Readers who have been following the often-heated debate on Capital in the Twenty-First Century are likely to be astonished by the mildness of the author’s tone, and by his relaxed rhetorical manner.  Indeed, Professor Piketty’s book owes nothing to its famous namesake beyond its title, as well as, more substantially, its grounding assumption that economics is as much an historical discipline as it is a scientific one.  Unlike Karl Marx, Thomas Piketty is an enemy neither of capital nor of inequality per se, but of monopoly (or, as he puts it, “divergent” capitalism, which, he argues, must end in destroying capital itself) and “unjustifiable” equality based on no rational or utilitarian principle.

Piketty’s thesis, based on the formula r>g, stating that the average annual rate of return on capital is greater than the rate of growth of a capitalist economy, holds that,

When the return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism generates arbitrary and unsustainable inequalities.

This argument, and what M. Piketty introduces as “two fundamental laws of capitalism,” have been challenged by a number of contemporary economists, while earlier ones have apparently shown that r>g does not accurately describe certain economies of the past.  I am no economist, and so my interest in Piketty’s book, which is considerable, has a great deal to do with the more general subjects of the relationship between history and the accumulation of wealth, and the historical relationship between wealth and civilization.

Piketty has two principle objections to what he believes is the growing “divergence” of the modern capitalist economy, which (he warns) seems to be returning us to concentrations of capital and levels of economic inequality not experienced by the Western world since the decade and a half before World War I.  The first objection is the economist’s: Uncontrolled capital, Piketty says, leads directly to capitalism’s ultimate failure, as too large a supply of capital lowers the return on capital, and capitalists, having acquired a surfeit of capital, find progressively less to invest their capital in.  The second objection is the democrat’s: Uncontrolled capital, the centralization of capital, and great inequalities in wealth will, Piketty fears, have antiegalitarian and antidemocratic financial, social, and political results.

Piketty estimates that, between 1700 and 2012, the average rate of growth per capita of output was 0.8 percent globally, a figure he breaks down to 0.1 percent for the period 1700-1820, 0.9 percent for 1820-1913, and 1.6 percent for 1913-2012.  For Europe, his figures are 1.0 percent for 1820-1913 and 1.9 percent for 1913-2012; for the United States, 1.5 percent for 1820-1913 and 1.5 percent (again) for 1913-2012.  The warning Piketty recognizes in these figures is that, according to him, no country in history “at the world technological frontier” (as distinguished from developing countries catching up with the First World) has managed 1.5 percent growth over a sustained period.  During the 19th century, above-average economic growth was supported by the Industrial Revolution and by a century of peace in the West, both of which allowed for accumulations of capital that were unprecedented in history.  But in the next century, two world wars and other “shocks,” by destroying huge amounts of capital, set capital accumulation back disastrously, so that it did not recover fully until about 1970.  Since then, it has succeeded in achieving a momentum that may very easily return it to the growth rates that pertained during La Belle Époque and the Edwardian era.  This development, in combination with the significantly lowered rate of demographic growth (or even “negative growth”) he expects in the next decades and perhaps for the rest of the 21st century, indicates to Piketty that the ratio between national wealth and national income threatens to return to the unprecedentedly high levels it reached before 1914, when national wealth amounted to as much as five or six years’ income, and that great inequality in wealth will return with it.  Indeed, Piketty seems to find this almost a foregone conclusion, unless the great new fortunes currently being accumulated are reduced by significantly increased levels of taxation of capital (as distinct from the progressive taxation of income, which he considers an outmoded, 20th-century policy unfit to answer 21st-century concerns), imposed not to support the “social state” but for the explicit purpose of cutting “irrationally” and “unfairly” large fortunes down to size—preferably by means of a “global tax,” which Piketty himself admits to be a utopian idea in a world progressively at odds with itself and able to agree less and less on anything.

His account of the accumulation, destruction, and reaccumulation of capital over the last two centuries is a plausible one, seemingly well supported by the statistics Piketty presents.  (Supposing such existed for the 17th century, economic historians would doubtless discern a similar pattern describing economic growth in the decades before, during, and after the Thirty Years’ War.)  Where Piketty, in his anxiety regarding the coming Big Inequality, seems to me to lose touch with historical reality is the application of his historical imagination to the future—or rather his failure, or perhaps his unwillingness, to apply it to his thesis.  Historically war, not peace, is the norm, and the likelihood of major international, or even natural, catastrophe occurring on a scale to deal capital, if not capitalism, a major blow or series of blows in the 21st century should look rather a certainty to anyone who follows the news reports today.  It may be, in fact, that war is capitalism’s natural corrective, the Invisible Hand’s opposable thumb that allows it to survive and adapt in the long run.  If so, there is probably slight chance of capitalism “diverging” unchecked to a significantly greater degree than it already has done (assuming that inequality really is greater today than in former times, an assumption some economists contest).

Thomas Piketty’s principal concern beyond the alleged concentration of capital to the point where capitalist economics simply seizes up, or chokes on its own greed, is the growing and increasingly destabilizing potential of “patrimonial capital”—that is, family fortunes passed down from generation to generation and waxing steadily over decades, even in certain instances centuries.  Piketty poetically describes this as a process by which “the past devours the future” and great wealth is a benefit bestowed by circumstances of birth, and other “arbitrary contingencies.”  He is not, as I have said, opposed to inequality in itself, but rather to inequality deriving from “fortunes that grow and perpetuate themselves beyond all reasonable limits and beyond any possible rational justification in terms of social utility.”  Piketty borrows his justice and utility criteria from the French Revolution’s “Declaration of the Rights of Man and of the Citizen,” whose framers failed, if indeed they ever tried, to resolve the moral considerations involved in attempts to determine how much wealth is “rational” and the degree of utility wealth possesses—questions that theologians no less than philosophers have failed to answer to the world’s satisfaction.  He says at one point that these are matters to be agreed upon by democratic debate—in other words, resolved according to the proverbial agreement between the wolf and the goat regarding what’s for dinner tonight.  The truth is, there can be no just excuse for the appropriation of private property by anyone for the simple purpose of realizing economic equality, an action that amounts to naked theft.  As for “arbitrary contingencies,” what right do politicians and technocrats have to reverse the operations of chance and the benefits of luck, understood otherwise by many people as blessings bestowed by God for reasons of His own that we cannot satisfactorily apprehend?  (Piketty describes with apparent approval the development of a “patrimonial or propertied middle class” as “the principal structural transformation of the distribution of wealth in the developed countries in the twentieth century.”)

On the other hand, the utility of wealth may rationally be justified by the role the wealthy classes have played in history—a role Piketty himself appears to hint at here and there in his book, though possibly with his tongue rolled up inside his cheek.  The straight fact that democrats have always refused to contemplate is that patrimonial capital is the indispensable basis of civilization, distinguished from anthropological society, and that for this reason alone it deserves to remain intact and unmolested.

Piketty estimates for Jane Austen’s characters, and Balzac’s wealthy ones, early in the 19th century, incomes 30 times the average prevailing in England and France in that period, and he acknowledges that 30 times the average was indeed required for their originals to “live a dignified life.”  He describes the class to which they belonged as “a well-defined and fairly numerous group . . . a large enough minority to define the structure of society and sustain a novelistic universe.”  Nineteenth-century novelists, Piketty continues, imply in their books that inequality allowed a very small elite to concentrate on something beyond subsistence, and that “extreme inequality [was] almost a condition of civilization.”  “In a sense,” he concludes, “a minority was chosen to live on behalf of everyone else . . . ”  Piketty, while neglecting to explain how this minority was supposedly “chosen,” and by whom, has set his finger lightly on the reality, highly unpopular in modern times, that has always made civilization possible.  Patrimonial capital is essential to the creation and preservation of civilized society because inherited wealth makes possible a class of highly civilized people formed by generations of wealth, education, taste, and manners, whose “utility” in society is the sustenance and transmission of high culture.  “High people,” said Dr. Johnson, “are better.”  One of the reasons they are better is that they have the capacity to appreciate civilization, which is a very rare capacity, indeed.  Aristocracy of birth (aristocracy, of course, is what we are talking about here) in civilized societies  has a value superior to mere wealth (even though the aristocracy is itself moneyed) that cannot be bought and sold and traded on the stock exchange, as Walter Bagehot observed.  But “high people” in what Piketty calls “hyperpatrimonial society” (unlike the meritocratic elites in modern “hypermeritocratic” societies) do not pretend to greater worth or virtue than everyone else possesses, a high form of modesty that eases the pangs of inequality among the lower and middle classes by allowing them to reflect that birth is a matter of chance after all, while middle-class intellectuals take comfort in the certainty that really they are superior to everyone else, and the financial elite consoles itself with the knowledge that, anyhow, it has more money than almost anyone.  Ultimately, Professor Piketty seems in search of something more elusive than financial reform and equality of wealth, something he hints at when he writes that “real democracy and social justice require specific institutions of their own, not just parliaments and other formal democratic institutions,” though he offers no hint regarding what these institutions might be.

As Piketty’s argument stands, an optimistic reader of Capital in the Twenty-First Century might plausibly conclude on closing the book that the world as it is apprehended by Thomas Piketty is in fact nearly the best of all possible worlds, a world where poverty in the fabulously affluent developed countries is for the most part only relative poverty, security for the bottom 50 percent of society has been mainly achieved, the middle 40 percent enjoys a far-higher standard of living than that enjoyed by kings and princes anywhere before about two centuries ago, and the top one or two percent have accumulated sufficient wealth, theoretically speaking, to recreate the lost aristocratic societies of the past and, thus, reestablish civilization.   Whether the new gilded parvenus of Wall Street, the City, and the Bourse and their offspring have the desire as well as the genius to become self-made men in any sense other than the financial one is, of course, a question as open as all the great outdoors.


[Capital in the Twenty-First Century, by Thomas Piketty, translated by Arthur Goldhammer, (Cambridge: The Belknap Press of Harvard University Press) 685 pp., $39.95]