Piketty Digest #4: The Metamorphoses of Capital
Piketty Digest #6: The Capital/Income Ratio over the Long Run

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

by Adam David Morton on August 12, 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 fifth ‘Piketty Digest’ on ‘From Old Europe to the New World’.

From Old Europe to the New World

This chapter opens with the begrudging remark that one need not subscribe to V. I. Lenin’s theses in Imperialism, the Highest Stage of Capitalism (1916) nevertheless to share his conclusion that the heightened competition between European powers for ‘colonial assets’ contributed to World War I — The chapter’s aim is to better understand the transformations that capital experienced over the course of the early twentieth century — The argument is that there was a collapse of the capital/income ratio over the course of the twentieth century and then, more recently, a spectacular recovery — To cite Piketty: ‘the decline of the capital/income ratio between 1913 and 1950 is the history of Europe’s suicide, and in particular of the euthanasia of European capitalists’  — Piketty is almost at pains to indicate that the low level of the capital/income ratio after World War II was ‘in some ways a positive thing’ indicating a deliberate policy choice to reduce the market value of assets and the economic power of their owners with real estate values and stocks falling to historic levels in the 1950s and 1960s relative to the price of goods and services — The argument is that there was a fall in the capital/income ratio between 1913 and 1950 with low national savings rates, loss of ‘foreign assets’ (a euphemism for colonisation), and destruction from war while there was a strong rebound of real estate and stock market prices in the 1970s and 1980s and especially the 1990s and 2000s helping to explain the rebound in the capital/income ratio and heightened inequality — ‘In the Belle Époque capital was king. In the years after World War II many people thought capitalism had been almost eradicated. Yet at the beginning of the twenty-first century Europe seems to be in the avant-garde of the new patrimonial capitalism, with private fortunes once again surpassing the US levels’ — Piketty posits that there are key differences between the history of capital in the United States compared to Europe stating that ‘the United States, the first colonised territory to have achieved independence, never became a colonial power itself’ — This is then succeeded by the statement that ‘the world of 1913 was one in which Europe owned a large part of Africa, Asia, and Latin America, while the United States owned itself’ — This is regarded as the major difference between capital in the New World and Old Europe: a greater emphasis on the control of foreign capital and colonial possessions in Europe compared to the United States — However such a rose tinted view of the role of US empire is challenged by 1) the history of United States imperialism and the territorial expansion of the American state, consider here just the example of the 1846-48 Mexican-American War and the annexation of present-day California, Arizona, Nuevo Mexico, Nevada, Utah, Texas, and parts of Wyoming, Colorado and Wyoming; and 2) how it came to be that the American state developed the interest and capacity to superintend the making of global capitalism, considering here the political economy of American empire as developed by Leo Panitch and Sam Gindin in The Making of Global Capitalism (2012) — As Chris Hesketh pointed out to me, how would Piketty account for this map of US military bases overseas? —MilitaryWhile there is brief mention of the Marshall Plan by Piketty, in contrast to no mention whatsoever in Chapter 2 (see Piketty Digest #3: Growth: Illusions and Realities), there is an inadequate appreciation in this chapter of issues of both formal territorial US imperialism and more informal US empire, the latter primarily aimed at preventing the closure of particular places or whole regions of the globe to capital accumulation — This is so despite the fact that in the Introduction there is mention of the radical increase in the territory of the United States owing to westward expansion in the nineteenth century but without considering this in relation to the geographical expansion of ‘The American Road to Capitalism’ — After all, between 1948 and 1949 Marshall Plan assistance amounted to an estimated 15 percent of the combined gross domestic capital formation of the UK, Italy, and France, while for Germany it was over 25 percent — These issues aside, the chapter closes with a comment on the historical role of slavery to imperialism with the statement ‘Attributing a monetary value to the stock of human capital makes sense only in societies where it is actually possible to own other individuals fully and entirely—societies that at first sight have definitely ceased to exist’ — This position seems entirely remiss in failing to acknowledge the role of unfree labour in contemporary capitalism and issues of trafficking, forced sex work, indentured and bonded labour, unpaid labour in the household, and other racialised and patriarchal forms of forced labour that still exist today on a worldwide scale.

Question: Why might it be important to consider the political economy of US empire and informal imperialism in the transition to global capitalism?

Updated: 31 August 2014

Adam David Morton
Adam David Morton is Professor of Political Economy in the Department of Political Economy at the University of Sydney.

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