Benjamin Studebaker

I subscribe to a weekly news magazine called The Week. It’s an excellent magazine highlighting the various things commentators have been saying in the popular press over the past week. In the most recent issue, however, I saw something strange. In the banner, there was a picture of Karl Marx, and the question “Is Marxism Back in Fashion?” This struck me as quite bizarre–I hadn’t seen any mention of Marx or Marxism in the last week. I turned to the relevant article and discovered that the controversy being highlighted was over Thomas Piketty’s new book, Capital in the Twenty-First Century. Many commentators, particularly those writing in right-leaning publications, were referring to Piketty and his work as Marxist (for an example, see Kyle Smith’s piece in the New York Post) This apparently is so uncontroversial that The Week felt comfortable guiding people to the story with a Marx reference. I found this extremely troubling, both because Piketty is most certainly not a Marxist and because the practice of calling all those with radical left-wing views “Marxist” is an attempt to straw man those leftists and prevent people from thinking seriously about their views. I’d like to elaborate on both themes today.

To explain how thoroughly inapplicable the Marxist label is to Thomas Piketty, we must understand the following:

1. What, in broad terms, is the Marxist view.
2. What, in broad terms, is Piketty’s view.
3. How #1 differs from #2.

That will be our structure.

The Marxist View

Marxists are engaged in a critique of capitalism not for the sake of improving or bettering the capitalist system but for the sake of destroying it. They typically believe both that capitalism is morally wrong and that it is a material inevitability that it will be destroyed. Marxists think that capitalism is wrong because it generates one or both of two different negative outcomes:

1. Alienation–workers in the capitalist system are alienated in four ways. They are alienated from the product of their labor insofar as the product’s design is determined by what the capitalist wants, not the laborer. They are alienated from the work itself insofar as the division of labor causes them to participate only in one small part of the productive process rather than see a product through from start to finish. They are alienated from themselves insofar as they do not have the opportunity to do a variety of kinds of work and have limited opportunities to exercise their creative natures. They are alienated from other workers insofar as they are made to compete with one another for jobs and income and are played off against each other by the capitalist.
2. Exploitation–workers in the capitalist system do not receive the full value of their labor because the capitalist keeps part of that value as profit.

For Marxists, there is no way to organize capitalism so as to overcome these critiques. Capitalism by its very nature generates these outcomes and it is only through the dissolution of capitalism into socialism that they can be avoided. Their solutions are usually divisible into two categories:

1. Revolutionary Marxism–in the classical form espoused by Marx, capitalism can only be ended by a violent revolution in which the workers seize the means of the production, i.e. they take from the capitalists the factories, land, resources, tools, and so on and own them collectively.
2. Reformist Marxism–in the form espoused by the Fabians in Britain and by the old left more generally throughout Europe (much of which is no longer a serious political force even on that continent), capitalism is ended gradually through the democratic system via the gradual seizure of assets and nationalization of industries by a socialist party which maintains its mandate by winning elections.

Many Marxists also subscribe to Marx’s belief in dialectical materialism, his “theory of history”. Marx believed that capitalism contained inherent contradictions that would reduce the workers to misery and compel them to overthrow the capitalist system. Many Neo-Marxists have made it their enterprise to figure out why this has not happened, often appealing to a cultural critique that alleges that the capitalist system uses hegemonic ideas and liberal reforms to keep itself palatable to the workers.

Piketty’s View

Piketty is engaged in a critique of capitalism not to abolish it, but to restore it to conditions under which its benefits are most widely and fairly disbursed. The central thrust of Piketty’s argument is a comparison between two rates:

1. The Rate of Return to Capital (R)–the rate at which existing wealth grows.
2. The Rate of Economic Growth (G)–the rate at which the economy generates new wealth.

If R > G, wealthy citizens will see their assets grow in size faster than the economy grows. They will become proportionally wealthier over time regardless of the amount of work they do or the extent to which they contribute to society. In this kind of society, once a family becomes wealthy, it gets wealthier in perpetuity provided that no member of the family actively squanders the fortune.

If G > R, wealthy citizens will see economic growth outpace the rate at which their assets grow. While they will still gain wealth in absolute terms, in relative terms their wealth will slowly become a smaller piece of the economic pie. In order to maintain their status over extended periods, they and/or their children will have to find and develop additional sources of income. In this kind of society, a family must continue to contribute to society in order to maintain its relative prominence.

Piketty has estimates for the relationship between R and G over the last several centuries and a projection of what that relationship is likely to be over the course of this century. Here’s what he finds:

In sum, Piketty is anticipating a return to the pre-20th century trend, in which growth rates are much slower and the rate of return to capital is much higher than was the case in much of the 1900’s. It’s not my task today to assess the empirical research behind this claim–Piketty uses almost 500 pages to defend it, and I don’t have that kind of verbage to spend here. The point is that this is a very different kind of argument from the Marxist argument. Marxists were wholly dissatisfied with the economic system even during the post-war period in which growth rates were quite high and inequality comparatively quite low. Piketty is a Keynesian liberal rather than a Marxist; his goal is to return us to the 20th century economic conditions under which we saw rapid growth with disbursed benefits.

Piketty’s policy solution is for states to collude on their tax rates so as to make it impossible for businesses and rich people to use capital flight to avoid higher rates. This would depress the rate of return to capital. Presumably, Piketty believes those funds could be redistributed to consumers for the purpose of consumption, disbursing the benefits of growth and stimulating the growth rate. R falls and G rises, so as to ensure that G continues to be greater than R.

The Difference

In the context of Marxism, Piketty’s view is actually remarkably conservative. He wants to restore and preserve the economic conditions that prevailed during much of the 20th century through taxes and transfers. He does not want a violent revolution. He does not even want socialist political parties to mass nationalize private sector business. It is only in the last several decades that capital mobility has become sufficiently fluid for businesses and rich people to credibly threaten to move their capital to other countries in the face of higher taxes or tougher regulations. Piketty’s goal is to restore the status quo ante and take capital flight off the table as a legitimate negotiating tactic businesses can use against states. This is a move in favor of making our economy more like the American economy in the 1950’s and 1960’s, not like the Soviet economy of the Marxists. Conservatives, who are often to some degree nostalgic for the social mores of yesteryear, should be sympathetic to this argument for consistency’s sake. Growth rates were much higher on average in the 50’s and 60’s:

And the benefits of this growth were more widely disbursed:

This is a nuanced argument for taking meaningful action to structure our economy more similarly to the economy into which the baby boomers were born. In the United States, Marxism is rightly or wrongly looked upon as frivolous and naïve. This is neither. Piketty’s proposed solutions are not politically feasible in no small part because of the right’s ability to associate in the mind of the general public these kinds of arguments with Marxism. It is a slanderous, dismissive comparison and a straw man argument. The claim that our society should disburse benefits moderately more equally is not equivalent to the claim that we should live in a perfectly equal Marxist utopia. Those that argue as much either do not understand what these left wing positions are or are failing to participate in the debate in an honest and forthright way.