If you were among those who followed the reports on French economist Thomas Piketty’s US book tour in support of his university-press-published, 696-page, Marxism-tinged treatise on inequality, Capital in the Twenty-First Century, and taxed your brain trying to recall a remotely recent antecedent for the ensuing excitement, well, relax—there isn’t any.
No less remarkable is the fact that one can, for once, believe the hype. Beautifully translated by Arthur Goldhammer, Piketty’s Capital is simultaneously intellectually rigorous, historically grounded, culturally nuanced and, in important respects, politically visionary. Even nitpicky economists who take issue with some of his interpretations of the mountains of data he and his colleagues assembled feel compelled to shower the book with praise beforehand—and frequently after as well. Paul Krugman credits Piketty with inspiring “a revolution in our understanding of long-term trends in inequality.”
Piketty’s central thesis presents a profound challenge to our political system and its response to the economic crisis of the past decade. As he puts it, an “apparently small gap between the return on capital and the rate of growth can in the long run have powerful and destabilizing effects on the structure and dynamics of social inequality.” Moreover, “there is absolutely no doubt that the increase of inequality in the United States contributed to the nation’s financial instability. The reason is simple: one consequence of increasing inequality was virtual stagnation of the purchasing power of the lower and middle classes in the United States, which inevitably made it more likely that modest households would take on debt, especially since unscrupulous banks and financial intermediaries, freed from regulation and eager to earn good yields on the enormous savings injected into the system by the well-to-do, offered credit on increasingly generous terms.”
While edifying intellectually, all this attention to inequality raises the question of what comes next—or, to borrow a phrase from another famous student of capital: What is to be done? Surprisingly for an academic economist, Piketty does not demur. On an entirely utopian plane, he imagines the effect of a progressive global tax on capital. “Such a tax would also have another virtue: it would expose wealth to democratic scrutiny, which is a necessary condition for effective regulation of the banking system and international capital flows.” On a minutely less unrealistic level, he argues for confiscatory tax rates on the wealthy of up to 80 percent. And on an ever-so-slightly more imaginable plane, he calls for boosting the minimum wage and improving the education and training opportunities of the poor and middle class, who are increasingly priced out of our faux-meritocracy, which is itself shaped by economic inequality.