Review: Thomas Piketty: Capital and Ideology

One of the most productive things that I have done during Melbourne’s lockdown is read Thomas Piketty’s latest work, Capital and Ideology (Harvard University Press, 2020). It is undoubtedly not the most leisurely book to read, at 1150 pages, dense with footnotes, appendices, and graphs, spanning a three-hundred-year period, multiple countries, and the fields of economics and history. It is a monumental work of scholarship, and along with his last significant work Capital in the 21st Century (Harvard University Press, 2014), it provides a rigorously empirical, data-centric and troubling view of the undoing of financial egalitarianism in Western democracies. Piketty provides the historical reasoning of this, the monumental failure of the command economies of communism, the weakening of progressive taxations and other policies design to redistribute wealth (such as inheritance taxes) and the shift in the ideology of egalitarianism to ideologies based the uncritical embrace of ‘meritocracy’.

The primary cause of the significant shift is that the political left (Labour and Democrat’s) shifted from worker’s parties to parties of the educated (or what Piketty calls the Brahmin left). A more educated demographic is more likely to vote left; the less educated are more likely to vote right. Politics has become less of a class battle and more of a battle between elites; the ‘Brahmin left’ and the ‘Mercantile right’, with a bunch of Identitarian political cleavages to keep things interesting.

I will attempt to outline the four key arguments.

Inequality has always been justified by ideology, from pre-modern ‘trifunctional societies’ (church, nobles, and warriors), to slavery, colonialism, communism to what Piketty terms ‘hyper-capitalism’. All regimes had an ideology to justify financial inequality from the slave states of the Caribbean and southern United States (that drew up to 100% of their income from the slave trade), to Belle Époque France, to 21st Century hyper-capitalist states. Piketty has a knack for measuring the transition of inequality through various historical epochs using vast data sets of national income, taxation, and inheritance records. During the late Belle Époque (the period after the French Revolution) a ridiculously small elite owned nearly all the property in Paris, justified by the post-revolutionary-meritocracy of mercantile ‘egalitarian exceptionalism’.  It was only through the advent of progressive taxation and inheritance taxes in the 20th Century that France and other countries moved to a more quantifiable egalitarianism.

Piketty claims that communism was a disaster so great that its failure overshadows the regimes of colonialism and slavery that came before it (and this argument has infuriated the Chinese CCP so much, that they have banned his book in China). Plus, the failure to regulate capital through the experimental, centralised command economies of communism, has pushed western countries in another ideological and policy direction, to have very-little wealth in public hands. In fact, all that citizens now own through their governments (schools, roads, buildings, and agencies) is worth zero dollars once government debt is considered. Indeed, in some countries, governments must pay private enterprise interest as governments own less that they owe (and this has happened in the short timeframe of 10 years).

Social democratic policies are another area of focus of Piketty’s examination. Although they have not disappeared altogether (Norway, Sweden, Germany, and to a lesser degree, New Zealand and Australia), their influence on the world stage is marginal to the 21st Century libertarian notion of globalism (free-trade, tax havens, and ‘race to the bottom’ tax competition between nations).  Piketty argues that social democracies should form federal alliances to regulate capital on a global scale, as they have so successfully done domestically.

The social democracies were some of the most egalitarian societies the world has ever known, but this did not happen through mere cultural reasons or imagined ‘egalitarian exceptionalism’, but through clear policies linked to the unambiguous ideology of wanting to be egalitarian. This entailed political courage and enacting policies of wealth distribution through high progressive taxation and high rates of inheritance tax. The period from the Second World War until 1980 was a prosperous, high-growth, high-innovation period and this was archived through maintaining egalitarianism via high progressive taxation, especially in the US (up to 75%), which is now the most inegalitarian western economy. Piketty’s point is that fiscal egalitarianism and innovation are not mutually exclusive, and in fact, the opposite may be the case.  Globalism needs to move onto a more egalitarian footing, and this can only be done through alliances of progressive, egalitarian countries, something like a federal version of the EU (that presently only collect and distributes 1% of European GDP).

As Piketty argues, one of the significant reasons that western countries (particularly the US), became so inegalitarian is because of shifting ideologies and voting patterns, especially on the left. Piketty uses post-election surveys to examine voter behaviour and discovered that there has been an almost complete reversal of voting patterns among a less-educated demographic. Since the 1980s, the less educated are more likely to vote Republican or Tory, and the more educated are more likely to vote Labour or Democrat. This shift mirrors the reduction of progressive taxation and the heightening of inequality in western democracies. The policies of the left (or what Piketty terms the Brahmin left) are seen by the working classes as supporting high-education and high-salaries, whilst neglecting working-class demands (which are often essentialised as ‘populism’). The pressure of global capital, the ‘race to the bottom’ in taxation competition, and a highly fractured polity have perhaps forced the hand of progressive parties.

As a conclusion, Piketty seems to be arguing that we need to get over communism, try egalitarianism again, and learn from the social democracies. The state does not have to own everything (the means of production). It can foster egalitarianism through taxation and ‘fiscal justice’, inheritance taxes (that prevent inter-generational wealth accumulation), and workers-representatives on company boards (as is the case in Germany and Nordic counties). One of his more interesting ideas is that there ought to be an explicit public-inheritance, or that every 25-year-old could receive a sum of say, 200 thousand euros to set them up in life at an early stage.  This money would come from an inheritance tax on the enormous fortunes. The ‘egalitarian ideology’ that justifies this is that wealth should be temporary and not accumulated over many generations (that could see us return to the nobility of pre-modern times).

I am fortunate enough to have read both of Piketty’s significant works, and the irony is, this type of scholarship is only possible in the 21st Century. The synthesis of quantitative data with a historical narrative on such scale using such techniques has all the hallmarks of emergent digital humanities (or ‘big reading’).  Piketty has even made much of his data available for further analysis, visualisation, and debate in the classroom. The book was released just before the global coronavirus pandemic, so perhaps there is a historical moment now, as there was directing proceeding the Second World War, where we have the chance to recalibrate ideologically and again move towards egalitarianism.

One Reply to “Review: Thomas Piketty: Capital and Ideology”

  1. Dear Craig, Thank you for this perceptive and valuable review. Your time was well spent and helps those of us intimidated by Piketty to at least get a sense of what he is arguing.,

Leave a Reply