Perhaps the biggest event in the intellectual history of the young twenty-first century is Thomas Piketty’s new treatise, Capital in the Twenty-First Century. Together with his collaborator Emmanuel Saez, Piketty has led the way in researching economic inequality over the last decade, and he has marshaled all of his expertise to produce a devastating indictment of the capitalist system.
Piketty has challenged the legions of establishment economists and political spokesmen to defend the system, but, so far at any rate, the Right has no answer. The upshot may be a sharp shift leftward in the consciousness of civil society. And, as we discuss below, the shift leftward may go further even than Piketty himself has countenanced.
Piketty’s mastery of the dynamics of economic inequality leads him to conclude that, barring a major wildcard or sustained, aggressive state interventions, the economic system of the developed world is primed to deliver ever greater returns to capital over the next few decades (at least), and relatively lower returns to labor. In consequence, the economic elite of the developed economies of the world stands to become an entrenched oligarchy, where the very few who possess great wealth will effortlessly accumulate ever more, while the rest of the population will be making do with ever less.
In other words, we are entering a period of “patrimonial capitalism.” Apart from the egregious injury patrimonial capitalism will do to economic justice, it will also suck much of the dynamism out of developed economies.
For insight into Piketty’s arguments and his policy proposals, Radio VR’s David Kerans spoke with University of Massachusetts Emeritus Professor of Economics Richard Wolff, who is also a co-founder of Democracy at Work, an organization dedicated to overcoming the worst features of modern day capitalism by building a social movement of economic renewal through workers’ self-directed enterprises.
Wolff accepts Piketty’s theses regarding the acceleration of inequality in recent decades and the approach of patrimonial capitalism. On the plane of economic theory, however, he laments that Piketty did not take establishment postulates of micro-economics to task in his new book.
Wolff contests the commonplace perception of the post-WWII decades as having delivered economic progress for all categories of the population, reminding us of Michael Harrington’s 1962 sensation The Other America: poverty in the United States, which spurred a variety of significant anti-poverty measures in the US. Wolff agrees with Piketty that the type of economic growth that produced a burgeoning middle class after WWII was an aberration in the history of capitalism. But in explaining this success he puts more stress than Piketty on the surge of activism from below in the wake of the Great Depression. Popular pressure–channeled in part through two socialist parties and a significant communist party–propelled the New Deal.
In other words, as Wolff explains, the rise of the middle class was not an inevitable outcome that flowed from a harmonious economic cycle following the war and destruction of the period from 1914-1945. It was political action from below that made the economy serve the wider population.
Wolff warns that we cannot band-aid capitalism. However laudable and even attainable may be suggestions from economists like Piketty or Dean Baker, to name just two, piecemeal policies designed to stop the system from funneling wealth upwards will not work for long. The elites are fully focused on preserving and expanding their fortunes, and the structure of the contemporary economy puts in the hands of a very few people in large corporate enterprises “both the incentive and the resources to roll back whatever adjustments a movement from below is able to make.”
“Something wasn’t done in the 1930s that enabled the rollback in half century that we’ve just been through, and we have to learn what that was and not make that mistake again.” Otherwise, “the corporate structure will undo all of (the adjustments) the minute the dust settles—only they’ll do it quicker this time because they have the great experience of the last fifty years to know how to do it.”
— David Kerans. source voiceofrussia.com