Summer Recap and a Brief Effort to Explain Thomas Picketty

Picketty_Capital Small

Before we begin, let me take a moment to recognize that our scheduled summer recess went longer than expected. Coming out of it, I’m going to try to do a few things a bit differently. For one, I will now be publishing once a week. There are also new Project Philosophy and From the Author pages – so check those out. If you have any suggestions, let me know. Tell me what you like, what you don’t like, and what you’d like to see more of. And as always, thanks for reading!

– – –

The late months of summer are supposed to be a slow time for the news. Apparently, somebody forgot to schedule that. Instead, we got the emergence of ISIS, the tumult of Ferguson, and now, the outbreak of Ebola. Even Congress, which was apparently so satisfied with everything they’ve accomplished in this term that they decided to take a five-week break to focus on the upcoming election, decided that it needed to come back and hold fantasy hearings.

We’ll unpack some of that in due course, as well as take a look at what’s potentially shaping up to be the most important election about nothing in recent memory. But before that, let’s reach into our pile of discarded news stories and revisit the phenomenon of the early summer that was Thomas Picketty’s Capital in the Twenty-First Century.

It’s a little hard to capture just how big of a deal Picketty’s book might turn out to be. For an academic tome (nearly 700 pages), Capital spent a surprising amount of time on the best-seller’s list. It’s been called everything from “authoritative”, to “one of the watersheds of economic thinking”, to “a political and theoretical bulldozer”. Libertarian economist Russ Roberts referred to it as the most significant economics book written since John Maynard Keynes’ General Theory. More broadly, it has been commonly described as ‘magisterial’.

The book’s English publication generated a fair amount of coverage, and as Picketty did the interview rounds, I was tempted to write about the conversation. Instead, I waited until I  had actually read the book – something I’m not sure everyone else did.

First, let’s very briefly recap why the book has made such a splash. In essence, Picketty’s thesis is that capitalism inevitably produces increasing inequality. That doesn’t sound so new. His main contribution is to provide a truly overwhelming amount of empirical data that looks at economic growth and capital distribution over a long period of time. Much of his data aggregation is original to this work and is quite impressive.

Picketty goes on to argue that, during the 20th century, the process of increasing inequality was only interrupted by the massive shocks of the Great Depression and the World Wars. Those events slowed the growth of income inequality and made it harder to appreciate the otherwise clear trend. But, as Picketty points out, left to its own devices, capitalism doesn’t correct for income inequality – that requires an external force. Picketty doesn’t recommend more Great Depressions and World Wars, but rather state action to tax and redistribute wealth.

It’s not difficult to see why that argument has struck a cord in the United States. It manages both to resonate with many of the themes of our current political arguments and has the added benefit of coming in a form that is also familiar: Americans who have read De Tocqueville have experience with Frenchmen explaining our society to us in what passes for scholarly exposition.

And it’s precisely that tone of detached empiricism that tempted much of the left to use Picketty as a cudgel in their political fight. Picketty and his followers certainly encourage you to think that the verdict is in – the data has spoken. Has it?

It helps to look at Capital from three different angles: as scholarship, as policy recommendation, and as an actual written work.

Let’s start with the last one and get this out of the way: Capital is not terribly well written. It is painfully repetitive. It does too much hand-holding at times and too much hand-waving at others. The most encouraging aspect of the Picketty phenomenon might very well be that one day we’ll get a Picketty Reader that condenses the work into a better-flowing format.

As scholarship, however, Capital is terrific. Picketty brings together data from a wide-variety of sources in order to paint a rich picture of capital flow and accumulation. If you want to get a clearer picture of how capitalism and wealth inequality have developed since the Industrial Revolution, you can’t do better than to seriously engage with Picketty’s work.

That said, Capital is hardly definitive. The main weakness is that Picketty’s approach depends on being able to study societies that have done a good job of maintaining records over time. In practice, that means that what is oftentimes referred to as a study of capital in the twenty-first century is really mostly a study of capital in the United States, the United Kingdom, and France over that time. Picketty argues that these case-studies are generalizable to the broader phenomenon of capitalism, per se, but if you don’t buy that argument, then Capital seems a lot less definitive than it thinks it is.

A related problem is that, as Picketty himself points out, you need the benefit of hindsight if you want to understand long-term phenomena. Picketty mentions this to explain why his view of economic development between 1950 and 1980 differs from contemporaneous ‘authoritative’ accounts – and he’s largely convincing, but it should encourage the reader to ask: how authoritative can Picketty, or anyone, be about our current moment without the benefit of any hindsight?

What, then, do we make of Picketty’s policy recommendations? One way to shorthand this is to say that Picketty becomes less impressive as he moves through time: his work on the mid-twentieth century is great, his remarks on the current state of affairs are less overwhelming, and his projection of the future feels even less convincing. Picketty recommends a global wealth tax to help remedy increasing inequality, a policy suggestion so out of touch with feasibility as to engender serious doubts about whether Picketty is nearly as good a student of political science as he is a student of economics.

But the biggest shortcoming of Capital is also the most important. If you want to understand it, as well as get a much better view of the arguments of Capital without having to read the tome, let me recommend this interview between Picketty and the aforementioned Russ Roberts. It’s a productive conversation for the listener, but less so for the interlocutors: Picketty and Roberts both do a good job at laying our their positions, but not such a good job at addressing each other’s concerns. The listener is left to provide their own synthesis.

Picketty lays out his argument that unchecked capitalism leads to increased economic inequality. Roberts doesn’t really refute that point, but he asks: why does it matter? If capitalism makes the worst off better, why does it matter if it also makes the best off even wealthier? In the end, everybody benefits. Picketty can’t seem to articulate why this is a problem, and he doesn’t do it in the book either. In fact, as Picketty explains that income inequality is worse in the current age than it was in the 1930s, readers might wonder why he doesn’t grapple with the fact that we’d all rather live today than eighty years ago.

The answer, which Picketty hints at but never states outright, is the relationship between economic and political power. The missing element from Capital’s analysis – perhaps because it so obvious to the author that he can’t figure out how to spell it out for the reader – is the explanation that economic inequality distorts a democratic process premised on the fundamental equality of the ballot box. That tension, between economic and political inequality, is at the heart of many of today’s political fights – brought to a head by the Supreme Court’s 2010 decision in Citizens United.

So let me provide the necessary addendum to Capital, taken from the pages of the New York Tribune‘s 1905 editorial pages:

In the United States the government is intended to be a government of men. A corporation is not a citizen with a right to vote or take a hand otherwise in politics. It is an artificial creation, brought into existence by favor of the State solely to perform the functions allowed by its charter. Interference by it with the State and attempts by it to exercise rights of citizenship are fundamentally a perversion of its power. Its stock holders, no matter how wise or how rich, should be forced to exercise their political influence as individuals on an equality with other men. That is the basic principle of democracy.

If Picketty’s book is of use to us, it is mostly in pointing out that that equality is being eroded, and in reminding us that we can do something about it.

Follow Pedro on Twitter @IamPedroA.

Want to help The Fog of Policy grow? Then take a minute and share this piece! Or let me know what you think in the comments section.

Have a question or suggestion for a new piece? Submit it through the Feedback form – and don’t forget to subscribe on the homepage to get posts and features automatically sent to your inbox.

One thought on “Summer Recap and a Brief Effort to Explain Thomas Picketty

  1. Pingback: The Other One Percent - They're Closer Than You Think.

Leave a Reply