Has Thomas Piketty Gone Full Marxist?

In other words, one would conclude that inequality has increased.

But in A Brief History of Equality Piketty says the very opposite. There, he took the longer, broader view. “The world of the early 2020s,” he says, “no matter how unjust it may seem, is more egalitarian than that of 1950 or that of 1900, which were themselves in many respects more egalitarian than those of 1850 or 1780.”

This is certainly true in reference not just to the United States or Western Europe but to the entire world. The emergence of hundreds of millions of Chinese and others in the developing world from extreme poverty has fueled a strong rise in global equality.

Piketty welcomes this rise in equality but clearly believes it is nowhere near enough. He believes the world has a great deal of progress yet to make. “Progress” means to Piketty nothing more or less than “increasing equality.”

There is little in the book to suggest that Piketty is not in accord with the Marxist vision of the utopian future, “From each according to his ability, to each according to his need.”

Wealth redistribution

The book’s main proposals are all about redistribution of wealth. (In this book, Piketty focuses more on the distribution of wealth than the distribution of income, perhaps because of quibbles that had been raised about Piketty’s and his associates’ measures of income inequality.) I assume that a reader who doesn’t believe in redistribution of wealth or income and thinks it’s a Marxist plot will seethe at reading this book and fling it into the fire. Nevertheless, at least some redistribution is a fact of life in all countries. Indeed, every fiscal measure enacted by our federal government redistributes wealth. It is worth considering, at minimum as a thought experiment, more extreme levels of redistribution.

Piketty’s proposals are extreme by today’s standards. A central proposal is for each person to receive an “inheritance” at the age of 25 of 120,000 euros (US$123,485). That inheritance would be funded by taxes on bequests and on wealth. I found the arithmetic of this funding to be explained better in Klein’s interview with Piketty than in the book. The idea is that although it could be funded entirely by a 100% taxation of bequests, Piketty believes that some percentage of each bequest should be allowed to pass to heirs, and so the remainder of the 120,000 euros would be funded by taxes on the wealth of the living.

And this is not all. Piketty says that “the idea of an inheritance for all presented here is meaningful only if it is added to systems of basic income and guaranteed employment, which ought to be established first.”

Utopianism in the march toward wealth equality

Extreme as these proposals will seem to some, one assumes they would be roundly cheered by Bernie Sanders and the proponents of a “Green New Deal.” And the justification that Piketty gives for them in the context of recent events is worth consideration. Like James Fok, the author of the otherwise very different book Financial Cold War, Piketty believes that much inequality is due to the fact that capital moves easily across borders while labor does not. In Piketty’s case, he believes that capital accumulators take advantage of citizen-funded national infrastructures but then can fluidly move their capital internationally, failing to compensate the citizens of the nations that provided the underpinnings of their ability to earn that wealth.

This is the way Piketty puts it:

The heart of the new rules is the free circulation of capital, without any compensation in the form of regulation or common taxation. In sum, states have instituted a legal system in which economic actors have won a quasi-sacred right to enrich themselves by using a country’s public infrastructures and social institutions (such as the educational and health-care systems), and then, with the stroke of a pen or the click of a mouse, to move their assets to another jurisdiction, without any arrangement to follow the wealth in question and to tax it in a way that is fair and coherent with the rest of the tax system.

This, Piketty believes, is the source of the rage against globalization – and he may be right.

How to rectify this injustice is not obvious. Most proposals are circuitous and politically impractical, like calls to harmonize taxation across all international borders. Piketty’s proposals amount to a Gordian knot solution: just deploy the most obvious and direct approach by taking away excessive wealth and redistributing it to those who otherwise would not be compensated.

This argument could be advanced in a cogent manner, but Piketty muddies the waters by strongly implying that this way of rectifying inequality will solve every other problem on earth too and achieve every cherished objective. In my opinion he doesn’t make any sort of logical argument for this view.

He is explicit about the implication – repeating it several times – that increasing wealth equality will result in a society that is more decentralized, more multicultural, more participatory, more ecological, and will have “an electoral and media system that cannot be controlled by money.”

I am not sure how this is all supposed to come to pass just because the wealth distribution is more nearly equal, but perhaps in a future book Piketty can explain this.

There are, admittedly, in his book other proposals that are not directed specifically to the increase of wealth inequality but to participatory democracy. The main proposal is that practices like Germany’s of requiring equal representation of workers on corporate boards should be stronger and more widespread. This might be a good idea, but it is not clear how this leads to a more multicultural, ecological, and decentralized society. But I am open to better arguments for this than those that Piketty delivers in this book.

Struggle or stable institutions

There is another thread in Piketty’s book that, though muted, may be frightening to many in the United States. It has, again, a Marxist undercurrent.

Having lived briefly in France I know that it is not unusual there for someone to identify herself or himself as a Communist. It is not shocking, as it would probably be in the United States. I don’t think Piketty is in that camp, but he may not be very far from it. And so, it is not too shocking to me to note another opinion expressed in this book – and that opinion may be, in fact, entirely valid.

Piketty considers whether progress (by which, as noted earlier, he appears to mean “increasing equality”) is achieved through institutional evolution or through social and political struggle. Plainly, he thinks it is both, with some emphasis on struggle. (No, he doesn’t say “class struggle” but it’s not hard to think of it that way.) “Between 1914 and 1980, it was social and political struggles that made institutional change possible,” he says. “Without a powerful social and collective movement supporting further change, the latter will not happen.”

In other words, we need activism and social struggle to promote social change, otherwise it will not happen.

Euphemism or gobbledygook?

Too much of the text is hard to understand. It reminds me of writings of philosophy that are difficult to grasp until you get the gist of the whole philosophical construct, and then maybe you can understand what individual passages are trying to say. Here is one example:

That is always how it has been in history: each government must, if it deems it useful, free itself from its predecessors’ commitments, especially if these commitments put social harmony and the survival of the planet in danger. However, it is essential that this form of sovereignism be defined on the basis of universalist and internationalist objectives, that is, by making explicit the criteria of social, fiscal, and environmental justice that can be applied to all countries in the same way.

In some cases, these abstruse passages are for the purpose of euphemizing something that Piketty may feel is too radical to be said straight out – a call for class struggle for example. But they make the book more difficult and monotonous to read.

Piketty has some important things to say – and he does better in his interaction with Ezra Klein, who, though a progressive himself, raises the objections that a conservative would raise. Piketty parries them reasonably well. But my hope is that Piketty’s next book will be a little more coherent.

Economist and mathematician Michael Edesess is adjunct associate professor and visiting faculty at the Hong Kong University of Science and Technology, managing partner and special advisor at M1K LLC, and a research associate of the Edhec-Risk Institute. In 2007, he authored a book about the investment services industry titled The Big Investment Lie, published by Berrett-Koehler. His new book, The Three Simple Rules of Investing, co-authored with Kwok L. Tsui, Carol Fabbri and George Peacock, was published by Berrett-Koehler in June 2014.

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