How to Think About Economic Inequality After Thomas Piketty
The French economist started an important conversation. Now, we need to talk about what kind of inequality matters, and what kind of life our economic system delivers.
French economist Thomas Piketty’s big, important book has stirred many pots. Three months ago, a mention at dinner parties drew blank stares. Now Capital in the 21st Century is the Game of Thrones of intellectuals. (Of course, Game of Thrones is also the Game of Thrones of intellectuals.) Conversation starter: will that Financial Times piece about his data kill our deft and dashingly accented Prince Oberyn?
Piketty’s basic claims are still looking pretty sound, unlike those of Oberyn, who got his eyes popped out by an enormous professional sadist. It’s also clear that, although Capital achieves great things, a lot of the conversation around it concerns Piketty’s arguments only glancingly. Much as Occupy Wall Street set loose political arguments about inequality that had been banned as “class warfare,” Piketty has given walking-around money to everyone who has the sense that We Need to Talk about the Economy.
This is excellent. We do need that. Piketty shows that wealth and income distribution are becoming markedly more unequal and that there’s troublingly good reason to think they’ll continue doing so. He gives grounds for doubt that executive salaries and financial markets are as rational as Economics 101 classes and the Wall Street Journal opinion pages tend to suggest. He shifts the lens from overall wealth (how big is the pie) to distribution (how big are the pieces).
These are just starting points. Here are four questions to start asking, with Piketty as a starting-point.
1. What kind of inequality matters most?
Knowing how wealth and income are distributed is valuable but incomplete. Only a fetishist cares about money for its own sake. The real question is whether inequality keeps people from living as well as they should be able to do.
Inequality matters more if no one but rich people can get essential goods. Education, health care, child care, and retirement security are some of these. Social Security literally socializes some of the cost of retirement, so that lifetime income and savings matter less (though they still matter a lot). On the flip side, we’ve been privatizing more and more of the cost of education, especially in college and beyond, with tuition rising and funding of public universities getting slashed. We fully socialize the cost of elementary and high school, but in many regions public schools are so unequal in quality that buying a house is really a way of buying a school. Economic inequality is a worse thing if it denies people education.
We should be asking which goods are so important that we should immunize them from inequality by sharing the cost, at least up to some basic level.
Inequality is also worse than wealth buys things that shouldn’t be economic at all, like political influence. Growing inequality is reason to care more about money in politics, and to press back harder against the Supreme Court’s decisions gutting campaign-finance reform.
2. What is wealth, anyway?
Piketty basically accepts standard accounting techniques in measuring wealth and income. But measures like Gross Domestic Product are perverse. They ignore environmental harms and benefits. They ignore the things we do for free, for friendship or pleasure—or out of a mix of love and duty, like taking care of family. Working longer hours at a strip mine increases total wealth, but a free concert, a political rally, or a community daycare doesn’t—and the permanent damage the mine causes doesn’t count against it.
We should be asking what we want our economy to recognize and reward. An economy is a system of values as well as prices, even if the values are buried deep in math. We should be asking who has the wealth, yes, but also what counts as wealth in the first place.
3. What kind of life does the economy give us?
Although Piketty’s title echoes Karl Marx, he shares some of his defining concerns with one of Marx’s targets, Adam Smith. Piketty mines the novels of Jane Austen and Balzac to show what life is like in highly unequal societies: too much sucking up to the super-wealthy, too much angling for a good marriage, not enough belief that a lifetime of hard work will get you somewhere. Although he doesn’t put it this way, Piketty describes the history of capitalism as a middle-class era sandwiched between two aristocratic eras, one in the Gilded Age of the nineteenth century, the other in our own new Gilded Age.
Smith, too, cared intensely about the social life that an economy made. His argument for markets (he would have said “commercial society”) was that they lowered the pride of the rich and powerful and brought respect for ordinary people and useful skills. He wrote gains in total wealth would be bad things if they only made slavemasters more powerful, because slavery and other extreme hierarchies were violence against human nature.
We should take cues from both Piketty and Smith and ask how our economy distributes respect. Does our inequality increase the social distance between workers and bosses, make the rich more arrogant and entitled, and create anxious, precarious employees who fear being fired and can’t quit because they’re worried about health care and have no savings? Failures of mutual respect and inequality in self-respect are failures in an economy, and in a democratic culture.
4. What kind of politics do we need?
Piketty’s major proposal is a modest global tax on wealth, like a real-estate tax for financial and other assets. He calls the proposal “utopian,” and that is probably generous. There’s no political entity that could even come close to enacting and enforcing such a tax.
This problem is not unique to inequality. We’ve built a global economy that turns out to have systemic problems: inequality, instability, and massive questions about environmental sustainability. Climate change and financial-market crises are as challenging to govern now as inequality is, because they are problems of a global system that has no government its own size.
Talk of global government really is utopian. One might say the national governments that built global capitalism should have thought harder about this before they created this problem, but that horse is out of the barn. People who care about inequality—and other global problems—should be very sobered by the reality that literally any political response that would be remotely adequate is utopian. And they —we—should be asking what kinds of trans-national political movements can speak back to global crises on their own scale.
In the last Gilded Age, much of progressive politics was explicitly internationalist, because it confronted a globalized capitalism that overran national borders. In a new Gilded Age, citizens need to think and act on the scale of the problems, even though that thought may be more disheartening than inspiring—at least at first.