Capital and Ideology - Well Worth Reading

I am about to finish Capital and Ideology, a 1000 page book by French economist Thomas Piketty.  It is requiring a major commitment but it is well worth it.  I want to mention several of the most interesting things that Piketty writes in this massive tome.

 

Piketty surveys the history of what he calls ‘inegalitarian regimes’ right up to the current growing inequality of the 21^st century.  His approach is very analytical and he makes use of data and statistics that he and his associates have gathered from historical archives and many other sources.

 

Piketty clearly believes that income and wealth inequality, especially in extreme forms, are an unhealthy condition for society.  He is not a Marxist or a communist, but he is also supremely skeptical of the efficacy of the so-called ‘invisible hand’ of pure capitalism. 

 

The first part of the book tracks the long history of what Piketty calls the ‘ternary’ regimes – regimes that consist of some sort of religious/clerical class, a warrior/noble class and a peasant class.  These regimes dominated the world for many centuries.  The inequality in these societies was extreme – the peasant class, by far the largest in number (usually close to 90%), essentially owned nothing or very little.

 

During the industrial revolution a new elite joined the traditional noble class, but inequality continued to be extreme.  The age of revolution and social consciousness in the late 1800’s ushered in a political will to address these inequalities, starting with Bismarck’s social security policies in Germany.  Later, the two world wars and the depression in the early to mid-1900’s caused major disruptive changes and resulted in a more active role for government in the world economy.

 

The post-WW2 period from 1950 to 1980 was a period of rapid economic growth, but also a period of serious efforts to redistribute wealth and income.  The level of inequality was dramatically lower than ever before in history.  Higher income and wealth taxes were utilized partly for war debt repayment but also to fund social programs and national infrastructure development.

 

But moribund economic results in the 70’s caused a shift away from redistributive tax structures (the Reagan and Thatcher era) and a return to full-throated worship of the free market.  The abject failure of communism seemed to place unfettered capitalism on an unassailable pedestal. The period from 1980 to 2022 has propelled income and wealth inequality to new heights and has caused a total stagnation of middle and lower middle-class incomes.

 

What is particularly interesting in Piketty’s analysis is the evolution of political alignment in the years from 1950 to the present.  From 1950 to 1980, the parties of the left were primarily supported by voters with lower income and lower education.  Conversely, those with higher income and education strongly supported the parties of the right.  This held true for all western democracies.

 

Since 1980, there has been a dramatic shift in these allegiances.  More highly educated voters have moved to the parties of the left (you can see this in my summary of the 2020 election poll by the Pew Charitable Trust - https://rvgeiger.blogspot.com/2022/01/the-2020-election-demographics-what-do.html) and the less educated have moved to the right.  But there is still a significant high-income group (not necessarily highly educated) that has remained faithful to the parties of the right.  Piketty terms these two groups the ‘Brahmin Left’ and the ‘Merchant Right’.

 

Piketty believes that this evolution is due to a couple of factors:  one, that lower income voters have not seen their circumstances significantly improved by the policies of the left and thus have become disenchanted, and two, that the globalization and meritocratic focus of the left has mainly benefited the ‘Brahmin Left’, leaving much of the population behind but attracting well-educated voters.  

 

Piketty posits that the policies of Clinton, Blair, Obama and Macron have not been significantly different than their conservative opponents in terms of reducing income and wealth inequality.  He sees the nativist/identity issues (immigration and nationalism being the primary ones) as secondary, though recognizing that these also play an increasingly noisy role.

 

Another interesting analysis in the book is how the lack of transparent international financial recording and the competition between countries for business by providing tax havens has allowed massive fortunes and profits to be realized and kept hidden from view.  This has clearly accelerated the global accumulation of absurdly disproportionate wealth by the top earners.

 

I have not yet read the final chapters that propose a new international approach to socio-economic challenges.  But it is clear that the current trends are unsupportable in the long run and can only lead to social and political instability.  Whether the world will be able to address this problem while facing climate change and the resurgence of totalitarian regimes is a weighty question.  If we cannot overcome the inertia of today's political chaos then there may be hell to pay.