Here’s part 1.

In a way, we are in the same position at the beginning of the twenty-first century as our forebears were in the early nineteenth century: we are witnessing impressive changes in economies around the world, and it is very difficult to know how extensive they will turn out to be or wht the global distribution of wealth, both within and between countries, will look like several decades from now  (page 16)

In part 2 of the Introduction to the book, Thomas Piketty looks at various economic philosophers to show they and their views were products of their times.  His meta-point being that our views on how the world works must change as the world itself changes.

Four economic philosophers who wrote about changes in inequalty are examined:  Thomas Malthus, David Ricardo, Karl Marx, and Simon Kuznets

 

The power of population is indefinitely greater than the power in the earth to produce subsistence for man.

 

Thomas Malthus wrote c. 1800  His basic thesis was that population gains would keep most of humanity in perpedual poverty.  Any improvement in technology would provide only a temporary bump in living standards, which would increase population until most people were again on the ragged edge of misery and destitution.  (This situation is known to this day as a “Malthusian Trap.”) His rather dark conclusion was that any aid to the poor was futile and destructive, producing that many more poor people down the road—analogous to feeding city pigeons.

While there are precious few “Malthusians” today, there are plenty of “neo Malthusians.”  — those who believe that population control is a key element to ensuring properity.  There is undeniable truth that nature has imposed hard-but-volatile limits, though it is harder to determine exactly what those limits are.

Thomas Piketty mentions that Rev. Malthus used as his primary date essays by Arthur Young, who had traveled France (whose population had tripled in the 18^th Century) in 1787-88 and saw plenty of misery.  However, uknown to Malthus and Young, those two years were years of failed harvests in France, and not indicative of the normal French life.

 

 

After all the fertile land in the immediate neighbourhood of the first settlers were cultivated, if capital and population increased, more food would be required, and it could only be procured from land not so advantageously situated.

 

David Ricardo wrote c. 1820.  Lacking good numbers to work with, he predicted that increasing population on a finite amount of land would make land progressively more valuable and landowners progressively wealthier relative to everyone else.  He did not foresee the extend of the technology-driven Industrial Revolution or the Green Revolution (greatly increased agricultural output per acre) of the late 20^th-Century.  Thomas Piketty concedes that Ricardo may have been right on principle, but the “bottleneck” was not fertile acreage but oil and possibly urban real estate.

 

Let the ruling classes tremble at a communist revolution. The proletarians have nothing to lose but their chains. They have a world to win. Workingmen of all countries, unite!

 

Karl Marx wrote the Communist Manifesto in 1848.  At the time, the Industrial Revolution had been going on for a half-century, but workers’ wages had not risen at all.  (The Lowell Mills history park in Lowell, Massachusetts has some great information about this, detailing how wages and conditions got worse as we moved from the 1820s to the 1840s and the labor force went from New England farm-girls doing a stint to save up some money to immigrant labor working in the mills for life.)

Thus, Marx reasonably-at-the-time saw Industrial Capitalism as a system which produced great wealth for the factory owners (“capitalists”), but would leave workers (“labor”) in perpetual destitution.  To Karl Marx, communism was the way that workers could benefit from industrialization.

Then during the last third or the 19^th Century, wages rose considerably.  And they continued to rise for much of the 20^th Century.  While Marx’s overall analysis didn’t see the future accurately, Thomas Piketty commends Marx for at least looking at the issue of inequalify and for pointing out the potential problem of “infinite accumulation,” where the profits from capital represent an ever-increasing share of the economy.

 

 

The very fact that after a while, an increasing proportion of the urban population was “native,” i.e., born in cities rather than in the rural areas, and hence more able to take advantage of the possibilities of city life in preparation for the economic struggle, meant a better chance for organization and adaptation, a better basis for securing greater income shares than was possible for the newly “immigrant” population coming from the countryside or from abroad

Simon Kuznets was the last person cited.  An American Economist, he wrote his key work in 1955, and used Income Tax data (The Income Tax in the United States started in 1913.)  Seeing an overall trend of reduced inequality, he ignored the two world wars, the Great Depression, the powerful union movement, and president Roosevelt’s policies as factors but put forth a belief that this reduction in inequality was automatic.  He believed that as an economy industrialized inequality would first grow, then shrink, (Plotting inequality as a time-series, it would produce a bell curve, known as the “Kuznets Curve.”)   Since this reduction in inequality was automatic the government needed to do no more than the government does to ensure market equilibrium (= Every product finds a buyer; every buyer willing to pay market price finds a product) in chewing gum.

Piketty writes, “Kuznets took care to remind his listeners that the intent of his optimistic predictions was simply to maintain the underdeveloped countries ‘within the orbit of the free world.’ In large part, then, the theory of the Kuznets curve was a product of the Cold War.”  Or, as I might call it, propaganda, though Thomas Piketty goes on record as stating that Kuznets had done some valid analysis and was not purely a professional liar.

It was Kuznets “(Economic) Growth is a rising tide that lifts all boats”—a quote later made famous by President Kennedy, not coincidentally the first president to successfully push for lower tax rates on the super-wealthy.  Kuznets was cited by economists to justify the steeper tax cuts of the 1970s and 80s, at which point inequality skyrocketed.

 

Implicit in this section, and explicit elsewhere, is that no major, comprehensive study of changing economic inequality has been done since Kuznets, and therefore that the last 40 years of increasing inequality have been missed and not accounted for.  Hence, this book.

 

I read Capital in the Twenty First Century in 2014-2015 and was extremely impressed by both the content and the presentation. In my views, it’s easily in the running for most important economics book of the last few . This year I am doing an in-depth, chapter-by-chapter review of the book. One chapter will be reviewed and discussed every two weeks.