Capital in the Twenty-First Century

Article by   July 2014
pikettycapital93.jpgThomas Piketty. Capital in the Twenty-First Century. Translated by Arthur Goldhammer. Cambridge, MA: Belknap Press of Harvard University Press, 2014. 696 pp. Hardcover. $24.99/£24.99

To say that Thomas Piketty's Capital in the Twenty-First Century has become a sensation would be a bit of a cliché at this point. The French economist's 700-page analysis of wealth and inequality over the past three centuries has dominated not merely the financial press, but the popular press as well since its March appearance in English translation. By late April, the book had rocketed to #1 on Amazon (of all genres) and was sold out (my own copy took three weeks to arrive); a month later, it seized the coveted #1 spot on the relevant NYT best-seller list, a position it held for a month. The blogosphere has been buzzing all this while with reviews, critiques, rebuttals, praise, slanders, and occasionally bewilderment. All of this for an academic work of economics, an unheard-of feat, and one that warrants even the attention of theologians, a group not particularly known for their attentiveness to economics.

Of course, that is in part because Piketty's book is not really an academic book--and I say that in the sense of a compliment, rather than an insult. While it is full of charts and graphs and numbers, it is readily comprehensible to the general educated public, and few, if any, sections require formal economics training to comprehend.  It is also an engrossing read--at some points, even a page-turner. Piketty's writing (and the translation provided by Arthur Goldhammer) may rarely rise to the threshold of eloquence, but it is remarkably lucid, smooth, and engaging, with an understated wit that occasionally flashes forth in biting sarcasm. It is also considerably more culturally literate than one would expect; Piketty frequently illustrates his observations about wealth and society by reference to film and literature, most notably the nineteenth-century novels of Jane Austen and Honoré de Balzac, to which he has recourse throughout.

Capital's success is perhaps also in part due to the fact that it is not really a book of economics, as many will tell you--some as a compliment, some as an insult. Piketty is far more interested in economic history and in what would have once been called "political economy," than in much of what passes for economics nowadays, a frequently abstract, hyper-mathematicalized discipline for which Piketty reserves his most scornful witticisms. Piketty proceeds on the conviction that economics as a moral and social science, as a political reality unfolding through history, is far truer to life, more insightful, and more useful than the sterile calculations which preoccupy much of profession today. In fact, perhaps more than anything else, Capital is a clarion call for economists to humble themselves and take their place among the social sciences, to abandon "their childish passion for mathematics" and "their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything" (p.33). As a demonstration of just what can be achieved by such a methodological shift, Piketty's magnum opus is a compelling argument that the discipline cannot afford to ignore.(1) 

Of course, this is not to say that Piketty is sloppy or lazy, indulging in philosophy and narrative without the foundation of hard numbers. On the contrary, the book is built on an enormous mountain of data, and is indeed the capstone of a more than 10-year data collection and collation project by Piketty and his collaborators, which before now had attracted little attention beyond the guild.  

The difference, though, between the enormous spreadsheets of data that Piketty has compiled and the "childish passion for mathematics" that he decries is one of a posteriori vs. a priori. Piketty's aim is to compile, as much as the available data allow (and he is the first to admit, and complain of, just how little they do allow), hard facts about the amount and distribution of wealth in western Europe and America since the Industrial Revolution, and then to infer general patterns and causes from this evidence, much as any good historian will do. What he has little patience for is mathematical models which aim to describe and predict in the abstract, based on assumptions about human agency, what sorts of wealth will be generated and where it will go. It is perhaps no surprise, then, that some of the sharpest critiques of Piketty's work have come from those most wed to such mathematical models, complaining that their models simply cannot yield the results that he describes and projects. Of course, to such naysayers, Piketty may make a fairly simple response: "So much the worse for your models, then"--that is to say, if history shows that something has happened, and does consistently happen, then it is little good denying that it is possible, on purely mathematical premises.

Nowhere is this more true than in what Piketty calls "the central contradiction of capitalism," the inequality r > g, which sums up, in three characters, the book's main concern: the rate of return on capital, in general and in the long-run, exceeds the economic growth rate (and thus, the growth rate of wage labor).(2)  What this means may best be understood narratively.  

Why was it that for so many centuries, the wealthy tended to be those who were born wealthy, not those who worked for it? This social dynamic is crystal-clear in the novels of Balzac and Austen, where even relatively important and high-earning professions, like law or the ministry, are held in some contempt, and anyone wanting to ensure their fortune seeks it by marriage or inheritance. The problem was that capital (generally in the form of land or bonds) yielded a fairly steady real return of 4-5%, while per-capita economic growth languished at near-zero before 1700, and 1-2% from 1700 on. Wage earners accordingly could only grow their income very slowly, while the wealthy could generally afford to live comfortably off their income and still reinvest enough to grow their wealth still further, perpetuating permanent extreme inequalities.  Conventional economic wisdom has long held that this state of affairs was steadily eroded by the rise of industrial capitalism: by unleashing an engine of economic growth and encouraging the rise of skilled labor, modern economies deprived static capital of its advantage and led to a steady equalization of the playing field as wealth flowed meritocratically toward the most talented and hardest-working. Piketty demolishes this rosy picture. On the contrary, he shows, wealth inequalities, built largely on the power of inherited wealth, continued to increase right up to the eve of WWI, at which point the quadruple shocks of WWI, inflation, the Great Depression, and WWII decimated the intergenerational wealth of Europe and to a lesser extent the United States.  In the accelerated growth period of post-war rebuilding, wages rose rapidly (g was greater than or equal to r), but already, these large but temporary aberrations behind us, r is again outpacing g, inequality is growing, and the importance of inherited wealth is re-asserting itself. In the future, as economic growth slows,(3) r may again exceed g by a wide margin, leading to spiralling inequality.  

Such is the gist of Piketty's main contention. Of course, this is far from his only contention; on the contrary, the book is profound and wide-ranging, shedding light on numerous historical and economic phenomena, so that anyone who claims to have discredited the book by discrediting one central argument has clearly not read it closely. (4) But "so what?" some are sure to ask. Why should we necessarily care?

Well, one answer is that, whether or not we think this is a problem that we should do anything about, it's still important to know. Piketty's main mission is simply that of a messenger, to provide a reality check for Western democracies, a revelation that many of the narratives we tell about ourselves have little relation to reality. In this, he might be compared to Edward Snowden, who insisted that his main point was not to push for one surveillance policy or another, but simply to present the facts of the matter to the American public, so that transparent democratic debate could occur. Likewise Piketty, although he certainly offers some policy suggestions, (5) repeatedly insists that primarily he just wants to get this information out there, to make sure that debate over economic policy takes place against a backdrop of hard reality, rather than self-satisfied reassurances that "a rising tide lifts all boats" (it doesn't necessarily), or "high income is the market's reward for hard work and superior talent" (not really), or "we all have equality under the law already, so what's the worry?" (if money is power, and we know it is, then economic inequality becomes political inequality).

Some will worry, however, that merely by raising these issues, Piketty is sure to destabilize a political discussion that is always vulnerable to the envy of the masses (much as critics worried that Snowden would simply provide fodder for terrorists and other enemies). Any talk of "inequality," they worry, is simply an excuse for coercive governmental redistribution from the virtuous "makers" to the envious "takers." While Piketty can hardly be accused of envy, as a would-be beneficiary of redistribution, or of ambition, as a would-be government bureaucrat, he does not make terribly clear the ground of his concern about inequality. He clearly sees it as a threat to democratic politics, and, at a certain point, a threat to social order, but beyond that, he mostly seems to just assume that most readers will share a sense that the Gilded Age (the era of hyper-inequality that preceded WWI) is not something we want to return to. This is probably a sound intuition, but if we are to re-ground economics (and politics, for that matter) in morality, more will obviously need to be said. Christians in particular might worry about Piketty's deep suspicion of inherited wealth as something of a social evil; Scripture, on the contrary, teaches us that "a good man leaves an inheritance to his children's children" (Prov. 13:22). 

On the other hand, Piketty's analysis does highlight the tensions between our various justifications of wealth. In earlier times, he notes, great disparities in wealth were often justified as an unfortunate providential necessity: there was simply not enough for everyone to be wealthy, but some people had to be wealthy to be the guardians of culture and social order, so God had apportioned this lot to a few but not to the rest. Today, however, we tend to justify these disparities on the much less realistic, and much more insidious, grounds of merit--"he earned what he has, by hard work." This adds insult to the poor man's injury: not only does he not enjoy the same privileges as others, but he is stigmatized as lazy and unworthy to boot. But it also undermines the justification for inherited wealth: if wealth is a matter of personal desert, then on what basis does anyone "deserve" to inherit millions, as many fortunate individuals do today?

Thankfully, Christian moral theology has had a great deal to say about the matter of inequality--of distributive justice--in centuries past, and it is high time that Christian ethicists take these dusty tomes down off of the shelves and apply them to our problems today. Whatever one thinks of Piketty's diagnosis or his prescriptions, it is to be hoped that by highlighting the magnitude of inequality today--and likely, in our future--his work will serve as a wake-up call for theologians to again weigh in intelligently on this important discussion.

Brad Littlejohn holds a Ph.D from the University of Edinburgh and is the Managing Editor, Political Theology Today, the General Editor, The Mercersburg Theology Study Series and can be found writing regularly at


1. To be sure, Capital's relation to neoclassical economics is an ambivalent one.  He continues to operate within the concepts and definitions (such as the key concept "capital") of mainstream neoclassical economics, while eschewing its ahistorical, apolitical methodology. Some dissident economists accordingly charge that he does not go far enough in questioning the terms of the debate, and thus offers us a historically illuminating but not altogether theoretically coherent book.

2. Some economists have objected that standard models show that as the supply of capital increases, r should fall to near g, long before capital concentrations reach the levels that Piketty is concerned about; however, given that this did not happen in the past, there is reason to be skeptical of such models. See also here (under the discussion of objection 3).

3. Economic growth is the sum of population growth and productivity growth. The former, which has played a huge part in global growth over the past century, is expected to slow to near zero in the coming century; the latter, once the developing world finishes industrializing (a process that allows for accelerated "catch-up" growth), global productivity growth is likely to return to its long-term industrial era average of 1-1.5%.  

4. A particularly unfortunate example of this was Chris Giles's attempt in the Financial Times to discredit Piketty wholesale by purportedly discovering serious number-fudging in one chapter of Capital (despite the fact that Piketty had made all his data public to maximize transparency).  Piketty's polite but withering response put most of Giles's objections to rest, but not before many conservative bloggers (without having so much as read a page of Piketty) triumphantly declared that he had been unmasked as a liar.   

5. Although, it should be noted, these are in fact much more tentative than most reviews or critiques have implied.  Most critics have dismissed his proposed "global wealth tax" as ridiculously utopian, but he is the first to admit this, and offers it instead in Capital as something of a thought experiment.  

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