions the politics of social democracy as the solution to growing inequality and, eventually, environmental degradation. He cites the example of Sweden, in that:

“it shows that inequality is not the product of some essential cultural predisposition: in the space of a few years Sweden moved from the most extreme hyper-inegalitarian proprietarian system, which survived until 1909-11, to a quintessential egalitarian social-democratic society once SAP came to power in the 1920s and then ruled almost continuously from 1932 to 2006.”

With the right policies and crucially an end to the retreat into identitarian separatism, the author sees a future where, during an individual lifetime, people can be as entrepreneurial and as successful as they like, but where tax systems and inheritance management ensure the recirculation of wealth and capital to ensure it does not become the permanent property of an ever-smaller elite. A still far from perfect Europe is the example, while the libertarian, identitarian deregulators pose the threat.

Capital and Ideology by Thomas Piketty

Thomas Piketty’s Capital and Ideology is a monumental achievement. Its scope is vast, its size is daunting, its scholarship and vision both quite breath-taking on every one of its 1000-plus pages. Ostensibly, it claims to be an analysis of the origins, politics and economics of inequality, but it goes considerably deeper and further than its brief. This work is nothing less than a snapshot of global economic history and politics taken at the time of writing. Though the historical element might be seen in different forms via the lenses of centuries and assumed perspectives, the book’s analysis of current political issues was always going to be subject to faster change.  I doubt whether Thomas Piketty himself would have predicted that, just a few months after his work’s publication, the global economic and political landscape would be redrawn by a new, microscopic virus. But that is exactly what has happened. And, given the effects on wealth and asset distribution the author attributes to the capital-destroying wars that dictated the history of the twentieth century, one wonders what a post-Covid analysis of the mechanisms that create and maintain inequality might look like. One suspects that the political prescriptions in the book’s last chapter may just, out of sheer necessity, have been rendered more likely.

Capital in the Twenty-First Century charted the origins and extent of inequality in human societies. Capital and Ideology follows on by examining current and historical circumstances and mechanisms that determine its extent and influence its propagation. The book charts comparisons of inequality across countries, continents, cultures and eras. In doing so, its author uses much more than statistical comparisons. Historical and cultural perspectives are offered. Economic analyses are suggested. Crucially, societal structures are analysed, especially those of triumvirate societies, where the ownership of religious, scientific and military power provide the justification and the means of establishing and maintaining skewed ownership of assets. Though the book covers much ground, many different civilizations, locations and eras, the overall analytical focus is never lost.

A criticism of such an achievement may seem petty, but the book could have profitably dealt with one of its weaknesses much earlier. A constantly aired opinion of Thomas Piketty’s work is that, like all socialists, he wants everyone to be the same, to compress all to the same lowest common denominator. This, the criticism continues, would stifle creativity and drive in any society that tried to implement his recommended policies or even tried to address the obvious and growing inequality caused by market capitalism. Readers of Capital and Ideology, however, will have to wait until the book’s last chapter before reading this passage.

“A just society is one that allows all of its members access to the widest possible range of fundamental goods. Fundamental goods include education, health, the right to vote, and more generally to participate as fully as possible in the various forms of social, cultural, economic, civic, and political life. A just society organizes socioeconomic relations, property rights, and the distribution of income and wealth in such a way as to allow its least advantaged members to enjoy the highest possible life conditions. A just society in no way requires absolute uniformity or equality. To the extent that income and wealth inequalities are the result of different aspirations and distinct life choices or permit improvement of the standard of living and expansion of the opportunities available to the disadvantaged, they may be considered just. But this must be demonstrated, not assumed, and this argument cannot be invoked to justify any degree of inequality whatsoever, as it too often is.”

Let’s juxtapose this quote from page 967 of Thomas Piketty’s book with the following: “Above all, we will listen to the people who have felt left behind by the last few decades of economic growth and want to have control of their future. (We) will give the public services the resources they need, supporting our hospitals, our schools and our police. We will help people and families throughout their lives…” This latter passage is quoted verbatim from the webpage of the British Conservative Party, from the manifesto upon which they fought their successful campaign for the 2019 election, an election where an unprecedented number of voters from disadvantaged communities (largely as a result of previous Conservative governments’ priorities) opted to vote for the party in the hope they would honour a promise to “level up” the country. There seems to be electoral kudos in levelling, despite the opinion of right-wing politicians who extol the need for libertarian individualism married to economically deregulated separatism. Thomas Piketty analyses such tendencies and offers a paradigm to explain these shifting political alliances.

Capital and Ideology is the perfect text for anyone needing an update on the world. It has so many succinct and pertinent analyses that even a list of its insights would be a tome in itself. Some examples will suffice.

For instance, if anyone finds it hard to understand why certain elite groups from Western democracies might now be sympathetic towards Putin’s Russia, Thomas Piketty can enlighten.

“It is important to note that it is very difficult to measure and analyse income and wealth in postcommunist Russia because the society is so opaque. This is due in large part to decisions taken first by the government headed by Boris Yeltsin and later by Vladimir Putin to permit unprecedented evasion of Russian law through the use of offshore entities and tax havens. In addition, the postcommunist regime abandoned not only any ambition to redistribute property but also any effort to record income or wealth. For example, there is no inheritance tax in postcommunist Russia, so there are no data on the size of inheritances. There is an income tax, but it is strictly proportional, and its rate since 2001 has been just 13 percent, whether the income being taxed is 1000 rubles or 100 billion rubles.”

When this is placed alongside the fact that Europe in general and the European Union in particular is a global outlier in the extent of its greater equality of wealth and income and we can see immediately why the libertarian, individualists of the political right, who for example favour Brexit for the United Kingdom, might also cast an envious glance towards Russia’s largely unregulated treatment of wealth, no matter how it was amassed.

Thomas Piketty offer numerous such insights. He analyses India’s castes, charts the French Revolution, analyses politics in the USA and takes long hard looks at colonialism and empires. And what is more, all of this is accomplished with transparency and fluidity, so that at no stage does a reader feel presented with a mere list. The analysis of current political strands is particularly enlightening.

Piketty rejects the term “populism” as meaningless. He prefers to use “identitarian” to describe the tendency for many voters in democracies to retreat behind promised protectionism and fortified borders to exclude foreigners. In doing so, he sums up both cause and effect in a single idea, a summary that is both more accurate and more enlightening than “populism” in terms of understanding the political direction being followed. But he goes beyond description and offers analysis of motives. He cites, for example, evidence relating to Poland and Hungary, both of whom currently have governments that have displayed tendencies to restrict freedom or roll back liberalism, even to the extent that they are at odds with a European Union they were once eager to join. Many observers are perplexed by this phenomenon, noting that both countries have benefitted hugely from European development aid and inward investment. Piketty’s analysis, however, examines net transfers and finds that for both countries, capital flow has consistently been out of the country and towards Europe’s epicentres of wealth. And electorates are aware of this bloodletting. The only solution, he maintains, is greater political integration, not less.

He analyses politics in the USA, though obviously not in great depth. He does, however, make enlightening points about race to illustrate how the Democrats became transformed from the party of southern slavery to the natural home of the “ethnic” vote. It is a process that happened over a century, from the Civil War, when the Republicans were the champions of opposition to slavery through the New Deal and into the late 1960s, when it was the Democrats who espoused civil rights.

The author spends much of the early part of the book identifying the structure of triumvirate societies, where a peasant majority is ruled by an alliance between warrior and priestly classes who, combined, rarely accounted for more than ten percent of the population. He then shows how this structure developed into proprietarianism, which preserved the right of the ruling classes to own property. This later evolved into capitalism when the owners of property increased the scale of operations and created industrialization. He makes a convincing case in relation to the political control claimed by an alliance of religion and sword that was used to justify and then preserve property ownership of the ruling minority. Piketty offers the following, again late in the book:

“I have defined proprietarianism as a political ideology based on the absolute defense of private property; capitalism as the extension of proprietarianism into the age of large-scale industry, international finance, and more recently to the digital economy. At bottom capitalism rests on the concentration of economic power in the hands of the owners of capital. In principle, the owners of real estate capital can decide to whom they wish to rent and at what price while the owners of financial and professional capital govern corporations according to the principle of “one share one vote”, which entitles them, among other things, to decide by themselves whom to hire and at what wage.”

And then there arose democracy and later war. It was not that wars had been unknown in the pre-modern era, but he suggests that the industrialization of war after the dawn of the modern era rendered it more thoroughly and extensively destructive than it had previously been. Because of its destruction of property and the creation of debt via interruption of economic life, war threatened proprietarian societies in a way they had never before experienced. Democracy also threatened ownership directly unless it could be manipulated, of course, and both of these threats to the classes born to own had to be managed. Ownership had previously coped with war losses, the twice national income debt in Britain after the Napoleonic Wars, for instance, having been turned to the owners’ advantage by the issuing of bonds their capital bought and a century of poor people’s contributions rendered lucrative to their owners via interest and redemptions.

Democracy posed a new type of challenge to the owners of assets, and still does. So, to explain how systems of inequality can be maintained after everyone, at least in theory, has an equal say, Thomas Piketty needs to examine in detail how politics have changed over the last century. He now finds there exist four almost equally popular political ideologies. He writes:

“In 2017, 21 percent of voters could be classified as “egalitarian internationalists” (pro-immigrant, pro-poor); 26 percent are “inegalitarian nativists” (anti-immigrant, pro-rich); 23 percent are “inegalitarian internationalists” (pro-immigrant, pro-rich), and 30 percent are “egalitarian nativists” (anti-immigrant, pro-poor).”

Furthermore, he finds that there is now a tendency for there to develop an alliance between the two factions of nativism, an alliance that does not challenge property rights.

 

And, crucially, he finds that the social democrat model that made significant inroads into inequality in the middle of the twentieth century has now been transformed into an ideology of a Brahmin-like educated elite, leaving the votes of the losers in the distribution of wealth to be hoovered into an identitarian trap by the owners of an increasing share of property. This, in essence, is not dissimilar in character to the concept of false consciousness that Marxists find they have to apply in order to explain why masses of people regularly vote or act against their own interests. Here, Thomas Piketty offers a rational mechanism and a convincing argument by which false consciousness can be cultivated and exploited, an approach which does not fall into the distasteful trap of branding poorer people merely stupid.

There is so much in Capital and Ideology that it is almost impossible to review. Reading it comes close to a life-changing experience. Please do read it. Do persevere with its length. Take it at a steady pace and read something else, something contrasting, alongside. Readers will immediately and repeatedly find themselves amazed at the scholarship, the revelations and the rationality of the book’s argument. Anyone interested in our own times should regard it as essential reading. The presence of a virus, however, probably demands a companion volume, since the political and economic landscape is now surely transformed, just like war ripped up its design a century ago.

Eventually, Thomas Piketty champions the politics of social democracy as the solution to growing inequality and, eventually, environmental degradation. He cites the example of Sweden, in that:

“it shows that inequality is not the product of some essential cultural predisposition: in the space of a few years Sweden moved from the most extreme hyper-inegalitarian proprietarian system, which survived until 1909-11, to a quintessential egalitarian social-democratic society once SAP came to power in the 1920s and then ruled almost continuously from 1932 to 2006.”

With the right policies and crucially an end to the retreat into identitarian separatism, the author sees a future where, during an individual lifetime, people can be as entrepreneurial and as successful as they like, but where tax systems and inheritance management ensure the recirculation of wealth and capital to ensure it does not become the permanent property of an ever-smaller elite. A still far from perfect Europe is the example, while the libertarian, identitarian deregulators pose the threat.

 

Capital In The Twenty First Century by Thomas Picketty

A review of Capital In The Twenty First Century would itself have to be a book, so let this be a mere reflection on some of Thomas Picketty’s wealth of material. And there is no better place to start than his startling demonstration of how little changes in the structure of the ownership of wealth, unless war intervenes. Furthermore, his demonstration that things are getting back to ‘normal’ after the twin conflict shocks of the twentieth century’s World Wars could, unless tempered by resigned realism, easily provoke depression in the reader. Thomas Picketty’s book ought to be required reading for anyone – certainly anyone who happens tp be British – who benefitted from the social mobility available in the 1950s to 1970s. We have tended to blame the 1944 Education Act for providing the abnormal conditions that led to a measurable, albeit temporary, decrease in inequality. But Thomas Picketty sets the record straight by clarifying that it was merely a result of the aberrations of war, which for a few decades weakened the power of capital. Normal service has since been resumed.

Picketty desribes how unevenly capital is distributed, especially in the developed societies. Typically, half of the population owns nothing, while the top ten per cent has about half of the wealth. For Picketty, capital means fixed assets that could potentially be traded, whose ownership can be bought and sold. It includes fixed assets, property, equity or cash, and excludes all forms of human capital, which may be an asset and may have value, but, he argues, its ownership can only be traded in slave societies, which now do not exist. He considers capital distribution and income distributions separately, however, so at least an element of human capital is represented in the latter. He observes that income is always more evenly distributed than fixed capital, with the top ten per cent receiving just 25 to 30 per cent of total incomes. As a consequence, if there has been any shift in the identity of the capital-owning elite in recent decades, then this has come about at least in large part as a result of the very highly remuneration available to certain professions at the very top of the income ladder. The phenomenon has also resulted in an increase in inequality observed in developed societies during recent decades, especially in the USA and United Kingdom. Inequality continues to increase.

One of Picketty’s fundamental laws is that capital always grows faster than the wider economy. Thus success via earning power inevitably leads to a graduation into the rentier class, a transformation that is needed if newly acquired status is to be consolidated. Furthermore, if the inequality stating that capital growth is greater than economic growth holds true, it implies that even the advantages of growth in the general economy will also eventually accrue to the owners of capital.

Historically, economic growth has been strongly associated with increasing population. Without the demographic element, economies have consistently attained no more than around two per cent growth. Two per cent is still a significant rate if maintained. But spurts in growth come with spurts in population. The opposite is also likely to be true, which in itself allows some facets of the current world economy to be seen in more informative light. Population surges produce economic surges, however, and this comes as no surprise. What does surprise a little is Picketty’s assertion, perhaps assumption, that since France experienced population growth before other developed societies, then we must all look to France as the setter of the international economic agenda, the historic standard, if you like, that others followed.

Another historical reality that shows up very clearly in his data is the effect of foreign earnings throughout the nineteenth century and through World War One. These “invisibles”, as they have sometimes been labelled, were simply the profits from colonialism and slavery. They financed deficits, borrowing and consumption at the heart of the empires from which they were drawn. In the modern world, he points out, there is perhaps a greater degree of foreign ownership of capital than ever before, but the benefits and capital transfers are two-way, as are the benefits, and thus net transfers are small.

This history is illustrated in economic data. He cites a number of cases where an imperial power, having amassed large debts after periods of conflict or downturn, managed to earn five per cent or more of its national income from invisibles, thus allowing the country in question to service debts that otherwise would have been crippling. In the modern world, crucially, this get-out-of-jail card is perhaps no longer available.

One aspect of Picketty’s analysis does surprise us. Throughout the book he uses fiction as a source of illustration, a source that will cause many an academic reader of the text to pause and wonder. Picketty often cites examples from Balzac, Austen and others to illustrate general points about the behaviour of capital. The process, though highly selective and, it must be said, apocryphal, does eventually convince, but it is the novelists that eventually shine through, not the economic model. His argument, which he claims is illustrated so clearly in nineteenth century fiction, is that it is always more likely that capital will be inherited or indeed married rather than earned. The endless machinations associated with finding a suitable marriage partner for eligible females in nineteenth century fiction are mere recognition that it is easier to marry money than earn it, capital growth being always lower than economic growth.

If Capital In The Twenty First Century can be criticised, then it is in its rather scant, even dismissive coverage of human capital. Yes, this becomes absorbed into income data. But the author does maintain that  “democratic modernity is founded on the belief that inequalities based on individual talent and effort are more justified than other inequalities – or at least we hope to be moving in that direction.” He contrasts this belief with a Balzac character who foregoes the chance of studying law in order to seek marriage to a fortune, and then asks who would do such a thing today?

Now if credentials as well as skills obtained by participants in education do develop human capital, even if this is only reflected in increased earnings, then access to high quality education is needed before these skills and credentials are attainable. It might even be argued that now the educational experience is not only sufficient for capital advancement but also necessary, since even the opportunity to wed capital may hinge on the attainment or not of educational levels that are preconditions for entering that particular market.

And so if education has become just another commodity offered via a market, then the cost of accessing the most highly developed and effective delivery systems will rise, since these are the most effective means of securing access to capital, whether via earnings or marriage. Such costs will also rise since, having become a market, educational demand will be highest from those with a need to protect their existing ownership of capital, and they have the resources to pay for what they need. Education thus becomes a means of confirming and re-asserting wealth, rather than a potential avenue for social mobility. Perhaps today it is still easier to marry wealth than earn it. Except that today the option of marriage may be determined by an educational credential that can most effectively be secured by existing access to wealth.

This argument, it seems, closes the loop and illustrates how, even in a materialistic society, capital will always grow faster than the economy as a whole and why inequality will not only persist, but increase.

No book review should concentrate on what a book is not. So as a final note let me describe Thomas Picketty’s book as essential reading for anyone with a brain. If you can disprove its analysis empirically, rather than merely deny its significance on ideological grounds, then please present your data. If you can’t, then join the call for policies that will attempt to address the destructive imbalances that result in growing inequality. It must be remembered that, underpinning Capital In The Twenty First Century is a need to examine whether a certain text called Capital in the nineteenth century contained a grain of truth in asserting that eventually the capitalist system would collapse under pressure of its own inevitable imbalances. The conclusion appears to have been demonstrated, and the case for re-reading that other book is thus made.