Capital in the Twenty-First Century Reviewed by Hans G Despain

I am excerpting to summarize some of the main points with respect to Marx and Piketty. This is a much more robust review than this summary would indicate. This is among the most penetrating reviews I have read.

The title suggests the book may be offering homage to Marx’s nineteenth-century Capital. Let us be clear from the beginning it is not. Nonetheless, this book will be appreciated by Marxian political economists, while at the same time a frustratingly theoretical disappointment.

Piketty’s book is nothing short of revolutionary in establishing flows of income over time. He establishes that there is a tendency toward the hyperconcentration of wealth, and the rise of a new “supermanagerial” class (315-21). Piketty leaves no doubt that it is class that matters and structural “class warfare” predominates in twenty-first century capitalism (246). Crucial to Piketty’s studies of capitalism is that there exist no economic laws determining distribution of income and wealth (274, 292-4, 361-4). This is an enormously important point, and a return to classical political economy with a vengeance, especially to Marx whereby distribution is a function of series of institutional power relations, rooted in production relations. These summaries will surely, and should, excite Marxian social theorists. However, Piketty’s definition of capital as a financial measure of physical equipment, money, financial assets, land, and other valuables will discourage Marxian social theorists. I will come back to these crucial points....

Piketty is especially anxious to distance himself from Karl Marx, even if it means creating a caricature of Marx. Piketty claims that Marx assumed long-term increases in productivity would be zero, so “capitalists accumulate ever increasing quantities of capital, which ultimately leads inexorably to a falling rate of profit” (228). Put simply, Piketty is wrong. Marx did not assume productivity increases would be zero. Secondly, Marx well understood the countervailing tendencies to the decline in the rate of profit (DROP), including especially the processes of concentration and centralization. On the dynamic structural tendencies of capitalism Piketty is much closer to Marx than he realizes....

Piketty’s definition of capital is highly problematic. Piketty defines capital as all physical equipment, land, housing, money, financial assets, and other valuables. To his credit he excludes so-called “human capital.” To count and aggregate these heterogeneous capitals Piketty estimates market prices. Thus, for Piketty capital is strictly monetary and financial. This definition is useful to demonstrate distribution flows throughout history. However, it fails to capture the deeper issues involved for social being. This is why Marx attempted a far more philosophical definition of capital as value. Marx’s notion of value captures the philosophical, moral, sociological, psychological, political economic, and monetary and financial aspects of capital. In this definition, capital is a social relationship that establishes the relations of production. This places Marx’s argument purposefully in the sphere of production. Piketty’s definition leaves his argument in the sphere of distribution. As a consequence Piketty’s policy recommendations remain geared toward issues of redistribution, with no attention toward production relations....

The book is not directly about capital, at least not capital in the Marxian sense. Rather the book concerns the accumulation of wealth and financial assets. Piketty is interested in how this wealth becomes concentrated in fewer hands and is finally passed on through inheritance. Nonetheless, indirectly this book is about (Marxian) capital. When Piketty assumes a rate of return on capital, he is simply assuming what Marx called in Volume Two of Capital, “value in process.” In this sense the book is tacitly about the commodification of the ability to exploit and create passive income streams through financial markets....

This is an important book that will be the reference point for political debates in the twenty-first century. Much of it can be embraced and praised. However, the structural dynamics and power-relations of the political economy of capitalism and the philosophical dimension of social being, albeit acknowledged by Piketty as important, are substantially underdeveloped in his book. Nevertheless, this book is intended as a call to action, not just to policymakers, but especially for citizens. Economics cannot be left to economists and policy makers. It is radically normative and requires attention and input from social philosophers and especially all citizens.

Marx & Philosophy Review of Books
Thomas Piketty Capital in the Twenty-First Century
Reviewed by Hans G Despain | Professor of Economics and Department Chair at Nichols College, Massachusetts