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 . 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. Here is the thirteenth ‘Piketty Digest’ on ‘Global Inequality of Wealth in the Twenty-First Century’.
Chapter 12: Global Inequality of Wealth in the Twenty-First Century
This is one of the most interesting chapters across Part III of Capital in the Twenty-First Century in terms of 1) the empirical analysis of inequalities at the global level and the unequal returns that flow from large endowments and sovereign wealth funds; and 2) the politics that flow from that analysis in terms of the advocacy for a progressive global tax on capital, bridging to the next section of the book, Part IV on Regulating Capital in the Twenty-First Century — Piketty starts by admitting that he has thus far adopted a too narrowly national point of view concerning the dynamics of wealth inequality and therefore wants to focus on the unequal returns on capital at the global level — ‘Will today’s wealthy countries end up owned by petroleum exporting states or China or perhaps by their own billionaires?’, he conjectures — By tracing the inequalities of wealth between countries, Piketty paints a scenario where divergence at the top of the wealth hierarchy could win out over the global forces of catch-up and convergence, discussed earlier in the book in Chapter 1 — Piketty posits that with the share of wealth at the top decile and centile increasing significant and a large upward redistribution from the middle and upper-middle classes to the very rich, violent political reaction might be triggered — The inequality of r > g is likely to give rise to a global dynamic of accumulation and distribution of wealth characterised by explosive trajectories and uncontrolled inegalitarian sprials: ‘only a progressive tax on capital can effectively impede such a dynamic’, Piketty argues — To demonstrate the highly inegalitarian returns on capital, Piketty assesses the role of 1) university endowments and 2) sovereign wealth funds — In terms of the former, Piketty highlights that Harvard University’s endowment is around $30 billion, which is administered with expenditure of $100 million in management costs, or just over 0.3 percent a year, with the largest endowments obtaining the highest returns — To put this into some comparative context, the University of Sydney was recently reported to have a portfolio of about AU$1 billion in the announcement that it would divest its AU$900,000 holding in Whitehaven coal — In relation to sovereign wealth funds, Piketty relays that the Norwegian sovereign wealth fund is alone worth more than €700 billion in 2013 with the fund’s management costs less than 0.1 percent of its assets — Although not the same, Saudi Arabia’s sovereign wealth fund, ranked about third highest globally, retains an average return of about 2-3 percent due to investments in US Treasury bonds that are lower yielding than more aggressive alternatives — Piketty surmises that the geopolitical aspects of the choice have to be considered given that ‘it is not illogical for Saudi Arabia to lend at low interest to the country that protects it militarily’ — Will sovereign wealth funds rule the world? — Billionaires and sovereign wealth funds own about 3 percent combined of the world’s total private wealth, notes Piketty, where the scenario of sovereign wealth funds owning 10-20 percent or more of global capital by 2030-2040 is feasible — The sovereign wealth funds of the petroleum exporting countries will continue to grow and their share of global assets in 2030-2040 will be at least two to three times greater than it is today — The Western countries, he notes, will find it increasingly difficult to accept the idea of being owned in substantial part by the sovereign wealth funds of the oil states with this sooner or later triggering political reactions, such as restrictions on the purchase of real estate and industrial and financial assets by sovereign wealth funds or even partial or total expropriations — Equally, countries such as China can be expected to increase the free flow of investments in Africa giving rise to serious tensions, ‘signs of which are already visible’ — The film When China Met Africa might be one example in this regard —
— To quote Piketty directly on these geopolitical issues:
petroleum rents might well enable the oil states to buy the rest of the planet (or much of it) and to live on the rents of their accumulated capital.
In contrast, Piketty upholds the belief in the fundamentally equalising process of knowledge and productive technologies, especially given that once the less advanced countries ‘catch up’ with the more advanced, they will cease to grow more rapidly — This view contrasts, for example, with the position of Samir Amin in The Implosion of Contemporary Capitalism who rejects the process of developmental catch-up and posits, in contrast, the continued polarisation and lock-in of centre-periphery relations — In contradistinction, Piketty dismisses continued divergence (or polarisation) between states to assess what he calls ‘oligarchic divergence’ meaning a process by which the planet’s transnational classes control global wealth — In terms of the changing geography of wealth, the recent increase in private wealth (relative to national income) in the rich countries is actually even larger than estimated on the basis of official accounts, with unreported amounts in tax havens coming to nearly 10 percent of global GDP — A progressive global tax on capital is deemed the solution to the possible disparities of oligarchic divergence.
Question: To what extent can the conditions of both equalisation and differentiation be considered contradictory products and enduring features of the uneven development of capitalism?