Wednesday, May 27, 2020

In conclusion, Libya is a land of contrasts


Don't get me wrong: I am not glad to be in quarantine now. But one silver lining is that my local library is closed, which means that I got to keep my copy of Capital and Ideology indefinitely. It's taken me three months to make my way through it. But I'm glad I did! It's been a really interesting and thought-provoking book, with lots to chew on.

I tend to think of this book as being a sequel to Capital in the Twenty-First Century. There is definitely significant overlap between the two: both are primarily interested in inequality, the large and growing gap between the very rich and the very poor, and seek to explain why inequality occurs and how we as democratic societies might address it. But they take very different tacks in how they approach and consider the subject. Cit21C is built on empirical research and data, but feels like a more theoretical book, with Thomas Piketty drawing general conclusions that show how certain inputs have led to consistent outputs across different continents and centuries. C&I feels almost like the opposite. It's a very story-focused approach, telling the history of a certain place at a certain time; and Piketty is more interested in the differences than the similarities, showing how the various decisions countries made resulted in very different outcomes. C&I is a much longer book, over 1000 pages versus the ~700 of Cit21C, but I almost feel like it's even more readable. Piketty keeps the same nice bite-sized sectional organization of the first book, and here has a more narrative style, weaving a story step by step rather than building up an argument brick by brick.

C&I progresses more or less linearly through history, starting with the emergence from the dark ages into the medieval and early modern period. Piketty focuses on what he calls "trifunctional societies". Honestly, this was one of the hardest parts of the book for me, and I kept muttering to myself "Piketty is so French!". Viewing trifunctional societies as a fundamental system of organization has always seemed so bizarre to me. I remember being kind of dumfounded in history class reading about the Three Estates in France; why would you organize your society into three groups where one of the three groups accounted for 95% of the population? They're probably particularly hard for Americans like me to grasp, as we've never had a landed noble class and have rather famously had separation of church and state, so the idea of devoting one-third of social control to a group that doesn't exist and another one-third to a fairly obscure profession seems bizarre. If you're going to divide into three groups, why not pick ones that are at least more numerically equal, like, say, those who work the fields, those who work with tools, and everyone else? Or manual laborers, intellectual laborers, and non-laborers? Or butchers, and bakers, and candlestick makers? THERE CAN ONLY BE THREE.

Piketty does seem to fundamentally agree that trifunctional organization is a dumb idea, but it also feels like he kind of stretches other systems to make them fit within his concept of a trifunctional society. He kind of hand-waves Swedish society, which was very explicitly a quaternary society, and kind of says "It's basically the same thing." And he writes at length about how different the various trifunctional countries were; for example, Spain had a much larger noble class than France, and Denmark had a more more strongly defined nobility than England.

But, I kept asking myself, what's the point? On the one hand Piketty seems to be saying "Trifunctional societies dominated in this period, everything can fit into this category!" and saying "Everything is different, there are no fundamental rules"! If that's the case, why use that lens to look at this period in the first place? I got somewhat annoyed by this endless parade of "A is different than B!", which makes me wonder, "Then why are you comparing A to B in the first place?" Anyways, I'm almost positive that an American writing this book wouldn't have started with trifunctional societies and made them such a focus.

However, this all retroactively started to make sense to me literally hundreds of pages later when Piketty starts to look at castes in Indian society, and I finally started to grok what trifunctional ideology was all about. While continuing to stress that there were important differences, he draws strong parallels between the Brahmins as the clergy class and Kshatriyas as the nobility class. He explains that the trifunctional schema was a method primarily advanced by the intelligentsia on both continents, arguing that strong warriors should rule the people, but those warriors must listen to the advice and counsel of learned men. The combination of strong executive action tempered by thoughtful and deliberate advisors is more effective than either one would be alone. That finally started to make sense for me. I think my hang-up had been that I only had thought of trifunctional societies as being under a monarch, who held real power; but actually the introduction of strong central-state power was the death knell for trifunctionalism, and its original logic preceded the monarchy. As Piketty makes clear, in both Europe and in India, the trifunctional divisions were always more aspirational goals for how society ought to be structured than impassive descriptions of how society actually worked. Of course, a clergyman, the one person who is actually literate in his age, would include a whole category for himself while writing up the ideal social order.

Piketty casts a much wider net in C&I than in his previous work, and that pays big dividends, with lots of interesting examples and lessons to be learned from smaller European and larger non-European nations. For instance, while the nobility and clergy were roughly equally balanced in power in France, the nobility held relatively more power in England, thanks to the larger estates granted after the Norman Conquest and the seizure of Church property during the Reformation. In India, the warrior nobility lost much status after failing to stem invading Muslim armies from the West, leaving the intellectual Brahmins as the dominant faction. On the other hand, in Japan the warrior-nobility Samurai dominated, while the clergy, divided between Buddhist temples and Shinto shrines, took a lesser role.

Sweden is a particularly fascinating example throughout the whole book. In the early chapters, Sweden stands out as a hyper-inegalitarian state organized around censitary suffrage: basically, each person can cast a number of votes proportional to the wealth they own, so while 100 men in a village might be eligible to vote, a single man may be able to cast more votes than the total of the other 99. And then, in a span of a few decades, this very same country transforms into the most egalitarian social-democratic state in Europe, with not only universal suffrage but also the lowest divide between rich and poor of any nation. As Piketty repeatedly insists, this shows that there is no racial or national character that makes some nations inherently more or less egalitarian (or violent or cautious or whatever) than other nations. Who would have thought that the Vikings would become superrich merchants, and then social democrats? Nothing is pre-ordained, and societies are always capable of choosing to change.

As a side note, introduced by Piketty, the censitary suffrage of 19th-century Sweden has uncomfortable similarities with the current political regime in the United States, particularly after Citizens United: the political influence wielded by, say, the Kochs is thousands or millions of times larger than the political influence of the people working for them. Piketty repeatedly urges looking to other examples in time and space: history never repeats itself, but we can learn many lessons from history, and seeing how Sweden evolved out of their domination by the hyperrich may provide some inspiration for paths the US could choose to follow today.

Piketty doesn't just point to contemporary events to make his points: he also loves referencing literature and cinema, both to show how events and topics were viewed in their own times, and also how artists have illustrated the implications of these eras. Cit21C had lots of great references to Jane Austen and Honore de Balzac and Titanic; C&I has the Grapes of Wrath and Proust and Donald Duck. The latter inspired me to go on quite a YouTube bender; I may even write a separate post later about it, but for now, I want to share the short he quotes, "Taxes to Beat the Axis."

It's a startling and wonderful cartoon. What a huge change in how our country thinks about taxes! These days both parties consistently describe taxes as burdens at best, theft at worst; back then, though, they were a source of pride and power, collective mobilization to accomplish a great task. (It also reminds me of eating hamburgers at the Ground Round when I was a kid, which is a good thing!)

The language used to describe taxes is important. Piketty implicitly stresses the importance of language throughout the book; one of his overriding theses is that every society needs to tell itself a plausible story to explain its inequalities. So, for example, a trifunctional society tells itself that the clergy need to receive food without performing physical labor so they can devote themselves to the spiritual health of the community; or a neo-proprietarian society tells itself that landlords need to collect rent in order for new housing to be built. Societies can endure in these forms for as long as their stories are generally believed, and crumble or transform once the stories are no longer widely believed.

Piketty is very careful with his own language, too. I really like how he creates or uses new or specific terms, like "proprietarianism". Very late in the book he mentions in passing that contemporaries used to refer to this economic regime as "liberalism", but the meaning of "liberalism" has shifted over time, so he prefers "proprietarianism" instead. I think that's fantastic: it takes a little more time to learn what he means, but provides so much more clarity later on, since he has precisely defined the word. It also avoids the messiness of automatic judgments based on our preexisting biases towards that word. It made me think of Matt Stoller, who used more standard terms like "liberal" and "progressive" over the course of Goliath, in ways that sometimes raised my hackles. Even if the actual point an author is making is valid, their language can stir up tribal feelings that rebel against the argument. It's much better to choose precise and neutral words and phrases, and when those don't exist, to judiciously coin your own.

Likewise, very late in the book Piketty spends a page or so writing about why he has avoided using the very common term "Populist" in this book. He wants to be specific and precise in his language, and Populism is so overused and slippery that it's useless: it just stirs up emotion and is used to denounce or dismiss people and movements without any real engagement. He notes the absurdity of "Populist" being used in 2016 to refer to both Donald Trump and Bernie Sanders, who are diametrically opposed on virtually every meaningful axis: nationalist versus internationalist, racist versus antiracist, tax cuts for the rich versus spending for the poor, and so on. Any word that can be applied to both of those candidates is not a useful word, so we shouldn't use it, and instead should be more specific about what we mean: nativism, progressive taxation, social democracy, and so on.

Another phrase Piketty is fond of is "transcending capitalism". Here, I think he's choosing his language to persuade more than to identify, although it accomplishes both. Many people automatically equate criticism of the capitalist regime with a devotion to communism and a fondness for autocracy. Piketty doesn't want a revolution, he wants an evolution. He has an Elizabeth Warren-esque outlook, trying to save capitalism rather than destroy it, as Karl Marx or Bernie Sanders would want to do. Once again, his language is important, avoiding knee-jerk reactions while still clearly conveying his meaning.

Returning to taxes: Piketty has a baseline assumption that higher taxes are generally good, matter-of-factly noting with approval that western European countries collect up to 40% of all national income in taxes, while tutting in dismay that other countries can barely manage 5%. I tend to agree with that point of view, but "taxes=good" is probably not a widely held view today, particularly in the United States. So, I think it's great that he takes a historical approach in looking at the growth of taxation and what it means for the state. In the 19th century, the taxes collected in our countries were equivalent to a few percent of GDP, which gives the state enough funds to act as the "Night Watchman." Basically, this level of funding lets the state hire a small percent of the population to provide internal security against blatant crime, deter external threats with a nominal army, and set up a court system to enforce the laws and peacefully adjudicate private disputes. More concretely, if the state collects 1% of the money earned in a country, then it can hire roughly 1 out of every 100 citizens to work for the state and put them to work as police officers or soldiers or judges.

For most of history, and even today in the developing world, lots of states can't even reach that "Night Watchman" level: there's a nominal state, but it doesn't have the manpower to enforce its will. This is why we had feudal systems in the Middle Ages: local elites, and particularly the warlord nobility, were responsible for performing security functions. Starting after World War 1, though, states started getting tens of percent of GDP in revenue. This enables a much more robust state that can provide public education to its children, build public infrastructure for its merchants, provide a social safety net to its citizens, and so on. That's interesting!

Having grown up under this regime, I think we take it for granted. The big threat Piketty sees now is that the wealthiest citizens are not paying their fair share of the tax burden; in a rather infamous example, Warren Buffet pays a lower total tax rate than his secretary does. This undermines the public's overall faith in and support for the tax system, which is leading to tax revolts and pressure (alongside fiscal competition between states) to cut total tax revenue, which in turn threatens the stability of the state. This can lead to a self-perpetuating cycle, as the state loses legitimacy by failing to perform its functions, causing more citizens to withdraw their support, causing the state to weaken further and eventually fail. That's one of a few dark futures that Piketty is worried about. We don't need to reduce inequality only because it is morally right; we also need to because it's creating a volatile situation that could lead to social calamity.

Reducing inequality is of course Piketty's great goal. The tool I was most familiar with was the one he promoted in Cit21C, a progressive wealth tax. I thought of that as a cool and innovative new idea, so while reading C&I I was a little surprised to learn that other countries have already used wealth taxes in the past. In fact, Prussia implemented one all the way back in the late 1800s, and it lasted for about a century before being repealed. Piketty goes deeper into the implementations and historical contexts of these European wealth taxes. He identifies technical shortcomings they had, such as being based on fixed assessments that were only updated in census years. He also looks at the political and social forces that took them down; there were several, but the biggest culprit is a race to the bottom. After capital flows were liberalized in the 1980s and wealthy Europeans could instantly move their wealth across borders, all countries tried to outdo one another in slashing rates to attract the wealthy, until most taxes were completely eliminated. This topic turns out to be one of Piketty's hobby-horses, particularly in the last few chapters of the book, where he looks at how Europe has gone awry in the last four decades and how it might get back on track.

I've watched a couple of interviews with Piketty recently, and one big point of his that keeps coming up in them is that just because something is good does not mean that it's best or right. For example, in India, during the last 40 years the bottom 50% of the income distribution has seen a dramatic increase in their standard of living in real terms: that translates to far less hunger and many more people living meaningful lives who otherwise would have died in misery. But, during that same time there's also been a drastic increase in inequality between the bottom 50% and the top 10%, even more so than the dramatic rise in the US. Other people often point to this relationship and say that inequality is justified or necessary when it can produce such great benefits to the masses. (As some free-marketers would say, "A rising tide lifts all boats": the argument is that inequality inspires people at the top to get rich, which generates economic activity, which provides more income for the poor.) But Piketty says that this is not the only way: India could still have had tremendous growth while sharing that growth more equally, leading to even better outcomes for its poorest citizens.

It's hard to argue these counterfactual points, which may be why he doesn't directly do it within the book, but it's the implicit reason for all of the many comparisons he makes in the first half of the book between nations and centuries. There isn't just one Marx-style order of progression through history, where you need to pass through a greedy capitalist phase before entering an egalitarian communist phase. People have chosen many different paths in the past, which have led to very different outcomes, and we can decide what course we want to follow in the future. We should learn from India's example and see what's possible, while remaining aware that it could have followed many other paths, and some of those may have resulted in an even richer and fairer country.

This comparative system, which was so frustrating and seemed pointless in the early part of the book, pays increasing dividends in the second half, as he explores the various systems and outcomes in more modern times. I'm particularly intrigued by his musings on alternate systems of corporate governance. I only became aware of the German/Nordic system, which guarantees workers seats on corporate boards, when I read Cit21C. I've thought about that system a lot in recent years, in both abstract and practical terms. In C&I, Piketty dives into much more detail about the various allocations used in Rhenish and Nordic countries, the successes and limitations they've had, and his thoughts on why they have failed so far to catch on in French, Japanese or Anglo-American companies. (It isn't because they aren't successful; German corporations consistently produce better results for both workers and stockholders than French or British corporations do.)

Piketty also writes about co-operatives, where every participant in a business gets equal say in making decisions and in sharing profits. (In a nice bit of synchronicity, Bay Curious had an episode this week on the surprisingly large number of cooperatively owned pizzerias in the East Bay Area.) Co-ops make perfect sense in many cases, where everyone is contributing substantially equal amounts, but can be ill-suited for others. For example, if someone invests $50,000 of her personal savings to start a bakery, and then hires two other people who invest no capital and are free to quit at any time and start their own competing bakery, then is it really right that the two employees can consistently outvote the founder? Clearly, co-ops aren't a one-size-fits-all solution for corporate governance.

But, he stresses, still other forms of organization can be imagined, and have even been used before. For example, in the 18th and 19th century there were limits on the total number of votes a single shareholder could cast, which de-facto capped ownership at certain levels. Or we could develop a model where any investment over, say, 10,000 shares has 10% as much voting power as smaller amounts. This could be wonderful for more modern, crowd-funded types of companies, particularly news and media organizations or Kickstarter-birthed enthusiast-driven companies. These wouldn't technically forbid large investment into the companies, but would strongly encourage broad-based ownership. People would invest because they want to participate in and support the company, not to strip it for parts.

This ties in with something I've been thinking about a lot regarding my own company. Based on my personal ideological preferences, I really like the idea of cooperatives, but it does feel fundamentally different when I've put a decade of my life into building something and am ride-or-die on it, while others are free to go their own way. I've mused about other ways we could organize, such as distributing voting shares that vest over time; that would follow a similar structure to employee stock-option plans, but instead of being about selling to profit, it would be more about earning a voice to shape the long-term future of the company. This kind of stuff is hard to change, though, particularly when there isn't a popular or standard model to follow. I'm glad to see more discussions like Piketty's proposal, along with other innovations like B-corporations, and I hope we can see more changes and options in the future so different sizes of companies can organize in fair and equitable ways for their employees and communities.

C&I seems simultaneously more and less relevant to "normal people" than Cit21C. It seems to be even more squarely aimed at lay audiences and avoid technical terms. But the contents of C&I seem to be almost entirely focused on changes in the top 10% of distributions (income, wealth, and education) and the bottom 50%; unlike Cit21C, he spends almost no time on the "middle" 40% (from the 90th down to the 50th percentile). For the most part this class has kind of tread water during the last 40 years; the gains of the top have almost all come from the very bottom. It's kind of interesting since I suspect that most readers of C&I belong to that "middle" class: it's our society, but the changes haven't affected us as strongly as at the extremes of the income distribution. (Well, except for missed opportunities, as the real gains from productivity growth have almost entirely gone to the top 10%.) This is one of a few cases where I wish that he had drawn more on his own work from Cit21C: as r > g, it seems inevitable that our current trajectory will shrink the "middle" class in the future, after the lower class's wealth is completely reduced to 0 and there's nowhere else to draw capital income from.

Capital and Ideology is divided into four (long!) sections: Inequality Regimes in History, Slave and Colonial Societies, The Great Transformation of the Twentieth Century, and Rethinking the Dimensions of Political Conflict. The first two sections are basically a long series of Piketty saying "One country did this one thing, this other country did this other thing. Any country could have done anything, and the results would always have been different." As he moves through the third and particularly into the fourth section, he shifts into saying "We could do this one thing, or we could do that other thing. These different things would have different effects." That vagueness is kind of maddening, but I came to realize that it's also his fundamental thesis: Everything that happens is a result of the decisions societies make, we don't need to be held hostage to the status quo or our pasts, and can choose to follow different trajectories as we encounter switch points in real-time.

On page 595 he writes, "It is too simple to say that private ownership is the solution to every problem or, conversely, that it should be criminalized in all circumstances." I simultaneously wanted to say "Yes, that's brilliant!" and to bang my head on the wall at frustration at how inane of a statement it is. "It's not this one extreme or this other extreme, it's in the middle!" Who exactly is he arguing with?!

The other part of Piketty's thesis, though, is that we should cease "sacralizing" property: treating our ownership traditions as immutable and inviolable. He shows early on how powerful this sacralization is: even after the radical transformations of the French Revolution and the upheaval of the social order, the Republic never seriously considered challenging the private-property regime in place, merely reapportioning (often with reimbursements) who owned what. As Piketty sees it, all of the property in a country collectively belongs to all of its people (in a moral sense, almost never in a legally recognized sense). We need to have democratic debates about how we want to use and manage that property, instead of mindlessly continuing to do what we've always done. Lots of situations don't stand up to close scrutiny: Why should the child of a poor person pay the child of a rich person for the privilege of living in a home? The poor child did not do anything to deserve his lot in life, nor did the rich child do anything to deserve his lot. We as societies have been afraid of tampering with our systems of ownership out of fear that we will open Pandora's box: once you start questioning, say, whether a legally-purchased slave can be set free without compensating its owner, then the whole system of ownership may come into question, and the forces of anarchy and chaos will be unleashed. Piketty insists that we must not be afraid. Many things that once seemed unthinkable are now taken for granted: Our ability to sail across oceans, to communicate our ideas across time, to govern ourselves, to eradicate diseases. There is absolutely nothing stopping us from reconsidering how we should treat property, other than the will to do so.

So, very broadly, Piketty just wants us to have a conversation about property: even thinking about it as a changeable thing will be a huge win. Within that topic, though, he does have personal guidance about what a just property regime may look like, in contrast to today's neo-proprietarian or the failed Soviet-style communist models. His thoughts kind of line up with my own: I've long thought that it's dumb to have multiple private fire departments competing to service the same houses, or to have multiple power companies stringing wire to adjacent houses, and so on, so those sorts of operations should be state-owned or at least regulated monopolies. Piketty takes a different tack than me, though. He doesn't look primarily at the mode of delivery: instead, he's interested in the homogeneity of the good or service. Electrical power is electrical power, no matter where it comes from or how it's transmitted, so it could be collectively-owned state property, and therefore owned by its customers (citizens funding the government funding the power company servicing the citizens). And if we really want the same educational quality and opportunities for everyone, then we should provide a fairly homogenous educational system, which should be state-owned as well. On the flip side, though, when there's a diversity of tastes and preferences, then it makes sense to support private ownership. So it's good to have a variety of small, independently-owned restaurants and fashion labels and publishers. For these kinds of industries, we just need to make sure that they don't get too powerful.

Unsurprisingly, Piketty doesn't see a one-size-fits-all solution to the property ownership question, but rather a variety of tools. Almost all of these were used in multiple countries in the 20th century and have a demonstrated track record of effectiveness. A highly progressive wealth tax can circulate resources within a country and ensure that the largest fortunes are eventually returned to the people. A power-sharing structure in corporate boards can ensure that large companies' workers are represented alongside owners. And so on - there are even more new ideas that Piketty introduces in the final chapter, but there are already plenty of well-known tools at our disposal that could lead to greater equality in wealth and power.

Moving on to some random topics:

The discussion of net public wealth was interesting. I remember Piketty writing about net public wealth in Cit21C, but mostly in the high-level comparative breakdowns in the early part of that book (country-versus-country) and not in the prescriptive second half. Instead of net public wealth, I'm more used to hearing debates about the deficit and the national debt; in the US, that's generally a cudgel that the GOP uses to dissuade the Democratic party from investing in the economy, a cudgel that is laid aside whenever the Republicans want to cut taxes or wage war. So, I'm used to just one half of the balance sheet: Piketty very naturally looks at the other half of the balance sheet, public assets, how much a country owns, and balancing it against what the country owes. This is a challenging but comprehensible process: sum up the total value of all government office buildings, VA hospitals, public universities, national parks, and so on, giving each the price it could conceivably fetch if sold on the open market. Then you subtract the total debt, the total market value of all Treasury notes, bills and bonds. The result is the net public wealth.

Piketty is alarmed that the value of public wealth has recently turned negative in both the US and the UK. Interestingly, this is different from the (often feigned) GOP alarm, because Piketty would like to correct it through a combination of reducing debt (by raising taxes) and increasing public assets, both of which are anathema to the GOP. So why is the net negative wealth so concerning? Once a country has net negative wealth, then the creditors don't just own all of the physical stuff in a country (its land and buildings): they also own the people. That isn't just an abstract hyperbolic statement: To be specific, the future earnings of those citizens will go to paying off the public debt. There's no theoretical maximum on the size of the public debt, which conceivably could be twice the value of public assets, or thrice, or even more. Once it went high enough, you would essentially have eternal, legal, fiscal slavery, with 100% of the citizens contributing 100% of their current and future earnings to pay off past bondholders. Such a situation would not be tolerated for long, and disruptive geopolitical actions could result, much like Germany after WW1.

There's a brief but fascinating discussion of meritocracy. As a reminder, each society needs to tell itself a story to justify its inequality. In premodern times, poor people were told that they were poor because of external forces: you were born into the wrong caste or born to slaves or otherwise dealt a bad hand in life. Even in the trifunctional society of France, after serfdom was abolished, the third estate was lower in status to the other two, but were told that they served an essential (even sacred) role: They had an important job, to feed society and produce goods.

In modern times, though, as suffrage has become universal and rights are theoretically available to all, the poor are now told that they are poor because of internal reasons: they're not smart enough to get rich, or not charming enough, or haven't worked hard enough. This is untrue! There's very clear evidence that your lot in life is still overwhelmingly based on the life you're born into. (For example, in France, 1% of children born to farmers entered university, compared to 75% of children born to factory managers and 80% of children born to independent professionals. The university is the path to well-paying and high-status jobs. There are glaring inequalities in opportunities based on origin, despite the hypothetical ability of anyone to get rich.) Meritocracy is hypocritical, telling a gaslighting story that does not match reality, and is designed to keep de-facto control in the hands of the elite while reducing the demand to share power.

The last section of the book seems mostly concerned with the evolution of parties in Western democracies over the last 80 years or so. People on the left have been worrying about the "loss" of the white working-class vote for decades; there were "Reagan Democrats" in my childhood, and in my early adult life I read lots of blog posts filled with indignant disbelief that the working class was "voting against their own economic self-interest", meaning that they were voting for George W. Bush and Republican congressmen who rewarded the rich and punished the poor. My own thinking on this topic has largely been shaped by Thomas Frank's "What's the Matter with Kansas" (which Piketty approvingly cites in a later footnote): the GOP hoodwinked the same rural and lower-class people who once formed the foundation of the Democratic party by distracting them with culture-war issues like abortion, guns, and gay marriage, causing them to lose sight of their ancestral class allegiance. Piketty, like Matt Stoller and others, flip this around: it was the left who abandoned the poor, not the other way around. More specifically, the left parties have become increasingly popular among well-educated, high-income, and wealthy (in that order) people. That change in party affiliation has shifted the priorities of the parties, which we saw in the "New Democrats" of Bill Clinton and "New Labour" of Tony Blair. The parties are now focused on promoting the interests of highly-educated people with 401(k) plans, and not really oriented around their classic roots in labor unions and farmers.

So, there are two theories: the left abandoned the WWC or the WWC abandoned the left. Piketty describes these two hypotheses as the "sociological" hypothesis and the "nativist" hypothesis. The sociological theory is that the lower classes are disaffected because the left parties no longer speak to their interests, while the nativist theory says that the lower classes have abandoned the left because of the left's support for social issues (immigration, gay marriage, etc.). Piketty says that there is some circumstantial evidence for the nativist theory, most notably the GOP's rise in the American South after the Civil Rights Act of the 1960s. But, if the nativist hypothesis was the main factor, then we would expect to see those classes enthusiastically turning out for right-leaning parties. That hasn't happened: instead, turnout has plummeted among the lower class. So, it seems like the sociological hypothesis is more convincing. It becomes even more convincing in later sections, as Piketty shows that the same decline and reorientation has been observed in all of the western European democracies, despite the fact that social issues didn't become motivating factors in their elections until decades later.

Piketty does a great job at putting into clear words what we've all noticed. The western world's political system has reoriented itself over the past 70 years. At the start, the political cleavage was basically between elites and non-elites: people with education and money on one side, the poor and less-educated on the other. Today, though, we're in a dual-elite system. The "Brahmin Left" draws its elites from the academy: highly educated people who are high in social capital. The "Merchant Right" gets its power from business, particularly finance.

These two groups of elites are united in some stabilizing ways, particularly sharing a certain desire to protect the status quo, to uphold existing property rights, and to support globalization. But the long-term effect of this dual-elite system will be destabilizing. A large and growing sector of the population doesn't see their interests represented by any political party, so they withdraw from political participation. As a result, we see wild swings from side to side in one election to the next, with the victor never earning the active support of 50% of a country's citizens. This is accompanied by increasing despair that politics can solve problems, as the underlying pain of inequality goes unaddressed no matter who is in power. This leads to a volatile situation, where there's an opening for a violent, non-democratic revolution that promises to make changes, instead of collectively solving our problems through a peaceful political process.

Piketty notes an interesting resemblance of our current political cleavage structure with the old premodern trifunctional societies. The Brahmin Left is the new intellectual class, continuing the role of the clergy. Warriors are no longer needed in modern society because the centralized state guarantees security, so instead merchants have taken the more worldly role that the nobility used to play. And, like on the eve of the French Revolution, the third estate is not seeing its interests promoted by the two factions in power.

It's a good explanation, though Piketty goes get rather repetitive in his analysis on how party structures have evolved over the last 70 years or so. I didn't need much convincing and pretty much immediately accepted it: "Yup, more educated people have become more likely to vote for left-leaning parties, got it." But he goes on and on and on, for dozens and dozens of pages, showing so many charts and in-depth arguments across so many different countries that all show the same overall trend. Maybe this would be important to convince skeptics, but I was a little surprised that he spent so many pages driving this particular point home when elsewhere he's perfectly willing to refer readers to the online appendix via a footnote.

Education is one of the dominant topics of this book, sharing equal billing with wealth, and I'm a little unsure what to make of it. I was surprised first when reading Cit21C and particularly in C&I by the huge emphasis Piketty places on education; personally, I think of education as being important, but not a first-order deterministic factor like he does. (Which may be ironic, given my personal background.) He does make some persuasive arguments for the primacy of education, which includes a pretty compelling hypothesis that the US's world-leading investment in public education during the 19th century led directly to our economic triumph in the 20th century, and that the loss of our leadership in the global economy today is largely due to our failure to maintain a similar lead in public education in the 21st century. Britain provides a counter-example: they had a very poor public (government) school system, which has resulted in an economy that consistently lags that of other countries.

And how does education relate to politics? Piketty's argument is that more educated people have become more likely to vote for left-leaning political parties. This is backed up in the way he breaks down the percentages, but it's really only one of two variables that have changed in the last 70 years: the rate of education has also drastically increased within that time. I was initially somewhat skeptical of his point. 70 years ago, only a tiny fraction of people would have attended colleges, and they were the elite of the society, so of course they didn't vote for left parties. Today, nearly half of American youth attend college, which by definition means most college students will not end up in the top decile of wealth or income: in other words, today's middle class mostly attends college, while in the past they did not. I would think that this would be the more important factor than the relative education level achieved: just by going to college, students are getting more exposure to liberal arts, to people outside their home town, to different cultures, to critical thinking, and so on. So we have people going to colleges to get jobs, not going to colleges to run businesses; to me that seems like it would push the curve towards left-leaning parties all on its own. But, Piketty says that he sees the same trends even when just looking at college-attenders versus non-attenders, so I guess I'm wrong and there really is a kind of "educational class" system that's changing.

So, with a bifurcated elite system that does not address the needs of the non-elite, how do those needs end up manifesting? As he nears the end of the book, Piketty's earlier insistence on looking at a wide variety of examples all around the globe really pays off. He identifies what he calls the "Social-Nativist Trap", tying together recent movements in the US, France, the UK, eastern Europe and other places. This is a natural response to the globalist bipartisan pro-business regime that has dominated these countries for decades. The rising social-nativist faction makes an appeal directly to disaffected lower-income and lower-education voters, promising to deliver real tangible benefits to them (spending, jobs, assistance) while also hardening borders and demonizing outsiders.

Donald Trump, channeling Steve Bannon, ran on this platform in 2016: breaking from GOP orthodoxy, he promised to keep Social Security intact, to create a superior healthcare system, to bring back manufacturing jobs. The Front National in France, originally born from an anti-tax movement, has recently reinvented itself with a strong (if false) pitch about spending money on the poor and on education instead of on immigrants. And the same line was very explicit in UKIP's campaign for Brexit, telling the British that they could spend more money on the NHS instead of sending it to Europe. Leftists like me roll our eyes at how transparently manipulative and misleading these pitches are, but the important thing is that these movements are actually speaking to the needs of the people, promising to improve their health and minds and wallets, while the center-left parties seem more concerned with international trade and cultural issues.

There are lots of problems with the social-nativist movements, and one big one is that they can't or won't actually deliver on their promises of increased social spending. Despite his campaign and rhetoric, Donald Trump has governed as a traditional Republican, only delivering tax cuts aimed at the superrich and undermining the social safety net. Brexit isn't going to lead to flush coffers for increased social spending. These social-nativist parties can't admit that they lied or failed, and so they'll need to double down on the second part of their platform, whipping up more outrage against immigrants or foreign states or domestic minorities or other enemies that they can blame for their failure to deliver. Once again, there are very discomforting parallels to what we saw in the run-up to World War 2.

While there's been a drastic rise in social-nativist parties in all of the major Western countries, there are other paths available, and modern India is a really fascinating counter-example. Places like the US have transformed into dual-elite systems, and there's a big risk of an enduring coalition between the economically disadvantaged and racist parties and policies. But India has gone in the other direction: over recent decades, the lower castes and poorer Indians have grown more closely politically aligned with Muslims, Christians, Sikhs, Buddhists, and other minorities. The Hindu-nationalist BJP has risen into power as a nativist party, but the BJP is very closely aligned with the Brahmin caste and other high-class people. Why have the poor Hindus not joined this nationalist party like poor Americans have joined the GOP or poor French have supported the FN? Part of this seems to stem from Indian institutions, including a system of reservations and quotas that benefit lower-caste people. It's natural to see common ground between disadvantaged people, whether it's because of caste, religion, or wealth: they're all in it together. The scheduled castes and tribes (former Untouchables) see that these systems support them against the elite power of the Brahmins, who also oppose the Muslims, and so solidarity grows between the lower-status groups, forging bonds of class rather than culture.

Piketty's big point as always is that nothing is inevitable. Western democracies can learn from India's experiences: not copy their systems, or react against them, but see what they've done and what the results have been, and then use that to guide our own goals and plans.

Brazil also provides an interesting counter-example to the rise of social-nativist parties. Since the end of the military dictatorship, its Labor Party has been a major contender in democratic elections, but in the early years there wasn't much class adherence to any parties. The Labor party was more focused on urban factory workers, who were slightly better-educated than the national average and also slightly poorer than average. The politics reflected an urban/rural divide more than a rich/poor, educated/uneducated or black/white division. After Lula led the Labor party to victory, though, he delivered concrete benefits to poor people, and as a result the political system has grown more organized around class than before. I'm sure that many people would see increased class division as a negative, but for Piketty it's definitely positive: He wants political solutions to inequality, which means politicians running on specific plans, winning popular mandates for those plans, and then implementing those plans. On the other side of Brazil's politics is Bolsonaro's party: the party of the rich, and also of "the whites" (who have recently become a minority within Brazil).

Brazil obviously has a different history than India. India was dominated by the centrist Congress Party for a long time, while Brazil has had a more dynamic left/right divide. But it's interesting to see how similar those countries are today. In both cases, the party in power is supported by the upper classes and promotes a nativist, socially reactionary platform. The opposition in both countries is a lower-class, multiconfessional, multiracial party. This is a very different dynamic than what we're seeing in the First World.

As Piketty has shown over the whole course of the book, and really even in the title, economics and politics are inherently intertwined, and we can't fix one without the other: we need political action to improve fiscal justice, and we need economic reform to realign our politics and escape the social-nativist trap. In the very last chapter he finally lays out his proposals. The progressive annual tax on wealth, his marquee suggestion from Cit21C, makes a return here: Over the long run it won't bring in an enormous amount of revenues for the state, but it will be a huge force for breaking up concentrations of capital and reducing inequality within nations. Alongside wealth taxes he also discusses inheritance taxes, which I don't recall being a factor in Cit21C. He seems to suggest that having an annual wealth tax could remove much of the need for an inheritance tax, as wealth would be recirculated during an entire life instead of just at the end, but seems to ultimately come down on the side of having lower, steeply progressive inheritance tax rates rather than just eliminating it. He has some compelling examples for lowering inheritance tax rates: for example, if parents want to pass down their house to a child, that child might not be able to afford to pay the inheritance tax without selling that house. Inheritance taxes could either be pegged to the value of the estate, as they are today, or based on the wealth of the heirs, which may be fairer.

His style is an interesting mix of humility and audacity. Piketty keeps repeating that these ideas are just proposals meant to start the conversation, that the final rates and details should be set by parliaments after extensive public debate, but he's very detailed and forceful in his arguments. These are things that he really wants to see happen, not just a thought exercise or intriguing hypothetical model. He gets deep into the politics, suggesting what things could be implemented immediately by large countries like the United States, what things could be implemented by medium-size countries like France, and what things would require international cooperation. He also thinks a lot about the staging of changes: what political reforms would be needed before other things can happen, such as escaping the EU's unanimity requirement (where a tiny nation like Luxembourg can veto any fiscal measure it dislikes) prior to signing reciprocal agreements to tax wealth. He often writes something like "A would be ideal, but if we can only get B, that would still be a significant improvement over the status quo." It's intriguing and refreshing to see such radical proposals paired with an openness to incrementalism.

Much as the global progressive tax on wealth was the big idea of Cit21C, the big new idea in C&I is a universal capital endowment. The large sums generated by wealth and inheritance taxes would be placed into a special national fund, and that fund would provide every citizen with an "inheritance" when they turn 25. In his tentative proposal, the value of the inheritance would be set at 60% of the average (mean, not median) wealth of citizens in the country, which in the United States would be around $130,000. As it stands today, the bottom 50% of the population inherits virtually nothing and has practically zero wealth, so this would open up enormous opportunities: the full range of the population could now engage in the full range of economic and social activities. A young man or woman could use their endowment to start a business, or as a down payment on a house, or buy their own professional tools, and so on, giving each citizen the freedom to choose.

It's a really interesting and compelling idea. Reading this proposal reminded me of my own parents, who were poor when they got married, but were able to buy a house because of an inheritance one of them received from a relative; it wasn't huge, but was enough for a down payment on a house. They continued to earn low incomes during my childhood, but were able to provide us kids with a stable home thanks to that gift. (Which I think probably did come around age 25, interestingly enough. As Piketty notes, the aging population means that even those people who do receive inheritances today receive them much later in life, and may arrive too late to serve as the springboard to a desired career.)

To play devil's advocate, I'm curious what this scheme would do to prices. My first thought is that if everyone suddenly received $130,000, then the prices of all houses would go up $130,000, and there wouldn't be any net improvement of the status quo. After mulling it over some more, though, that's probably not much of an issue. First, only around 2% of the population will turn 25 in a given year, so it's only a limited and gradual infusion rather than a sudden shock. Second, since the endowments are funded by wealth taxes, they're basically transfer payments: the total number of dollars in the economy isn't increasing, they're just being moved around. You can think of it as, instead of a millionaire buying a house and then renting it to a college grad, the college grad can buy the house herself; the overall demand is the same as before, since the millionaire has proportionally less money to purchase rental properties.

In a separate section on expatriation of property, Piketty also alludes to how real estate prices might drop as a result of foreign investors (who only own real estate for income and not to live in) offloading their portfolios to avoid paying the wealth tax in that country. So, even if the universal capital endowment did lead to an increase in domestic prices, it may offset the fall in prices from foreign buyers. And of course, not all of the capital endowment will go towards purchasing real estate! People could also invest it as a nest egg to live on, to provide economic security during future times of turmoil, to live on while attending grad school, or whatever makes the most sense for their personal journey through life.

In the conclusion, Piketty updates Marx and Engels' famous assertion that "The history of all hitherto existing society is the history of class struggles," stating instead that "The history of all hitherto existing societies is the history of the struggle of ideologies and the quest for justice." I think that's on point. First, looking narrowly at our socities in 2020, I don't think class struggles can satisfactorily explain today's GOP or the FN in France; but ideological struggles perfectly explain both. This updating has huge implications and really inverts Marxism. Instead of viewing history as an ineluctable process driven by natural laws and inevitable developments, Piketty sees it as a far more dynamic and living thing, driven mostly by the decisions we make. This mindset puts the power right in the hands of the people: not the power to carry out a preordained role, but the power to exercise our own free will and to select our future.

I think it's fitting that Piketty ends C&I with the same general statement with which he opened Cit21C. He indicts the field of economics for divorcing itself from the other social sciences: becoming too wrapped up in mathematical models and abstract theories, and not seeing itself in relation to questions of politics, society, culture, or history. And on the other hand, journalists and citizens have surrendered discussion or thinking about economic matters to professional economists. His main goal, across both books, is to bring economics back into the democratic sphere, and empower citizens to make choices about how they want their economies to function.

As you can tell, I enjoyed this book a lot, despite a slow, meandering start and some stretches of repetition. But I do have some complaints. Here they are!

On a minor pedantic note, there are quite a few typos sprinkled throughout the entire text. Usually these are minor things, like writing "was" instead of "way". In a few cases, the text or caption for a figure gives the wrong year, like 2009 instead of 2019, or gives the wrong dollar amount. It's usually obvious what he means, but is still a little disappointing. Given how excited I've been to get my hands on this book, I'm pretty sure that Harvard University Press rushed the translation and editing, so I shouldn't be surprised. I'm sure they'll all be addressed in the second edition.

The overall flow of the book is generally fine, but it seems like Piketty wrote it to support readers jumping around to specific chapters that interested them, like just reading the sections on Russia or just reading about the mid-20th-century social democracies. But maybe as a result, there is an interminable number of footnotes saying "See Chapter 5" or "See figure 11.3". It's annoying to me because I already know what he's referring to, and the chapter numbers by themselves aren't meaningful. On the whole the footnotes really break up the flow of the book for very little gain; for every illuminating note, there are four notes referring back to stuff you just read, another three referring you to the online appendix, and one strange digression that seems unrelated to the text.

Overall, the book feels less disciplined than Cit21C. I absolutely adored Cit21C's brick-by-brick approach, where he patiently laid down the fundamentals and developed indisputable points before gradually building up to his major theses and conclusions. In this book, Piketty can't resist rushing forward and applying modern-day applications in the midst of his historical review. In Cit21C he often said "I will return to this point" and just moved on (which always made me go "Aw snap, he gon' do it!!!"). In C&I he will close out sections on, say, 17th century British landlords by saying "This will later form the basis of the extreme concentrations of financial ownership that occurred starting in the 1990s." On the one hand, I spent the first half of Cit21C wondering "Why does this matter?", so maybe it's good that Piketty previews the relevance of these topics prior to Page 700. But I really miss the discipline and focus of the earlier book, which very patiently built an edifice out of neat, tiny self-contained arguments and eventually grew into something undeniable.

I feel a little like the disgruntled fan of a band who keeps asking them to just play the hits! I'm really surprised that, over the 1000+ pages of this book, Piketty never really addresses economic growth. I'm surprised because I felt like that was the most important element of Cit21C; he returns to many of that book's other themes here, but not that central one. It's important because Piketty painstakingly showed that low growth rates are the historical norm, with the 20th century's high growth as the aberration; and that there's an inverse relationship between growth rates and concentrations of capital. In the new book, he only briefly talks about growth to show that the extremely high tax rates levied by the US and the UK in the period 1950-1980 coincided with the incredibly high economic growth rates of both, thus disproving the common assertion that high taxes inhibit growth. But, based on his earlier book, it was inevitable that growth after 1980 would slow anyways, due to the ending of the baby boom and the completion of post-war reconstruction.

Anyways, I'm curious why he didn't include that topic in this massive book. Maybe he has changed his mind and now believes that the social-democratic policies really were responsible for large growth and not just reduction of inequalities. Or it could be a tactical political decision: it's compelling to say "Let's return to the policies of the 1950s-1980s so we can experience those growth rates again", and less inspiring to say "Let's return to the policies of the 1950s-1980s so we can more fairly share a shrinking pie."

And... I think that's the extent of stuff I disliked about this book!

I want to close by expressing my deep appreciation for Thomas Piketty's moral clarity. He's an economist, but he's a human being and a humanist foremost. It felt incredibly refreshing that, for example, he treats slavery as an absolute evil. Piketty does examine slavery seriously: not banishing it from discussion, he fully looks at all of the economic and political effects that the slavery and colonial regimes had, but he never loses sight of the human suffering behind those numbers and the gross injustices they inflicted. Particularly after my disappointment with Goliath, it's such a relief to see a humanist perspective underlying all the very solid financial and ideological observations he makes. This in turn makes me far more receptive to the ideas he proposes, as I can trust that we both see the world in compatible ways and share moral values. It seems hard to believe that these ideas could become realities; but, as he notes, ideas like a wealth tax that seemed unthinkable in the US at the time he wrote his prior book are now championed by leading presidential candidates and hold majority support in public polling. Bringing them into a reality will take a struggle, just as democracies themselves were born from struggle. With enough hard work, we might live to see more just ideologies and fairer capital systems in our own future.

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