Letter: Thomas Piketty (2025)

Letter to the Editors from the December 2025 issue of the Socialist Standard

"Practical proposals"

Dear Editors

I have read Socialism as a Practical Alternative, this is very interesting, although I would like it to know more about voting rights and other decision making processes in the political sphere and in the economic sphere, in particular regarding the rights to use capital assets, both for housing and for equipment in small production units vs large production units, etc. I make some practical proposals on my Brief History of Equality (see eg, tinyurl.com/5xbapcn5), but of course they are highly imperfect and the only way to make progress is to compare with other proposals and learn from them!

Thomas Piketty

Reply:

At this stage, when there are so few who want a socialist society of common ownership and democratic control of the means to produce what society needs to survive, it is premature to draw up detailed plans as to how things will be arranged in such a society. That is something for those around at the time to decide when capitalism is about to be replaced by socialism; in other words, when a majority of the population want socialism. All we can do is to come up with some suggestions and even then not going into the detail that your proposals do. But we don’t doubt that when that time comes detailed plans will be drawn up.

We are approaching the question from a different position from yours. You see a different kind of society coming about gradually through a serious of reform measures, to be implemented now under capitalism. Hence the need to come up with a detailed proposal. We don’t see that a gradual transition to socialism is possible as, in the end, what decides what happens is the operation of the uncontrollable economic laws of capitalist society which impose that the priority must be profit-making and the accumulation of capital. They rule out detailed reform measures working as planned. Our view is that, before anything constructive and lasting can be done, the basis of society needs to be changed root and branch from class ownership of the means of life to their common ownership and democratic control by society as a whole.

So while you are proposing measures to be implemented now under capitalism, we are envisaging possible measures to be implemented after capitalism has been replaced by socialism.

Nevertheless, to try to answer your specific questions. By ‘the rights to use capital assets’, by which we assume you mean the physical means to produce wealth. These won’t belong to anyone; they will simply be there to be used in accordance with democratically decided rules. We imagine that the day-to-day operation of them will be in the hands of those who operate them, through some democratically chosen management committee. This could be chosen by any number of different voting systems or even by lot (now called ‘sortition’). And there is no reason why this needs to be the same everywhere and in every workplace.

Housing: houses and flats won’t belong to anyone either. They wouldn’t be privately owned, not even by individuals; but this wouldn’t rule out people having the right to use a house or flat for a prolonged period. One possible arrangement would for their allocation to be in the hands of a local council in accordance with some democratically agreed criteria. These would have to be fairly complicated, allowing for appeals and settlement of disputes, but we can’t say much more today about them other than that they would have to exist and that it will be up to those living in socialism to decide the details which, once again, need not be the same everywhere.

Editors.

Letter: Equality (2025)

Letter to the Editors from the November 2025 issue of the Socialist Standard

Equality

Thanks for sending this (your review of Equality, October Socialist Standard). Needless to say, everything I propose and describe about democratic socialism needs to be discussed, amended, improved, discussed again and again. See the longer discussion in my Brief History of Equality. From that viewpoint, I am very interested to better understand what kind of organization and institution you are advocating in your own view of socialism.

Thomas Piketty

Reply:

We comment on your Brief History of Equality on page 9. In the meantime we refer you to our pamphlet Socialism As A Practical Alternative – Editors.

Material World: A history of inequality (2025)

The Material World Column from the November 2025 issue of the Socialist Standard

Thomas Piketty is an academic who specialises in the study of economic inequality and has written a number of books on the subject, the most well-known of which is the 700-page tome Capital in the Twenty-First Century (2013), which we reviewed in 2014. The most recent is A Brief History of Equality which first came out in French in 2021. Based on historical records such as the archives of legacies, property transactions and tax returns, Piketty identifies a trend since the beginning of the 19th century towards less inequality in wealth ownership, income, and access to education, health care and better-paid jobs. Describing himself as a socialist but in the gradualist, reformist tradition, he believes this can continue and lead to ‘a systemic transformation of capitalism’.

On wealth ownership, he takes as a measure of inequality the proportion of wealth owned by the top one percent compared with that of the bottom 50 percent. The figures for all forms of property are:

‘The wealthiest 1 percent held about 45 percent of total property in France in 1810, and about 55 percent of the total in 1910 …. Then, in the course of the twentieth century, we observe a very strong deconcentration of fortunes: in the whole of France, the richest 1 percent’s share fell from 55 percent in 1914 to less than 20 percent at the beginning of the 1980s, before beginning a slow increase; in 2020, that share was nearly 25 percent’.

But ‘this did not benefit much the poorest 50 percent, whose share rose from 2 percent in 1910 to 6 percent in 2020’ and ‘the richest 1 percent’s share of total private property is currently two times smaller than it was a century ago, but it still remains on the order of five times larger than the share held by the poorest 50 percent’.

The beneficiaries have been the middle 40 percent between the top 10 percent and the bottom 50 percent who Piketty calls the ‘patrimonial middle class’. Their wealth he finds is ‘held mainly in housing’. In fact, the monetary value of housing represents about half of that of all privately-owned wealth. The figures for the ownership of all wealth are interesting but the relevant one for socialists is the one for the ownership of means of production. Piketty usefully defines means of production as ‘all the goods necessary to produce other goods and services’ (‘agricultural land and equipment, factories and machinery, offices and computers, shops and restaurants, salary advances and working capital’). He doesn’t produce figures for this but says that ownership of these is more concentrated than for all wealth. But there is a table which shows that:

‘In France in 2020 (as in all countries for which such data are available), small fortunes are composed principally of cash and bank deposits, middle-sized fortunes of real estate, and large fortunes of financial assets (especially stocks)’.

It cannot be denied that the middle 40 percent — the vast majority of whom are members of the working class properly defined — have benefited, but this doesn’t mean that this group is not dependent, like the rest of the working class in the bottom 50 percent, on having to sell their ability to work in order to buy what they need to live. If they lose their job, they can survive for longer before they become destitute, perhaps a year or so after selling their house. But it does mean that we socialists should be careful when we say the working class is ‘propertyless’. We don’t mean that they literally own nothing but that they don’t own means of production.

There has also been a reduction in inequality of access to education and health care. But this can’t be seen as anti-capitalist, as a better educated and more healthy workforce became necessary as production methods became more complex. As Piketty himself points out:

‘During the second Industrial Revolution [chemicals, electricity, the car industry, household goods], it became essential that an increasingly large part of the labour force be capable of mastering manufacturing processes that required technical and digital education, and the ability to understand detailed equipment manuals’.

Nor is the lessening of discrimination over job opportunities for women and minorities incompatible with capitalism. Capitalism could cope with the abolition of discrimination and even benefit from it by being able to draw on a wider pool of trainable and competent workers.

As a gradualist, Piketty would like to see what he calls ‘the march towards equality’ continue and completely ‘transform capitalism’. Besides steep taxes on wealth and inheritance, he envisages changing company law to allow for more employee participation in decision-making and for a proportion of profits to be set aside for spending to benefit workers. Neither of these will change the workings of capitalism as an economic system which imposes on those who make decisions about production that the priority be making a profit. Widening the circle of those who make such decisions won’t alter this; even worker cooperatives have to obey capitalism’s basic economic law of ‘no profit, no production’. And, of course, from time to time companies go bust and there are no profits to set aside.

He also proposes a scheme to give everyone at age 25 a minimum inheritance equal to 60 percent of average wealth per adult (which is France in 2020 would have been about 120,000 euros, or about £105,000; more today of course). The aim, he says, would be to ‘increase the negotiating power of everyone who owns almost nothing (that is, about half the population)’:

‘Recipients could reject certain job offers, buy an apartment, engage in a personal project, or create a small business. This freedom, which is certain to delight some, may well frighten employers and property owners’.

Which, apart from the cost, is precisely why it will never happen; it would undermine the wages system by putting workers in a stronger bargaining position with employers and enable them to extract a higher wage, meaning less profits. It is rather surprising that anyone should seriously imagine that the capitalist state could be made to give half the working class a lump sum of at least £105k. In any event, such a redistribution of wealth would not affect the unequal ownership of means of production.

In short, the trend since 1800 towards less inequality has not undermined the basis of capitalism. Even less has it been an ongoing slow, gradual transition towards socialism. Not that socialism is a society with a more equal distribution of wealth. Its basis is the common ownership of the means of production which will allow everyone access on equal terms to education, health care, work and what they need to live.

Adam Buick

Reformism (2025)

Book Review from the October 2025 issue of the Socialist Standard

Equality. What It Means and Why It Matters By Thomas Piketty and Michael Sandel, Polity, 2025. 119pp.

‘‘Why should a hedge fund manager make 5,000 times more than a teacher or nurse, or for that matter a physician?’ (Michael Sandel)

This short book is the record of a public discussion between two well-known ‘left’ academics. Social and economic historian Piketty is author of the much discussed Capital in the Twenty-First Century (see review in this journal), while Sandel is a prominent ‘public intellectual’, who has written books on what may broadly be called political philosophy. The book is divided into a number of chapters with titles such as ‘Why Worry About Inequality?’, ‘Should Money Matter Less?’, ‘The Moral Limits of Markets’, ‘Globalization and Populism’, ‘Meritocracy’, ‘Borders, Migration and Social Change’ and ‘The Future of the Left: Economics and Identity’.

Though presented as a kind of debate, both participants tend to agree on most things. In particular, they both seem convinced that the current social and economic system, capitalism, can be reformed in such a way as to make things significantly more ‘equal’ than they are at present. Piketty points to how, over the history of capitalism, vast swathes of people have seen their conditions of life greatly improve. And we can agree: even in the nineteenth century, in the system’s relatively early stages, this is something which Marx, for all his insistence on capitalism’s inevitable inequalities, observed as an ongoing reality. In this connection Piketty mentions, for example, the abolition of slavery, universal suffrage, decolonisation, increasing gender and racial equality, the welfare state, and higher living standards for many.

The way forward from this, according to both discussants, is even greater equality. They do not view this as lying in the ‘neoliberal’ turn capitalism has taken since the 1980s which has seen an increased proportion of total wealth owned and controlled by the richest, but in governments levying swingeing taxation rises on the wealthiest (‘80-90% on income and profits’) and being more active in implementing ‘a fuller development of the welfare state’. This, rather than ‘uncritically embracing the market faith’ as they see recent Western governments as having done, will assure a more equal (or at least less unequal) distribution of wealth and give more people access to the goods and services which will allow them to have comfortable living standards. The aim, Piketty argues, should be an economy that is ‘99% decommodified’, by which he means extensive government ownership and control of the means of living, and one which, Sandel asserts, will also lead to ’greater equality of recognition, honor, dignity and respect’.

It would be churlish not to acknowledge the well-meaning nature of the two commentators’ wish lists, their support, for example, for ‘more investment in health and education, higher progressive taxation, curbing the political power of the rich and the overreach of markets’ (Sandel). Unfortunately, however, these do not stand up to close scrutiny. While capitalism, with its ‘growth at all costs’ compulsion, may continue to improve living standards for many on the planet overall, governments simply cannot create anything resembling equality among those who live under that system, since their prime purpose is to manage it in the overall interest of the minority who monopolise the wealth. Different governments may of course have different approaches to this, in the degree of central control they exercise, for example, but, so long as the overall framework of money, wages and salaries, and buying and selling exists, they will always – and inevitably – find themselves trying to keep afloat a system founded on producing goods and services for a profit.

At one point, one of the discussants (Piketty), who claims to stand for ‘democratic, federalist, and internationalist socialism’, seems to come close to suggesting the society of free access that socialists advocate. He talks about a situation in which ‘99% of goods and services, like education and health, are freely accessible’ and ‘you only have 1% left commodified’, advocating ‘a system outside monetary logic and the profit logic’. Yet he comes out the other end still failing to see beyond a monetary economy, and in the end it becomes clear that what he is hoping for is a form of capitalism with a less unequal distribution of wealth and income and a more extensive welfare state (or ‘social state’, as he calls it) than exists at present. It also becomes clear, in the end, that the discussion between the two figures is one about old-fashioned reformism, about the extent to which it is possible for capitalism to ‘narrow’ the pay gap between one worker and another and the wealth gap between workers and capitalists. It is not about achieving the absolute economic equality that will characterise a society of voluntary cooperation and free access to all goods and services – the society of the future that we call socialism.

Howard Moss

Cooking the Books: Some reformists never learn (2024)

The Cooking the Books column from the August 2024 issue of the Socialist Standard

When, after losing the European elections to the National Rally (formerly the Front National), Macron called a snap election, the politicians regrouped to contest it. On the left, the hard-left breakaway from the ‘Parti Socialiste’ France Unbowed, the Communist Party, the Greens and the PS itself formed a New Popular Front (NFP) which emerged as the largest group in the National Assembly.

In an article in the Guardian (2 July), Julia Cagé and Thomas Piketty (yes, him) described its economic policy and the logic behind it. They wrote of its:

‘ambitious policies to improve the purchasing power of poor and lower-middle-class people. These reforms include a substantial increase in the minimum wage, wages indexed to prices and free school lunches. Most importantly the NFP wants to prioritise investment in the future by increasing public spending on infrastructure – throughout the country, including in isolated rural areas – as well as in health, education and research’.

The two are co-authors of a book about elections in France since 1789 in which they concluded that it was people in small towns and rural areas that tended to vote far-right ‘first and foremost because of socio-economic concerns: they lack purchasing power, they suffer most from the lack of investment in public infrastructure’, adding ‘and they feel that they have been abandoned by governments of all stripes in recent decades’. Hence the rise of the far-right.

This seems plausible enough; it’s unlikely to be just because they want to kick immigrants out or stop more coming in (that’s only the false solution proposed by the far-right). Cagé and Piketty reckon that, if the parties of the left increase purchasing power and spending on public infrastructure they can win people away from the ex-Front National.

An increase in people’s purchasing power through higher and indexed wages and benefits and more government spending on public services and amenities is all very well but where is the money to come from? Ultimately, there is only one source: the profits of business enterprises. But the pursuit of profits is what drives the capitalist economy and if you tax them too much to redistribute income to the ‘poor and lower-middle-class’ or to pay for first class health care and education that will provoke an economic slowdown, making this unsustainable. That’s the way capitalism works and can only work: by giving priority to profits over satisfying people’s needs. Despite the political slogan, profits cannot be put before people.

The last time this was tried in France was in 1981 after Mitterrand was elected President and a government including the Communist Party came into office. In June the new government increased people’s purchasing power by putting up the minimum wage, pensions, family allowances and housing benefit but the result was a disastrous failure compared to which what happened under Truss was a storm in a teacup.

The increase in benefits had been paid for by recourse to the printing press; as a result, the internal price level in France got out of line with the international level. The franc was devalued in October and again in June 1982. By this time, the government had learned the lesson that if you are in office under capitalism you must respect its economic laws, and rowed back on its reforms, giving priority instead to trying to revive the profits of business enterprises and adopting a policy of ‘rigueur’ regarding wages and benefits. In March 1983 the franc had to be devalued for a third time.

While, to judge by the programme of the NFP, reformists in France have not learned by their previous failures to improve people’s lives by increasing their purchasing power, reformists in Britain have. The new Chancellor of the Exchequer here is skipping trying to do this and going straight to the ‘rigueur’ stage, called here fiscal responsibility.

Paul Mason Waits For Godot (2015)

From the December 2015 issue of the Socialist Standard

Paul Mason (economics editor at Channel 4 and author of the recent book Postcapitalism: a guide to our future has reported on a paper by the Morgan Stanley economists Charles Goodhart, Manoj Fradhan and Pratyancha Pardeshi (Guardian Weekly, 2 October). Their argument was that global demographic trends have resulted in a glut of labour that has exerted a downwards pressure on wages for the past three decades (the result of a baby boom in developed economies, urbanisation in the industrialising economies and the entrance of millions of women into the workforce). As urbanisation peters out and birth rates fall, it is suggested, a labour shortage will develop leading to a rise in the bargaining power and wages of the labour force. This will counter the predictions of rising twenty-first century inequality by the likes of Thomas Piketty. We will find out in good time who is closer to the mark.

In practice any gains by workers will depend not only on global economic conditions (the vagaries of the business cycle) but on the balance of class forces (improvements in pay and conditions need to be maximised by a strong trades union movement) and on the economic, political and cultural conditions in different localities. Mason, however, regards the report as grist to the mill for his ideas as to how a post-capitalist world may materialise. Faced with the possibility of a higher paid labour force, Mason asserts that the stimulus for businesses to introduce labour saving technology will be increased. He uses the example of McDonalds, which he says is introducing touch-screen technology to replace that portion of its labour force currently taking orders and payments from customers.

The pursuit of flexible labour markets over recent decades has led to a substantial increase of employees on temporary and informal contracts (a section of the workforce Mason calls the ‘precariat’). Mason cites another recent report by economists (at Delft University) that such flexible workforces come at the expense of expanded management and limited incentive to increase productivity through technological innovation. Hence the reason that ‘it’s common to hear politicians of all stripes say that wages need to rise.’ Mason is concerned that these politicians succeed in tackling the presence of the ‘precariat’. The theory goes (as set out in his recent book) that continued increases in productivity will see the value of goods reduce to the point where they become virtually free heralding a transition to a post-capitalist era, a sort of lengthy and convoluted transition from capitalism to a kind of communistic society.

Need for conscious political action

Capitalism undoubtedly does demonstrate a tendency for the price of goods to fall over time due to the development and implementation of labour saving technology. This drive to reduce labour costs (to maximise profits) is a basic feature of capitalism and not just when wages are rising, after all the touch-screen technology being introduced by McDonalds is being carried out despite its labour force consisting of the ‘precariat’.

The drive to innovate may well be stimulated by rising wages but it is doubtful whether the trend for increasing productivity will reduce the value of a significant amount of goods to the point where their value is negligible at any point in the next 50-100 years, despite the fact that some (mainly digital) goods can or could do. Such developments certainly do highlight a major contradiction of capitalist production – an increase in material wealth (more goods) leads at the same time to a fall in the value (per unit) of those goods. However, waiting for this trend to result in a post-capitalist world will probably be like waiting for Godot.

There are contradictions enough in capitalist production for workers to see the necessity in ending it, not just following through the logic of its development. Just as the transition from feudalism to capitalism entailed political struggle, battles over different visions of the future, of different ideals, so will the transition from capitalism to socialism. The difference is that now the struggle is not over one group of owners, of rulers, supplanting another in a struggle in which intentions and ideas were often veiled (by religion) and unconscious. Marx has some interesting things to say on this when he writes about the fetishism (veiled appearance) of commodities:

  ‘The veil is not removed from the countenance of the material process of production, until it becomes production by freely associated men, and stands under their conscious and planned control’ (Capital, Vol.1).

In other words, the transition from capitalism to socialism, by necessity, has to reject capitalist social relations (appearing as a society of free and equal exchange but based on exploitation and the extraction of surplus value from workers) and establish a new society of free association and conscious and planned control of economic activity. In other words, the transformation of a society based on commodities and value (buying and selling) to one based on the free exchange of use-values, the establishment under democratic control of the means of living (nature, factories, transport, etc.). A transition between capitalism and socialism must therefore have to be conscious and clear-sighted and involve a relatively short period of rapid social change, a revolution, a break from one kind of society to another.

The contradictions within capitalism of the kind that Mason cites, that make some goods effectively free (as examples of different social possibilities), may be part of the story of how such a revolution comes to pass. However, there will, at some point, need to be a conscious process of social change and not, as Mason suggests, a lengthy opaque and semi-conscious process where various policies are advocated that would encourage the digital revolution in order to transfigure capitalism rather than end it.

Colin Skelly

The Rich Stay Rich (2018)

From the July 2018 issue of the Socialist Standard

Part Two

Part three of our series on ‘philanthrocapitalism’

If ‘self-made billionaires’ tend to be ‘more willing to give their money away than those who inherit their fortunes’ as Bishop and Green contend then, seemingly, the prospect of philanthrocapitalism making a larger impact on society depends to some extent on a relative increase in the proportion of wealthy individuals who allegedly made their wealth in this way. In other words, on the degree to which individuals are able to become upwardly ‘socially mobile’. On current trends, however, this seems unlikely. If anything, what seems more likely is that the significance of inherited wealth is going to grow in relative terms.

What helps to sustain the myth of ‘self-made men’ is precisely the belief that we live in a socially mobile society in which inheritance plays only a negligible role. This discounting of the importance of inheritance is a characteristic feature of conservative sociological analysis and its barely concealed aim of wanting to justify the existence of gross inequalities. Such inequalities will tend to be more tolerated insofar as it is assumed they reflect the workings of a meritocratic principle. The rich are rich because of hard work, runs the argument. That’s quite true, of course, except that it omits to mention that it is other people’s hard work that made them rich.

In a sense, then, the argument about the role of inheritance in perpetuating gross inequalities is a distraction. Whether the capitalists inherited their wealth or ‘made’ it, that wealth overwhelmingly derives from that portion of the labour performed by working people that is effectively unpaid or unreciprocated. The only virtue in drawing attention to the significance of inheritance in modern capitalism is that it helps to clarify this point and make it all the more obvious.

How significant a role does inherited wealth play in modern capitalism, then? This is a difficult question to answer. Partly this is because what is called ‘inheritance’ is not simply what it is often imagined to be asLisa Keister and Stephanie Moller explain in their article, ‘Wealth Inequality in the United States’:

  ‘We know very little about how wealth is actually inherited because data on inheritance is virtually nonexistent. Indeed, Menchik & Jianakoplos (1998) estimated that between the 1970s and 1990s, as little as 20% and as much as 80% of total wealth may have been inherited. Those who study inheritance typically refer to three forms of inheritance: inheritance at the death of a parent or other benefactor, inter-vivos transfers of money and other assets, and transfers of cultural capital (Miller & McNamee 1998:3) While we typically think of inheritance as occurring at the death of the benefactor, Kurz (1984) estimated that inter-vivos transfers account for nearly 90% of intergenerational wealth transfers’ (Annual Review of Sociology, August 2000, Vol 26: 63-81).

Study after study has confirmed that, far from ‘social mobility’ in America (and elsewhere) increasing, it is on the wane (and, along with it, faith in the ‘American dream’). This seems to have gone hand in hand with the steadily widening gap between rich and poor. If you are born poor today you are more likely to remain poor than was the case with your parents or grandparents but the corollary of that is that, if you are born rich, your offspring are more likely to remain rich, too. Meaning that the role of inheritance is likely to loom ever larger as an explanation for the extremely skewed distribution of income and wealth. Consequently, if it is true that the ‘self-made’ super-rich give more to charity than those who inherit their wealth, this would seem to imply that a relative long-term decline in charitable donations from the super-rich is in prospect.

According to Thomas Piketty, author of the best seller, Capital in the Twenty-First Century (2013), the recent growth in inequality augurs a return to the ‘patrimonial capitalism’ of the Gilded Age and the dynastic wealth of a rentier economy.In America, for example, the share of total wealth owned by the top 0.1 percent increased from 7 percent in late 1970 to 22 percent in 2012. This is approaching levels of inequality to be found in the era of the Robber Barons.

What is driving this process, argues Piketty, is the simple fact that the rate of return on capital has been consistently exceeding the rate of economic growth over the past few decades, meaning the super-rich have been appropriating a steadily growing slice of the economic pie. A kind of positive feedback loop is at work which ensures that, to those who have, shall more be given, simply by virtue of the fact that they have the capital to invest which the rest of us don’t. If you are securing a rate of return that exceeds the rate at which the economy is growing, then, logically, that can only mean you are accumulating wealth at the expense of others who lack capital. Inequalities in the distribution of wealth and income will thus grow. That, in turn, acts to slow down or impede social mobility and thus boost the significance of inheritance. The recipients of this inherited wealth not only benefit directly but indirectly too by capitalising on all advantages that great wealth bestows upon them in terms of social capital, having connections with the right people and so on.

The problem is, as Piketty suggests, that while some of the super-rich might claim to have earned their wealth by the sweat of their brows, plainly the same could not really be said of their offspring inheriting this wealth. The corollary of reduced upward mobility is obviously reduced downward mobility – meaning an increased capacity for the super-rich to hang on to their huge fortunes and thus to pass them on to their heirs.

Inheritance is thus the cuckoo in the nest of capitalist ideological legitimation. With the rich getting increasingly richer at the expense of the rest, more and more discrediting the myth of upward social and intergenerational mobility, it is going to be increasingly difficult to justify their huge fortunes in the face of these stubborn realities. The disconnect between ‘merit’ and ‘reward’, which were never closely linked to begin with, will become ever more apparent.

This is where the ideological significance of philanthrocapitalism comes into the picture. It represents an attempt to shore up a failing mechanism of ideological legitimation by projecting an image of the philanthrocapitalist as a generous benefactor and of capitalism itself, as a system that can be philanthropic, working for the good of mankind  (http://philanthrocapitalism.net/about/faq/). It is the application of a fresh lick of paint on a crumbling façade that barely conceals the stark structural reality of capitalist exploitation.

Exploitation and charity

While philanthrocapitalism focuses on what the rich give to the poor it would be far more to the point to focus on what the poor give to the rich. According to Barbara Ehrenreich the appropriate response to such giving ought to be one of ‘shame’:

  ‘shame at our own dependency, in this case, on the underpaid labor of others. When someone works for less pay than she can live on — when, for example, she goes hungry so that you can eat more cheaply and conveniently — then she has made a great sacrifice for you, she has made you a gift of some part of her abilities, her health, and her life. The “working poor,” as they are approvingly termed, are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect’ (Nickel and Dimed: On (Not) Getting by in America, 2001).

However, the problem with Ehrenreich’s way of framing the whole question is that it is seriously misleading. She is focussing only on the lowest paid members of the working class, those who are ‘underpaid’. The presumption seems to be that were they not ‘underpaid’ but paid at the going rate they would have no cause for grievance. Her perspective is the suppressed view of a ruling class which she faithfully echoes in talking of ‘our’ dependency on the ‘underpaid labour’ of others. She ignores completely the unpaid labour that workers in general contribute towards the accumulation of capital even when they are not ‘underpaid’. Her sympathy for the ‘working poor’ is the sentiment of a guilt-ridden liberal trying to eradicate the more unpalatable aspects of contemporary capitalism and to soften some of its rough edges.

What makes the working class – not just Ehrenreich’s ‘working poor’ – ‘the major philanthropists of our society’ is the brute fact of surplus value, the value which our class creates over and above what it receives by way of a wage. As Friedrich Engels put it: ‘It is infamous, this charity of a Christian capitalist! As though they rendered the workers a service in first sucking out their very life-blood and then placing themselves before the world as mighty benefactors of humanity when they give back to the plundered victims the hundredth part of what belongs to them!’ (The Condition of the Working Class in England, 1845).

But even if we look at philanthropy in its more conventional sense as the voluntary donation of money and effort to others, it is quite misleading to portray this as the prerogative of the rich alone. Workers likewise give handsomely in this sense.

Indeed, according to one survey, individuals with incomes below $25,000 gave away around 4.2 percent of their income while those on an income of $150,000 or more gave away around 2.7 percent. Research carried out by Dacher Keltner revealed that ‘lower class people just show more empathy, more prosocial behavior, more compassion, no matter how you look at it’ (LINK.)

Robin Cox

(Next month, concluding article: No Such Thing As A Free Gift)

Top, Middle and Bottom (2016)

Book Review from the February 2016 issue of the Socialist Standard

'Social Class in the 21st Century', by Mike Savage et al. Penguin £8.99

This book is based on the findings of the Great British Class Survey (see www.bbc.co.uk/news/magazine-22000973), previously discussed in the Socialist Standard in May 2013. This was launched on the BBC website in 2011, and the analysis here derives from an impressive first round of 161,000 responses, supplemented by further face-to-face interviews, as those who took part in the online survey were disproportionately higher up in the social scale and living in England.

The authors distinguish three kinds of capital (this term is not used in the Marxist sense of means of production used to employ wage labour for the sake of profit). Economic capital is a person’s income and wealth (savings and the value of their home). Cultural capital, a concept taken from the work of Pierre Bourdieu, is a matter of a person’s tastes and interests, and is divided into two kinds: highbrow (going to art galleries, eating in French restaurants, liking jazz, etc) or emerging (using the internet, going to the gym, spending time with friends and so on). Social capital relates to your social networks, the kinds of people you know and how well you know them (knowing ‘the right people’ may help you get a job with a law firm but won’t help with a job in IT).

Based on these criteria, no fewer than seven social classes are identified: elite, established middle class, technical middle class, new affluent workers, traditional working class, emerging service workers and precariat. A person’s place in this is determined by their income and savings, their ‘score’ for the range of people in different occupations they know (boosted by knowing those in higher status jobs), and their cultural capital. For instance, new affluent workers will have on average household income of £29,000 and little in savings (so ‘affluent’ is something of a misnomer), and be roughly in the middle in terms of the value of their house. But they score quite highly for their range of social contacts and they have rather more emerging than highbrow cultural capital. Though social class in the way used here is not directly linked to occupation, the authors have stated elsewhere that members of this class might well work as electricians, postal workers and catering assistants, among others.

The classes falling between the elite and the precariat do not form a simple hierarchy, but are clearly distinguished from those at the top and bottom. The precariat, forming about 15% of the population, have an average household income of just £8,000 and very little in savings, and get low scores for cultural and social capital. They are often stigmatised, and women in this class were well aware that they were at the bottom of the heap, while men were ‘more resistant’ to consideration of class.

In contrast, the elite had average household income of £89,000, with sizeable savings and valuable houses; they had extensive social contacts and scored particularly highly for highbrow cultural capital. They form about 6 percent of the population, so they are far more than just the top 1 percent (compare Thomas Piketty’s discussion of the ‘9 percent’, those in the top 10 percent but not in the top 1 percent, who they are clearly distinguished from). This income (which is for the household and so may include more than one wage) is well above the average but of course is very small when compared to the really top incomes, of millions a year, for those who may have billions in wealth and several large mansions. And assets accumulated from the past (whether savings or houses) are far more important than current income. There is relatively little mobility into this elite, and also little down from it. As the richest get even richer and pull away from the rest of the population, so those lower down have much farther to go to get to the top (a larger hill to climb, in the metaphor used here).

The volume contains a lot of other interesting points, some related to changes in society. Highbrow cultural capital is increasingly confined to an older age group, and there are links between class and age: new affluent workers and emerging service workers are much younger on average than those in the traditional working class. Attending a prestigious university such as Oxford, Cambridge or the LSE is still a real help in joining the elite and so amassing large savings. Most people have more wide-ranging social ties than fifty years ago. Less than a third of respondents thought of themselves as belonging to a social class, though when pressed 62 percent ‘gave themselves some kind of working class identity’.

But the classes identified here do not have shared interests as against the rest: nobody is ever going to say ‘New affluent workers of the world, unite!’, nor will they ever form a class for itself (Marx’s term for a class conscious of its status and interests, mentioned in the Introduction). And, when all is said and done, an approach which puts dentists in the elite alongside multi-millionaires is missing quite a lot. 

Paul Bennett

'Capital in the Twenty-First Century' (2014)

Book Review from the September 2014 issue of the Socialist Standard

Book Review from the September 2014 issue of the Socialist Standard.

Capital in the Twenty-First Century. By Thomas Piketty. Harvard University Press. 700 pages. 2014

Capitalism is based on the ownership and control of the means of wealth production by a minority. This can take various forms but, historically, the most usual – what might be called the classic form – has been through private property titles vested in individuals and enforced by the courts and the state generally. Another has been direct minority control of the state where ownership of most means of production is vested in the state, as in the old USSR.

Where ownership is through private property rights, minority ownership can be shown from the degree of concentration of property titles. This can be worked out from inheritance tax returns, wills and household surveys. The results in all countries show a very unequal distribution of wealth amongst the population .

The minority ownership of the means of wealth production is also reflected in the unequal distribution of income, due to the large non-work, property income of the top property-owners.

In this much-discussed book French economist Thomas Piketty has assembled data about the distribution of wealth and of income covering over two centuries, mainly from France, Britain and the US but also from other European countries and some in Asia and Latin America. He posits an economic law that the distribution of wealth tends to become more unequal, in that the top 10 percent come to own proportionately more, the wider is the gap between what he calls the ‘rate of return on capital’ (r) and the rate of growth (g).

What is capital(ism)?

Although he sets out two ‘fundamental laws of capitalism’ he never actually defines what he means by the term. He does, however, define ‘capital’:

‘In this book, capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market. Capital includes all forms of real property (including residential real estate) as well as financial and professional capital (plants, infrastructure, machinery, patents, and so on) used by firms and government agencies’ (p. 46).

This is not the definition of either conventional or Marxian economics as it includes land and owner-occupied houses. So his ‘rate of return on capital’ is not the same as the rate of profit, which is the ratio of profit to wealth invested in production with profit in view. Piketty himself recognises this:

‘… the rate of return on capital measures the yield on capital over a year regardless of its legal form (profits, rents, dividends, interest, royalties, capital gains, etc.), expressed as a percentage of the value of capital invested. It is therefore a broader concept than the ‘rate of profit,’ and much broader than the ‘rate of interest,’ while incorporating both’ (p. 52).

It will in fact be less than the rate of profit, which is normally much higher than the 4-6 percent that Piketty calculates as the range of his rate of return.

There is another peculiarity about his ‘rate of return on capital’. In some of his graphs he applies it to pre-capitalist times so it comes to mean any return, in whatever form, that property-owners obtain by virtue of owning property, including the labour service of feudal barons and the slave-labour of slave-owners in ancient Greece and Rome and not just the financial returns on marketable wealth as under capitalism.

This means that his claim at one point that r > g is ‘the fundamental structural contradiction of capitalism’ (p. 572) cannot be sustained. It is not even a contradiction but would be some measure of the exploitation of the producers in all private property societies whether or not that property or its income are marketable.

He offers no explanation as to how and why there should be a ‘return’ on capital but simply takes its existence for granted. There is no understanding that it only arises in private property societies and amounts to a tribute extracted from the producers – under capitalism from the class of wage and salary workers – by those who monopolise the means of wealth production.

It’s the same with ‘growth’, which he defines as the increase in a year of national income plus the increase in population. He just accepts that it happens as productivity and population increase. There is no understanding that what drives the capitalist system is the economic imperative, imposed through competition, on individuals and firms, who have invested in production, to maximise profits and accumulate them as more and more capital. Even so, his criticism of capitalism as he understands it is pretty damning.

Degrees of inequality

Thomas Piketty

Chapter 10 on ‘The Inequality of Capital Ownership’ has tables which show that in France the top 10 percent currently own just under 60 percent of total wealth and the top 1 percent nearly 25 percent. The figures for Britain are 70 percent and 29 percent; for the US 70 percent and 32 percent; and for Sweden (said to be the least unequal country in the world) 59 percent and 20 percent.

The tables also show, as graphs, the evolution of wealth-owning inequality for the two hundred years from 1810 to 2010. The highest degree of inequality was reached in 1910 when the top 10 percent in France owned 89 percent and the top 1 percent 60 percent; in Britain it was 90 percent and 70 percent and in Sweden 90 percent and 60 percent. At that time the US was less unequal than Europe with 80 percent and 45 percent.

The tables confirm the socialist contention that the basis of present-day society is the ownership of the means of wealth production by a minority. But they also show that the degree of inequality has gone down as well as up during this two-hundred year period. This requires an explanation. Piketty offers two.

The first is a long-run secular trend which he calls ‘the emergence of the patrimonial middle class’ by which he means that the share in total wealth of the middle 40 percent – those in between the top 10 percent and the bottom 50 percent – has increased since 1910. This statistical category has come to acquire enough wealth to own, together, between a quarter and a third of total wealth. This has had the statistical result of reducing the share of the top 10 percent but has not affected or reduced or been at the expense of the amount of wealth of the top group, whose wealth has continued to grow in absolute terms.

It should be noted (though Piketty doesn’t) that a large amount of the wealth of the middle 40 percent takes the form of the houses they live in and which have been paid for but which are not capital in the sense of an asset that brings in an income. This means that the figures in the tables underestimate the degree of concentration of the amount of assets that do bring in an actual property income.

Piketty notes that this shift has not affected the share of ‘the poorest half of the population, whose share of total wealth has always been miniscule (generally around 5 percent), even in Sweden (where it has never been more than 10 percent)’ (p. 347).

The exception not the rule

The second explanation that Piketty offers as to why the share of the top 10 percent fell in the period 1920-1970 develops his theory that the wider the gap between r and g the stronger the trend towards greater inequality. His explanation is that during this period the rate of return was reduced by the destruction of wealth during the two world wars of the period and by the devaluation through inflation of capital invested in government bonds. At the same time the rate of growth increased due to reconstruction work. The result was a reduction in inequality beyond that caused by the rise in the share of the middle 40 percent.

This explanation makes this period, when the rate of return, the share of income from capital in national income and the share of the top 10 percent in national wealth, all fell – in other words, when the richest were squeezed a little, though hardly till the pips squeaked – an exception to the normal working of capitalism.

The normal or ‘natural’ tendency as he calls it, for Piketty, is for the rich to get proportionately richer. In fact he argues that the degree of inequality will tend to increase in the course of the 21st century on the grounds that growth is likely to be slower while the rate of return can be expected to remain the same, so that the gap between the two will widen. He sees this as a danger to democracy and the welfare state (which he calls ‘the social state’). As an old-fashioned Social Democrat reformist (he is a supporter of the French ‘Socialist’ Party) he wants to stop and reverse this trend and probably wrote the book to drum up support for measures aimed at achieving this.

The trouble, from his point of view, is that his theory, if valid, provides a powerful argument against the chances of this reformist campaign succeeding. It means that the reformists in this field have set themselves the task not simply of reducing inequality in the ownership of wealth but also of overcoming economic forces working in the opposite direction.

That legal private property capitalism has a tendency for the rich to become richer in absolute terms is a consequence of the accumulation of capital (in the sense of wealth used to produce more wealth with a view to profit). Where there are private property rights over means of production the income these ‘yield’ when used as capital goes to the owners and the part that is re-invested (accumulated) is added to their wealth, ie, they become richer. This is a tendency the reformists will have working against them, whether or not Piketty is right about there also being a tendency too for the rich to get richer relative to the rest of the population.

The measures he proposes in Part Four to stop the rich getting richer are incredibly weak – higher taxes on high incomes (on the ‘supersalaries’ of the ‘supermanagers’ as well as the investment income of the rich) and a wealth tax. He recognises that no one country is likely to adopt this for fear, in the context of globalised capitalism, of putting off outside investment and so proposes a ‘global wealth tax’. Which is even more unlikely.

In any event, it is not a less unequal distribution of wealth and income that will help solve the problems that the class of wage and salary earners and their dependants face under capitalism. It is for the minority who monopolise the means of wealth production to be expropriated and for these to become the held in common so that they can be used to turn out what people need instead of things for sale with a view to a profit for their owners as at present.

Adam Buick

Cooking the Books: The Falling Rate of Profit (1) (2014)

The Cooking the Books column from the August 2014 issue of the Socialist Standard

In his much talked-of book Capital in the Twenty-First Century (to be reviewed next month) Thomas Piketty has a section headed ‘Back to Marx and the Falling Rate of Profit’ where he accuses Marx of holding that ‘capitalists accumulate ever increasing quantities of capital, which ultimately leads inexorably to a falling rate of profit … and eventually to their own downfall.’ Earlier he had said that Marx’s theory ‘implicitly relies on a strict assumption of zero productivity growth over the long run.’ Since Marx’s ‘law of the tendency of the rate of profit to fall’ is based precisely on a long-run growth of labour productivity this is a bizarre accusation.

A clue as to what is behind it is a passage elsewhere where Piketty equates ‘economic growth’ with ‘growth in output per capita, which is productivity growth’. So it is this that Marx is accused of ignoring. It is true that Marx does not employ this concept but it is not true that he was unaware of it, as in section 5 of chapter 25 of Volume I of Capital on ‘The General Law of Capitalist Accumulation’ (which Piketty himself cites) Marx does compare the rate of increase of profits and the rate of increase of population for the period 1853 to 1864. He even quotes from the Registrar General’s report on the census of 1861 that ‘rapidly as the population has increased, it has not kept pace with the progress of industry and wealth.’

In any event Marx would not have regarded total output per capita as a measure of productivity at national level. He would have defined this rather as total output divided by the number of productive workers.

What Piketty appears to be trying to do is fit what he thinks is Marx’s view into his own categories. He lays down as a ‘first fundamental law of capitalism’ that the share of income from capital in national income = the rate of return on capital multiplied by ratio of the stock of capital to national income. This last, known in conventional economics as the capital/income ratio, or the stock of capital expressed as a multiple of national income (or output, the same thing), is obviously affected by the rate of growth of national income.

Piketty is accusing Marx of assuming an unlikely very high and rising capital/income ratio. According to his first fundamental law of capitalism, the higher is this ratio the higher too is the share of income from capital in national income. If, for instance (as Piketty points out Marx assumes in some of his examples), the stock of capital is ten times annual national output and the rate of return on capital is 5 percent, then capital’s share of national income is 50 percent. Piketty adds that if the capital/income ratio ‘is extremely high, then the rate of return on capital must get smaller and smaller and closer and closer to zero, or else capital’s share of income will ultimately devour all of national income.’ This was why, according to him, Marx had to assume a falling rate of profit.

Piketty says that the only way out of this difficulty is a reduction in the capital/income ratio brought about by an increase in the growth of national income per capita. But Marx does not need rescuing by introducing this since he never held the theory Piketty attributes to him. Marx did hold that there was a slow long-run tendency for the rate of profit to fall (though not for the reason Piketty gives) but he also listed a number of counteracting tendencies too. This meant that there was nothing ‘inexorable’ about it.

Cooking the Books: Capitalism and Inequality (2014)

The Cooking the Books Column from the May 2014 issue of the Socialist Standard

The Observer (13 April) carried an interview by Andrew Hussey with Thomas Piketty, a French economist whose views on capitalism are, apparently, the talk of the town amongst economists. He is the author of a book Capital in the Twenty-First Century which is said to show that growing inequality is a built-in feature of capitalism.

In the interview Piketty says that, going through the data from the 19th century for Britain and other countries, ‘I saw a pattern beginning to emerge, which is that capital, and the money it produces, accumulates faster than growth in capital societies.’ What he is saying he has discovered is a tendency for a larger and larger proportion of new output to be accumulated as new capital. As a result, over time, the income from capital (property incomes such as profit and interest) grows faster than other incomes (mainly wages and salaries). The rich get richer. He claims, ‘I have proved that under the present circumstances capitalism simply cannot work.’

The key phrase here is not the claim that capitalism cannot work (it clearly can, even if this involves the rich getting richer) but the ‘under the present circumstances’ which suggests that under other circumstances capitalism could work. That this is his view can be seen by his proposal in the interview for ‘a progressive tax, a global tax, based on the taxation of private property.’

However unlikely it might be that any government would adopt what he calls in French a ‘révolution fiscale’ and impose high taxes on property and property incomes – Will Hutton in a comment in the same paper on the interview writes of ‘a top income tax rate of 80%, effective inheritance tax, proper property taxes and, because the issue is global, a global wealth tax’ – the implication must be that Piketty thinks that, if ever this was done, it would stop the rich getting richer.

It is not clear from the interview how Piketty defines capitalism. He seems to mean what the French call capitalisme sauvage, or unregulated, wildcat capitalism. If so, then his claim to have shown that ‘capitalism simply cannot work’ is reduced to the lesser claim that unregulated capitalism cannot work. This is a powerful refutation of the free marketers but is still suggesting that capitalism can be reformed ‘to work’.

The similarity between Piketty’s view and that of Marx on how capitalism works to make the rich richer is obvious but there is a difference. Piketty is more concerned with the distribution of the income from capital while Marx was concerned with the accumulation of capital itself irrespective of who owns it (whether individuals, corporations or the state) or who benefits personally from it.

Piketty claims in the interview that the data his research uncovered ‘contradicted nearly all of the theories [of inequality] including in Marx and Ricardo.’ He doesn’t say in the interview what he thinks Marx’s theory was, but elsewhere he has made it clear that he is criticising the theory of the long-run tendency for the rate of profit to fall (a position held, in different forms, by both Marx and Ricardo). He doesn’t think that there is any such tendency.

And of course, unlike Piketty, Marx never advocated trying to stop or reverse capital accumulation and/or the rich getting richer through legislation or government action. The distribution of property income amongst the rich can be changed, but that would make no difference to those whose income is derived from working. The way out is to get rid of capitalism.