Thomas Piketty's 600+ page book on Capital has caused some jitters in the US and UK. Some right wing commentators have roundly condemned the work as a product of unmitigated socialist ideology (which might just be a badge of honour in Piketty's home country France). Yet, nothing could be further from the truth. The book is in fact adopting a measured and balanced tone throughout and cultivates a sense of intellectual fairness that serves the ongoing discussions about equality well.
It is also well written and easily accessible which makes it, if not exactly bed time reading, a welcome contribution to a wider debate on the effects of capital accumulation in the developed world (Pickety is unashamedly focussing on the 'First World', mainly for reasons of data sources, and consequently there is very little about China, India, or even Central European countries in Piketty's volume).
It is of course easy to find flaws in a monumental piece stretching over more than 600 pages but Pickety insulates himself well to criticism by pursuing a tightly controlled theme and rarely straying from the main path. The data he has marshalled are impressive and the argument flows coherently and plausibly.
Yet, after a detailed exposition of capital in all its manifestations (real estate, financial and industrial assets), Piketty then embarks on a more daring path, entering the territory of economic prediction and tax proposals. His suggestion of a world wide capital tax has been widely debated and criticised so I wont go into detail on this, except, in fairness, point out that he repeatedly reiterates the hypothetical and idealistic character of his own proposal.
A more relevant criticism appears to lie in the way in which he discusses the purposes of taxation in general. At times, he seems to suggest that the reason taxation is levied is to give tax authorities (and researchers) a better data set. To my mind, this is like putting the cart before the horse. Taxation should have a purpose beyond simply generating knowledge for bureaucrats in tax authorities or, incidentally, academics.
Once his political instincts come to the fore, he identifies another additional purpose of taxation: to reduce capital differentials amongst the populations. This, of course, is the expected culmination of his treatise on the history of capital: to reduce inequalities. Yet, Piketty cant quite bring himself to look for a consistent justification why taxation should be the prime mechanism to bring about equality. To do this, he would have to enter the domain of political philosophy yet, he struggles to engage in this debate. It may be because the language of politics is less determined by the grammar of economic development than by political legitimacy, an aspect of political morality that sits oddly in any economic treatise. In an aside, he lets his guard down and writes:
'Even a person of the most refined taste and elegance cannot easily spend 500 million euros in a year.' (p525)
The implication is that if somebody cannot plausibly make use of what she owns, she should not keep it. It is this curious inversion of property rights that puts him on a par with the illiberal sections of radical socialism. Incursions into people's right to life, liberty and property (as Locke referred to them) requires careful justification. Simply stating that somebody couldn't plausibly have any use for their property moves Piketty dangerously close to the illiberal discourse of envy. This does a disservice to an otherwise insightful and impressive historico-economic study.
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