Capitalism reconsidered | Business Standard News


Seven years ago the French economist Thomas Piketty released Capital in the Twenty-First Century, a magnum opus on income inequality. Economists already knew and admired Piketty’s scholarly work, and many — myself included — offered the book high praise. Remarkably, the book also became a huge international best seller.


In retrospect, however, what professionals saw in Capital wasn’t the same thing the broader audience saw. Economists already knew about rising income inequality. What excited them was Piketty’s novel hypothesis about the growing importance of disparities in wealth, especially inherited wealth, as opposed to earnings.


But for the book-buying public, the big revelation of Capital was simply the fact of soaring inequality. This perceived revelation made it a book that people who wanted to be well informed felt they had to have.


To have, but maybe not to read. An analysis of Kindle highlights suggested that the typical reader got through only around 26 of its 700 pages. Still, Piketty was undaunted.


His new book, Capital and Ideology, weighs in at more than 1,000 pages. There is nothing necessarily wrong with writing a large book to propound important ideas.


To be fair, the book does advance at least the outline of a grand theory of inequality, which might be described as Marx on his head. In Marxian dogma, a society’s class structure is determined by underlying, impersonal forces, technol­ogy and the modes of production that technology dictates. Piketty, however, sees inequality as a social phenomenon, driven by human institutions. Institutio­nal change, in turn, reflects the ideology that dominates society: “Inequality is neither economic nor technological; it is ideological and political.”

But where does ideology come from? A Piketty argues that history is full of “ruptures” that create “switch points,” when the actions of a few people can cause a lasting change in a society’s trajectory.


To make that case, Piketty provides what amounts to a history of the world viewed through the lens of inequality. The book’s archetypal case study is French society over the past two and a half centuries. But Piketty ranges very far afield, telling us about everything from the composition of modern Swedish corporate boards to the role of Brahmins in the pre-colonial Hindu kingdom of Pudukkottai.


He describes four broad inequality regimes, obviously inspired by French history but, he argues, of more general relevance. First are “ternary” societies divided into functional classes — clergy, nobility and everyone else. Second are “ownership” societies, in which it’s not who you are that matters but what you have legal title to. Then come the social democracies that emerged in the 20th century, which granted considerable power and privilege to workers, ranging from union representation to government-provided social benefits. Finally, there’s the current era of “hypercapitalism,” which is sort of an ownership society on steroids.


Using a combination of extrapolation and guesswork to produce quantitative estimates for eras that predate modern data collection is a Piketty trademark, and it’s a technique he applies extensively here, I’d say to very good effect. But for me, at least, the vast amount of ground it covers raises a couple of awkward questions. The first is whether Piketty is a reliable guide to such a large territory. His book combines history, sociology, political analysis and economic data for dozens of societies. Is he really enough of a polymath to pull that off?






I was struck, for example, by his extensive discussion of the evolution of slavery and serfdom, which made no mention of the classic work of Evsey Domar of MIT, who argued that the more or less simultaneous rise of serfdom in Russia and slavery in the New World were driven by the opening of new land, which made labour scarce and would have led to rising wages in the absence of coercion.


The second question is whether the accumulation of cases actually strengthens Piketty’s core analysis. It wasn’t clear to me that it does.


For Piketty, rising inequality is at root a political phenomenon. The social-democratic framework that made Western societies relatively equal for a couple of generations after World War II, he argues, was dismantled, not out of necessity, but because of the rise of a “neo-proprietarian” ideology. This is a view shared by many, though not all, economists.


But why did policy take a hard-right turn? Piketty places much of the blame on centre-left parties, which, as he notes, increasingly represent highly educated voters. And his clear implication is that social democracy can be revived by refocusing on populist economic policies, and winning back the working class.


Piketty could be right but most political scientists would disagree. In the US, at least, during the Obama years the Affordable Care Act extended health insurance to many disadvantaged voters, while tax rates on top incomes went up substantially. Yet the white working class went heavily for Trump, and stayed Republican in 2018. Maybe the political science consensus is wrong. What I can say with confidence, though, is that until the final 300 pages Capital and Ideology doesn’t do much to make the case for Piketty’s views on modern political economy.


The bottom line: I really wanted to like Capital and Ideology, but have to acknowledge that it’s something of a letdown. There are interesting ideas and analyses scattered through the book, but they get lost in the sheer volume of dubiously related material. In the end, I’m not even sure what the book’s message is. That can’t be a good thing.


CAPITAL AND IDEOLOGY


Author: Thomas Piketty


Publisher: The Belknap Press of Harvard University Press


Translated by: Arthur Goldhammer


Price: $39.95


Pages: 1,093





©2020 The New York Times News Service





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