Work in progress: Book review of ‘After Piketty: The Agenda for Economics and Inequality’
A team of economists and social scientists takes on Thomas Piketty, who insists that collective bargaining can reduce inequality generated by capitalism
After Piketty examines a thesis that there is a fundamental dynamic within capitalist economies that will inexorably increase the gap between wealth from capital and income from work. The debate it examines is whether there are interventionist political and institutional changes that can be put in place to avert or minimise this gaping inequality.
One argument is that the underbelly of poverty, hunger and social apartheid, which are witnessed in the third world, are the results of the callous financial interests of western institutions like the IMF and the World Bank. The new world order is a fiction; financial institutions remain in self-serving collusion with the powerful nations focusing on economic gain through coups and destabilisation of regimes around the world.
As Zygmunt Bauman would argue, “A state is ‘social’ when it promotes the principle of the communally endorsed, collective insurance against individual misfortune and its consequences. There is a need to remember that the status of the citizens lies in their becoming not only beneficiaries of state policies, but also actors in the onward march of collective responsibility and shared interests for communal harmony and the end of inequality.” Therefore, liberals and progressives must work towards equitable distribution in a world free from hunger and war. Such a possibility depends on countering the corporate ideology of predatory capitalism.
The book, a collection of essays by eminent economists and social scientists, is a response to Thomas Piketty’s Capital in the Twenty-First Century where he had argued that the situation in the developing world is dismal while in the developed world the corporate sector is busy manufacturing a zombie culture sold out to consumerism and compliance. Inequality, in the words of Obama, “becomes the defining challenge of our times.”
Oligarchy rules the world; the 1% is all pervasive, whereas the 99% face economic privations of the foulest kind. Piketty in his essay ‘On Oligarchy in Americas’ in his recent book Chronicles of our Times relentlessly critiques the world of corporate greed that has taken control of not only our lives but specifically our educational institutions. Underscoring the assault on Public Education, he argues against institutions of learning that discourage independent thought.
Focus on financial capital
Briefly, Piketty’s thesis states that the widening inequality integral to capitalism if unbridled, will lead to perpetual oligarchies across the globe. This widening gulf between the rich and the poor, explains Piketty, exists because financial capital grows at a faster rate than the economy as a whole, and consequently, those who possess capital are in a position to get richer faster than those who do not. Owing to low inheritance tax, wealth passes conveniently to the next generation thereby having a snowballing effect on existing wealth. History of the last 300 years is witness to wealth generated from capital far surpassing earnings from work. This comes as a revelation even to economists like Paul Krugman who admit that Piketty has enabled them to shift focus from human capital to financial capital, as well as inherited wealth which is the foremost cause of inequality.
The amalgamation of democracy and the free market economy has moved all motivation towards profit. To halt the pernicious march of inequality, it is imperative to examine all aspects of our social existence from the concepts of public employment to fiscal redistribution, from taxation of income and wealth transfers to assured returns on public savings.
According to Piketty, the solution lies in a global wealth tax and high rate of income tax on the rich along with meaningful human interventions in social transformation.
However, there is no assurance that the money thus generated will ever trickle down to the poor or the middle class. Piketty has enumerated in his book certain proposals for the creation of a global tax on capital. As it is clear from a discerning essay by Elisabeth Jacobs in After Piketty, there seems to be no political strategy that has been proposed by him that would overcome economic inequalities.
Political inequalities understandably breed economic inequalities, and until the political rights of the people are boosted, there is indeed no viable solution to the world of poverty and deprivation. In such a world of capitalism, economist Branko Milanović argues in his paper that the rising inequality in a period of slow growth may necessitate reallocation of capital and not merely income.
Act of confrontation
Piketty hits out at the dismantling of public welfare in the name of private enterprise and the brutalisation of democratic coexistence and ecology that incites a language of resistance. So, do we let ourselves be claimed by this affliction or should we consider our existence, in the words of philosopher-critic Giorgio Agamben, “a possibility or a potentiality” where the act of confrontation remains the only human force to counter the recklessness of a dreadful world proliferating with violence and inequality?
This calamity of uninhibited economics, or the pernicious example of the rise of nationalism in the face of homeless migrants, is taken up by the writers in this collection, suggesting a counterforce through the celebration of freedom, social coexistence and the transgression of modern day production that caters to unappeasable consumer fantasy with profit for the few as the only motive.
The essay by Piketty at the end of the book goes on to make a suggestion of the potential of collective bargaining to reduce inequality generated by capitalism. Individuals as consumers, as workers, or as employers, have the power to intervene for the cause of equality. But do economic changes depend on stubborn laws or institutionally approved procedures? This remains unclear both in Capital and this symposium of divergent papers.
Piketty is of the opinion that the relevance of social sciences needs to be underscored so as to come to grips with economics as a human science: “I would like to see Capital as a work-in-progress of social science rather than a treatise about history or economics,” he maintains.
The debate must go on because the creeping social, political and economic inequality is a global issue and may reach a tipping point beyond which we may envisage a cataclysmic upheaval in the world order.