Capital in the 21st Century: Introduction
This summer I will be working through a comprehensive exam engaging the intimate link between leftist economics and liberation theology. Since Piketty’s controversial Capital in the Twenty-first Century has been the increasing center of economic, political and social debate, I couldn’t help but incorporate it into my work, even if its liberal approach sits somewhat uncomfortably within the more explicitly left/socialist work of Marxian economics and liberation thought. That being said, I am nonetheless excited to break into this powder-keg, it being (I suspect) the first piece of serious (sorry Freakonomics) economic thought to have broken into the public consciousness to this degree in decades (having reached #1 on the NYT Nonfiction Best Sellers list in early June [presently 3rd]).
With this reading in mind, I have decided to blog my way through the text, devoting a small note to each chapter of the lengthy book. My hope is that these blogs will function as “cliff notes” for those who don’t have the time (or desire) to slog through 600 pages of economic data, as well as offering bits of my own thoughts and critiques, particularly as related to the Marxian economic writings that I will be reading simeltaneously.
Today I completed the introduction, which attempts to historically situate the work within political-economy, as well as lay out the basic methodology. While distinct, these two concerns are by no means divorced from eachother. Rather, the principal critique that Picketty will level against the classic political economists–from Malthus and Young, through Ricardo, to Marx–is a failure to properly ground their work in the “data.” Data, it already seems, will be the recurring refrain of the work, a fact which is consitent with his public appearences and self descriptions as a bit of a data-phile.As he writes, “intellectual and political debate about the distribution of wealth has long been based on an abundance of prejudice and a paucity of fact” (2). Nevertheless, to his benefit, Piketty does not merely denigrate the non-empirical character of classical political-economics, and unequivocally throw it out. Rather, he recognizes the strengths in each thinker, pulling out small noteworthy pieces which will be incorporated into his overall project (e.g. the relevance of population in Malthus, scarcity in Ricardo, and the internal contradictions of capitalism and the indefinite return on capital in Marx).
Nonetheless, it is the twentieth century optimist, Kuznets, who will function as Piketty’s true spiritual forefather. For, it is Kuznets who attempted an investigation on wealth inequality methodologically centered on data; “it was the first theory of this sort to rely on a formidable statistical apparatus” (11). Ironically, for important historical reasons (the Great Depression and the World Wars), Piketty will suggest that Kuznets’ conclusions are misguided, even directly opposed to his own (Kuznets argued that inequality naturally decreases over time). Nevertheless, the methodological strength of Kuznets–even if his data was insufficient or narrow (only covering, roughly, 1920-1950)–leads Piketty to rate and regard the economist rather highly.
It is in this way that Piketty’s methodological concerns are directly tied to the historical, for it is this heavily statistical/data-oriented Kuznetsian approach that Piketty himself takes up in Capital. Drawing upon a variety of sources, most importantly income and estate tax records, Piketty charts a course of inequality inverse of Kuznets’ curve (the claim that inequality follows a bell curve, getting initially worse, then correcting itself over time). On Piketty’s account, the share of wealth among the top decile has a tendecy to expand over time, a process which was merely momentarily disrupted by the Great Depression and the World Wars, but which has, since the 1970’s, returned to its “natural” state of rapid increase.
This tendency is sumarized by Piketty in his now (in-)famous formula “r>g”. That is to say, the rate of return on capital investment is greater than the growth of GDP. Thus, if the top decile’s wealth is increasing faster than the economy is growing, than by necessity their share of total wealth will necessary increase, along with wealth and income inequality.
Since this is an introduction, and Piketty has not yet begun to lay out his thoughts in detail, I will refrain from too much critique. I will merely say that–as I am currently working through Marx’s Capital at the same time–Piketty is certainly correct that Marx makes very little use of statistics or hard-data. Though, I think that Piketty may be overstating the case to mark this as a failure of Marx’s policital-economic writings. Simply put, Marx appears, at least in my reading, to be undertaking an entirely different sort of program than Piketty, one which does not use data in the same way, but in my opinion at least, also doesn’t appear to “need” it. Marx is much more directly concerned with the internal structure of capital, a concern which appears quite well fitted to his ideological and notional analyses. But, again, it is worth noting that as uninterested in connecting his work to Marx as Piketty seems to be, he also does not seem particularly interested in disparaging him.