It has been a long, long time since Americans accepted the advice of a French intellectual about anything important, let alone the future of democracy and the economy. But the furor over Thomas Piketty’s stunning best-seller, Capital in the 21st Century — and especially the outraged reaction from the Republican right — suggests that this fresh import from la belle France has struck an exposed nerve.
What Piketty proves, with his massive data set and complex analytical tools, is something that many of us — including Pope Francis — have understood both intuitively and intellectually: namely, that human society, both here and globally, has long been grossly inequitable and is steadily becoming more so, to our moral detriment.
What Piketty strongly suggests is that the structures of capitalism not only regenerate worsening inequality, but now drive us toward a system of economic peonage and political autocracy.
The underlying equation Piketty derives is simple enough: r>g, meaning that the return on capital (property, stock and other forms of ownership) is consistently higher than economic growth. How much higher? Since the early 1800s, financiers and land-owners have enjoyed returns of roughly 5 percent annually, while economic growth benefiting everyone has lagged, averaging closer to 1 percent or 2 percent. This formula has held fairly steady across time and space. While other respectable economists may dispute his methodology and even his conclusions, they cannot dismiss his conclusions.
As a work of history and social science, Capital in the 21st Century outlines a fundamental issue, while offering little in policy. Piketty mildly suggests that nations might someday cooperate in a progressive and global taxation of capital gains, with shared proceeds. There isn’t much reason to hope for any such happy solution, but then it isn’t up to Piketty to solve the problem.
He has done America and the world a profound service by demolishing an enormous shibboleth that has long stood as an obstacle to almost every attempt at economic reform, from raising the minimum wage to restoring progressive taxation: Only if we coddle the very wealthy — and protect them from taxation and regulation — can we hope to restore growth, employment and prosperity. Only if we meekly accept the revolting displays of power and consumption by the very fortunate few can we expect them to bestow any blessing, however small, on the toiling many.
If you read Piketty — whose translation into English by Arthur Goldhammer makes macroeconomics a literary pleasure — you will quickly realize that we’ve been told a big lie about this most basic social bargain. The stratospheric accumulation of rewards accruing to the top 0.01 percent of owners, at the expense of society and everyone else, is not only unnecessary to promote growth; in fact, that unfair dispensation retards growth.
Rather than argue honestly with Piketty’s findings, right-wing responses have varied from old-fashioned redbaiting, although he is plainly no communist, to juvenile misrepresentation of a book that at least one critic admits she didn’t bother to read! The boneheaded Tea Party reaction is to accuse him of demanding that sanitation workers earn the same salary as surgeons — although he explicitly agrees that a degree of inequality is important to encourage innovation, enterprise and industry. But then the wing nuts and trolls attacking him have no interest in debate, let alone knowledge. They hate social science just as much as they hate plain old science.
For the rest of us, Piketty’s opus poses an epochal challenge. Confronted with the truth about exacerbating inequality and the costs imposed on democratic society, what are we going to do about it? History provides a few clues if not a blueprint. The highest level of economic equality and social strength in the West arrived during the postwar era — back when unions were strong, taxes restrained the rich, minimum wages were higher, and redistribution was not a dirty word.
It will be the task of the next generation to restore decency and democracy — and save the planet — against the ferocious political resistance of the super-rich. They can now begin by discarding the ideological illusions that Piketty has so neatly dispatched.