The English translation of French economist Thomas Piketty's magnum opus Capital in the Twenty-First Century is finally out, and it's made an enormous splash (see reviews here, here, and here). It's a brilliant, surprisingly readable work that synthesizes a staggering amount of careful research to make the case that income inequality is no accident. Indeed, Piketty argues that it is a feature of capitalism itself — unless governments take action to rein in capitalism's excesses.
That may sound like an obvious point to you. But the value of Piketty's work is that it shows that capitalism's postwar heyday — in which incomes at the bottom and the top actually converged — was a historical anomaly. Piketty's analysis of the last two centuries makes the case that capital in its natural state does not tend to spread out or trickle down, but to concentrate in the hands of a few.
This is news to those on the right who have long championed capitalism's egalitarian benefits. Conservatives have been far too complacent in believing that capitalism is the only possible economic system, and far too aggressive in attempting to demolish the structures that mitigate capitalism's worst side effects. If Piketty is correct, he has laid the intellectual groundwork for a resurgence of American socialism — and conservatives are starting to feel distinctly uneasy about it.
Jim Pethokoukis has the closest bead on this, with a red-baiting post worrying that a cultural conspiracy could result in the victory of "soft" Marxist statism:
Piketty thinks the German progenitor of Communism basically got it right...
[His] research is driving the economic agenda pushed by Washington Democrats and promoted by the mainstream media. The soft Marxism in Capital, if unchallenged, will spread among the clerisy and reshape the political economic landscape on which all future policy battles will be waged. We've seen this movie before.
John Maynard Keynes and Friedrich Hayek famously squared off in the 1930s, Left versus Right. But when Keynes published his revolutionary General Theory in 1936, Hayek went silent. It was a de facto retreat that helped give free rein to anti-market forces — even if that was not what Keynes intended — for decades until Milton Friedman and Anna Schwartz wrote A Monetary History of the United States in 1963 and energized the intellectual fight against statism. Who will make the intellectual case for economic freedom today? [National Review]
The biggest problem with this account is that Keynes was not a Marxist, nor much of a statist by any reasonable definition. He was a bourgeois economist whose life's work was dedicated to saving capitalism from itself, by solving the problem of recessions. He was on the side of conservatives when it came to maintaining the capitalist project. Markets are great, in Keynes' view, it's just the government must be ready with certain policies to prop up aggregate demand during recessions.
In the Keynesian view, the self-destructive tendencies of capitalism can be easily moderated with the right policies, something which Piketty also believes. Piketty's favorite policy is a progressive wealth tax, to lean against the natural tendency of capital to accumulate in ever-fewer hands. Indeed, his thesis might have been strengthened by a more explicit comparison between France, where sharp taxation on the rich and other policies have prevented a return to pre-World War I inequality, and America, where such policies have long since been smashed and inequality has returned to such levels.
Of course, no one has been doing more to prove Keynes and Piketty right than American conservatives, who have been eagerly demolishing these moderating structures. For at least the last 40 years, their policy orientation has been frankly aristocratic. When they get the chance, they sharply reduce taxes on inheritances and other unearned wealth much more than they do those on income. The bold new conservative innovation since the 2008 financial crisis has been to add social insurance, especially for the poor, to the list of things that need to be slashed.
That is why Piketty has made such a huge impact: He has starkly and convincingly outlined the stakes for future generations. Either we'll have a new birth of reformed capitalism, with his preferred progressive wealth tax and other institutions, or we'll have wealth concentration on such a colossal scale that it will threaten the democratic order.
Conservatives are just now waking to the danger they face from the fact that their beloved economic system is manifestly failing to share its benefits. That partly explains the hysterical reaction that greets people who aren't ashamed to wield overtly leftist slogans. These days, the ultra-rich are capturing nearly all (or more than all) the gains of economic growth, a rapidly shrinking middle class is treading water, and an increasingly huge minority is being left behind in poverty and desperation. Capitalism as we know it is responsible for those trends.