Piketty’s Pessimistic Bestseller: Economic Inequality and the Twilight of Democracy

Piketty’s Pessimistic Bestseller: Economic Inequality and the Twilight of Democracy

Robert J. Antonio (University of Kansas)


In last spring’s and early summer’s unlikely bestseller, Capital in the Twenty-First Century,  Thomas Piketty contended that the post-World War II great convergence of the classes and much expanded middle classes in wealthy nations were ‘accidental,’ and warned that enduring plutocracy is on the rise. Two months after the book’s March 10th release, the 686 page tome reached the top of the Amazon.com list for all books and topped many other important bestseller lists throughout the US. Nobel Laureate economists Paul Krugman and Robert Solow and other luminaries praised the work as a watershed book, and even critics warned, sometimes quiet fearfully, that it could stir wider public interest in inequality and possibly unwelcome progressive political action and policy changes. Piketty interviews, reviews, commentaries, and companion pieces suffused the media for three months.

Referring to ‘the rockstar economist,’ pundits compared Piketty’s rapid public ascent to ‘Beatlemania,’ but most held that ‘Pikettymania’ would be of much shorter duration. A Financial Times satirical, op-ed forecast a nine stage ‘Piketty bubble’  bursting soon and the book being shelved and forgotten for a long while. After FT’s Chris Giles’ supposed exposé of Piketty’s carelessness, dishonesty, and cherry-picked data, the business media trumpeted the good professor’s demise and burst bubble, but the too hasty celebration was cut short by his devastating point-by-point rebuttal (FT published a very short Piketty response with Giles’ critique. Piketty said that Giles did not interview or provide complete materials in advance and that he was given less than 24 hours to respond. About a week later, FT published Piketty’s long rebuttal, now part of his book’s online technical appendix). By mid-November, however, the book slipped to  #237 on the US Amazon.com list, public discussion of it receded, and US mid-term elections affirmed the political party favoring tax reductions and other policies that have enriched the top and Piketty scorned.

However, the latest research from Piketty’s colleagues demonstrate that past analyses sharply underestimated concentrated wealth among the American ultrarich – the top 0.1 and 0.01 percent capital incomes are at record levels and the 0.1 percent share of wealth is equal to that of the lower 90 percent!  The renewed discussion of inequality continues in the media, manifesting palpable public uneasiness about the ongoing erosion of the middle class and immiseration of those below. The work of Piketty and his circle continues, and, even the FT satire conceded at the end that the conversation about the book is not over and likely will intensify again in a crisis.

Piketty criticizes sharply mainstream US economists’ overreliance on abstract mathematized theory, which he says ignores historical and institutional contexts and public problems, such as inequality, and is coloured by ideological presuppositions. He rejects their claims to be more scientific than other social disciplines, and  contends that they have too much influence on American public policy. Piketty insists that ‘economic’ issues are irreducible to purely economic forces and that distributional matters are ‘deeply political,’ being shaped by power relations and state policies, ideals of justice, and other social structural and sociocultural factors. He sees economics to be an unwilling subfield of social science, which would contribute more and better knowledge by working collaboratively with sociology, anthropology, and related social disciplines.

Piketty and his collaborator Berkeley economist Emmanuel Saez have been well-known in US policy circles for more than a decade.  Their work has generated debate over income inequality, helped inspire Occupy Wall Street, caught the attention of the Obama Administration, and stirred counterattacks from the right. Being public intellectuals, they aim to inform the populace about a nascent economic inequality and democracy crisis and motivate efforts to initiate policies to moderate them. They operate The World Top Incomes Database with Facundo Alvarado and Tony Atkinson and lead an international team refining methods and building datasets aimed to facilitate the analysis of income inequality and especially to illuminate poorly understood and much underestimated ultrahigh incomes. Using their website, one easily sees the enormous American income divergence; e.g., lower 90 percent US tax units’ (single and joint filers) average market incomes (in 2012 dollars) reached its peak of $35,600 in 1973 and by 2012 fell to $31,000 while top 1 percent incomes for the period  soared from $440,150 to $1,264,100 and top 0.01 percent from $4,532,000 to $30,785,700.

Piketty’s proposals for an 82 percent top marginal tax rate and progressive wealth tax, led numerous business media opinion writers to denounce the work as retrograde Marxism. The book’s dust-jacket with Capital in big red letters and the rest of the title in a much smaller black font likely was designed to evoke Marx’s magnum opus. However, Piketty says he is neither a fan of Marxism nor has he really soldiered through Marx’s masterwork. Beyond the shared concerns about income inequality and concentrated wealth, Piketty’s book has little to do with Marx (i.e., Piketty does not focus on commodity production, the labor process, or exploitation, and does not define capital in a manner to illuminate distinctly modern capitalist accumulation).

Addressing the long-term historical vicissitudes of economic inequality, Piketty compares labor income and capital income (from ownership of wealth) across historical epochs and different types of socioeconomic systems. His analyses span periods from nearly one hundred to three hundred years and sometimes as much two thousand years. Rather than addressing today’s class structure exclusively, he employs categories (i.e., top centile [‘dominant class’], top decile [‘upper class’], the middle 40 percent [‘middle class’], and bottom fifty percent [‘lower class’]) that facilitate his comparisons of income hierarchies across different historical conjunctures and divergent types of societies with varied cultures, institutions, and political economies.

Piketty follows postwar US economist, Simon Kuznets’ strategy of using tax data and estimates of national income to study economic inequality. Finding that US economic inequality declined between 1913 and 1948, Kuznets speculated that the trend would continue and that other wealthy and industrializing nations would experience the same bell-shaped pathway, or Kuznets Curve. Extending the US study until 1998, however, Piketty and Saez found decreasing, then increasing inequality, or a U-shaped curve. Piketty’s book develops this argument further in comparative work addressing longer timeframes and employing fresh methodological strategies and analytical arguments. Most importantly, he portrays the class convergence reported by Kuznets, which had been celebrated as inhering in progressive modernization, to be a temporary or ‘accidental’ result of great crises (e.g., Great Depression and World Wars) and consequent heretofore unusual or extreme political responses (e.g., confiscatory taxes, regulation, planning, welfare policies).

Piketty’s most controversial argument, however, is that the old industrial nations are returning to a regime based on inherited wealth, family ties, and rigid social hierarchy, as described by novelists like Jane Austen and Honoré de Balzac. Piketty argues that the rich often take major risks initially to build their wealth, but that they become rentiers, employing their social power to secure regular or practically certain high returns as their fortunes grow large. He holds that the top decile of old ‘rentier societies’ usually owns about 90 percent of the wealth and the top 1 percent half of it and that today’s wealthy nations may be on track to eventually reach such extreme divergence. Moreover, past rentier regimes have persisted for centuries and even millennia.

Piketty’s core analytical argument is that the average long-term rate of return on capital (r) has always exceeded growth rates (g) and that even a ‘small gap’ between the two will likely have enormous impact on inequality’s structure and dynamics. From antiquity to the seventeenth century, he explains, growth never exceeded 0.1 to 0.2 percent for long, but that the rate of return on capital averaged 4 to 5 percent. Piketty projects that economic growth will slow sharply this century as population increases shrink and growth spurts of newly industrialized nations end and that the rate of return on capital will likely exceed growth rates more substantially than today. He contends that r>g is the decisive force driving greater class divergence and the reemergence of rentier society. In his view, only new radical shocks can slow or stop the ‘drift into oligarchy.’

Rejecting claims that record labor income inequality in the US has been based on the marginal productivity of ‘superstars’ and ‘superentrepreneurs,’ Piketty argues that American CEOs and other top managers receive the ‘vast majority’ of ultrahigh incomes and they basically set their own salaries. The reduced top marginal tax rate, which they helped shape by buying and deploying sociopolitical power, motivates them to ‘bargain’ hard with compliant salary boards. Piketty holds that elite fractions of the top centile enjoy very high rates of return on capital due to their access to teams of top tax lawyers and advisors, hedge funds, tax shelters, and other sophisticated tax avoidance strategies. He contends that 10 to 30 percent of Global GDP is hidden in tax havens by the ultrarich. He believes that no force inheres in capitalism to slow the ‘oligarchic divergence.’

Piketty says his work has been inspired by his fear that people have not taken stock of how much society has changed over the last several decades and how much it diverges from the postwar era socioeconomic order and that we may be ensconced in a rentier society before taking notice. The methodology of this work stresses long-term inquiry about slow changing social structures and processes, which are obscured by living in the embrace and glare of everyday events. Although having different specific forms in varied historical moments under divergent regimes, Piketty implies, rentier elites employ configurations of sociocultural, sociopolitical, and socioeconomic power in wealth protection strategies that reproduce the social conditions that insure r>g.

Piketty has been criticized for what he did not attempt in his book. His long-term comparative method precludes detailed analysis of the varied forces and events that shape shorter-term historical conjunctures (e.g., his points about the shocks and politics that generated the twentieth century class convergence are simply suggestive). It also precludes exploration of the many configurations of status attributes (e.g., race, gender, ethnicity, religion) that intersect with class and help provide socioeconomic hierarchies their distinctive shapes in diverse eras and locales. These tasks are left for others in his circle and especially for other social scientists.

Although qualifying that r>g is historically contingent and dependent on politics, Piketty’s highly pessimistic portrayal of nearly inevitable oligarchic divergence arguably holds sway in his book. Late in the text, he urges a defense of hard won postwar social welfare rights (e.g., pensions, health care, higher education), and proposes increasing the top marginal tax rate to near its New Deal peak and instituting a progressive tax on wealth.  He acknowledges that the proposed changes, which have motivated business and conservative op-ed writers to brand him a Marxist and even a communist, are minimalist aims given the ongoing great reversal’s looming antidemocratic threats. Indeed, he says the proposals are ‘utopian’ under the current neoliberal regime and political gridlock, and even his most friendly reviewers heartily agree. He simply does not see signs of political forces on the near horizon capable of resisting plutocracy’s advance.

It will take time to determine whether Piketty’s book is the classic that his supportive reviewers suggest or is relegated to history’s dustbin or falls somewhere between. But his rentier society thesis resonates with American public fears that the ‘new normal’ of shrinking opportunity, mobility, fairness, and democracy is here to stay. Piketty’s data and mode of argument illuminate the enormous scale of economic inequality, challenge us to see and think critically about the radical rupture from the postwar era’s economic egalitarian tendencies and ultimately about the claims and arguably prevailing sensibility that there is no alternative to the current drift toward an even more unequal, undemocratic future. Like John Dewey in the 1930s, Piketty stokes fears that liberal institutions and formal democratic processes cannot withstand for long extreme economic inequality and consequent erosion of substantive equal opportunity and broader social democratic culture. If Piketty’s deeply pessimistic scenario stirs some cultural awakening and serious political conversation about the drift away from, threats to, and ultimately the meaning of democracy, then his stern warning about its twilight time could become the legacy of his book.


Robert J. Antonio is professor of sociology at the University of Kansas.