Thomas Piketty, Paul Krugman (Reuters/Charles Platiau/Anton Golubev)

The problem with Thomas Piketty: "Capital" destroys right-wing lies, but there's one solution it forgets

After "Capital," we'll never talk income inequality or meritocratic myths the same way. But we must talk unions


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Thomas Frank
May 11, 2014 3:00PM (UTC)

What makes Thomas Piketty’s "Capital in the Twenty-First Century" such a triumph is that it seems to have been written specifically to demolish the great economic shibboleths of our time. The stock market is not an instrument of economic democracy, it seems; nor does every natural-born American get a chance to run (which is to say, to loot) a Fortune 500 company. The gap between the billionaires and the rest of us is not really a matter of talent or education, we learn; nor do the rich really deserve every last penny of their winnings. Yet it seems that those winnings, once won, multiply relentlessly as time passes, in a way that far outstrips wages even in the best years.

The effect of knowing all these things is a healthy one, like when a fever breaks and all those fanciful explanations for things that we had imagined turn out to have been just a dream. The simplest explanations are in fact the true ones, and we owe Piketty thanks for reminding us of this. However, he also has a serious historical blind spot, and it leads even him to wander into the land of make-believe at times, particularly when he is proposing solutions. This is unfortunate, because in reality the simple remedy for inequality has been staring at us all along. We merely need to sober up and look it in the face.

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I was puzzled at first by the extraordinary success of Piketty’s book; despite his commitment to cant-free prose, it is not an easy read. Besides, most of what Piketty tells us has been told to us before, many times over, in a three-decade long parade of forgotten treatises and sad New York Times stories on downsizing and deindustrialization. But there is something about dispassionate statistical proof, comprehensively brought together, that warms the liberal heart. Virtually the same phenomenon played itself out several decades ago with Kevin Phillips’ "The Politics of Rich and Poor," another relentless, data-heavy book on inequality that duly mounted the best-seller lists back in 1990.

If the world of letters was as coldly mathematical as the world of capital, we could now say that any debate over inequality is over: There can be no doubt that we are fast approaching a 19th-century-style distribution of wealth. That’s why the overwhelming sensibility of Piketty’s magnum opus is a dark fatalism, a feeling that mankind is groping blindly while in the grip of a determining force far larger than ourselves — namely, Piketty’s now-famous return on capital, growing wealth from generation to generation and always outstripping wages — that has only slackened on rare occasions.

One of the best things about Piketty’s masterwork is his systematic demolition of his own discipline. Academic economics, especially in the United States, has for decades been gripped by a kind of professional pretentiousness that is close to pathological. From time to time its great minds have grown so impressed by their own didactic awesomeness that they celebrate economics as “the imperial science”— “imperial” not merely because economics is the logic of globalization but because its math-driven might is supposedly capable of defeating and colonizing every other branch of the social sciences. Economists, the myth goes, make better historians, better sociologists, better anthropologists than people who are actually trained in those disciplines. One believable but possibly apocryphal tale I heard as a graduate student in the '90s was that economists at a prestigious Midwestern university had actually taken to wearing white lab coats—because they supposedly were the real scientific deal, unlike their colleagues in all those soft disciplines.

Piketty blasts it all to hell. His fellow economists may have mastered the art of spinning abstract mathematical fantasies, he acknowledges, but they have forgotten that measuring the real world comes first. In the book’s Introduction this man who is now the most famous economist in the world accuses his professional colleagues of a “childish passion for mathematics and for purely theoretical and often highly ideological speculation”; he laughs at “their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.” In a shocking reversal, he calls on the imperial legions of economic pseudo-science to lay down their arms, to “avail ourselves of the methods of historians, sociologists, and political scientists”; the six-hundred-page book that follows, Piketty declares, is to be “as much a work of history as of economics.”

They may be weeping in the gothic halls of your local econ department, but when I read that, I wanted to cheer. As I wrote on Salon several months ago, the growing plutocracy is a subject for all of us; in Piketty’s words, it “is too important an issue to be left to economists, sociologists, historians, and philosophers.”

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Unfortunately, Piketty’s enthusiasm for disciplines other than economics is more theoretical than anything else. "Capital in the Twenty-First Century" draws overwhelmingly on data, data derived overwhelmingly from France and the UK. Whenever Piketty moves away from numbers and tries to describe life in the United States, things go wrong in a hurry. The worst example first: Piketty tells us that, unlike the French, Americans feel “no nostalgia for the postwar period” because our economy didn’t grow rapidly in those years. In fact, American GDP often grew by 5 and 6 percent in the '50s and '60s and Americans have felt intense sweet wistfulness for those days ever since "American Graffiti" came out in 1973. To be fair, Piketty corrects himself several hundred pages on, but then not because he’s looked around and noticed the four decades of '50s-revival crap Americans have so eagerly consumed, but because of a stray nostalgic remark by his fellow economist Paul Krugman. It’s all moot, I guess, because before long and without any explanation he reverts to his original position of nostalgia denialism.

Piketty’s command of American political history is, quite simply, abysmal. He announces that the U.S. “never became a colonial power,” which would be news to the people of the Philippines, not to mention the Sioux. He describes Herbert Hoover as a “liquidationist” though that was Hoover’s own term for the policies that Hoover rejected. About the presidency of Franklin Roosevelt—ordinarily an important period for students of inequality—Piketty seems to know almost nothing, except that FDR used wage and price controls during World War II. At one point, he comes close to denying the existence of Rooseveltian liberalism altogether, writing that for we benighted Americans “the twentieth century is not synonymous with a great leap forward in social justice.” As for the great right turn of the Eighties, he asserts repeatedly and with virtually no documentary evidence that it happened because America was falling behind Germany and Japan in economic growth—in other words, that the galaxy of nutty anxieties that fuel modern right-wing politics can be easily deduced from a few lines on a graph.

There are numerous other examples in Piketty’s enormous book of this weird blind spot concerning all things American; indeed, you could write an entire review just cataloguing them.

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Now, none of these blunders are fatal or even very damaging to Piketty’s main argument about the snowballing nature of wealth, but misunderstanding America so dramatically nevertheless carries a penalty. To write about capital while misapprehending the history and culture of the world’s greatest proponent of capitalism makes the next act in the program—proposing a solution to inequality—nearly impossible. Piketty goes on to suggest remedies that are fanciful in the extreme, even as workable solutions that arise directly from the American experience are all around us.

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It is useful to recall, when considering what to do about inequality, that an uncomplicated hatred of caste, privilege, and perpetuities runs deep in the American grain. I was reminded of this a few months ago when I pulled from my shelf a forgotten classic on the subject, the 1939 book The Ending of Hereditary American Fortunes by Gustavus Myers, a journalist of the muckraking persuasion. The story begins appropriately enough in 1776, when Thomas Jefferson, then a delegate to the Virginia legislature, began the fight to abolish primogeniture and entail, the archaic laws that maintained enormous landed estates from one generation to the next. As the American revolution proceeded, state after state got on board with Jefferson, leveling our would-be aristocracy in an explosion of straight-up class warfare. Wrote one Jefferson biographer who is quoted by Myers:

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“That distinguished class, whose existence as a social caste had been forever destroyed, reviled the destroyer [i.e., Jefferson] from this time forth with reckless animosity; and even to the second and third generation, the descendants of many of these patrician families vindictively cursed the statesman who had placed them on a level with the rest of their countrymen.”

As Gustavus Myers tells the story, there were victories and defeats in America’s long war against inherited privilege, until finally we get to the twentieth century and the estate tax, which make up the final chapters in the journalist’s account. Although it was established in 1916, the tax on inheritance was raised to deliberately confiscatory levels in 1935. The rationale then was as plain as it was in Jefferson’s day: Americans raised that tax because Americans detest aristocracy. “Great accumulations of wealth cannot be justified on the basis of personal and family security,” said President Roosevelt, on the occasion of demanding the massive increase in estate taxes. “In the last analysis such accumulations amount to the perpetuation of great and undesirable concentration of control in a relatively few individuals over the employment and welfare of many, many others.”

Check the IRS website today, however, and you will find that critical moment in tax history explained not as the expression of a leveling social policy but merely as a way to “generate needed funds.” Our contemporary debate over inequality is the same: a bland, technical matter of think tanks and academic conferences and debates among professional economists—just another problem for the experts to solve. It is as though we have completely forgotten the democratic passions that drove our ancestors.

Well, the right certainly hasn’t. Their policies may give us things like perpetual trusts—legal instruments designed to cement the privileges of the plutocracy many generations into the future—but the right’s rhetoric always goes back to sympathetic souls like Jeffersonian family farmers who are supposedly put at risk by the “death taxes” of those grasping government elites.

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Thomas Piketty, for his part, understands the danger of restricting the great inequality debate to economists only, and he is also oddly well-informed about the history of the estate tax in the United States. But when he turns his attention to solutions, the best he can do is propose a “global wealth tax” that would probably ring the big-government alarm bell of even the staunchest liberals, and that Piketty himself admits to be a “utopian ideal” that will never happen.

This simply will not do. There are countless other options available to us before we have to turn to some unaccountable international IRS. As Gustavus Myers told us back in 1939, bringing the aristocracy to heel is entirely within our power and our tradition, and American statesmen from Jefferson to FDR (the man on the nickel, the man on the dime) have taken enthusiastic part in the business of leveling. There is nothing utopian about it at all. It is not an opium dream to imagine that Grover Norquist and company might one day be defeated or that the estate tax might be brought back in full Rooseveltian force; both are eminently possible, if only the Democrats would pull their heads out of their butts.

Turning to the problem of income inequality here in the United States, there is an even simpler solution, by which I mean a more realistic solution, a solution that builds on familiar American traditions,that works by empowering average people, that requires few economists or experts, that would involve a minimum of government interference, and that proceeds by expanding democracy and participation rather than by building some kind of distant and unapproachable global tax authority: Allow workers to organize. Let people have a say on the basic issues affecting their lives.

Piketty’s biggest blind spot is that he has virtually nothing to say about labor unions. He starts Chapter 1 of "Capital" with an anecdote about a bloody strike in South Africa and he returns to that same tragic episode at the very end of the book, but in between he addresses the matter almost not at all. Piketty talks a good game about democracy, but like other economists who have made inequality their subject, he prefers solutions that are handed down from the lofty heights of expertise.

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The best remedy for inequality, however, is the one that comes up from below. Economists may not think very highly of those hardened people in SEIU t-shirts—some of them smoke too much, some are suspicious of “free trade,” some of them (gasp!) didn’t go to college—but the fact remains that in nearly every particular they represent the obvious and just about the only social force on the ground in America that might bend the inequality curve the other way.

It is not a coincidence that labor’s rise in the 1930s happened at the same time as the One Percent’s fall from grace, nor is it a coincidence that labor’s long decline has been almost a mirror image of the One Percent’s recovery of its nineteenth-century heaven. These things happened the way they did because labor’s most basic function is to turn the bright light of democratic scrutiny on economic power. When labor is strong, our composers write things like “Fanfare for the Common Man” and blue-collar workers buy cars and boats and snowmobiles. When labor is weak, we bow down before “job creators” and McMansions sprout like mushrooms after a rainstorm.

Consider the crazy imbalance in the current capital-labor split, which is the central thread holding together Piketty’s enormous book. Well, having strong unions that are able to negotiate effectively would remedy this situation almost by definition. That’s the idea of unions in the first place.

Consider the problem of out-of-control executive compensation, of Piketty’s “supermanagers” who stuff their pockets with stock options simply because no one will stop them: As it happens, this is an issue of particular significance to organized labor, as you will learn from one look at the AFL-CIO’s shocking website, “Executive Paywatch.” Allowing workers to bargain fairly with bosses would put the brakes on the runaway CEO freight train instantly.

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The disappearing middle class? This is labor’s grievance par excellence. The minimum wage? Labor is always the loudest voice calling for an increase. Stratospheric college tuition and student debt? The AFL-CIO has been admirably forthright on the issue. Social Security and the rest of the welfare state? There is no more dedicated supporter than organized labor. Were labor strong instead of weak, privatization and the other attacks on the welfare state would probably never even come up. Certainly no Democratic president would be able to say, as Barack Obama did in one of his debates with Mitt Romney, that his own position was “somewhat similar” to the Republican’s on this issue.

Nor is it utopian or even unrealistic to imagine labor staging a comeback. It would probably happen overnight if the workplace rights we are told we enjoy actually had force behind them. A large percentage of American workers consistently tell pollsters they’d like to have some kind of collective bargaining organization at work, and yet only a tiny sliver of them actually have such organizations—6.7% in the private sector, according to the latest data. The reason for the difference, to put it bluntly, is that management doesn’t want their workers to have such organizations, and bosses routinely threaten and fire workers who try to bring such organizations together, law or no law.

A powerful labor movement is not the complete solution to plutocracy, as we know from certain European countries, but it would go a long way toward addressing the problem in its out-of-control American form. What we need is not some all-powerful UN tax collector to descend on the United States, but our own elected officials to protect the rights we already have on paper. Organized labor has suggested one possible remedy: the Employee Free Choice Act, which Obama supported but which got nowhere in Congress. Others have proposed protecting union membership with Civil Rights laws, thereby allowing workers who are fired for joining a union to sue their bosses directly rather than going through a labyrinthine Federal bureaucracy. Other changes—helping new bargaining units to negotiate their first contract with management, or enhancing the penalties incurred by bosses for misbehaving—would be so technical they would go unnoticed by everyone except the Chamber of Commerce itself, and yet their impact on inequality would probably be significant.

The outrage of soaring inequality is ultimately, as Piketty reminds us, a challenge to democracy itself. That the beginning of a solution might come from extending the logic of democracy to the workplace would make for an appropriate storybook ending to this saga of plutocracy unbound. In reality, of course, it will be messy. There will be fights within the labor movement and a thousand lesser fights over local and even trivial issues. But that’s what democracy looks like.

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Thomas Frank

Thomas Frank is a Salon politics and culture columnist. His many books include "What's The Matter With Kansas," "Pity the Billionaire" and "One Market Under God." He is the founding editor of The Baffler magazine.

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