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Piketty Digest #5: From Old Europe to the New World

Piketty Digest #4: The Metamorphoses of Capital

by Adam David Morton on August 4, 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. Here is the fourth ‘Piketty Digest’ on Chapter 3: ‘The Metamorphoses of Capital’.

The Metamorphoses of Capital

After concluding Part I of the book on income and capital, Chapter 3 commences the focus in Part II on the dynamics of the capital/income ratio and a chapter on the metamorphoses of capital, although the title of the chapter is clearly a riff from Karl Marx’s Capital, Volume 2 (1893) — Piketty continues with his use of literary sources as historical sources, taking a detour through literature in relation to the cases of Britain and France in order to trace the subject of wealth from Sense and Sensibility and Mansfield Park to Père Goriot — ‘In the classic novels of the nineteenth century, wealth is everywhere, and no matter how large or small the capital, or who owns it, it generally takes one of two forms: land or government bonds’ — The purpose of the recourse to literary sources is to question how and why modern capital is regarded today as more ‘dynamic’ and less ‘rent-seeking’ than the past — A central argument that shapes the book is that the wars of the twentieth century created the illusion that capitalism was structurally transformed, including how decolonisation evaporated ‘net foreign capital’ or the vast stocks of ‘foreign assets’ held by colonial powers — Part of the overall definition of the capital/income ratio is therefore his euphemism for colonial possessions, or ‘net foreign capital’ referring to how ‘the rest of the world worked to increase consumption by the colonial powers and at the same time became more and more indebted to those same powers’ — In tracing the fluctuations or metamorphoses of capital, Piketty looks at how in the twentieth century after World War II public debt served as an instrument of policy that was aimed at raising public spending and redistributing wealth for the benefit of the least well-off members of society — This is contrasted with the French novels of the Belle Époque and their reference to how interest on government bonds handsomely reimbursed private wealth — In the twentieth century debt was drowned by inflation and repaid with money of decreasing value — Focusing on public debt and private capital, Piketty traces a change from the role of rentiers in the eighteenth and nineteenth centuries to expropriation by inflation in the twentieth century, when public debt became a mechanism of redistribution via inflation — Piketty states that the latter is ‘the simplest though not necessarily the most just way to reduce the burden of public debt and the influence of accumulated wealth’ — This view underplays the role of inflation as an expression of class conflict, meaning that inflation is as much a manifestation of the class character of the state in terms of its unequal impact on social conditions as it is a monetary feature — Piketty also refers to public debt as a vehicle of important internal redistributions and issues of wealth distribution and inequality through public assets, which have been subsequently privatised since the 1980s — Again, alongside ‘net foreign assets’ (the anodyne term for colonial possessions) and reference to ‘redistributions’ flowing from inflation, Piketty’s commentary on the privatisation of public assets since the 1980s is flaccid — The privatisation of Royal Mail at a £1 billion loss to British taxpayers is simply the latest expression of transferring the proceeds of what are now profitable operations to powerful private interests while resulting in no apparent public benefit — What does Piketty say about the global era of privatisations that has preceded the most recent example of Royal Mail? — To cite Piketty directly: ‘With the end of postwar reconstruction and the high growth rates of the Trente Glorieuses, it was only natural to question the wisdom of indefinitely expanding the role of the state and its increasing claims on national output’ (my emphasis).

Question: In stating that it was only “natural” to question the wisdom of expanding the role of the state after the Trente Glorieuses of the 1940s to the 1970s, is Piketty getting dangerously close to evoking a discourse about the inevitability of the rise of neoliberalism?

Note: the use of the set image for this post was given courtesy of Gillian Blease.

Updated: 11 August 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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