In the early days of 2020, President Donald Trump couldn’t stop talking about how much the American economy prospered on his watch. Indeed, unemployment levels remained at historic lows, the Dow at dizzying highs. From a certain point of view (that is, from an uncritical one that didn’t question the precariousness of the gig economy, crippling debt loads, racial disparities in the distribution of wealth or whether the stock market even has any bearing at all on the day-to-day economy), we had “never had it so good.” How long ago that all seems now. Naturally, economic booms don’t last forever and the decade-long expansion after the nadir of the 2007-2009 Great Recession needed to wind down at some point.
Yet there’s something about a pandemic-induced economic crash followed by riots and clashes with heavily armed police in most major American cities that feels distinctly apocalyptic. I can’t quite put my finger on why but the past few months have felt particularly epoch shaking. Most Americans alive today have never lived through a truly cataclysmic world-historical economic event - not the Great Recession, not the post-9/11 recession, not Black Monday of the 1980s nor stagflation of the 1970s. Only our seniors aged enough to have survived the Great Depression and the Second World War have comparable memories of living through a period in which things got so bad that policymakers collectively tossed out the economic orthodoxy of the preceding period. For Zoomers, Millennials, Gen-Xers and even our dearly beloved Boomers, now might be the time to learn a little history about how we got here and how we can extract ourselves from our current economic and social downward spiral.
Now, I know it’s tempting for many people to brush aside the study of history when it doesn’t have to do with exciting battles and easy-to-identify heroes and villains. I have a high degree of certainty, therefore, that when I say that one of the most important books of our time is a 1,000 page economic history, your eyes are going to immediately glaze over. I’m going to do my damndest to make sure you don’t mentally check out, however. And I’ll do it by dropping profanity and pop culture references. Like that old Steve Martin SNL skit “A Holiday Wish,” if I had one wish it would be “for all the children of the world to join hands and sing together in the spirit of harmony and peace,” but if I had two wishes, the second would be for everyone to read Thomas Piketty’s books.
Source: Wikimedia Commons
I first developed my man crush on Thomas Piketty in 2014 upon the publication of his sensational Capital in the 21st Century. Piketty wasn’t like the other economists my pro-“Washington consensus” professors required me to read in college. He made “hip” lit references to Jane Austen and Balzac. He didn’t bend over backwards to defend free market dogma. He even made extremely abstruse economic ideas human - critically so, as the economy should serve humans, no? He was like a sexy French Paul Krugman. Thomas Piketty was everything I ever wanted in my life but didn’t realize until that point. For the first time as an adult, I grasped the gravity of the problem of economic inequality having felt unswayed by the antics of protestors in Zuccotti Park in 2011. Like a lovesick puppy, I waited six years for another book from this “rockstar” economist. When I learned that his follow-up, Capital and Ideology, was due out in March 2020, I promptly handed over $30 to Jeff Bezos to assure that I received my copy on the release date like I was ten years old again and awaiting Harry Potter and the Doomspell Tournament. And then like a scene straight out of a formulaic novel, it arrived in the mail the day before I received notice that I needed to quarantine myself at home until further notice and all heretofore normal economic activity began to cease across the United States.
Written and originally published in France in 2019, Capital and Ideology does not explicitly describe the world economy in the age of COVID. Piketty is not clairvoyant and cannot predict the future - but he’s a very astute economic historian, which is the next best thing. He may not have known that a respiratory virus would be the straw that broke the camel’s back, but he certainly knew from studying the history of inequality that a day of economic reckoning would come. As a result, reading Capital and Ideology in the spring of 2020 felt as incredibly “of the moment” as Tiger King memes or senior ladies staning Dr. Fauci.
Because Capital and Ideology builds on and expands so much work already done in Capital in the 21st Century, it’s worth briefly reviewing the main points of that book. Capital in the 21st Century’s central thesis is that r > g. What does r > g mean? It means that for most of the last two centuries of capitalism the rate of return on capital (r) has been greater than economic growth (g). G briefly surpassed r during the 20th Century, due to the disruptions of the two world wars and the Depression, but Piketty contends that this is a period of aberration in the longer history of capitalism and that the last few decades show that we are reverting back to the r > g norm.
Once again, what does that mean? It means that for the vast majority of the global population, which does not receive income from returns on capital but solely from labor (with wages determined by paltry economic growth), it is almost impossible to build wealth by work alone (no matter how hard they work). Add on the fact that governments tax labor at a higher rate than capital and you have a recipe for the concentration of wealth at the very top throughout most of capitalism’s history. Worst of all is the intergenerational nature of such wealth and poverty. Thanks to low rates on inheritance taxes, the wealthy are able to pass on lucrative assets so their heirs can live off the largesse of their forebears while the children of the rest are condemned to a life of relatively fruitless labor.
Where Capital in the 21st Century primarily explains the history behind r > g, Capital and Ideology’s scope is more ambitious. In this new book, Piketty wants us to understand how political and economic systems (or in Piketty’s non-neutral terminology “inequality regimes”) throughout history have been able to justify the levels of inequality that we have all grown to unquestionably accept in the years following the 1980s. Compared to Capital in the 21st Century, whose geographic and historic scope primarily stuck to France, the U.K. and the U.S. since the 1800s, Capital and Ideology is downright panoramic - covering Western and Eastern societies from the feudal age onward. Piketty spends the first half of the book outlining the economic trajectories of all major world regions in a sometimes head-spinning tour de force. When I first started this review, I attempted to write condensed versions of Piketty’s argument for each region and found even that too unwieldy to condense here. Instead, let me broadly outline the contours of modern world history at the highest level according to Thomas Piketty:
The Ternary Age (The Middle Ages-1789)
In this period, nakedly inegalitarian hierarchies structured both European and non-European societies into three classes: scholars (in Europe the clergy, India the Brahmins, China imperial mandarins), warrior-nobility, and everyone else. There were differences of size and privilege for these classes in each society, but the same general pattern emerges globally. Nearly all wealth in the pre-industrial world took the form of land and the first two classes possessed the overwhelming majority of that property. Central state power was weak (even in the large empires of Qing China and Mughal India) and the noble and clerical classes wielded significant economic, military and judicial powers on the lands they owned. Though the French Revolution is the symbolic (and Eurocentric) demarcation of the end of feudalism, the modernization process was already underway in other countries thanks to the development of strong central states that began to wield a monopoly on military and judicial powers.
The late Ternary Age coincided with the beginning of the “Great Divergence” in which European powers came to dominate the once great Asian empires. Although religious, political and economic competition between the small kingdoms of Europe gave the initial kickoff to explore greater parts of the world, the economic basis of the Great Divergence emerged not from the pluck of free market entrepreneurs in the New World, but from wealth extraction enforced by state sanctioned violence towards indigenous peoples and African slaves.
The First Age of Propertarianism (~1789-1914)
The French Revolution, the creation of the modern nation state and the Industrial Revolution all set the stage for Europeans to sacralize the concept of private property during the long 19th century. Enlightenment thinkers laid the intellectual foundations that granted the state a monopoly on legitimate violence but severely restricted its power to alter the so-called natural order of property rights. Many thinkers throughout the long 19th century made Pandora’s Box arguments about there being no end to the amount of social chaos if rulers entertained ideas of even a modicum of wealth redistribution. Because suffrage was largely restricted to property owners during this period, political conflict remained limited between conservative forces still fighting for a restoration of their old feudal privileges and the ascendant liberal-bourgeois order that fought for the unlimited power of capital in this age of industry. This restrictive ideological window perpetuated an age of winner take all capitalism marked by regressive proportional taxes on property, to say nothing of nonexistent taxes on inheritance or income. In both Europe and the United States, during the so-called Belle Epoque/Gilded Age, wealth reached levels of concentration even higher than they are today. It was not until the end of this period, bolstered by the expansion of suffrage, that levels of inequality began to creep slowly down with the creation of modest progressive income and inheritance taxes.
Beyond the borders of the West, Europeans spread their philosophy of sacred property rights to every corner of the globe during the second age of imperialism. This European intellectual export lead to some of the most egregious inequities in world history, as tiny minorities of European colonizers extracted vast amounts of wealth from subjugated peoples and Western military might compelled non-Europeans to pay crippling indemnities to European property owners whenever agrarian reform and other measures of capital redistribution came to pass. Piketty notes the height of absurdity of this colonial propertarian ideology occurred when the French subjected Haiti to a century and a half of debt to pay the former slave owners of Sainte-Dominique restitution for the emancipation Haiti’s slaves had won through bloody rebellion.
The Years of Crisis (~1914-1945)
According to Piketty, the long 19th century’s toxic mix of imperial competition abroad and gross inequities at home made conflicts on the scale of the two World Wars almost inevitable. The crises of the 20th century necessitated the birth of a strong state supported through robust taxation much to the dismay of the owners of private wealth. The First World War inaugurated or increased national financing through progressive income and inheritance taxes in the belligerent nations. Progressive tax rates only increased throughout this period to help finance programs to combat the Great Depression and the Second World War. On top of this, capital destruction thanks to war, revolution and the financial crash reversed the trend toward inequality that dominated the long 19th century. The destruction of these years not only revealed the intellectual bankruptcy of the propretarian ideology but it also gave nations a tabula rasa upon which they could rebuild societies less beholden to these free market orthodoxies.
The Social Democratic Transformation (~1945-1980)
The thirty or so years after the Second World War in the west witnessed a broadly social democratic consensus for an interventionist government that could manage capitalist economies after the war and compete with the Soviet Union. We can quibble about how broadly Piketty defines “social democracy” when I might argue that Keynesianism, not socialism, defined this period, but the point remains that this was a period marked by a new economic orthodoxy that did not worry about coddling the owners of private wealth. This was largely because the dominant interventionist ideology was propped up through electoral support for the French Socialist Party, the U.K. Labour Party and the U.S. Democratic Party. There was democratic legitimacy behind the decisions to nationalize industries in France, to liquidate war debt in West Germany, to create the NHS in Britain or to wage the War on Poverty in the U.S. It was also an age of steeply progressive income taxes on the highest incomes, the aforementioned reversal of r < g (meaning that high taxes do not, in fact, impede economic growth) and acquiescence from the conservative parties (the Gaullists, the CDU, the Tories and the G.O.P.) towards this social democratic orthodoxy. Social democracy at home accompanied decolonization abroad (or in the case of the United States, desegregation at home), a small, but certainly not entirely effective, measure by which the new social democratic order attempted to dismantle other legacies of the prewar inequality regimes.
The New Age of Propertarianism (~1980-Present)
Compared to other accounts of how the social democratic period came to an end, Piketty doesn’t talk much about the typical 1970s crises that heralded the rise of conservative governments around the world. Stagflation, labor strikes, student and civil rights protests, and a general malaise towards big government following the failures of the Great Society and Vietnam are all important milestones to explaining the return of conservatism that don’t make it in Piketty’s book. From Piketty’s point of view, Social Democrats failed to sustain their hold on power because they never moved social democracy beyond the nation-state and chose not to make socialism more participatory. This is to say, that mid 20th century social democracy never did anything to build true international solidarity and devoted entirely too much time worrying about the nationalization of industries instead of creating democratic power sharing between employees and management of firms. This might be the case, but as an explanation for the emotional resonance of the movement that swept Thatcher and Reagan into office, it isn’t enough.
More satisfying is Piketty’s analysis of what these conservative governments did once in power. Emboldened by the apparent failures and eventual collapse of Soviet communism, conservatives in the U.S. and U.K. successfully convinced their voting populations that deregulated markets and lax tax rates were the only game left in town. History had “ended” and there was a clear winner to the dialectical struggle between “Communism” and “Capitalism.” The only problem was that the emboldened hypercapitalism that emerged triumphant from the Cold War was not the same social democratic capitalism that laid the foundation for 40 years of postwar prosperity. In the decades that followed, the “West” of middle class mobility backed by strong labor protections, regulations and redistributive measures began receding further and further into memory and what emerged from the open palm of the Invisible Hand was not all that pretty: stagnant wages, exploding consumer and public debt burdens for the many, big bonuses, multiple properties and the most conspicuous of consumption for the few. By the 2010s the widening gap between rich and poor began to take even uglier forms - accelerated no doubt by the Great Recession - in addictions, overdoses, suicides and the embrace of xenophobic and nationalist hates not seen in the West since the crisis years of the last propetarian age.
Yet none of this mattered one iota to the purveyors of the neopropetarian ideology who’ve spent the last thirty years exporting the gospel of St. Reagan to every corner of the globe (much as 19th century propretarianism spread around the world through European colonial powers). Russia and Eastern Europe underwent brutal market reforms, so-called Shock Therapy, to undo the egalitarian excesses of Communism. In Russia, this hypercapitalist turn reached its apogee by laying the foundation for a tiny number of oligarchs to control the fate of Russia’s mineral wealth. Meanwhile, China’s Communist Party has survived, but only through pursuing market reforms which have simultaneously raised the standard living of millions of Chinese, enriched without seeming limit a small urban elite and breathed new life into once moribund authoritarian political apparatus.
Now that is a lot of history to cover in one book. And this overview neither captures the full geographic scope of Piketty’s ambition, nor does it get into the weeds of the economic data he uses to back this narrative up. Nor still does that historical narrative comprise the whole book. Piketty devotes the other half to exploring in greater detail the transformations of political parties between the social democratic age and today (in short the left wing parties morphed from parties of the uneducated to the educated and vice versa for the right wing parties), the related convergence of educational and monied elites, the trajectory of political conflict in the 21st century (in which four main factions emerged based on their views towards immigration/globalization and redistribution of wealth: internationalist egalitarian [think Berniecrats], internationalist inegalitarian [centrist Democrats], nationalist inegalitarian [establishment Republicans], nationalist egalitarian [alt right]), and finally an extended essay on what policies need to be put into place to combat the socially corrosive disease of unfettered capitalism (including but not limited to more worker participation on the boards of firms, higher rates of progressive taxation, especially of wealth and carbon emissions, more federal legislative unions, especially in Europe, to enforce taxes and prevent capital flight, distribution to all of a national inheritance at age 25, education reform and voucher systems to democratize media and non-profit giving). For some, all this in one volume might come across as bloated as a Tolstoy novel. I, however, found the attempt to write a truly universalistic understanding of the crises of our time to be the only way Piketty could escape criticisms that he is to wedded to the French experience. Much as War and Peace used a novel set in 19th century Russia as a vehicle for a meditation on the nature of history, Capital and Ideology doesn’t want to be an economics tome about Western liberal democracies so much as a philosophical reflection on what makes a “just society.”
Piketty hits his stride (perhaps too briefly given the title of the book) when he explores the ideological scaffolding that props up what in 2020 should objectively appear as a deeply problematic fetishization of unrestricted capital. Like other inequality regimes of the past, the modern neopropertarian one has to use some sort of ideological cover to justify the gross inequities from the economic structuring of society. In the days of feudalism, elites spoke of the “Great Chain of Being” that gave all a place on a divine hierarchy from the Holy Trinity all the way down to the lowly serf. In the 19th century, French and American leaders utilized vague abstractions about “liberty,” “democracy” and “equality” as an ideological palliative to the woes of the industrial revolution. Sure, they said, you are poor but you are poor in the land of the free. Some of those 19th century abstractions come in handy for the ruling class today but Piketty is rightly adamant that the most powerful ideological weapon of the contemporary elite is the myth of meritocracy. Piketty is one of a growing number of commentators who have exposed the idea of modern meritocracy as a pernicious lie.
I say this as an ostensible beneficiary of the middling meritocracy - well educated with a cushy office job with benefits - and as someone who still believes that I could improve my material condition if I gave slightly more fucks about making money by joining the typically well remunerated professions of the elite educated. But millions of people in this rich country alone have not been so fortunate as I and don’t even have the opportunity to reject lucrative careers in banking, consulting, or the law - even after taking out large student loans to finance higher education. On top of low pay for uninspiring, menial or contingent work, they are told all the while by society at large that they are losers for their place in life. If they have material wants that extend beyond the poverty line, they are simply commanded to work harder. Of course, this is only speaking of the pre-COVID era. We now honor our essential worker “heroes” ;)
Yet commanding everyone to “rise and grind” and “get this bread” to get ahead in life is surely something of a cruel farce if you acknowledge the aforementioned fact that r > g. It doesn’t matter how much you “grind” if you lack capital and the only asset you have to sell is your labor. Money will inevitably flow up to the top like in a game of Monopoly. Furthermore, the so-called paragons of this meritocratic age, your Jeffs Bezos, your Bills Gates, your Marks Zuckerbergs, built their fortunes on the backs of decades of publicly funded research, education and infrastructure and a tax system that favors capital. These titans of industry had to work hard to a certain extent, no doubt, but they are beneficiaries of publicly pooled resources and now most of the bread they get comes from the return on their investments and not from grinding with their workers on the floors of their warehouses, cube farms or data centers.
Piketty is trying to help us understand why we put up with this woefully unequal state of affairs. Thinking critically about ideology helps us get past simple campaign catchphrases about “Makers and Takers” or “For us, not the billionaires.” Ideology, in traditional Marxist thought, is sometimes described like a sort of colorless, odorless gas that we live our lives entirely submerged in, imperceptibly impacting how we view everything in the world. The meritocracy myth is not just propagated by politicians and titans of industry but in television shows, movies, music, fashion, our families, and the education system itself. These last two areas were decidedly important to my own inculcation of the meritocratic ideal. Despite what I’ve said here about meritocracy, I grew up believing certain things about working hard and being rewarded for going to the “right schools” or doing the “right activities” that are hard to shake. Sometimes I still hear a voice put in my head by my upbringing that says “You worked hard to get where you are. You did well in school and rose through the system. You have proved you are smart and deserve special things in life” before reminding myself that so much of these outcomes come from pure chance of birth. I still struggle with the most quintessential of all these ideological dilemmas: refusing to call myself a socialist even though my values are by global standards certainly social democratic.
Looking beyond the ideological milieu into which we are born is not an easy thing to do. But we can’t ever hope to escape from our current mess as long as we’re unaware of the ways neopropetarian ideology colors all our value judgments. This, more than the handy dandy graphs and charts Piketty includes, is the most helpful tool this book gives to readers who are largely unfamiliar with the history of capitalism. We have been living in an age when the dominant ideology encourages a certain historical amnesia because to be fully aware of the past can guide us to legitimate alternatives to contemporary hypercapitalism. Social democracy isn’t some sophomore’s dorm room fantasy - it actually existed and worked comparatively well for three decades in the nations of the West. Of course, comparatively is a loaded term. Compared to the quality of life enjoyed by the top decile of wage earners in the West today, it would have been worse because back then it would have been laughably pointless to have salaries 30x the average when top tax rates were set at 60, 70 or 80%, as they were throughout most of these years. Piketty is therefore the perfect antidote to the often cringy wannabe revolutionary who talks a big game about how the whole system needs to be overthrown but offers absolutely no concrete policy suggestions to enact redistributive change. Piketty is nothing but concrete policy suggestions and is outright dismissive of these ineffective leftists in the book. The way forward is not through violent revolutionary action but through expanding our ideological frame of reference to reject the meritocracy myth through expanding educational opportunities, encouraging greater democratic participation, voting out individuals who refuse to abandon the proprietarian ideology, and using the apparatuses of legal power to make changes to tax codes and finance new social programs.
Many will no doubt find this answer unsatisfying - especially in light of the upheavals caused by the COVID lockdowns and the George Floyd protests. These are immediate crises and the solutions Piketty calls for involve much longer time horizons for deliberation and implementation. Yet the sad truth is that no one knows how much time it will take before our capitalist economies return to the same level of prosperity they were at even a few months ago. But no matter how long these crises drag on, the power of the propretarian ideology will weigh strongly on a significant chunk of voting populations who are willing to grind and wait it out until we get things “back to normal.” Humans are resilient and are willing to tolerate immiseration for periods longer than one would want to believe. Why? Because of ideology. History shows us that it took a 30 year crisis of intermittent warfare, genocide and economic devastation to exorcise the demon of unfettered capitalism from the west and replace it with an ideology of redistribution and solidarity. Yet unlike our grandparents who endured three decades of crises blind, we have historical knowledge to aid us in the creation of a better world. By studying the rise and fall of capitalist ideology, Piketty has prophesied what can come again. If we all equip ourselves with the historical knowledge so masterfully articulated in Capital and Ideology to move beyond the ideological follies of the past, we might still hope for a new age of social solidarity very soon indeed. Or we’ll just let Jeff Bezos become a trillionaire, who the heck knows.
Note: All images are in the public domain unless otherwise attributed
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