Reviewed by Hans G. Despain in Marx & Philosophy Review of Books
Capital in the Twenty-First Century
The Belknap Press of Harvard University Press, Cambridge MA, 2014. 696pp., $39.95 / £29.95 hb
About the reviewer
Hans G Despain
Hans G Despain is Professor of Economics and Department Chair at Nichols College, Massachusetts. He encourages your correspondence: email@example.com
Capital in the Twenty-First Century is a most impressive book that deserves great attention. Piketty insists that social scientists generally, and economists in particular, must confront and examine “facts” (574-5). This is what he sets out to do in his momentous nearly 700 page text.
The title suggests the book may be offering homage to Marx’s nineteenth-century Capital. Let us be clear from the beginning it is not. Nonetheless, this book will be appreciated by Marxian political economists, while at the same time a frustratingly theoretical disappointment.
Piketty’s book is nothing short of revolutionary in establishing flows of income over time. He establishes that there is a tendency toward the hyperconcentration of wealth, and the rise of a new “supermanagerial” class (315-21). Piketty leaves no doubt that it is class that matters and structural “class warfare” predominates in twenty-first century capitalism (246). Crucial to Piketty’s studies of capitalism is that there exist no economic laws determining distribution of income and wealth (274, 292-4, 361-4). This is an enormously important point, and a return to classical political economy with a vengeance, especially to Marx whereby distribution is a function of series of institutional power relations, rooted in production relations. These summaries will surely, and should, excite Marxian social theorists. However, Piketty’s definition of capital as a financial measure of physical equipment, money, financial assets, land, and other valuables will discourage Marxian social theorists. I will come back to these crucial points.
The primary problem with the book is an underdeveloped social theory and normative philosophy. Consequently, Piketty’s policy recommendations are impressively anemic and aimed at perpetuating exploitation of the economically vulnerable populations. In the end Piketty wants to take the ‘hyper’ out of hyperexploitation and reestablish good old-fashion exploitation with higher minimum wages, taxes on capital, progressive income tax, and limits on inheritance.
With emphasis, Piketty defends the strengthening of the “social state” or the historical development of public education, healthcare, social security, unemployment compensation, and income support for the poor (471-92). Moreover, he maintains that deficits are not bad in-and-of-themselves, but must be spent wisely and should not be paid for with fiscal “austerity” but by means of central-bank-generated-inflation and/or a tax on capital (540-70). This defense of the “social state” and federal deficit pushs Piketty into the area of (political) philosophy, social ethics, and morality. Piketty is well-aware of this (479-81). He recognizes that the so-called “science of economics” is more accurately political economy that generates enormous normative philosophical implications (574).
This gets well ahead of our story and the details of Piketty’s book. The essence of the book is remarkably straight forward and is intended for a popular audience. Piketty brilliantly succeeds on this account and should be duly praised. The essential argument is that capitalistic economic growth inevitably slows. As the rate of economic growth diminishes, the past accumulated “capital”/wealth gains in importance (233), and indeed allows past wealth “to devour the future” (378). Piketty calls this a “fundamental law of capitalism” (166).
This fundamental law of capitalism means that the “return on capital” (r) is greater than the economic growth (g): r > g. As a prosperous and industrialized capitalist economy begins to stagnate, past wealth becomes more important and powerful and inequality begins to increase rapidly (572). Thus, one of Piketty’s main goals “is to understand the conditions under which such concentrated wealth can emerge, persist, vanish, and perhaps reappear” (262).
According to Piketty, the primary mechanism (25) causing inequality is the fact that the rate of return on capital is 3 to 5 times greater than the rate of growth (233). Thus, the structural tendency of capitalism toward stagnation and 4-5% rate of return on capital means that markets and competition do not reduce inequality (370). It is in this sense that there is a “logic of accumulation,” based on the divergence between the rate of return on capital and economic growth (22-7), that accounts for the very high concentration of wealth throughout capitalist history (377).
The Daily Mirror today returned to its radical, campaigning best, with a front-page lead report by Kevin McGuire on slave labour in Qatar. To the best of my knowledge, it’s the first time a British tabloid has raised the issue of the murderous conditions of migrant workers in Qatar as the Emirate prepares for the 2022 World Cup (though Nick Cohen has written some excellent pieces for the Observer).
The Mirror‘s report:
Qatar is accused of working 1,200 people to death in its £39billion building bonanza for the 2022 World Cup.
An investigation by the Mirror into the oil-rich Emirate revealed horrific and deadly exploitation of migrant workers, who are forced to live in squalor, drink salt water and get paid just 57p an hour.
Campaigners fear the death toll could reach 4,000 before the Finals kick off. One worker told us: “We are treated like slaves and our deaths are cheap.”
FIFA faces renewed pressure to show Qatar a World Cup red card following the exposure of mass deaths and vile exploitation of construction workers in the region.
A team of British trade union leaders and MPs warned that the 2022 tournament is being built “on the blood and misery of an army of slave labour”, after uncovering appalling abuse during a visit to the Gulf monarchy.
Qatar is accused of working 1,200 migrants to death since being awarded the World Cup in 2010 and campaigners have insisted the shocking death toll could reach 4,000 before a ball is even kicked in the Finals.
On a mission organised by Geneva-based Building and Woodworkers’ International, a global federation of construction unions, I witnessed and heard distressing evidence of systematic mistreatment on an industrial scale. Sneaking into squalid labour camp slums under the cover of darkness, frightened workers lured to Qatar with false promises of high salaries complained of persecution.
One Nepalese carpenter, paid the equivalent of just 95p an hour, said: “We’re treated like slaves. They don’t see us as human and our deaths are cheap. They have our passports so we cannot go home. We are trapped.”
Following Michael Gove’s bizarre article in the Mail, attacking ‘Blackadder’ and ‘Oh What A Lovely War’ (and then fellow Tory Max Hastings’ equally fatuous follow-up), I thought it might be an idea to check up on what a proper historian has to say about the First World War. Here’s the late James Joll (Emeritus Professor of the University of London and a Fellow of the British Academy), in his 1973 book Europe Since 1870:
Any single explanation for the outbreak of war is likely to be too simple. While in the final crisis of July 1914 the German government acted in a way that made war more likely, the enthusiasm with which war was greeted by large sections of opinion in all the belligerent countries and the assumption by each of the governments concerned that their vital national interests were at stake were the result of an accumulation of factors — intellectual, social, economic, and even psychological, as well as political and diplomatic — which all contributed to the situation in 1914 and which can be illustrated in the events of the last weeks before the outbreak of war.
While some people have argued — and it was a popular view in the period between the wars — that the war was the result of the ‘old diplomacy’ and of an alliance system based on secret agreements, others, and especially some of the leading German historians since the Second World War, have seen in the war a half-conscious or in some cases deliberate attempt by governments to distract attention from insoluble domestic problems by means of an active foreign policy and an appeal to national solidarity at a time of war. For Marxists the war was inherent in the nature of capitalism; the forces which drove states to expand overseas were in this view leading inevitably to a clash in which the great international cartels would no longer be able to agree on a peaceful division of the under-developed world and would force governments into war for their own economic interests. Other writers have concentrated attention on the implications of strategic decisions and on the influence of for example the naval rivalry between Germany and Britain in creating international tension, or on the effects of the German decision finally taken in 1907 that, in order to defeat the French army before turning to fight the Russians on the Eastern Front, it would be necessary to violate the neutrality of Belgium, and thus run the risk of bringing Britain into the war as a guarantor of Belgian neutrality under the treaty of 1839
If we try to account for the widespread optimism and enthusiasm with which the war was initially greeted by many people in all the belligerent countries, we have to look at many of the factors described in the preceding chapters — the belief that the doctrine of the survival of the fittest could be applied to international relations, so that war seemed to be the supreme test of a nation’s right to survive; the belief, stemming from Nietzsche, that only by a supreme shock and effort could the limitations of bourgeois life be transcended and its essence transmuted into something nobler. Or again, even if the governments of Europe did not deliberately envisage war as a way out of their internal political difficulties, the fact remains that war briefly produced a sense of national solidarity in which bitter political quarrels were forgotten: Irish Catholics and Ulster Protestants could agree to shelve their differences ‘for the duration’, as the phrase went; right-wing Catholics and socialist free-thinkers who had not spoken for years shook hands with each other in the French Chamber of Deputies, and the Kaiser gave a warm greeting to a gentleman whom he mistakenly supposed to be the Social Democratic leader Scheidemann. In Germany in particular the war seemed to create a new sense of solidarity, of belonging to a Volsgemeinschaft such as a generation of social critics had been longing for, a national community in which class antagonisms were transcended and in which the Germans felt rightly or wrongly a sense of mission and of purpose which had been lacking since the 1860s and early 1870s.
But perhaps in addition to the illusion that the war would be a short one, the illusion which received the most bitter blow, even though it was to be revived hopefully by President Wilson in 1918, was the belief that international relations could be conducted on a rational basis in which the interests of the various nations could be made to harmonise with each other without the need for armed conflict. It was this illusion that had governed Grey’s diplomacy and his attempt to mediate between the continental powers in the last days of July 1914; and it was a similar belief that inspired the leaders of the Second International when they came to Brussels in the hope of finding a way to demonstrate that the international solidarity of the European working class was stronger than the division between their capitalist rulers. The ideological assumptions on which European liberalism had rested were already breaking down before 1914. The war was going to hasten this process in the field of practical politics and everyday social and economic life. The war destroyed the political, economic, social and territorial structure of the old Europe and neither conservatism nor liberalism nor even socialism were ever going to be the same again. From the standpoint of sixty years later there is all too much truth in the prophesy made by Jean Jaures in 1905: ‘From a European war a revolution may spring up and the ruling classes would do well to think of this. But it may also result, over a long period, in crises of counter-revolution, of furious reaction, of exasperated nationalism, of stifling dictatorships, of monstrous militarism, a long chain of retrograde violence.’
I have little doubt that I shall be returning to James Joll from time to time throughout the coming year: in the meanwhile I recommend Europe Since 1870 (from which the excerpts quoted above were taken) and his The Origins of the First World War (1984, with Gordon Martel). I doubt that Michael Gove will want to read anything so objective, scholarly and challenging.
Comrade Coatesy: ‘Daily Mail Attacks My Granddad.’
“The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilisation. The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, i.e; to become bourgeois themselves. In one word, it creates a world after its own image” – Marx and Engels, Communist Manifesto, 1848.
Nothing must stand in the way of Osborne’s “personal mission” to make London a Chinese offshore banking centre and a global renminbi hub.
The Torygraph‘s Michael Deacon gives a pretty fair account of Osborne’s grovelling:
“Long gone, thankfully,” said George Osborne, “are the days when Western politicians turned up here and simply demanded that China open up its economy to Western economies.”
He’s right. Our politicians no longer demand.
The Chancellor’s speech at Peking University, on the first of his five days in China, was almost magnificently obsequious. Lavishly he praised “your great country”, “the depth and sophistication of the Chinese culture”, “the value you place on consistency and stability and on friendship”, and “your Vice Premier Ma Kai, whose reputation for economic reform and diligence impresses all”.
According to his script, available on the Government website, Mr Osborne is delighted that Britain and China have grown more “complimentary”. At first I thought he meant complementary, but on second thoughts I suspect not.
Normally when Mr Osborne encounters something he considers Left-wing – for example, Ed Miliband’s idea to freeze energy bills – he derides it. For some reason however his speech today contained no jokes at the expense of China’s ruling Communist Party. Perhaps he’s saving up those jokes for later in the trip. Although if he does tell them, he may find that the local authorities generously extend his visit. By, say, three or four decades.
Britain, gushed the Chancellor, would be only too delighted to welcome lots of lovely Chinese investment. We couldn’t get enough of the stuff. Not like those rotten Europeans, who “find all sorts of ways of making clear that Chinese investment is not welcome” – heavens, no, don’t invest in their snooty little countries! Invest in Britain! Do come in, sirs! May we take your coats, sirs? And may we recommend a bottle of the Chateau Margaux? On the house, sirs, of course!
His audience was largely made up of students. It was, he gurgled, “an honour” to be among them, “the students who are going to shape the future of the world”. Students who would make advances in technology, build new businesses, create jobs around the world – but more than that. “You,” said Mr Osborne, almost sighing with admiration, “are the students of today who will write the poems of tomorrow.”
And with any luck, they’ll come and open a vast new poem factory in Britain, employing thousands of British youths to mass-produce state-of-the-art villanelles at competitive prices…
Or, to put it another way:
“All that is solid melts into air, all that is holy is profaned, and man is at least compelled to face with sober senses, his real conditions of life, and his relations with his kind.”
Above: from the Financial Times
“As a result of the speech, I believe that perceptions of Labour policy are in danger of being taken backwards. At the business department I tried to move on from the conventional choice in industrial policy between state control and laissez-faire. The industrial activism I developed showed that intervention in the economy – government doing some of the pump priming of important markets, sectors and technologies – was a sensible approach” – Peter Mandelson
Above: puppet of big business
It was, of course, inevitable that Ed Miliband’s modest proposal to freeze energy prices for 20 months would induce howls of outrage from the big six energy profiteers and their mouthpieces – one of whom performed exactly the same service for the banks not so long ago.
Scare stories about the lights going out, and thinly-veiled threats of an investment strike, were entirely predictable from the energy giants, the City, the right-wing media and the Tories.
But doesn’t poor Miliband have the right to expect at least a discreet silence from people who – on paper at least – are in the Labour Party? Obviously not. Loathsome Lord Mandelsnake has emerged from the woodwork to denounce the plan and accuse Miliband of going “backwards” – by which the Snake presumably means being slightly less craven towards big business than he and his boss Mr Blair were when they were in government.
Actually, Miliband’s proposals are pretty weak: what he aught to be promising (especially now in the face of the blackout and investment strike blackmail) is simply to renationalise all power generation and distribution.
And Miliband needs to understand that there is a group of unreconstructed Blairites like Mandelsnake, organised by the ‘Progress‘ outfit, who are absolutely determined to thwart even the slightest suggestion of a leftward shift in Labour policy and don’t give a damn if the Party loses the next election.
If this is true it should be more widely publicised:
Profit behind Galician train crash?
From the Basque newspaper Gara:
The disaster took place on a curve where a new high speed rail line was connected to a slow one – to save money. Drivers were supposed to slow from 220 km to 80 km. There was nearly an accident during the inauguration run.
There was no automatic braking system -to save money… Drivers had to be punctual to avoid passengers claiming compensation (and save money.) The accident train was running late.
…But of course, it’ll be the driver who carries the can.