Review Essay of Thomas Piketty's "Capital in the Twenty-First Century"

Abstract

[MWS 14.1 (2014) 103-112] ISSN 1470-8078 Review Essay of Thomas Piketty's Capital in the Twenty-First Century Sam Whimster Thomas Piketty, Capital in the Twenty-First Century (Cambridge MA: Belknap Press of Harvard University Press, 2014), viii + 685pp. Hard back ISBN 978-0-674-43000-6. £29.95. The widespread uptake of Piketty's new book not just in heterodox economics but also mainstream, and to boot in the pink press of the FT as well as review sections of Sunday papers, indicates some kind of shift is at last occurring in the hegemony of neoclassical economic thinking. In Weberian social economics, ideas do not win out on the basis of rationalism alone, and Piketty observes that neoliberal econ omists have become the plutocracy in universities through their alli ance with finance capital. The new Keynesians have been battering away with limited success at neoclassical obduracy in the face of the recessions that were triggered by the global financial crash of 2007 2008, pointing out the irrationality of austerity when the priority is to restore growth by whatever combination of fiscal and monetary methods is required. As yet the balance of social forces are not on their side. Enter Piketty who makes growth subsidiary to distribution. Fie concentrates on the return to capital and the share of capital in overall national income. The exercise is historical and based on the historical data for different periods throughout the 19th and 20th centuries and the beginning of the 21st century, which includes the financial crash and after (to 2013). France and Britain have the longest and most con tinuous record of income and wealth statistics. Reliable records only come into existence with the invention of income tax, inaugurated by William Pitt in 1798 to pay for the wars against Napoleon. Piketty insists on data and the intelligent interpretation of that data. Fie has been popularized most of all for his call for a tax on wealth, on capital. But equally he demands that a proper 'cadastral'© Max Weber Studies 2014, Clifton House, 17 Malvern Road, London, E8 3LP. 104 Max Weber Studies register is set up that accurately recor whom and where. Without accurate reco is blind and tax havens—in Luxembourg of London—are allowed to flourish. Pik notes that tax havens are 'outright thef decided to apply a haircut to Cyprus af ing system imploded, it was assumed t being targeted. But financial capital is e and it was Cypriot savers who got hit. and the scheme had to be reformulated fair, without access to records the polic ting the haircut and whether such a tax is Max Weber's own research in the Roman A remembered was based on the cadastra Rome. Weber argued that the large capi the burden of taxation onto the small f undermining of the free citizen basis of tion shapes political economy. Piketty is not, however, to be claimed as his book will alter the whole understand problématique is Kapital as the title ma with David Ricardo and Karl Marx and the issue of which class draws what from the factors of production: land, labour and cap ital. Ricardo assumed that land would become increasingly scarce with rising rents as population and economic growth proceeded and that the only way to mitigate this was a tax on land rents. But as industrial population ramped up, land rents in fact fell. Piketty still holds the Ricardian argument tenable now with respect to urban land and oil resources. Marx observed that wages were held down by the capitalist class while production and population increased. Capital was set to accumulate infinitely, with capitalist fractions fall ing out between themselves as capital was concentrated in fewer and fewer hands; or, alternatively, the proletariat would revolt in the face of static or squeezed wages. Piketty's data shows that in fact from the 1870s onwards in France and Britain wages started to rise and this increased labour's share of national output; also technology boosted productivity. Piketty's general observation is that where the increases in population and productivity occur they outweigh the return on capital. Marx failed to grasp this. Did Max Weber...