Piketty is singing to our choir

by Jehu

Okay, so here is an argument unfortunately touching on the subject of M. Piketty and the whole inequality thingy. For those who have had enough of the mention of this simpleton’s name, I can only ask you to bear with me for the next 1000 or so words: I promise this will not be a simple regurgitation of what has been previously stated in the arguments of other writers for or against Piketty.

17-4094_hiresI want to draw attention to the parallels between Piketty’s work on inequality and the thinking of activists in the movements for an increased minimum wage, basic income and jobs guarantee. In large measure, Piketty’s work shares many of the same assumptions of activists in these movements and could be thought of as a theoretical argument for them.

Piketty’s work shows there is a long-term tendency toward inequality that was only temporarily reversed for a period during the mid-20th century. As Zigedy argues, after the publication of Piketty’s book, the question is not whether inequality is growing, but why it slowed or reversed during the mid-century.

“The importance of this empirical finding should not be underestimated. The historical tendency for income and wealth inequality to grow cannot be easily dismissed as deviant or uncommon. Rather, it appears to be systemic to the capitalist system… “

As is typical of simpleton economists the alleged “cause” of this problem is tautological: When the increase of the wealth of the owners of capital exceeds the increase in wealth of society in general, inequality will increase. This profound observation is represented in the silly equation:

r > g

Where r is the rate of return on capital and g is the rate of growth of the national economy as a whole. This equation, which purports to explain some hidden relation in the structure of social relations, actually does no more than tell us that when the increase in the mass of mass of wealth falling to the capitalist exceeds the increase in the mass of wealth falling to society as a whole, wealth will be concentrated in the hands of the capitalists — something any sensible reader knew before she even opened his book.

So what is the explanation for hundreds of years of secular increase in the concentration of wealth in the hands of a few? At the outset of his study, and despite the formidable historical data amassed and presented on the issue of inequality and poverty, Piketty makes a startling assertion; warning us to be wary of any “economic determinism”:

“What are the major conclusions to which these novel historical sources have led me? The first is that one should be wary of any economic determinism in regard to inequalities of wealth and income. The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms. In particular, the reduction of inequality that took place in most developed countries between 1910 and 1950 was above all a consequence of war and of policies adopted to cope with the shocks of war. Similarly, the resurgence of inequality after 1980 is due largely to the political shifts of the past several decades, especially in regard to taxation and finance. The history of inequality is shaped by the way economic, social, and political actors view what is just and what is not, as well as by the relative power of those actors and the collective choices that result. It is the joint product of all relevant actors combined.”

According to Piketty then, the distribution of wealth has always been political and cannot be reduced to economic mechanisms. The slowing of inequality (roughly during the inter-war period) and its acceleration after 1980 (roughly ‘neoliberalism’) are the result of war and policies adopted to cope with war. Thus Piketty’s argument is that there is no economic mechanism for what he calls a long-standing secular tendency toward wealth inequality.

Why does Piketty insist there is no underlying economic mechanism to what he himself demonstrates to be centuries of secular expansion of inequality. Given the historical data he offers, one would think the opposite conclusion should be drawn: the normal condition for the creation of wealth is the creation of poverty and inequality at one pole, while wealth is concentrated at the other. When the underlying mechanism breaks down because of a ‘shock’ of some sort, this concentration of wealth is interrupted.

Piketty’s argument is that the distribution of wealth is being determined by political factors unrelated to an underlying economic mechanism. The only interruption to these political forces is an external shock that temporarily reverses the political forces. But here is the thing: At no point does Piketty demonstrate there is no process actually creating poverty — he simply asserts it. He then states the process driving inequality and poverty is deeply political.

If he really believes this is true, why doesn’t Piketty call for an end to politics — to the state? If Piketty is to be believed, the state constantly creates poverty and inequality unless it is interrupted by the external shock of war, yet he proposes this same state can be used to end the poverty and inequality it has itself created.

Why Piketty does not call for an end to the state is, at least in part, explained by another assertion he makes: the more perfect the market, the more inequality is expressed:

“In the model I propose, divergence is not perpetual and is only one of several possible future directions for the distribution of wealth. But the possibilities are not heartening. Specifically, it is important to note that the fundamental r > g inequality, the main force of divergence in my theory, has nothing to do with any market imperfection. Quite the contrary: the more perfect the capital market (in the economist’s sense), the more likely r is to be greater than g.”

Thus, we are left with two contradictory assertions: First, the increase in inequality is driven by political forces; And second, the more free markets are from political forces the more inequality increases. The state is itself the source of inequality, yet absence of state intervention is the condition for expansion of inequality.

The reason for this clear contradiction in Piketty’s argument is simple: In no case should we look beyond politics to actually existing economic relations to explain poverty and inequality. Thus inequality and poverty are to be explained both by the active intervention of the state to concentrate wealth in the hands of the capitalists and by its lack of intervention.

Singing to the choir

However, as I stated above, I am not trying to critique Piketty’s simpleton rubbish. I point to Piketty’s contradictory argument here only to raise the suggestion that advocates of basic income, higher minimum wage, and jobs guarantee effectively operate on the same premise as he does: either there is no underlying “economic determinism” to the increase in poverty and inequality or, if there is such a mechanism, it can be ignored without consequences for the struggle against poverty and inequality. Poverty and inequality can be addressed by income, wage and full employment policies without investigation into their sources in economic relations.

In other words, when activists pick up his book, they find Thomas Piketty is singing to their choir.

Whether Piketty is being deliberately disingenuous in his book or not really doesn’t matter, since, whatever the particular cause of his denial of an underlying economic determinant to inequality, this same essential idea is also practically expressed by activists in their demand for basic income, higher minimum wage and jobs guarantee.

To be sure, I am not suggesting advocates of wage and income policies share Piketty’s agenda (nor do I even want to suggest he has one). My point is just the opposite: Piketty’s argument is actually the way the matter appears to activists and to all us empirically. Empirically, poverty and inequality are purely accidental characteristics of members of society; and it really does appear as if we can fix inequality and poverty by simply taking limited measures like raising the minimum wage or providing a basic income and a job to everyone.

This deeply complicates the issue of the demands for basic income, higher minimum wage and jobs guarantee. On the one hand, communists do not want to oppose these demands since they obviously arise spontaneously. On the other hand, the underlying reality is that demands such as these can no more address the problem they are meant to address than can food stamps and Lyndon Johnson’s War on Poverty.

Again, my concern in this case is not with Piketty and his simpleton argument, but with the activists demanding a basic income, a higher minimum wage or a jobs guarantee. The advocates of these demands share certain assumptions with Piketty that lead them to focus on politics and statist measures and ignore underlying economic processes. Thus, to one extent or another, they think the underlying process that is creating poverty and inequality can be addressed by state actions in the opposite direction.

To be absolutely clear: I want emphatically point out that Piketty’s argument is not the source of this delusion, but a reflection of it — it is the way the matter appears to us empirically.

The very structure of capitalist social relations makes it appears as if characteristics of bourgeois society like wages and employment are completely random and accidental — and this even in the face of massive data showing this cannot possibly be true in any but the most superficial sense.

It is not simply a matter of refuting Piketty but of grasping why things really do appear this way in our society and how this perception of randomness can be overcome. The premise of activist today is that centuries of steadily increasing poverty and inequality can be remedied by a higher minimum wage, a jobs guarantee or some combination of the three.

The state’s role in satisfying these sorts of demands hinges on the perception that political relations, no less the economic relations, are entirely random and accidental. It really does appear as if the state can be employed to realize measures that will slow or even reverse centuries of steadily increasing poverty and inequality.

However, the contradiction in Piketty’s argument — that the intervention of the state is the cause of poverty and inequality, yet absence of the state intervention only exacerbates poverty and inequality — reflects the ambivalent attitude of activists toward the state and politics.

On the one hand, the practical experience of activists in the neoliberal period is that the state has deliberately sided with capital to cripple the movement of the working class at every turn through pursuit of free trade agreements, deregulation, corporatization of free speech and other rights of citizenship, a revolving door from industry and finance into positions of power in the state machinery. The policies of the state appear to be abitrarily directed at the concentration and centralization of wealth in the hands of a few precisely because it is expressed in the ever more flagrantly incestuous relation between the state and ostensibly private capitals.

In large part, the very form taken by state intervention in the process of production of wealth makes its critical role in that process appear entirely dependent on the behavior of individuals and the policies implemented by these individuals.

On the other hand, if the policies of the state appear to be arbitrarily influenced by private capital, it remains the case that abolition of the state only appears to promise the unfettered domination of society by private capitals and even social catastrophe.

In this ambivalent view of activists toward the state — reflected in the contradictory argument of Piketty — resolves itself into the view the state only assists the concentration and centralization of wrealth in society because it has been captured by private interests seeking this result. If the state could be wrested from the grip of these private interests, it could be employed to liberate society from the growing poverty and inequality of the neoliberal period.

In my opinion, Piketty’s argument is not accidental; rather it reflects, in a developed theoretical form, the actual practical views of activists in the movement, who are trying to make sense of the random, accidental appearance of capitalist relations of production. Capitalist relations appear accidental because they actually are.

However the ambivalent character of activists’ view of the state also reflects an unconscious recognition of the social character of their own material relations as well as a recognition that this social character must be given some practical form.

This form cannot be the existing state.