Where are the power relations in Piketty’s Capital?

I would like to raise two related questions to Thomas Piketty. The first

concerns his repeatedly declared conviction that economic theory cannot

explain trends in inequality by itself, that policies and institutions

are equally important, and that economists must therefore put forward

their hypotheses and explanations with this interdependence in mind.

Given what I have understood Piketty’s main thesis to be, I wonder up to

which point he is actually committed to that claim. The second concerns

Part Four of _Capital_, where Piketty sketches a proposal for how to

regulate capital in the 21st century. In a nutshell, my concern about

Piketty’s proposal is that there seems to be a friction between the

diagnosis offered in the rest of the book (which seems to draw a rather

bleak picture of the power of capital in the early 21st century) and the

suggested cure (which seems to rely on the optimistic hope that, once

well-minded citizens will have recognized the problem, the only hurdle

will be to find the right policy to fix it). To put it provocatively,

both my questions are inspired by the suspicion that Piketty seems to

hold on to a social-democratic optimism of sorts at all costs, whereas

his findings seem to push him in a different direction. With the label

‘social-democratic optimism’ I mean two things: on the one hand,

optimism about the role of policies and institutions in taming capital

on the one hand; on the other, the persuasion that what politics is

fundamentally about is making citizens understand what the problems are

in a well-minded, reasoned dialogue, and then they will be persuaded to

do the right thing.

Let me unpack the first question first. To the best of my understanding,

whereas the book makes repeated gestures towards the idea that policies

and institutions play a central role in explaining economic trends, and

that economists should be extremely cautious to draw conclusions on the

basis of their own discipline alone, there is very little politics in

_Capital._ The book argues that our delusion, in the decades following

WWII, that democracies could, after all, tame capitalism and make it

subservient to public ends was largely just that – a temporary delusion.

Piketty’s thesis, especially in chapters 3 to 6, is that the sheer

destruction of wealth caused by WWII is the central reason why

inequality seemed to be back under control for a while in the Bretton

Woods era. It is that destruction which temporarily brought long term

trends (the ‘fundamental laws of capitalism,’ and the capital/income

ratio and _r>g_ in particular) out of line. Although Piketty

repeatedly claims that policies and institutions also played a major

role, it is rather unclear, from his analysis, what that role was. The

rise of the welfare state and its regulatory policies – in short,

democracy’s control over capital – play only a moderate role in his

historical analysis. This explains his claim that, once the

effect of WWII started to wane, capital (though not its share of the

pie, or at least not yet) slowly returned to its 19th century shape.

Indeed, one of Piketty’s most insightful ideas, to a lay reader like me,

is his point that the internal structure of capital (the role played by

land or by financial capital, for instance) then and now are very

different, yet the capital/income ratio remains surprisingly constant

across history with the only exception of the _Trente Glorieuses._ Most

of the book seems to imply that, bar extreme shocks, what he calls ‘the

fundamental laws of capitalism’ take the upper hand – and such laws lead

to the rise of a patrimonial and largely unaccountable aristocracy. In

short, the idea that the problem is capitalism period (not deregulated

capitalism, not globalized capitalism, not austerity-based capitalism)

seems to lurk in the background. Yet such claims are never explicitly

made. General lessons are not absent. Piketty argues, for instance, that

‘progress toward economic and technological rationality need not imply

progress towards democratic and meritocratic rationality’ (p. 234); or

that ‘there is a set of forces of divergence associated with the process

of accumulation and concentration of wealth when growth is weak and the

return on capital is high’ (p. 23). Yet they are formulated with extreme

caution.

My hunch, from reading that part of the book, is that Piketty’s

thesis actually suggests (and, to be clear, it is a suggestion I find

quite persuasive) that the policies and regulations of the post-war era

were, if at all, the effect rather the cause – i.e., they were made

possible by the fact that the power relationship between capital and

labour had changed, but did not cause that shift in power relationships

themselves. As such, they were perhaps instrumental in further slowing

down the recovery of capital, not in determining it. And indeed, once

the recovery of capital reached a certain level, a change in policy

trends followed suit. If this is correct, such a diagnosis has a

sobering effect: it means both that social-democratic politics by itself

is by far not enough to contain inequality, and that it is itself only

possible when a window of opportunity opens up, and it is a window of

opportunity determined by extraordinary events (and events we probably

would not want to see repeated any time soon). So, isn’t Piketty telling

us that the long-term trends set by the ‘fundamental laws of

capitalism,’ and not regulatory policies, are where the action is, after

all? Now, my reading may very well be wrong; but if so, I would like to

know where exactly it is wrong.

Let me now turn to my second question. It will quickly become evident, I

hope, that it is related to the first. In Part Four of *Capital*,

Piketty asks: if the dynamics of inequality are those which I have

identified so far – namely, if ‘forces of divergence’ are particularly

obstinate under capitalism, bar exceptional shocks – how, if at all, can

we structure policy to oppose or at least mitigate such tendencies?

Piketty’s answer, after the review of several alternatives, is

cautiously formulated but clear: a highly progressive, global tax on

capital. This, he adds, might be a utopian project in the short run (and

perhaps in the long run, too), but it nevertheless constitutes the

regulative blueprint we should adopt to reach any more realistic,

midterm goals. Now, the question I would like to raise is very simple:

given the picture that Piketty himself has drawn throughout the book, is

the proposal of the optimal policy to ‘fix’ the problem an appropriate

way to end it? My suspicion is that it might suggest that the kind of

problem identified by Piketty is one which, once widely recognized and

acknowledged, will almost automatically generate the political will to

fix it. Inverting the trend is just a matter of good will – this is what

I mean by ‘social-democratic optimism.’

I find this twist somewhat puzzling, and I am not alone. Other readers,

whether generally more critical like [Thomas

Palley](http://www.thomaspalley.com/?p=422)[^11] or overall very

appreciative like [Paul

Krugman](http://www.nybooks.com/articles/archives/2014/may/08/thomas-piketty-new-gilded-age/)[^12],

have also pointed out a very basic point: if patrimonial capitalism is

back, then surely its determination and capacity to influence political

power is, too? And if this is the case, then surely the problem is not

to identify a good policy which everybody will agree to once they have

understood Piketty’s diagnosis to be correct, but to think about how to

harvest the sufficient counter-power to put any redistributive policy

back on the agenda to begin with. In other words, we seem to need less

policy and more politics: the emphasis should be more on political

action and political processes than on which cure to put forward once

the political power to put forward a cure at all has been achieved. Both

the rise of economic elites and their capacity to use globalization in

their favor (by threatening capital flight, to mention but the most

obvious example) have undermined the capacity of other sectors of

society to participate in democratic politics, whether through parties

or unions Ð so much so that some observers today argue that we might

very well live in [de facto

oligarchies](http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=9354310)[^13],

at least in some jurisdictions.

If this is the case, the point seems to

be how to reclaim some control over our democracies – how to generate

the political conditions under which the right policies and institutions

could be back on the agenda to begin with. To make an example, and as

some have already argued, the final part of Capital would have been more

in tune with the rest of the book had it concentrated on the [prospects

of labour as a political

actor](http://www.salon.com/2014/05/11/the_problem_with_thomas_piketty_capital_destroys_right_wing_lies_but_theres_one_solution_it_forgets/?utm_source=facebook&utm_medium=socialflow)

rather than on designing the optimal, if utopian, policy. I am not

thereby implying that Piketty should have the solution to these problems

– this is not his job and, indeed, it is very unclear whose job exactly

it is. But I am puzzled by the absence of a more straightforward

acknowledgment of the issue. By jumping to an exercise in admittedly

utopian policy design, the book ends with an optimistic note that is in

contrast with the rest of the book, for it suggests a faith in the power

of well-meaning democratic politics which, if my reading of the books

main these are correct, strikes me as unwarranted. I am not known for

quoting Slavoj Žižek, but I must confess that I found the [way he

recently put this

point](https://www.youtube.com/watch?v=GgOVVCHp0lM) particularly

eloquent: ‘If you imagine a world organization where the measure

proposed by Piketty can effectively be enacted, then the problems are

already solved. Then already you have a total political reorganization,

you have a global power which effectively can control capital, we

already won… The true problem is to create the conditions

for his apparently modest measure to be actualized.’

In a way, I would have found the book more consistent had it contained

no Part Four at all, and had it admitted that our main and probably

daunting challenge today is to found out how to reach a place where

something resembling the content of Part Four can be put on the table at

all. Such an ending, if more pessimistic, strikes me as more in line

with the findings of _Capital,_ which are very radical indeed and

somewhat at odds with social-democratic optimism. Again, I could be

wrong – but if I am, I am very keen indeed to understand why we have

reasons to be optimistic. I would like to end that my questions might

strike readers as being somewhat provocative – if that is the case, the

reason why they are is that I found the book extremely insightful and

eye-opening, and I am tempted to say that its implications might well be

more radical than its author wishes.

Post-Scriptum: Acknowledging that the problem is in creating the

political conditions for a change in policy making might entail

accepting fairly high levels of political conflict. Piketty might find

this highly undesirable, and this could be a key to an [alternative

interpretation](http://robertpaulwolff.blogspot.co.uk/2014/04/thomas-piketty-capital-in-twenty-first.html)

of his conclusions, according to which what prompts his emphasis on

optimal policies is not social-democratic optimism but the awareness,

and the will to communicate to those who have control over

policy-making, that letting inequality unravel will inevitably generate

massive social and political destabilization, and that everybody (the 1%

included) has a strong interest in avoiding that. Part Four is therefore

not the expression of optimism, but a recipe to avoid a disaster. Again,

I would be extremely interested in reading what Piketty has to say about

this.