A CRITIQUE OF THOMAS PIKETTY’S ‘CAPITAL IN THE TWENTY-FIRST CENTURY’ – 11

 

CONTAINING CAPITAL – 11

PRASANNA K CHOUDHARY

7. LONDON CHICAGO PARIS

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.

John Maynard Keynes; ‘The General Theory of Employment, Interest and Money’, Chapter 24, ‘Concluding Notes on the Social Philosophy towards Which The General Theory Might Lead’.1

At the beginning of political economy, British, French and American economists and philosophers dominated the scene. A comparative study of their writings and characters illuminates the social divergence among Britain, France and America at the close of the seventeenth century and the beginning of the eighteenth. It explains the origins of the national contrasts obtaining in British, French and American political economies. Here, we may have a quick look into the origin of political economy as a separate discipline.2

William Petty (1623-1687): The father of English political economy wrote his ‘Political Arithmetick etc.’ (London, 1699) at a time when Holland was still the predominant trading nation and France seemed to be on the way to becoming the principal trading power. However, Petty believed and proved that England was destined to conquer the world market: “ That the King of England’s subjects have stock competent and convenient to drive the trade of the whole commercial world. That the impediments of England’s greatness are but contingent and removable.” (Holland was then regarded as the model country just as Britain was later regarded as the model country by continental economists.)

Petty treats the division of labor as a productive force, and in his ‘Essay Concerning the Multiplication of Mankind etc.’ (1698), he shows the advantages which division of labor has for production not only with the example of the manufacture of a watch – as Adam Smith did later with the example of the manufacture of a pin – but considers also a town and a whole country as large-scale industrial establishments. This conception of the source of material wealth leads to the political arithmetic, the first form in which political economy is treated as a separate science. ..His audacious genius becomes evident for instance in his proposal to transport all the movables and people of Ireland, and of the Highlands of Scotland ..into the rest of Great Britain. According to him, this would result in the saving of labor time, in increasing productivity of labor, and ‘the King and his subjects would thereby become more rich and strong’.

Petty rejects taxes which transfer wealth from industrious people to those who do nothing at all, but eat and drink, sing, play, and dance; nay such as study the Metaphysics’.

About the person, Marx writes, “..William Petty is not only the father of English political economy but also an ancestor of Henry Petty, alias Marquis of Lansdowne, the Nestor of the English Whigs. But the Lansdowne family could hardly prepare a complete edition of Petty’s works without prefacing it with his biography, and what is true with regard to the origin of most of the big Whig families, applies also in this case – the less said of it, the better. The army surgeon, who was a bold thinker but quite unscrupulous and just as apt to plunder in Ireland under the aegis of Cromwell as to fawn upon Charles II to obtain the title of baronet to embellish his trash, is hardly a suitable image of an ancestor for public display. In most of the writings published during his lifetime, moreover, Petty seeks to prove that England’s golden age was the reign of Charles II, a rather heterodox view for hereditary exploiters of the ‘Glorious Revolution’.3

Pierre le Pesant, sieur de Boisguillebert (1646-1714): The father of French political economy Boisguillebert wrote his ‘Dissertation sur la nature des richnesse de l’argent et des tributs’ in an entirely different conditions compared to Britain. He fights against the ‘blindly destructive greed for gold which possessed the court of Louis XIV, his tax farmers and the aristocracy; whereas Petty acclaims the greed for gold as a vigorous force which spurs a nation to industrial progress and to the conquest of the world market.

Boisguillebert (although he may not be aware of it) reduces the exchange value of commodities to labor time, by determining the ‘true value’ according to the correct proportion in which the labor time of the individual producers is divided between the different branches of industry, and declaring that free competition is the social process by which this correct proportion is established. But simultaneously, and in contrast with Petty, he wages a fanatical struggle against money, whose intervention, he alleges, disturbs the natural equilibrium or the harmony of the exchange of commodities and, like a fantastic Moloch, demands all physical wealth as a sacrifice.

This difference between Boisguillebert and Petty throws into bold relief more profound fundamental differences which recur as a perpetual contrast between typically English and typically French political economy.

William Petty was just a frivolous, grasping, unprincipled adventurer, Boisguillebert, although he was one of the intendants of Louis XIV, stood up for the interests of the oppressed classes with both great intellectual force and courage.

Benjamin Franklin (1706-1790): Franklin was a man of the New World – where bourgeois relations of production was imported together with their representatives sprouted rapidly in a soil in which the superabundance of humus made up for lack of historical tradition. Among the first supporters of the labor theory of value, Franklin formulated the basic law of modern political economy in an early work written in 1729 and published in 1731 (‘A Modest Inquiry into the Nature and Necessity of a Paper Currency’).

Sir James Steuart (1712-1780), one of the last representatives of mercantilism, was the first Briton to expound a general system of bourgeois political economy. His work ‘An Inquiry into the Principles of Political Economy, Being an Essay on the Science of Domestic Policy in Free Nations’ was first published in London in 1767, ten years earlier than Adam Smith’s ‘Wealth of Nations’. ‘Le Commerce et la Gouvernement’ of Etiênne Bonnet de Condillac (1750-1780) was published in 1776, the same year in which Adam Smith’s work was published. Condillac has been dealt with earlier in this critique.

Henry Charles Carey (1793-1879): American economist, for whose views the historical background was provided only by the New World, set forth the theory of class interest’s harmony in capitalist society. According to him, the harmonies in themselves are there. But in the non-American countries they are distorted by the state, and in America itself, by the most developed form in which these relationships appear, their world-market reality, in the form of England. Carey finds no other means of restoring them than ultimately to call for help from his denounced devil, the state, and to stand it as the guardian angel at the gates of the harmonious paradise, namely protective tariffs. But since America’s development over the years has dealt such a blow at his harmonious view that he sees the distortion of the ‘natural’ harmonies, to which he is firmly attached, no longer in the external influence of the state, but in trade! A truly remarkable result this: to extol exchange value as the basis of harmonious production, and then to declare that the developed form of exchange, trade, abolishes this exchange value in its immanent laws! That is the desperate form in which Carey expresses his belated conclusion that the development of harmonious exchange value is disharmonic. ..

Frédéric Bastiat (1801-1850), the French economist borrowed his economic theodicy, the Harmonies économiques from Carey. But Bastiat’s only real background was the pettiness of French economic conditions, whose long years kept sticking out from his harmonies, and in contrast to these, he formulated the idealized English and American production relationships as ‘the demands of practical reason’.

Here I do not want to prolong this description of early classical political economy. Suffice it to say that soon Adam Smith and his ‘Wealth of Nations’ became the representative symbol of the classical political economy. The rise of Britain as the paramount industrial and colonial power helped in this process. French and American streams were relegated to the background.

Marx’s ‘Capital’ (as its sub-title proclaimed) was the critique of political economy. This critique soon became the guiding spirit behind the working class movement, and this critique was further carried forward by the social-democratic/socialist/communist movements. If one (like Piketty) wants to revive the spirit of political economy, he/she is bound to encounter the spirit of the critique of political economy as well. If political economy faces the challenge of entering new time, then the critique of political economy too faces the same challenge. Mere revival will not do.

We have already seen that between the period 1870s-1920s, the various streams of Austrian School dominated the bourgeois economic scene. Rest of the twentieth century was dominated by the London School (Keynes) and the Chicago School (Milton Friedman). The period 1930s-1970s was dominated by various streams of Keynesian economics, and the latter period (from 1980s onwards) by various proponents of the Chicago School.

Piketty describes the rise of the American school in the 1970s as follows: “It was not until the 1970s Solow’s so-called neoclassical growth model definitely carried the day ..as American economists sought to emancipate themselves from the historical tutelage of their British counterparts, who had reigned over the profession since the time of Adam Smith, while the British sought to defend the memory of Lord Keynes, which they thought the American economists had betrayed.” (Chapter Six/Beyond the Two Cambridges)

But where were the French?

École d’Économie de Paris (Paris School of Economics) is a fairly new institute, created just eight years ago on December 21, 2006 in Paris. Its tagline is ‘Economics serving society’, and its brochure pledges to shake up economics:

“The central paradigm of economic science, according to which man is a rational economic agent, has provided powerful explanations of a number of social phenomena.

However it today faces numerous challenges: the increasing complexity of those phenomena, an explosion in available data, scientific experimentation. In this context, there are now three main possible approaches to studying economics: the first is to deepen the existing paradigm for certain kinds of question, the second is to critically re-examine that paradigm and seek alternatives to remedy its failures; the third possible path is to investigate the boundaries shared by economics and other social sciences (history, demographics, sociology, social psychology, political science) and other disciplines (including neuroscience and cognitive science).

Thanks to its pluralism, PSE is at the forefront of this evolution in economic thinking, using an approach that is both traditional and innovative to investigate the open questions in economics. For instance, our researchers ask how we should manage economic activity and regulate the global economic cycle, especially during periods of crisis; how to reduce poverty in developing countries; how to explain and combat growing inequality; how to evaluate and improve public policy in sectors such as health, the environment and education; or how to model bounded rationality.”4

Piketty’s book strives to follow the brochure’s agenda, and hence, it may be aimed at creating an identity (distinct from the London and Chicago Schools) for this twenty-first century French school. Can it lift the French school of political economy from centuries of oblivion? Can this school emancipate French economists from the tutelage of their American counterparts?

Remember, in this century different streams of economic thought emanating from emerging economies like China, India, Brazil, etc. will claim their share of economic discourse. Piketty keeps the dialogue confined, in the main, to Europe and the United States.

All said, Thomas Piketty still deserves many thanks.

NOTES

  1. Keynes, John Maynard; op.cit.
  2. Descriptions regarding the beginning of political economy are taken from and based on Marx’s ‘A Contribution to the Critique of Political Economy’, Part One, (Written in November 1858-January 1859) and ‘Grundrisse’; op.cit.
  3. Ibid
  4. From the Brochure of École d’Économie de Paris.

[This critique is divided in eight parts, tentatively titled as: i. Apocalypse and Exuberance; ii. Data and Dialectics; iii. Capital Social and Self-Expanding; iv. Wealth Inherited and Created; v. Century Twentieth and Twenty-First; vi. Yes Marx No Marx; vii. London Chicago Paris; and viii. Thank You Mr Piketty.]

October, 2014.

CONTINUED.

NEXT: 8. THANK YOU MR PIKETTY

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