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Thomas Piketty's Capital in the Twenty-First Century: An Introduction
An introduction to Thomas Piketty’s monumental workUS Nobel Prize–winner Paul Krugman described Thomas Piketty’s Capital in the Twenty-First Century as “perhaps the most important book of the last decade.” It has sparked major international debates, dominated bestseller lists and generated a level of enthusiasm—as well as intense criticism—in a way no other economic or sociological work has in a long time. Piketty has been described as a new Karl Marx and placed in the same league as the economist John Maynard Keynes.
The “rock star economist’s” underlying thesis is that inequality under capitalism has reached dramatic levels in the last few decades and continues to grow—and that this is not by chance. A small elite is making itself richer and richer and acquiring everincreasing levels of power.
Given the sensational reception of Piketty’s not-so-easily digested 800-page study, the question as to where the hype around the book comes from deserves to be asked. What does it get right? And what should we make of it—both of the book itself and of the criticism it has received? This introduction lays out the argument of Piketty’s monumental work in a compact and understandable format, while also investigating the controversies Piketty has stirred up. In addition, the two authors demonstrate the limits, contradictions and errors of the so-called Piketty revolution.
The “rock star economist’s” underlying thesis is that inequality under capitalism has reached dramatic levels in the last few decades and continues to grow—and that this is not by chance. A small elite is making itself richer and richer and acquiring everincreasing levels of power.
Given the sensational reception of Piketty’s not-so-easily digested 800-page study, the question as to where the hype around the book comes from deserves to be asked. What does it get right? And what should we make of it—both of the book itself and of the criticism it has received? This introduction lays out the argument of Piketty’s monumental work in a compact and understandable format, while also investigating the controversies Piketty has stirred up. In addition, the two authors demonstrate the limits, contradictions and errors of the so-called Piketty revolution.
97 pages, Kindle Edition
Published August 1, 2017
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Displaying 1 - 19 of 19 reviews
December 25, 2017
Giving in to the hype machine, I too purchased Piketty Thomas' 2013 Capital in the Twenty-First Century becoming one of the 97.6% of readers that stopped reading and never finished the formidably sized book. Browsing the bookstore recently, I found this tiny summary on the shelf and picked it up, intrigued by the prospect that I might be able to at least understand a summary of Capital in the Twenty-First Century without needing to read all 685 pages of the full-sized book.
In this introductory text, Stephan Kaufmann and Ingo Stützle give what seems to me to be a well-rounded summary and discussion of Piketty's work. Covering not just the content of the book, the authors also discuss the economic conditions and events that hyped this book and what to make of Piketty's policies going forward.
Piketty's central theme is that a fundamental tenant of capitalism is the relation r > g (r = returns on capital, g = growth of income, r is greater than g). The ratio (r/g) changes over time in response to power dynamics between those whose primary economic function is gaining wealth versus those whose primary economic function earning income. This ratio has historically been large (r sometimes near 7x g) since the 1700s but dropped significantly to historic lows--as low as 2.5 in Britain--after WW1 and WW2 literally destroyed vast amounts of wealth. Since then, the ratio has steadily increased, with a more rapid increase after the rise of neoliberalism in the 1980s. Piketty's primary argument is that in order to sustain long-term growth and productivity in capitalism r > g must be kept at a low ratio. Mechanisms to do this include high taxes on inheritance and capital gains through a global tax system, providing more equal economic participation through welfare from those who's primary economic function is earning income.
According to Piketty's theories, without imposing higher taxes, the r > g ratio will continue to rise and give way once again to highly unequal economies where the vast majority of the population is poor and the wealthy are so because of familial relationships and vast inheritances.
Though there are some criticisms of Piketty's work, this introduction finds that Piketty's work is pretty strongly grounded in objective statistics and a fairly non-partisan perspective of economics.
I highly recommend this introduction to anyone who picked up Piketty's book and ended up not reading it as I did. You might find that this will inspire you to pick up the full volume once again and read it to completion. Even if that's not the case, Piketty's ideas are important in this volatile ideological climate especially for those left-of-center who might be looking for objective material to combat the rising power of an increasingly nihilistic conservative ideology. Kaufmann and Stützle's quick primer provides a good overview of the important points and material to meditate on.
In this introductory text, Stephan Kaufmann and Ingo Stützle give what seems to me to be a well-rounded summary and discussion of Piketty's work. Covering not just the content of the book, the authors also discuss the economic conditions and events that hyped this book and what to make of Piketty's policies going forward.
Piketty's central theme is that a fundamental tenant of capitalism is the relation r > g (r = returns on capital, g = growth of income, r is greater than g). The ratio (r/g) changes over time in response to power dynamics between those whose primary economic function is gaining wealth versus those whose primary economic function earning income. This ratio has historically been large (r sometimes near 7x g) since the 1700s but dropped significantly to historic lows--as low as 2.5 in Britain--after WW1 and WW2 literally destroyed vast amounts of wealth. Since then, the ratio has steadily increased, with a more rapid increase after the rise of neoliberalism in the 1980s. Piketty's primary argument is that in order to sustain long-term growth and productivity in capitalism r > g must be kept at a low ratio. Mechanisms to do this include high taxes on inheritance and capital gains through a global tax system, providing more equal economic participation through welfare from those who's primary economic function is earning income.
According to Piketty's theories, without imposing higher taxes, the r > g ratio will continue to rise and give way once again to highly unequal economies where the vast majority of the population is poor and the wealthy are so because of familial relationships and vast inheritances.
Though there are some criticisms of Piketty's work, this introduction finds that Piketty's work is pretty strongly grounded in objective statistics and a fairly non-partisan perspective of economics.
I highly recommend this introduction to anyone who picked up Piketty's book and ended up not reading it as I did. You might find that this will inspire you to pick up the full volume once again and read it to completion. Even if that's not the case, Piketty's ideas are important in this volatile ideological climate especially for those left-of-center who might be looking for objective material to combat the rising power of an increasingly nihilistic conservative ideology. Kaufmann and Stützle's quick primer provides a good overview of the important points and material to meditate on.
October 31, 2017
I went in expecting basically nothing but this book turned out to be so, so good. Clear and accessible prose + situating Piketty in the proper historical and theoretical context + providing a cogent leftist critique of his work. I'm reading Capital in the 21st Century for a class & this book nicely elucidates my existing qualms with it, while suggesting others I hadn't even thought of.
This is also super short and imo not a bad replacement for actually reading Capital in the 21st cus let's be honest, that book does not really merit all 600 pages.
This is also super short and imo not a bad replacement for actually reading Capital in the 21st cus let's be honest, that book does not really merit all 600 pages.
January 22, 2022
Short and sharp, finished during my layover in Singapore.
A good book to get you thinking about inequality and how I’m we should respond.
(Minor spoilers but not really because this has pretty much been the mainstream discourse for a while)
—-
Main theme is income growth lags behind wealth growth and accumulation (r>g) and as those with lower incomes spend a higher proportion on consumption they can’t accumulate assets and thus the ‘haves’ continue to accumulate more than the ‘have nots’
Pikketys proposal is higher taxes, particularly on inheritance and top 1%.
Though I don’t necessarily disagree with the premise, of his solution, I think there is a growing sentiment that governments are inefficient at deploying capital and higher taxes haven’t always led to better outcomes (e.g. deterioration of California and widening income inequality despite highest taxes in the US). Plus in certain cases corruption also inhibits a belief that this is the best solution.
MY IDEA
Just a thought and would welcome comments, but I’m a strong believer that putting money directly into the hands of people is a far more equitable solution to supporting the economy than lowering interest rates, increasing the money supply, and the fed buying bonds (which have been the trend as of late).
Therefore, if there was a specific progressive tax levy that funds a UBI support system (e.g. everyone received £1,000 per month). Thus money in lower income communities is allowed to be spent within the community and if income is low enough they don’t contribute. The wealthy still receive this but net of the tax levy so if they pay £4k in tax the net is £-3k. Or Bill gates probably spends £x millions.
Obviously wouldn’t solve the problem of income inequality entirely but step in the right direction?
Would be appealing to both left wing (wealth redistribution) and right wing/libertarian (small/less government intervention).
People complain about inflation due to UBI but the inflation we are experiencing now due to money printing/loose monetary policy is worse, and only benefits the wealthy bc their asset prices rise.
Andrew Yang introduced me to the concept of Universal Basic Income so check him out on podcasts etc if you want to learn more.
—-
Slightly unrelated but very strongly against the tax proposals in the US late last year that considered taxing unrealised gains. A musing for another time maybe…
A good book to get you thinking about inequality and how I’m we should respond.
(Minor spoilers but not really because this has pretty much been the mainstream discourse for a while)
—-
Main theme is income growth lags behind wealth growth and accumulation (r>g) and as those with lower incomes spend a higher proportion on consumption they can’t accumulate assets and thus the ‘haves’ continue to accumulate more than the ‘have nots’
Pikketys proposal is higher taxes, particularly on inheritance and top 1%.
Though I don’t necessarily disagree with the premise, of his solution, I think there is a growing sentiment that governments are inefficient at deploying capital and higher taxes haven’t always led to better outcomes (e.g. deterioration of California and widening income inequality despite highest taxes in the US). Plus in certain cases corruption also inhibits a belief that this is the best solution.
MY IDEA
Just a thought and would welcome comments, but I’m a strong believer that putting money directly into the hands of people is a far more equitable solution to supporting the economy than lowering interest rates, increasing the money supply, and the fed buying bonds (which have been the trend as of late).
Therefore, if there was a specific progressive tax levy that funds a UBI support system (e.g. everyone received £1,000 per month). Thus money in lower income communities is allowed to be spent within the community and if income is low enough they don’t contribute. The wealthy still receive this but net of the tax levy so if they pay £4k in tax the net is £-3k. Or Bill gates probably spends £x millions.
Obviously wouldn’t solve the problem of income inequality entirely but step in the right direction?
Would be appealing to both left wing (wealth redistribution) and right wing/libertarian (small/less government intervention).
People complain about inflation due to UBI but the inflation we are experiencing now due to money printing/loose monetary policy is worse, and only benefits the wealthy bc their asset prices rise.
Andrew Yang introduced me to the concept of Universal Basic Income so check him out on podcasts etc if you want to learn more.
—-
Slightly unrelated but very strongly against the tax proposals in the US late last year that considered taxing unrealised gains. A musing for another time maybe…
August 16, 2018
Stephan Kaufmann and Ingo Stutzle have written a concise introduction and critique of Thomas Piketty's capital. It's short and fair, often defending Piketty from sloppier criticism of right-wing critics and even over-enthusiastic fans. Yet, in the last chapter, Kaufmann and Stutzle point out that Piketty isn't even out of line with many Neo-Keynesian thinkers, much less the Marxists whose name his book invokes. Kaufmann and Stutzle also point out that Marxist definitions of capitalism and class are far more clarifying than many of Piketty's assumptions, but that is the only hat-tip into the direction of their political-economic concerns. While the first 2/3 of this slim volume are largely sympathetic, the reader who is unaware of Marxist categories or debates on in heterodox economics and left European economics may find the last chapter difficult, although I found the most illuminating. The translator, Alexander Locascio, has made this someone technical introduction readable in fairly clear English. Worth a read.
October 24, 2023
Insightful summary of the book that presents an interesting marxist critique of Piketty
January 3, 2022
(german edition)
Prägnante Zusammenfassung, Darstellung und Diskussion der zentralen Thesen und Argumentationslinien Pikettys. Zudem stellt das Buch anschaulich die aus unterschiedlichen Richtungen kommende Kritik gekonnt dar und vermag diese für den:die Leser:in verständlich einzuordnen. Das Autorenduo schließt sich in ihrer eigenen Schlussfolgerung einer kapitalismuskritischen Perspektive an. So changiere die Analyse Pikettys in einem reduktionistischen Schema neoklassischer Tradition, sodass nur von sozialer Ungleichheit zwischen Individuen gesprochen wird, die problematisch wird, sobald das ökonomische Wachstum stagniert. Die Autoren plädieren daher dahingehend für eine an Marx angelehnte Analyse, die die Kapitalakkumulation unter den Gesichtspunkten von Macht, Herrschaft, Klasse und sozialen Kämpfen beleuchtet.
Prägnante Zusammenfassung, Darstellung und Diskussion der zentralen Thesen und Argumentationslinien Pikettys. Zudem stellt das Buch anschaulich die aus unterschiedlichen Richtungen kommende Kritik gekonnt dar und vermag diese für den:die Leser:in verständlich einzuordnen. Das Autorenduo schließt sich in ihrer eigenen Schlussfolgerung einer kapitalismuskritischen Perspektive an. So changiere die Analyse Pikettys in einem reduktionistischen Schema neoklassischer Tradition, sodass nur von sozialer Ungleichheit zwischen Individuen gesprochen wird, die problematisch wird, sobald das ökonomische Wachstum stagniert. Die Autoren plädieren daher dahingehend für eine an Marx angelehnte Analyse, die die Kapitalakkumulation unter den Gesichtspunkten von Macht, Herrschaft, Klasse und sozialen Kämpfen beleuchtet.
April 21, 2023
I found this short Verso book review a good way of approaching Thomas Piketty's Political Economy, having read only some of his articles and a few chapters of his 800-words Capital in the Twenty First Century.
In the first and second chapters, the authors explain the reasons behind the "Pikettymania": the book made the author an "economist rockstar" by confirming emerging voices within the economic mainstream about inequality. In particular, it can be understood in the context of the early 21st century realization of neoliberalisms' "discontents", as pointed out by Stigliz. The authors summarize this line of argumentation as "inequality and poverty are no longer regarded as a consequence of capitalist economic growth, but rather as a break on such growth and as a problem for stability".
What does Piketty observe about Capital's historical tendencies?
First, he challenges economic determinism, stating that inequality is partly a direct consequences of conscious political choices. Secondly, he analyzes trends of convergence (less inequality) and divergence (more inequality) and concludes that in periods of slow economic growth, which is likely to happen in the 21st century, divergence is likely to happen more esponentially. In other words, when the economy grows less in already unequal capitalist society, inequality is more likely to rise sharply. This is for instance illustrated by the effect that inherited wealth grows faster than output and income: quoting Piketty's introduction, "People with inherited wealth need to save only a portion of their income from capital to see that capital grow more quickly than the economy as a whole. Under such conditions, it is almost inevitable that inherited wealth will dominate wealth ammassed from a lifetime's labor by a wide margin, and the concentration of capital will attain extremely high levels." Piketty calls this trend towards inequality "structural divergence", and illustrates it via the formula "r > g", or capital/income growth ratio, in which r is the rate of growth of wealth (capital) - including profits, dividends, interest, rents, while g is the growth of the whole economy, meaning the growth of individual incomes and production. The formula shows that, historically, income grows slower than wealth. This is not "a coincidence, but rather inscribed into economic development", due to specific political choices. Piketty is critical of this "fundamental inequality" because it is "potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies". For this reason, he wants r > g to be fixed, which can be done through conscious political policy-making such as via a "progressive global tax on capital".
Kaufmann and Stuztle's literature review of the existing commentaries on Piketty is very well-organized. In particular, the section on its critique is interesting. For some critics, "inequality is good". This sort of criticism comes from neoliberals, led by The Economist, that postulate that inequality is good for enhancing competition and productivity.
One of the most powerful criticisms, however, is that Piketty is "situated within the neoclassical mainstream". The authors summarize these criticisms by arguing that "What stands at the centre of attention are no longer the problems that the poor have with capitalism, but the problems that the poor pose for capitalism and its growth. [...] The demand that follows is a correction of the present [system] - and not a correction of wealth to the benefit of the poor, but a correction of poverty for the benefit of wealth. The goal is not a better life for people -such better life is only supposed to be a means of making economic growth smoother and faster." David Harvey, for instance, says that Piketty "in line with neoclassical theory, understands capital as a thing and not as a process, as a social relation." Inequality is taken as a given, and there are "good and bad inequalities". Some are good for the economy, some are not. The critique of Piketty's eurocentrism is also on point.
Other critics say that Piketty ignores the role of the people and their social struggle in fighting for "convergence". The divergence between r and g that occurred after the post-war "golden era" is explained by these critics, in part, as a result of "the decline of trade unions as well as change in business leadership and culture". According to Kramer, "this act of ignoring social struggles is not a coincidence, but rather the necessary result of neoclassical theory. [...] Income distribution [...] is determined exclusively 'technically'. There is no room for the consideration of the influence of power upon distribution". These critics see Piketty as essentially neoliberal also because he ignores the role that financial markets have in creating an elite based on "income without work", as the financialization of the economy is virtually discarded as an explanatory factor for the increasing returns on capital compared to growth.
i found the Marxist criticism of Piketty quite on point as well. He admits that his conclusions are less dramatic than Marx's - whereas the latter predicted infinite accumulation and perpetual divergence, Piketty concludes that divergence can be reversed, or it can be decreased by policy-makers. This, according to the authors of this review, is due to Piketty's missed opportunity to explore the defining features of capitalism as such: he regards "the dominant economic system completely positively. All of his criticisms of conditions and their development are not intended as a principled objection to the capitalist mode of production and distribution. The ideal condition he strives for is a prosperous capitalism characterized by economic growth. Critique of growth as such is foreign to Piketty. And he only criticizes inequality to the extent that it could damage growth and the legitimacy of capitalism. In this sense, he is both a progressive and a conservative: he wants to change something in order to maintain social relations as they are. He wants to protect capitalism from the poor- not the other way around". He misunderstands capital by equating it with wealth. "Wealth is a form of property. property, however, is not a universal principle according to which somebody has power of disposition over a thing (in pre-capitalist societies, namely, that was not the case in such a generalized sense). Rather, the property relation encompasses the appropriation of nature by human beings. [...] The difference between pre-capitalist and capitalist form of production can only be established in terms of how individuals relate to the means of production and the fruits of their labour. This in turn depends on how the relation of individuals to the community is regulated"
The authors add that Piketty seems to revolve around a circular argument: "inequality is growing because inequality exists". "On the one hand, inequality appears to be only explainable in terms of different levels labour performance and therefore only legitimate in terms of labour performance; on the other hand, reality shows that this is not the case". Inequality, in contrast, came to be because of the "separation of direct producers from the objective possibilities of production. Thus the author asks: is it possible to reach Piketty's goal, a meritocratic, democratic, capitalist society? is it possible to have a capitalist society in which "everyone would receive their fair share of wealth according to their performance?" No, because capitalists will alway earn more than workers, since "the workers do not receive a wage corresponding to the value product produced by their labour. That is how it is possible in the first place that the success of the business can be measured in terms of profits - in terms of that which the workers precisely do not receive- surplus-labour". Piketty's misunderstading of capitalism is thus clear when one looks at his definition of GDP as a communal effort, income and outcome, of society.
"There is never a meritocracy - a just correspondence between performance and income - in capitalism. [...] What does he see as the central problem of growing inequality? the fact that wealth is increasingly distributed through inheritances and not through performance. [...] Only with that inequality becomes unjust[...]. His demand is that only the market should decide the distribution of income. The market is for him the central entity of justice: market results are fair results."
Thus, "with a wealth tax, Piketty seeks to rescue liberal ideology - everyone is the master of his or her own fate - from the results of the market. He wants to restore people's belief in a just capitalism, or at least the hope that proverbialy dies last. [...] If the belief in a society that justly rewards performance with legitimate differences in income disappears, then people will start to doubt whether everything is as it should be in capitalism and whether differences between poor and rich are ultimately just. Piketty argues like a crafty technician of power who exhibits concern about the subservience and motivation of the propertyless masses."
In the first and second chapters, the authors explain the reasons behind the "Pikettymania": the book made the author an "economist rockstar" by confirming emerging voices within the economic mainstream about inequality. In particular, it can be understood in the context of the early 21st century realization of neoliberalisms' "discontents", as pointed out by Stigliz. The authors summarize this line of argumentation as "inequality and poverty are no longer regarded as a consequence of capitalist economic growth, but rather as a break on such growth and as a problem for stability".
What does Piketty observe about Capital's historical tendencies?
First, he challenges economic determinism, stating that inequality is partly a direct consequences of conscious political choices. Secondly, he analyzes trends of convergence (less inequality) and divergence (more inequality) and concludes that in periods of slow economic growth, which is likely to happen in the 21st century, divergence is likely to happen more esponentially. In other words, when the economy grows less in already unequal capitalist society, inequality is more likely to rise sharply. This is for instance illustrated by the effect that inherited wealth grows faster than output and income: quoting Piketty's introduction, "People with inherited wealth need to save only a portion of their income from capital to see that capital grow more quickly than the economy as a whole. Under such conditions, it is almost inevitable that inherited wealth will dominate wealth ammassed from a lifetime's labor by a wide margin, and the concentration of capital will attain extremely high levels." Piketty calls this trend towards inequality "structural divergence", and illustrates it via the formula "r > g", or capital/income growth ratio, in which r is the rate of growth of wealth (capital) - including profits, dividends, interest, rents, while g is the growth of the whole economy, meaning the growth of individual incomes and production. The formula shows that, historically, income grows slower than wealth. This is not "a coincidence, but rather inscribed into economic development", due to specific political choices. Piketty is critical of this "fundamental inequality" because it is "potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies". For this reason, he wants r > g to be fixed, which can be done through conscious political policy-making such as via a "progressive global tax on capital".
Kaufmann and Stuztle's literature review of the existing commentaries on Piketty is very well-organized. In particular, the section on its critique is interesting. For some critics, "inequality is good". This sort of criticism comes from neoliberals, led by The Economist, that postulate that inequality is good for enhancing competition and productivity.
One of the most powerful criticisms, however, is that Piketty is "situated within the neoclassical mainstream". The authors summarize these criticisms by arguing that "What stands at the centre of attention are no longer the problems that the poor have with capitalism, but the problems that the poor pose for capitalism and its growth. [...] The demand that follows is a correction of the present [system] - and not a correction of wealth to the benefit of the poor, but a correction of poverty for the benefit of wealth. The goal is not a better life for people -such better life is only supposed to be a means of making economic growth smoother and faster." David Harvey, for instance, says that Piketty "in line with neoclassical theory, understands capital as a thing and not as a process, as a social relation." Inequality is taken as a given, and there are "good and bad inequalities". Some are good for the economy, some are not. The critique of Piketty's eurocentrism is also on point.
Other critics say that Piketty ignores the role of the people and their social struggle in fighting for "convergence". The divergence between r and g that occurred after the post-war "golden era" is explained by these critics, in part, as a result of "the decline of trade unions as well as change in business leadership and culture". According to Kramer, "this act of ignoring social struggles is not a coincidence, but rather the necessary result of neoclassical theory. [...] Income distribution [...] is determined exclusively 'technically'. There is no room for the consideration of the influence of power upon distribution". These critics see Piketty as essentially neoliberal also because he ignores the role that financial markets have in creating an elite based on "income without work", as the financialization of the economy is virtually discarded as an explanatory factor for the increasing returns on capital compared to growth.
i found the Marxist criticism of Piketty quite on point as well. He admits that his conclusions are less dramatic than Marx's - whereas the latter predicted infinite accumulation and perpetual divergence, Piketty concludes that divergence can be reversed, or it can be decreased by policy-makers. This, according to the authors of this review, is due to Piketty's missed opportunity to explore the defining features of capitalism as such: he regards "the dominant economic system completely positively. All of his criticisms of conditions and their development are not intended as a principled objection to the capitalist mode of production and distribution. The ideal condition he strives for is a prosperous capitalism characterized by economic growth. Critique of growth as such is foreign to Piketty. And he only criticizes inequality to the extent that it could damage growth and the legitimacy of capitalism. In this sense, he is both a progressive and a conservative: he wants to change something in order to maintain social relations as they are. He wants to protect capitalism from the poor- not the other way around". He misunderstands capital by equating it with wealth. "Wealth is a form of property. property, however, is not a universal principle according to which somebody has power of disposition over a thing (in pre-capitalist societies, namely, that was not the case in such a generalized sense). Rather, the property relation encompasses the appropriation of nature by human beings. [...] The difference between pre-capitalist and capitalist form of production can only be established in terms of how individuals relate to the means of production and the fruits of their labour. This in turn depends on how the relation of individuals to the community is regulated"
The authors add that Piketty seems to revolve around a circular argument: "inequality is growing because inequality exists". "On the one hand, inequality appears to be only explainable in terms of different levels labour performance and therefore only legitimate in terms of labour performance; on the other hand, reality shows that this is not the case". Inequality, in contrast, came to be because of the "separation of direct producers from the objective possibilities of production. Thus the author asks: is it possible to reach Piketty's goal, a meritocratic, democratic, capitalist society? is it possible to have a capitalist society in which "everyone would receive their fair share of wealth according to their performance?" No, because capitalists will alway earn more than workers, since "the workers do not receive a wage corresponding to the value product produced by their labour. That is how it is possible in the first place that the success of the business can be measured in terms of profits - in terms of that which the workers precisely do not receive- surplus-labour". Piketty's misunderstading of capitalism is thus clear when one looks at his definition of GDP as a communal effort, income and outcome, of society.
"There is never a meritocracy - a just correspondence between performance and income - in capitalism. [...] What does he see as the central problem of growing inequality? the fact that wealth is increasingly distributed through inheritances and not through performance. [...] Only with that inequality becomes unjust[...]. His demand is that only the market should decide the distribution of income. The market is for him the central entity of justice: market results are fair results."
Thus, "with a wealth tax, Piketty seeks to rescue liberal ideology - everyone is the master of his or her own fate - from the results of the market. He wants to restore people's belief in a just capitalism, or at least the hope that proverbialy dies last. [...] If the belief in a society that justly rewards performance with legitimate differences in income disappears, then people will start to doubt whether everything is as it should be in capitalism and whether differences between poor and rich are ultimately just. Piketty argues like a crafty technician of power who exhibits concern about the subservience and motivation of the propertyless masses."
April 1, 2019
This is a review of a review...because this book sets out to review Thomas Piketty's monumental work: "Capital in the twenty first Century"...... (685 pages in the English version). A fair bit of hype has accompanied Piketty since his book started drawing attention. The economic changes that Piketty describes come against a background of: lowered general taxes; A shift from direct taxes to indirect taxes such as VAT; A trend to flat taxation rather than progressive taxation for interest and dividends..and competition between countries to attract capital...part of which was a weakening of labour unions. All of this was leading to increased inequality of incomes in western countries. In 2010 the IMF published a study pointing out the connection between growing inequality and financial crises.
One thing seems to get lost in the discussion about inequality and that is the general rise in global wealth. For example, around 1800 about 85% of the world lived in extreme poverty but today that percentage is down to nine. And over just the past 20 years the level of extreme poverty in the world has halved. And in 1965 there were 125 countries where > 5 percent of children died before their fifth birthday. Today, only 13 countries fit that category. So yes....inequality might have gotten worse in my country ....but I'm significantly wealthier and healthier than my grandparents....and so are most others.
The central equation in Piketty's analysis is the ratio of capital to wealth and income to economic performance.
National income is the total sum of income available to residents of a country regardless of legal classification.
Capital, is the sum total of non-human assets that can be owned and exchanged. It excludes human capital on the grounds that it cannot be owned by another person or traded on the market. (I'm not so confident about this...the assets of a legal services firm are really the sum of the human capital in the form of knowledge of the partners, associates, clerks etc. and their skills in the court rooms. It is not their offices or computers....which are probably rented anyway. And such assets have been sold to other legal firms or have been listed on stock exchanges. In fact I understand that most of the assets of companies these days is in the form of intellectual property or human capital. What is being sold or purchased when a soccer star is purchased by a rival soccer club? (What else but the human capital?).
The ratio of capital/ income is called beta by Piketty and is useful as a way of comparing per capita wealth in countries over time. According to Piketty, the ratio in western countries is between 5-6 at the moment.
Income is derived from labour in the form of wages, salaries fees, etc. plus income from capital in the form of interest, dividends, profits
Wealth grows when some of the income is not consumed but saved. And the only people who can save are those who do not live hand-to-mouth.
According to Piketty, the pool of wealth tends to grow faster than income so the capital-income ratio increases. And the reason for this is that returns on capital (r) are historically higher than the performance of growth (g) in incomes. so r > g.
A high number .....say 7 represents high inequality. A low number, (say 3) represents a more even distribution of wealth.
That would not be an issue if wealth was evenly distributed but it's not. (Piketty doesn't attempt to explain why he takes inequality as a given and examines its development over time.
According to Piketty, until about 1500 per capita growth in income was close to zero . (But before 1800 Piketty really has no data ...relies on novels).
After all the analysis, Piketty concludes that the average return on capital (r) over the long term averages out at about 4-5 %. The long term growth of economic performance (g) averages out at about 1-2 %. So r > g.
In France and Britain, from 1700 to 1910 Beta was about 7 it then fell to about 2.5 in Britain and less than 3 in France. The USA was similar but started lower around 5 in 1910.
Why these changes? Well capital is no longer just in land but in industry (and increasingly in IP). And progressive taxation was implemented after WWI. Between 1910 and 1920 the richest tenth of french households held 90% of the wealth. Between 1950 and 1970 this share supposedly fell to 60-70%. (Similarly in Britain).
After 1970 tax policy shifted to advantage capital; The share of wages in National income has declined; inheritance became increasingly important as a source of wealth; unequal access to education has allowed super rich managers.
Projecting forwards 80 years to 2100, Picketty predicts, worldwide, an acceleration of inequality with Beta approaching 7.
In the phase 1950-1970 effort tended to be rewarded. In the future, it's not effort that will determine prosperity but background and family...that is "inheritance". The guarantee of prosperity will be having rich relatives rather than hard work.
Piketty's solutions: 1. A wealth tax which would be progressive ..up to say 5-10%.
2. A progressive income tax on high incomes (Up to 80%)
Though he appreciates that one of the reasons for current situation is competition between countries for capital...so it will require international cooperation and agreement.
There has been a lot of criticism of Piketty's thesis ...as one would expect. But it seems to have withstood the criticism fairly well. His predictions are based on past trends over the last 30 years. (Which may prove to be an unreliable guide if artificial intelligence starts to take away jobs, for example).
Other critics ..such as writers in The Economists argue that growing inequality does not inevitably lead to instability. Others argue that inequality acts as an incentive for outstanding performance.
The Financial Times criticised his data ...but after correcting the data nothing much is changed. And Piketty and friends acknowledge that it's difficult to clarify exactly what counts as wealth. And the rich, have reason to understate their taxable incomes.
Picketty has also been criticised on the grounds that he doesn't really provide a reason for the rise in inequality. And again, because of the increasing importance of financial markets...where the growth in capital no longer has material limits. And again because his work is rather Eurocentric.
The authors of this review acknowledge that Piketty has at least ignited a broad debate about taxation wealth and inequality. And they make the point that his work tends to refute the neoclassical school of economics which assumes the free forces of the market leads to equilibrium and this is a social optimum. Paul Krugman is a supporter of Piketty suggesting that the inequality it documents must provoke a will to change things towards a redistribution ..more state and less market. The authors suggest that real change will not come just from Piketty's sort of analysis but from social struggles. (Such as the sit-down strikes in the US around 1932). On the whole, I felt that this book was a good summary of the larger work. Gave me the feeling that they had captured the gist of the original book. (But, I'm not really in a position to make this call until I've read the original). It wasn't particularly easy reading....and maybe that could have been improved.
One thing seems to get lost in the discussion about inequality and that is the general rise in global wealth. For example, around 1800 about 85% of the world lived in extreme poverty but today that percentage is down to nine. And over just the past 20 years the level of extreme poverty in the world has halved. And in 1965 there were 125 countries where > 5 percent of children died before their fifth birthday. Today, only 13 countries fit that category. So yes....inequality might have gotten worse in my country ....but I'm significantly wealthier and healthier than my grandparents....and so are most others.
The central equation in Piketty's analysis is the ratio of capital to wealth and income to economic performance.
National income is the total sum of income available to residents of a country regardless of legal classification.
Capital, is the sum total of non-human assets that can be owned and exchanged. It excludes human capital on the grounds that it cannot be owned by another person or traded on the market. (I'm not so confident about this...the assets of a legal services firm are really the sum of the human capital in the form of knowledge of the partners, associates, clerks etc. and their skills in the court rooms. It is not their offices or computers....which are probably rented anyway. And such assets have been sold to other legal firms or have been listed on stock exchanges. In fact I understand that most of the assets of companies these days is in the form of intellectual property or human capital. What is being sold or purchased when a soccer star is purchased by a rival soccer club? (What else but the human capital?).
The ratio of capital/ income is called beta by Piketty and is useful as a way of comparing per capita wealth in countries over time. According to Piketty, the ratio in western countries is between 5-6 at the moment.
Income is derived from labour in the form of wages, salaries fees, etc. plus income from capital in the form of interest, dividends, profits
Wealth grows when some of the income is not consumed but saved. And the only people who can save are those who do not live hand-to-mouth.
According to Piketty, the pool of wealth tends to grow faster than income so the capital-income ratio increases. And the reason for this is that returns on capital (r) are historically higher than the performance of growth (g) in incomes. so r > g.
A high number .....say 7 represents high inequality. A low number, (say 3) represents a more even distribution of wealth.
That would not be an issue if wealth was evenly distributed but it's not. (Piketty doesn't attempt to explain why he takes inequality as a given and examines its development over time.
According to Piketty, until about 1500 per capita growth in income was close to zero . (But before 1800 Piketty really has no data ...relies on novels).
After all the analysis, Piketty concludes that the average return on capital (r) over the long term averages out at about 4-5 %. The long term growth of economic performance (g) averages out at about 1-2 %. So r > g.
In France and Britain, from 1700 to 1910 Beta was about 7 it then fell to about 2.5 in Britain and less than 3 in France. The USA was similar but started lower around 5 in 1910.
Why these changes? Well capital is no longer just in land but in industry (and increasingly in IP). And progressive taxation was implemented after WWI. Between 1910 and 1920 the richest tenth of french households held 90% of the wealth. Between 1950 and 1970 this share supposedly fell to 60-70%. (Similarly in Britain).
After 1970 tax policy shifted to advantage capital; The share of wages in National income has declined; inheritance became increasingly important as a source of wealth; unequal access to education has allowed super rich managers.
Projecting forwards 80 years to 2100, Picketty predicts, worldwide, an acceleration of inequality with Beta approaching 7.
In the phase 1950-1970 effort tended to be rewarded. In the future, it's not effort that will determine prosperity but background and family...that is "inheritance". The guarantee of prosperity will be having rich relatives rather than hard work.
Piketty's solutions: 1. A wealth tax which would be progressive ..up to say 5-10%.
2. A progressive income tax on high incomes (Up to 80%)
Though he appreciates that one of the reasons for current situation is competition between countries for capital...so it will require international cooperation and agreement.
There has been a lot of criticism of Piketty's thesis ...as one would expect. But it seems to have withstood the criticism fairly well. His predictions are based on past trends over the last 30 years. (Which may prove to be an unreliable guide if artificial intelligence starts to take away jobs, for example).
Other critics ..such as writers in The Economists argue that growing inequality does not inevitably lead to instability. Others argue that inequality acts as an incentive for outstanding performance.
The Financial Times criticised his data ...but after correcting the data nothing much is changed. And Piketty and friends acknowledge that it's difficult to clarify exactly what counts as wealth. And the rich, have reason to understate their taxable incomes.
Picketty has also been criticised on the grounds that he doesn't really provide a reason for the rise in inequality. And again, because of the increasing importance of financial markets...where the growth in capital no longer has material limits. And again because his work is rather Eurocentric.
The authors of this review acknowledge that Piketty has at least ignited a broad debate about taxation wealth and inequality. And they make the point that his work tends to refute the neoclassical school of economics which assumes the free forces of the market leads to equilibrium and this is a social optimum. Paul Krugman is a supporter of Piketty suggesting that the inequality it documents must provoke a will to change things towards a redistribution ..more state and less market. The authors suggest that real change will not come just from Piketty's sort of analysis but from social struggles. (Such as the sit-down strikes in the US around 1932). On the whole, I felt that this book was a good summary of the larger work. Gave me the feeling that they had captured the gist of the original book. (But, I'm not really in a position to make this call until I've read the original). It wasn't particularly easy reading....and maybe that could have been improved.
July 31, 2022
A clear and concise introduction to Piketty's work, and a primarily leftist critique towards the end. Piketty's work is no doubt important to the conversation of inequality, but Piketty himself is unfortunately too entrenched in orthodox economics and ideology to suggest anything beyond a modest wealth tax.
July 30, 2018
I suggest this book is perfect for a drinking game. Dunk one whenever you come across a depressing line, sentence or passage. Perhaps you will be dead from poisoning in the end.
August 21, 2019
This book was listed in the search results while I was trying to search Piketty's book from a pirate website. I downloaded it on a whim anticipating I might want to get some context and check some criticism of Piketty's book, which this book might provide.
All my expectations were exceeded; this short book gives a comprehensive and very useful leftist critique of Piketty's book, and I dare say, is even necessary to be read before/after (or at least when you abandon) Piketty's book. It might even function as a short summary of that book.
All my expectations were exceeded; this short book gives a comprehensive and very useful leftist critique of Piketty's book, and I dare say, is even necessary to be read before/after (or at least when you abandon) Piketty's book. It might even function as a short summary of that book.
August 27, 2018
A clear, concise summary of Piketty's book, reactions to it, and rebuttals to those reactions, ending with the authors' own critique of Capital in the Twenty-first Century, which faults Piketty for not being Marxist.
June 4, 2019
A good, concise introduction to Piketty's huge Capital in the Twenty First Century, where the authors also present critique of the book in the general media, and their own critique (clearly from the left). An interesting read!
February 27, 2020
A useful-ish primer to a book that I have accepted I will never read. While I respect them sneaking in a Marxist take down at the end, the description of the Capital...'s contents (i.e. the bit I paid for) only runs to about 20 pages. Ho hum.
May 5, 2020
This has got to be the best alternative to reading Picketty's 800 page tome.
November 4, 2022
Piketty-ism? Down with it!
March 11, 2023
Yep - seems to repeat itself... and it has some good stuff. But not in the mood for it right now.
October 16, 2023
Mainly Marxist critique.
November 8, 2017
Thomas Piketty's Capital in the Twenty-First Century: An Introduction by Stephan Kaufmann is a slim introduction to the 685 page book Capital in the Twenty First Century by Thomas Piketty.
The slim Intro book is well done. It contains:
Chapter 1: Pikettymania
Chapter 2: The Prelude: Redistribution, Inequality and Debt Crisis
Chapter 3: The Book
Chapter 4: Hype and Critique
Chapter 5: Capital in the Twenty-First Century – What to Make of It?
The slim Intro book is well done. It contains:
Chapter 1: Pikettymania
Chapter 2: The Prelude: Redistribution, Inequality and Debt Crisis
Chapter 3: The Book
Chapter 4: Hype and Critique
Chapter 5: Capital in the Twenty-First Century – What to Make of It?
Displaying 1 - 19 of 19 reviews