Reconstruction Vol. 14, No. 4
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Of Rents and Apocalypse: How Piketty's Capital in the 21st Century is Bleaker Than We Think / Benjamin Balthaser
<1> I had the rare experience of meeting an actual member of the industrial bourgeoisie recently. He is the owner of a furniture-manufacturing firm in Columbia -- the father of a friend, he had come to help her move into a new apartment. He patiently explained the quality and historical stage of development of each piece of furniture we moved, the kind of manufacturing process it requires, even the region from which the wood was grown. When I asked him if his furniture sold in the U.S. he smiled and said in broken English, "oh no; I could never compete. I sell only Latin America." After finishing Capital in the 21st Century, it occurred to me I met someone much like Piketty's interpretation of Pere Goriot: reactionary, Catholic, pragmatic and skilled, this CEO, who owns his own firm and has a masters degree in engineering, is an anachronism. And will likely never move beyond his regional market.
<2> Reviews of Thomas Piketty's Capital in the 21st Century tend to fall into two neatly divided camps: liberal economists such as Paul Krugman who offer unreserved praise, and more radical critiques by Marixsts, feminists, and anti-racists who fault the book for its lack of attention to the dialectics of class and identity in reproducing capitalism. In more private conversation, I find that one's opinion of the book often precedes actual experience with it, in which various radicals I know condemn it as "liberal," based on the august and pungent opinions of its Marxist detractors - most notably David Harvey - who point out quite perceptively that class struggle, not neoclassical equations, tells the history of capital accumulation.
<3> Perhaps some of this rejectionism is just posture, a reflex of negation that is part of the DNA of being a leftist in the U.S. Because saying "no" is the one forbidden act in America, anything that comes with praise from the New York Review of Books and even worse, on the New York Times best seller list, must be resisted. As one member of my reading group said, of course we shouldn't read it - it's popular economics. I wasn't sure which of those two words committed the greatest sin.
<4> The most consistent and compelling critique of Piketty's book lay in its policy prescriptions. To lower the return on investment, discourage hording by the very rich, and promote growth, Piketty embraces a global wealth tax or failing that, a global income tax on high earners. From the perspective of race and gender, these policies do not consider the way in which the history of egalitarianism in the U.S. and Western Europe tend to benefit only the white middle class.
<5> And perhaps the most insightful critique came from Slavoj Zizkek in an interview: it's not that these policies do too little, rather that they are utopian and impossible. To be able to impose a global wealth tax sounds modest on the face of it, but would mean global control over capital: you and whose Red Army is going to impose this? The abstraction of the book's neoclassical economics is compounded by the abstraction of its solutions.
<6> And yet these reviews tend to assume we all agree on is what Piketty means by "capital" and "capitalism." Indeed, few reviewers seem to pay much attention to the historical narrative Piketty tells about capitalism's longue duree. As I finish the book, I find myself less interested in questions of policy in the same way I ignore advice of flight attendants on how to strap on an oxygen mask should I be plummeting to my death. Because the analysis of what capitalism is in Piketty's book is that stark: far more radical - or at least more disturbing - than Marx's.
<7> It must be remembered that Marx was a dialectical thinker, and that he felt capitalism had a positive role to play on the world stage. This role was not limited to the overthrow of feudal regimes by a bourgeois civil society - capitalism's progressive role lay in the dynamics of production itself. In part technocratic and in part social, capitalism according to Marx is always in tension with the very working class it produces. By socializing and deskilling labor in large industrial factories, capital is able to lower the cost of labor while at the same time make production far more efficient. As the cost of labor increases (as all those workers suddenly under the same roof start talking to each other about how shitty their pay is), capitalists respond by further mechanizing production (increasing constant capital), so that fewer workers are needed. While this produces massive misery, it also increases the productive power of capital: what we call in polite quarters as "technological advance." In other words, the very engine of capitalism - what makes it "progressive" - is rooted in the class struggle at the site of production.
<8> This dynamism at the heart of capitalism is central to Marx's theories of social transformation and indeed, it one of the things that creates for Marx a sense of historical rupture - capitalism has a transformative social and productive capacity unlike any previous system. Going back to our furniture manufacturer in Columbia, he is a model of this type: lean, precise with language and movement, I can only imagine working for him would be like working for a delicate machine for whom a certain amount of cruelty is just part of running an efficient, modern operation. And it is this story about capitalism that Piketty's book quietly undermines. Certainly, Piketty agrees that at times capitalism increases growth and productivity. It may even engage in technological "progress" and might, by sheer coincidence, even make useful things. But that's all beside the point. Mostly what capitalism produces is rent. And people who live off rent.
<9> What is remarkable in Piketty's historical description of capitalism is how little he seems to think it differs from feudalism. Unlike Marx, there is no historical rupture at the dawn of the bourgeois revolution. "Throughout human history" Piketty writes," the social world of the Ancien Régime, much like the social world of today, is based on the "inescapable fact" that that "the rate of return on capital was always at least 10 to 20 times greater than the rate of growth of output (and income)".[i] Indeed, for Piketty, it is this fact that has created the "the very foundation of society itself: it is what allowed a class of owners to devote themselves to something other than their own subsistence."
<10> It's not that there are no entrepreneurs or that capitalists do not engage in production. It's that they are simply irrelevant to the larger story. Piketty grants the figure of the heroic bourgeoisie, the inventor or the engineer or the risky investor exists, s/he is someone in the process of being absorbed by the inevitable logic of the system: "Capital is never quiet: it is always at risk-oriented and entrepreneurial, at least at its inception, yet it always tends to transform itself into rents as it accumulates in large enough amounts -- that is its vocation, its logical destination." [ii] The very logic of Piketty's book, that the rate on return of investment outstrips growth, implies that actually making things is simply not that profitable. As he puts bluntly: "the logic of r > g implies that the entrepreneur always tends to turn into a rentier."[iii]
<11> The opposition between the rentier - someone who lives not off production but "rents" charged through prior ownership of monopolies, land, or capital - and the industrialist is certainly not new. John Maynard Keynes called famously for the "euthanasia of the rentier," and Marx predicted that as capital centralized, there would be a polarization of classes between a small bourgeoisie and a giant proletariat. As Immanual Wallterstein suggests, Marx's prediction was a "liberal thesis," based on a shared conception with classical economists that capitalism was an inherently dynamic system based on a rapacious, but Promethean technocratic class of industrial producers, chained to an "iron law of profit" - that a penny spent in luxury is a penny lost on reinvestment.[iv]
<12> Wallerstein argues that the Calvinist notion of the hard-working, self-denying capitalist is but a myth - while possible in theory (or under a state control or monopoly of productive forces) - capitalists would rather be aristocrats living off of rent, than endlessly accumulating capital, lean, efficient, and hungry.[v] And it is fact that Piketty offers us with data, that we have merely moved "from a society with a small number of very wealthy rentiers to one with a much larger number of less wealthy rentiers: a society of petits rentiers if you will." [vi] Again, for Piketty, "for most of the history of capitalism, the level of inequality, and indeed, the structure of society, resembled the Ancien Regime in France - 90% of wealth for the top decile and at least 50% for the top centile." [vii]
<13> In other words, Piketty's theory of capitalism, told from the view of the investor, is one of near total stasis. Rates of return on investment have not changed; the dynamism associated with the industrial revolution, given time, merely returns back to the rentier world of aristocracy. Even the French Revolution for Piketty is kind of non-event, changing neither the rate on investment nor creating a "just or ideal society" -- it's only positive accomplishment is to inaugurate very good record keeping.[viii]
<14> This understanding of Capital solves what was one of the greater mysteries for me - why war is the "locomotive of history" for Piketty, not revolution. The Bolshevik Revolution, like the French Revolution, or even the de-colonization of the Third World figure very little in Piketty's text, though he does grant they put pressure on the investor class for a short period of time. The two great wars of the 20th century, rather, figure as milestones, as they are the only moment in which vast accumulations of wealth are destroyed, through the devaluation of currencies, collapse of government bonds, sheer plunder and destruction, and of perhaps even greater importance, the wartime emergency ability of states to tax the wealthy to pay for the wars.
<15> While it may seem self-evident that World Wars I and II were major events in world history, to suggest they are the only events to have a generational impact on capitalism is actually fairly novel and, I would add, disturbing. It suggests that capitalism is a static, insulated system, only vulnerable to violent, exterior shocks - the kind that annihilate tens of millions of people and lay waste to entire continents. Unlike Marx's vision of a capitalism that can be transformed from within by the creators of its wealth, this is a capitalism that is vulnerable only to world-wide devastation. Perhaps Piketty should adorn the cover of his book with a still from Walking Dead or Snowpiercer, as both suggest that a new, egalitarian world can only emerge from the very literal ashes of the old.
<16> Speaking of destruction, Piketty lays waste to one final myth of capitalism so surely and firmly it almost goes without saying. Capitalism, according to Piketty, is system stripped of any progressive sheen or ethos. It does not generate a more equal world over the long run, it does not generate a greater technological upsurge, it cannot be defended by claims of progress, rights, democracy, entrepreneurial elan or even transformative change. It is merely a system of return profits to investors, that stretch over time, will become even more stagnant and unequal. Unless of course, you have a world war to start.
Notes
[i] Thomas Piketty, Capital in the 21st Century (Cambridge: Harvard University Press, 2014), 335.
[ii] Ibid., 115.
[iii] Ibid., 395
[iv] Immanuel Wallerstein, "The Bourgeois(ie) as Concept and Reality," Race, Nation, Class: Ambiguous Identities (London, Verso, 1991), 140, 146.
[v] Ibid., 148.
[vi] Piketty, Capital in the 21st Century, 420.
[vii] Ibid., 262.
[viii] Ibid., 29.
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