Paul Krugman calls it "the most important economics book of the year - and maybe of the decade. The New Yorker Magazine says it's a book that "nobody can afford to ignore." And not to be outdone in the kudos category, The New York Times Magazine says that its the "blockbuster economics book of the season."
What are they all raving about? Thomas Piketty's Capital in the Twenty-First Century, a synthesis of analyses of national accounts done over the last fifteen years with a particular focus on the hot-button issue of income and wealth inequality. I'm going to write two reviews of the book, the second a detailed analysis of the methodology employed by Piketty and his colleagues, but go below the fold for a briefer comment on the basic assumptions that underlie the work itself.
The good news is that Piketty, who comes out of the French structuralist school, understands and employs a longue duree view; i.e., he distances himself from the "here and now" school of modern economics which looks at data over the short term, and instead wraps his analysis within data-sets that spread over several hundred years. In that regard he finds that the extraordinary growth rate of Western capitalism that narrowed the wealth gap between 1940 and 1980 in the United States (beginning after WWII in Europe) was not only an anomaly in Western history, but is probably never going to be repeated again.
I'll save until Part 2 my analysis of the methodology and data that Piketty uses to justify this quasi-Doomsday forecast for the US economy, although to be fair he goes out of his way to remind readers on multiple occasions that there's a good chance that he'll be as wrong as he might be right. Nevertheless, if you want to place Piketty within the current inequality debate, he's clearly on the side of those who believe it not only to be real, but more important, is convinced that economic inequality, as he defines it, is a threat not only to democratic values, but can be blamed for "the violent political conflict that inequality inevitably instigates."
Were this only true. Of course inequality breeds conflict, of course differences in living standards create hardships for some, which may lead to violence as the have-nots decide to even things up with the haves. But when I think about political violence in the 20th Century, it's hard to imagine that most of it arose out of inequality or any other form of socio-economic discontent. For example:
-- The Nazis didn't murder 6 million Jews, 4 million regime opponents and 20 million Russian civilians because of economic inequality. Did they exploit the feelings of anger and humiliation vis-a-vis the French and Versailles in their electoral victory of 1933? Of course they did. But the bestiality and savage violence of the Nazi regime only began after the economy started to recover in the run-up to World War II.
-- Did the murder of nearly one million Rwandans in less than three months take place because of income inequality? As I recall, this wanton slaughter was the work of Hutu militia, who viewed the Tutsi population as a racial, but certainly not an economic threat.
-- Remember Pol Pot? Nobody really knows how many were slaughtered between 1975 and 1979, but while some of the victims were from the upper-class, the truth is that the Cambodian genocide was basically an attempt to secure political authority for the Khmer Rouge.
-- And let's not forget Presidents Kennedy, Johnson and Nixon who, on the advice of the "best and the brightest" killed 66,000 Americans and God knows how many millions of Vietnamese, Cambodians and Laotians in an effort to keep the dominoes from all falling down.
Don't get me wrong. I'm not saying that economic inequality is a good thing. But the ability of modern governments to extend authority through the massive use of violence goes far beyond any degree of death and destruction that arises out of unequal wealth or resentment over the same.