There’s a moment in this interview with Paul Krugman about Thomas Piketty’s book Capital In The 21st Century where Bill Moyers asks Krugman this question:
Moyers: Do you agree with [Piketty] that we’re drifting towards oligarchy?
And Krugman gives him this reply:
Krugman: Oh yes. There’s no question of that.
And watching it I realised that the next political phase of the campaign started by Occupy is now starting to emerge.
I haven’t read Piketty’s book yet, though I’ve now read plenty of reviews and commentary. If you’ve missed this. Martin Wolf’s appreciative review in the Financial Times is a good place to start, as is Bill Moyers’ 20-minute interview with Krugman.
The new Belle Epoque
But there are a couple of core arguments:
- that it is normal in a capitalist society for the rate of return on capital to be higher than the rate of economic growth (r>g)
therefore it is a normal condition of capitalism that holders of capital will tend to do better than people who have to work to earn (Piketty argues that the post-war period, where this was not true, was a blip, because growth rates were high and much wealth had been wiped out by depression and war)
that in practice this is not about enriching the 1% – worth noting that Piketty’s earlier work with Emmanuel Saiz was the source of Occupy’s 1% meme – but about enriching the 0.1%, or perhaps even the 0.01%
and that we are moving (also based on data) to an era of “patrimonial capital”, as distinctive as the Belle Epoque of the 19th century, when inherited wealth dominated Europe and the United States.
The interests of millionaires
Piketty is a French socialist, and his suggestion is much higher taxation on inherited wealth, which of course has largely been dismissed out of hand by critics, which is perhaps mostly an indication of the way in which political discourse is currently dominated by the interests of the 0.1%, and by extension, by the interests of finance capital. In the UK, of course, we have a cabinet of millionaires; in the US at present, whoever you vote for, Wall Street gets in.
But there are some reasons to believe that this can change.
The way capital works
First, if Occupy was a howl of rage, Capital in the 21st Century is 700 pages of data driven analysis that focuses on the way that capital works. In the interview with, Moyers, Krugman acknowledges that he’d taken his eye off capital in his economics thinking. Martin Wolf suggests that we’d become over-interested in human capital instead of financial capital. The result is that everyone who has an interest in economics and politics has to engage with it in some way. In futures terms, it’s moved that Occupy debate from ‘Spring’, at the bottom of the S-curve, into Summer, where it starts accelerating towards the mainstream.
Second, if the issue is about the 0.1%, not the 1%, that’s a much smaller base of losers if governments decide to take any kind of action. A rich, influential, well-connected base, to be sure, but it’s much smaller. In the current issue of New Left Review, Goran Therborn has a short article about “New Masses?” (needs subscription) where he looks at possible social bases of resistance. One group, ‘white collar massess’, which has been squeezed because so much of the proceeds of growth has been acquired by the 0.1% over the last three decades, seems to be re-emerging as such a base. Therborn doesn’t mention Bill de Blasio’s election in New York, but that’s the sort of sign we’d expect to see of this.
Third, the point about the next generation of wealthy living on inherited wealth is important. One of the deep discourses of American and north European societies is about the sanctity of earned wealth. This isn’t the place for a discussion of this, although in my view pretty much all large-scale wealth, perhaps excluding creative performance, has involved some form of predation. But the important point here is that I don’t think this is just an ideological frame; I suspect it derives from the Protestant roots of those societies. Inherited wealth, on the other hand, has none of the same cultural metaphors protecting it.
Fourth, even if you think there is no chance of new taxes on wealth, now that the analysis is in place there are other routes by which the wealth of the 0.1% can be eroded. Over at Real World Economics Review Geoff Davies lists seven financial flows that have that have pumped money to the richest members of society, and suggests ways that these can be restricted or even stopped. Dean Baker has [a similar list[(http://ourfuture.org/20140416/living-in-the-short-run-comment-on-capital-in-the-21st-century) of “clearly identifiable mechanisms through which government policy has acted to increase private sector profits in recent decades”. Once the frame exists for discussion of these, politics changes.
[Update: And by way of evidence that the politics is changing, see Will Hutton today on the response to the NYT‘s latest survey of US chief executive pay:
A growing number of US commentators are asking, as are some of the braver remuneration consultants, just why executives in America need to be paid so much. The LA Times, for example, headlined one opinion piece “Obscenely high salaries are stark reminders of US wealth gap”. The NYT talked about the dark side of executive pay driving US inequality.]
Horizons of Change
During the Occupy encampments, I wrote a post drawing on the Three Horizons futures model. This suggested that Occupy was a was a Third Horizon activity, associated with visions of change but not particularly engaged with the current “First Horizon” systems, instututions, and patterns of power. What Thomas Piketty has done, by drawing on long-term and credible data, is moved the discussion from the moral to the practical, to the place in the Second Horizon where visions collide with the present and starting reshaping politics and policy.