“I was worshipping the god’s temple, an ancient pile of stone. ‘Lord of Thymbra, give us an enduring dwelling place; grant a house and family to thy weary servants and a city to abide: keep Troy’s second fortress, the remnant left of the Grecians and merciless Achilles. Whom follow we? Or whither dost thou bid us go, where fix our seat? Grant an omen, O Lord, and inspire our minds.’ Scarcely had I spoken thus, suddenly all seemed to shake, all the courts and laurels of the god, the whole hill to be stirred round about, and the caldron to moan in the opening sanctuary. We sink low in the ground, and a voice is borne to our ears: ‘stubborn race of Dardanus, the same land that bore you by parentage of old shall receive you again on her bountiful breasts. Seek out your ancient mother; hence shall the house of Aeneas sway all regions, his children’s children and they who shall be born of them. .. Then my father unrolling the records of men of old, ‘Hear, O princes’, says he, ‘and learn your hopes. In mid ocean lies Crete, the island of high Jove, wherein is Mount Ida, the cradle of our race. ..” Virgil, ‘The Aeneid’.1

Millions of people all over the world today are dispossessed, displaced, and uprooted from their lands, water bodies, forests etc. due to industrialization, wars, partition, natural disasters, and are spending their lives in horrible conditions in temporary shelters and refugee camps. No divine voice reminds their children of their ancient mother and her bountiful breasts, of their Crete and Mount Ida. These dispossessions and displacements are creating future inheritances for a few. So, whenever we talk about large inheritances, we should remember the disinherited, dispossessed, displaced rootless millions.

In history, a large section of human population used to inherit debt of their ancestors (in other words, they have negative inheritance), and their slavery and serfdom. Slave and serf labor on the other hand created large inheritances of their lords. A slave child inherited from his/her parent slavery; Thomas Jefferson inherited more than 600 slaves from his father and father-in-law.

Workers without any inheritance have to eke out their living by selling labor-power. Some inherit so meager a property that is hardly sufficient for bare subsistence. Some others inherit earned income of their ancestors, and combined with their own living labor, are able to sustain a decent, or modest, or comparatively affluent living. The living labor of these workers and professionals (scientists, engineers, doctors, artists, etc.) keeps the economy going, provides the source of good return on inheritances.

And lastly, there are large, very, very large inheritances – most of them owe their origin to profiteering and robbery.

“The gypsy thought that there was no vulgar ambition then to possess bedrooms by the hundred. .. Looked at from the gypsy point of view, a Duke, Orlando understood, was nothing but a profiteer or robber who snatched land and money from people who rated these things of little worth, and could think of nothing better to do than build three hundred and sixty-five bedrooms when one was enough, and none was even better than one. She could not deny that her ancestors had accumulated field after field; house after house; honor after honor; yet had none of them been saints or heroes, or great benefactors of the human race. Nor could she counter the argument that any man who did now what her ancestors had done three or four hundred years ago would be denounced – and by her own family most loudly – for a vulgar upstart, an adventurer, a nouveau riche. ..” Virginia Woolf, ‘Orlando: A Biography’.2

This vulgar display of one’s wealth is nothing new in this age of capital as well. Because of their size and past ‘successes’, large firms face limited competition. Instead of paying tremendous amounts of cash in their hands to their employees and investors, ‘they waste it on pet projects, plush offices, executive jets or making an architectural statement with a new building .. a mausoleum to themselves. Examples of this kind of phenomenon are legion. Phillipe Kahn of Borland International (a front-ranking software maker) started building a $100 million headquarters – complete with a full size basketball court, pool, and two tennis courts – in 1992.’3 Kahn’s project was soon overshadowed by Indian billionaire Mukesh Ambani’s ‘Antilia’.

Granted that supply and demand, differences in capital intensity and rates of profit in different countries, uneven economic development, diversified prudent investments etc., have important roles, but the primary source of return on inherited wealth/capital is the living labor of workers, of the dispossessed and the disinherited, of various sections of professionals. Only when seized and filled with a soul by living labor that inheritances increase with the advancing stages of accumulation. ‘It is the natural property of living labor to transmit old value, whilst it creates new. Hence, with the increase in efficacy, extent and value of its means of production, consequently with the accumulation that accompanies the development of its productive power, labor keeps up and eternizes an always increasing capital-value in a form ever new. This natural power of labor takes the appearance of an intrinsic property of capital, in which it is incorporated. ..’4

Part Three of Piketty’s book is dedicated to discussions on the relative importance of inherited wealth versus income from labor over the very long run. Providing valuable data and information on this subject, he takes the readers on to a ride into the interesting world of Balzac (‘Père Goriot’), Jane Austen (‘Sense and Sensibility’), Henry James (‘Washington Square’), and Orson Welles (‘The Magnificent Ambersons’). Inheritance too has been a subject of fierce debates since the advent of classical political economy. The demand to abolish the right of inheritance was put forward by Saint-Simon’s followers (Enfantin, Bazard, Rodrigues, Buchez, etc.) way back in late 1820s. In 1830, a book was published in Paris which, based as it was on Bazard’s lectures, expressed the views of Saint-Simon’s followers on the right of inheritance.5 Later at the Basle Congress of the First International (6-11 September, 1869), the question of the right of inheritance was entered on the agenda at the suggestion of the Geneva Section headed by Bakuninists. They proposed to annihilate the right of inheritance believing this to be the only means of eliminating private property and social injustice.6

However, revolutions, wars, great depression, inflation wiped out much of the inherited wealth during the period 1914-50, particularly in Europe. Piketty writes, “During the decades that followed World War II, inherited wealth lost much of its importance, and for the first time in history, perhaps, work and study became the surest routes to the top. Today, even though all sorts of inequalities have re-emerged, and many beliefs in social and democratic progress have been shaken, most people still believe that the world has changed radically since Vautrine lectured Rastignac. .. In the vast majority of cases, however, it is not only more moral but also more profitable to rely on study, work, and professional success.” (Chapter Seven/ Inequality and Concentration: Preliminary Bearings)

Moreover, he warns, “If, for example, the top docile appropriates 90% of each year’s output (and the top centile took 50% just for itself, as in the case of wealth), a revolution will likely occur, unless some peculiarly effective repressive apparatus exists to keep it from happening. When it comes to the ownership of capital, such a high degree of concentration is already a source of powerful political tensions, which are often difficult to reconcile with universal suffrage. .. Indeed, whether such extreme inequality is or is not sustainable depends not only on the effectiveness of the repressive apparatus but also, and perhaps primarily, on the effectiveness of the apparatus of justification. If inequalities are seen as justified, say because they seem to be a consequence of a choice by the rich to work harder or more efficiently than the poor, or because preventing the rich from earning more would inevitably harm the worst-off members of society, then it is perfectly possible for the concentration of income to set new historical records. That is why I indicate in Table 7.3 that the US may set a new record around 2030 if inequality of income from labor – and to a lesser extent inequality of ownership of capital – continues to increase as they have done in recent decades. The top docile would then claim about 60% of national income, while the bottom half would get barely 15%. .. I want to insist on this point: the key issue is the justification of inequalities rather than their magnitude as such. ..


Piketty further writes, “The first of .. two ways of achieving such high inequality is through a ‘hyper-patrimonial society’ (or a ‘society of rentiers’): a society in which inherited wealth is very important and where the concentration of wealth attains extreme levels (with the upper docile owning typically 90% of all wealth, with 50% belonging to the upper centile alone). The total income hierarchy is then dominated by very incomes from capital, especially inherited capital. ..

The second way of achieving such high inequality is relatively new. It was largely created by the US over the past few decades. Here we see that a very high level of total income inequality can be the result of ‘hyper-meritocratic society’ (or at any rate a society that the people at the top like to describe as hyper-meritocratic). One might also call this a ‘society of superstars’ (or perhaps ‘super-managers’, a somewhat different characterization). In other words, this is a very inegalitarian society, but one in which the peak of the income hierarchy is dominated by very high incomes from labor rather than by inherited wealth. .. At this point, it will suffice to note that the stark contrast I have drawn here between two types of hyper-inegalitarian society – a society of rentiers and a society of super-managers – is naïve and overdrawn. The two types of inequality can co-exist: there is no reason why a person cannot be both a super-manager and a rentier – and the fact that the concentration of wealth is currently much higher in the US than in Europe suggests that this may well be the case in the US today. And, of course, there is nothing to prevent the children of super-managers from being rentiers. In practice, we find both logics at work in every society. ..” (Chapter Seven/Inequality of Total Income: Two Worlds)

Super-salaries of these super-managers defy any explanation on the basis of the theory of marginal productivity. Piketty admits, ‘The very notion of ‘individual marginal productivity’ becomes hard to define. In fact, it becomes SOMETHING CLOSER TO A PURE IDEOLOGICAL CONSTRUCT ON THE BASIS OF WHICH A JUSTIFICATION FOR HIGHER STATUS CAN BE ELABORATED.”

Warning against such justification, he further writes, “In the United States in recent years, one frequently has heard this type of justification (defense of meritocracy) for the stratospheric pay of super-managers (50-100 times average income; if not more). Proponents of such high pay argued that without it, only the heirs of large fortunes would be able to achieve true wealth, which would be unfair. In the end, therefore, the millions or tens of millions of dollars a year paid to super-managers contribute to greater social justice. This kind of argument could well lay the groundwork for greater and more violent inequality in the future. The world to come may well combine the worst of two past worlds: both very large inequality of inherited wealth and very high wage inequalities justified in terms of merit and productivity (claims with very little factual basis, as noted). Meritocratic extremism can thus lead to a race between super-managers and rentiers, to the detriment of those who are neither.” (Chapter Eleven/Merit and Inheritance in the Long Run/Meritocratic Extremism in Wealthy Societies).

Thus, the theory of marginal productivity fails Piketty, but the way out of this ‘pure ideological construct’, lies, as we have seen before, in explaining the super-salaries of these super-managers as ‘profit of the firm or enterprise’, and hence, as part of capital income (instead of labor income). With the financialization and socialization of capital, there appears the duality of capital proper and functioning capital, and of interest and profit of the enterprise/firm. This duality creates illusion of which Piketty is a victim. The capitalist entrepreneur, as distinct from the owner of capital, does not appear as operating capital, but rather as a functionary irrespective of capital, or as a simple agent of the labor-process in general, as a laborer, and indeed as a salaried laborer. Similarly, interest on capital lends other portion of profit (profit of enterprise) as wages of superintendence. I have already dealt with this subject in the earlier part of the critique.

Piketty persists with this illusion and hence, despite his reservations, fails to effectively challenge the justification for these super-salaries in terms of merit and productivity.

However, with the advent of new technologies, new organizational forms become necessary. Until around the middle of 19th century, most firms were managed by their owners – Eric Hobsbawm contrasted the 150 top families in Bordeaux (France) in 1848 with the top 450 families in the same region in 1960 and found that the largest group in the latter period, the salaried business executives was completely absent.7

In the latter half of the 19th century, ‘as Alfred Chandler argues, advances in transportation (in particular, the advent of the railways) and in communication (the telegraph) made possible larger markets for goods. The large volume of goods that were required allowed manufacturers to amortize set up costs and capital investment quickly. As a result, large, capital-intensive manufacturing units sprang up to exploit technologies that could realize lower per unit costs than smaller outfits. In this background, new organizational form emerged: large, vertically integrated firms that Chandler calls the modern business enterprise. And with this new organizational form emerged a class of salaried business managers.’8

In 1941, American philosopher J Burnham (1905-1987) propounded the theory of ‘Managerial Revolution’, which seems to be behind placing super-managers in the category of laborers. Burnham maintained that with the development of capitalist production, the class of capitalists becomes increasingly isolated from direct economic activities and management of enterprises. The functions of organizing and managing the economic, and then, the whole life of society are gradually assumed by a new social stratum, the managers, a sector of the broad working class. Therefore, the gradual ousting of capitalist owners and the increasing role of the technocrats, or managers, will result in a change in the nature of the entire social order.

For the term ‘meritocratic’ (which is advanced in defense of super-salaries), we can well go back to American sociologist Daniel Bell’s theory of post-industrial society. Bell’s post-industrial society is supposed to be founded not on the production of material benefits, but on the scientific institutions, on a kind of scientific and administrative complex wielding great influence, and hence, the key decision-making process is being gradually assumed by talented scientists promoted by all sections of society – which he terms as meritocracy.

In the latter half of the 20th century, due to computer revolution, necessity of new organizational forms provided the basis for the emergence of super-salaried super-managers. Computer revolution led to the restructuring of industrial production, and most prominently, to the emergence of a variety of financial instruments.

“Entire new markets such as NASDAQ have emerged catering specifically to young firms. Institutions such as money market funds did not exist in early 1970s. A large number of financial derivatives that are commonplace today, such as index options or interest rate swaps, have not yet been invented three decades ago. The turnover in the trading of such derivative instruments was $163 trillion in the fourth quarter of 2001, about 16 times the annual GDP of the United States. .. Revolving consumer credit such as credit card debt has exploded from near nothing in the US in the late 1960s to nearly $700 billion in late 2001. .. Gross cross-border capital flows as a fraction of GDP have increased nearly tenfold in developed countries since 1970 and more than fivefold for developing countries. In the decade of 1990s alone, these flows more than quadrupled for developed countries. .. In 1979, the US Department of Labor finally clarified the concept of prudence: risky investments were deemed legitimate if they were part of a well-diversified portfolio strategy. As a result of this decision, pension funds and large endowments were able to start investing in riskier intermediaries such as venture capital funds (which finance start-up companies), buyout funds (which finance the acquisition of existing companies), and ‘vulture funds’ (which buy debt of financially distressed firms while hoping to profit from their restructuring). This new market, called the private equity market, emerged and grew with breathtaking speed. While in 1980 the US private equity market accounted for only $5 billion in investment, in 1999 it was over $175 billion. This roughly equal to the total amount of investment made annually by a country like Italy, the fifth biggest economy in the world. .. In 2000, venture capitalists channeled more than $100 billion into 5,608 new companies. In 2001, even after the collapse of euphoria about the Internet, 3,244 companies obtained more than $38 billion in venture capital finance. Only ten years earlier, the total amount financed was just $3 billion spread over 1,143 companies. .. From 1980 to 2000, the fraction of public equity owned by institutional investors in the US went from below 30% to over 60%, while the fraction owned by individuals declined in tandem. The number of mutual funds increased from 564 in 1980 to 8,171 in 2000. There are now more mutual funds in existence in the US than there are domestic companies listed on US stock exchanges! .. Substantial increase took place in the average rate of return on corporate assets. While in 1980, it had dropped as low as 5.7%, by 1996, it was a healthy 9.9%. ..”9

I think this is enough to understand the background behind the phenomenon of super-salaries and super-managers in the US. Needless to say that there is a vast difference between these super-managers (CEOs, COOs, CFOs, CTOs, directors, etc.) and lower level managers (doing almost clerical jobs). While the former claims profit of the firm/enterprise, the latter sections have to do with their wages only.

Apart from industrial and financial firms, this phenomenon of superstars-super-managers-super-salaries can be observed in professional firms (like medical, engineering, educational, law, consultancy, music/entertainment, and similar firms) as well as in many non-governmental organizations (NGOs) engaged in social sector. Superstar doctors, engineers, educationists/academicians, lawyers, actors and performers, musicians, social activists/entrepreneurs, top executives of NGOs etc. (some of them may be owners or partners of their respective firms), claim profit of their firms, while their employees – doctors, engineers, teachers, lawyers, actors, musicians etc., have to remain content with their wages.


Accumulated wealth tends to follow the formula M → M′. When Tom Sawyer and Huck found the money that the robbers hid in the cave, it made them rich – they got six thousand dollars apiece, all gold. It was an awful sight of money when it was piled up. What did they do with that money? They took it to Judge Thatcher who put it out at interest, and it fetched Tom and Huck a dollar a day apiece, all the year round – ‘more than a body could tell what to do with.’10

In the ancient and medieval world, it took the form of usury; in the age of capital, it takes the form of financialization. ‘There is no reason why a person cannot be both a super-manager and a rentier. .. There is nothing to prevent the children of entrepreneur or super-managers from becoming rentiers.’ In the earlier part of this critique, this tendency of capital is discussed in detail. Since in bourgeois economics entrepreneurial income (or super-salaries of super-managers) is designated as income from labor, it is extolled as virtuous, morally correct. Rentiers’ income is derided as morally degrading leading towards a highly inegalitarian patrimonial society, instead of building a meritocratic society based on justifiable inequalities. As we have observed, Piketty here offers nothing new (George Ramsay expressed similar fears in case of England almost one hundred seventy-eight years ago, and he too included entrepreneurial activity in the category of labor).

Bernick: .. Fifteen years ago, I was the guilty man. ..

(To his son Olaf): In future you shall be allowed to grow up, not as the inheritor of my life-work, but as someone who has a life-work of his own to look forward to.

Olaf: And will you let me be whatever I want to?

Bernick: Yes, you shall.

Olaf: Thank you. Then I won’t be a pillar of the community.

Bernick: No? Why not?

Olaf: Because I think that must be so dull. ..

Bernick: .. I have learnt that, too, these last days; it is women who are the pillars of the community.

Miss Hessel: Then you have learnt a poor kind of wisdom, my dear man. [Laying her hands firmly on his shoulders] No, my dear: the spirit of truth and the spirit of freedom, they are the pillars of the community.

Henrik Ibsen, ‘The Pillars of the Community’.11

Piketty is well aware that within the capitalist mode of production, this tendency of capital (entrepreneurs turning into rentiers) cannot be checked. He writes, “The inequality r > g, combined with the inequality of returns on capital as function of initial wealth, can lead to excessive and lasting concentration of capital: no matter how justified inequalities of wealth may be initially, fortunes can now grow and perpetuate themselves beyond all reasonable limits and beyond any possible rational justification in terms of social utility. Entrepreneurs thus tend to turn into rentiers, not only with the passing of generations, but even within a single lifetime.” (Chapter Twelve/ The Moral Hierarchy of Wealth)

Further, “One conclusion is already quite clear; however: it is an illusion to think that something about the nature of modern growth or the laws of the market economy ensures that inequality of wealth will decrease and harmonious stability will be achieved. (Chapter Ten/ Inequality of Capital Ownership/Hyperconcentrated Wealth: Europe and America) .. “The idea that unrestricted competition will put an end to inheritance and move toward a more meritocratic world is a dangerous illusion. The advent of universal suffrage and the end of property qualifications for voting ended the legal domination of politics by the wealthy. But it did not abolish the economic forces capable of producing a society of rentiers.” (Chapter Eleven/Merit and Inheritance in the Long Run/The Rentier, Enemy of Democracy)

On the moral hierarchy of wealth, Piketty is again confronted with the limits of the theory of marginal productivity. See this interesting passage from the book: “It is rather common to contrast the man who is currently the world’s wealthiest, Carlos Slim, a Mexican real estate and telecom tycoon who is of Lebanese extraction and is often described in the Western press as one who owes his great wealth to monopoly rents obtained through (implicit corrupt) government favors, and Bill Gates, the former number one, who is seen as a model of the meritorious entrepreneur. At times one almost has the impression that Bill Gates himself invented computer science and the microprocessor and that he would be 10 times richer still if he had been paid his full marginal productivity and compensated for his personal contribution to global well-being. .. No doubt the veritable cult of Bill Gates is an outgrowth of the apparently irrepressible need of modern democratic societies to make sense of inequality. To be frank, I know virtually nothing about exactly how Carlos Slim or Bill Gates became rich, and I am quite incapable of assessing their relative merits. Nevertheless, it seems to me that Bill Gates also profited from a virtual monopoly on operating systems (as have many other high-tech entrepreneurs in industries ranging from telecommunications to Facebook, whose fortunes were also built on monopoly rents). Furthermore, I believe that Gates’s contributions depended on the work of thousands of engineers and scientists doing basic research in electronics and computer science, without whom none of his innovations would have been possible. These people did not patent their scientific papers. In short, it seems unreasonable to draw such an extreme contrast between Gates and Slim without so much as a glance at the facts. .. Rather than indulge in constructing a moral hierarchy of wealth, which in practice often amounts to an exercise in Western ethnocentrism, I think it is more useful to try to understand the general laws that govern the dynamics of wealth. .. At the very least, the reader will grant that these various cases are not fundamentally different but belong to a continuum, and that a fortune is often deemed more suspect if its owner is black. ..” (Chapter Twelve/Global Inequality of Wealth in the Twenty-First Century/The Moral Hierarchy of Wealth) Well said indeed.

However, despite being aware of the limitations of the theory of marginal productivity, he refuses to allow living labor (and its unpaid labor-time) any role in the return on capital. He sticks to his basic premise (as mentioned in the earlier part of this critique). He writes, “Broadly speaking, the central fact is that the return on capital often inextricably combines elements of true entrepreneurial labor (an absolutely indispensable force for economic development), pure luck (one happens at the right moment to buy a promising asset at a good price), and outright theft. ..” (Ibid)


Piketty is well aware that ‘there is no guarantee that distribution of inherited capital will not ultimately become as inegalitarian in the 21st century as it was in the 19th. .. There is no ineluctable force standing in the way of a return to extreme concentration of wealth. .. If the top docile appropriates 90% of each year’s output (and the top centile took 50% just for itself, as in the case of wealth), a revolution will likely occur, unless some peculiarly effective repressive apparatus exists to keep it from happening. .. The crisis of 2008 was the first crisis of the globalized patrimonial capitalism of the twenty-first century. It is unlikely to be the last.’ Since this problem of concentration of wealth and the resultant crisis cannot be resolved within the confines of capitalist mode of production, he even ‘imagines’ of ‘transcending capitalism’ – ‘Can we imagine a 21st century in which capitalism will be transcended in a more peaceful and more lasting way, or must we simply await the next crisis or the next war (this time truly global)?’ (Chapter Thirteen/A Social State for the Twenty-First Century)

He further writes, “The solution to the problem of capital suggested by Karl Marx and many other socialist writers in the 19th century and put into practice in the Soviet Union and elsewhere in the 20th century was far more radical and, if nothing else, more logically consistent. .. By abolishing private ownership of the means of production, Soviet experiment simultaneously eliminated all private returns on capital. The rate of exploitation, which for Marx represented the share of output appropriated by the capitalist thus fell to zero, and with it the rate of private return. With zero return on capital, man (or worker) finally threw off his chains along with the yoke of accumulated wealth. The present reasserted its rights over the past. The inequality r > g was nothing but a bad memory, especially since communism vaunted its affection for growth and technological progress. .. The problem was that private property and the market economy do not serve solely to ensure the domination of capital over those who have nothing to sell but their labor-power. They also play a useful role in coordinating the actions of millions of individuals, and it is not so easy to do without them. ..” (Chapter Fifteen/A Global Tax on Capital)

Here, we cannot go into the examination of Soviet experiment regarding ‘transcending capitalism’. The point is, even after finding Marx’s and other socialists’ suggestion logically consistent, Piketty, presenting the failure of Soviet experiment as an instance, refuses to venture into the challenging field of ‘transcending capitalism’. Instead of putting forward any new insight and suggesting any new experiment based on previous experiences, he simply closes this option.

The other option of making capitalism stable, balanced and harmonious is already closed. He time and again makes it clear that he does not believe in such illusions. Experiments to make capitalism stable, balanced and harmonious during the last three centuries have been proved to be more disastrous and devastating. He does not want to attempt any new experiment in this regard as well.

So, what should be done? A stable, balanced and harmonious capitalism is impossible, and transcending capitalism too is not feasible. Piketty suggests, let capitalism function the way it functions, only regulate and control it so that it does not meet a violent end. He suggests a controlled capitalismtaming of capital going wild. He is reconciled to a future of ‘patrimonial capitalism’, like the patrimonial feudalism of the past, and just wants to prevent it from developing into a ‘hyper-patrimonial society’.


He writes, “A tax on capital would be a less violent and more efficient response to the eternal problem of private capital and its return. A progressive levy on individual wealth would re-assert control over capitalism in the name of general interest while relying on the forces of private property and competition.” (Chapter Fifteen) .. “But if democracy is to regain control over the globalized financial capitalism of this century, it must also invent new tools, adapted to today’s challenges. The ideal tool would be a progressive global tax on capital, coupled with a very high level of international financial transparency. Such a tax would provide a way to avoid an endless inegalitarian spiral and to control the worrisome dynamics of global capital concentration.” (Ibid) .. “The progressive tax is a crucial component of the social state. .. The progressive tax is thus a relatively liberal method for reducing inequality, in the sense that free competition and private property are respected while private incentives are modified in potentially radical ways, but always according to rules thrashed out in democratic debate. The progressive tax thus represents an ideal compromise between social justice and individual freedom. ..” (Chapter Fourteen/Rethinking the Progressive Income Tax) .. “A progressive tax on capital is a more suitable instrument for responding to the challenges of the 21st century than a progressive income tax.” (Chapter Thirteen/A Social State for the Twenty-First Century)

Piketty is also aware of the limitations of his proposal. For him, a stable, balanced and harmonious capitalism is a utopia, transcending capitalism too is a utopia, but his own proposal of a global tax on capital is a useful utopia worth trying.

In the face of three centuries of objective data that unequivocally provide useful objective lessons regarding the movement of capital accumulation, Piketty instead of pursuing those lessons further, settles for a useful utopia. Data, in Piketty’s hands, degrades into a delusional utopia.

Capitalism is a mode of production based on exchange. Division of labor, exchange, trade and usury have been in existence since ancient times, but exchange-based mode of production (as we have already seen) became a reality only after the advent of industrial capital, and soon it replaced the land-based feudal mode of production as the dominant mode all over the world. Exchange is based on the law of value, hence transcending capitalism means transcending exchange and law of value. It is during exchange that surplus-value is created and that is the source of capital accumulation. Since exchange-based economy remains in operation even during wars, crisis and calamities, hence despite setbacks, periodic fluctuations, capitalism continues to flourish. Different sectors or departments of capital assume prominence during different conditions (e.g., military-industrial complex during wars). It just cannot be wished away – pious condemnation or subjective efforts or administrative steps cannot check capital accumulation. Even in extreme cases of capital controls, it temporarily may go underground only to reappear with vengeance at a later date. However, in course of its development, it itself creates and expands objective conditions and factors for its own transcendence. Here it is not possible to go into its details.

Capital is a flow, and in its continuous movement around the world in different terrains and environments, it takes in its embrace everything that comes in its way – private small savings, large inheritances, pension funds, tax revenues, sovereign wealth funds, etc., invests them in different financial instruments and seeks to get better and better returns.

Government’s subsidies and social spending on education, health, insurance, etc., becomes part of this capital circulation. A lot of educational, medical, insurance, construction, etc., firms actually flourish on government’s social sector spending. All corporate houses now have diversified in different fields and grab a large part of government’s social spending. All money temporarily withdrawn (or taken away) from this circulation through taxes, etc., finally return to it – that may result in a somewhat redistribution of capital among its different constituents.

So, a progressive tax on capital is destined to return to capital in different forms. Moreover, capitalists have, over the past three centuries, mastered the art of tax evasion – Piketty himself suggests a revision of his capital/income ratio in view (although it is a very modest view) of this tax evasion – ‘It turns out that we need to add several percentage points to capital income’s share of national income (perhaps as many as 5 percentage points if we choose a high estimate of tax evasion, but more realistically 2 to 3 percent points). This is not a negligible amount.’ (Chapter Eight/Two Worlds)


Inheritance, wars over inheritances, dispossession, search for new lands, creation of new kingdoms have been subjects of great epics, both eastern and western. Throughout history, inherited wealth has often changed hands due to the rise of new economic forces, due to rebellions and revolutions, due to wars, and other factors. With the rise of agrarian communities, tribes were restructured on the basis of feudal mode of production and tribal wealth was transformed into feudal property. Throughout the agrarian period spread over thousands of years, due to rise of new kingdoms and empires, and frequent wars, feudal inheritances regularly changed hands.

The advent of capital led to the restructuring of agrarian societies and feudal property was transformed into capitalist property. The promulgation of the 1534 Act of Supremacy, which proclaimed the king head of the Church, was followed in England by the confiscation of Catholic Church lands and property in favor of the king and dissolution of the monasteries, sanctioned by the Parliamentary acts of 1536 and 1539. In France, after the revolution of 1848, ‘freed from court and representation costs at Paris, landholders had, out of the very corners of provinces, only to gather the golden apples falling into their châteaux from the tree of modern industry, railways enhancing the price of their land, agronomy applied to it by capitalist farmers, increasing its produce, and the inexhaustible demand of a rapidly swollen town population, securing the growth of markets for that produce.’12  Under the colonial system, large inheritances of tribal communities and feudal kingdoms in colonial countries were (through loot, plunder, unequal trade, etc.) converted into capitalist property of the colonizing countries – guess how much west African and Indian inheritances got metamorphosed into French and British capital? This process is still going on in different ways and with different actors.

Remember if, on one end of the spectrum, inherited wealth forms the large, very large component of accumulated capital in Europe and the United States, then, on the other end, there are very large countries like China where inherited wealth has yet to make its mark. In China, Russia, East European countries, etc., world’s largest number of first generation capitalist millionaires and billionaires are emerging – these are countries where revolution has wiped out all inheritances of the earlier period and private property and capitalist enterprises emerged only in eighties and nineties. Hence, in what way does the composition of global inherited wealth get reconstituted in the 21st century is anybody’s guess.

Moreover, the computer revolution has itself created and is still creating a new generation of billionaires in the US and other developed and developing countries (India, Ireland, Brazil, Mexico, Indonesia, South Africa, Turkey, Vietnam, Philippines, etc.), and much of the inherited wealth in these countries is passing into the hands of these new first generation billionaires. Capitalism has since long converted wealth (material and cultural) generated thousands of years ago during Mesolithic and Neolithic period (not to say of the wealth created during the Middle Ages) into capitalist property – Pyramids, Stonehenge, or Lascaux cave paintings are now part of the billions of dollars of tourist industry as well as of a number of other trades. Ancient artifacts are now part of the antique business (legal as well as illegal). Codex Leicester (named after its eighteenth-century owner Thomas Coke, Earl of Leicester), the most unified of Leonardo da Vinci’s notebooks is now owned by Bill Gates.13


  1. Virgil; ‘The Aeneid’, Book Third; The Modern Library, Random House, New York, 1950. Translated by J W Mackail.
  2. Woolf, Virginia; ‘Orlando: A Biography’, Selected Works of Virginia Woolf, Wordsworth Editions Limited, Hertfordshire, 2005.
  3. Rajan, Raghuram G, and Zingales, Luigi; ‘Saving Capitalism from the Capitalists’, Crown Business, New York, 2003.
  4. Marx, Karl; ‘Capital’, Volume I, Chapter XXIV.
  5. Marx-Engels Collected Works; Volume 43. (‘Doctrine de Saint-Simon Exposition’, Première année, 1829, Paris. 1830.)
  6. Ibid.
  7. Hobsbawm, Eric; ‘The Age of Capital, 1848-1885’, New American Library, New York, 1979.
  8. Chandler, Alfred; ‘Scale and Scope: The Dynamics of Industrial Capitalism’, Cambridge, Massachusetts, Belknap Press, 1990. Quoted in Rajan and Zingales.
  9. Rajan and Zingales; op.cit.
  10. Twain, Mark; ‘Huckleberry Finn’, Paragon Boks, London, 1994.
  11. Ibsen, Henrik; ‘Three Plays’, ‘The Pillars of the Community’, Penguin Books, London, 1954. Translated by Una Ellis-Fermor.
  12. Marx, Karl; ‘The Civil War in France’, Foreign Languages Press, Peking, 1966.
  13. Nicholl, Charles; ‘Leonardo da Vinci’, Penguin Books, London, 2007.

[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.]

September, 2014.




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