Book Summary: "Capital and Ideology" - Thomas Piketty

Brief about the Book:

To an overwhelming extent, Piketty’s Capital and Ideology* – has neither capital nor ideology as core subjects. Instead, the book delivers an impressive amount of empirical evidence and critical analysis on ‘the nature of inequality regimes’ even though, as the author notes rather frequently, inequality regimes are not natural. Radically, Piketty’s book challenges the l’idée fixe that ‘modern inequality [exist] because it is the result of a freely chosen process in which everyone enjoys equal access to the market and to property and automatically benefits from the wealth accumulated by the wealthiest individuals, who are also the most enterprising, deserving, and useful’.

As a well-trained economist, Piketty starts with a classic line: ‘For this book, an inequality regime will be defined as a set of discourses and institutional arrangements intended to justify and structure the economic, social, and political inequalities of a given society’. While Piketty is an expert on economics and inequality, things get a bit nebulous when it comes to the issue of ideology. He says that ‘I use “ideology” in a positive and constructive sense to refer to a set of a priori plausible ideas and discourses describing how society should be structured’. His book does not deliver a sustained discussion on ideology. As a substitute, he tries to get away with a rather ambiguous definition in which ideology means almost anything and nothing simultaneously, fit well together in a sum with Art Goldhammer & Harvard Business Publishing . Art Goldhammer & Harvard Business Publishing .

While avoiding a healthy debate on the role of ideology in sustaining inequality regimes, Piketty pitches feudalist – Piketty’s ‘tri-functional societies’ against modern property societies – his code word for capitalism. Here, he rejects the notion of an inextricable link between capital and the political-ideological sphere when he emphasises that the political level is autonomous from that of capital. If that is the case, one wonders why there are more corporate lobbyists than politicians in every country with the noted exception of North Korea and Cuba. One also wonders why capital operates a gigantic PR machine telling us day in and day out how wonderful capitalism is. In the end, it is hard to avoid the conclusion that Piketty’s l’idée fixe of an autonomous political-ideological sphere might be somewhat of a misconception.

Book publication date: March 2020.

Brief about the Author:

Thomas Piketty is an Economics and Economic History Professor at EHESS and the Paris School of Economics. His research lies at the intersection of historical economics, political economy and socio-economic history.

He is the author of research articles published in journals such as the Quarterly Journal of Economics, the Journal of Political Economy, the American Economic Review, the Review of Economic Studies, Explorations in Economic History, Annales: Histoire, and Sciences Sociales. He has done historical and theoretical work on the interplay between economic development, the distribution of income and wealth, and political conflict. These works have led to emphasize the role of political, social and fiscal institutions in the historical evolution of income and wealth distribution.

Thomas Piketty is also co-director of the World Inequality Lab and the World Inequality Database, and one of the initiators of the Manifesto for the democratization of Europe.

He is the author of several books including-

Capital in the 21st Century (2014),

Capital and Ideology (2020)

A Brief History of Equality (2022).

Current position

Professor at EHESS and the Paris School of Economics

Co-director, World Inequality Lab & World Inequality Database

Training and positions

1989-1990: M-Sc. in Mathematics at Ecole normale supérieure (ENS, Paris, France)

1990-1993: PhD in Economics at EHESS and LSE (European Doctoral Programme in Economics)

1993-1995: Assistant Professor at MIT Economics Department

1995-2000: Research Fellow at CNRS (Paris, France)

2000-: Professor (directeur d'études) at EHESS (Paris, France)

2007-: Professor at the Paris School of Economics

Other positions

1996-2012: Co-editor of the Journal of Public Economics

2000-: Visiting Professor at MIT Economics Department

2002-2013: Co-director of the Public Policy Programme at CEPR (London, UK)

2004-2006: Director of the Department of Social Sciences at ENS

2004-2006: Head of graduate programme "Analyse et politique économiques (APE)"

2005-2007: Director of the Paris School of Economics

2011-2015: Co-Director, World Top Incomes Database (WTID)

2013-: Prize "Yrjo Jahnsson" awarded by the European Economic Association

2015-2016: Visiting Centennial Professor at the London School of Economics (part-time visiting position)

2015-: Co-Director, World Inequality Database (WID World) and World Inequality Lab (WIL)

2016-: Member of Centre de Recherches Historiques (EHESS-CNRS) and Centre d'Histoire Economique et Sociale Francois-Simiand

Capital and Ideology:- Book Review

Exordium:

Piketty gets very close to the third function of ideology when, for example, noting that ideologies seek to ‘naturalize inequality’ while eliminating ‘alternative forms of social organization’. Such a naturalisation is a classic tool of ideology to prevent emancipation. Piketty also gets close to ideology’s first function when writing that ideologies impose a specific meaning on a ‘complex social reality’. Inside every ideology’s attempts to impose meaning lurks the denial of capitalism’s contradictions (Bell 1976).

The imposing of meaning includes the fact that ‘inequality has come at the expense of the bottom 50%’ while others benefit. During the last three decades, those who benefited ‘were Russian oligarchs, Mexican magnates, Chinese billionaires, Indonesian financiers, Saudi investors, Indian industrialists, European rentiers, and wealthy Americans’.

Building stratospheric wealth and its accompanying inequality regimes acceptable to ordinary people, a handy ideology is needed. Such ‘an ideology [is] based on equal opportunity, but its real purpose is to glorify the winners’. As for the winners, this is a very useful ideology for people [who] find themselves at the top of the heap. The wealthiest individuals can use it to justify their position vis-a-vis the poorest’.

A capitalism-sustaining ideology is not only a pathological machine, it also must be, and is, an ideology that appears to be plausible. For example, ‘the ideology of American exceptionalism has often served as a cover for the country’s inequalities and plutocratic excesses’. As in the USA and elsewhere, ‘inequality of wealth is above all inequality of power in society’.

Piketty correctly identifies the source of inequality regimes when emphasising that ‘history teaches us that what determines the level of inequality is above all society’s ideological, political, and institutional capacity to justify and structure inequality’. This is perhaps Piketty’s key insight into the relationship between capital and ideology. For Piketty’s progressive taxation project, the political context was hardly inspiring from the period 1990–2010. Long before that, ideologies that sustained colonialism told us that colonialism would liberate and civilize nations. The actual conduct, i.e. colonialism, often led to outright disaster, suffering, and misery.

Section I: Inequality Regimes in History.

Piketty sees the years 1990 to 2010 as a period of rising inequality while saying that ‘the period 1950–1980 [was] the golden age of social democracy’ (1116). At this point, Piketty’s interpretation, at least partly and at least in the case of Germany’s social democracy, departs from reality. The 1950s were governed by Germany’s staunchly conservative Adenauer – a strong opponent of social democracy.

Adenauer re-integrated plenty of ex-Nazis into the economic, legal, and political apparatus of post-war Germany. In the 1960s, these ex-Nazis still defined German politics with ex-Nazi chancellors and presidents. Having joined the Nazi party in 1933 with 2,633,930 members, Kissinger used the social-democrats to become chancellor in 1966. Only in 1969, Willy Brandt, chancellor of Germany in a coalition with the neoliberal FDP, became a social democracy. In other words, for most of Piketty’s golden years of social democracy, Germany was not governed by social democrats.

Still, Europe made significant gains during 1950-1990 then declined after that. West Europe’s annual growth of per capita national income fell from 3.3% in 1950–1990 to 0.9% in 1990–2020. Meanwhile ‘the top marginal income tax rate fell over the same period from 68 to 49%’. Piketty’s book is full of economic data supporting his thesis that post-war Europe was defined by a high growth rate and high progressive taxation. Neoliberalism reversed this resulting in a more regressive tax structure combined with a slower growth rate. Instead of trickling down, a vacuuming up of wealth occurred under neoliberalism defined by a worldwide rise of inequality starting during the 1980s (1327). From that time onward, the hegemonic ideology of economists mirrored the Anglo-American form of neoliberal capitalism rather than European social democracy or Germano-Nordic co-management (1357).

Section II: Slave and Colonial Societies.

There is a risk here in projecting a liberal democratic sensibility back over time, as if every age has been fuelled by a benign Pikettian spirit. It seems to assume the existence of a well-functioning public sphere to determine allocations of property based on reasoned argument and evidence, rather than via domination or opportunism. Economic historians may baulk at this, but it pays certain rhetorical and philosophical dividends in forcing us to confront the justice (and lack of it) of various economic models, including our own.

Piketty maps the dominant “inequality regimes” of the past millennium. “Ternary societies” (such as feudalism) were divided into clerical, military and working classes. “Ownership societies” developed over the 18th century, becoming dominant by the end of the 19th, concentrating income and wealth in the hands of landowning families and the new bourgeoisie. “Slave societies” offered the most extreme model of inequality (Haiti circa 1780 is revealed as the most unequal society on record).

“Colonial societies” had various combinations of military power, bourgeois ownership and slavery. Communist and post-communist societies provide a tragic overture in the book, in which the utopian ideal of complete equality produces poverty, stagnation and then the rampant inequality of contemporary oligarchical Russia.

His insistence on looking beyond the perimeter of the liberal West – and confronting some of its worst historical crimes – is admirable, even if it does inevitably involve some broad brushstrokes. But Europe, and France in particular, remain his centre of gravity. Being Piketty, this is less because of some Hegelian belief in Europe’s unique status in world history, and more – like the drunk man searching for his keys under the streetlight – because that’s where the data is. That said, Capital and Ideology also serve as an intervention in policy debates that are unmistakably European. It is also a reminder to the current occupant of the élysée Palace that the French Revolution wasn’t fought for liberté and fraternité alone.

Section III: The Great Transformation of the Twentieth Century.

His insistence on looking beyond the perimeter of the liberal West – and confronting some of its worst historical crimes – is admirable, even if it does inevitably involve some broad brushstrokes. But Europe, and France in particular, remain his centre of gravity.

Being Piketty, this is less because of some Hegelian belief in Europe’s unique status in world history, and more – like the drunk man searching for his keys under the streetlight – because that’s where the data is. That said, Capital and Ideology also serve as an intervention in policy debates that are unmistakably European. It is also a reminder to the current occupant of the élysée Palace that the French Revolution wasn’t fought for liberté and fraternité alone.

The book’s story of shifting “inequality regimes” within the liberal West partly repeats the account given in Capital in the Twenty-First Century. Despite the avowed egalitarianism of the French Revolution, wealth and income inequality remained high throughout the 19th century, until the First World War. A combination of war and progressive taxation led to dramatic falls in inequality over the first half of the 20th century, setting the stage for the social democratic regimes of the second half.

Evidence on these postwar regimes confirms that very high marginal tax rates are both reasonable and effective. But they had a lurking weakness, which Piketty views as fatal: they accommodated highly unequal access to education. Not only is educational equality the biggest factor in economic development (more so than property rights, he argues), but the sharp division between graduates and non-graduates produced political schisms that, by the 1990s, had left the working class electorally homeless.

Section IV: Rethinking the Dimensions of Political Conflict.

As he recounts the history of the transition from slave-owning, feudal and colonial societies towards 19th-century modernity, the most consistent actor in the name of progress is the state. By the end of the book, while we have a detailed description of the correlation between forms of inequality and the ideologies used to justify them, there is not a trace of cause and effect. Facts, Piketty states, are untrustworthy because they are socially constructed.

It is as if Piketty, a commanding figure in the economics department, has sauntered across to give a (very long) lecture series in the history department without bothering to engage in the methodological debates that rage there. But his implicit method is that of the Enlightenment philosopher Georg Hegel: human progress exists, the state is nearly always its main actor, and history is driven by supra-historical ideas – above all, the idea of justice.

And that’s what makes his political solutions seem so abstract and unworkable. What happens to the value-creation process in a world where the rich are getting their wealth confiscated and their incomes flattened (ie the actual problem that destroyed the Soviet experiment)? How do you revive the actual democracies we are fighting in other than by giving every citizen a “democracy voucher” to even out political spending by the elite? By the time we get Piketty’s design for a world government, we are well and truly down the rabbit hole of bright abstractions.

As for the most pressing problem – how to deal with the rise of nativism and xenophobia among the communities that once voted left – Piketty’s solutions are perfunctory. He rightly slates the French left for becoming “Brahmins” – exclusive representatives of the educated class – and calls for left parties to be less elitist and less hostile to the self-employed.

But electoral experience – in the UK, the US and France – shows that right-voting workers are strongly wedded to inequality. As Labour found out in December 2019, pledging to tax the rich without mobilising those voters with a narrative of self-liberation can backfire. Only recently, a survey of “red wall” seats found they want “modest tax hikes to make the system fairer but outright reject attempts to take money from the modestly well-off and even from billionaires”.

Piketty is right to say that, in moments of transformation, big ideas come first. His big idea is to tax capitalism out of existence, and it has triggered an avalanche of derision among the Davos-going crowd. My objection is not that it is too radical but, lacking any explanation of which social forces might enact it, not radical enough.

Conclusion:

Piketty with a tentative policy programme aimed at meeting the nativist challenge along such lines. This includes some bold ideas (such as an equal education budget for every citizen, to be invested as they choose), but mostly rests on ideas of participatory governance, progressive taxation, democratisation of the EU and income guarantees that have been circulating on the radical liberal left for decades. Suffice it to say that naming such policies is considerably easier than executing them.

He might be right that, given the climate crisis among other factors, current levels of inequality cannot long be maintained and new policies will be introduced: he prefers to take an optimistic position, based on the assumption that “inequality regimes” never last forever. But despite the pearl-clutching of the Telegraph, his “elements for a participatory socialism” are not the most arresting features of the book.

Learnings:

Capital and Ideology is an astonishing experiment in social science, one that defies easy comparison.

1. In its ambition, obsessive testimony and sheer oddness, it is closer to the spirit of Karl Ove Knausg?rd than of Karl Marx.
2. It alternates between sweeping generalities about the nature of justice and the kind of wonkery that one might expect from the Institute for Fiscal Studies, often in the same paragraph.
3. It is occasionally naive (it will bug the hell out of historians and anthropologists) but in a provocative fashion, as if to say: if inequality isn’t justified, why not change it?

What would drive someone to write a book like this?

If Piketty has one core political and methodological belief it is in the emancipatory power of public data: that when people are given sufficient evidence about the structures of society, they will insist on greater equality until they are granted it.

Amid the distraction and perpetual outrage of our dysfunctional public sphere, this enlightenment confidence in empirics feels beamed in from another age. It also makes for a unique scholarly edifice, which will be impossible to ignore.

Art Goldhammer & Harvard Business Publishing

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