This book is Thomas Piketty’s third major work, after Les hauts revenues en France au XXe siècle (2001) and Capital in the Twenty-First Century (2014). “The subject of this book is the history and evolution of inequality regimes” (3). Its almost 1100 pages in the English version can be summarized as follows: inequalities have “increased in all regions of the world since the 1980’s” (1); they are economic (income and wealth), social (education), and political (participation in collective decision processes) inequalities, and they are not natural but caused by ideologies. To explain this, Piketty proposes to broaden the historical vision of inequality and, above all, the justifications that have been elaborated over time through different institutional configurations (feudalism, proprietarianism, social democracy, neoproprietarianism). Capital and Ideology also contains a proposal to correct these inequalities worldwide.
It is not an easy task to critically review a work of this magnitude, with frequently repeated arguments and with a clearly normative and—dare I say—aggressively partisan purpose. In what follows, I try to describe his main arguments; the final part of this review focuses on the book’s relationships with ethics, as readers of Business Ethics Quarterly are likely to expect.
The book is structured into four parts. The first three review the history of unequal societies: the ternary societies (clergy, nobility, and third estate) and the societies of orders, which gave way to ownership societies in Europe (part I, chapters 1–5); the slave and colonial societies (part II, chapters 6–9); and the Great Transformation of the twentieth century (part III), with the collapse of private property between 1914 and 1945 (chapter 10), the experience of incomplete equality in social-democratic societies (chapter 11), communist and postcommunist experiences (chapter 12), and the current neoproprietarian, hypercapitalist societies (chapter 13). Part IV expands the analysis of the sociopolitical conflicts that take place in unequal societies, mainly in the United States, and accounts for the drift of the leftist social-democratic parties toward identity, the party of the educated, and issues of race and immigration (chapters 14–16). Chapter 17 gathers the main measures of the participatory socialism that Piketty proposes.
Capital and Ideology contains rich empirical material on inequality throughout history; it also shows remarkable cultural breadth. The reader will acknowledge the quality of Arthur Goldhammer’s translation.
INEQUALITY AND IDEOLOGY
Piketty’s vision of inequality is neither economic nor technological but ideological and political. Inequality is not something inevitable but the result of the free decisions of elites. What causes inequality is not capitalism but ideology: private property is itself “a political ideology based on the absolute defense of private property; capitalism is the extension of proprietarianism to the age of large-scale industry, international finance, and more recently to the digital economy” (971). Furthermore, Piketty argues that “the market and competition, profits and wages, capital and debt, skilled and unskilled workers, natives and aliens, tax havens and competitiveness—none of these things exist as such. All are social and historical constructs, which depend entirely on the legal, fiscal, educational, and political systems that people choose to adopt” (7).
Ideology is “a set of a priori plausible ideas and discourses describing how society should be structured” (3), including the structure, limits, and transmission of property rights; the tax regime; the transmittal of opportunities, values, and knowledge in the educational system; and so on.
Political conflicts are consequences of inequalities; they are the result not of class struggle but of ideologies (466). Piketty differentiates his position from that of Marxists, who argue that “the state of the economic forces and relations of production determines a society’s ideological ‘superstructure’ in an almost mechanical fashion. In contrast, I insist that the realm of ideas, the political-ideological sphere, is truly autonomous” (7).
Throughout history, numerous explanations for inequality have been offered. The most frequent in recent times is what Piketty calls “meritocratic,” for example, wages are high when effort and human capital accumulated thanks to education are applied; this inequality is natural and desirable, insofar as it leads to growth. “Modern inequality is said to be just because it is the result of a freely chosen process in which everyone enjoys equal access to the market and to property and automatically benefits from the wealth accumulated by the wealthiest individuals, who are also the most enterprising, deserving and useful” (1).
Another explanation invokes randomness or good luck: your wealth depends on your parents’ wealth, your marriage, your genetic capabilities, the career you choose, the fortune of being in the right place at the right time—a set of “natural,” undeserved opportunities.
Piketty prefers an institutional explanation: the accumulation of wealth confers economic power, which is transformed into political power and which configures the legal and institutional framework of economic activity to extract income from workers, consumers, or competitors; to secure a privileged investment in education; and to ensure a tax treatment that perpetuates the growth of wealth. Countries that praise the creative and competitive spirit of the market and “sanctify” private property have low taxes, low social spending, and few restrictions on the power of companies.
From the very first pages, capital, which appears in the title of the book, gives prominence to private wealth, which adds other forms of wealth, financial, professional, or real estate. In Capital and Ideology, what moves history is not the accumulation of productive capital and production processes and structures but the accumulation of wealth, which is always the result of a social process, sustained by the institutions, laws, and knowledge accumulated over centuries (990). The loss of relevance of productive capital, be it financial, physical, or intangible, leaves the process of capital accumulation in the air. For example, Piketty does not explain why, after feudalism, the emergence of modern private property generated a process of capital accumulation.
Piketty seems to assume that what promotes economic growth is the fight for equality, not the search for efficiency: “what made economic development and human progress possible was the struggle for equality and education and not the sanctification of property, instability, or inequality” (3). If this is the case, redistributive policies may not have negative effects on production and its structure, and Piketty does not discuss these possible effects. Among “our most precious institutions—those that have made human progress a reality, including universal suffrage, free and compulsory public schools, universal health insurance, and progressive taxation” (7), the private company, the market, or entrepreneurship does not appear.
A PROGRAM OF PARTICIPATORY SOCIALISM
In the book, especially in chapter 17, Piketty develops a program of “participatory socialism” that can replace the outdated social-democratic program, which, he says, has lost its appeal to the underprivileged classes by accepting some assumptions of the conservative program and by drawing socialism toward the “Brahmin left,” the educated elites, leaving the popular classes without political representation (755).
Piketty’s proposal materializes mainly in three areas: 1) a reform of corporate governance to take power away from the owner class, 2) a fiscal policy for the massive redistribution of wealth and income, and 3) a plan of transnational federalism.
The reform of corporate governance consists mainly of giving employees half of the seats on the boards of directors of large companies and capping the voting rights of shareholders who have more than 10 percent of the companies’ capital (495ff.). Piketty does not discuss the impact this measure can have on efficiency, innovation, risk taking, or short-termism in business decisions.
The redistributive policy aims to “transform the entire distribution of income and wealth and, beyond that, the distribution of power and opportunity; it goes far beyond just setting a floor on income” (1003). Private property will become a transitory right. To do this, Piketty proposes strongly progressive tax rates on wealth (practically confiscatory for large fortunes), on inheritance, and on income. This will allow a one-time transfer, “a universal capital endowment” (972), to all citizens upon reaching, for example, twenty-five years of age, so that everyone has access to a proportional part of total wealth, to open up the opportunity to entrepreneurship and the “permanent circulation of property” (972); furthermore, some form of universal basic income would be introduced (1002).
Piketty recommends generous equal investment in education for all, as this is the main obstacle to economic equality (513ff.). Public spending will be financed by progressive direct taxes. He does not discuss the effects of these taxes on savings and investment, innovation, and growth, as he seems to assume that these policies will not affect capital accumulation. He does not pay attention to the ownership structure of companies in the long term, when capital and extraordinary profits are expropriated, and he does not dispute the honesty and efficiency of the public management of business (cf. 495).
The mobility of capital and the opacity of information on private property make the effectiveness of the previous measures unlikely if they are not applied to all countries, so a large agreement is necessary that transcends national borders. In the case of Europe, Piketty proposes a transnational federalism that would be complemented by the “free circulation of people, and de facto virtual abolition of borders” (1031).
The Capital and Ideology program includes other measures, also aimed at limiting the power of the property classes, such as the financing of political parties from state budgets and the substitution of private donations to parties and philanthropic organizations through vouchers that each citizen could deliver to the party or institution of his or her choice (1016ff.).
SOCIAL JUSTICE
Capital and Ideology is not a treatise on business or economic ethics, nor does it contain discussions on these topics. Piketty defines a just society as “one that allows all of its members access to the widest possible range of fundamental goods … education, health [elsewhere he adds “employment, the wage relation, and deferred wages for the elderly and unemployed” (1003)], the right to vote, and more generally to participate as fully as possible in the various forms of social, cultural, economic, civic, and political life” (967–68).
Piketty writes that “a just society organizes socioeconomic relations, property rights, and the distribution of income and wealth in such a way as to allow its least advantaged members to enjoy the highest possible life conditions” (968). He notes the resemblance of this thesis to those of John Rawls (1971, 1993), “especially his ‘difference principle’ ” (968n1). But his idea of a just society is elaborated not from a hypothetical social contract under the Rawlsian “veil of ignorance” but from real, historical experiences and public debates, because “it is wise to be wary of abstract and general principles of social justice and to concentrate instead on the way in which those principles are embodied in specific societies and concrete policies and institutions” (969).
Capital and Ideology rejects “the idea that strictly private property exists and that certain people have an inviolable natural right to it” (990), although this does not imply recognizing a “social function” of property. In any case, “to the extent that income and wealth inequalities are the result of different and distinct life choices or permit improvement of the standard of living and expansion of the opportunities available to the disadvantaged, they may be considered just. But this must be demonstrated, not assumed” (968). So there can be “just inequalities,” but Piketty does not explain how to identify them. “What is just ownership?” he asks (971). The reader will expect this question to be followed by a more or less precise definition, but what the reader will find is again a critique of “proprietarianism as a political ideology based on the absolute defense of private property” (971). In this way, in the absence of a reflection on the criteria of what is fair to possess, receive, use, and transmit and the conditions under which this fair relationship can be carried out, the only thing that counts is the redistribution program that will put an end to all inequalities, fair or unfair.
Many theories try to justify the fair use of property rights, such as the arguments of convenience of private property versus common property (the best care of one’s own things, the best administration if everyone takes care of his or her affairs, the preservation of social order); the defense of the dignity and autonomy of the person; ownership as a defense of the citizen against the state and the powerful; and the right to one’s own person and activity and, therefore, to the fruits derived from it. In some way, these arguments show that the different dimensions of justice, personal and social, should not be treated as separate realities. Piketty does not discuss them, probably because he fears that recognizing some right to private property will set in motion a social process of justification of the accumulation of wealth, the creation of an ideology that justifies “any level of inequality” (2).
There are other gaps in the discussion of ethical issues in Capital and Ideology: there is no definition of a just tax, beyond the progressivity of tax rates and the transparency of information, and although there is some mention of the just wage (1000ff.), this concept is not defined or explained—it is only related to the basic income and the income tax, whose progressivity “can help to achieve a just wage by reducing the income gap to a level consistent with a just society” (1004).
Reading Capital and Ideology is not easy because of its length. Near the end of the book, the author reminds the reader that “the struggle of ideologies involves shared knowledge and experience, respect for others, deliberation, and democracy” (1036). Piketty proposes to carry out a dialogue that takes into account the logic of events “with due attention to historical experimentation and concrete institutional practices” (41), because nobody “will ever possess the absolute truth about just ownership, just borders, just democracy, just taxes and education” (1036) and “every ideology,” also the one that Piketty criticizes so harshly, “contains plausible and sincere elements from which we can derive useful lessons” (966). These statements of intellectual humility can be a good start for the reader who dares to confront Capital and Ideology.
Antonio Argandoña is emeritus professor of economics and business ethics at the IESE Business School, University of Navarra. He received his PhD in economics from the University of Barcelona in 1969. He is a member of the Real Academia de Ciencias Económicas y Financieras de España (Royal Academy of Economics and Finance), chairman of the Comité de Normativa y Ética Profesional (Committee of Standards and Professional Ethics) of the Association of Economists of Catalonia, and a member of the Commission on Corporate Social Responsibility and Anti-Corruption of the International Chamber of Commerce of Paris.
