The Power of Piketty’s Capital

This post originally appeared in The Nation.

If you were among those who followed the reports on French economist Thomas Piketty’s US book tour in support of his university-press-published, 696-page, Marxism-tinged treatise on inequality, Capital in the Twenty-First Century and taxed your brain trying to recall a remotely recent antecedent for the ensuing excitement, well, relax; there isn’t any.

No less remarkable is the fact one can, for once, believe the hype. Beautifully translated by Arthur Goldhammer, Piketty’s Capital is simultaneously intellectually rigorous, historically grounded, culturally nuanced and, in important respects, politically visionary. Even nitpicky economists who take issue with some of his interpretations of the mountains of data he and his colleagues assembled feel compelled to shower the book with praise beforehand — and frequently after as well. Paul Krugman credits Piketty with inspiring “a revolution in our understanding of long-term trends in inequality.”

Piketty’s central thesis presents a profound challenge to our political system and its response to the economic crisis of the past decade. As he puts it, 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.” Moreover, “there is absolutely no doubt that the increase of inequality in the United States contributed to the nation’s financial instability.

The reason is simple: one consequence of increasing inequality was virtual stagnation of the purchasing power of the lower and middle classes in the United States, which inevitably made it more likely that modest households would take on debt, especially since unscrupulous banks and financial intermediaries, freed from regulation and eager to earn good yields on the enormous savings injected into the system by the well-to-do, offered credit on increasingly generous terms.”

While edifying intellectually, all this attention to inequality raises the question of what comes next — or, to borrow a phrase from another famous student of capital, what is to be done? Surprisingly for an academic economist, Piketty does not demur. On an entirely utopian plane, he imagines the effect of a progressive global tax on capital. “Such a tax would also have another virtue: it would expose wealth to democratic scrutiny, which is a necessary condition for effective regulation of the banking system and international capital flows.” On a minutely less unrealistic level, he argues for confiscatory tax rates on the wealthy of up to 80 percent. And on an ever-so-slightly more imaginable plane, he calls for boosting the minimum wage and improving the education and training opportunities of the poor and middle class, who are increasingly priced out of our faux-meritocracy, which is itself shaped by economic inequality.

But to be brutally honest, it’s hard to imagine any measurable impact from Piketty’s work on the problem it seeks to address — at least insofar as it relates to America today. “Inequality is not just the result of economic forces,” notes economist Joseph Stiglitz, “but political processes themselves are affected by the level and nature of inequality.” Stiglitz and others may treat this fact as cause for optimism. I do not. The chances that significant national action will be undertaken to improve the lives of the vast majority of our citizens have fallen to nearly zero, should such action be perceived to conflict with the interests of any subset of the super-rich, regardless of how small their number or how trivial its cost.

The ability of money to win what it wants is the defining characteristic of our politics — one exacerbated by the Supreme Court’s recent decision in McCutcheon and Citizens United before that. A reflection of this power and a not-so-silent partner in the ethical crimes it perpetrates, is the manner in which demonstrable bullshit is able to dominate our political discourse and thereby mask all of the above behind ideological assertion and meaningless cliché. In his discussion of Piketty, Krugman recalls Upton Sinclair’s famous observation that “it is difficult to get a man to understand something when his salary depends on his not understanding it.” Thanks to the simultaneous corporatization and conglomeratization of our media apparatus, that category now includes almost every credentialed political pundit in America. (On this topic, congratulations to ABC News on the hiring of both William Kristol and Laura Ingraham for its Sunday-morning show This Week With George Stephanopoulos.)

As with Piketty’s data, the proof is in the proverbial pudding. Researching 1,779 national policy outcomes over a period of 20 years, Martin Gilens and Benjamin Page note in a new study that “economic elites and organized groups representing business interests have substantial independent impacts on US government policy, while mass-based interest groups and average citizens have little or no independent influence.”

This dynamic is evident in pretty much every policy area where the interests of even a relatively small number of really rich folk are remotely imperiled. Writing in The American Prospect, Jacob Hacker and Paul Pierson compare inequality to climate change, a problem “in which a solution must not only overcome powerful entrenched interests in individual countries but must be global in scope to be effective.”

Good luck with that. Just prior to Piketty’s arrival here, the United Nations’ Intergovernmental Panel on Climate Change released yet Koch brothers — whose estimated net worth now exceeds $100 billion — and their puppet politicians and pundits continue to profit from the poisoning of our planet, you can bet nothing will be done.

Behold, ladies and gentlemen, the power of capital in the 21st century.