Reading Thomas Piketty: A Critical Essay


by Zoltan Zigedy

I should perhaps add that I experienced the American dream at the age of twenty-two, when I was hired by a university near Boston just after finishing my doctorate… Here was a country that knew how to attract immigrants when it wanted to! Yet I also realized quite soon that I wanted to return to France and Europe… One important reason for my choice has a direct bearing on this book: I did not find the work of US economists entirely convincing… To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in. — Capital in the Twenty-first Century, Thomas Piketty (p31-32).

Thomas Piketty’s newly released book in English, Capital in the Twenty-first Century, has stirred more interest in economic questions—or as he might prefer, political economy—than any book in decades, certainly since the Reagan/Thatcher turn away from Keynesian orthodoxy. Polemicists of every political stripe, professional economists, academics, editorial writers, and many other opinion-shapers have commented on the merits of the views of the youthful professor at France’s Paris School of Economics. Though assessments differ widely, nearly all commentators agree on the almost breathtaking scope of the book, while recognizing the challenge it poses to conventional economic thinking.

And indeed it is a challenging book, drawing upon an unprecedented mine of historical data. Piketty builds an explanatory edifice on this foundation, purporting to provide a fresh and well-grounded understanding of trends in global income and wealth inequality over hundreds of years. From this theory of inequality, he constructs a political program designed to address inequality and its consequences. Thus, Capital is an ambitious effort of statistical research, historical interpretation, and political theory. Does Piketty succeed in this titanic project? Yes and no.

He is surely an unparalleled assembler and organizer of historical economic data, related, but not limited to income and wealth inequality. Grateful researchers will be sifting through the assemblage of useful charts, graphs, and data for years to come. As an interpreter of the data, as a theorist matching evident economic trends with their causes and contexts, he is insightful, often provocative, but less satisfying and too often off the mark.

And Piketty fails rather embarrassingly as a political theorist, lacking both imagination and political sophistication.


Piketty and Bourgeois Economics

As the preamble to this article indicates, Piketty has strong, openly expressed reservations about the profession and discipline of economics, particularly as it is practiced in the English-speaking world. Like his book’s distant, but conscious namesake, Karl Marx’s Capital, the new book is “A Critique of Political Economy.” Not, in this case, the political economy of Smith, Malthus, and Ricardo, but the economics of Kuznets, Arrow, Solow, and their ilk. He is not afraid to challenge mainstream economists for their class bias, noting the personal stake associated with their often impressive incomes. Perhaps it is not surprising that prominent commentators among Piketty’s peers have yet to challenge this criticism or others aimed at their method.

Apart from class bias, Piketty’s book scores contemporary bourgeois economics for its irrelevance: “…these methods rely on an immoderate use of mathematical models, which are frequently no more than an excuse for occupying the terrain and masking the vacuity of the content… The new methods often lead to a neglect of history and of the fact that historical experience remains our principal source of knowledge.” (p574-575)

By rejecting this failing, Piketty shares a method common to Marx and Marxism. The lessons of history are fundamental to the Marxian approach, informing theory and shaping the laws of social motion. While Marx certainly lacked the historical data and the computing power available to Piketty, his long, painful hours in the British Museum gave him both the best data and historical research available in his time. Piketty, in a footnote (p580), only grudgingly concedes Marx’s determined effort to tie facts to theory.

Obsession with mathematical models and the austere axioms of individualism, rationality, self-interest, and calculated choice have emerged with ever growing dominance since, and perhaps because of, the onset of the Cold War. At the same time, as Piketty points out, interest in historical trends diminished. And when attended, the studied trends were misleadingly short in duration, spanning a few decades at best. Underlying the neglect of longer term trends was an unjustified confidence in stability and contempt for discreet social change. An unfortunately neglected book by S. M. Amadae (Rationalizing Capitalist Democracy: The Cold War Origins of Rational Choice Liberalism, University of Chicago: 2003) credibly questions the objectivity and adequacy of the turn to rational choice theory. And now Piketty does the same for the retreat from historical study.


Piketty and Marx

Piketty’s book reflects the author’s ambivalent view of Marxism. Clearly, the title alone exhibits a certain affinity for Marx’s most iconic work. We find homage in Piketty’s discussion of accumulation and also the exposition of the reproduction of inequality and its foretelling in Marx’s Falling Rate of Profit thesis. At the same time, there is hostility toward the course that Marxism has taken. Piketty sees Marxism as a failed project, dashed by its embrace of central planning and rejection of market mechanisms.

On the penultimate page of his book, Piketty makes a curious and puzzling comment: “The clash of communism and capitalism sterilized rather than stimulated research on capital and inequality by historians, economists, and even philosophers.” (p576) He continues in a footnote to this passage: “When one reads philosophers such as Jean-Paul Sartre, Louis Althusser, and Alain Badiou on their Marxist/communist commitments, one sometimes has the impression that questions of capital and class inequality are of only moderate interest to them and serve mainly as a pretext for jousts of a different nature entirely.” (p655)

Unfortunately, the claim of “sterility” betrays a lack of familiarity with authentic Marxist literature. In Communist Party literature as well as academic studies emanating from the former European socialist countries, the issues surrounding class inequality and capital were commonplace and in the forefront. Likewise, Western Marxists from Dobb through Sweezy attended seriously to matters of capital and class; Rochester and Perlo studied the concentration of capital. Admittedly, none demonstrated the command of such a vast trove of data as do Piketty and his colleagues. Credit Piketty for innovation and dogged determination in this task. Surely Marxists share more of the spirit and even conclusions of Piketty and his collaborators than do their bourgeois economist counterparts.


One suspects that Piketty’s academic exposure to such “Marxists” as Sartre, Althusser, and Badiou accounts for his misconceptions as well as his dismissal of Marxism. They have as little to do with the Marxist tradition as does the school of “analytical Marxism” spawned by disciples of Kenneth Arrow and Isaiah Berlin (though unlike the French theorists, Analytical Marxists do somewhat address capital, class, and inequality).

On occasion, Piketty notes his lack of data, study, and analysis of the former Soviet Union (or its successor) or Eastern Europe. It is a pity that he does not sift through the abundant data available today. It is difficult to imagine how one can draw conclusions about global aggregates, about global income and wealth inequalities and capital accumulation without including consideration of an economy that was once largely removed from capitalist socio-economic relations (and once the second largest economy in the world)—an economy dispersed by political chaos and for the last two and a half decades, returned to the world capitalist system. Do not events of such magnitude significantly affect the eras that importantly come under Piketty’s scrutiny?

Moreover, he makes no comparison of the consequences for wealth and income equality of the two rival socio-economic systems dominating the twentieth century. Surely something could be learned from contrasting the levels of equality and inequality in two radically different economies and foraging for the causes of those differences. To simply ignore real existing socialism seems intellectually indefensible. Piketty is entitled to refrain from advocating for it, but not to deny socialism’s actual existence. Indeed, I am certain that its presence had much impact on the course of inequality in the last century, a key factor relevant to the development of Piketty’s major thesis.


The Source of Inequality

Apologists for the inequalities of wealth and income that have accompanied capitalism since its birth have argued that inequality springs from an unequal distribution of talent, determination, or opportunity. They contend that individual capacities (talents) and will-power (determination) are largely products of nature and outside the scope of social intervention. Society can only guarantee equality of opportunity. Thus, a just society is simply one that removes all obstacles to expressing the diverse talents and resoluteness present among its citizens. With the roadblocks removed, inequalities may arise, but they reflect nothing more than the unequal distribution of personal attributes. Gifted, driven people earn more money and accumulate more wealth.

Slow witted people with little motivation make less money and acquire less wealth. While this may be unfortunate, it is neither a matter of injustice nor a consequence of the capitalist economic system. Where opportunity is denied (segregation, anti-union laws, male supremacy), defenders advocate that barriers must be removed. Where capitalism runs-off its rails, supporters advocate regulation. And where natural endowments (and natural shortcomings) produce obscene inequalities or extreme poverty, proponents of capitalism advocate charity or an adequate social safety net. The opportunities necessary for a just capitalism are thought to be guaranteed by an ever expanding basket of human rights.

If this explanation of inequality were correct, one would expect something like the classic bell-shaped curve to capture the wealth/income distribution in mature capitalist societies. Like the distribution of test scores purporting to measure intelligence and the distribution of other human assets apparently gifted by nature, wealth/income would be expected to cluster in the middle, with extremes of inequality tailing-off away from the center. Thus, incomes and wealth would be distributed in a way roughly isomorphic with the random distribution of talents and personal characteristics (always with the caveat that opportunities are reasonably equal).


Such a picture would have the happy consequence—for the advocate of capitalism—of demonstrating that inequality was, for the most part, independent of the operation of the market and the influence of the profit motive.

On the other hand, suppose inequality is genetically linked to capitalism or, more generally, to class-based societies. Suppose that mechanisms embedded in capitalism continuously produce and reproduce inequality. If such were the case, extremes of wealth and income inequality would likely be the norm while periods of relative equality or the convergence of income and wealth would be the exception. If such a theory of inequality were true, we would likely find that wealth and income largely bunched at one end of the distribution curve while tailing-off rapidly, leaving little distributed to those at the other end, the “poor” end.

Such a distribution—sustained and exaggerated over a long period of time—would strongly suggest that inequality is not the result of differential natural assets, but some other factor. Of course locating the source of inequality in the structure of capitalism is only raised here as a supposition. A more careful historical survey and analysis would be needed to demonstrate (1) that inequality is a systemic product and not merely the result of differential nature-given assets and (2) that something in the dynamics of a capitalist system actually generates inequality.

This is where Piketty joins the conversation.


Unlocking the Mystery

Piketty’s argument stands upon two legs: (1) an empirical finding from the long-term study of trends in inequality and (2) a simple model offered to explain the trajectory demonstrated by the empirical study. Taken together, they constitute a challenge to a fundamental tenet of contemporary capitalist ideology: the strongly held belief that capitalism is, at worst, unconnected to producing and reproducing inequalities or, at best, a positive force combating inequality. That is to say that the Piketty findings support the supposition that inequality is a part of capitalism’s DNA.

By diligently and thoroughly compiling data from as early as the eighteenth century (Gregory King pioneered the modern survey of income and wealth data with his study of England dating from the late seventeenth century), Piketty arrives at the conclusion that inequality and its tendency to grow are constants of economic life for most of the last four hundred years. Indeed, the exception is only the period extending from sometime in the second decade of the twentieth century to roughly mid-century—a period of perhaps only thirty or more years when income and wealth inequality actually and demonstrably subsided in several of the larger economies. (In most countries, equality/inequality remained stable for twenty or thirty more years before returning to an upward path).

Piketty’s results fly in the face of conventional wisdom. Most economists and political theorists see economic growth as a driving force for equality, a force captured metaphorically by the popular bromide that “a rising tide lifts all boats.” In this view, embraced today by both liberals and conservatives, economic growth tends to improve the lot of all, while admittedly some may benefit more or at a faster pace than others. Piketty associates this stance with two influential economists, Simon Kuznets and Robert Solow, though certainly this conjecture is even more deeply and widely embedded in Western thought. That is not to say that economists and other social theorists find no need for redistribution of assets for “correcting” inequalities; they often do.


Rather, the assumption, pre-Piketty, was that extreme, corrosive inequality was the exception and not the norm. Piketty’s findings belie that assumption. Henceforth—presuming Piketty is right—social scientists must scramble to explain when inequality is receding and not when it is on the rise, the now apparent status quo. Expanding inequality is the historical commonplace; shrinking inequality is the historical aberration. Perhaps nothing underscores this point more dramatically than Piketty’s assertion that at no significant time in recorded history has the bottom half of any society’s population claimed more than 5% of that society’s wealth (again, this dramatic fact does not include research on the former Soviet Union which Piketty and his associates willfully ignore).

The importance of this empirical finding should not be underestimated. The historical tendency for income and wealth inequality to grow cannot be easily dismissed as deviant or uncommon. Rather, it appears to be systemic to the capitalist system (or class-based economic orders, if the tendency, in fact, precedes capitalism). Of course its correlation with class-based economies does not prove that inequality is in capitalism’s genes, only that there is a prima facie plausibility that the cause lies within the structure of capitalism. Conversely, historical evidence does fail to support the view that economic growth alone will rescue an economy from expanding inequality: the conventional dogma.

Understandably, Piketty searches for the causes of the long-term tendency toward inequality. He believes that he finds it in the straightforward, direct relationship between growth and the rate of return on capital. Of course his discussion of this relationship is rich and nuanced as well as mediated by other concepts like the capital/income ratio and savings rate. But in the end, Piketty defends a commendably clear, elegant relationship that purports to capture the fundamental cause of rising inequality: the rate of return on capital exceeding the growth rate. Intuitively, if holders of capital achieve a gain on their holdings at a greater rate than the entire economy generates wealth, then capital holders will gain against all others. Depending on the mass of capital, the difference between the two rates, and the duration of this inequality, relative inequality will grow accordingly.


Is this argument sound? Does the relationship between return on investment and aggregate growth determine inequality? Does the relationship correspond to the historic trend in inequality?

Piketty’s historical data suggests that there is indeed a strong correlation between rising inequality and a rate of return on capital superior to the rate of growth. Moreover, he argues plausibly that a stagnant or declining rate of economic growth is associated with mature capitalist economies, thus ensuring that even a modest rate of return negatively impacts equality.

Thus, Piketty builds the case for the view that inequality is systemic to capitalism (though he would likely dissociate himself from any anti-capitalist conclusions that we might draw). Left to its own devices, capitalism does produce and reproduce inequality, a result revealed by an examination of its long-term trajectory. While this may be, and should be, a startling outcome for apologists for capitalism, it comes as no surprise to Marxists. Indeed, it is welcome support for the long-held view that class exploitation is the persistent, fundamental source of economic inequality. Thanks to Piketty’s careful research, the Marxist thesis is on much firmer empirical ground.


The Exception to the Rule: “Shocks,” War, Crises, and other “Externalities”

While Piketty makes a convincing case for inequality as an intrinsic, long-term consequence of capital accumulation, he must account for the seemingly anomalous shifts toward egalitarian distribution occurring in the early twentieth century and enduring past the mid-century (remembering, of course, that convergence could be expressed by lost wealth or income at the top and/or gains at the bottom). While details vary from country to country, Piketty makes note of the consistent U-shaped curves of inequality’s diminution and return in the last century. At some time in the first decades, inequality slipped from its Belle Epoque high, only to return to the same extremes late in the twentieth century, the period associated with the neoliberal turn.

Before Piketty, the twentieth-century moderation of inequality was generally thought to arrive through the populist rise of the welfare state—a political initiative; the return of extreme inequality was credited to the political “counter-revolution” of Reaganism and Thatcherism on an international scale. This simplistic view, common to conservatives, liberals and the non-Marxist left, boasted no strong evidential base or theoretical sophistication. However, it did prove to be a handy myth in shaping the political debates, both in the US and within each of its Cold War allies.

For Piketty, this is not an adequate explanation. Inequality arises systemically; it is the most powerful distributional trend in the world’s economies. To counter that inherent trend, powerful “shocks”—external to the normal operation of the system—must have disrupted the tendency toward inequality. He locates these shocks in the two great wars of the twentieth century and the Great Depression. No doubt the destruction of assets associated with war and with a global downturn of unprecedented depth sandwiched between the two catastrophes severely disrupted patterns of accumulation as well as distribution trends (perhaps rendering them somewhat incoherent, rather than exceptional).


This may well be part of the story, perhaps even a big part of the explanation. However, it is surely not an adequate explanation, nor the whole story. At this juncture, Piketty’s historical myopia clouds the answer.

Wars destroy assets at an extraordinary pace, but assets are rapidly replenished at an equally furious pace. Most of the contested assets are nominally owned by the belligerent governments. Their replenishment is funded through taxes and bonds. Economic activity is necessarily high. Employment is high with hyper-domestic employment (employment of those not customarily in the work force) and extremely high costs associated with the “labor” of military personnel (training, transportation, provisions, care, uniforms, equipment, weapons, etc.). All these factors have often varied, swiftly changing effects upon the levels of wealth and income inequality and how they should be understood. Much depends on conscious political decisions. Under conditions of war, governments adopt central planning, with markets overridden by decisions calculated by necessity (Piketty does not discuss military spending in war and peace and its impact upon public debt and private capital).

After a war, countries can return to reconstruction-driven growth (Germany after the Marshall Plan) or wallow in debt and inflation (Germany after the Armistice). In other words, there is no obvious systemic connection between war and its aftermath and changes in inequality.

In fact, one of the great systemic shocks to the global capitalist system is nearly lost on Piketty: the shearing away of the Russian empire after the First World War. With one exception, albeit of great importance, Piketty fails to explore the impact of the Bolshevik revolution on global inequality. He concedes, regarding the genesis of progressive taxation: “The Bolshevik Revolution of 1917 was fresh in everyone’s mind. It was in this chaotic and explosive situation that the modern and progressive income tax situation was born.” (p500)


Fear and admiration of Bolshevism drove not only modern progressive taxation, but a host of other movements, actions, and reactions that shaped inequality until the demise of the Soviet Union and other socialist states late in the twentieth century. Blindness to the impact of the Soviet Union’s exit from, and the subsequent influence upon, the global economy, counts as one of the more serious failings of Piketty’s book. Departure and isolation from the global capitalist system marked a sharp reduction of markets, the first reversal of the global expansion of markets and trade in the classic era of imperialism. Capital and capital income were lost. At the same time, a new era of labor militancy arose (spurring a reactionary fascist menace), though somewhat less so in the US.

The Great Depression and the growing popularity of the socialist alternative combined to create even greater pressure on capital. In Europe, Popular Front left governments succeeded in altering the balance of social forces against capital to some extent; again, the US was the outlier where, despite the celebrated New Deal, inequality remained relatively stable.

The radical reconfiguring of the world, with occupation, resistance and unprecedented destruction during the Second World War, surely disrupted income and wealth distribution as well as its accurate gauge. But it should be clear that a real shock to the global capitalist system came with the post-war loss of Eastern Europe and China. In addition, the post-war changes included the beginnings of decolonization in Africa and Asia. Undoubtedly, the loss of sources of hyper-exploitation in the colonial world and the Far East, along with the exit of semi-colonial Central European nations, shifted the global balance in a more egalitarian direction; billions in exported capital were lost due to expropriation and canceled debt.


“Trente Glorieuses” and “the America We Loved”

Piketty pointedly addresses the immediate post-war period, three decades of capitalist growth, stability, and relative prosperity in Western Europe and North America. He notes that the French celebrate the thirty years with an especially favorable fondness and nostalgia. Curiously, he remarks that in “Great Britain and the United States, post-war history is interpreted quite differently” (p98), suggesting that Great Power paranoia was more typical of the Anglo-American sensibility at that time. In fact, nostalgia for this period was just as rampant as he indirectly acknowledges with a later quote regarding the same period: “This is what Paul Krugman nostalgically refers to as ‘the America we loved’—the America of his childhood” (p294). In a footnote, Piketty cites Joseph Stiglitz as sharing a similar sentiment about this “golden age.” Indeed, it is remembered fondly as such by many of those associated with the so-called Baby Boom, the generation that today occupies the most important leadership roles in politics, economic life, culture, and the media.

It is no surprise that this “golden age” is identified with social democracy (and Euro-Communism) in Western Europe and social harmony, liberal values, and the ‘War on Poverty’ in the United States. But placed in the context of Piketty’s long-term analysis of inequality and its persistent tendency to reproduce, this is a rather pathetic basis for projecting the success of those values, a thin foundation for advocacy of center-left moderation.


Moreover, one could persuasively argue that this age of relative prosperity was an unspoken tax on wealth and high incomes used to purchase social cooperation and consensus, a kind of insurance policy against Bolshevism. To blunt the attraction of socialism (or the growing desire to be on the right side of history), a consensus emerged in the West to burnish the working conditions and living standards of the majority of people. Egalitarian concessions were made in order to secure loyalty at home and sympathy abroad.

Taken in this light, nostalgia for a golden age of general prosperity and social harmony—the promised land of social democracy–is a delusion grounded on a mere temporary compact between capital and labor, a reluctant concession meant to anesthetize the power of labor and anti-capitalist action. If we take seriously Piketty’s claim that “historical experience remains our principal source of knowledge,” then we must concede that the thirty glorious years offer only a momentary and deceptive respite from the march of inequality.

It should be noted, and Piketty does note, that the “golden age” in the US was an age tarnished by extreme reaction (McCarthyism), segregation and rabid racism, and the systematic suppression of women and other groups. Without taking anything away from the dedicated fighters and their struggles for justice, the moderation of these evils was part and parcel of the Cold War compromise.


Back to the Past

In the early to mid-1970s, the “trente glorieuses” ended in both Western Europe and North America. Slowly at first, and then with gathering momentum, inequality began to grow again. Throughout the post-war period, US wages and benefits grew roughly at the same pace as the growth in productivity; since the early seventies, the growth of productivity diverged more and more from the rise in wages and benefits to the detriment of working people.

While wages stagnated, the advantages of productivity gains flowed largely to the wealthy. At the same time, economic growth in Western Europe slowed with a similar consequence for inequality.

For Piketty and his thesis, the change signaled a return to the normal course of events; inequality regained momentum to continue its systematic march. Given that his central idea is that inequality is the strongest inherent trend in mature economies, he is not compelled to give much explanation when matters return to the norm. Nonetheless, Piketty takes a stab at an explanation of the shift in the US and UK: “I showed … that part of the explanation for this difference might be that the United States and Britain came to feel that they were being overtaken by other countries in the 1970s. This sense that other countries were catching up contributed to the rise of Thatcherism and Reaganism” (p509).

Perhaps there is some merit to Piketty’s argument, but it is distant from answering the central questions of historical explanation: How? And why now?


By the 1970s, social democracy, as the guardian of capitalism’s future, was spent. The chaos of the decade underscored the failings of Keynesianism. Faced with the intractable problems of lagging growth and high inflation, elites were won over to a new paradigm (actually an old one!). In the US, the shift actually began well before the election of Reagan, who was merely the accelerant. When labor responded tepidly to his aggression against union power and unions failed to mobilize popular support, conditions were met for the revocation of the Cold War contract, inaugurating a one-sided class war and expanding inequality.

Change did not come to the US from shattered expectations, but from a multifaceted crisis, a crisis of economics (failed Keynesianism), a crisis of political legitimacy (Nixon’s impeachment), and a crisis of foreign policy (defeat in Vietnam).

The threat of Bolshevism receded in Europe with the rise of Euro-Communism and the growing passivity of the labor movement. The means for revolutionary change remained, but the will was gone. The left-center coalitions that remained were ineffectual and untenable, leaving the social democratic vision in shambles. Here, as well, the road was open to a return to capitalism’s normal course.

The schisms in the Communist movement–especially the Soviet/Chinese split—emboldened Western governments to renege on the post-war social contract, to discard the anti-Bolshevik insurance policy. Capitalism resumed its normal course and inequality marched forward as well.


Crisis, Accumulation, and Marx’s Tendency for the Rate of Profit to Fall

Piketty offers little by way of insight into the causes of the deep crisis afflicting the global economy since 2008. He writes, somewhat inscrutably: “To my mind, a potentially more important cause of instability [than trade deficits] is the structural increase of the capital/income ratio (especially in Europe), coupled with an enormous increase in aggregate international asset positions.” (p298) In an associated footnote, he offers by way of clarification: “…that the nation-state, democracy, and globalization are an unstable trio (one of the three must give way before the other two, at least to a certain extent).” (p651, fn35) For the usually commendably transparent Piketty, this is teasingly suggestive, but fatally obtuse.

On the other hand, Capital in the Twenty-First Century carries on a fascinating, almost sub rosa engagement with Marx’s crisis theory, the tendency for the rate of profit to fall (TRPF): “My conclusions are less apocalyptic than those implied by Marx’s principle of infinite accumulation and perpetual divergence (since Marx’s theory implicitly relies on a strict assumption of zero productivity growth over the long run).” (p27) Piketty returns directly to the question in a long discussion (Back to Marx and the Falling Rate of Profit, p227-230.) Once again, he charges Marx with an untenable assumption (zero productivity growth over the long run). Anyone familiar with Marx’s Capital would find this odd, since Capital contains many references to increased productivity, even explicitly as a counter tendency to TRPF. Perhaps Piketty is referencing the oft cited charge that Marx overlooks technological advances that could cheapen constant capital and thereby increase the productivity of an element in the productive process. Marx addresses this as well in Volume III.

But exegetical questions aside, Piketty concedes that, granting certain assumptions,

…we run up against a logical contradiction very close to what Marx described… The dynamic inconsistency that Marx pointed out thus corresponds to a real difficulty, from which the only logical exit is structural growth… Otherwise, capitalists do indeed dig their own grave: either they tear each other apart in a desperate attempt to combat the falling rate of profit (For instance by waging war over the best colonial investments, as Germany and France did in the Moroccan crises of 1905 and 1911), or they force labor to accept a smaller and smaller share of national income, which ultimately leads to a proletarian revolution and general expropriation. In any case, capital is undermined by its internal contradictions. (p228)


Interestingly, Piketty thus endorses a weak version of TRPF stripped of logical certainty or inevitability (“less apocalyptic”). In other words, Piketty accepts Marx’s tendency-law as a heavily qualified tendency.

This is in contrast to the strong version of TRPF gaining popularity with Marxism-influenced academics, an interpretation that approaches a “breakdown” notion of capitalist crisis. The strong reading follows a line of argument developed by Henryk Grossman, Paul Mattick and others that takes Marx’s schema offered to illustrate the atomic structure of a commodity in Capital, Volume I, as axiomatic and, thus, seeks a formal proof that capital investment will choke-off profitability. While the renewed interest in TRPF is a welcome relief to the Keynes-tainted consumer demand-centric analysis of crisis that has dominated Marxist thought for generations, it must not become an arid, academic exercise.

True, Marx’s exposition of the accumulation process and the TRPF make use of the schema, but in an expository fashion. A mechanical search for a proof seems alien to the Marxian method. Moreover, one risks becoming entangled in the fallacy of composition by generalizing enterprise, even sectoral patterns, toward conclusions about aggregates. TRPF is a claim about aggregate capital and aggregate profits. Perhaps Marx inadvertently encourages this entanglement. Piketty notes:

In particular, he [Marx] did not try to figure out whether the very high capital intensity that he observed in the account books of certain factories was representative of the British economy as a whole or even some particular sector… Marx seems to have missed entirely the work on national accounting that was developing around him, and this is all the more unfortunate in that it would have enabled him to some extent to confirm his intuitions concerning the vast accumulation of private capital in this period and above all to clarify his explanatory model. (p229-230)


Piketty’s way of looking at the problem is most suggestive. Well before the 2008 crisis, economic journalists and commentators frequently noted the “glut” or “huge pool” of aggregate capital seeking a respectable or conventional return on capital. They were reflecting the fact that docile labor and what should be acknowledged as Piketty’s historical law of growing inequality generated enormous concentrations of capital; these concentrations were aggressively chasing “conventional” rates of profit. But the conventional investment opportunities were overwhelmed by the mass of capital.

Consequently, risky, unconventional investment vehicles were found or created to absorb the overflow. The results are only too well known: financial setbacks were amplified dramatically because of the riskiness of these investments, shocking the entire global financial system, unwisely thought of as the absorbent for the capital glut. Underlying this entire development was pressure on the rate of profit, a tendency for the rate of profit to fall in the face of hyper-accumulation.

Piketty recognizes a mechanism akin to this explanation when he writes: “…if the fortunes of wealthy individuals grow more rapidly than average income, the capital/income ratio will rise indefinitely, which in the long run should lead to a decrease in the rate of return on capital.” (p361)


Some Conceptual Housekeeping

Capital in the Twenty-first Century takes some key concepts for granted, ideas that may not bear the weight that Piketty places upon them. At the same time, Piketty’s research forces us to re-think some matters of which many of us have grown complacent:

Inequality: While social scientists may prefer the word “inequality” because it is redolent of the mathematical expression, suggesting a scientific exactitude, the word fails to conjure the moral and political dimensions of economic disparities. For that reason, social scientists are inclined to fumble the task of finding a correct or proper distribution of wealth and income. Attempts to link egalitarian policy to marginal utility or productivity growth are either ad hoc or patently circular. It is precisely the sterility of “inequality” as it is customarily used that renders it so difficult to answer the question central to Piketty’s political program: What is the fair tax rate?

No satisfactory answer can be given without a robust theory of income and wealth desert. In other words, the nominal inequalities tell us nothing about what constitutes a fair and equitable distribution, what people deserve. As a colleague put it, inequalities do not capture inequities.

Smugness over the apparent scientific objectivity of “inequality” blinds social scientists to the fact that a theory of desert is already deeply embedded in the existing distributional order; it is not merely impersonal markets that determine the distribution of economic goods and services, but established social customs and juridical relations that logically precede and sustain markets.

Marxism’s answer is that no theory of wealth and income desert can be adequate without removing exploitative social relations. Thus, eliminating exploitation becomes a necessary condition of any egalitarian program and a long, but precise step toward equality.


Class: Piketty writes of the earliest pioneers in quantitative income and wealth research: “… social tables always aimed to provide a comprehensive vision of the social structure: they indicated the number of nobles, bourgeois, gentlemen, artisans, farmers, and so on along with their estimated income (and sometimes wealth); the same authors also compiled the earliest estimates of national income and wealth. There is, however, one essential difference between these tables and mine: the old tables used the social categories of their time and did not seek to ascertain the distribution of wealth or income by deciles and centiles.” (p270)

Sadly, Piketty does not explore what is lost by neglecting the social structures that stand behind his “deciles and centiles.” Early researchers suspected correctly that existing social categories mirrored significant groupings of income and wealth. They thought that incomes and wealth were not randomly distributed in society, but connected in important ways to roles reflective of economic and social relationships. Their results seemed to bear out these intuitions.

A quick glance at Gregory King’s 1688 work shows that 62% of England’s families made up of “common seaman, laboring people and outservants, cottagers and paupers, and common soldiers” shared 21% of the English aggregate income. On the other hand, 4% of families made up of “temporal and spiritual lords; baronets; knights; esquires; gentlemen; persons in offices, sciences, and liberal arts” commanded 23% of the income (Carlo Cipolla, Before the Industrial Revolution, p10). Surely, this is a meaningful result, suggesting a small number of people were rewarded with more income than were the great majority of people in England. Indeed, this is a result that confirms King’s intuitive classification of the social structure while crying out for further explanation.

What socio-economic structure could produce and reproduce this significant difference?


Clearly, it could not be explained by the socio-economic system of ancient Greece or Rome. Or the structure of modern capitalism. Only the social system of semi-feudal England at that time could explain this non-random, non-accidental distribution. Only the socio-economic system intuited by Gregory King could fit this distribution, a social structure that would reveal how a “spiritual lord” could command greater income than “laboring people.”

Thus, a rudimentary class understanding—the grouping of people by their shared relations to economic categories—gives rise to an understanding of the how and why of inequality. Indeed, defining class structure seems to be essential in going beyond a superficial understanding of inequality.

To limit the study of income and wealth to deciles and centiles gives only a meager grasp of the mechanism behind the phenomena.

Ownership and hyper-income: Piketty’s study clearly and effectively shows that capital ownership and extreme incomes (especially of the managerial strata) shift in importance and prevalence. Thus, a rigid, mechanical concept of a bourgeois class comprised solely of owners of inherited stock or enterprises is untenable and, hopefully, a memory of distant Marxist theory. The CEO and other top executives are more and more likely to command the heights of capitalism and enjoy the greatest incomes and accumulate wealth at the most ferocious pace.

Piketty’s work shows that current trends may once again recreate the domination of inheritable wealth in the near future. In any case, his book calls for a more nuanced look at who constitutes the bourgeois class and how that class functions.

Interestingly, despite the perception of a CEO as elite by virtue of income rather than ownership, the CEO position shares most of the features of a nineteenth-century owner/magnate: he or she generally holds decisive quantities of stock; he or she accrues income independently of performance; he or she cannot easily be deposed; he or she makes all of the ultimate decisions. This is an interesting area for further study.


Middle class /petite-bourgeoisie: Piketty’s study sheds light on one of the most abused terms in popular parlance: the middle class. In the US, where pundits proclaim that there is no class system, all hail the virtuous and cherished middle class; labor unions aspire to middle class status for their members; politicians pander to middle class votes.

Piketty’s research identifies the emergence of what he calls a “patrimonial middle class” that owns about one fourth to one third of national wealth. He argues that in the twentieth century the formerly inconsequential “middle class” was enriched principally from gains against the uppermost reaches of wealth. The problem for Piketty is that, without a class analysis, it is impossible to determine who these people are.

Are they rejects from the top echelon? Recycling elites? Are they climbers from below? Are those who populate this location on the wealth continuum nouveau riche entrepreneurs? Are they courtiers to the rich? Are they labor aristocrats? Piketty’s “decile/centile” will not settle these questions—these questions make no sense without a framework of social relations. He has no answer, only deciles.

Nonetheless, Piketty points to an important group and the target of investigation by anyone serious about political change. The fact that 40% of the people have a share—albeit a much smaller share—of the national wealth may explain why profound social advances are so difficult in the advanced capitalist countries. This group could account for why opinion polls in the US have shown paradoxically that almost 40% of the population embrace the delusion that they are already very rich or soon will be.

Marx famously characterized the middle strata—the petite bourgeoisie—as vacillating and unstable, a description that often seems tragically fitting. Marxists ignore Piketty’s findings at their peril.


Addressing Inequality

If there is anything disappointing about a book that dares to re-open many questions for an audience desperately in need of new answers, it is Piketty’s political prescriptions for taming raging inequality. A book that shakes the smugness and complacency of the academic mainstream and reveals the bankruptcy of the political punditry deserves a more audacious finale.

With capitalism facing an obscene intensification of inequality, Piketty can only muster the meek and utopian solution of “a global tax on capitalism.” Like liberals who yearn for long-past and never-to-return romantic eras like trente glorieuses or the New Deal period, Piketty hopes for a return of the political will necessary to impose profoundly progressive taxes. But, as with the past periods of a limited turn toward equality that he documents so well, the will to tax or secure any shift in income or wealth distribution is neither a matter of hope nor easily won.

Though he has little patience for the liberal rights-based regime (“…the professed equality of rights of all citizens contrasts sharply with the very real inequality of living conditions…” (p422), he remains confident that the liberal state is capable of acting counter to the enormous power of concentrated wealth. It seemingly never troubles him greatly that the very inequality that he exposes destroys the democratic operation of liberal institutions, crippling the effort to achieve anything like a progressive global tax on capital.


This is the contradiction that exposes the bankruptcy of social democracy, the “respectable” Left. Like Piketty, social democrats believe that a capitalist system that persistently channels overwhelming economic power to the few can be managed to somehow deny overwhelming political power to that same few (and that overwhelming political power can somehow be neutered in order to change economic relations). Piketty makes a clear statement of that illusion: “The progressive tax is thus a relatively liberal method for reducing inequality, in the sense that free competition and private property are respected while private incentives are modified in potentially radical ways, but always according to rules thrashed out in democratic debate. The progressive tax thus represents an ideal compromise between social justice and individual freedom.” (p505)

Does Piketty believe that he could get the CEOs of Goldman Sachs and Citibank to accede to this agenda through “democratic debate”? Would they agree to forgo spending millions to amplify their voice and influence political leaders against such an agenda, a power that they oftentimes have demonstrated?

For literally centuries thinkers have sought a “compromise between social justice and individual freedom.” All have failed to deliver social justice except when private property was questioned. All will fail until the sanctity of private property is challenged as essential to individual freedom. Surely no sane person would view the private family ownership of Walmart as a cornerstone of individual freedom. Yet such a view flows from the dogma of the inviolability of private property. In truth, individual freedom can only be guaranteed at the expense of excessive private property; the proper relationship is the converse of how Piketty presents it.

Multicultural Center mural. Photo for use on in the campus history book

Why do Piketty and other well-intentioned theorists protect the sanctity of private property and sidestep the contradiction between economic concentration and authentic democracy? Why do they assiduously avoid considering the socialist option?

Piketty answers as follows:

I belong to a generation that turned eighteen in 1989, which was not only the bicentennial of the French Revolution but also the year when the Berlin Wall fell. I belong to a generation that came of age listening to news of the collapse of the Communist dictatorships and never felt the slightest affection or nostalgia for those regimes or for the Soviet Union. I was vaccinated for life against the conventional but lazy rhetoric of anticapitalism, some of which simply ignored the historical failure of Communism and much of which turned its back to the intellectual means necessary to push beyond it. (p31)

I can respect Piketty’s candor, but it is a pity that he was not vaccinated against the virus of anti-Communism. As with the French Revolution, there are regrettable events in the twentieth-century history of real, existing socialism. The transition to socialism, like the transition to capitalism, was an unprecedented experience coming at considerable human cost. One does not have to minimize that cost by studying the gains that were made, the advances that were achieved in such a dramatic, unprecedented transition. Sadly, anti-Communism forecloses the relevance of this grand social experiment for Piketty, an experience that counted as the first attempt at systematically addressing and arresting the evils of income and wealth inequality.


1. Piketty, Thomas. Capital in the Twenty-first Century, trans. Arthur Goldhammer (Harvard University Press, Cambridge, London: 2014).


[Thank you ZZ for this essay.]

Zoltan Zigedy is the nom de plume of a US based activist in the Communist movement who left the academic world many years ago with an uncompleted PhD thesis in Philosophy. He writes regularly at ZZ’s blog, and on Marxist-Leninism Today. His writings have been published in Cuba, Greece, Italy, Canada, UK, Argentina, and Ukraine.

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