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Piketty Digest #1: Introduction

by Adam David Morton on July 16, 2014
Piketty Forum

With all the furore surrounding Thomas Piketty’s Capital in the 21st Century my aim here is to carry a weekly focus on the book reblogged from For the Desk Drawer. The purpose is modest. There is already in existence some rather excellent coverage and detailed engagement with the book both in the general media and on specific blog sites. I am thinking here of the analyses by Michael Roberts on his blog site; the competing viewpoint or ‘afterthoughts’ of David Harvey; Benjamin Kunkel’s assessment in ‘Paupers and Richlings’ for London Review of Books matched by Knox Peden’s great essay on ‘The Abstractions of History’; or Paul Krugman’s rather different tone in ‘Why We’re in a New Guilded Age’ for The New York Review of Books. My own endeavour is much less ambitious than any of these engagements. It seeks to offer a weekly equivalent to the ‘Pocket Piketty’ provided by Duncan Green. Each week my intention is to carry a blog post that summarises my notes on each chapter in just a few hundred words that can be read quickly. The purpose of these summaries is to produce an interpretative synopsis of each chapter drawn from my more detailed notes.

These interpretative digests will also enable me to formulate my engagement with a reading group on Piketty’s Capital in the 21st Century, organised by Chris Hesketh at Oxford Brookes University. They will also provide a quick précis for teaching purposes at the University of Sydney and through this novel pedagogical exercise conclude with a question each week to be developed in my Department of Political Economy classes on ‘The Political Economy of Global Capitalism’ (linked to the Twitter hashtag #ECOP2613). Such short interpretative digests may thus provide a different and original form of engagement with the book. Without attempting to rival or replace the importance of detailed engagement, these ‘Piketty digests’ will facilitate a quick and accessible read for people ‘on the go’. The posts will be formulated and produced after reading each chapter, in dialogue with the Oxford Brookes University reading group and colleagues at the University of Sydney, rather than polished after completing the reading of the whole book and then subsequently edited; although I may tidy up a little week-to-week. Perhaps these ‘Piketty digests’ will also provoke some wider resonances and points of contact. I start here with the first ‘Piketty Digest’ on the Introduction.

Introduction

The book wants to trace the distribution of wealth and issues of fundamental inequality by drawing from new sources based on (1) the inequality and distribution of income, noting the unprecedented explosion of very elevated incomes from labour and (2) sources dealing with the distribution of wealth and the relation of wealth to income, including estate tax returns, inheritance, and the measure of the total stock of national wealth — These sources have been compiled in a World Top Incomes Database (WTID) based on the joint work Piketty has conducted with some thirty researchers concerning the evolution of income inequality, essentially across the United States, Japan, Germany, France and Great Britain but also including additional cases along the way — Piketty indulges in a fetishism of science, data, facts and calm analysis over and against ideological speculation and theory — Marx is accused of lacking statistical data, settling on predictions in 1848 in The Communist Manifesto before his research in Capital published in 1867 — There is the spurious claim that ‘Marx totally neglected the possibility of durable technological progress and steadily increasing productivity, which is a force that can to some extent serve as a counterweight to the process of overaccumulation and concentration of private capital’ — Any reader of Capital, Volume 1, can witness in the chapter on ‘Machinery and Large Scale Industry’ the comment by Marx that:

Technology discloses man’s mode of dealing with Nature, the process of production by which he sustains his life, and thereby also lays bare the mode of formation of his social relations, and of the mental conceptions that flow from them

LapavitsasAs Costas Lapavitsas makes absolutely clear in his latest book Profiting Without Producing: How Finance Exploits Us All‘Marx was the first among the great economists to study technical change and the evolution of technology in depth’ — That Piketty is so remiss in these areas is also coupled with his focus on the ‘Marxist apocalypse’ of the communist revolution in Russia, conflating Marxism with “really existing socialism” — Piketty positions himself between what he sees as Marx’s ‘apocalyptic predictions’ about the inexorable tendency for capital to accumulate (based on the Marxist principle of infinite accumulation) leading to greater inequality and the ‘happy ending’ view of Simon Kuznets’ position that inequality was shrinking in states entering late development — It is noted that Kuznets, awarded the Nobel Prize for Economics in 1971 and one-time co-author with Milton Friedman, ‘shared the true scientific ethic’ but developed his theory ‘within the orbit of the free world’ and was a product of the Cold War in arguing that income inequality would automatically decrease in advanced phases of capitalist development — Piketty highlights the importance of intuitive knowledge gained from literature and the novels of nineteenth century society by Jane Austen or Honoré de Balzac, delivering portraits of the distribution of wealth in Britain and France between 1790 and 1830 — ‘These and other novelists depicted the effects of inequality with a verisimilitude and evocative power that no statistical or theoretical analysis can match’ — Key definition: r>g [fundamental inequality] where r stands for the average annual rate of return on capital, including profits, dividends, interest, rents, and other income from capital, expressed as a percentage of its total value is greater than g that stands for the rate of growth of the economy, the annual increase in income or output — Convergence on wealth distribution and developmental catch up linked to diffusion of knowledge rather than market mechanisms — Divergence, or fundamental inequality (r>g), is the result of the rate of return on capital exceeding growth of output and income — The history of inequality is linked to the joint product of actors’ choices (agency) rather than conditions of uneven development shaped by colonialism or imperialism (structure) — Historical and geographical study of inequality based on methodological nationalism meaning states as statistical containers — The trope of disease: Piketty is ‘vaccinated for life’ from anticapitalism: does this give immunity from critiquing capitalism? — Defending the rule of law and social democracy — Pragmatism reigns supreme with economics delivering truth in dialogue with bourgeois social science.

Question: Why does the rate of return on capital matter to democratic questions of wealth and distribution within political economy?

Updated: 2 October 2014

Adam David Morton
Adam David Morton is Professor of Political Economy in the Department of Political Economy at the University of Sydney. He is author of Unravelling Gramsci: Hegemony and Passive Revolution in the Global Political Economy (2007); Revolution and State in Modern Mexico: The Political Economy of Uneven Development (2011), recipient of the 2012 Book Prize of the British International Studies Association (BISA) International Political Economy Group (IPEG); and co-author of Global Capitalism, Global War, Global Crisis (2018) with Andreas Bieler. He co-edits Progress in Political Economy (PPE) with Gareth Bryant that was the recipient of the 2017 International Studies Association (ISA) Online Media Caucus Award for the Best Blog (Group) and the 2018 International Studies Association (ISA) Online Media Caucus Award for Special Achievement in International Studies Online Media.

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