Thomas Piketty’s Capital in the 21 Century is simultaneously ambitious and modest. The book is ambitious because Piketty sets out to tell a high-level history of the global economy and to outline a fresh theory of where we are heading. It’s the sort of grand intellectual enterprise that was common in the 19 century, but has become a rarity in our era of more specialised scholarship. But Capital’s also modest because Piketty wants to put economics, his own discipline, back in its place. Rather refreshingly, he regards economics as merely a branch of the social sciences. He eschews the hubristic claims for supremacy made by some practitioners.
Are the ambitions achieved? On the historical side the answer is yes. Perhaps the greatest contribution of this book is the data it brings to the table. Piketty throws a spotlight on the very wealthiest and those with the chunkiest incomes and puts these patterns in a long historical context. This is important because it tells the story of our time: huge wealth and huge incomes are now concentrated in the hands of a relatively small number of people. Many politicians and commentators on the right have sought to obfuscate this tendency by talking of inequality in relation to the richest 10 or 20 per cent of society, which makes the economic gulf look less extreme and easier to justify on the grounds of individual effort, talent and education. In fact, inequality is approaching 19 century heights in the rich world. Piketty has been extensively critiqued, but no one quibbles with his data. He has forced people to confront and debate our extreme winner-takes-all economy.
But what next? Piketty’s essential argument is that there is a natural economic tendency for the rich to get richer. This contradicts the widely-held assumption that as, economies grow and become more sophisticated, the spoils will tend to be more equally divided across society. Piketty acknowledges that such a levelling occurred in the Twentieth Century but he describes this as a historical aberration. The old economic forces driving inequality, he says, are back. There are good reasons to be sceptical of Piketty’s theory. But it’s a valid hypothesis. And the course of the past three decades certainly seems to support his concerns.
The most controversial element of the book has been his advocacy of a progressive global wealth tax and 80 per cent tax rates on the highest incomes. Critics have dismissed this as utopian and naïve. More sympathetic voices say he should just have presented his facts and let others debate the necessary prescriptions. Maybe. But, if so, it is possible to imagine him being accused to offering little more than a counsel of despair. Plus Piketty is too ambitious for that.
The French scholar is a fine teacher. One of the reasons for the book’s 600-plus page length is that he takes the reader back to first principles, assuming no specialist knowledge. The English translation by Arthur Goldhammer is limpid. Piketty says he wants the book to be widely read and his ideas debated. He has succeeded. Questions of economic theory have now reached an uncommonly large audience. And people are relating these ideas to the world around them – something that will doubtless please Piketty even more.
One could, of course, fill a book twice the size with all the reviews and commentary Capital has prompted. But there is a better way into the debate than consuming the Piketty media phenomenon: spend a little capital and read the original yourself.