By Bernard Murphy
Thomas Piketty, Capital in the Twenty-First Century, Cambridge (Mass.): Belknap Press, 2014; €25.
Thomas Piketty’s Capital In the Twenty-First Century, published in English translation in 2014, made the New York Times best-seller list. In the book Piketty, a professor of political economy at the University of Paris, details the enormous accumulation of capitalist profit and the origins of the state-supported financial oligarchies in advanced capitalist countries over the last thirty years.
He does this without broaching its motive force: the promotion of Milton Friedman’s economic policies by Ronald Reagan in the United States and by Margaret Thatcher in Britain. These policies hegemonised economies on both sides of the Atlantic, that of Ireland included, and led to the unprecedented capital accumulations in capitalist coffers.
Piketty was criticised in the United States by capitalist apologists and media, such as the Wall Street Journal, which defined his tract as “communist.” He put liberal and neo-liberal economists on the defensive, demolishing their idea that neo-liberal taxation policies are necessary for growth and creating wealth. He blames the current socio-economic downturn on precisely those policies, showing that economic growth rates were greater between 1932 and 1980 than between 1980 and 2008, when taxes on capital and high earnings were much lower than in the earlier period.
But Capital in the Twenty-First Century virtually ignores the capitalist exploitation of labour, central to Marxist political economy. Piketty sees capital accumulation and concentration as being largely intrinsic to the nature of capital itself and unrelated to conditions (wages included) in the work-place. Yet conditions in the latter have been undergoing a continuing deterioration since the 1980s.
Growth in salaries in the United States was less during the years 1980–2009 than in 1950–1980, contrasting with spectacular increases in capital’s rate of profit over the former period (Jack Rasmus, Z Communications, 1 May 2014). Income from work, as a proportion of national income, fell from 56 per cent in 1983 to 52 per cent in 2007, when the crisis reached its peak, and has now fallen to a (still falling) 49 per cent.
Average family income fell accordingly, losing 10 per cent of its acquisitive value. Well-paid jobs ($14 per hour) were replaced by low-paid labour ($7.64 per hour). Part-time labour and precariousness became the norm throughout the entire neo-liberal order. Meanwhile, income from capital jumped well ahead of that from labour. Why?
The period following the Second World War, from 1945 to 1980, was marked by a social pact between the owners and managers of capital and the workers, fronted by their political representatives and trade unions. Thence, income from work (as a proportion of total earnings) reached between 70 and 75 per cent of national income on both sides of the Atlantic. The welfare state emerged and expanded, thanks to working-class power. Scandinavia, where working-class clout was strongest, led this tendency.
Reagan and Thatcher, aided by the collapse of the socialist bloc, reversed these advances. They aimed to recuperate the power of capital and weaken labour. Alan Budd, economic adviser to Thatcher, stated clearly that the neo-liberal measures adopted by her government were to increase unemployment in order to reduce the power of the working class, which would permit a reduction in salaries, with a corresponding increase in the profitability of capital. (Observer, 21 June 1992)—a classic example of the capitalist exploitation of Marx’s “reserve army of the unemployed”!
As the oft-quoted American billionaire Warren Buffet put it, “Sure, there is a class war in this country. And my class, the rich, are winning it every day.” (New York Times, 26 November 2006.)
The central question Piketty doesn’t ask: Is the enormous concentration of capital and its profits over the last thirty years—accentuated during the years of recession—directly related to a corresponding collapse in labour earnings? The first can hardly be explained without the second. Marx taught that the continuing accumulation of capitalist wealth is due to the exploitation of continually rising labour productivity. The enormous power of capital—with its corresponding political influence—explains why most of this wealth is captured by the owners and managers of capital and not by those who create it.
The exploitation of labour reaches record levels during the present crisis. During the Clinton presidency, from 1993 to 2000, 45 per cent of the wealth created in the United States was stolen by 1 per cent of the population, rising to 65 per cent during the Bush presidency (2001–2008) and to 95 per cent during the Obama era. Such variation in the distribution of the social product can be understood only in the context of this abusive capital-labour relationship.
The huge salaries that the non-productive, parasitic 1 per cent give the managers of its riches—bankers, higher executives, speculation wizards, casino adepts, etc.—greatly distort national salary averages. They thus hide the substantial salary decreases and impoverishment of the operators of the productive economy, the working class. The inordinate growth in the earnings of the former group is the major cause of current economic instability.
The generating of mega-profits from the productive economy is due neither to sales increases nor to price rises but to the enormous reduction in production costs, above all labour costs—exploitation, in short. For example, productivity per worker in the United States increased by 80 per cent between 1973 and 2011, but the worker’s hourly salary rose by only 4 per cent. But you will search Capital in the Twenty First Century in vain for the word “exploitation.”
Socio-political imperatives mandated by these facts go far beyond the fix proposed by Piketty: a Tobin tax on international financial transactions to augment social spending. But such a highly desirable step would need to be accompanied by major increases in returns on productive work, salary increases, and greatly expanded social expenditure to ensure the health and cultural well-being of working people and guarantee the basic human rights (as defined by the UN Charter on Human Rights) of all citizens.
Strong popular demands for such measures, ignored in capitalism’s decision-making centres, would rock the foundations of the existing neo-liberal order. Rallying around them would bring a popular movement into sharp conflict with the realities of the EU and the capitalist state. But, most importantly, in the context of such struggle the outlines of an alternative and humane social order—socialism—would come gradually into focus. This would be seen by increasing numbers of working people as the only viable alternative to the present toxic social order, which destroys democracy and reduces them to serfs.
Such messy perspectives of popular struggle form no part of the elegant, mathematically configured socio-economic landscape described by Thomas Piketty in his otherwise stimulating Capital in the Twenty-First Century.