IN PURSUIT OF THE JUST ECONOMY

Dick Pountain/ Political Quarterly/ 18 Jul 2020

Book Review: ‘Capital and Ideology’ by Thomas Piketty, Belknap Press Harvard, 2019, pp1091

Thomas Piketty's place as the current scholar of inequality would be hard to dispute. His first huge project, 'Capital In The Twentieth Century' assembled and analysed statistical evidence for economic inequality throughout recorded history, demonstrating that it had remained roughly constant until exponential growth began after the British Industrial Revolution. This growth was interrupted by a pronounced dip between the 20th-century's two World Wars, but has now resumed to a point where 1% of the world population owns 50% of its wealth. 

In this new volume ‘Capital and Ideology’, Piketty applies the same meticulous research methodology to the related question of the different ways that people have justified economic inequality throughout history, and to what was responsible for that dip, which takes him into the realm of political economy. Comparison of his work to Karl Marx's Capital feels inescapable – the significance of his focus on ‘inequality’ versus Marx's focus on ‘exploitation’; the choice of ideology for his second volume, when Marx famously didn't live long enough to fully tackle the subject. However Piketty ends the book with a set of radical and concrete proposals that perhaps demand more attention given the current worldwide crisis. 

Piketty diverges from Marx right from the start, since for him ideology isn’t entirely determined by the mode of production but is conditioned by multiple factors and thus can play out differently at different places and times. In this he is closer to Weber, Veblen, Bourdieu and Boltanski. The gap widens since he treats ‘class’ not as the foundational category it was for Marx but as a secondary effect of factors that include income, wealth and education. He starts the book with a definition of ideology so commonsensical as to be an affront to post-Althusserian, post-modern orthodoxy: 

I use “ideology” in a positive and constructive sense to refer to a set of a priori plausible ideas and discourses describing how society should be struc­tured. An ideology has social, economic, and political dimensions. It is an attempt to respond to a broad set of questions concerning the desirable or ideal organization of society. Given the complexity of the issues, it should be obvious that no ideology can ever command full and total assent: ideological conflict and disagreement are inherent in the very notion of ideology.

For Piketty all ideologies exist to answer two categories of question – about borders (who is us and who is them?) and about property (who’s allowed to own who or what?). The bulk of ‘Capital and Ideology’ consists of detailed examinations of statistics about various ‘inequality regimes’ that have arisen throughout history and across the world – this is not a wholly Eurocentric work even if he does apologise for speaking only French and English. 

Like Marx he periodises history, but not into the same eras. For Piketty premodern societies have a ternary or ‘trifunctional’ structure divided between three classes, the military (warriors, kings, nobles), the clerical (priests, lawyers, scholars), and a ‘third estate’ of merchants, artisans, peasants and workers. The French Revolution marked the first overturning of such an order, to inaugurate the era of ownership or ‘proprietarian’ regimes which separate possession of power from property and create the modern state (though for a long time political rights remain confined to property owners). Proprietarian regimes diminish the influence of the clergy and instead ‘sacralise’ private property itself to render it unquestionable by any political agent. 

The first three parts of the book deal with premodern trifunctional and slave societies, proprietarian and colonial societies, and culminate with the more egalitarian communist and social­-democratic regimes that arose in the 20th century after periodic crises of proprietarian regimes generated resistance from the lower, ‘disadvantaged’ classes. It was these regimes which created that mid-century dip in inequality. In a review of this length I can barely sketch the breadth and complexity of Piketty’s analysis so I’ll cut straight to the chase: he regards communism and social democracy as both having failed, causing a return to extreme inequality in the ‘hypercapitalist’ and ‘postcommunist’ societies we are living through in the 21st century.

For Piketty communism failed because dogmatic application of Marxist theory merely sacralised state property instead of private property: the authoritarianism and economic stagnation this engendered undid those regimes so deeply that post-communist regimes in Russia, China, and Eastern Europe have become staunch supporters of 21st-century neo-liberal ‘hypercapitalism’. It also instilled in the Western democracies a “dis­illusionment, a pervasive doubt about the very possibility of a just economy, which encourages identitarian disengagement”.

He concedes that the social-democratic alternative was the more successful, but began to unravel with the elections of Ronald Reagan and Margaret Thatcher (a process completed by the elections of Donald Trump and Boris Johnson). Social­-democratic parties had lost the ability and ambition to redistribute wealth, which allowed the living standards of middle and working classes to stagnate and then erode. Competition between states to lower taxes, encouraged for example by EU membership, compounded this situation. Post-war educational reforms gradually lead to those with higher education voting Left while those without voted Right, an ironic role-reversal that anti-i­mmigrant parties (and factions within older parties) were quick to exploit. Also, while for 50 years the mere existence of a communist counter-model had inhibited capitalist elites and par­ties hostile to redistribution, that inhibition was lifted with the fall of the Soviet Union. But for Piketty the most significant flaw of social-democratic politics lay in confining itself within the nation state, and thus failing to construct the international structures needed to combat capitalist tax evasion and outsourcing. 

For me the crux of his argument, and the most engrossing part of the book, is Part 4 entitled ‘Rethinking The Dimensions Of Political Conflict’. In three chapters on ‘Borders and Property’, ‘Brahmin Left’ and ‘Social Nativism’ Piketty applies his schemas to the current politics of the UK, USA, Europe, India and Brazil. By analysing statistics on voting patterns, wealth and education he demolishes perceptions of the balance of electoral forces on both Left and Right. His thesis will be controversial and likely to evoke furious condemnation from the Left. He contends that the Left-Right cleavage (which he labels as ideologically ‘classist’) is being displaced by a more complex set of contests:

Briefly put, the social hypothesis is this: that the less educationally advantaged classes came to believe that the parties of the left now favor the newly advantaged educated classes and their children over people of more modest backgrounds [...]  the classist left­ right party systems of the postwar era have given way to a system of dual elites consisting of a “Brahmin left” attractive to the highly educated and a “merchant right” attractive to the wealthy and highly paid.

The political struggle is no longer two- but four-sided: inegalitarian internationalists (pro-immigrant, pro-rich); inegalitarian nativists (anti-immigrant, pro­-rich); egalitarian internationalists (pro­-immigrant, pro-poor); and egalitarian nativists (anti-­immigrant, pro­-poor). Older ruling parties, like both Labour and Conservative in the UK and Republican/Democrat in the USA, are often internally split along such lines, and egalitarian nativists may of course merely adopt an egalitarian pose as an electoral tactic – a whole three-page section is devoted to his critique of the term ‘populist’. 

Piketty is certainly a reformist, but not a liberal reformist. In the final chapter 17 of Part 4 he proposes fiscal and legal measures sufficiently radical that if implemented they would, he claims, transcend capitalism: he regards them as a minimum requirement to bring the egalitarian portions of the electorate back together. These measures include a return to steeply progressive taxation, with confiscatory wealth, property, inheritance and carbon taxes. Rather than a universal basic income he demands a universal capital endowment to be paid to everyone on their 25th birthday. Industry is to be co-managed through compulsory representation of workers on all company boards, and fiscal transparency to be imposed through a world-wide financial register. And to top it all off, Piketty recommends constitutional amendments to protect these measures against future diminution. 

He refrains from putting exact figures on tax rates and board numbers on the grounds that these are matters for public, political debate and negotiation, hence his own preferred label of ‘participatory socialism’. Such policies could equally be described as radical, ‘Bernsteinian’ social democracy. Whatever we call them, they’re precisely the concrete political-economic policies so badly needed by, but so conspicuously absent from, recent radical movements like Occupy Wall Street. 

Marx’s ‘Capital’ was the foundational document of 20th-century labour movements and thus changed history, but his insights became ossified into a quasi-religious dogma that still hinders even the democratic Left via an unspoken teleological belief that history leads us inevitably toward success: “would be revolutionaries who argue that nothing can be done until the conditions for revolution are ripe” in Piketty’s words. The 21st-century world he analyses is one already altered by Marx, and his multi-factorial approach can help us understand why the Left/Right demarcation became so confused. 

Capitalists will certainly mobilise colossal resources to oppose these measures, and when I first proposed this review to our esteemed Literary Editor on 19th February 2020 I might well have joined a chorus accusing Piketty of naivety. What neither of us knew was that 9 cases of Covid-19 had been reported in the UK that day. Two weeks later there were 85, a month after that 43,282. That's what 'exponential' looks like, those are the sorts of fact in which Piketty deals. We face economic meltdown of a depth yet to be plumbed, and maybe a moment of historic bifurcation where the only alternatives are something like Piketty’s participatory socialism or descent into a neo-feudal regime with most people jobless and poor, and the insulated, corona-vaccinated 1% as a new ‘nobility’. 

WORLD ON FIRE

Dick Pountain/Tue 23 March 2004/10:08 am/Political Quarterly

BOOK: 'World On Fire'
AUTHOR: Amy Chua
PUBLISHER: William Heinemann, London 2003
ISBN: 0-434-01220-3

The current state of the world presents us with a number of paradoxes, not least of which is that the deeply conservative administration of George W. Bush appears to be cleaving to a Whig interpretation of history. Bush supporters are apparently convinced that the whole of history so far has been leading us toward the present triumph of free markets, democracy and multiculturalism, which must now be accepted without question as our greatest virtues. Since the collapse of Communism that culminated in the 1989 fall of the Berlin Wall, it's been almost universally assumed that any continuing advance of history (pace Fukuyama) must be brought about by exporting these virtues to the rest of the world: that is, to those countries we refer to as the 'developing' countries which lack one or all of them. Most of the principal political parties throughout the Western world now subscribe to such an interpretation, included both main parties in the USA and the UK. Bush's stated objective is to impose them through military action in certain pathological cases. 

However virtues are inadequate for understanding today's world, partly because they, by definition, lie beyond criticism, and partly because they obey a seductive but false arithmetic in which applying two virtues together always results in another one. The bigger problem is of course that they don't actually exist. What exist are flesh-and-blood people and their institutions, whose messy variety cannot be contained by such simple abstractions - in the arithmetic of the real world, applying democracy on top of a free market sometimes results in wealth and happiness, but sometimes results in genocide. It takes some courage to point out this fact in the present hysterical climate, because to question multiculturalism can get one branded a racist, while to question whether free markets and democracy are a universal panacea is seen as unreconstructed Communism or Trotskyism. Amy Chua, in her persuasive book 'World On Fire' finds her way out of this Platonic cavern without falling into any of those three deadly sins.
 
Chua is neither a political scientist nor an economist but a professor of international law at Harvard, and perhaps it's the unsentimental detachment proper to that profession that allowed her to notice, where so many seem to have been blind, that the introduction of free markets and democracy in many developing countries has not automatically produced good effects. The reason she deduces is rivalry between ethnic groups, which can be exacerbated enormously when a free market enriches one group at the expense of others - and if the others happen to form the majority, democracy offers them the opportunity to take power and exact bloody revenge against their exploiters. Chua did not need to dig far for her raw materials, merely to harvest them from the newspaper headlines: massacres of Chinese in Indonesia in 1998; land-grabs in Zimbabwe from that same year up till the present; the hellish genocides in Rwanda and Bosnia; and so, sickeningly, on.

That this connection has not been made so clearly before may well be because it's hardly respectable to talk about ethnicity at all in many circles, because someone is bound to accuse you of, at best, essentialism and at worst racism. In this respect Chua has a valuable advantage in her own Philipino-Chinese descent, and perhaps in her female gender too (it's worrying to ponder how differently this book might have been received had it been written by a white Anglo-Saxon male). 'Ethnic' was originally adopted as a euphemism for 'racial' but is incapable of suppressing the dangerous ambivalence that surrounds the whole subject and has split under the tension to become on the one hand a category of consumerism (ethnic jewellery, restaurants, furniture, fashion) and on the other a category of terror (ethnic cleansing). Chua takes a no-nonsense approach to the term, refusing to become bogged down in definitions of ethnicity. For her purposes an ethnic group is one which defines itself so: "I will assume that ethnicity is not a scientifically determinable status". She treats ethnic identity instead as "a sense of belonging to a people, that is experienced 'as a greatly extended form of kinship'", which is not static but constantly shifting, and most importantly, is malleable and manipulable by ideologues. For example the division between Hutu and Tutsi in Rwanda was a vague and permeable one 200 years ago, with much intermarriage, but the Belgian colonists deliberately entrenched and inflammed it by issuing ethnic identity cards on the the basis of nose-length and and head-size.

Such Deweyian pragmatism pervades the whole book, which is therefore refreshingly free of post-modern jargon. Chua only employs two terms that might be called jargon, both of which are crucial to the exposition of her argument. A 'market-dominating minority' is a social grouping (self-defined, or sometimes defined by its opponents) that concentrates ownership of a nation's wealth out of proportion to its numbers, and 'ethnonationalism' is a type of ideology similar to nationalism but applying only to a sub-group within a nation, such as the Hutu Power movement in Rwanda or India's BJP. Note that 'market-dominating minority' doesn't presume an ethnic definition, so it can equally be applied to classes such as the industrial and media-owning classes of the USA, or even to a political clique like the nomenklatura in the old USSR. Chua's argument is that is precisely in those places where a market-dominating minority is *also* a separate and identifiable ethnic group that the combination becomes explosive. Relatively poor majority populations often tolerate the enrichment of their 'own kind' - in the USA they even welcome it as evidence of the possibility of social mobility for all. However where the wealth is all in the hands of an ethnic 'them', the conditions for a genocide may arise, because class and ethnicity pulling in the same direction exert sufficient force to break a society.

In many of the countries that Chua discusses, a clear historical progression can be seen to lead up to civil disturbance or genocide, the stages of which go something like:
a) During the mid to late 20th century, nationalist or socialist goverments expropriate the assets of a market-dominant minority
b) As a result the national economy all but collapses.
c) In the 1990s or 2000s privatisation is introduced to revive the economy.
d) Under privatisation the old minority prospers even more disproportionately than before.
c) Mass democracy brings the party of the impoverished majority to power.
Such scenarios don't alway lead immediately to genocidal confrontation. Sometimes, as in South Africa, a charismatic leader (Mandela) can engineer a 'soft landing'. More often a form of 'crony capitalism' emerges where the leaders of the party of the majority are bribed by the market-dominating minority to keep the lid on, the Marcos and Suharto regimes being prime examples. In all cases though, the underlying situation remains unstable and combustible.

Chua mostly wields her two abstractions - market-dominating minority and ethnonationalism - in a sensitive and pragmatic way, seldom forcing examples to fit into her template. By doing so she can explain a lot of the violence in the world that might otherwise appear as purely irrational. In the case of Weimar Germany, she is at pains to point out that Jews were not in fact a market-dominating minority in the same way as the Chinese are in Indonesia, the Ibos in Nigeria or the Lebanese in Sierra Leone. However the Nazi party falsely and fatally succeeded in *portraying* them as such, because they were visibly numerous in a few professions like banking, medicine and law, which chimed with historical anti-Semitic prejudices. Chua always resists crude economic determinism and is eager to concede that multiple factors may be at work, going to some lengths to find counter-examples to any overly-simple application of her own schema, such as the complications of Latin America or the oddly-peaceful Thailand. (In the latter case she suggests that a far-from-democratic programme of forced assimilation promoted by King Vajiravudh in the 1930s left its Chinese population less separate, identifiable and vulnerable than in neighbouring states).

Her scheme has its limitations though, of which she is for the most part well aware. Of necessity she must skim over detailed differences in the different social formations she examines. Are the economically-dominated groups factory workers, slash-and-burn subsistence farmers or agricultural labourers? Is land or industrial capital the asset that is being monopolised? Of course the whole point of an abstraction is that it enable us to glimpse the big picture through such details, but it always will leave the argument open to attack in specific cases where a detail doesn't fit. But in a few cases Chua takes big risks by using her abstractions in a metaphorical rather than literal way, which opens her up further to such attack. For example she proposes at various points that immigrant Koreans could be viewed as a market-dominating minority within US inner cities (rather than the whole nation), or that Israel could be seen as a market-dominating minority within the whole Middle East region (rather than within its individual nations) and even, finally, America as the market-dominant minority for the whole world. It's possible to see what Chua is getting at by such metaphors - the hatred that these minorities engender has a similar psychological structure regardless of geographical scale - but such discipline-defying leaps can only attract trouble. The Israeli comparison is particularly touchy and earned Chua a sharp rebuke from Vijay Joshi and Robert Skidelsky in the New York Review of Books (March 25 2004), though elsewhere their review is less than fair to her arguments: pointing out that China's wealth is not concentrated by an ethnic minority can hardly be held against her since she never suggests that it is. 

Perhaps the most cogent objection to 'World On Fire' (also advanced by Joshi and Skidelsky ) is that Chua makes no serious attempt to explain why, in those cases where a minority has seized the wealth, the majority permitted it to happen. I'm inclined to cut Chua a great deal of slack in this matter, because to attempt such an explanation would be both extremely difficult and far, far more inflammatory than the existing book. What Max Weber did for German capitalism in 'The Protestant Ethic and the Spirit of Capitalism', Chua would have had to do separately for each minority/majority combination as there are few universal principles that can be relied on (save that we must emphatically reject the colonialist and racist explanations that these people are merely 'lazy', 'feckless' or 'childlike'). Instead there are just lots and lots of historical and cultural contigencies - old tribal hierarchies, religious taboos, pastoralist and nomad ethics that despise menial work, hunter/gather sexual divisions of labour, slavery, ritual drug use, and so ad infinitum. I think she was very wise to leave this as someone else's mess.

Some may also object that Chua offers little in the way of concrete policy solutions to ethnic strife that is exacerbated by free markets and democracy, which would be true but harsh since it's by no means clear that such solutions exist: it must be said that she has done an invaluable service merely by pointing out and analysing the problem. The USA is now the world's only superpower and its governments, of either party, are wholly committed to spreading free markets and democracy as the cure-all for the rest of the world's problems, based on a belief that these two institutions form a virtuous circle that will sweep away the cultural obstacles to universal enrichment. While Chua herself is in favour of both free markets and democracy, she thinks that faith in this virtuous circle is misplaced, for the reasons she sets out in this book. Furthermore, she sharply observes that the nations of the West never actually followed their own prescription: capitalism and markets predated the inauguration of universal suffrage by centuries in most of them; not one of them tolerates the crude laissez faire capitalism that they prescribe for developing countries, but all (even the USA) ameliorate it by some degree of redistributive taxation and a welfare state; and in all of them, majority rule is tempered by a vast civil society of long-established and robust institutions that help to safeguard minorities rights but simply do not exist in the developing world.

Such solutions as Chua does present are anodyne and hardly dramatic. The Western nations need to be far more circumspect in their advocacy of free markets - past performances like the IMF's enforcement of deflationary measures that further impoverish the indigenous majorities, or the disastrously skewed privatisations in Russia and Eastern Europe need to be avoided. Democratisation means far more than simply shipping out ballot boxes and observers, and in some cases might be better delayed (as perhaps in China) until markets have done their work of creating a middle class. Market-dominant minorities themselves should become more aware of their vulnerability and reduce it by eliminating corrupt practices and by voluntary charitable works. Their majority governments might introduce affirmative action to help defuse ethnic tension, despite its current deep unfashionability in the USA.

It's unsurprising, if disappointing, that Chua doesn't explicitly suggest that the free market system that we're so keen to export might  benefit from a little more redistribution and regulation at home, and that ideological laissez faire be replaced in the museum of economic history where it belongs: Keynes might never have lived as far as Chua's book is concerned, but she is to be warmly congratulated for having broken free of our *other* greatest taboo.

Dick Pountain