Reading Piketty's "Capital and Ideology" (Part 4): The Great Transformation, or How to Destroy Capital in Three Easy Steps

Piketty’s earlier and more famous work, “Capital in the Twenty-First Century” shocked many readers by demonstrating that wealth and income inequality in the developed world in the early years of the 21st century was approaching the same levels as the Gilded Age. Rather than some unnatural and perverse state unique to late capitalism, Piketty used his unparalleled data to show the opposite - that the relative egalitarianism of the post-War era was, in historical terms, a fluke. The World Wars had led to destruction of capital on such a vast scale that post-War elites simply could not reconstitute their prior social roles. Most readers could be forgiven for coming away pessimistic that the only way to truly return to even a 1950s level of economic equality would be renewed destruction on an equally massive scale - perhaps in the form of “disaster socialism”.

Part Three of “Capital and Ideology” represents Piketty’s re-appraisal of this period. Is is true that egalitarian social democracy was the direct result of armed conflict? In short, no. The role played by the physical destruction of capital was ‘minimal’. The true cause was a series of political and social decisions, often taken under the circumstances of social emergency, which resulted in the novel and relatively fragile inequality regime Piketty terms ‘social democracy’. Whereas the top centile of the population owned between 55-70 per cent of all property in advanced Western nations in 1900, this number remained as low as 15-20 per cent as late as 1980 [it’s now back over 40 per cent in the United States]. Critically, changes in the distribution of wealth were almost entirely responsible for flattening the distribution of income - labour inequality did not change significantly over this period, but the ability to make an income from owning capital did. The importance of this ‘Great Transformation’ [Piketty uses Karl Polanyi’s phrase] cannot be overstated - including in how effective social democracy proved at generating sustained economic growth and productivity increases.

How to Destroy Capital in Three Easy Steps

Piketty provides an exemplary overview of the various mechanisms (destruction, expropriation, inflation) by which the accumulated surpluses of the Gilded Age were smashed to pieces. One could almost read this part of the book as a ‘how to’, if one were so inclined. As mentioned, while physical destruction of property was significant in France and Germany (representing perhaps a quarter and third of national wealth lost during the World Wars), only a tiny percentage of capital was physically bombed out of existence in the UK, US or elsewhere. Piketty instead located the source of capital’s decline in two broad sets of policies: first, expropriations and nationalisations - i.e. policies aimed at explicitly reducing the value of private property; and secondly, policies and decision that reduced the level of return on private capital, including inflation which reduced the value of existing assets.

While outright nationalisation and expropriation was rare in the developed West during peacetime (often tempered by the propertarian impulse to compensate existing owners), de-Nazification after the War often led to the seizure of vast fortunes, matched in the communist East by the large-scale collectivisation of the means of production. De-colonialisation also played a significant role, and Piketty, to my mind correctly, singles out the Suez Crisis as representing a decisive break with the gunboat diplomacy model of imperial debt enforcement which had previously extracted a heavy toll from colonial subjects for their attempts to take control of their own destiny. Agrarian land reform also played a large role in a few former colonial states. Given the scale of British and French national wealth held abroad - either in the colonies, the form of Russian or Eastern European debt, or in German or Italian factories - the War significantly constrained the power of exhausted European elites to call on Empire to enforce their ill-gotten property rights.

The War’s secondary affect was a massive increase in government debt, which states financed through borrowing the capital of their own citizens. It’s worth remembering here, as Piketty pointed us to in his first book, that states are relatively poor in comparison to the size of their economy - most wealth is held privately, not publicly. Indeed, Piketty points out that post-GFC government wealth in the US, UK and elsewhere has turned negative - private hands not only own the equivalent of 100% of national assets, but also have liens on future national production through ownership of government debt. When a government borrows money, it exchanges a promise of future repayment (which has value) for the ability to call on real assets. So long as the state does repay its debts, those promises preserve the social power of those that hold them. But states always have the option - whether by accident or design - of paying back its debts using goods and services less valuable than those accepted in exchange, in essence, causing inflation. Piketty notes that inflation averaged above 10 per cent after WW1 - a historically unprecedented occurrence after centuries of near-zero price movements. And in the immediate aftermath of the War, Paris and Berlin saw inflation of 40-50 per cent, effectively eliminating their war debt after a few years. Even in the US and UK - which averaged closer to three per cent- this modest level of inflation was sufficient to wipe out many multiples of national GDP in debt, finished off by the hyperinflationary bout in the 1970s.

Obviously, from a progressive perspective, debt and inflation are not desirable tools of public policy. Piketty notes that inflationary episodes suppress labour power, impoverish retirees and tend to produce generations of poverty. Inflation is regressive. He and I prefer a stronger solution - highly progressive taxes on capital holdings, combined where necessary with price controls and democratic control over the means of production. Piketty has a quote here, which seems in my mind should be kept in mind by proponents of so-called modern monetary theory, who would rather tinker with the money supply than do the hard political work of actually going against the interests of the powerful in society:

“Inflation is the sign of a society that is dealing with a serious distributive conflict: it wants to unburden itself of debts incurred in the past, but cannot openly debate how the required sacrifices should be apportioned and prefers to rely on the vagaries of rising prices and speculation. The obvious risk of doing so is that a widespread send of injustice will be created.”

Finally, Piketty acknowledges that it’s in principle possible to pay off national debt by running a long period of budgetary surplus and devoting a significant percentage of national revenue to the reimbursement in full of property owners. This was certainly the British strategy in the nineteenth century, and the austerian policy followed by most centre and right-of-centre governments to this day. Piketty argues that had the post-War European regime adopted such policies, the end result would have been that War debt was still being repaid as late as 2050, economic growth would have been lower and Golden Age levels of inequality a permanent social fixture, not just a twenty-first century phenomenon.

On Social Democracy

Piketty argues that the destruction of significant amounts of surplus value in the middle decades of the twentieth century was not necessarily intentional, but a result of an ideological transformation brought about by policy-makers dealing haphazardly with a series of financial, economic, social and military crises which had been ultimately caused by the previous propertarian regime. Chapter Eleven details the contours of ‘social democracy’ - the inequality regime that came to dominate most developed states in the second half of the twentieth century. It should be clear from Piketty’s framing that he does not have a serious ideological theory of social democracy as either a philosophy, or as an economic or political moment. Piketty does not seriously engage with the history and evolution of social-democratic movements, or reckon with their failures and transformations into neoliberal parties. Instead, he treats ‘social democracy; as short hand for a ‘set of social and fiscal policies that made societies not only more egalitarian but also more prosperous”. In this, he’s writing as much as post-War conservatism as he is about social democracy, and lazily embedding his historical narrative with a wistful longing for a post-War consensus that in all likelihood didn’t exist without the political and social pressure applied by the communist challenge from without and strong labour unions form within.

Piketty’s only major theoretical contribution in this section is an attempt to define the terms of the social democratic property regime. Whereas communist and socialist states are interested in the state- or democratic-control of the means of production respectively, Piketty argues (without any evidence) that social democracy is characterised by the ‘temporary’ nature of property ownership. In this, he is clearly importing and prefiguring his own conceptual model in order to justify higher and progressive levels of taxation. In this view, capital (unconsumed surplus) is passed down from generation-to-generation - one person can only ever be the temporary steward or guardian of capital wealth, and it should be recycled for other purposes through progressive taxation, most especially progressive taxes on inheritance.

Piketty’s history of social democracy is extremely dull and drags on for nearly a hundred pages. In all honesty, it represents some of the poorest scholarship and weakest writing in the entire book. Piketty bounces from topic to topic, introducing the banal left-of-centre ideas that he’ll pick up in Part Four - including the importance of access to education for achieving lasting equality, the need for taxes on private wealth and his obsession of transnational federalism. Piketty also hand waves at the typical ‘labour aristocracy’ and feminist critiques of mid-twentieth century social democracy - that the affluence of the Western proletariat was built on the back of the exploitation of third world, subaltern workers and women - without offering any sort of serious analysis.

Post-Communism, Neo-propertarianism and MMT

Piketty does the Cold War and post-Cold War periods an immense intellectual disservice. His Chapter on the communist experience runs through the standard liberal ‘dictatorship of prolertariat’, New Economic Policy, Stalin, gulags line - with some added ‘Venezuela!’ thrown in for good measure. Piketty has some useful statistics on China - noting, for example, that overall the public ownership of capital in modern China is closest to that in social-democratic Europe (although distributed very differently, with most land being privately owned but most large enterprises being controlled by the party-state). Those same statistics show that the gradual privatisation of wealth in China essentially ceased around the same time as the GFC - China has been in a steady state ever since (private wealth has grown, but public capital has grown just as much). But in discussing ‘deliberative democracy’ in the context of the Chinese Communist Party, he misses the obvious opportunity to make a comparison to the undemocratic features of neoliberalism in the West.

The remainder of this part of the book makes only two serious contributions. The first is an attempt to define ‘neo-propertarianism’ as a distinct inequality regime. He notes that the governing ideology of the modern developed world is not as explicitly anti-democratic as the canonical texts of neoliberalism/ordoliberalism or even classical liberalism might suggest, and that it remains committed to some degree of popular legitimacy and sovereignty (if anything, based on the idea of meritocratic competition). But, on the other hand, modern political leaders are so terrified of change - of opening Pandora’s Box - that economic management has become increasing opaque and non-transparent - as if hiding the scale of inequality will ameliorate its effects. There’s something of the scholar’s complaint in these pages - Piketty clearly wants more and better data. But there’s some truth to the idea - which one witnesses every day from nominally leftist social democratic parties of the world - that fear [informed by historical experiences of the 20th century] is the overriding motivation in modern governance. God forbid the voting public develops expectations that their governments can do better ($1400 cheques anyone?).

Finally, Piketty concludes by once again looking at the monetary policy and the role of central banks. The man clearly has little sympathy for MMT. Pointing out the historically unprecedented expansion of Central Bank balance sheets after the GFC (a phenomenon that COVID-19 has only accelerated), Piketty argues in familiar Keynesian terms that Central Banks - as executive agencies with powerful capabilities - have a role to play in managing serious crises. Central Bank balance sheets remain small compared to the overall size of the private economy, yet the seemingly unlimited expansion of QE has seemingly fueled bubbles in the prices of certain asset classes, while preventing the kind of ‘creative destruction’ that allowed unsustainable firms to fail. Monetary activism, in Piketty’s view, “attests to the many roadblocks government face in other policy areas such as financial regulation, taxes and budgets . . . [but] even though monetary policy is supposedly a technical matter beyond the understanding of ordinary citizens, the amounts involved are so huge that they have begun to alter perceptions of the economy”. MMT, for Piketty, is not a magic bullet, but a warning sign that something has gone seriously wrong with the ordinary mechanisms of political and economic management. A point on which I will of course agree.

Reading Piketty's "Capital and Ideology" (Part 3): Liberal Imperialism and the Globalisation of Inequality

When we left off at the end of Part One of Piketty’s “Capital and Ideology” (here), the feudal European inequality regime(s) had been substituted - either by reform or revolution - for a new ‘propertarian’ liberalism that in theory made property ownership a right open to to all in society, eliminating arbitrary social distinctions based on fixed social roles. Ignoring questions of how wealth and power was distributed in society was to provide the foundation for a stable, dynamic liberalism based on unchallengeable property rights. Part Two of the book juxtaposes this ideal with the reality of European slavery, colonialism and exploitation in the nineteenth century. As one chapter title puts it, this part of the book is concerned with the ‘globalisation of inequality’ - or in looking at inequality regimes from a non-European perspective.

Ostensibly, these chapters focus on slave societies, colonial governance and the Indian caste system. But as before, Piketty offers little new insight into the internal ideological justification of these regimes - students of slavery, for example, would be much better served by reading Sven Beckert’s work, which Piketty cites extensively. He’s more interested in the encounter between these systems and European propertarianism, and their transformation into more propertarian forms. In telling these rather scattered stories, one common theme that emerges is the centrality of the ‘political regime’ problem as a core question of ideology: identifying the boundaries of the political and economic community and defining its rules of membership.

A wretched hive of scum and villainy

Piketty makes a distinction between ‘societies that had slaves’ and ‘slave societies’, in which unfree human beings provided a significant percentage of the economically significant labour. The latter category includes Ancient Greece and Rome, but also the Caribbean sugar islands, the pre-Civil War United States and Brazil (not to mention the widespread enslavement of native peoples in settler-colonial societies). Notably, this means that a significant number of the most heavily slave-dependent human economies in history evolved during the nineteenth century under the authority of nominally liberal European regimes. Staggeringly, half of the total African population forced into chattel slavery in the Americas were enslaved after 1780, even as the European powers moved haltingly towards abolition.

The history of abolition, which consumes much of Piketty’s page count, is a depressingly familiar refrain as reformists and lawmakers focus almost exclusively on the compensation of slave owners - to “respect acquired rights, no matter what their origin”. The end result was a massive transfer of wealth to already-rich slaveowners, funded by public debt and ultimately - thanks to the regressive tax structures in place at the time - paid off by the working class. Particularly appalling was France’s treatment of its rebellious ex-colony of Haiti, which was still paying off its ‘debt’ to metropolitan France in 1947. Piketty emphasises that throughout this process, the formerly enslaved remained firmly outside the social contract in most propertarian societies, with debt and anti-vagrancy laws used to impose a level of labour discipline not all that more lenient than slavery itself. This emphasis on the moral use of debt as a tool of legitimising inequality resonates strongly with the work of the late David Graeber.

The story of exploitation in European colonial societies is ultimately not much better, though markedly more sophisticated. Generally, Piketty finds, the larger the European settler population, the less extreme the inequality - colonial elites, especially buearcrats and administrators brought in from the metropole and paid out of the taxes of locals, lived well but not as well as elites back home. Only in a small handful of societies where a settler minority came to dominate as local landowners (notably South Africa) did inequality reach levels seen in the slave colonies. While slavery was a racial caste system sometimes justified in patriarchal terms, from the ground-level colonial societies were the inverse: justified as ‘civilizing’ missions abroad, but often requiring the construction of elaborate racialised hierarchies.

Piketty demonstrates, using his incomparable data, that whatever their ostensible source of legitimacy, the primary purpose of late European colonialism was extractive and financial. At no point in European colonial history did the Empires transfer a significant amount of resources abroad to develop their colonies - administration was funded almost exclusively on the backs of locals. Access to raw materials - especially fuel and manufacturing inputs - was key. But financial dominance also played a large role. One-quarter to one-fifth of all capital in the UK and France in the late nineteenth century was held abroad - a staggering sum that generated capital profits equivalent to 5-8 per cent of total national income. This not only made wealthy citizens of the metropole wealthier, but funded an unprecedented level of consumption. The UK and, to a lesser extent, France, could run trade deficits to the rest of the world while still balancing their capital accounts - only the modern American empire comes close to this pattern of global hegemony. And this degree of financial extraction depended then as it does now largely on military occupation and economic coercion of developing states underwritten by the threat of violence.

A Digression on Inequality

For a theorist of inequality, Piketty devotes remarkable few pages, either in his first book or this one, to discussing inequality from a sociological or philosophical perspective. Endless volumes of data can be produced to demonstrate how bad inequality has become, but Piketty himself seems to struggle to explain why this is abnormal or undesirable. “Capital and Ideology” doesn’t tackle this question head-on either, but scattered around these middle pages of the book, like a few half-formed thought bubbles, there are hints that the author is struggling to put together his own thoughts on the matter. He notes, once again, that inequality of wealth and inequality of income are very different different: that the former is often an order of magnitude more extreme than the latter, but it is the latter which tends to generate social discontent and disorder. Piketty seems to flirt with the “Capital as Power” thesis (which I also personally endorse):

“Inequality of wealth is above all inequality of power in society, and in theory it has no limit, to the extent that the owner-established apparatus of repression or persuasion (as the case may be) is able to hold society together and perpetuate this equilibrium”.

Think of the current pandemic-induced crisis for just a moment. Real economic production is certainly hurting - most major economies have entered a deep Depression, jobs are disappearing and incomes are suppressed. Yet at the same time, the stock market is as high as it’s ever been, most major asset classes (including both secure investments like real estate and insecure ones like BitCoin) have increased in value and major corporations are enjoying the benefited of essentially unlimited free credit from banks. The value of all this capital cannot possibly be related to the real value of their assets, their productivity or their profitability. Instead, they represent the bare, naked manifestation of the relative power those who control those assets exercise or expect to exercise over the rest of society. The pandemic has seen an acknowledgement, in some countries more than others, that the institutions of the state serve first and foremost the interests of capital. And so the massively increased monetary [quantised] value of those assets is a call that the owning class will able to exercise essentially untrammeled social and economic authority in the neo-feudal technocratic dystopia that will most likely emerge after COVID-19.

Inequality of income is different because a certain share of annualised production must always be devoted to the maintenance and upkeep of the members of society - the labour share of income. Income inequality can only go so high [“maximal inequality”], otherwise the majority of a population would lack access to the resources they need to physically survive and reproduce (though this isn’t a fixed standard - i.e. ‘poverty line’ - and evolves over time with material expectations). Perversely, Piketty notes, this means that the wealthier a society becomes, the higher income inequality can rise. Once the elites no longer need to concern themselves with how the proles will clothe and feed themselves, they can choke off any further egalitarian measures and appropriate a larger share of income for themselves. This helps explains why many pre-capitalist societies appeared to maintain admirable levels of income equality for long periods, even when their social structures and the distribution of wealth within them are high inegalitarian. Depressingly, Piketty’s data suggests on the basis of historical comparisons that wealth inequality would need to be significantly higher (three to four times current levels) before the modern West entered pre-Revolutionary conditions.

War makes States and States Make War

The final chapter of this part of the book looks at modern history in a broader perspective and seeks to answer the “Great Divergence” question - why was it European societies that were in a position to impose this level of global inequality on everyone else? Although growing populations and the windfalls of the Colombian Interchange set the stage, even as late at 1700 the fiscal capacity of European states was not significantly different from those of either the Ottomon or Qing Empires. Most pre-modern societies collected far less than ten per cent of national revenue - for context the modern welfare state requires the the order of 40-50 per cent. Piketty notes that the jump to 10 per cent of national income - what he terms the state’s ‘fiscal pressure’ - was the key step that enabled the rise of Europe. But as to why Europe: he basically endorses a version of Charles Tilley’s “States Make War, Wars Makes States” argument - the fragmented nature of the European polity, combined with a general intensification of conflict after 1700, made increasing demands for military and fiscal capacity, that could only be met by extracting more surplus value from the population.

In turn, the high levels of public debt that these interstate wars often triggered were a catalysts for the development of sophisticated financial markets and a further intensification of extraction. Piketty charts at length how the Europeans used their military and financial sophistication to choke off the early seeds of manufacturing elsewhere - especially in India and China - through the combination of forcing open colonial markets and closing home markets (commonly called ‘mercantilism’). Finally, Piketty notes the immense ecological consequences of this modern of liberal imperialism - extraction of resources from the colonial world allowed a level of industrial intensification and production that far surpassed the natural carrying capacity of their homelands, laying the seeds of the ideology of limitless growth that was to come later.

Reading Piketty's "Capital and Ideology" (Part 2): The French Revolution and Propertarian Liberalism

In this second entry of my reading guide to Piketty’s “Capital and Ideology” (Part One is here), we’re going to take an in-depth look at the first section of the book, which focus on the transformation of Western European inequality regimes from what Piketty terms ‘ternary societies’ into the classical liberal ‘propertarianism’ of the nineteenth and early twentieth century. Overall, this is one of the weaker parts of the book, where the limits of Piketty’s historical method are on full display. Piketty’s data on nineteenth century inequality is certainly impressive, his insights meaningful, and when it comes to the history of France he knows his stuff. But grand histories of the transformation of European feudalism into modern capitalism are ubiquitous - we’ve all heard this story before and Piketty brings comparatively little new to the discussion.

Ternary Societies

Piketty’s starting point - his ‘inequality regime’ par excellence - is represented by the feudal structure of Christian Europe, at least as it it was understood by Medieval writers and theologians. In this model, society was divided into three classes - nobles, priests and peasants - who differed in political, economic and social rights but whose interests and roles were balanced against one another as part of a cohesive whole. Piketty wants to make the claim that this three-fold distinction is ‘oldest and most common’ type of inequality regime in the world, shared alike by nomadic tribes, pre-modern agricultural kingdoms, European and Indian feudalism, and elsewhere. This is, of course, grossly ahistorical and under-theorised. It makes little room for city states, militarised empires or bureaucratic regimes, and ignores much of the historical contingencies that played a role in the early construction of European feudalism. So as a category, ‘ternary societies’ may be illusory, but we may be able to make use of it as a somewhat idealised type.

Piketty asserts that all societies have the same needs - ‘meaning’ and ‘security’. In a ternary society, the nobility and clergy legitimise their unequal access to power and wealth through the institutional provision of these public goods in a way that is accepted as legitimate by the other two orders. What matters in a ternary society is that the property rights of the clergy and nobility went hand-in-hand with the quasi-government (‘regalian’) powers they need to exercise their social function of maintaining moral and physical security. In other words, as a serf or tenant farmer, your landlord not only extracted rents and taxes, but exercised judicial and political authority over you; in the same way, your social and family life was regulated by the clergy.

For Piketty, the three estates of pre-Revolutionary France are the archetypal orders of a ternary society, despite the fact that he pays careful attention to the ways in which European feudalism differed significantly from ternary societies on other continents. Celibacy among the Christian clergy largely prevented the establishment of a hereditary priest caste. And the Christian prohibition on cousin-marriage (which is addressed extensively in Jo Henrich’s new book, “The WEIRDEST People in the World”) and gradual embrace of primogeniture inheritance laws meant that the power of the nobility became increasingly concentrated in fewer and fewer hands. The practical upshot is that on the eve of the liberal Revolutions the first two estates were, in a cross-historical and and cross-cultural perspective, shockingly weak, with only 0.7% of the French population belonging to the clergy and 0.8% belonging to the nobility. Nevertheless, the former still owned 25% of France’s land and the latter owned as much as 50%. Clearly, the tension between the political and economic powers of this tiny elite could not longer be justified by their functional contribution to society and a rupture was inevitable. The question was was sort of society would emerge from the ashes?

The first liberalism - propertarianism

The most valuable, and most informed, tracts of this part of the book comes in Chapters 3 & 4, where Piketty deploys an in-depth and well-researched discussion of legislative changes made during the French Revolution to tell the story of how the liberal notion of property rights was first conceptualized and led to the creation of the first liberal inequality regime, which Piketty terms ‘propertarian-ism’. Piketty argues, rather convincingly, that rather than its popular pretensions to radical egalitarianism, the leaders of the Revolution were in fact from the outset involved the construction of a new ownership society in which every citizen of France had, in theory, equal rights to own property, but in which the distribution of that property was deemed a non-justiciable or non-political question. One still encounters elements of this propertarian ideology in modern capitalism, and this rights-based framework remains an essential underpinning of libertarian arguments against redistribution today. It is a conservative, even fatalistic recognition that the origins or all property rights lie in violent expropriation and injustice, but that to question such rights would unleash a uncertainty and disorder potentially worse that the inequalities of the status quo.

Piketty has an insightful quote at the beginning of this narrative, that’s worth citing at length for the way that it pre-figures the sorts of questions that transformative figures in every era of change have to asked themselves about the construction of a just society.

“On the night of August 5, 1789, the French National Assembly voted to abolish the privileges of the clergy and nobility. In the months, weeks and years that followed, the challenge was to establish the dividing line between the prerogatives that should simply be abolished and those that were legitimate and therefore worthy of perpetuation or compensation, perhaps requiring reformulation in a new political and legal language.”

In other words, the demise of one inequality regime does not imply, or even begin to suggest, the demise of the structural inequality that existed under that regime. Rather, the new regime must come up with new ways to justify inequalities that persist. There’s an analogy here with modern intersectional liberalism, I feel, which was done a good job of identifying injustice but has really struggled to explain the persistence and even deepening of economic inequality despite the gradual historical progress made towards racial and gender equality.

Put simply, the legislators of the French Revolution wanted first and foremost to separate public and private powers - to erect a public sphere in which the state had sole authority over laws, justice and morality. But at the same time, they put very strong guard rails around the private sphere of property. The way in which this would be justified would be to make a distinction between those property rights which were historically or linguistically associated with the excessed of the ancien regime, and those ‘just’ rights which were rooted in modern notions of free contract. Of course, these were arbitrary lines being drawn around a centuries-long process of often violent expropriation. But they were the lines that were drawn, and the lines that were to stay, even after the Bourbons returned to the French throne. What made propertarianism so enduring and powerful as an ideology is the way in which it made individual rights - and especially property rights - sacred, regardless of their origin or extent. Then, as now, the invocation of the right to property was to serve once and for all as a stop-gap against further radical redistribution.

For Piketty, the new propertarian order was a failure, but an explicable one. Through his own rigorously gathered data, Piketty shows that the new liberal France of the belle epoque was as fundamentally unequal, if not more so, than the feudal order which it had replaced. The ideological function of the new propertarian regime was to legitimise the perpetuation of gross material inequality for far longer than the previous ternary inequality regime had been able to. Yet for Piketty, we shouldn’t blame late-eighteenth century liberals for this failure - “political actors caught up in fast-moving events often have no choice but to draw on a repertoire of [past] political and economic ideologies. . . at times they may be able to invent new tools on the spur of the moment, but to do so takes time and a capacity for government that is generally lacking”. In other words, when revolutions occur there are only a limited set of examples and counterfactuals leaders can draw upon - as cultural evolution theory suggests, there wasn’t enough information evolve a more complex or egalitarian form of social organisation. Even if some utopians were calling for it, they had no way to overcome majoritarian caution and institutional inertia.

On the Justification of Inequality in Ownership Societies

“If one begins to question property rights acquired in the past, and the inequality that derives from them, in the name of a respectable but always imperfectly defined and contested conception of social justice about which consensus will never be achieved, doesn’t one run the risk of not knowing where this dangerous process will end? Political instability and permanent chows may then ensue . . .redistribution is a Pandora’s Box, which should never be opened”.

It may be that each new inequality regime thinks of itself as the End of History, the end of politics. But this is never so. By the early twentieth century, propertarianism was being torn apart by its own paradoxes - firstly, by the economic inequality it generated at home, secondly by its dependence on imperial conquest and colonial extraction in order to fund its need for constant capital accumulation, and finally, by the vicious and militaristic nationalism which the first two paradoxes unleashed.

Propertarian liberalism was modern in many ways, but regressive in others that we a century-and-a-half later find almost inconceivably rigid and inexplicable. Piketty demonstrates at length the consequences of comically-low levels of taxation in Western Europe on the accumulation of vast fortunes by elites, and how the struggle for voting rights which led slowly but inexorably towards universal suffrage was by-and-large part of the struggle for progressive taxation. What’s fascinating with the benefit of hindsight is how naturally the early liberal order accommodated itself to the idea of attaching property qualifications to voting - that even from the outset of the French Revolution, liberalism made distinctions between ‘active [tax-paying] citizens’ and passive or non-voting citizenship. Hilariously, Piketty shows that in Sweden until the 1920s, some electors could cast as many as a hundred ballots or represent more than half the electorate of their township if they were sufficiently wealthy. It perhaps says something that his model of ownership democracy remains the one extant in modern corporate governance to this day - at odds with ideological values at work in mainstream society.

This brings up an important element of the propertarian inequality regime which has been supplanted by a more moralistic and meritocratic ideology in modern capitalism. According to Piketty’s reading, in the nineteenth century “no trace of heroism remains in ownership society; there is no clear relation between the size of one’s fortune and one’s aptitude or capabilities . . .Each person plays the role assigned by his or her capital.” In other words, because the distribution of wealth in society is beyond question, there can be no thought given to the idea that wealth has either moral causes or consequences. [I would note that the situation was likely different in the United States, where the frontier society likely created an early incarnation of meritocratic, Protestant liberalism in which virtue and wealth went hand-in-hand].

In the end, Piketty’s account of propertarian liberalism - the first of three key variants he’ll discuss over the course of the book - is valuable to understanding the modern capitalist ideology, even as, as we shall see, inequality regimes grew more complex and continued to evolve over the course of the twentieth century.

A Reading Guide to Piketty's "Capital and Ideology" (Part 1): Introduction, Overview and Impressions

“Capital and Ideology” (2020) is the long-awaited sequel to French economist Thomas Piketty’s 2013 opus, “Capital in the Twenty-First Century”. Whereas the first volume was a fairly dry text, heavily informed by Piketty’s lifetime of data collection and research on the true extent and causes of economic inequality, this second volume aspires to something more like history, sociology or even political philosophy. Piketty is a polymath and, for better and worse, he has opinions on everything and wants to share them with you. Nevertheless, this is another 1,000+ page tome, so to save y’all the trouble of reading it I’ve attempted to distill the key lessons of each part of the book into this five-part reading guide, which I’ll be posting weekly over the course of March 2021. Today’s blog will provide a general review and introduction to Piketty’s core arguments.

When I began this project, I wanted to take the time and give “Capital and Ideology” proper consideration. Piketty is a serious contributor to economic policy debates, with robust data backing him up and a strong, central message. He was an invaluable influence on my thinking when I was writing my first book, “Politics for the New Dark Age: Staying Positive Amidst Disorder”, and the role of ideology in social order is a foundational leftist question. I regret to report, however, that “Capital and Ideology” does not reach the same heights as its predecessor. A much shorter book [300 pages] making the same arguments would not have gone unnoticed in the broader left-utopian publishing sphere - there’s genuine insights in the text that are worth engaging with. But as an editor myself, let me just say this book is many hundreds of pages too long - there are very many lengthy digressions and repetitive historical examples that add little of value. It’s too long for a polemic and too disorganised to treat as a a serious work of scholarship.

Theodicy and the construction of inequality regimes

I’ve noted before on this blog that liberalism has a theodicy problem: if all men [sic] are created equal, then why is inequality everywhere? Piketty’s book, if it had to be summed up as addressing one central problem, generalises this observation to construct a theory of inequality regimes. Here, ‘regime’ is being used in the same sense as in my second book, a social order that proscribes a specified set of benefits to a specified set of beneficiaries. Inequality is everywhere, Piketty begins, so “every human society must justify its inequalities". Inequality regimes are ideologies that legitimise the inequality that exists in the material world, and upon the basis of which people develop rules, norms and institutions that make sense of their social order.

“[Every] inequality regime is associated with a corresponding theory of justice. Inequalities need to be justified; they must rest on a plausible, coherent vision of an ideal political and social organisation. Every society therefore needs to answer a series of conceptual and practical questions about the boundaries of the community [the political regime], the organisation of property relations [the property regime], access to education [the education regime] and the apportionment of taxes [the fiscal regime].“

Note that the ‘truth-value’ or hegemonic nature of any given inequality regime is irrelevant; every justification of inequality “contains its share of truth and exaggeration, boldness and cowardice, idealism and self-interest”. What matters is whether a regime successfully legitimises and stabilises a particular social order - at least for a little while. Piketty is not explicit in doing so, but his approach to ideology fits [as mine does] within the broader field of Cultural Evolutionary Studies. For Piketty, ideologies are in constant dialogue with the need to solve social problems, and evolve and change overtime in haphazard and uncontrolled ways until they are replaced by something more fit. Piketty’s historical method is admirably historically contingent - ideologies are experiments enacted by stressed politicians and bureaucrats in times of crisis who often have little sense of the social changes they’re making.

“Each nation’s political and ideological trajectory can be seen as a vast process of collective learning and historical experimentation. Conflict is inherent in this process because different social and political groups have not only different interests and aspirations but also different memories. Hence they interpret past events differently and draw different implications regarding the future.”

Nevertheless, the book would have benefitted from a more serious engagement with evolutionary sociological literature. This is something of a theme in Piketty’s work - he’s more likely to invent his own term or concept than engage in debates with existing academic disciplines.

What kind of leftist is Piketty anyway?

For Piketty, inequality is neither economic nor technological - it is political and ideological, the result of conscious and unconscious social choices which are enacted by people and could have been enacted differently. The inequalities that exist today (which, Piketty’s data constantly reminds us, is worse today that at any time since the Gilded Age) and the institutions that maintain it are not the only ones possible - change is permanent and inevitable, and we do not live in the best of all possible worlds. It bears mentioning here that both orthodox Marxists [e.g. Gramsci] and leftists working in the broader Marxian tradition [e.g. Habermas etc.] have already problematised the classical deterministic understanding of the relationship between economic base and ideological superstructure. Dialectical materialism, correctly understood, is a philosophical practice that emphasises social change as a process, a dynamic, and a movement.

Nevertheless, Piketty himself is often contemptuous when writing about mainstream socialism, and treats Marxism as synonymous with narrow economism - in which the structure of society is purely materalistic, deterministic and decidedly Newtonian in outlook and character. This may be something of straw man, but Piketty himself sometimes hints that he’s veering in precisely the opposite direction. The ideological sphere is “truly autonomous”, we are told and “given an economy and a set of productive forces at a certain stage of development, a range of possible ideological, political and inequality regimes always exist". The truth lies somewhere between these two strawmen - some ideological variation is always possible, but which variations are stable is a question that only a dialectical or evolutionary sociology can tell us. Piketty is too sensible to outright endorse pure idealism, and the vast bulk of the text is finely graduated story of the historical contingencies and accidents that led to the emergence of each inequality regime in each particular time and place. But a strain of idealism underpins both his analysis and the kinds of solutions he thinks should be pursued, as if solving the greatest social, economic and political questions of our age were just a matter of finding the right policy mix.

Despite the sheer radicalism of Piketty’s policy proposals, the book itself embodies an almost instinctual dismissal of revolutionary change. Piketty, a tenured economic professor at one of France’s most prestigious institutions of learning, disdains the so-called populist left, most varieties of localism and mass movements in general. As a confirmed liberal of the self-described Rawlsian variety, his eyes are fixed firmly on the multinational and institutional - good policy is an end result of good institutional design. No one should have any doubts about Piketty’s genuine commitment to popular democracy or to a radical redistribution of wealth but like most utopians he’s unwilling or unable to outright acknowledge that the true barrier to the kind of reform he wants isn’t bad ideas or bad values but the entrenched social power of institutions with vastly more social and political influence than any reformer.

So what *does* Piketty want to do about all this inequality?

Like any good utopian book, “Capital and Ideology” is replete with ideas and schemes to remedy the injustices and inequalities it identifies. Piketty describes his outlook as ‘participatory socialism’ and he’s more or less explicit that this is little more than re-branding of the currently de rigueur current of democratic socialism. In this sense, in policy terms it’s not too different from the sorts of proposals you’d hear from Paul Mason, Rutger Bremen, Stephanie Kelton, or even myself - though I will give Piketty credit for dreaming big. The core element of Piketty’s programme are social and temporary ownership of the means of production, an universal capital endowment [universal basic inheritance], strongly progressive taxes on property, inheritance and income, educational justice and more participatory democracy.

I’ll say a few things about these specific programs in a moment, but the details aren’t really that important. None have any chance of being implemented, nor does Piketty offer even the hints of a work program that would bring them closer to fruition. Like a disaster capitalist, Piketty is putting his plans on a shelf in the hope that they’ll be be dusted off by harried bureaucrats the next time a crisis rolls around. But from the perspective of the middle stages of the worst economic crises in a century caused by the COVID-19 pandemic, it’s clear that no one with real power is reading “Capital and Ideology” in search of a way out.

Co-determination in workplace management - a corporate structure whereby workers in a firm have a permanent right to representation on management boards - is of course an idea that is long overdue. It’s proved highly successful in those countries that have adopted it, and democracy at work has been a core demand of socialists for a hundred years. Piketty also remains a strong advocate of a hefty wealth tax, on all forms of capital (not just real property), that would return 1 per cent or more of capital wealth to society each year and act as a strong incentive against hoarding. His central concept, ‘temporary ownership’, aims to emphasise that ownership is not seen as exclusive and legitimate right of any one individual, but rather as a stewardship of a society’s surplus value on behalf of future generations. In fact, Piketty’s full-throated embrace of heavily progressive taxes on almost all forms of wealth and income is fucking admirable in this day and age. One of the core things a wealth tax would fund would be a universal capital endowment [a sort of universal basic inheritance] for all citizens, a sort of permanent land reform or rolling libertarian ‘year zero’. Although as Piketty points out later on educational justice means that most states could also spend about the same order of magnitude educating a child from birth through to tertiary degree, so the question of how best to allocate that inheritance, I think, remains an open one.

So, what’s next?

There are good ideas in “Capital and Ideology” - the concept of inequality regimes, the ‘Brahmin Left’, ‘propertarianism’, trifunctional societies etc. - that will be picked up and discussed for years to come, but you shouldn’t have to slog through 1040 pages just to get to the good stuff. So I’ve done that for you! Future parts of this reading guide will be published weekly, every Monday. Links to each part are provided below for future reference:

Part 2: The French Revolution and Propertarian Liberalism [published 8 March]

Part 3: Liberal Imperialism and the Globalisation of Inequality [published 15 March]

Part 4: The Great Transformation, or How to Destroy Capital in Three Easy Steps [published 22 March]

Part 5: The Brahmin Left and the Nazbol Vortex [published 29 March]

Review: "People Without Power" a.k.a. "The People, No" by Thomas Frank

There are three essential traits I look for in a political book: the author must choose interesting subject matter; they must present a coherent theory of events; and they must write clearly and succinctly in support of their narrative. Thomas Frank’s new book, “People Without Power: The War on Populism and the Fight for Democracy” - or as it is known in the US market, “The People, No” - is a hit on all three fronts. Rarely do I encounter progressive tracts that I enjoy reading as much as I enjoyed this book.

I have a semi-regular series on my blog I call “Myths of the Old Order”, where I take aim at one of the cherished myths of liberal ideology and examine how liberalism’s failures have exposed the tenuous underpinnings of the old order. Frank - previously famous for his cutting and insightful work in “What’s the Matter with Kansas?” and “Listen, Liberal!” - performs a similar task in taking aim at the myth of “populism”: “Populism is the word that comes to the lips of the respected and the highly educated when they see the global order going haywire . . .the political face-off of today . . .pits the center against the periphery, the competent insider against the disgruntled”. We might also call this out as radical centrism, or horseshoe theory-as-praxis. Frank calls it the ‘Democracy Scare’. In the writings of think tanks and government agencies, in the books of centre-rightists like William Galston or centre-leftists like Yasha Mounk, democracy is supposedly under threat from authoritarians and extremists on both the left and right that share more in common with one another than either does with the sensible centre.

In response, Frank has written a history of ‘actual existing populism’ to show that left-wing populism is nothing like the centrist caricature. But he has also written a matching history of ‘anti-populism’ - how the rhetoric and tropes of the ‘Democracy Scare’ have evolved, and remained the same, throughout recent history and how the liberal sneering of today against the likes of Bernie Sanders and Jeremy Corbyn is in truth little removed from the reactionary ravings against FDR’s New Deal. Frank is able to tackle this daunting task because he has the most sophisticated analysis of what elites mean when they say ‘democracy’ that I’ve encountered outside a graduate-level classroom. Elites don’t really believe in democracy as it is popularly or even philosophically understood: the notion that individuals should have a say in decisions that might affect their rights and legitimate interests. Instead, elites operate under a consensus model of governance or what Galston (and Frank) call ‘pluralistic democracy’ - in which elites representing diverse constituencies meet in closed rooms to hash out solutions that serve the interests of the communities those elites supposedly represent. Barack Obama, famously, holds to this vision of liberal undemocracy, as does the NGO industrial complex. But what it amounts to, whether in the 19th century or the 21st, is a vision of society in which the majority of the population is deemed unfit to govern themselves.

Agrarian Populism

The core of Frank’s thesis is an in-depth account of the US People’s Party of the late 19th-century - the movement that was the first to explicitly call itself populist and the only indigenous American political movement to be praised by the first general of European communists. Frank demonstrates how - contrary to the assessment of later historiography - the first populists represented a multi-racial, working-class movement overwhelmingly focused on collective solutions to questions of economic justice. The People’s Party prospered when it teamed up with local political institutions (Democrats in most states, Republicans in others) to overthrow the status quo, but failed when it threw its weight behind the national Democratic Party (in the personage if Williams Jenning Bryant) and when it was culturally wedged on the grounds of race and culture. Frank notes that most of the macroeconomic principles the centre now takes for granted - the welfare state, fiat currency and free trade - were originally the ‘fringe’ ideas of radicals, and that there was nothing reactionary or anti-scientific about the first Populists - quite the contrary. Populists believed then and believe now - contrary to the self-congratulatory smugness of elites - that ordinary men and women are more than capable of governing themselves.

Frank matches his history of the People’s Party with an equally incisive account of the first wave of anti-populism, told largely through the story of the US presidential election of 1892 and the machinations of one Mark Hanna, campaign manager of the genteel Gilded Age president William McKinley. Hanna, the political hero of modern day conservative propagandists such as Karl Rove, invented the myth of populism out of almost whole cloth: that populists were ‘lunatics in rag’, that they posed a threat to democracy and rule of law, motivated by demogoguery and jealousy of the wealthy rather than a sober assessment of their real material conditions and those responsible for it. Frank points out that almost all of the tropes of modern anti-populism can be traced back in their genealogy to the mad hysteria of Gilded Age elites - with one notable exception. And that is that early anti-populisms did not accuse their opponents of racism (and anti-semitism), misogyny and xenophobia (if only because the establishment of the time was thoroughly soaking in such beliefs itself). That element, so common in anti-populist rhetoric now, came much later.

Rise of the PMC

The remainder of Frank’s history examines the recurrence of these patterns from the 1890s in three subsequent historical eras: the triumph of social-democratic populism in FDR’s New Deal, largely told through the story of FDR’s triumph in the presidential election of 1936; the ‘New Left’ era of the 1960s and the catastrophic failure of George McGovern, and finally the conservative counter-revolution represented by Ronald Reagan and Donald Trump. The key question Frank asks us to consider is how the populist triumphs of the New Deal gave way to an era in which anti-populism came to be seen as a not a fringe reactionary opinion, but a mainstream centre-left belief, and how latter-day conservatives came to portray themselves as populist insurgents against a corrupt liberal establishment.

This, sadly, is well-trodden ground for the contemporary left. The New Deal era was so successful that it produced a generation of administrators who believed that political problems were essentially technical in nature; a protest culture among students which came to see academic credentials and schooling (something inaccessible to their own parents) as granting moral virtue; and a union movement that was focused above all on defending the gains of the 1930s, even if it meant selling out their radical comrades at every opportunity. The self-satisfied Keynesian consensus of the 1950s and 60s was the first time that elites could claim to have ended history - and the first time that their abject failure to deal with overlapping economic and social crisis led to their ideology being completely discredited. The 2010s are in some respect, merely a neoliberal echo of this earlier failure; Trumpism a farcical repetition of the Reagan Revolution.

As early as the 1950s, the imagined opponent of this liberal consensus was the conservative firebrands exemplified by McCarthy and Goldwater. Their crusades against the liberal establishment failed, only to be picked up in later generations. But how the centre-left translated anti-populism into opposition to their own left flank [which had defended them again McCarthy and Goldwater] is the central mystery of the twentieth century: how did well-meaning technocrats “retrieve pieces of long-forgotten conservative stereotype, fit them out with fashionable academic jargon of their era, and launch the result as a shiny new diagnosis handed down by the well-adjusted administrative mind”? Franks blames particular academics and writers - Daniel Bell, Richard Hofstader, Michael Rogin, Edward Shils and Seymour Lipset - but these men were representative of a particular materialist transformation: the rising influence of the professional-managerial class. These elitist academics from Ivy League institutions only had influence because a generation of social movement and union leaders had come to believe in the moral value of their credentials - the same credentials that gave them, as children of the working class, access to the halls of economic and political power.

The Disciplining of the Working Class

Thomas Frank has once again written an important book, that leftists everywhere should read in order or understand the moment in which they live. The increasing movement towards managerial liberalism on the liberal lift - the idea that the working class (who are inherently racist, misogynist and xenophobia) need to be educated and disciplined by their social betters - is a political disaster in waiting. Social democratic parties that have embraced the sensibility of liberal undemocracy have seen their vote whither and their popular support die. On the contrary, right-wing populists have once again discovered that elites will tolerate proletarian manners so long as the give capital complete freedom of action. This is a uniquely dangerous moment for liberalism - it has rarely been as a weak as it is right now. Socialists are once again called upon to defend the liberal order against itself. Because liberals no longer have the good sense to recognise that popular democracy provides the legitimacy that keeps their social order running.