By Sam Pizzigati
A number of commentators have recoiled from that question. They’ve chosen instead to grumble about the enormous hype around the book — and pound out pieces that trumpet out some variant of “Piketty has got it wrong.”
These pieces do have their place. Indeed, author Piketty opens and ends his epic tale of wealth’s ebb and flow stressing the limits of what he has to say. His sources, he notes, “remain imperfect and incomplete.” His conclusions — “by nature tenuous” — “deserve to be questioned and debated.”
But make no mistake. This book has fundamentally changed our global discourse over inequality. We have been contemplating for years now how deeply unequal we’ve become. Capital in the Twenty-First Century has shifted our gaze to the future, to how terrifyingly unequal we may soon be.
We have “no natural, spontaneous process,” as Piketty notes, that can “prevent destabilizing, inegalitarian forces from prevailing permanently.”
Yet nothing in our political and economic life, he also reminds us, comes to us “foreordained.” We can shape our future. We just have to start soon, or else resign ourselves to the restoration of “patrimonial capitalism,” an economic order where inherited wealth dominates, distorts, and destroys any hopes for real democracy — or even basic decency.
Capital in the Twenty-First Century actually represents Thomas Piketty’s second major contribution to our global inequality discourse.
We have ‘no natural, spontaneous process’ that can ‘prevent destabilizing, inegalitarian forces from prevailing permanently.’
About a dozen years ago, Piketty and fellow French economist Emmanuel Saez, now at the University of California at Berkeley, began revolutionizing how we track — and think about — income distribution.
Up until then, researchers had largely depended on government household surveys for most all of our income stats. These surveys generated an abundance of useful data about the low- and middle-income households that make up the vast bulk of our developed world’s populations, but collected next to zilch of statistical value from society’s highest-income households.
The result: We ended up with analyses of income distribution that typically clumped households into broad “quintiles” or “deciles.” Studies based on these stats seldom did more than compare the incomes of the bottom fifth or tenth of a nation’s households with the middle and top fifths and tenths.
Piketty, Saez, and their colleagues upset this applecart. They dove into tax return data and assembled, first for France and then for the United States and other nations, detailed data series that traced the evolution of incomes at — and even within — the top 1 percent of households.
In 2011, the Occupy movement would shove this top 1 percent data onto our political center stage, and pols and pundits would soon be acknowledging the vast gap between the top 1 percent and everyone else. Piketty’s pioneering research helped ease all this new awareness out of the public policy shadows.
With his blockbuster new book, Piketty is taking us another giant step forward. Capital in the Twenty-First Century places contemporary income concentration in over two centuries worth of historical context, primarily zeroing in on France, Britain, and the United States since the late 18th century.
Intense levels of income and wealth concentration have defined our industrial world for generations.
Intense levels of income and wealth concentration, Piketty’s broad sweep reveals quite strikingly, have defined our industrial world for generations. The only exception: the decades of the mid twentieth century, a relatively brief interlude when the richest 1 percent’s share of society’s income and wealth dropped substantially in both Europe and the United States.
During these mid-century years, the return on capital — the dividends, rents, interest, and capital gains people of means rake in off the assets they own — did not follow basic historical norms. Economies in the mid twentieth century grew more quickly than the wealth of the rich. Societies became more equal.
What explains this equalizing? The twentieth century’s incredibly disruptive world wars, Piketty argues, opened a unique window for egalitarian shifts in tax and other public policies.
But the mid-twentieth century, Piketty argues, represents a special case, and he spends a major portion of his Capital in the Twenty-First Century endeavoring to show why. His central theme: The rate of return from capital will generally tend to outpace economic growth, a relationship Piketty reduces to the formula r > g.
In plainer terms: “Wealth accumulated in the past grows more rapidly than output and wages.” Inevitably, writes Piketty, the entrepreneur “tends to become a rentier, more and more dominant over those who own nothing but their labor.” Eventually, “the past devours the future.”
Serious reviewers have differed over how convincing a case Piketty makes for his “r > g” formula. Much more convincing: Piketty’s demolition job on mainstream economics and the political fairy-tales our top politicians tell about our economic system, most notably the notion that the free market, left to its own devices, will distribute “the fruits of economic progress among all people.”
Piketty’s work demolishes the fairy-tales our top politicians tell about our economic system.
Piketty, adds economist Paul Krugman, crumbles “that most cherished of conservative myths, the insistence that we’re living in a meritocracy in which great wealth is earned and deserved.”
The historic data Piketty so impressively marshals, the anecdotal evidence he brings to bear from the historical record and even from literature, all make clear that capitalism has a powerful tilt toward the top, an underlying tendency to rather ferociously concentrate income and wealth.
And where will this concentration, if we let it continue, lead us? Increasingly inherited wealth, Piketty writes, will confront us with an extreme concentration of capital “potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies.”
But we face other threats as well from extreme inequality, threats that sour our daily lives on any number of fronts, from the trust we have in each other to our physical and mental health. Capital in the Twenty-First Century doesn’t go into these threats. Another landmark book on inequality does.
That book — The Spirit Level: Why More Equal Societies Almost Always Do Better — appeared five years ago, first in the UK and then around the world. Spirit Level editions have appeared since then in two dozen nations and sold, in English alone, well over 150,000 copies, a monster total, at least before Capital in the Twenty-First Century, for a serious book in the social sciences.
Like Thomas Piketty, Spirit Level co-authors Richard Wilkinson and Kate Pickett have marshaled vast arrays of data. These two epidemiologists — scientists who study the health of populations — have identified nearly every social problem where reliable statistics let us compare how well or poorly the major nations of the developed world are delivering a decent quality of life.
People in more equal societies simply live longer, healthier, and happier lives than people in more unequal societies.
In which developed nations, Wilkinson and Pickett ask, do people live the longest? What nations show the highest levels of obesity? Where do people born at the bottom have the best shot at climbing up? Which nations send the most people to prison? Have the most teenage moms? Tally the most homicides?
People in some developed nations, the Spirit Level documents, can be anywhere from three to ten times more likely than people in other developed nations to be obese or get murdered, to mistrust others or have a pregnant teen daughter, to become a drug addict or escape from poverty.
And the nations that do the best, on yardstick after yardstick, all turn out to share one basic trait. They all share their wealth.
“If you want to know why one country does better or worse than another,” as Wilkinson and Pickett note, “the first thing to look at is the extent of inequality.”
The United States, the developed world’s most unequal major nation, ranks at or near the bottom on every quality-of-life indicator that Wilkinson and Pickett examine. Portugal and the UK, nations with levels of inequality that rival the United States, rank near that same bottom.
People in more equal societies simply live longer, healthier, and happier lives than people in more unequal societies. And not just poor people in these societies, Wilkinson and Pickett emphasize, but all people.
All people, in other words, have a personal vested interest in preventing the frightfully unequal future Thomas Piketty has put before us. Successfully sharing this understanding, widely and broadly in the political arena, may be our best hope at forging a twenty-first century where that future never takes place.