Monthly Archives: June 2014
Head on over to The Charnel-House for an insightful analysis of Marx’s interest and dependence upon Hegel, even in his “late” work.
By now it should be obvious to anyone who has looked at Karl Marx’s entire corpus, both published and unpublished works, that the philosophy of Georg Wilhelm Friedrich Hegel was an abiding influence on his thought. Marx certainly had no patience for those “the ill-humored, arrogant, and mediocre epigones” who treated Hegel a “dead dog,” much in the same way that the Leibnizian philosopher Moses Mendelssohn treated Spinoza like a “dead dog.” This is amply evident both in the 1873 postface to his masterpiece, Capital, as well as in private letters written to friends and colleagues between 1866 and 1870.
In this post, I will adduce clearly that Marx still held Hegel in high regard up to and beyond the publication of his “mature” works (if one still insists, following Althusser and Colletti, upon drawing a rigid distinction between the Young Marx and Old Marx). Even further, I…
View original post 2,373 more words
The fifth chapter of Piketty’s Capital, is centered around his second “law of capitalism”–rendered as β=s/g. That is to say, over the long run, “the capital/income ratio β is related in a simple and transparent way to the savings rate s and the growth rate g” (166). This is law simply says that a country which saves a lot and grows slowly will accumulate a tremendous capital stock (and thus a high β), whereas a country which saves little and/or grows at a significant rate (i.e. the post-War Western world) will maintain a relatively small capital stock (and thus a low β). Certain important considerations are important to note regarding this law. First, this “law” presents a more interesting reality than the first “law” for the simple reason that the first law is itself completely tautological. The first law merely illustrates an accounting identity. The second law, on the contrary, presents general trends which, becuase they are not a mere accounting identity, are generally less precise than the first law. It is for this reason that Piketty emphasizes that this law is only valid over a long scale. “This is an asymptotic law, meaning that it is valid only in the long run: if a country saves a propotion s of its income indefinitely, and it the rate of growth of its nation income is g permanently, then its capital/income ratio will tend closer and closer to β=s/g and stabilize at that level” (168), and “the law β=s/g does not explain the short-term shocks to which the capital/income ratio is subject, any more than it explains the existence of world wars or the crisis of 1929–events that can be taken as examples of extreme shocks” (170).
Second, growth here not only accounts for economic growth (growth in output), but also demographic growth. “Countries with similar growth rates of income per capita can end up with very different capital/income ratios simply because their demographic growth rates are not the same” (167).
Third, this law only applies to human-produced capital; i.e. societies in which naturally occuring capital (e.g. land, mineral resources, etc.) play a significant role will maintain a considerable higher capital stock (β). The fact that this law is able to map the capital/income ratio with a certain degree of accuracy, Piketty suggests, may be an indication “that pure land constitutes only a small part of national capital” (196). Of course, this is not to say that natural resources don’t play a considerable role in national income and capital, but merely that this value is mediated through human productive expenditures (e.g. irrigation, mining, etc.).
The consequences of this law can be seen with particular clarity in the Neoliberal revolution of the Western world. Since 1970, Piketty shows, private capital has seen a strong consistent comeback in the West (and Japan). Of course, this regularity is periodically interrupted by bubbles, but even when these bubbles are taken into account, the trend of the capital/income ratio is decisively positive; “or, to put it another way, [we are witnessing] the emergence of a new patrimonial capitalism” (173). In fact, not only are these nations’ capital/income ratios growing together, they are growing at an almost identical rate (viz. 1.6-2.0%, “and more often than not remained between 1.7 and 1.9 percent” ).
Noteworthy in this account, is its centralization on private wealth. Not only has public wealth failed to grow in concert with private capital, but in fact, has seen a significant decrease. Simply put, “the revival of private wealth is partly due to the privatisation of national wealth” (184). Of course, this role cannot be overstated . As private weealths growth has been considerably faster than the respective decline in public wealth. Nonetheless, as Piketty notes, “the decreaes in public wealth represented between one-fifth and one-quarter of the increase in private wealth–a nonnegligible share” (185). This effect may even find itself exasperated by an “undervaluing” of public assets in 1970, a fact which, if correct, would increase public wealth’s rate of decline during the last 45 years.
An additional factor in the growth of β in the second half of the 20th century was that “catchup” of asset prices. From 1910-1950 asset prices were strongly surpressed, and corporations and other assets found themesleves valued at historically low levels. This rebound, Picketty suggests, may account for as much as 1/4 to 1/3 of the increase in the capital/income ratio between 1970 and 2010 (191). While Piketty consistently cautions against overly optimistic or certain prediction, he does suggest that the global capital/income 21st century will likely converge on 700% percent of yearly global income (based upon an estimated growth rate of 1.5% [down from current 3%], and a savings rate of approx. 10%) (195).
For most people who have read any of Nietzsche’s work, it seems that they interpret him as a quintessential cynic or misanthrope. And this is a completely understandable interpretation, especially if one reads anything regarding the “Will to Power” or his thoughts on politics. Nietzsche seems to think that people are only concerned with themselves and the weak are meant to be trampled on. Or we can just look at the chapter titles of Ecce Homo for quite a profound example of his own engagement with cynicism.
In all honesty, I’m not confident in my understanding of parts of Nietzsche’s (non-)philosophy, so I won’t speak at length on them, but I think there is something to be said about the intersection between his and bell hooks’ thoughts. The notable connection is in the following two quotes:
To talk much about oneself may also be a means of concealing oneself. 
Ultimately, cynicism is the great mask of the disappointed and betrayed heart. 
In both quotes there is the element of hiding something. I’m not sure if Nietzsche would identify with the label “cynic” but even if not, the specter of cynicism maybe still be there for a reason. If we are following bell hooks, Nietzsche’s cynical attitude is really an attempt to distract the reader (and probably himself) from his own pain and disappointment in life.
Might there be a part of Nietzsche which he tries to suppress? Which is a simmering hope and faith in humanity that is crushed by utter indifference? Indeed, he writes:
You desire to live ‘according to Nature?’ Oh , you noble Stoics, what fraud of words! Imagine to yourselves a being like Nature, boundlessly extravagant, boundlessly indifferent, without purpose or consideration, without pity or justice, at once fruitful and barren and uncertain: imagine to yourselves indifference as a power– how could you live in accordance with such indifference? To live–is not that just endeavoring to be otherwise than this Nature? Is not living valuing, preferring, being unjust, being limited, endeavoring to be different? 
At this, one might say we don’t and can’t know the real Nietzsche (probably because there is none). Regardless, I think it is reasonable to contend, whether loosely or confidently, that Nietzsche’s cynicism serves to mask his own insecurities and pains.
 Friedrich Nietzsche, Beyond Good and Evil, aphorism 169.
 bell hooks, All About Love: New Visions, xviii
 Friedrich Nietzsche, Beyond Good and Evil, aphorism 9.
In the fourth chapter of his Capital, Piketty expands the analysis of Britain and France in the third chapter, with analyses of the capital/income ratio in Germany, the US, and Canada.
In large, the German case largely parallels that of Britain and France (more specifically, the later), capital having peaked in the 1870’s at approx. 700% national income, and having seen a dramatic decrease in throughout the first half of the 20th century (bottoming out in 1950 at approx. 200%). That being said, Piketty does note four discrepancies between the German model and the French/British. First, net foreign capital plays a considerably smaller role in 19th century Germany than its two European neighbors. This difference is easily explained by Germany’s lack of an extensive colonial empire. While Germany had foreign holdings, they were nothing compared to the extensive imperial reach of Britain, for example. Interestingly, for a thinker who appears quite intent on distancing himself from the Marxist left, Piketty here makes positive (albeit passing) reference to Lenin’s Imperialism, the Highest Stage of Capitalism. A second noteworthy difference is Germany’s relationship to inflation in the second half of the 20th century. Traumatic hyper-inflation in the 20’s so deeply scarred the German psyche that it would pursue considerably more conservative inflation in the post-war period (rigidly capping inflation at approx. 2% per year). Third, mid-century Germany possessed shockingly low private capital (approx. 100-150% national income), yet since the war, has seen an extensive growth in its private sector (to a substantial 400% national income). Lastly, Germany exhibits a noteworthy gap in wealth compared to other European countries. Piketty explains this fact through two factors: to a lesser extent, Piketty marks a devaluation of German real estate, due in part to “German reunification, which brought a large number of low-cost houses onto the market” (144). More substantially though, Piketty marks “Rhenish capitalism,” with its preference for stakeholders over shareholders as a factor that continues to drive down German firms’ stock value. Nonetheless, as he notes, this stakeholder model may possess its own internal benefits. Firstly, though “the stakeholder model inevitably implies a low market valuation,” such a devaluation does not necessitate a”a lower social valuation” (146). Second, this model may also maintain a greater stability than the more common shareholder model. “Between 1998 and 2002,” Piketty writes, “Germany was often presented as the sick man of Europe. [But] in view of Germany’s relatively good health in the midst of the global financial crisis (2007-2012), it is not out of the question that this debate [between shareholder and stakeholder models] will be revived in the years to come” (146).
The United States, on the other hand, saw significantly different capital trends then its neighbors; the distinctive European “U-shaped curve” of the capital/income ratio is present in the US, but severely attenuated . No doubt this difference can be attributed to the US’s isolation from the full-scale ravages and capital destruction of the Second World War, but Piketty will also note a number of other important factors in this difference. First, capital tends to play a considerably smaller role in the US (generally between 300-500% national income). The value of capital appears, to a great extent to be held down by an extremely high growth rate in the US (both economically and demographically). As might be recalled from the second chapter, a growth in both forms tends to have an “equalizing effect,” decreasing reliance upon inherited wealth and decreasing the value of previously accrued capital. Second, the US employed “no sweeping policy of nationalization” (153) as was common following the Second World War. Lastly, the US shows almost no reliance on foreign capital, having never acquired any significant conventional colonial power. Moreover, on the inverse side, very little capital in the US was foreign-owned. “the world of 1913 was one in which Europe owned a large part of Africa, Asia, and Latin America, while the United States owned itself” (155).
Piketty’s analysis of Canada is considerably more brief, and largely uninteresting (there’s a joke in there somewhere). The most important difference in Canada is that, having remained a colony of the British crown, a large percent of Canadian capital was foreign-owned. In the late 19th century, as much as 100% of national income (roughly 20% of national capital) was foreign-owned. The 20th century has seen this percentage decrease considerably, though Canada’s net foreign income is still negative (roughly 10% of national income, or 2.5% of capital).
The chapter ends with a discussion of slavery. Piketty appears markedly uncomfortable calculating human life as capital–“to add the value of slaves to capital in this way is obviously a dubious thing in more than one way: it is the mark of a civilization in which some people were treated as chattel rather than as individuals endowed with rights” (159)–nonetheless, his analysis is enlightening. At the turn to the 19th century, capital in the form of human persons composed as much as 100% of national income in the US, 250% if the south is calculated separately.
In the next chapter, Piketty will explore the capital/income ratio “over the long run,” and introduce his second law of capitalism: β = s/g.
As part of my read-through of Piketty’s Capital in the Twenty-First Century, here, as promised, is an article from 2013 by Andrew Kilman published at the Marxist-Humanist Initiative. Here, Kliman challenges the “Piketty-Saez method” of calculating income and income-units. Enjoy.
(If the above link does not work: http://www.marxisthumanistinitiative.org/economic-crisis/%E2%80%9Cthe-99%E2%80%9D-and-%E2%80%9Cthe-1%E2%80%9D-%E2%80%A6-of-what.html)
Opening Part Two, “The Dynamics of the Capital/Income Ratio,” Piketty’s third chapter, “The Metamorphoses of Capital” tracks the development of the captial/income ratio (previously designated as β) in France and Britain, with particular emphasis upon its “U-shpaped” curve, “net foreign income” (income from foreign investments minus foreign rents, expenditures, etc.), and public vs. private capital.
Whereas both population and output growth, Piketty repeatedly insists, follow the pattern of a bell curve–increasing dramatically throughout the early 20th century, and now in the process of returning to their “natural” rate (.3% and 1-1.5%, respectively)–the capital/income ratio follows precisely the opposite pattern, falling off precipitously after the start of WWI, and only beginning a recovery following the second World War. “In short, what we see over the course of the century just past,” Piketty says, “is an impressive ‘U-shaped’ curve.’ The capital/income ratio fell by nearly two-thirds between 1914 and 1945 and then more than doubled in the period 1945-2012” (118). This data appears to track well with Andrew Kilman’s more traditionally Marxist thesis that profitability requires the destruction or dramatic devaluation of capital stock; “if, on the other hand, capital is not destroyed to a sufficient degree, there is no boost in profitability.” Capital investment can only remain profitable, Kilman suggests, if its rate of profit is managed by periodic destruction of capital (either by war, calamity, or sufficent slump), “in an economic slump, machines and buildings lie idle, rust and deteriorate, so physical capital is destroyed. More importantly, debts go unpaid, asset prices fall, and other prices may also fall, so the value of physical as well as financial capital assets is destroyed. Yet the destruction of capital is also the key mechanism that leads to the next boom” (LINK). This destruction/boom thesis, largely tracks with two key data points of Piketty’s analysis, first, what he calls the “catchup” of growth–the tendency of growth to spike following a trauma (e.g. approx. 4% global growth from 1950-1990)–and the dramatic reduction of national capital’s value (1910-1950).
Next, Piketty examines the role of “net foreign capital,” a source of capital whose effect on total national capital is shockingly low. Certainly, as Piketty notes (solely analyzing Britain and France), the imperialist reach of these two colonial powers resulted in a heyday of foreign capital during the late 19th/early 20th century–“by the eve of World War I, Britain had assembled the world’s preeminent colonial empire and owned foreign assets equivalent to nearly two years of national income, or 6 times the total value of British farmlands” (120)–but this boom was incapable of surviving the fall of colonialism in the 20th century. Rather, what Piketty discovers is that like non-colonial powers, Britain and France’s post-colonial net foreign income was largely neutral: “the net foreign asset holdings of France and Britain varied from slightly positive to slightly negative while remaining quite close to zero, at least when compared with the levels observed previously” (122).
In the second half of the chapter, Piketty shifts his focus to the question of public vs. private capital/debt. Central to this analysis is the recognition that public debt generally manifests as private domestic income. Simply put, when the government owes money, it is generally to its own population (e.g. government bonds). The importance of this fact is twofold. First, it means that government debt does not affect net national capital (the public debt is cancelled by the private income). But, second, that this debt does significantly increase the private share of national capital over and against public capital. In fact, private capital, at least in the two cases that Piketty analyzes (Britain and France) has already dominated public capital throughout their respective histories (since at least the 18th century). “Net public wealth,” Piketty writes, “is quite small and certainly insignificant compared with total private wealth” (125). So great is this difference, that public wealth only marginally affects net national capital at all. “In other words,” he writes,” the history of national capital to national income in France and Britiain since the eighteenth century, summarized earlier, has largely been the history of the relation between private capital and national income (see Figures 3.5 and 3.6)” (126). From the perspective of American politics, this revelation is central, as it challenges the myth often propogated by conservative voices that France and Britain represent socialist (even communist) nightmare regimes, where private wealth is severely penalized. On the contrary, as Piketty shows, “after 1950, France became the promised land of the new private-ownership caplitalism of the twenty-first century” (138). Even prior to the 1980’s “conservative revolutions” and their mass privatisation of public assets, the post-WWII nationalization of various institutions (auto industry, coal mining, etc.) by pro-socialist parties in France, still barely put an dent in private capital’s decisive monopoly on national capital (at that time, net private capital still roughly doubled net public capital).
In the next chapter, Piketty will shift his gaze from the French and British situation, in order to examine the development of capital in Germany and America (US and Canada). In the meantime, I will also hunt down and post a recent article by Kliman which more directly targets Piketty’s work, in order to offer an alternative perspective on capital and labor.
Here is this week’s Online Deleuze Reading Group Link
In the second chapter of his Capital, Piketty analyzes two distinct, though by no means unrelated conceptions of growth–population growth and productive output growth. Both of which, Piketty suggests, have been greatly misunderstood by economists, who have been biased toward the period since the industrial revolution, or even more specificially, the twietieth century. Rather then understand these periods as normative and the present “stagnation” as divergent, Piketty suggests precisely the opposite, the present stagnation (at least in the West), is, on the long scale, a return to normalcy.
This discussion of growth will be pivotal in Piketty’s argument, as it is precisely the establishment of the “natural” rate of output growth closer to 1%, rather than the often sought 3-4%, which will feed the assymetry of his central formulation: r>g. As he writes, “the central thesis of this book is precisely that an apparently small gap between the return on capital and the rate of growth can in the long run have powerful and destabilizing effects on the structure and dynamics of social inequality” (77).
The first target of analysis is population growth. Clearly, any discussion of population growth from an economic standpoint cannot help but stand in the shadow of Malthus’ infamous population pessimism. Yet, it is precisely such a pessimism that Piketty challenges. By examining population growth over the long term, Piketty suggests that the rate of growth in population should be understood, as neither static, nor increasing, but instead as a bell curve. Piketty notes that the dramatic increases in growth, particularly during the early years of the twentieth century (nearly 2%), have already begun to dramatically decline (presently approx .9%) and based upon his projections, will continue to decline throughout the ensuing century (bottoming out a little below .2%). Of course, Piketty is careful to note that his furture predictions of highly tentative. As Niels Bohr famously quipped, ” it is difficult to make predictions, especially about the future.” Nonetheless, a central point can be abstracted from his analysis. As he notes, “other things being equal, strong demographic growth tends to play an equalizing role because it decreases the importance of inherited wealth: every generation in some sense constructs itself” (83). This notion can be seen quite easily with an (overly simplistic) example. If a wealthy capitalist owns, say, 10 million dollars in capital at the time of their death and has a single child, that child will inherit 10 million dollars. Yet, if that same capitalist has 5 children (setting aside privelege for older children etc.), each child will now merely inherit 2 million dollars; 10 children, 1 million, so on and so forth. By this same principal, as larger communities increase, wealth tends to disperse more thoroughly and wealth inequality tends to decrease.
Thus, he contends, the greatest inequality of the preceeding few centuries was (at least partially) held in check by a rapidly increasing poulation. But, as this population growth reduces, perhaps not to stagnation or decrease, but certainly below the rate of output growth (.2% pop. growth, as opposed to 1% output growth), then we should see an increase in inequality over the next century.
Turning to output growth, and as I have already mentioned above, Piketty believes that the traditional neo-liberal narrative of 3-4% natural growth is wholly misguided. Quite to the contrary, Piketty contends, the rate of output gowth since the industrial revolution has been a (surprise surprise) bell curve. Much as population, though with a peak centered a generation or two later, the rate in output growth remained relatively stagnant from 0-1700, increased through the industrial revolution, and shot through the roof during post-WWII reconstruction, but has since largely settled back down to pre-war levels. In Piketty’s analysis, this fantastic growth 3-4% was a bizarre anachronism, pushed forward by the need to recover from the destruction of the war (hence, for example, the rate of growth during that period was considerably higher in continental Europe than the United States). “Past growth,” Piketty contends:
“as spectacular as it was, almost always occurred at relatively slow annual rates, generally no more than 1-1.5 percent per year. the only historical examples of noticeably more rapid growth–3-4 percent or more–occurred in countries that were experiencing accelerated catch-up with other countries” (93).
This annual growth rate of 1-1.5% Piketty thus argues, is the standard growth rate of a country on the edge of industrial and technological expansion. “The key point is that there is no historical example of a country at the world technological frontier whose growth is per capita output exceeded 1.5 percent over a lengthy period of time” (93). Nonetheless, he is also not one to belittle such growth rates. As he notes, “over a period of thirty years [one generation], a growth rate of 1 percent per year corresponds to cumulative growth of more than 35 percent. A growth rate of 1.5 percent per year coresponds to cululative growth of more than 50 percent” (95). Thus, as he cleverly puts it, even at the so-called “near-stagnant” rate of growth of 1% per year, more than a third of businesses, capital, and production will be new for each generation.
The section ends with a brief look at inflation, which as he notes, is largely a 20th century phenomenon. Drawing upon nineteenth century novels, e.g. Jane Austen and Balzac, Piketty notes that income was often used as a status indicator. This literary feature would later disappear from 20th century fiction, not because they become more “polite,” but because the income of one generation would be completely meaningless in a generation or less. One need only examine yearly income, or house prices from their parent’s or grandparent’s generation to see how meaningless such figures became under inflation. It is unclear as of yet precisely what role this analysis of inflation will play in the forgoing analyses. Certainly, inflation is central to his output growth statistics, which are themselves adjusted for inflation, but whether this disucssion merely seeks to underly his existing numbers, or whether it will reemerge in the later portions of the book is of yet unclear.
Having now moved through Part 1 “Income and Capital,” the next post will begin Section 2 “The Dynamics of the Capital/Income Ratio,” and its first chapter “The Metamorphoses of Capital.”
In honor of my current project working through Piketty’s tome, here is an interesting critique of the work by the prominent Marxian economist, David Harvey. Harvey, with greater vigor than I have mustered, challenges the work from the position of Marx’s Capital, and accuses it off failing to offer a coherent notion of capital, and thus, a coherent account of the underlying reality which generates the “law” r>g.
[ Edit: if the above link doesn’t work, here is the full address: http://inthesetimes.com/article/16722/taking_on_capital_without_marx ]