Three critical comments on Zoltan Zigedy’s critical reading of Piketty’s ‘Capital in the Twenty-first Century’

by Jehu

bush-obama-imperialismA number of writers have attempted to critique Thomas Piketty’s Capitalism in the Twenty-First Century. However, I have found it a better use of my time to read and critique the Marxist critiques of Piketty’s 600 pages of worthless bourgeois simpleton trash. One theme that has emerged on both sides of the divide between Marxist and bourgeois criticisms of Piketty is his vague, semi-Marxian criticism of capital and inequality. This is probably something we need to clear up here and now. Piketty has nothing in common with Marx’s critique of political-economy. While Piketty spends an ungodly amount of electrons showing how capitalism creates inequality, Marx demonstrated something much more important:

Capitalism creates the material basis for communism.

Lack of clarity on this point must lead to some pretty bizarre results.

ONE: On the so-called Thatcher/Reagan turn from Keynesian Orthodoxy

According to Zoltan Zigedy, in his recent critique of Piketty work:

“Capital in the Twenty-first Century, has stirred more interest in economic questions than any book in decades, certainly since the Reagan/Thatcher turn away from Keynesian orthodoxy.

Thus, almost from the very first lines in this “critical review” by Zigedy, the reader is hit with a constant torrent of disinformation. When did this alleged “Reagan/Thatcher turn away from Keynesian orthodoxy” occur? What is even meant by the term “Keynesian orthodoxy”?

First it is necessary to dispense with the caricature made of Keynes’ work throughout this “critical review”. Keynes is typically credited for producing an underconsumptionist theory of capitalist crisis by Marxists, however this is not the least bit true. Rather the opposite is the case, Keynes properly diagnosed the crisis as one produced by overproduction of capital; the crises of the 1930s was one in which more surplus was being produced than could be profitably invested; resulting in the displacement of direct labor by machines and leading to what he called “technological unemployment” — a surplus population of proletarians. For instance, in his 1930 essay, Economic Possibilities for our Grandchildren, Keynes makes this statement:

“We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come – namely, technological unemployment. This means “unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.”

Second, far from believing the crisis could be resolved by measures aimed at increasing wages, and contrary to underconsumptionist explanations, Keynes, like most of his bourgeois contemporaries, thought the immediate solution to the crisis was to reduce wages, not increase them. But here Keynes made a distinction between the nominal wage (the quantity of wages in some form of state issued currency and the real wage (the mass of commodities money wages could buy). The state would be a more efficient and effective capitalist by employing the depreciation of its currency to reducing real wages while leaving nominal wages unchanged. As Keynes makes clear in his General Theory, the working class would not be able to resist reductions of their real wage by means of such inflation:

“Thus it is fortunate that the workers, though unconsciously, are instinctively more reasonable economists than the classical school, inasmuch as they resist reductions of money-wages, which are seldom or never of an all-round character, even though the existing real equivalent of these wages exceeds the marginal disutility of the existing employment; whereas they do not resist  reductions of real wages, which are associated with increases in aggregate employment and leave relative money-wages unchanged”.

Since Keynes believed in the reduction of real wages of the working class as a solution to the crisis of overproduction, how could the policies of Reagan and Thatcher, which were never anything more than an attempt to forcibly reduce wages, represent a turn away from Keynesian policies?

If Marxists detect some element of underconsumptionism in Keynes’ theory, this underconsumption is not an underconsumption of commodities, but an underconsumption of capital, (which, as we all know, having been reminded of this by Marx on so many occasions, also includes capital in the form of commodities). Another, more familiar, way to define underconsumption of capital is that Keynes identified the problem facing the mode of production as overaccumulation of capital. Thus, fascist state deficit spending was critical to Keynes’ ideas for how the crisis could be resolved: the role of the state was to borrow the excess mass of capital within the world market, consume it unproductively and pay interest to the capitalists on the now consumed capital.

According to Keynes, fiscal deficit spending was necessary because the excess capital consumed by the state was superfluous to the needs of private capitals.

“Business enterprise will not seek to expand until after profits have begun to recover. Increased working capital will not be required until after output is increasing. Moreover, in modern communities a very large proportion of our normal programmes of loan-expenditure are undertaken by public and semi-public bodies. The new loan-expenditure which trade and industry require in a year is comparatively small even in good times. Building, transport, and public utilities are responsible at all times for a very large proportion of current loan- expenditure.

“Thus the first step has to be taken on the initiative of public authority; and it probably has to be on a large scale and organised with determination, if it is to be sufficient to break the vicious circle and to stem the progressive deterioration, as firm after firm throws up the sponge and ceases to produce at a loss in the seemingly vain hope that perseverance will be rewarded.”

Any serious examination of fascist state fiscal policy during the Reagan administration has to conclude Reagan fiscal policies were simply Keynesian deficit spending measures on steroids. But Zigedy, at the beginning of a “critical review”, just alleges a turn away from Keynesian Orthodoxy as if such a turn ever happened. The so-called Reagan/Thatcher turn away from Keynesian orthodoxy is some sort of shared hallucination of an event that never happened. Fascist state deficit spending led to unprecedented accumulation of debt and public employment increased constantly under Reagan.

Here is a chart on state share of GDP, which increased every year of the Reagan administration:


Here is deficit spending, which became a chronic phenomenon during Reagan’s administration


Marxists have convinced themselves Reagan era neoliberalism was a “turn away from Keynesian orthodoxy”, i.e., away from reducing the real wages of the working class by means of fascist state deficit fiscal policies, and no one can tell them different.

TWO: On the material basis of the so-called Golden Age and its collapse

In Zigedy’s discussion of Piketty and post-war history, there is more than a little Euro-centrism, especially Anglo-American exceptionalism, and this despite his complaint Piketty focused too narrowly on western capitalist societies.

In any event, one thing I have a hard time distinguishing is what of the section “’Trente Glorieuses’ and ‘the America We Loved'” and the following section “Back to the past” is Zigedy’s opinion and what is his paraphrasing of Piketty’s argument. For instance, Zigedy writes,

“In fact, nostalgia for this period [the golden age of fascism — Jehu] was just as rampant as he indirectly acknowledges with a later quote regarding the same period”.

It is unclear whether Zigedy also subscribes to the idea that nostalgia for the immediate post-war period is rampant or whether this is just Piketty’s argument. Zigedy adds, “Indeed, it is remembered fondly as such by many of those associated with the so-called Baby Boom…” Zigedy writes it is no surprise this period is identified with “social harmony, liberal values, and the ‘War on Poverty’ in the United States.”

I find this argument bizarre to say the least. First, in what sense was the 1950s, 1960s and 1970s a golden age in anyone’s mind? The only people I know who want to go back to the 1950s are either segregationists or people who fail to remember segregation. Among what crowd is the 1960s remembered fondly as an era of social harmony? And by what stretch of the imagination could the 1970s be recalled as the era of “The War on Poverty”, since it was precisely during this period that wages began to fall and never recovered.

Zigedy then adds this completely bizarre statement:

“one could persuasively argue that this age of relative prosperity was an unspoken tax on wealth and high incomes used to purchase social cooperation and consensus, a kind of insurance policy against Bolshevism. “

Bolshevism? Is this person serious? When was there ever a threat of Bolshevism in the United States? Still less any desire to be on the “right side of history”.

Zigedy asserts

“a consensus emerged in the West to burnish the working conditions and living standards of the majority of people.”

Huh? Where did this consensus emerge? When? This, of course, is an attempt by Zigedy to explain the collapse of segregation and greater participation by women in the labor market. In the dominant Marxist view, these events could not possibly result from the interest of capital, since those guys are completely reactionary. It must, therefore, be explained either by factors external to the bourgeois class — the result of ‘the threat of Bolshevism’ — or, failing this cause, the enlightened grasp of long-term self-interest by the bourgeoisie.

Zigedy exhibits a malady common to the Left: an inability to realize the bourgeois class might have its own interest for ending segregation quite apart from the alleged militant threat of FULL COMMUNISM that was, in her/his imagination, sweeping the working class in the 1950s and 1960s. Thus, the golden age of fascism can be explained by a “compact” between capital and labor.

However, since there never really was a threat from the working class to capital in the 1950s and 1960s, we are still left without an explanation; and we need one with a little more weight than bribery of the working class and an attempt by Washington to spruce up its image abroad.

Could the explanation have anything to do with the fact World War II effectively brought the most important pre-war industrial powers of Europe and Asia under US hegemony? It just seems possible that having your money established as the reserve currency of all the other industrial powerhouses might improve the bottom line considerably back in the United States. It also might help that the other industrial powers all had to rebuild their shattered economies and were completely dependent on the United States for credit and critical commodities. And it might help that the chief competitors of the United States within the world market essentially lost control of their colonies as a result of the war. Finally, it might help that the United States was the only industrial power whose industrial capacity actually increased during the war — so it had far more productive capacity at the end of the conflict than at the beginning. And with this massively increased industrial capacity, it could easily undercut the prices of its rivals anywhere within the world market.

Indeed, was this not the reason the belligerents entered the conflict in the first place? To expand their respective markets beyond their national borders? So, who the fuck won that contest? Or does this not matter? I mean, why look for material changes in the mode of production when you can simply assert Washington ended segregation because it wanted to fluff up its image and buy the loyalty of black people — who were somehow being seduced by bolshevism?

Against an argument that seeks the cause of political event in the material relations of society, Zigedy can only offer that the golden age of fascism was,

“a delusion grounded on a mere temporary compact between capital and labor, a reluctant concession meant to anesthetize the power of labor and anti-capitalist action.”

Thus, although there is every indication the so-called ‘neoliberal turn’ by Thatcher and Reagan was clearly produced by changes in the material economic relations of society, and only represented a change in the form of already established Keynesian policies, our Marxist, Zigedy, insists finally it owes its victory to a failure of the Left:

“When labor responded tepidly to [Reagan’s] aggression against union power and unions failed to mobilize popular support, conditions were met for the revocation of the Cold War contract, inaugurating a one-sided class war and expanding inequality.”

Which is to say, the bourgeoisie reneged on its “Keynesian compact” with the proletariat and the proletariat rolled over and submitted. But, just to be sure, Zigedy plays the trick of tossing every other possible cause into the pot to cover his bases:

“Change did not come to the US from shattered expectations, but from a multifaceted crisis, a crisis of economics (failed Keynesianism), a crisis of political legitimacy (Nixon’s impeachment), and a crisis of foreign policy (defeat in Vietnam).”

Thus the actual collapse of Bretton Woods (1971), Nixon impeachment (1974) and defeat on the battlefield in Vietnam (1975) explain the origins of a neoliberalism said to emerge full blown in the 1980s. Did she/he leave anything out? Because we want to be sure all our bases are covered. So, let’s toss in euro-communism and a passive labor movement for good effect. And the Sino-Soviet split. Anything else? Come on, there must be something else we can add to this “historical materialist” stew.

What Zigedy has done, without admitting to it, is to state there were only accidental historical forces at work in the collapse of the golden age of fascism. The collapse of the so-called “Keynesian compact” occurred mostly because of a confluence of a series of, at best, tangentially related events.

In actuality, the cause can be easily seen in the chart below: the depression of the 1970s, as measured in gold:


As can be seen in the chart, measured in gold, the US economy expanded until 1970 and then began contracting until about 1981. The depression of the 1970s lasted more than twice as long as the Great Depression and easily exceeded the latter in depth. All the causes of both the golden age of fascism and its subsequent collapse were nothing more than superficial political expressions of the expansion and subsequent contraction of economic activity.

One would think this is already obvious to a Marxist, but clearly this is not true in the case of Zigedy and almost all in the Marxist school.

THREE: Piketty’s theory of inequality versus Marx’s theory of the communist movement of society

According to Zigedy, Piketty provides a “fresh and well-grounded” understanding of the problem of income and wealth inequality. Zigedy alleges that Piketty’s book is a critique of contemporary political-economy, much like Marx’s Capital. In this way, the whole of Capital is reduced to a Victorian complaint against inequality — the rich were getting richer and the poor poorer.

Zigedy’s intent becomes more obvious the further he gets into his essay: Marx’s project is, if not identical to Piketty’s, at least parallel with it. This because Zigedy, in fact, intends to reframe Marx’s Capital as an examination of how capitalism leads to income and wealth inequality. Like so many before him, under the guise of a critique of some bourgeois hack, he is actually engaged in a critique of Marx. Essentially, Piketty is complimented for his excellent works marshaling the data for Marx’s alleged thesis on inequality in bourgeois society.

Thus, says Zigedy,

“Thanks to Piketty’s careful research, the Marxist thesis is on much firmer empirical ground.”

The problem with this last statement, is that nowhere does Zigedy ever actually explicitly discuss the so-called “Marxist thesis”. This leaves us in the position of assuming that labor theory has something to do with the idea capitalism creates inequality. Three things are important to assert at this point:

First, Marx was never concerned even in passing about inequality among individuals. This might come as a surprise to our Marxists, but Marx focused on the accumulation, concentration and centralization of capital, not individual wealth. If fact, to the contrary, Marx asserted the management of private capital would eventually be stripped from the hands of these private individuals by the state and they would be rendered entirely superfluous to accumulation.

How little Marx was concerned about inequality can be seen in the fact that he warned his own followers that inequality would continue even under communism. For right to be equal, Marx explained, it had to be unequal when applied to persons of unequal capabilities and material requirements. The very idea Marx was concerned at all about Piketty’s project is a complete fabrication.

Second, insofar as the great mass of society was progressively stripped of all wealth over the capitalist epoch, and wealth concentrated in a few hands, this was, in Marx’s view, not a side effect of capital, but the historical mission of the capitalist mode of production. In fact, communism itself presupposes capitalism,

“must necessarily have rendered the great mass of humanity ‘propertyless,’ and produced, at the same time, the contradiction of an existing world of wealth and culture”.

Which is to say, communism presupposes a level of inequality that was unthinkable even in Marx’s own day. Piketty’s concern with inequality was never in any way, shape or form, Marx’s concern. The path to communism passed, and, of necessity, had to pass, through the most ruthless concentration of wealth by every means at the disposal of the capitalists. This process would continue until the wage slaves would not even be able to sell themselves into slavery — until they themselves were rendered superfluous to the production of material wealth. They would be utterly cut off from all possibility of life itself and thus forced to take the whole of society under their control.

I would ask Zigedy: How the fuck is Marx’s argument in any way reflected in Piketty’s trash?

Third, the concentration and centralization of wealth at one pole and massive unrelenting poverty at the other is the result of what Marx called the “historical task and justification of capital.” Once social production was unleashed nothing could prevent it from arriving at its logical conclusion: The abolition of labor. This means all those who live by their own labor were doomed to increasingly more difficult conditions of life if they did not take the process under their control. Where does this fact appear either in Piketty’s book or in Zigedy’s critique?

It would be precisely by development of the forces of production, a development that also stripped the mass of society of its property and forced it into the ranks of the propertyless wage slaves, that the material basis of communist society was established. And it is only on the basis of this assumption that a proletarian political revolution makes any sense at all: To complete the development of the productive forces as rapidly as possible. The process itself was inevitable. What was not inevitable was tens of thousands dying of starvation every day on a planet awash in food and every means to life.

Moreover, as Zigedy explains without meaning to, the concentration and centralization of wealth in the hands of the state is never examined by Piketty. And why is this? Certainly, this is because the concentration and centralization of wealth in the hands of the state would not appear as inequality between individuals in official data on inequality, since it is no longer in the hands of a stratum of wealthy individuals. However, at the other pole of this relation we still have an impoverished mass of individuals.

Somehow when 3% of all wealth is concentrated in JP Morgan’s hands, this is shocking inequality. However, when 40% of all wealth — and money itself — is concentrated in the hands of the state itself, it does not appear as inequality as such. The question of individual inequality loses its significance by the very same process that renders the capitalist class superfluous to the process of accumulation. The concentration of wealth under the control of the state does not even appear as a real concentration, although it has  progressed far beyond private ownership of wealth. And all this hinges on the illusion that concentration and centralization of wealth in the hands of the state is, in some bizarre sense, “socialistic”.

The problem for Marxists, however, is that this myth flies in the face of the historical materialist conclusion that the state must become the capitalist. If we then assume inequality aa a relation between the capitalist and the working class, and accept Engels prediction that the state becomes the national capitalist, clearly inequality has reached a shocking levels.

Marxist don’t want to talk about this for the same reason Zigedy complained that Piketty ignored the Soviet Union: concentration of wealth in the hands of the fascist state is not, for Marxists, a real concentration of wealth over against the members of society, but the “socialization” of wealth, the “return” of wealth to society as a whole. Only that portion of total social wealth in private hands is to be considered in a discussion of inequality.

Of course this overlooks the argument made by Engels that, at a certain point, concentration and centralization of capital can only continue on the basis of state ownership for two reasons: First, the management of this concentrated wealth escapes the practical control of even the very largest capitalist monopolies. Second, as Engels noted, no society would put up with a private monopoly owning and controlling 40% of the wealth in the United States.

The state does not take control of the national capital to put an end to the concentration and centralization of capital; rather the state, by taking control of private capital frees concentration and centralization from the limits imposed on it by private ownership — and, at the same time, adds to the concentration and centralization of capital, the force of state violence to accelerate the process. It is only with the state assumption of the function of national capitalist that concentration and centralization of capital achieves its final form.