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THIS WEEK

Piketty bookThomas Piketty hasn’t just produced a book. He has produced a phenomenon — and we’re devoting this week’s entire Too Much to his new Capital in the Twenty-First Century. How could we not?

A few short months ago, after all, who would have ever imagined that a tome about inequality would be topping the bestseller lists? Or that an obscure French economist who cheerfully contemplates “confiscatory” taxes on the rich would have an audience with America’s highest tax official?

We did our first Too Much piece on Capital in the Twenty-First Century a month before the book’s official U.S. publication. Since then, a host of commentators have chimed in, some with insight, others with nonsense. We survey below this chattering class chatter.

We also offer our own take on Capital in the Twenty-First Century as well as a reader’s guide that can help you dig as deep into the Piketty perspective as you have the curiosity — and the time — to go.

So welcome to Thomas Piketty’s world. May our own come to share his vision.

 

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GREED AT A GLANCE

You don’t have to turn too many Capital in the Twenty-First Century pages to come across a fascinating instance of greed and grasping, past or present. The past in these pages stretches back to the let-them-eat-cake days before the French Revolution. Years after that Revolution in 1825, author Thomas Piketty relates, officials in Paris incurred a huge public debt to finance what became known as the “émigrés billion,” the fortune in francs paid to aristocrats who had fled revolutionary France “to compensate them for the rather limited redistribution of land that took place in their absence.” The French government continued borrowing to enrich the rich throughout the rest of the nineteenth century. By the twentieth century, interest on that debt amounted to over 2 percent of national income, more than France was spending on education . . .

Capital in the Twenty-First Century also goes exploring the wealth scene in the nineteenth-century United States. Men, women, and children held in slavery, Piketty details, made up 40 percent of the population of America's South in 1860, and the wealth these slaves represented — for slave owners — roughly equaled the entire total value of U.S. farmland. In fact, Piketty adds, the value of Southern capital by 1860 amounted to nearly as much as the then “total value of capital in Britain and France.” In the South, observes Piketty, “we find a world where inequalities of ownership took the most extreme and violent form possible, since one half of the population owned the other half.”

We can choose to track the concentration of our modern world’s wealth, points out Capital in the Twenty-First Century, by counting the billionaires among us. We had five billionaires per 100 million adults in 1987, 30 in 2013. But a more helpful yardstick, Thomas Piketty suggests, might be the wealth owned by a fixed percentage of the world’s population, “say the richest twenty-millionth of the adult population of the planet,” about 150 of 3 billion adults in the late 1980s and 225 of 4.5 billion today. These uber rich averaged $1.5 billion each in 1987 — and nearly $15 billion in 2013. After inflation, these deep pockets have upped their net worth annually by an average 6.4 percent over the last three decades.

 

Quotable

“If you'd like to live in Downton Abbey, the good news is that our economy has entered a second Gilded Age of opulence and elegance. The bad news is that you'll likely end up among the vast majority stuck sweating in the kitchen.”
Bernard Condon, Josh Boak, and Christopher Rugaber, A French Economist's Grim View of the Wealth Gap, AP

“The oligarchs of tomorrow are likely to have names like Walton, Zuckerberg, Soros, Adelson, Trump, and Koch, even if they never work a day in their lives.”
Chuck Collins, Derailing the Dynasty Train, OtherWords

PETULANT PLUTOCRAT OF THE WEEK

Pete du PontThomas Piketty’s warnings against letting our world sink under the domination of inherited wealth seem to have hit too close to home for Pierre “Pete” du Pont IV. The 79-year-old former governor of Delaware hails from one of America’s oldest wealth dynasties, and the hubbub around Capital in the Twenty-First Century has him seriously out of joint. We have too many “smart and talented people,” du Pont pronounced last month, who “spend their time and energy fulminating about things that don't really matter” — like the wealth of the wealthy. Added the former GOP Presidential candidate and leading light of a family worth over $15 billion: “America is a great nation. We should not be surprised or troubled that some of its citizens are wealthy.”

 

 

 

 

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IMAGES OF INEQUALITY

Piketty with chart on tour

All the numbers in Thomas Piketty’s Capital in the Twenty-First Century boil down in the end to a century-long “U.” The top 1 and top 10 percent shares of income and wealth waxed high at the beginning of the twentieth century, dropped substantially in the middle, and have come roaring back up over recent decades. Piketty recently traced this distributional “U” at a presentation in London.

 

 

Web Gem

Paris School of Economics/ The academic home base of Thomas Piketty has thoughtfully devoted a sizable amount of its online real estate to everything Capital in the Twenty-First Century-related. You can find here all the book’s figures and tables — and spreadsheets with all Piketty’s basic stats.

 

 

 

PROGRESS AND PROMISE

A Global Wealth Tax? Let's Show Some Love

global wealth tax

The top complaint against Capital in the Twenty-First Century? Author Piketty, critics charge, offers up only a single solution — and an impractical one at that.

Piketty’s “policy proposal — a global tax on wealth — has no chance of happening,” the New Republic opines in a typical comment. “Why describe such a serious problem and then offer such an un-serious solution?”

Another analyst deadpans that Piketty’s global wealth tax belongs on a “fantasy shelf.” But all this dissing of a global tax on wealth does Piketty’s thought a distinct disservice — on two counts.

The first: Capital in the Twenty-First Century does not advance just one solution.

Piketty places his annual global wealth tax in the context of what he sees as a broader rejuvenation of progressive taxation. He urges much higher top marginal rates on income — up to 80 percent on income in the top brackets, about double the current U.S. top rate — and a stronger estate tax to prevent the passing on of immense private fortunes from one generation to another.

Capital in the Twenty-First Century also recognizes the equalizing impact of what Piketty calls the “social state,” the public policies and institutions “put in place to regulate the relationship between capital and labor.”

The second reason the dissing of Piketty on the wealth tax rates as piling on: Every major brake on wealth’s concentration, down though the years, has come across initially as wildly impractical.

In Capital in the Twenty-First Century, Piketty acknowledges the utopian feel of his global wealth tax proposal, but then goes on to lay out a step-by-step process for moving a global wealth tax forward in a politically practical fashion.

The global wealth tax Piketty proposes would yearly subject net worth over 1 million euros, about $1.37 million, to a set of escalating tax rates that would range from 1 percent on wealth between 1 and 5 million euros to as much as 10 percent on fortunes of “several hundred million or several billion euros.”

The “global” aspect of the tax, Piketty argues, could grow over time from national and regional arrangements.

“International coordination to restrict capital movement is already happening in certain places,” This Week analyst Ryan Cooper noted earlier this month. “A similar effort to tax wealth wouldn't be all that different.”

 

Quotable

“In the United States, Piketty shows, the incomes of the top 1 percent have grown so high — chiefly due to the linkage of top executive pay to share value, a form of capital — that they soon will create the greatest level of income inequality in the recorded history of any nation.”
Harold Meyerson, How capitalism enriches the few rather than the many, Washington Post

“There are two ways to change a society: from the bottom and from the top. Occupy Wall Street tried it the first way and paved the road with populism. Thomas Piketty is going for the second way. He has roiled the pundit classes.”
Heidi Moore, Thomas Piketty is a rock-star economist, Guardian

“Understanding how the elite become what they are, and how their wealth perpetuates itself, is now a hot topic of scientific inquiry.”
Mike Konczal, Studying the Rich: Thomas Piketty and his Critics, Boston Review

“Piketty has brought to the fore the empirical fact that income inequality calcifies into wealth inequality.”
Heather Boushey, I Like Jane Austen’s Novels, Huffington Post

inequality by the numbers

Wealth shares

 

 

Stat of the Week

Our planet held about 7 billion people in 2012, notes Capital in the Twenty-First Century, and generated enough economic output to provide a $1,035 monthly income for every person on Earth, had the income from that output been divided equally.

 

 

 

 

IN FOCUS

All Hail Piketty, But Props for Pickett, Too

A bold new egalitarian take on our modern economy from France joins a powerful rendering of inequality’s toll — on our daily lives — from the UK. Blend the two into our politics and watch plutocracy start shaking.

What makes the new book from French economist Thomas Piketty, Capital in the Twenty-First Century, so important?

A number of commentators have recoiled from that question. They’ve chosen instead to grumble about the enormous hype around the book — and pound out pieces that trumpet out some variant of “Piketty has got it wrong.”

These pieces do have their place. Indeed, author Piketty opens and ends his epic tale of wealth’s ebb and flow stressing the limits of what he has to say. His sources, he notes, “remain imperfect and incomplete.” His conclusions — “by nature tenuous” — “deserve to be questioned and debated.”

But make no mistake. This book has fundamentally changed our global discourse over inequality. We have been contemplating for years now how deeply unequal we’ve become. Capital in the Twenty-First Century has shifted our gaze to the future, to how terrifyingly unequal we may soon be.  

Thomas PikettyWe have “no natural, spontaneous process,” as Piketty notes, that can “prevent destabilizing, inegalitarian forces from prevailing permanently.”

Yet nothing in our political and economic life, he also reminds us, comes to us “foreordained.” We can shape our future. We just have to start soon, or else resign ourselves to the restoration of “patrimonial capitalism,” an economic order where inherited wealth dominates, distorts, and destroys any hopes for real democracy — or even basic decency.

Capital in the Twenty-First Century actually represents Thomas Piketty’s second major contribution to our global inequality discourse.  

About a dozen years ago, Piketty and fellow French economist Emmanuel Saez, now at the University of California at Berkeley, began revolutionizing how we track — and think about — income distribution.

Up until then, researchers had largely depended on government household surveys for most all of our income stats. These surveys generated an abundance of useful data about the low- and middle-income households that make up the vast bulk of our developed world’s populations, but collected next to zilch of statistical value from society’s highest-income households.

The result: We ended up with analyses of income distribution that typically clumped households into broad “quintiles” or “deciles.” Studies based on these stats seldom did more than compare the incomes of the bottom fifth or tenth of a nation’s households with the middle and top fifths and tenths.

Piketty, Saez, and their colleagues upset this applecart. They dove into tax return data and assembled, first for France and then for the United States and other nations, detailed data series that traced the evolution of incomes at — and even within — the top 1 percent of households.

In 2011, the Occupy movement would shove this top 1 percent data onto our political center stage, and pols and pundits would soon be acknowledging the vast gap between the top 1 percent and everyone else. Piketty’s pioneering research helped ease all this new awareness out of the public policy shadows.

With his blockbuster new book, Piketty is taking us another giant step forward. Capital in the Twenty-First Century places contemporary income concentration in over two centuries worth of historical context, primarily zeroing in on France, Britain, and the United States since the late 18th century.

Intense levels of income and wealth concentration, Piketty’s broad sweep reveals quite strikingly, have defined our industrial world for generations. The only exception: the decades of the mid twentieth century, a relatively brief interlude when the richest 1 percent’s share of society’s income and wealth dropped substantially in both Europe and the United States.

During these mid-century years, the return on capital — the dividends, rents, interest, and capital gains people of means rake in off the assets they own — did not follow basic historical norms. Economies in the mid twentieth century grew more quickly than the wealth of the rich. Societies became more equal.

What explains this equalizing? The twentieth century’s incredibly disruptive world wars, Piketty argues, opened a unique window for egalitarian shifts in tax and other public policies. 

But the mid-twentieth century, Piketty argues, represents a special case, and he spends a major portion of his Capital in the Twenty-First Century endeavoring to show why. His central theme: The rate of return from capital will generally tend to outpace economic growth, a relationship Piketty reduces to the formula r > g.

In plainer terms: “Wealth accumulated in the past grows more rapidly than output and wages.” Inevitably, writes Piketty, the entrepreneur “tends to become a rentier, more and more dominant over those who own nothing but their labor.” Eventually, “the past devours the future.”

Serious reviewers have differed over how convincing a case Piketty makes for his “r > g” formula. Much more convincing: Piketty's demolition job on mainstream economics and the political fairy-tales our top politicians tell about our economic system, most notably the notion that the free market, left to its own devices, will distribute “the fruits of economic progress among all people.”

Piketty, adds economist Paul Krugman, crumbles “that most cherished of conservative myths, the insistence that we’re living in a meritocracy in which great wealth is earned and deserved.”

The historic data Piketty so impressively marshals, the anecdotal evidence he brings to bear from the historical record and even from literature, all make clear that capitalism has a powerful tilt toward the top, an underlying tendency to rather ferociously concentrate income and wealth.

And where will this concentration, if we let it continue, lead us? Increasingly inherited wealth, Piketty writes, will confront us with an extreme concentration of capital “potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies.”

But we face other threats as well from extreme inequality, threats that sour our daily lives on any number of fronts, from the trust we have in each other to our physical and mental health. Capital in the Twenty-First Century doesn’t go into these threats.  Another landmark book on inequality does.

That book — The Spirit Level: Why More Equal Societies Almost Always Do Betterappeared five years ago, first in the UK and then around the world. Spirit Level editions have appeared since then in two dozen nations and sold, in English alone, well over 150,000 copies, a monster total, at least before Capital in the Twenty-First Century, for a serious book in the social sciences.

Like Thomas Piketty, Spirit Level co-authors Richard Wilkinson and Kate Pickett have marshaled vast arrays of data. These two epidemiologists — scientists who study the health of populations — have identified nearly every social problem where reliable statistics let us compare how well or poorly the major nations of the developed world are delivering a decent quality of life.

In which developed nations, Wilkinson and Pickett ask, do people live the longest? What nations show the highest levels of obesity? Where do people born at the bottom have the best shot at climbing up? Which nations send the most people to prison? Have the most teenage moms? Tally the most homicides?

People in some developed nations, the Spirit Level documents, can be anywhere from three to ten times more likely than people in other developed nations to be obese or get murdered, to mistrust others or have a pregnant teen daughter, to become a drug addict or escape from poverty.

And the nations that do the best, on yardstick after yardstick, all turn out to share one basic trait. They all share their wealth.

“If you want to know why one country does better or worse than another,” as Wilkinson and Pickett note, “the first thing to look at is the extent of inequality.”

The United States, the developed world’s most unequal major nation, ranks at or near the bottom on every quality-of-life indicator that Wilkinson and Pickett examine. Portugal and the UK, nations with levels of inequality that rival the United States, rank near that same bottom.

People in more equal societies simply live longer, healthier, and happier lives than people in more unequal societies. And not just poor people in these societies, Wilkinson and Pickett emphasize, but all people.

All people, in other words, have a personal vested interest in preventing the frightfully unequal future Thomas Piketty has put before us. Successfully sharing this understanding, widely and broadly in the political arena, may be our best hope at forging a twenty-first century where that future never takes place.

 

New Wisdom
on Wealth

A selection that highlights some of the more telling reflections on Capital in the Twenty-First Century

From Academe

Jacob Hacker and Paul Pierson, A Tocqueville for Today, American Prospect, March 10, 2014. Two political scientists note that Piketty has little to say about “the kind of political movement necessary for a fairer future.”

Emily Eakin, Capital Man, Chronicle of Higher Education, April 17, 2014. The best positioning of Piketty and his thinking's evolution.

Robert Solow, Thomas Piketty Is Right, New Republic, April 22, 2014. Exploring the “rich-get-richer dynamic.”

From the Business Press

Gillian Tett, Lessons from a rock-star economist, Financial Times, April 25, 2014. Musings on why Piketty's Capital has received such a bountifully positive reception.

From Beyond the Beltway

Jay Bookman, On Piketty, capitalism, and increasing inequality, Atlanta Journal Constitution, April 28, 2014. The Jefferson connection.

From the Left

Doug Henwood, The Top of the World, BookForum, March 25, 2014. Piketty helps us see how wealth concentrates in capitalist economies.

Mark Weisbrot, Piketty in Washington, Common Dreams, April 16, 2014. Following Piketty — and the debate that surrounds him — around for a day.

Robert Kuttner, What Piketty Leaves Out, American Prospect, April 30, 2014. If we want less inequality, we need to understand the institutions and politics that once undergirded our equality.

Thomas Frank, Capital destroys right-wing lies, but there’s one solution it forgets, Salon, May 11, 2014. Piketty’s blind spot? He has virtually nothing to say about labor unions.

David Harvey, Taking on 'Capital' without Marx, In These Times, May 20, 2014. An analysis from a top Marxist thinker.

James Galbraith, Kapital for the Twenty-First Century? Dissent, Spring 2014. An unsparing critique.

From the Right

Pascal-Emmanuel Gobry, The Conservative Case For Thomas Piketty, Forbes, April 24, 2014. Bring on a capital tax.

Joshua Hendrickson, Unequal to the Task, National Review, May 5, 2014. This University of Mississippi economist acknowledges “the sheer volume” of the data Piketty has compiled as a “significant contribution.”

William Watson, What Thomas Piketty gets right, Financial Post, May 16, 2014. A conservative claims Piketty as a fellow crank.

Mervyn King, The Tenuous Case Against Capitalism, Business Day, May 18, 2014. A central banker says we should worry that greater income inequality might be transmitted to succeeding generations

From Analysts of the Right

Kathleen Geier, What Piketty’s Conservative Critics Get Wrong, Baffler, April 28, 2014. A sweeping rundown.

Jared Bernstein, Piketty’s Arguments Still Hold Up, After Taxes, New York Times, May 9, 2014. A look at the conservatives attack on Piketty’s statistics.

From Abroad

David Priestland,  Are we at a Piketty tipping point for the left? Guardian, May 7, 2014. We’re not living in 1945 anymore.

Saliem Fakir, The Relevance of Thomas Piketty for South Africa, All Africa, May 14, 2014. Piketty is bringing our focus back to how super wealthy elites earn their money and what they do with it.

From the Light Side

Robert Shrimsley, The nine stages of the Piketty bubble, Financial Times, April 30, 2014.

NEW AND notable

Thomas Piketty's Capital: A Reader's Guide

Thomas Piketty, Capital in the Twenty-First Century. Cambridge: Harvard University Press, 2014.

The thought of tackling a 685-page book a little intimidating for you? Cheer up. Thomas Piketty’s Capital in the Twenty-First Century actually only runs 577 pages in text. You can skip the footnotes.

You can, truth be told, skip the whole book and still dip your toe deep into the Piketty waters. The online world is bustling with resources that can help you get a really solid sense of what Capital in the Twenty-First Century has to offer.

And all these online resources also make for a great orientations should you choose to actually read the entire book. So where do you start? Some thoughts.

Read an online primer.

Matthew Yglesias at Vox has put together one of the best. His Short Guide to Capital in the Twenty-First Century revolves around 14 questions that range from the most elemental (“What is capital?”) to the interestingly edgy (“Does this have anything to do with Karl Marx's Das Kapital?”).

Steve Pressman at the Boston-based Dollars & Sense has taken a different approach. This progressive economist has been blogging about Piketty's Capital as he makes his way through the book — and the excitement around it. You can start with his intro or skip right into his reading travelogue.  

Watch a quick video.

BBC Newsnight has prepared this sprightly three-minute introduction to Piketty’s most basic points. You'll enjoy it, whether or not you ever intend to open the book. Piketty's publisher, the Harvard University Press, offers a more traditional, but equally brief, “talking head” video prologue.

Watch Piketty discuss his thesis.

In New York last month, Piketty talked about his book on a City University of New York panel that included three of inequality’s most honored critics within the economics profession. The video runs over an hour and a half. Don't freak. If you have a free evening, watching this won’t waste it.

Looking for a bit more manageable time-frame? This Chris Hayes MSNBC one-on-one discussion with Piketty runs only a half-hour.

Read interviews with Piketty.

PBS economics correspondent Paul Salmon conducted a particularly lucid interview with Piketty earlier this month, and this New York Times write-up of a chat with him offers the most personal background on the French economist.

A useful interview with the British journal Juncture has Piketty grappling directly with many of the points his progressive critics raise. For more on the Piketty basics, try this Real News Network dialogue.

We’ve also seen some riveting interviews about Piketty, most notably this Bill Moyers discussion.

Check out the reviews.

The Century Foundation is hosting one list of major Capital in the Twenty-First Century reflections. Try reading as many as you can before you tackle the book. They won't spoil the ending.

 

 

 

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The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class cover

How did the grand fortunes of the early 20th century shrink down to democratic size by the middle? Thomas Piketty's Capital in the Twenty-First Century doesn't go into the details. Too Much editor Sam Pizzigati's new book does. Learn more about it.

About Too Much

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