A CRITIQUE OF THOMAS PIKETTY’S ‘CAPITAL IN THE TWENTY-FIRST CENTURY’ – 1

CONTAINING CAPITAL – 1

Prasanna K Choudhary

Piketty-1024x682

1. APOCALYPSE AND EXUBERANCE
No. This is not a story about London society where ‘old Madame du Deffand and her friends talked for fifty years without stopping, and during those fifty years Madame du Deffand said no more than three witty things (or that the fraction of three witty sayings lasted eighteen thousand two hundred and fifty nights.’1
This is also not a story about the Faubourg Saint-Germain, about ‘Princesse de Guermantes’s drawing room, illuminated, forgetful, and flowery, like a peaceful cemetery, where time had not only brought about the ruin of the creatures of a former epoch, it had made possible, had indeed created, new associations.’2
This is about a sanatorium. In Davos, Switzerland. News of the assassination of a prince in not very far off Sarajevo was still in the making.
AN OLD STORY RETOLD
Tubercular patients from all over the world in the International Sanatorium Berghof formed a ‘charmed circle of isolation and invalidism’, and ‘in a sort of substitute existence’, spent their time talking of disease and health; life, love and death; civilization and humanity’s prospects, etc. Two of them got engaged in very intense arguments over the future of capitalism, of bourgeois democracy.
One was Ludovico Settembrini, a literary man, the rhetorical rationalist and humanist, grandson of a Milanese lawyer, a patriot, political agitator, orator and journalist Giuseppe Settembrini. He is quite excited about the prospect of bourgeois democracy’s victorious march all over the world.
He was also a Freemason. He had much to tell of the great names whose bearers had been Masons: Voltaire, Lafayette, Napoleon, Franklin and Washington, Mazzini and Garibaldi; among the living, the King of England, and besides him, a large group of people in whose hands lay the conduct of nations of Europe, members of governments and parliaments.
His exuberance was well reflected in his arguments: “Technical progress gradually subjugated nature, by developing roads and telegraphs, minimizing climatic differences; and by the means of communication which it created proved itself the most reliable agents in the task of drawing together the peoples of the earth, of making them acquainted with each other, of building bridges to compromise, of destroying prejudice; of finally, bringing about the universal brotherhood of man. Humanity had sprung from the depths of fear, darkness and hatred: but it was emerging, it was moving onward and upward, toward a goal of fellow-feeling and enlightenment, of goodness and joyousness; and upon this path, the industrial arts were the vehicle conducive to the greatest progress. ….Christ had been the first to proclaim the principle of equality and union, that the printing-press had propagated the doctrine, and that finally the French Revolution had elevated it into a law. ….
The achievements wrung from the past by the Renaissance and the intellectual revival, are personality, freedom, and the rights of man. ….
Two principles were in perpetual conflict for possession of the world: force and justice, tyranny and freedom, superstition and knowledge. ….There was no doubt as to which of the two would finally triumph; it would be the power of enlightenment, the power that made for rational advance and development. For human progress snatched up ever more peoples with it on its brilliant course; it conquered more and more territory in Europe itself and was already pressing Asia-wards. Much still remained to be done, sublime exertions were still demanded from those spirits who had received the light. Then only the day would come when thrones would crash and outworn religions crumble, in those remaining countries of Europe which had not already enjoyed the blessings of eighteenth century enlightenment, nor yet of an upheaval like 1789. But the day would come if not on the wings of dove, then on the pinion of eagles; and dawn would break over Europe, the dawn of universal brotherhood, in the name of justice, science, and human reason. It would bring in its train a new Holy Alliance, the alliance of the democratic peoples of Europe. …. In a word, it would bring in its train the republic of the world. ….”3
The other was Leo Naphta, professor of ancient languages, son of a village slaughterer father and a working class mother. His mother worked in a cotton-spinning factory, where she labored as long as her strength held out, while the children attended the common school. Naphta, in his young age, studied Karl Marx’s ‘Capital’ in a cheap edition, and passed from Karl Marx to Hegel. Born a Jew, he converted to the Roman Catholic faith and ‘sang the praises of the Middle Ages’.
He became a Jesuit.

 

He was convinced of the apocalyptic end of capitalism. He, too, was quite forthright in defense of his conviction: “Is your Manchester liberalism unaware of the existence of a school of economic thought which means the triumph of man over economics, and whose principles and aims precisely coincides with those of the kingdom of God? ….The fathers of the Church ….were humane enough, anti-commercial enough, to feel that all commercial activity was a danger to the soul of man and its salvation. They hated money and finance, and called the empire of capital fuel for the fires of the hell. The fundamental economic principle that price is regulated by the operation of the law of supply and demand, they have always despised from the bottom of their hearts; and condemned taking advantage of chance as a cynical exploitation of a neighbor’s need. Even more nefarious, in their eyes, was the exploitation of time; the monstrousness of receiving a premium for the passage of time – interest, in other words – and misusing to one’s own advantage and another’s disadvantage a universal and God-given dispensation. ….Quite indeed, these humane spirits were revolted by the idea of the automatic increase of money; they regarded as usury every kind of interest-taking and speculation, and declared that every rich man was either a thief or the heir of a thief. They went further. Like Thomas Aquinas, they considered trade, pure and simple, buying and selling for profit, without altering or improving the product, a contemptible occupation. …. They demanded that the measure of profit or of public esteem should be in proportion to the actual labor expended, and accordingly it was not the tradesman or the industrialist, but the laborer and the tiller of the soil, who were honorable in their eyes. For, they were in favor of making production dependent upon necessity, and held mass production in abhorrence.

Now then: after centuries of disfavor these principles and standards are being resurrected by the modern movement of communism. The similarity is complete, even to the claim for world-domination made by international labor as against international industry and finance; the world-proletariat, which is today asserting the ideal of the Civitas Dei in opposition to the discredited and decadent standards of the capitalistic bourgeoisie. The dictatorship of the proletariat, the politico-economic means of salvation demanded by our age, does not mean domination for its own sake and in perpetuity; but rather in the sense of a temporary abrogation, in the Sign of the Cross, of the contradiction between spirit and force; in the sense of overcoming the world by mastering it; in a transcendental, a transitional sense, in the sense of the Kingdom. ….
What had been the net result of the vainglorious French Revolution – what but the capitalistic bourgeois state? ..Progress? It was the cry of the patient who constantly changes his position thinking each new one will bring relief. ..The flabby humanitarianism of it went hand in hand with the wolfish cruelty and baseness of the economic conflict within the bourgeois state. War, war! ..Justice, in short, was an empty husk, stock-in-trade of bourgeois rhetoric. ..Freedom is historically bound up with the inhuman degeneration of commercial morality, with all the horrors of modern industrialism and speculation, and with the devilish domination of money and finance….”4

These passionate arguments led them to duel with pistols. Settembrini refused to fire at Naphta; instead he fired in the air. Naphta shot himself in the head, leaving behind the blackened red hole in the temple.
Naphta died; Settembrini with his excessive fondness for fairy tale capitalism survived. But soon, there ‘came the peal of thunder, that deafening explosion of long-gathering magazines of passion and spleen; that historic thunder-peal made the foundations of the earth to shake; and that fired the mine beneath the magic mountain.’ The First World War had begun.
In between these arguments, Hans Castorp, young scion of good Hamburg society, and an indifferent engineer, although sympathetically inclined towards Settembrini’s views, often pondered over striking a balance, a pedagogic equilibrium, a sort of harmony.
I do not intend to stay further in the magical world of Thomas Mann. I can now descend from the magic mountain to the flatland of real life existence.

Davos now hosts the World Economic Forum’s annual gathering of corporate bigwigs, heads of governments, and who’s who of the world. They discuss the health of global capitalism.
MARX AND KUZNETS
Almost a century after the story stated above, Thomas Piketty, in his ‘Capital in the Twenty-First Century’5, strives to tread the path between, what he calls, ‘the two extremes of Marxian apocalypse and Simon Kuznets’s excessive fondness for fairy tales, or at any rate happy endings.’ This theme runs throughout the book. He does not believe in Kuznets’s fairy tales, and the thrust of his study is on avoiding Marxian apocalypse.
Whether Karl Marx’s analysis of capitalism can be categorized as ‘apocalyptic’ or not will be dealt with in course of the critique. So far as Kuznets’s study is concerned, it was, from the very beginning, lacking in credibility. At the beginning of the Cold War in early fifties of the last century, when McCarthyism was at its height in the United States, Simon Kuznets’s findings were part of a political project to counter Soviet communism. It was designed to present a rosy picture of capitalism – it tried to show that inequality was not an inalienable part of capitalism, that over the course of industrialization and economic development inequality actually decreases, and this trend (reduction of inequality) was in fact observed in the US between 1913 and 1948. He further portrayed this finding ‘as one instance of a more general phenomenon, which should theoretically reproduce itself everywhere, including underdeveloped countries then mired in post-colonial poverty.’

 

Piketty rightly points out, “The sharp reduction in income inequality that we observe in almost all the rich countries between 1914 and 1945 was due above all to the world wars and the violent economic and political shocks they entailed. ….It has little to do with the tranquil process of inter-sector mobility described by Kuznets. ….The data Kuznets had presented in his 1953 book suddenly became a powerful political weapon. He was well aware of the highly speculative nature of his theorizing. ..He took care to remind his listeners that the intent of his optimistic predictions was quite simply to maintain the underdeveloped countries ‘within the orbit of the free world’. In large part, then, the theory of the Kuznets curve was a product of the Cold War.” Kuznets himself put it: ‘This is perhaps 5% empirical information and 95% speculation, some of it possibly tainted by wishful thinking.’ (Piketty, ‘Introduction/The Kuznets Curve’) Despite these clear-cut observations, one wonders why Piketty gives so much space and importance to Kuznets.
While Piketty is quite forthright regarding Kuznets’s exuberance, he appears to be quite defensive about ‘Marxian apocalypse’. He writes, “Despite ….limitations, Marx’s analysis remains relevant in several respects. First, he began with an important question (concerning the unprecedented concentration of wealth during the Industrial Revolution) and tried to answer it with the means at his disposal, economists today would do well to take inspiration from his example. Even more important, the principle of infinite accumulation that Marx proposed contains a key insight, as valid for the study of the twenty-first century as it was for the nineteenth and in some respects more worrisome than Ricardo’s principle of scarcity. If the rates of population and productivity growth are relatively low, then accumulated wealth naturally takes on considerable importance, especially if it grows to extreme proportions, and becomes socially destabilizing. In other words, low growth cannot adequately counterbalance the Marxist principle of infinite accumulation: the resulting equilibrium is not as apocalyptic as the one predicted by Marx but is nevertheless quite disturbing. Accumulation ends at a finite level, but that level may be high enough to be destabilizing. In particular, the very high level of private wealth that has been attained since the 1980s and 1990s in the wealthy countries of Europe and in Japan, measured in years of national income, directly reflects the Marxist logic.” (‘Introduction/Marx: The Principle of Infinite Accumulation’. Here I would like to replace the word ‘infinite’ with ‘unsustainable’ – unsustainable accumulation. Although Marx uses terms like ‘endless’ or ‘limitless’, this should be understood in conjunction with his theory of periodic cycle of crisis and social revolution. Its un-sustainability makes it what Piketty calls ‘socially destabilizing’.)
So much so for Apocalypse and Happy Endings! Let Princess Apocalypse and Mademoiselle Exuberance amuse themselves in their respective salons. I can now move on.

NOTES
1. Selected Works of Virginia Woolf; ‘Orlando: A Biography’, Wordsworth Editions Limited, Hertfordshire, 2005.
2. Proust, Marcel; ‘In Search of Lost Time 6’, ‘Finding Time Again’, Penguin Books, London, 2002. Translated from the French by Ian Patterson.
3. Mann, Thomas; ‘The Magic Mountain’, Vintage Books, London, 1999. Translated from the German by H T Lowe-Porter. Quotations have been selected from different pages of the novel.
4. Ibid.
5. Piketty, Thomas; ‘Capital in the Twenty-First Century’, The Belknap Press of Harvard University Press, Cambridge, Massachusetts, London, 2014. Translated from the French by Arthur Goldhammer. (From now on, references – related chapters and subheadings – regarding all the quotations of Thomas Piketty from this book will be mentioned in the running text in bracket.)

[This critique is divided in eight parts, tentatively titled as follows: 1. Apocalypse and Exuberance; 2. Data and Dialectics; 3. Capital Social and Self-Expanding; 4. Wealth Inherited and Created; 5. Century Twentieth and Twenty-First; 6. Yes Marx No Marx; 7. London Chicago Paris; and 8. Thank You Mr Piketty.]

July, 2014.

Continued.
Next: DATA AND DIALECTICS

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