One can’t have an economics page without commenting on this book, apparently. Its recently published English edition, Capital in the Twenty-First Century, was a US best-seller – a remarkable feat for a hefty econ tome.
For those who haven’t read it and/or have no intention of doing so, The Economist has taken to reviewing it in parts (of which there are four) for subscribers. It’s that important. The critique of Capital‘s conclusion is noteworthy:
If the most likely outcome of the trends Mr Piketty describes is that somewhere down the line a left-of-centre government is elected and passes higher top income-tax rates, higher estate-tax rates and pension reforms, and that defuses the crisis, well, that puts the rest of the book in perspective. If the most likely outcome is revolution, well, that does too. And while it would be absurd to expect Mr Piketty to say definitely whether one possibility or another is bound to occur, I don’t think it’s asking too much, given the ambition of the rest of the book, to think we ought to be given some sense of his view on how social and political movements generally evolve in response to widening inequality, and how that evolution tends to be reflected in policy. What good is it to suggest utopian ideas about how to fix these problems without at least gesturing toward the political mechanisms needed to bring them about?
The topic of capital and wealth distribution precludes separating the political from the economic analysis – which, ironically, is the point of contention between Capital and Kapital. As Marx succinctly put it (prior to Kapital): Although theoretically the former is superior to the latter, in actual fact politics has become the serf of financial power.
In noting that the post-World-War periods during which income inequality declined were an aberration rather than proof that capitalism (as we’ve come to know it) optimally (re)distributes wealth, Piketty effectively supports Marx’s central premise that it doesn’t.
And it’s not just Piketty who (despite not conceding the point) has recently come to the uncomfortable realisation perhaps Marx was right.
However, Piketty (among others) ignores the obvious correlation between capital ownership and political influence by suggesting policy makers can address widening inequality by simply hiking taxes on capital wealth. Bill C-23, the Canadian ‘Fair’ Elections Act, and related recent events in the US speak to the obvious omission.
Picketty also ignores capital flight, a problem his home country of France faced only a few short years ago. And that was before it elected a Socialist government and a famed French actor made it headline news.