Robert Kuttner — What Piketty Leaves Out

Despite some losses to financial capital during the Great Depression, the more powerful era of equality in the U.S. began during World War II.

Robert Kuttner makes the liberal (Keynesian) case.

For instance, in the need to invest in a green transition is there a possible strategy analogous to what the U.S. achieved during World War II to use public capital to produce both social gains and a more equal distribution of wages? In his treatment of growth and public capital, Piketty accepts the conventional view that mature economies by definition operate at the frontier of technical possibility. But the new and important book The Entrepreneurial State by Mariana Mazzucato suggests that this is not necessarily so. Private capital is myopic when it comes to long-term pursuit of technological breakthroughs. That’s why so many of the core innovations of the postwar era were the fruit of patient public capital and public risk-taking. Is it only during depressions and wars that public investment can make up for private market failures, or can public capital increase productivity growth, employment, and expand the technology frontier on an ongoing basis? Piketty commends “new forms of democratic control of capital” (otherwise unspecified) but does not address whether more government support for technical advances could improve the market rate of innovation and productivity growth....

In a short interview, Piketty says that his discussion of the postwar recovery missed some of the political story, and he regrets understating the important role of unions and shifting power relations. He adds in an e-mail message, “I probably suggest too much that recovery was mostly mechanical, which is excessive. More inclusive institutions and better regulation policies did promote [postwar] mobility and growth.” He also says he favors of some kind of green transition, led by public capital.

If we want a more equal society, we need to understand both the institutions and the politics that once undergirded greater equality. Yes, there was the historical accident of two wars and the effect on inherited wealth, but there was also the effort of both statesmen and organizers to maximize the opportunity that history offered.

American Prospect
What Piketty Leaves Out
Robert Kuttner | co-founder and co-editor of The American Prospect, as well as a distinguished senior fellow of the think tank Demos