Why are They Afraid of Thomas Piketty?

When I first wrote about Thomas Piketty and his book-- a month before the publication of the English language edition of Capital in the Twenty-first Century-- I felt confident that he, and it, would have a large impact even beyond the academic community. For sure, I never expected it to be a best-seller, but I thought I saw the book filling a particular, urgent need for one segment of the political spectrum. While others noted the book's timely appearance in the wake of the 2007-2008 economic catastrophe and arrival concurrent with attention to revealed trends in inequality, my sense was that the book would be received as a godsend by liberals and social democrats.

Though the crisis cast a long ideological shadow over neo-classical economics and its associated policies, the widely expected return to the Keynesianism of the post-war era never materialized. Despite the best efforts of high-exposure, acclaimed economists like Joseph Stiglitz and Paul Krugman, New Deal-like policy prescriptions failed to gain popular traction or political support. The dashed high hopes invested in center-left governments in the UK, the US and, most recently, France, further disappointed reform-minded forces in North America and Europe. Accordingly, hopes of turning away from the conservative, free-market paradigm of the last thirty-five years were at a low ebb before Piketty's book.

It was my view that the Piketty book would be enthusiastically welcomed outside of the conservative consensus. His exposure of historical patterns of inequality demonstrates the tendency of capitalism to generate inequality, a condition seeming to cry out for a remedy. In Piketty's research and his theoretical claims, liberals and social democrats might find a new foundation for reforms, even a grand assault on conservative hegemony. Indeed, some economists have likened the anticipated impact of Piketty's book to the much earlier publication of Keynes's General Theory of Employment, Interest, and Money.

Indeed, the Piketty phenomenon continues to draw interest. My Google alerts on “Piketty” show fewer entries, but continue unabated. Yet liberal and social democratic ideologues and policy makers are not nearly as enthusiastic as I expected. The initial euphoria has been tempered as Piketty's ideas are digested and their implications carefully examined.

A recent issue of Real World Economics Review demonstrates the widespread and growing hesitancy to accept Piketty as the messiah of reform. Friends in the Communist Party of Ireland brought attention to the Review's Special Issue on Piketty's Capital in which 17 economists of liberal and social democratic persuasion reflect on the popular book.

The “Respectable” Left Sours on Piketty

The participants in the RWER forum are established social scientists sincerely troubled by persistence of inequality and poverty. Some-- Yanis Varoufakis, Ann Pettifor, Richard Parker, Michael Hudson, James K. Galbraith, and Dean Baker-- are prominent commentators in liberal and left circles. All express admiration for Piketty's success in drawing attention to inequality. Yet nearly all are uncomfortable with his research results and theoretical claims. Some challenge his “fundamental laws of capitalism,” others his “determinism.” In the end, the stone in the shoe of these liberal or social democratic thinkers is Piketty's notion that, ceteris parebis, capitalism systemically produces and reproduces inequality. Dean Baker confirms this when he states: “It is the adoption of policies that were friendly to these business interests that led to the increase in profit shares in recent years, not any inherent dynamic of capitalism, as some may read Piketty as saying.” (My italics)

It is the “inherent dynamic of capitalism” that troubles liberals and social democrats. If capitalism necessarily generates inequality, if inequality follows from the laws of capitalist development, then reforms will never satisfactorily conquer social inequality. Should it be true that inequality is a systemic product of capitalism, then a basket of reforms, as advocated by nearly all of the RWER commentators (and Piketty), will, at best, only slow or retard the growth of inequality.

It is this question that separates capitalist reformers from socialists, and social democrats from Marxists. Marxists embrace Piketty's claim that inequality is the capitalist norm, that periods of diminishing inequality are the exceptions. Moreover, the very logic of capitalism, with exploitation at its core, promises to increase inequality. For capitalism to continue, capital must accumulate-- not in social consumption, but in investment targeted to more accumulation. Efforts to resist, reform or regulate will only retard that process.

For sure, progressive governments may enact reforms to redistribute wealth, but eventually this inhibits accumulation and results in a capital strike or capital flight. Capitalism is not an equality-generating mechanism. Nor is it equality tolerant.

Labor may fight for a larger share of wealth, but only to be trumped by capitalist threats of plant closure or mass unemployment. Today's collaborative labor leaders are caught in the compromised position of being both an agent for corporate profitability and an advocate for working class living standards. Surely no advance against inequality is possible in the face of this dilemma.

The RWER writers would prefer to address the decades since Reagan and Thatcher rather than the centuries studied by Piketty. Where Piketty finds a long-term tendency for capitalism to generate growing and extreme inequality, they prefer to ignore that elephantine fact and debate the causes of growing inequality since the nineteen seventies.

They are intent upon ignoring centuries of enduring inequality because accepting that reality would cast doubt on the possibility that equality and capitalism are compatible, that the capitalist system can be reformed. Piketty's long-term data and theoretical argument challenge that possibility.

Rather than accept the implications of capitalism's long-term tendency, its centuries-old trajectory, liberals and social democrats point to the historically brief respite from income inequality after World War II (in the US and parts of Europe) along with the post-war expansion of the welfare state as a kind of golden age for social democracy. They see the abrupt turn away from the moderation of inequality-- occurring only some twenty-five years later-- not as a return to the normal course of capitalism, but as a political coup against tamed and tempered capitalism. With little more than nostalgia to support this view, reformists cling to the illusion that an egalitarian, humane capitalism is in the cards. Liberals and social democrats refuse to see the maintenance and growth of inequality as systemic; rather they want to believe that growing inequality is merely a matter of political choices. Thus, they rail against the ideology of “neo-liberalism,” as though the explosion of inequality in North America and Europe over the last 30-40 years was the result of a right-wing confidence game and not driven by the logic of capitalism. “Defeating neo-liberalism” has become a convenient mantra for those ill-disposed to fighting for a new socio-economic order: socialism.

Writing for the RWER forum, Claude Hillinger bluntly states his opposition to Piketty and his allergy to capitalism as inequality's father: “By treating inequality as an economic problem, Piketty diverts attention away from what it really is–a political problem.”

A “political problem” that has proven intractable for hundreds of years under capitalism? A “political problem” better solved under twentieth-century socialism than by any and all twentieth-century bourgeois politicians? A “political problem” only if we choose to slight or ignore Piketty's data.

It is an unpleasant, unstated truth that liberals and social democrats are much more comfortable addressing the concept of poverty rather than inequality. Under capitalism, alleviating the pain of those at the very bottom of the economic hierarchy appears to be much easier and more desirable than tackling the economic hierarchy in its entirety. Not surprisingly, many well-compensated academics are impressed with their own merit and, thus, find a ready defense of the hierarchy of inequality.

RWER contributor V.A. Beker gently attempts to move the spotlight on to poverty: “Let me now ask an awkward question. Should reduction of inequality or reduction of poverty be our main concern?” Certainly by reducing the target to poverty, the question of inequality's relationship to capitalism can be evaded.

Another evasion is to interpret “egalitarianism” as “procedural egalitarianism,” as does YanisVaroufakis in the EWER forum. While taking a gratuitous, but well-deserved pot shot at John Rawls's liberal theory of distributive justice, Varoufakis cavalierly dismisses all distributive egalitarianism in favor of procedural justice, a lofty euphemism for “equal opportunity.” Proponents of “procedural egalitarianism” claim victory for equality when the rules of life apply equally to everyone. Outcomes are irrelevant if no one violates the shared mutually agreeable procedures, standards, or rules of participation. Everyone has the same opportunity-- the “created equal...” of the US Declaration of Independence.

Thus, nine innings of baseball, played according to the rules, constitute an example of procedural justice. And while the outcome might be lopsided, the game would be played consistent with procedural egalitarianism.

What the advocates of procedural justice dare not address is the case of a Little League team playing the Chicago Cubs. While the rules of that game may be assiduously observed, the outcome is certainly not fair, just, or egalitarian. I doubt if any political philosophers would show enough confidence in procedural justice to bet on the Little League team.

Should the advocates of procedural justice modify the rules of baseball to disallow the inequality of resources or skills enjoyed by the Cubs, they must also recognize that outside of the world of games, differential resources and skills always affect fairness, justice, and equality. Accordingly, “procedural” egalitarianism can be no answer to inequality, unless it comes to grips with the inequality of resources, skills, and power ever present in capitalism. But addressing questions of asset distribution returns us to distributive justice and, ultimately, how capitalism distributes these assets.

Try as they may, liberals and social democrats are faced with an impossible task in imagining a capitalist world that evades or transcends the inequalities of the system's past. Inequality is inherent in capitalism, deeply embedded in its genetic code.

Piketty's conclusions from studying “la longue durée” of inequality-- its trajectory over centuries-- stands as an obstacle to those who believe the myth of capitalism without inequality. Or put another way, the results stymy those who want equality without socialism.

Zoltan Zigedy

zoltanzigedy@gmail.com