There’s been a lot of debate and political controversy around French economist Thomas Piketty’s new work “Capital in the Twenty-First Century,” so naturally I had to read it as soon as I possibly could. The book discusses economic inequality throughout the world (though primarily France, Britain and the United States), which has been a contentious issue for the last few years on both sides of the Atlantic. I finished it this last week, and my thoughts are as follows:
My political leanings aren’t much of a secret, but in reading “Capital” I wanted to put aside any preconceptions and just see what I could learn. That turned out to be pretty easy. “Capital” is much less prescriptive than one might assume. On top of that, there’s hell of a lot of data and history crammed into this 600-page thesis.
“Capital” isn’t for newcomers to macroeconomics. I’m not an econ PhD by any stretch of the imagination, but I have read a number of other texts on the subject, and without that base knowledge the book would have been borderline unreadable. If you’re looking for a more palatable entry point, I recommend Charles Wheelan’s “Naked Economics.”
For those familiar with the topics, “Capital” is not an ideological screed nor an exercise in scare tactics. Malthus was wrong, Piketty says – uncontrolled growth will not be humanity’s downfall. Marx, too, was wrong, as he underestimated the power of productivity growth, education and innovation as rising tides that lift all boats. However, Piketty argues, the prominent 20th century economists, who hailed capitalism as an ultimate solution to inequality and universal prosperity, were also wrong. To paraphrase Churchill, capitalism, like democracy, is the least worst option. As it turns out, capitalism itself inherently produces and perpetuates the types of wealth inequality we saw in the 19th century. It needs adjustment and correction, and does not inherently self regulate. The “invisible hand” is dealing much more to a select few.
Even if you don’t subscribe to these views, the breadth of data accumulated in the first two sections is staggering. Not being an economics expert, the history of capital, productivity and growth since the year 0 A.D. fascinated me in a way that academic texts rarely do.