Piketty’s Capital in the Twenty-First Century is that rare phenomenon, an economics tome that flies off the shelves
Thomas Piketty: the French economist bringing capitalism to book
It was around 7.50 on Thursday morning when it became clear that Thomas Piketty had gone viral. Forget topping the bestseller lists. Forget the praise heaped on him by Paul Krugman. Never mind the hundreds of thousands of times his name is Googled. When Piketty was namechecked on Thought for the Day, he stopped being a modest 42-year-old French economist and went mainstream.
In case you haven’t noticed, Piketty’s Capital in the Twenty-First Century is a publishing sensation. It has already sold 200,000 copies, making it the 50 Shades of Grey of economics books. It is being reviewed on the internet by supporters and critics who self-evidently have not read all of its 577 pages. And it has jolted the right, who are scrabbling around for an answer to its main message: rising inequality is killing capitalism.
But there is more to Capital than that. It is a big book in every sense of the word, using empirical evidence from 30 countries to describe how capitalism has evolved over the past 300 years and is now reverting to what Piketty calls the Downton Abbey world of a century ago.
Where much modern writing about economics is cloaked in impenetrable jargon, Piketty is not afraid to draw on literature and popular culture to make his points. Quentin Tarantino gets a mention, as does the film Titanic. He likes Balzac and Jane Austen, he knows his Elizabeth Bennet from his Lady Mary.
That said, it is still a book about economics, and many readers will find it hard going when they get to the sections on the Cobb-Douglas production function and the marginal productivity of capital. Like Adam Smith’s The Wealth of Nations and Maynard Keynes’s General Theory it is a tome that will be more quoted from than read right through.
The gist of Piketty’s book is simple. Returns to capital are rising faster than economies are growing. The wealthy are getting wealthier while everybody else is struggling. Inequality will widen to the point where it becomes unsustainable – both politically and economically – unless action is taken to redistribute income and wealth. Piketty favours a graduated wealth tax and 80% income tax for those on the highest salaries.
Lord (Adair) Turner, the former chairman of the Financial Services Authority, says Capital is “a remarkable piece of work”. Turner, who has name-checked Piketty in his recent lectures, added: “He is saying that we have a set of tendencies at work to which the offset has to be a degree of redistribution. I completely agree with him.”
Krugman, writing in the New York Review of Books, says Piketty’s work will “change both the way we think about society and the way we do economics”.
The book has also created waves on the right. Allister Heath, writing in the Daily Telegraph, said the book was flawed but admitted that supporters of capitalism were being “slaughtered on the intellectual battlefield” and needed to get their act together fast.
The problem for Heath is that Piketty’s book seems to explain the brutal world of the Great Recession and its aftermath rather better than trickle-down economics. Capital speaks to the Occupy movement; it speaks to the under-25s in Britain whose real wages are 15% lower than at the end of the 1990s; it speaks to Generation Rent.
Piketty finds the right’s hostility strange. Despite the title’s echo of Marx’s magnum opus, he is a mainstream European social democrat rather than a Marxist. His argument is that the world is reverting to the Belle Epoque of the late 19th and early 20th centuries when conservatives such as Bismarck and liberals such as Lloyd George, Keynes and Roosevelt knew that change had to come.
“My object is to make people think,” said Piketty. “I am a defender of the free market and private property, but there are limits to what markets can do.”
Born in 1971, Piketty has a radical lineage. His parents were part of the generation of students that manned the Paris barricades in May 1968. As a young academic he spent some time in the US, but quickly returned. A rather shy man, he seems bemused by his rock star status. “Economists are not highly regarded in France, so you have to be modest.”
He says that what is new about his book is that he has been able to collate data on such a scale. “Until now there has been very little historical evidence.”
Piketty draws a number of conclusions from his meticulously compiled data: there is rising inequality in a number of countries; the world is moving in the wrong direction; something can and must be done.
It is rare for economics books to fly off the shelves. Once in every generation, usually when the world has started to recover after a serious recession, there is a search for answers. Will Hutton’s The State We’re In was the must-buy book two decades ago just as Piketty’s is today.
Lord (Stewart) Wood, special adviser to Ed Miliband, says it is a “really important book that has hit a nerve with its scale and scope”. Wood is impressed by the way it exposes sweeping historical trends and has shone a light on wealth as an issue. Admiring the analysis is one thing; accepting the policy prescriptions quite another. Labour will steer clear of some of Piketty’s more radical suggestions, although the author of Capital can’t see a problem.
In Britain, the poorest half of the population owns just 3-4% of the wealth. It must be possible to do better than that, Piketty says, brushing aside suggestions that a wealth tax would destroy capitalism. “You can’t say that 1% off the wealth of the richest will kill the economy,” he says.