It was in 2013 that Thomas Piketty rediscovered the problem of wealth inequality with his celebrated book Capital in the Twenty-first Century. Published by Harvard University Press and selling several million copies, the book turned prevailing mainstream economic thinking on its head. Academic economists and capitalist apologists had long assured us that capitalism persistently created wealth and distributed it fairly to all the factors of production, with deviations from this fair distribution attributable to unusual or exceptional intervention in the process.
But Piketty’s look at all the available, relevant data showed just the opposite: capitalism-- absent any external or exceptional circumstances-- invariably generated growing inequality. Using sources dating to the eighteenth century, Piketty showed that, with the exception of the destruction of capital or the rare active measures to redistribute it, wealth inequality was bound to grow. Piketty offered no deep explanation of why this is a feature of capitalism, but he did offer the usual social democratic panacea-- tax the rich!
Coming only four years after the steepest economic downturn since the Great Depression, Piketty’s opus was well received by a wide audience. As a consequence, one might think that the idea of overthrowing the system responsible for more than two centuries of growing inequality would accordingly enter the popular conversation.
But it was not to be. Though a new gilded age of conspicuous consumption, new manifestations of privilege, and raging demand for luxury emerged, no serious threat to the capitalist system sprung forth. Anger was contained effectively in the US by a rotten, corrupt two-party system. Fear and a deeply ingrained hostility to socialism gripped older generations. And younger people-- facing a desperate future-- were open to an alternative to capitalism, but saw no clear road for it.
Now, thirteen years later, The Wall Street Journal’s top economic commentator, Greg Ip, has again rediscovered inequality. He writes about today’s economy:
Its rewards are going disproportionately toward capital instead of labor. Profits have soared since the pandemic, and the market value attached to those profits even more. The result: Capital, which includes businesses, shareholders and superstar employees, is triumphant, while the average worker ekes out marginal gains.
The divergence between capital and labor helps explain the disconnect between a buoyant economy and pessimistic households. It will also play an outsize role in where the economy goes from here.
The brute financial force of all that wealth means market fluctuations, like last week’s, matter more for consumer spending. Meanwhile, artificial intelligence could funnel even more of economic output toward capital instead of labor. Last week may be a taste. Amid reports that layoffs are climbing and job openings plunging, especially for professionals exposed to AI, the Dow Jones Industrial Average closed above 50000 for the first time…
The shift to capital from labor has actually been under way for more than 40 years. Labor received 58% of the total proceeds of economic output, as measured by gross domestic income (conceptually similar to GDP), in 1980. By the third quarter of last year that had plummeted to 51.4%. Profits’ share, meanwhile, rose from 7% to 11.7%.
Ip’s charts show that S&P 500 profit margins have doubled over the last 15 years, with corporate profits rising 43% since the end of 2019.
Where Ip tells us that this is an alarming trend over the last 40 years, Piketty tells us that growth in inequality is the long-term trajectory of the capitalist economy. Both are right.
What is disconcerting is that the victims of this trend, the vast mass of working people, have no voice, no representation, no program to address this inevitable-- if we are to believe Piketty-- consequence of a capitalist system.
What is even more disconcerting is that voices on the left that purport to advocate for working people offer such unimaginative, weak alternatives.
Now Ip only raises the specter of growing inequality to alert ruling circles of the danger that the masses will sharpen their pitchforks and rebel against the privileges of capital. Piketty proposes redistributing wealth through mechanisms-- like taxation-- that the system controls with its most loyal agents. The idea that bourgeois political parties will substantially tax the bourgeoisie is truly fantastic.
Unions-- one of the few remaining mass organizations supporting workers-- offer a poor record of staunching the flow of wealth to capital, even in industries where unions are well represented and strong. And union leaders seldom have any vision beyond that offered by center-left parties.
Sadly, too many of the left’s public intellectuals are mired in side shows: cooperatives as an answer to international monopolies, romanticizing the capitalist order existing before Thatcher and Reagan, or cheering on an abstract “global south” bringing capitalism to its knees.
Others paint a dire picture of wealth being cannibalized by a cabal of rentiers, scorning the Marxist theory of bourgeois and exploited proletariat. This novelty finds currency in the fashionable, but deeply incoherent idea of “technofeudalism.”
Missing from these distractive theories is any understanding of capitalism’s fundamental logic: the contradiction between workers and capital. Oddly enough, a capitalist apologist, a conservative writer, Greg Ip, understands this contradiction all too well in his observations about growing inequality, as does Piketty in his writings.
For many of those offering their thoughts to working people, the working class is inconsequential or decimated by deindustrialization in their relatively small part of the world (typically, English speaking or Eurocentric). As a result, they spin arcane theories of inequality or oppressions. They overlook the reality that there are over a billion and a half workers in Asia alone, most of whom are working under conditions of capitalist exploitation as described by Karl Marx and Frederick Engels. They have forgotten that while industry has shifted globally, while there is a constant change in the global division of labor, the material wealth is still created by working people.
The mobility of production and the division of labor are permanent features of capitalism that have only accelerated in recent decades. New technologies and industries have sprung up, where older technologies and industries migrated to areas of cheaper labor. A country like the United States is hollowing out, with a diminishing manufacturing sector, but a high-value, high-income technology sector at one level and a precarious, lower-income service sector at another level. Workers at all levels in all countries where capital employs labor are exploited by capital.
The lengths to which so many supposed leftists go to ignore or deny the fundamental relationship between workers and capitalists-- the ultimate cause of growing inequalities-- is startling. The dawn of the industrial age gave new meaning to the word “exploitation.” Marx and Engels refined that meaning, giving it a rigorous role at the center of their analysis. And it remains essential to our understanding of the world today.
Workers are exploited.
Reformers seek to blunt exploitation’s sting.
Revolutionaries act to eliminate it.
Greg Godels
zzsblogml@gmail.com
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