than the final episode of “Breaking Bad.” Progressives are celebrating
the book — and its unexpected popularity — as an important turning point
in the fight against global wealth inequality. This, of course, means
that conservatives have gone
:
“Some French socialist, Marxist, communist economist has published a
book, and the left in this country is having orgasms over it,” he
exclaimed during a recent broadcast.
When the right drops the
C-bomb, the M-bomb and S-bomb all at once, you can be certain a book is
having an impact. And “Capital” may well be the “
” of the first half of the 21st century, redefining the way we think about capitalism, democracy and equality.
This,
of course, means that the right-wing attacks have only just begun. That
in mind, here is a handy guide to navigating the more absurd responses:
There
are two Marxes. One, a scholar of capitalism of repute, put forward
testable hypotheses, some of which you may accept, some of which you may
reject. The other is a conservative boogeyman, the human representation
of all they find evil. If they dislike something, it must be Marxist.
Thanks
to Piketty, the Left is now having a “Galaxy Quest” moment. All that
stuff their Marxist economics professors taught them about the “inherent
contradictions” of capitalism and about history’s being on the side of
the planners — all the theories that the apparent victory of market
capitalism in the last decades of the 20th century seemed to invalidate —
well, it’s all true after all.
How to respond: Most times someone drops the M-Bomb, he is
intending to be provocative. With enough effort, you can make
almost anything Marxist.
While Marxists don’t agree on everything, and the term is very nebulous
(Marx once said he wouldn’t describe himself as a Marxist), there are
some pretty established rules for determining if someone is, indeed, a
Marxist. First, he generally doesn’t write things like,
- “Marxist
analysis emphasized the falling rate of profit — a historical
prediction that turned out to be quite wrong” (“Capital in the 21st
Century,” page 52)
- “Marx usually adopted a fairly anecdotal and unsystematic approach”. (“Capital in the 21st Century,” page 229)
- “Marx
evidently wrote in great political fervor, which at times lead him to
issue hasty pronouncements from which it is difficult to escape. That is
why economic theory needs to be rooted in historical sources …”
(“Capital in the 21st Century,” page 10)
- “… Marx totally
neglected the possibility of durable technological progress and steadily
increasing productivity.” (“Capital in the 21st Century,” page 10)
These
are not the words of a Marxist, but rather a reasonable scholar,
investigating the truth of the claims written by the greatest political
economist who ever lived. The fact that Piketty abstains from the
vitriol and misrepresentation that typify most writing on Marx are to
his credit.
Piketty certainly
does argue that capitalism will not inevitably reduce inequality, as economist
Simon Kuznets had famously claimed. As to whether capital will accumulate without end, as Marx believed, he is more nuanced.
Piketty
argues that capital will accumulate in the hands of the few when growth
is slower than the rate of return on capital and dis-accumulate if not
(This is the now famous “r>g” formula). As growth slows, companies
can replace workers with machines (written by economists as
“substitution between capital and labor”), but only if there is a high
elasticity of capital to labor (higher elasticity means easier
replacement). This means that the share of income going to the owners of
capital will rise, and the distribution of that capital will become
more unequal.
Piketty does not hold to a labor theory of value, he
does not believe that capitalism is founded on the exploitation of the
proletariat, and he does not believe the system will inevitably collapse
on its own contradictions. But critics who call Piketty a Marxist don’t
actually mean, “Piketty subscribes to a collection of propositions
generally accepted by Marxists”; they mean it as a verbal grenade. Step
over it and move to more substantive criticisms.
Claim: The social safety net has already solved the problem
In
order to somewhat compensate workers for voluntary unemployment and the
ludicrously low wages that “markets” pay them, modern societies have
developed transfer systems, or social safety nets of various levels of
robustness, to bolster the incomes of low-wage workers. Some
conservatives argue that these transfers have solved the inequality
problem.
Scott Winship, the lovable but irksome economist dedicated to upsetting the inequality consensus,
writes in Forbes,
Most
importantly, in the United States, most public transfer income is
omitted from tax returns. That includes not just means-tested programs
for poor families and unemployment benefits, but Social Security. Many
retirees in the Piketty-Saez data have tiny incomes because their main
source of sustenance is rendered invisible in the data.
How to respond: There’s
not enough room to give his data claims a full airing. For our
purposes, it suffices to say that, while America does have a transfer
system, it’s far less robust than that of other developed nations. (See
chart below, from
Lane Kenworthy.)
Government
revenues are far lower in the U.S. than in other countries, making
redistribution more difficult, and thus our safety net is far more
frail. (See chart below, from
Sean McElwee.)
Far
more interesting is what would happen if conservatives made this their
line. After all, if transfers are what is preventing inequality from
skyrocketing then the rising share of pre-transfer income accruing to
the wealthy capital owners means we need more robust transfer system.
Because few, if any, thinkers on the right have argued for a stronger
transfer system (and are, in fact, attempting to violate it), they must
accept the logical conclusion: Their policies will set off skyrocketing
inequality (or, more likely: They don’t give a shit).
Claim: Inequality isn’t a problem because look at consumption!
There
are lots of ways to look at inequality. You could look at income
inequality by examining how much a person takes home every year from
their labor, income from assets and transfers. You could also look at
wealth inequality by figuring out how many assets they own, in the form
of stocks, bonds, property, and subtract from it their debts. Or you
could look at how much they are able to consume.
Some conservative
economists argue that an increase in income inequality has not been
mirrored by an increase in consumption inequality because the wealthy
save or invest their income. Kevin Hassett, a former Romney economic
adviser, illustrates this point,
arguing:
From
2000 to 2010, consumption has climbed 14% for individuals in the bottom
fifth of households, 6% for individuals in the middle fifth, and 14.3%
for individuals in the top fifth when we account for changes in U.S.
population and the size of households. This despite the dire economy at
the end of the decade.
Although he initially made this argument against Piketty in 2012, he has revived it recently in a
lecture on the subject.
How to respond: In large part, this is a common trope on the right — the “
but they have cellphones!” argument. The empirical literature on this subject is still very much in flux, and there is not a consensus. Some
recent studies
find that consumption inequality has increased with income inequality.
But even if we except the consumption inequality argument, conservatives
have some explaining to do. After all, if income inequality has been
rising while consumption inequality has stayed the same, where is the
spending coming from?
Debt. Which means that wealth inequality is increasing, as the rich save more and the poor fall further into debt. Research
released this week by Amy Traub of Demos
finds
that the recent increase in credit card debt hasn’t been driven by
profligate spending, but unemployment, children, the declining value of
homes and lack of health insurance. Recent research by Emmanuel Saez and
Gabriel Zucman show how the bottom 90 percent simply haven’t been able
to save their incomes and thereby build wealth. (
See chart below.)
Claim: We need lazy rich people
Tyler Cowen is one of the more honest of Piketty’s critics, and there is certainly a lot to like in
his review. However, this section is a head-scratcher:
Piketty
fears the stasis and sluggishness of the rentier, but what might appear
to be static blocks of wealth have done a great deal to boost dynamic
productivity. Piketty’s own book was published by the Belknap Press
imprint of Harvard University Press, which received its initial funding
in the form of a 1949 bequest from Waldron Phoenix Belknap, Jr., an
architect and art historian who inherited a good deal of money from his
father, a vice president of Bankers Trust… consider Piketty’s native
France, where the scores of artists who relied on bequests or family
support to further their careers included painters such as Corot,
Delacroix, Courbet, Manet, Degas, Cézanne, Monet, and Toulouse-Lautrec
and writers such as Baudelaire, Flaubert, Verlaine, and Proust, among
others.
How to respond: It’s very
true that in the past, many artists, writers and thinkers benefited from
familial wealth (or rich benefactors). This, however, is not to be
celebrated! It means that marginalized people are frequently removed
from mainstream discussion. It’s also a dreadful defense of inequality.
As theologian Reinhold Niebuhr writes,“The fact that culture requires
leisure, is however, hardly a sufficient justification for the
maintenance of a leisured class. For every artist which the aristocracy
has produced, and for every two patrons of the arts, it has supported a
thousand wastrels.”
Poverty and oppression can also create other
powerful types of art, from boheim to the blues. More important, there
are far better ways to fund the arts than throwing money at rich
families and hoping they cook up something nice. For instance, the
National Endowment for the Arts has funded arts education, dance,
design, folk and traditional arts, literature, local arts agencies,
media arts, museums, music, musical theater, opera, theater and visual
arts. In the aftermath of the Great Depression the Works Progress
Administration had an arm devoted to
funding the arts that
supported Jackson Pollock, William Gropper, Willem de Kooning, Leon Bibel and Ben Shahn. The CIA has
even gotten into the game.
As
Niebuhr notes, “An intelligent society will know how to subsidize those
who possess peculiar gifts … and will not permit a leisured class to
justify itself by producing an occasional creative genius among a
multitude of incompetents.” It’s a wonder that conservatives want the
wealthy financing art and philosophy — Marx, after all, would have died
of penury without the beneficence of the wealthy Engels. Given that his
economist friends have been impressed by Piketty’s cultural depth
because of his ability to cite Jane Austen, I wouldn’t put much weight
on their cultural defense of privilege.
Claim: Piketty is French, and we saved their butts in World War II
This is true. You’ve lost the debate.
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