[D66] Why Piketty isn’t Marx

[J.N.]

http://mondediplo.com/2015/05/12piketty


Capitalism in the 21st century short on capital
Why Piketty isn’t Marx

Thomas Piketty’s thousand-page economics bestseller reduces capital to
mere wealth — leaving out its political impact on social and economic
relationships throughout history.

by Frédéric Lordon

Thomas Piketty’s global renown shouldn’t stop us from asking some hard
political questions — or rather questions about his intellectual and
political deception. The media have been almost unanimous about his
Capital in the Twenty-First Century  (1), proof in itself of the book’s
total innocuousness. The world would have to have changed a great deal
for Libération, Le Monde, the New York Times, the Washington Post and
many more to be so enthusiastic about anything actually controversial.
Some English-language media, helped by less than progressive
reservations, have managed to keep their heads: the Financial Times took
Piketty to task on an obscure statistical point; Bloomberg ran a front
cover last May in the style of a teen magazine, showing Piketty as a
heartthrob surrounded with stars.

One thing is for sure: only favourably disposed media could hail Piketty
as a “21st-century Marx” simply because he calls his book Capital. He
admits he has “never managed really” to read Das Kapital (2) or any
other works of Marx, does not set out any theory of capitalism, and
makes no attempt to challenge its basis (3).

We should not ignore the book’s merits. Every commentator must be
impressed by the scale and quality of Piketty’s statistical work. But
its principal virtue lies in the fact that it is a book. Most
economists, driven by the need to publish, have unlearned the skill of
writing books. Instead, they produce technical papers (not longer than
the 15 pages allowed by academic journals) so standardised that they
lose all meaning. Capital in the Twenty-First Century is the
thousand-page culmination of 15 years of dedicated toil. The usefulness
of social sciences is never so clear as when they contribute to the
political debate with solidly established facts.

But all the methodological rigour in the world will not make up for the
most basic deception, so obvious that it has passed unnoticed: the
title. Piketty tells us he is going to discuss capital. He is aware that
a well-known author has written a book about it before him. He seems to
think “I can get away with this”. Unfortunately, it does matter: it’s
fine to call a new book Critique of Pure Reason provided you are not
writing about, say, herbal medicine.

Just what is capital? Piketty, not having really read Das Kapital, is
only able to give a very superficial definition: the wealth of the
wealthy. To Marx, capital was something else entirely, a mode of
production, a complex social relationship which, crucially, adds
employment relationships to the monetary relationships of simple market
economies. These are based on private ownership of the means of
production and on the legal myth of the “free worker”, who is deprived
of any means of making a living independently and therefore forced to
hire himself out to survive, and to submit to domination by an employer.
Ultra-long-term view that isn’t

That is what capital is, not just the Fortune 500. In the narrow sense
of wealth, capital affects ordinary people through the obscene spectacle
of wealth inequality. But as a mode of production and a social
relationship, it affects them far more through the slavery it creates —
an eight-hour working day takes up half their waking day. Redundant
workers probably suffer less from seeing the rich parade their wealth
than from the way their lives have been wrecked by the iron law of
financial valuation. The same goes for those in work, who suffer under
the tyrannical demands of productivity and profitability, constant
threats of mass layoffs, delocalisation, restructuring — the
energy-sapping precariousness and brutal nature of employment. None of
this is even mentioned in the book.

The form and intensity of this slavery are determined by the historical
circumstances under which capitalism is manifested — for in practice,
there are many different kinds of capitalism. And it is the inseparably
linked, changing economic and political factors that continually steer
capitalism in new directions. But Piketty is quite unable to see things
in a light that would show up the specifically political factors in the
history of capitalism.

The first problem is his insistence on taking an ultra-long-term view —
which is welcome, given how little most economists know about history,
but creates its own problems. To do this over decades can be highly
relevant and informative; to do it ultra-long-term, over millennia,
means constructing meaningless statistical models and creating huge
anachronisms. Piketty presents a graph of “after-tax rate of return vs
growth rate at the world level from antiquity to 2100”, as if the
concepts of GDP, capital and return on capital after tax had any
relevance in antiquity, or even in the 18th century. Applying such
concepts as if they were universal is a typical economist’s solecism.
Piketty is unable to see that they are ad hoc (and recent) inventions.
Ironically, it is when he turns historian, and suddenly switches to the
ultra-long-term view, that he most clearly demonstrates his ignorance of
the historical realities.

There is also a clear risk of depoliticisation, in that events taking
place over decades become minor fluctuations when seen from the
perspective of millennia. The decade is the pertinent timeframe for
political action, the timeframe within which nations judge their living
standards and assess the scope for doing something about them.

Readers may object that Piketty deals mainly with the 20th century. He
does, but he applies to it the same universal “laws” that he believes he
can apply to capitalism through the ages. To believe that it is possible
to define the course of capitalism according to invariant,
transhistorical laws, modulated only by fluctuations whose principles
are never clearly explained, is the most distinctive feature of
economists’ thinking. They see themselves as physicians to society, and
often succumb to the temptation of formulating scientific “laws”, like
the law of gravity. Piketty is not as naïve as that. But the fact that
he too is tempted shows how prevalent “economist-think” has become,
affecting even those who (belatedly) advocate a break with economism.
‘Fundamental laws of capitalism’

There are no transhistorical laws applicable to capitalism, and
Piketty’s own fundamental laws of capitalism are nothing more than
accounting equations. What does exist is the historical course of
capitalism, as determined by institutional configurations, their
succession controlled mainly by political processes; each of them brings
particular forms of the servitude that capital — not wealth — imposes on
labour.

Piketty may repeat over his thousand pages that inequality increases
when r(rate of return on capital) is greater than g (growth rate), but
he has explained nothing because he doesn’t describe the factors that
determine rates of return and growth in each era. These depend on the
organisation of structures in the particular era, the result of
political struggles — of class struggles. In France, there was an
impressive institutional conjunction after the second world war, and the
balance of power between capital and labour tipped some way in favour of
labour, with tight controls on capital, the reduction of the stock
exchange to a rump, strict regulation of international competition,
economic policies geared towards growth and employment, and repeated
currency devaluations, producing 5% growth and forcing capital to behave
a little more decently. But this only happened because the Matignon
agreements of 1936 had prepared the ground after the liberal elite of
the 1920s had been swept away, because employers had been compromised by
collaboration with the Nazis, the Communist Party had 25% of the vote in
the post-war years, and capitalists were nervous about the Soviet Union.

Though Piketty repeatedly mentions “institutions” and “politics”, he is
blind to institutional and political history. He talks about the effects
of war, and more remotely of decolonisation. These external shocks are
almost impossible to quantify, but their role is to destroy capital
(wealth) and turn the clock back. He fails to mention general strikes,
social struggles, the power struggle between capital and labour, and
their institutional consequences. Capitalism according to Piketty has no
history — only an unvarying age-old law, occasionally disturbed by
accidental events, but always returning to its implacable long-term
trend, which leaves no room for conflict between social groups, the real
force behind institutional change.

Yet it is the outcome of such conflicts that determines the course of
capitalism. Just as it took one direction after the second world war, it
took another at the end of the 1970s. Piketty says nothing of the
ideological and political reconquest by the rich who, having been less
rich for a time, wanted to be richer again. The rollback agenda of US
conservatives in the 1970s explicitly expressed the intention of
reversing social advances. These advances are always institutional
conquests.

The key question is who controls institutions and structures, who has
the power to create them, or reshape them to their own ends. Such
political questions never surface; the book never mentions any real
conflict. There is no analysis of financial deregulation in the 1980s,
which made businesses more subject than ever to shareholder control.
There is no account of the key role of the socialist governments of the
time, the management revolution or the elimination of political and
economic differences between leftwing and rightwing elites. There is no
account of the unchecked neoliberal drift of the EU from 1984 towards
“free and undistorted competition” — the mechanism par excellence for
the destruction of advanced social models. There is no account of the
treacherous treaties that have removed all room for manoeuvre in
national economic policy. Unless these things happened by chance, they
must be human work. Capital, as a social group, has now won back
everything it conceded after the second world war. But it is still
pressing its advantage — with unprecedented support in France from the
Socialist Party, which seems to have decided to hand it everything on a
platter.
Evasion and sleight of hand

Piketty remains in a fog of macroeconomic abstractions, repeating that r
> g, and cannot claim to have shed light on anything, still less to have
made the “theoretical breakthrough” some journalists claim for him. He
is ill equipped to tell this story. Nothing in his career has prepared
him for it: he cannot go overnight from a social-democratic, organic
economist to being the Marx of the 21st century. He is a historian of
the sociopolitical school of Pierre Rosanvallon; he was an adviser to
the Socialist Ségolène Royal during her 2007 presidential election
campaign; the media call him one of the “substitute intellectuals”. In
the late 1990s, tousled casual was no longer fashionable, people wanted
seriousness: figures, a scientific approach and no ideology, except for
Rosanvallon-style globalisation-is-doing-OK-though-it-could-do-better
equivocation, suggesting we should not rebel over a few imperfections
(“that’s what we have experts for”). La République des Idées (RI), a
thinktank and publisher of “correct” ideas led by Rosanvallon, with a
mission to nurture France’s Socialist Party intellectually, has
consistently taken great care never to raise any indecorous issues. RI
has talked about inequality for many years, weeping over the sufferings
of the workers, but has blamed rapid technological innovation and lack
of training, and praised the virtues of academic research. What about
free trade and the devastation it brings? Or the tyranny of shareholder
value? Or the EU, now in the final stages of neoliberalism? Not a word
(4). RI thinks all these are our destiny. It has a strategy of evasion —
and sleight of hand. Those who claim to be serious and are keen to
maintain their influence and their reputation in the media never mention
such things.

The financial crisis of 2007-8 and the European crisis of 2010 brought a
violent resurgence of what had been suppressed. (This will have to be
discussed. But it is difficult to discuss such issues from scratch —
when one does not know how to respond properly, not knowing about whole
areas and without the words to describe what can be seen.) Finance has
been globalised and nobody had taken any notice, but it is now clear
that everything is not rosy. The economist Daniel Cohen, like Piketty,
after decades of silence on this, has suddenly realised that the design
of the EU’s monetary union was “faulty from the start” (5). These
experts must be running on diesel: they clearly need time to warm up.
Their belated rectifications will have very little effect. Long-term
intellectual and political habits are hard to overcome. Capital is
riddled with them; Piketty skips over the political and social history
that led to Fordism, then to neoliberalism.

Even more spectacular is the ambition expressed in the last part of his
book, boldly titled “Regulating Capital in the 21st Century”. The
logical consequence of the strategy of evasion is that taxation becomes
the only remaining tool available. Giving up on trying to change
structures means taking palliative measures. Taxation has never been
anything more than a social-democratic palliative — if we can’t tackle
the causes, let’s at least try to alleviate the effects. Piketty, torn
between the immediate problem and his desire not to disrupt anything
fundamental, would like taxation to have greater virtues than it does,
even the ability to regulate international finance. It’s hard to see
what kind of tax could substitute for the necessary major assault on the
structures of liberalised finance. What tax could replace bank
separation, closure of some markets, a ban on securitisation? If Piketty
saw the problem this way, he would have to approve of the creation of a
definancialised enclave with adequate protections — severe restrictions
on the freedom of movement of capital. That would be too much for him:
he is so anxious to maintain his anti-nationalist credentials that he
apologises for using France as an example.
Globalised solutions

In line with its own unvoiced assumptions, orthodoxy requires a solution
in the style of Jacques Attali (first president of the European Bank):
globalised capitalism has suffered a few mishaps, but we will find
globalised solutions. People must be patient. The globalisation of
solutions is coming. “Socialist” France is prepared to abolish a tiny EU
tax on financial transactions, but a global tax on capital is on the
way. Piketty takes a thousand pages to conclude that the choice is
between a global tax and isolationism. Those who have read his book in
good faith may feel disappointed that they are not yet out of the woods.

They may also have been a little naïve. The media sold Piketty as the
new Marx, but did not mention his background. And readers believed the
media. It is surprising how many people, including some who should have
known better, were taken in. Piketty claims he is “vaccinated for life
against the conventional but lazy rhetoric of anti-capitalism.” A
clean-shaven Marx, then, not a hair out of place. But he is still
willing to wear a false beard. In a US interview with New Republic, he
claimed he had no time for Marx (6). Back in France, he said straight
out that he was “trying to contribute to the emergence of the communist
idea” (7). And everyone believed him. In December 2014 he reaffirmed his
belief in “market forces” and rebuked “the new extreme left movements in
Europe”, Podemos and Syriza (8). But by January he had become an
informal adviser to Podemos’s leader Pablo Iglesias, since he now saw
the rise of anti-austerity parties as “good news for Europe” (9). On a
French television show in February, he refused to say whether he was a
leftwing or a rightwing economist. He may lack intellectual consistency,
but you have to admire the opportunism with which he adapts to public
opinion in real time, so as to please the widest possible audience.

Piketty provides a scientific consecration, not only of the public
perception that monetary inequality exists, but also of the theme around
which the discussion of capitalism will revolve — around which it
already revolves: even The Economist has had years of articles on
monetary inequality, which will be the weakest link in the diagnosis,
the point where the most inoffensive critiques converge. Monetary
inequality has a great virtue: it makes it possible to avoid talking
about the other inequalities created by capitalism, which are not
accidental, but fundamental and constituent — the political inequalities
in the true sense of hierarchical subservience in employment; that in
business, some give orders and others must follow them. No tax, not even
a global tax, will ever be able to address this.

To ask questions about this inequality, which is ultimately about the
way lucrative property (capital) (10), controls our lives, and of the
pressure to be employed, is to ask the key question that the real Marx
asks about capital. Or anyway the key question about capitalism’s
current configuration, which a global financial tax (that will never
happen) could do nothing about. Only a resumption of the struggle for
popular sovereignty, by a single nation, or several nations together,
according to political circumstances, would be able to do anything — by
changing, through the transformation of structures, the balance of power
that allows capital to hold society to ransom (11).

Piketty’s critique of wealth inequality touches on none of this. He has
the good taste to offer us a pleasant vision of social harmony, with the
top 1% or 0.1%, as the villains — as if the remaining 99.9% were united
in deservingness by their employment, when they are in fact divided by
all the conflicts of their own situations and the neoliberal violence
propagated along the chains of command in business. Those divisions are
all the greater because of the particular structures of contemporary
capitalism, established by the persistent efforts of a class aware of
itself and its interests; but this is something those who claim to be
serious will not mention, even when they claim they are discussing the
theory of capital.

The worst is that Piketty’s book has an explicit “social philosophy”:
labour is deserving, but wealth generated through business enterprise is
good — unless the rich merely sit on that wealth. The formula “every
fortune is partially justified yet potentially excessive” is not scary.
The media, controlled by their shareholders, did not misjudge Piketty.
In his desire for generalised peace — between capital and labour, the
peace of the 99.9%, the peace of “global governance” — Piketty, who
mentions “institutions”, “politics” and “conflicts” only as a matter of
form, delivers his vision: “The bipolar confrontations of the period
1917-89 are now clearly behind us.” This does not sound like our moment
in time, when a historic crisis of capitalism has returned the idea of
ending it to the intellectual agenda.