Capital in the 21st Century by Piketty

I haven't read beyond the intro yet, but seems to be an extended discovery that wealth accumulates to the owners of capital, interspersed with weird assertions about Marx being wrong (he didn't understand machinery could improve productivity, apparently).

I read a decent critical review of this. So decent that I promptly forgot all about Picketty as "obvious reactionary toss". Unfortunately I can't remember where that review was. However here's a not bad Monthly Review one:
MR: Thomas Piketty's Capital in the Twenty-First Century: Its Uses and Limits

also:
Michael Roberts: Thomas Piketty and the search for ‘r’
Shorter than the Monthly Review piece, however Roberts rather coyly asks questions without giving answers (or explanantions) as he's due to write a proper review for the next Historical Materialism (as he says up front).

A Marxist review of Piketty's book is at
http://mltoday.com/professor-piketty-fights-orthodoxy-and-attacks-inequa...

Not yet read the book, but from reading other stuff from him in English and French that summary seems accurate enough.

One of his criticisms of Marx is that Marx's (and Ricardo's) theory of the long-run tendency of the rate of profit to fall implies that the rich get poorer whereas they've got and get richer. He also seems to think that Marx thought that capitalism would eventually collapse economically because the rate of profit would fall to low.

By capitalism he means unregulated capitalism. His solution amounts to a redistribution of surplus value more equally among the property-owning class by a "tax revolution", i. e. regulated capitalism. See this.

This is a useful short summary of the (dubious) axiomatic reasoning behind Piketty's idea.
Matt Bruenig: Piketty on Marx

Ah, found it. It was the James K. Galbraith review in Dissent mag I read some time back, that I thought was pretty definitive. (or good enough for me, anyway).
J K Galbraith: Kapital for the Twenty-First Century?

The key here is the confusion between capital-as-physical-assets and capital-as-market-value-of-capital-assets. Not to mention finance capital.

And then he goes on to talk about the Cambridge controversy, which Piketty gets entirely wrong, unsurprisingly, as its the key to deconstructing his whole argument.

In short - read this one first.

I was thinking about this in relation to another thread obliquely touching on MMT. Which I won't go into here other than to say that a bit of research led rapidly to the conclusion that MMT is "not even reformist".

I think there's a tendency to dump political positions - other than the outright reactionary/pro-oligarch - into a reformist/revolutionary binary. imho there's value in adding a bit more granularity in the space between communist and neoliberal positions. So MMT for e.g. suggests that austerity is unnecessary because government can simply turn on the money printing press and spend our way into recovery (I simplify, but actually not much!). This is a simple government policy choice that doesn't involve any redistribution from capitalists to workers. Nor does it involve any structural changes in the way the system works. So it's neither redistributive nor reformist.

Piketty's solution is at least redistributive. He identifies a problem in capitalism's current direction that it's making the rich richer and the poor poorer (those trees did not die in vain!). But in terms of actual reforms, his only real reform is simply to put in place a redistributive tax mechanism (a souped up Tobin tax, afaics, ATTAC must be wetting themselves,,,*).

So, on the distributive axis you could go further to the extreme of socialisation of the means of production - i.e. actual expropriation of the expropriators. Now socialists say that's not just an extreme form of redistribution, but a radical structural change or reform, because private property relations (in the means of production) have been changed/abolished.

Of course the communist critique of market socialism, collectivism or other forms of self-managed capitalism, is precisely that most of the structure of social production as private production for exchange, remains unchanged, so from a communist point of view, socialisation of the m.o.p., while a necessary redistributive measure, is not sufficient to ensure a permanent rupture with the social relations of capitalism.

But before we get all the way to settling the dispute between socialists and communists, there are other proposed changes, which explicitly fall short of revolutionary anti-capitalism, but which propose actual (if limited) changes to the day-to-day functioning of how production and circulation actually function. Often without any direct redistributive precondition (of course many of the more egalitarian-minded ones may hope to see redistributive consequences of their pet reform, but that's effect rather than cause). Regardless as how cranky or naive most of these measures may be, it seems appropriate to call them reformers, rather than redistributionists or simple panacea hawkers (e.g. MMT).

All of which is a long-winded way of saying, maybe it would be worthwhile distinguishing two axes of alternative progression - a redistributive one and a restructuration one. By properly categorising people in relation to these two dimensions, we can clarify which arguments (and inconsistencies) are most worth focusing on. (And perhaps even, which ones are not even worth bothering with)

Anyway, just an idea.

Summary: Piketty - not quite as shit as MMT (but then not much is).

* originally wrote: "ATTAC must be wetting themselves over Piketty"; then realised this conjured up an unfortunate image.

He's a social liberal or left-liberal. Contradicts neo-classical/conservative views in many ways. He writes in a clear & engaging way, which helps with all the mind-numbing charts & so forth.

I think a worthwhile aspect of the book is that it marshals extensive & comprehensive statistics about wealth accumulation & capital accumulation & global growth & inequality....over long periods of time. This makes it possible to compare different periods in the history of capitalism.

It's value for me is sort of marred by the way he defines "capital" as equal to all wealth, so if a working class person owns a house outright (paid off the mortgage, say) then that is net capital. The problem here is in failing to understand capital as a class relation, a power relation to factors of production, in particular, to labor. He tends to define "class" in the liberal way, in terms of income.

Nonetheless, that weakness is made up for to some extent by the fact he focuses on the top wealth owners, the "1 percent", or in some cases the top 10 percent, and breaks down composition of income sources. So one difference in the "1 percent" today versus late 19th century is that back then "the 1 percent" got 90 percent of their income from capital income whereas, at least in USA, today it is 60 percent. He refers to all forms of corporate officer compensation -- salaries, bonuses, stock options -- as "labor" income which doesn't seem right to me. Nonetheless, his stats do back up his claim that capitalism has tended towards the rise of what he calls "super-managers"....top management in corporations. Given the bureaucratization of capitalism in the last century, this seems unsurprising.

He also looks at public expenditure as percentage of national output. He points out that today it's about 30 to 40 percent in USA & western Europe. He says that back in the 19th century it was around 10 to 15 percent. That's because the state back then was the "night watchman" state...it's focus was on police, military, judiciary, etc. The emergence of systems of social provision since the '30s has led to the big increase in state spending for things like education & health care. He points out that despite neoliberalism, the size of the state as a percent of national income has not declined since the '70s but has stabilized...stopped growing as a percent of national output.

His left-liberalism comes out towards end of the book in his attack on the current austerity polices in Europe. He proposes as an alternative a global, or at least Europe wide, progressive tax on all forms of capital. Starting at 1 percent on fortunes of 1 million euros. He also tries to justify this as needed to finance campaigns needed to address climate change.

He points out that the relative capital intensivity of Europe -- which he measures as ratio of capital (all forms of wealth) to output -- is equal to its highest previous point in history...before World War 1, and in USA is equal now to highest point in past, which was achieved during the Roaring 20s boom.

His main line of argument is that capital intensivity in this sense (the relative size of the accumulated capital) will tend to grow as long as the rate of return on capital R is greater than growth of value of output of goods & services G. During the 30 years after World War 2 growth rate in Europe was higher than return on capital, but he says that was due to destruction of capital during the 1914-45 period. He says that that period was unique historically in the history of European capitalism, where R tends to be always greater than G. This in the 19th century the average growth rate was 0.8 percent but R was 4 to 5 percent. He says the current Chinese growth rate is also an unusual "catchup" rate of growth that will not persist over the long run.

He says that this means capitalism has an inherent tendency, what he calls a "logical contradiction", to concentrate ownership ever more unequally, thus increasing the wealth & power of the 1 percent. He suggests that over the long run this is likely to create problems, such as growing resentment & possibly revolutionary movements.

EDIT: I should point out that by G being output, he means output per capita.

Output as a total quantity...essentially national income or GDP....figures in his main formula, about capital intensity, which he labels with the greek letter beta. I'll use B. So B is the total capital stock divided by annual national income. So he points out that on the eve of World War 1 this was 500 to 600 percent or 5 or 6 years of annual income in western Europe. He says that now B in western Europe is again approaching that level. Also, the historic high in B in USA was during the Roaring 20s boom, when it was close to the western European level, and in USA today B is once again approaching the level of the '20s boom.

He argues...very convincingly....that as long as the rate of return to capital is greater than per capita growth in output, this trend can continue indefinitely. But he suggests that there is likely to be some social limit to how far this can go without some sort of social explosion.

At one point toward earlier part of book he suggests Marx also held or suggested that if capital accumulation continued to grow indefinitely like this, this would generate a social explosion, and is one of capitalism's "contradictions."

He points out that the history of the core capitalist countries...especially Europe...was marked by a U structure in capital intensity (shape of the graph)), reaching historic high in 1913, and then going thru vast shocks that destroyed huge amounts of capital between 1914 and late '40s. He refers to war & the great depression & also inflation episodes that wiped out holders of national debt. I'd add revolution, civil war & rise of fascism as additional "shocks" as he puts it. In USA the U shape is less severe, since USA wasn't physically bombed in World Wars. Nonetheless, there were things like the Great Depression & confiscatory tax rates during & after World War 2 on high incomes.

Short piece on him here.

That review by SPGB is incorrect in a key respect: The review supposes that Piketty thinks his thesis applies only to what the reviewer calls "savage capitalism." This is false. Piketty thinks this tendency will follow simply from the historic observed rate of return (4 to 5 percent) being higher than the likely rate of growth per capita. The periods when this did not happen were what he calls "catchup" periods when growth outstripped the rate of profit...as in the 30 years in Europe after World War 2 when output per capita grew by 5 percent per year....an historically unprecedented level. But he does NOT suggest that somehow that rate of growth could be returned to if capital were regulated better....in this respect he differs from the Keynsians like Krugman & others.

Altho he's not a Keynesian, he does propose to tax capital incomes at a progressive rate, to defend the "European social state" against austerity. I would regard this part of his proposal as unrealistic...without major struggle that seems unlikely.

I don't think that the article does argue that this is his view, but I see what you mean. But even if he doesn't think government intervention can make the rate of growth grow faster than the rate of return on capital, he does think that government intervention can stop the returns of capital accumulating more and more in the hands of the few. He is in effect arguing for these returns to be distributed differently through severe taxes on wealth and property incomes. It's the old, failed reformist "redistribution of wealth" policy, which is why his views are getting such a welcome from reformists.

If he doesn't think the tendency of the rich to get richer (as opposed to the rate of return growing faster than the rate of growth) can be reversed why does he call for a "tax revolution" to try to do this? After all, he's not a Trotskyist raising this as an unrealistic transitional demand ! If he really believed that this particular tendency couldn't be reversed he would come as an opponent of capitalism but he definitely does not.

Apols for re-posting a bit of pointless cynical witticism on the subject from yesterday's FT, but it amused me:

sure. and this is exactly where i think he's unrealistic. but i wasn't particularly interested in his reform nostroms. I was more interested in his factual descriptions.

Interestingly in Krugman's latest response to the current round of Post- vs Neo- Keynesian ding-dongs (Palley v Wren-Lewis, in this instance), he takes a swipe at Galbraith's critique of Piketty (as linked above - and again here), in the process of trying to "diagnose" what he thinks is at the root of the problem - i.e. the Cambridge Capital debates -

Which rather ignores that Samuelson, one of Krugman's main heroes, subsequently admitted that his side had lost the Cambridge debate. But anyway, never let the facts stand in the way of a good rant...

An example of Piketty's practical politics here.

A couple of recent pieces on Piketty - the first from Paul Mason in response to the recent FT attack on Piketty's figures. The second from Jacobin mag, more focused on the "how are we going to do anything about it?" question.

Grauniad: Paul Mason, Thomas Piketty's real challenge was to the FT's Rolex types

Jacobin: Mike Beggs, A General Without an Army

He's another crack who understands neither Marx's take on mechanization nor the tendency of the rate of profit to fall.

Michael Hudson probably said it much better. The tendency of the rate of profit to fall is actually basic cost accounting. "Profit," if understood in classical economics terms, comes after labour costs, but the pie for dividends shrinks as the pie for depreciation grows.

That, I think, is a caricature of MMT if you limit it to just spending money. Various MMT-derived policies are more structural than that.

Socialization of the MOP would be more accurately called a form of "predistribution," something different altogether from redistribution.

Paul Mattick Jnr. offers his thoughts on the book

http://www.brooklynrail.org/2014/06/field-notes/editors-note-much-ado-ab...

Thanks for posting that. It was really good - well worth a read.

I recently read the whole Piketty book - doesn't really say a great deal except that inequality is increasing, and he suggests the absurd idea of a global wealth tax. Like, yeah, that's gonna make some kind of a difference.

I think this article from the ICT/CWO was pretty good in it's critical review of Piketty's analysis and in it's explanation and illustration of the Marxist understanding of the 'tendency of the rate of profit to fall' including using some of Piketty's own material to advantage:
http://www.leftcom.org/en/articles/2015-08-07/piketty-marx-and-capitalis...

In addition to the useful Paul Mattick Junior and ICT/CWO reviews above there is this very short comment, rather than review, from Gilles Dauve that rightly emphasises the co-determinant role of collective class struggle in the evolution of 'Western society'.
http://libcom.org/library/reforming-reformers-gilles-dauve

Piketty has now added to all this with his new book 'Capital and Ideology' that rejects Marx's materialist analysis with an idealist interpretation of the causes of inequality and crisis in the modern capitalist economy. Michael Robert's provides this useful critical review in addition to his earlier one on Picketty's first book see here:
https://thenextrecession.wordpress.com/2019/10/18/capital-not-ideology/
See also the links in my posts #22 and #23.