CAPITAL IN THE TWENTY-FIRST CENTURY
by Thomas Piketty | Belknap Press | 696 pages |
capital in the twenty-first century
by Thomas Piketty | Belknap Press | 696 pages | $39.95
It’s not often these days that a new grand theory of history gets taken seriously, and it’s even rarer when the theorizing surrounds a subject as all-encompassing and abstract as capitalism. Somehow, though, the French economist Thomas Piketty has managed to publish a nearly 700-page tome on capitalism that’s not only heavily indebted to Karl Marx and bracingly critical of capitalism, but that’s been read and debated by the US Treasury Secretary, members of President Obama’s cabinet, and virtually every prominent modern economist. It’s also become a bestseller, which for an economics book published by an academic press is notable.
There are a few reasons that Capital in the Twenty-First Century, which was released in English translation this month, is getting so much attention — and that Piketty himself is getting “rock star treatment,” as a New York Times headline put it in April. First, Piketty writes under the assumption that economists should tell a story that’s compelling rather than wallowing in the “childish passion for mathematics” that he believes dominates his field. And he succeeds: His book is a good read, even if you’re not an economist.
Piketty was already known for proving that economic inequality has grown increasingly extreme. His past research helped trigger the Occupy movement and, more recently, Obama’s declaration that inequality is the “defining challenge of our time.” Capital in the Twenty-First Century is Piketty’s attempt to extend his gaze beyond the last several decades to the entire history of capitalism.
Piketty is not a Marxist economist, but it’s no accident that his book’s title recalls Karl Marx’s 1867 treatise Capital. Piketty concludes that some of Marx’s most important insights into capitalism were basically on target; many of the 19th-century economist’s theoretical shortcomings can be attributed to the fact that he just didn’t have enough capitalism to study or the right data sets to examine. Piketty, writing with more than 200 years of capitalism behind him, has spent his career gathering the data to build a more precise critique. The result stands in stark contrast to the story of capitalism as it’s commonly told.
What Marx got right and Piketty meticulously proves is that capitalism inevitably leads to the concentration of wealth in the hands of very few people. It does not, in other words, lead to a egalitarian society with increasing economic mobility — the assumption that has guided economic policymaking throughout US history.
It’s the argument behind this conclusion that is most striking. Everyone knows about the obscene gap between the earnings of ordinary workers and the earnings of CEOs because such imbalances are central to many critiques of capitalism. But Piketty says this sort of inequality isn’t the main problem. Over the long run, he argues, inequality will be heightened most not by how much people get paid for their labor but instead by the ease with which the affluent rely on their existing wealth to get wealthier. In other words, the wealthiest one percent are becoming increasingly rich through income on capital rather than income from work. Inherited wealth, and income from assets like stocks and real estate, is driving inequality much more than huge salaries. This blows apart the notion that the wealthy earned every penny of their riches, along with the related idea that they are “job creators” fueling economic growth.