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Overcoming Capitalism without Overcoming Globalism?

Capital and Ideology
by Thomas Piketty, trans. Arthur Goldhammer
Harvard University Press, 2020, 1,093 pages

If Thomas Piketty’s first book—the seven-hundred-page Capital in the Twenty-First Century—was more than you could chew on, brace yourself: his latest effort, Capital and Ideology, is even longer, surpassing the thousand-page mark. On the upside, it’s a much more interesting read. In his previous book, Piketty focused on the evolution of income and wealth (capital) in the West throughout modern history, mainly from the point of view of tax policy. He painstakingly demonstrated the role played by progressive taxes in reducing long-entrenched inequalities during the postwar era, and conversely the way in which the slashing of taxes on high incomes and wealth in the neoliberal era has led to today’s extreme concentration of wealth and alarming levels of inequality.

Piketty’s earlier thesis, which all but disappears in the new book, was that the tendency of returns on capital to exceed the rate of economic growth threatens to undermine not only democracy but capitalism itself. Piketty, however, had little to say about the deeper political-ideological dynamics driving these trends. This latest book is an attempt to fill that gap. Capital and Ideology aims to explain not only what has happened but why. In particular, the book focuses on the relationship between inequality and the way in which the concept of private property has evolved over time. Piketty argues that all the major political-ideological battles of the past centuries—and the regimes they have given rise to—have revolved around conflicting views of property.

The Invention of Private Property

According to Piketty, the modern concept of private property can be traced back to the French Revolution, which marked the birth of what he calls the ownership or proprietarian regime. On the one hand, the revolution abolished the privileges of the old dominant classes—the clergy and the nobility—and marked the first historic attempt to create a social and political order based on equal political-economic rights for all (male) citizens, including the right to vote and the right to property. On the other hand, by hardening the rights of a property distribution largely inaccessible to poor peasants, it created new privileges and new socioeconomic cleavages between the haves and have-nots. Hence Piketty describes the early years of the French Republic as the first true liberal-capitalist state, based upon the formal equality of universal male suffrage (though the latter would be abolished shortly thereafter) but also upon actual economic, and thus political, inequality.

Indeed, the new economic cleavages in many ways reproduced the old political cleavages, given that the “historical” approach adopted by the revolutionaries meant that most of the property owned by old seigneurs was deemed to be legitimate. Article 2 of the 1789 Declaration of the Rights of Man and of the Citizen declared that property rights acquired in the past were held by “natural and imprescriptible rights”—a declaration that hindered attempts at a more radical redistribution of property. This “naturalization” of property rights is one of the main reasons, according to Piketty, why the French Revolution was unable to solve the problem of extreme concentrations of wealth. In fact, “the concentration of property increased steadily during the nineteenth century and up to the beginning of the twentieth century, and was even greater on the eve of the World War I than in the 1780s.” As Piketty writes:

The French Revolution illustrates a tension that we will encounter again and again in what follows. On the one hand, proprietarian ideology has an emancipatory dimension, which is real and should never be forgotten. On the other hand, it tends to bestow quasi-sacred status on existing property rights, regardless of origin or extent. This is just as real, and the inegalitarian and authoritarian consequences can be considerable.1

Piketty associates the French Revolution with the rise of the so-called proprietarian regime—a regime based upon the sacralization of property rights and in which, despite claims of égalité and fraternité, economic power and political power are inextricably linked. This was self-evident before the introduction of universal suffrage in the early twentieth century, when voting rights in practically all Western countries were reserved for property owners. Restriction of the franchise was a cardinal principle of early liberal theories, which were viscerally opposed to mass democracy. In France, for example, under the first Restoration, the right to vote was limited to 1 percent of the richest landowners and real estate owners in the country, and similar systems were in place in other countries. In this sense, Western proprietarian proto-democracies were fundamentally aristocratic and oligarchic even from a purely formal standpoint.

This remained largely true, de facto if not de jure, even after the introduction of universal suffrage. As Piketty points out, “constitutional restrictions then and now severely limited the possibility for political majorities to modify the property regime by legal and peaceful means.”2 Indeed, the notion that political regimes cannot be separated from the underlying property regime is a central aspect of Piketty’s analysis, just as it has always been for Marxists. Karl Polanyi, whom Piketty quotes throughout, once made the same point about the U.S. Constitution. The Constitution, he argued, “isolated the economic sphere entirely from the jurisdiction of the Constitution, put private property thereby under the highest conceivable protection, and created the only legally grounded market society in the world. In spite of universal suffrage, American voters were powerless against owners.”3

As one might expect from a system in which political power was mainly in the hands of property owners and where the purpose of political institutions was essentially the “hardening, protection, and . . . sacralization of the right of property,”4 proprietarian regimes were characterized by an extreme concentration of property and inequality of wealth until the beginning of the twentieth century. Somewhere around 85–90 percent of all property was held by the richest 10 percent of the population—equal to or higher than the levels observed even in the ternary feudal societies of the previous centuries.

Ideology and Regimes of Inequality

A point often stressed by Piketty throughout the book is that such grotesque levels of inequality, in order to be sustained, “need to be justified: they must rest on a plausible, coherent vision of an ideal political and social organization.”5 In other words, each inequality regime is based on a specific ideology which aims to manufacture consent and “naturalize” the regime in question. Take proprietarianism, which is essentially liberal-capitalist ideology in its crudest form—in Piketty’s words, “a political ideology whose fundamental purpose is to provide absolute protection to private property.”6 This ideology took hold in Europe during the nineteenth century, lasting up to World War I, and has been revived over the course of the past four decades.

On the one hand, proprietarian ideology speaks the language of “freedom” and “rights.” Such language is not entirely without justification: private property, “when correctly redefined within proper limits, is one of the institutions that enable the aspirations and subjectivities of different individuals to find expression and interact constructively.” On the other hand, it is “an inegalitarian ideology, which in its harshest, most extreme form seeks simply to justify a specific form of social domination, often in excessive and caricatural fashion.” As a result, Piketty says, “significant, durable, and largely arbitrary inequalities of wealth tend to reconstitute themselves.” Proprietarianism can be said to embody the “spirit” of capitalism in its purest form, according to Piketty. He describes capitalism as

a historical movement that seeks constantly to expand the limits of private property and asset accumulation beyond traditional forms of ownership and existing state boundaries. It is a move-ment that depends on advances in transport and communication, which enable it to increase global trade, output, and accumulation. At a still more fundamental level, it depends on the development of an increasingly sophisticated and globalized legal system, which “codifies” different forms of material and immaterial property so as to protect ownership claims as long as possible.7

In other words, capitalism can be understood as a constant movement to extend, in both geographic and legal terms, a property- and market-based logic to as many domains of human life as possible. Of course, as Polanyi powerfully argues, this movement inevitably encounters resistance or countermovements, as societies react against the destructive forces of unbridled proprietarian capitalism and attempt to remove the elements of production—land, labor, and money—from the market. Indeed, as Piketty notes, again echoing Polanyi, it is precisely the intrinsic contradictions of the proprietarian system—its deeply inegalitarian and undemocratic nature, its dependence on military and colonial domination over other parts of the world, and the inter-capitalist competition fueled by the mercantilist logic of proprietarian capitalism, which paved the way for the warring phase of 1914–1945—that ultimately sowed the seeds of its own destruction, leading “to the emergence first of counterdiscourses and then of communist and social-democratic counter-regimes in the late nineteenth and first half of the twentieth centuries.”8 Piketty stresses the importance of the ideological dimension in bringing about this regime change. He writes:

The end of ownership society was due more than anything else to a political-ideological transformation. Reflection and debate around social justice, progressive taxation, and redistribution of income and wealth . . . grew in amplitude in most countries in the late nineteenth and early twentieth centuries, owing largely to the very high concentration of wealth generated by industrial capitalism as well as to educational progress and the diffusion of ideas and information. What led to the transformation of the inequality regime was the encounter between this intellectual evolution and a range of military, financial, and political crises, which were themselves due in part to tensions stemming from inequality.9

The “Great Transformation of the Twentieth Century

Between 1914 and 1945, the nature of private property and the structure of global inequality, both within countries and at the international level, experienced a deep and rapid transformation:

In 1914, on the eve of World War I, the private property regime seemed as prosperous and unalterable as the colonial regime. . . . Yet by 1945, barely thirty years later, private property had ceased to exist under the communist regime in the Soviet Union, and soon in China and Eastern Europe as well. It had lost much of its power in countries that remained nominally capitalist but were actually turning social-democratic through a combination of nationalizations, public education and health policies, and steeply progressive taxes on high incomes and large estates.10

During the first half of the twentieth century, in Europe and in the United States, income and wealth inequalities, and the power of private property, experienced a dramatic decline. This was partly due to the material destruction linked to the wars, but above all stemmed from a multitude of political decisions aimed at “reduc[ing] the social influence of private property”: expropriation of foreign assets, nation-alizations, rent and price controls, large-scale progressive taxation, etc. This historic turning point, Piketty notes, was undoubtedly the result of the chaotic political developments of this period, but was also, and above all, made possible by specific political-ideological conditions: namely the “great transformation” of attitudes towards private property and the market that Karl Polanyi masterfully analyzed in his 1944 book of the same name. Those decisions, Piketty writes,

stemmed from profound and lasting changes in social perceptions of the system of private property and its legitimacy and ability to bring prosperity and offer protection against crises and war. This challenge to capitalism had been in gestation since the middle of the nineteenth century, before crystallizing as majority opinion in the wake of two world wars, the Bolshevik Revolution, and the Great Depression of the 1930s. After such shocks, it was no longer possible to fall back on the ideology that had been dominant until 1914, which relied on the quasi-sacralization of private property and the unquestioned belief in the benefits of generalized competition, whether among individuals or among states. . . . The traditional laissez-faire doctrine of government nonintervention in the economy, which prevailed in all countries in the nineteenth century and to a large extent until the early 1930s, was durably discredited. A shift in favor of interventionism took place almost everywhere. Governments and people naturally demanded explanations from financial and economic elites that had enriched themselves while leading the world to the brink of the abyss. People began to imagine forms of “mixed economy” involving some degree of public ownership of firms alongside more traditional forms of private property or, at the very least, stronger public regulation and oversight of the financial system and of private capitalism more generally.11

In Polanyian terms, the economy was partially “re-embedded” in, and subordinated to, society.

Piketty, however, is keen to stress that the egalitarian nature of social democratic societies, though undeniable relative to previous regimes, should not be overemphasized in absolute terms: postwar social democracies, if less unequal than the ownership societies of the Belle Epoque or than other social models around the world, remained “highly hierarchical . . . in economic and monetary terms.” Even more troublingly, in terms of its political consequences, social democratic regimes failed to truly and lastingly challenge the power of private capital, which exploited the crisis of the “Keynesian” regime in the late 1970s to rear its ugly head once again.

Hyper-Capitalism: Proprietarianism Makes a Comeback

Throughout the 1980s, “Keynesian” full employment and interventionist-regulationist policies were abandoned in virtually all advanced countries and replaced by nominally “free market” policies that today fall under the rubric of neoliberalism. Those policies were based upon the privatization of state enterprises, trade liberalization, deregulation of the financial sector, the lowering of taxes on wealth and capital, and, more generally, a newly sacralized view of private property. This paved the way for today’s hyper-capitalist or neo-proprietarian regime, as Piketty calls it, and resulted in levels of inequality and concentration of property/wealth typical of nineteenth-century proprietarian societies. As one might expect, a significant part of the book is dedicated to analyzing the regressive tax policies that have been associated with the so-called neoliberal counterrevolution, as well as their effects on inequality. More interesting still is Piketty’s analysis of the way in which contemporary neo-proprietarianism has radically expanded the scope of private property in the twenty-first century.

Piketty focuses in particular on what he considered to be a defining feature of neo-proprietarianism: the privatization and commodification of knowledge. He cites the case of private companies like Google that embark on the digitization and appropriation of public libraries and collections in order to charge people for accessing resources that were previously accessible for free. This is just one of the many examples of the new forms of capitalist rent associated with the private appropriation of knowledge. In many cases, this is appropriation of previously existing knowledge—a kind of modern equivalent of the enclosure of common land in thirteenth-century England. Other examples include trademarks, copyright, design rights, geographical indications, trade secrets, and patents. As Guy Standing of SOAS University notes, since the passage of the Agreement on Trade-Related Aspects of Intellectual Property Rights (trips) in 1995 (binding on all WTO members), intellectual property has become the prime source of rental income:

Knowledge-intensive industries, which now account for 30 per cent of global output, are gaining as much from intellectual property (IP) as from the production of goods or services. This represents a political choice to grant monopolies over knowledge to private interests, allowing them to restrict access to knowledge and to raise the price of obtaining it or of products and services embodying it.12

In other words, neo-proprietarianism hasn’t simply reestablished the power of private capital over traditional material property—through the reprivatization of public assets, etc.—but has extended its dominion over immaterial property as well. As Katharina Pistor contends in her widely debated book The Code of Capital, this is done primarily through a sophisticated system of legal coding. “The key to understanding the basis of power and the resulting distribution of wealth,” Pistor writes, “lies . . . in the process of bestowing legal protection on select assets and to do so as a matter of private, not public, choice.”13 It is only by grafting onto assets the legal attributes of priority, durability, universality, and convertibility that such assets can be transformed into capital. “There is no capital without law,” Pistor notes, and “the law has been placed firmly in the service of capital.”14 For Piketty, these new forms of property are fundamentally illegitimate. In many cases, they are based on publicly funded research. Consider Mariana Mazzucato’s famous claim that every technology that makes the iPhone so “smart” was government-funded: the internet, GPS, its touch screen, and the voice-activated Siri.15 More generally, innovations are built on the collective knowledge accumulated by mankind through the centuries. We will return to this point, and to Piketty’s broader case against private property, when discussing the author’s policy prescriptions.

Piketty takes aim at the hyper-meritocratic discourse on wealth and the idealization of the figure of the “wealth creator”—proof, he says, of “the irrepressible human need to make sense of social inequality, at times in ways that stretch credulity.”16 He notes that the quasi-beatification of figures like Bill Gates and other techno-billionaires obscures the fact that they would never have been able to build their businesses without hundreds of billions of dollars of public money invested in basic research over many decades. The quasi-monopolies they have built by patenting public knowledge would never have reaped such enormous profits without the active support of legal and tax codes—the “code of capital” that Pistor talks about.

Interestingly, Piketty’s criticism of contemporary hyper-capitalism isn’t limited to its property regime but extends to its political counterpart as well: Western-style liberal democracy. In a comparative analysis of Western representative democracy vis-à-vis China’s one-party system, Piketty calls into question “the supposed civilizational and institutional superiority of Western electoral democracies.” “There is obviously something absurd about the idea that ‘Western’ democratic institutions have achieved some sort of unique and unsurpassable perfection,” he writes.17 Among the criticisms traditionally addressed to Western parliamentary institutions by other regimes, such as the Russian and Chinese, Piketty argues that one warrants particular attention. Equal political rights, he suggests, are an illusion when the media are captured by big money, which allows the wealthy to influence people’s opinions and make them vote against their interests. The resulting situation is one of the perpetuation of inequalities and the status quo—exacerbated by the funding of political parties by the wealthy.

In other words, Piketty invites us to distinguish between the formal political equality that everyone is granted in our liberal democratic regimes, and the actual political inequality that results from economic inequality. Allowing a small minority to amass obscene amounts of wealth leads them to wield disproportionate influence and power, and allows them to capture the legislative process and push through laws that further cement their power and influence. As Branko Milanović writes, the “higher the inequality, the more likely we are to move away from democracy toward plutocracy.”18 Extreme inequality and democracy are, in short, fundamentally incompatible. Of course, Piketty doesn’t suggest that we adopt the Chinese or Russian model, but rather that we address the property regime that is at the root of inequality.

The Dynamics of Social Transformation

After analyzing the evolution of inequality regimes throughout history, Piketty takes a deeper look at the dynamics of political transformation. As we have seen, Piketty’s main argument is that all the major political-ideological battles of the past centuries—and the regimes they have given rise to—have revolved around conflicting views of property. Piketty’s analysis itself is an explicitly partisan one. Indeed, he comes clear about his socialist and “anti-capitalist” leaning from the book’s outset: “What made economic development and human progress possible was the struggle for equality and education and not the sanctification of property, stability, and inequality,” he writes.19 The point that Piketty wants to highlight by offering such a broad overview of the dramatic changes in the economic and political regimes of the past centuries is that societal structures are neither “natural” nor “immutable”:

Inequality is neither economic nor technological: it is ideological and political. . . . 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 and the conceptual definitions they choose to work with. . . . At every level of development, economic, social, and political systems can be structured in many different ways; property relations can be organized differently; different fiscal and educational regimes are possible; problems of public and private debt can be handled differently; numerous ways to manage relations between human communities exist; and so on.20

The role of ideology is precisely to “naturalize” existing inequality and property regimes—to “explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good,” as Keynes famously put it.21 “It is hardly surprising,” Piketty notes, “that the elites of many societies, in all periods and climes, have sought to ‘naturalize’ inequality”—that is, to try to give it natural and objective foundations. Piketty argues that the opposite is closer to the truth:

They argue that existing social disparities benefit not only the poor but also society as a whole and that any attempt to alter the existing order of things will cause great pain. History proves the opposite: inequality varies widely in time and space, in structure as well as magnitude. Changes have occurred rapidly in ways that contemporaries could not have imagined only a short while before they came about. Misfortune did sometimes follow. Broadly speaking, however, political processes, including revolutionary transformations, that led to a reduction of inequality proved to be immensely successful. From them came 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.22

These transformations, Piketty writes, are shaped first and foremost

by each society’s conception of social justice and economic fairness and by the relative political and ideological power of contending groups and discourses. Importantly, this relative power is not exclusively material; it is also intellectual and ideological. In other words, ideas and ideologies count in history. They enable us to imagine new worlds and different types of society. Multiple paths are possible.23

Now, Piketty admits that change doesn’t rely on ideas alone, but on the interaction between ideas, collective mobilizations, and sudden disruptions that create political-ideological bifurcations (economic crises, wars, etc.). He has little to say, however, about the specific conditions that allow such interactions to take place. This is evident in his account of the rise and fall of the postwar “Keynesian” interventionist-regulationist regime. The history of that regime cannot be explained solely in terms of the trauma caused by the Great Depression and then by World War II, but should instead be viewed as the outcome of the fortuitous confluence of the “right” social, ideological, political, economic, technical, and institutional conditions—including the fact that state interventionism was an indispensable element of the Fordist mode of regulation. By the same token, as Bill Mitchell and I explain in our book Reclaiming the State, the fall of that regime cannot be explained solely as the result of neoliberal ideology over Keynesianism, or of the capitalist counteroffensive.24

Instead, these political and ideological developments should be seen as part of a deeper structural crisis. The system began to exhibit a growing inability to accommodate the popular demands for rising incomes and employment as well as the capitalist need to subordinate production to profit, which had provided the basis for the Fordist-Keynesian “class compromise.” Ultimately, in his well-intentioned attempt to refute any form of historical determinism, and to demonstrate the nonessentialist nature of human structures, regimes, and societies, Piketty all too often swings to the other extreme—idealism. In other words, Piketty frequently adopts a worldview that tends to overemphasize the importance of ideas in shaping human history, and fails to fully take into account the way in which ideas interact with the other dimensions of the historical process. In this sense, Piketty largely fails to explain the actual dynamics of social transformation. And where he does attempt to do so, he reaches the wrong conclusions.

The Transformation and Decline of the Left

One of the most interesting yet problematic segments of the book is Piketty’s analysis of the evolution of the socioeconomic structure of the electorates of the different parties and political movements since the middle of the twentieth century, in particular the transformation and decline of the electoral Left (the socialist, communist, labor, and social democratic parties) over the past few decades. Piketty notes that from 1950 to 1980 the political and electoral landscape in Western countries was essentially organized along “classist” lines, in the sense that it pitted less advantaged social classes against more advantaged social classes. Simply put, the least advantaged (on any dimension: education, income, or wealth) tended to vote for socialist, communist, and social democratic parties (in the broad sense). Moreover, voter turnout was equally strong among the working, middle, and upper classes. From the 1980s and 1990s onwards, however, this dramatically changed: electoral support for Left parties, which in the meantime radically changed in nature, and electoral participation in general progressively declined among the working, popular, and less qualified classes. At the same time, it grew among middle-class graduates, managers, and intellectuals—the so-called professional managerial class (PMC).

The term PMC was coined in the 1970s by Barbara and John Ehrenreich, who claimed that the professional managerial class only exists “by virtue of the expropriation of the skills and culture once indigenous to the working class”—cultural production, social reproduction, and so on—and that it relates to the working class with a mixture of “contempt and paternalism,” while workers interact with them with “hostility and deference.”25 In other words, the parties of the electoral Left went from being the parties of the workers to being the parties of the graduates. Piketty thus dismisses the argument that the electoral Left’s decline is due to an irrational reactionary regression of the popular classes (which, he notes, is “a very convenient hypothesis allowing the ‘progressive’ elites to justify their civilizing mission”), claiming instead that the popular classes abandoned Left parties because they felt abandoned by the latter. The old Left parties gradually turned to, and came to reflect the worldview of, the new urbanite, highly mobile, highly skilled “progressive” elites, now geographically, ideologically, and anthropologically detached from the lower-skilled and less-educated peripheral working classes. The result is that today, with few exceptions, the electoral Left is relegated to the margins of the political spectrum in most Western countries (like many of their center-right counterparts, one might add), due to their embrace of “progressive neoliberalism”26 and failure to offer a meaningful alternative to the status quo.

Concretely, the conflicts between the popular categories which have gradually deserted the electoral Left and the new “Brahmin Left” have manifested themselves in recent decades in multiple public policy issues—most notably “globalization.” This is where Piketty’s ideas start to get more muddled and his ideological biases start to emerge more clearly. Piketty posits that one of the main reasons for the Left’s decline, and the rise of what he calls social nativism, is the Left’s inability to adapt its socialist/social democratic program to the new reality of globalization (“the development of trade, financial and cultural exchanges on a global economic scale,” as he puts it). In other words, Piketty wants the Left to “go beyond the nation-state”—to scale up its redistributive program at the international or supranational level in the face of what he claims to be the inability of nation-states to regulate the economy in this new global competition. Piketty echoes the same criticism that Hannah Arendt lodged against social democratic parties in the early 1950s, when she argued that the regulation of the unbridled forces of the world economy could only be done by means of the development of new transnational political forms.

History, however, proved Arendt wrong. Through the institutions of the democratic nation-state (and acting internationally rather than supranationally), from the mid-1940s until the early 1970s, Western countries were able to achieve lower levels of unemployment, greater economic stability, and higher levels of economic growth than ever before. There’s little evidence that Piketty’s claim concerning the waning role of nation-states was any truer in the 1980s than it was in the 1950s. The problem with this argument is that it hinges upon an interpretation of globalization (growing economic interdependence, internationalization of finance, etc.) as an inexorable and quasi-natural phenomenon resulting from economic and technological developments that nation-states (and especially Left parties within them) have little choice but to accept. In this view, nation-states are forced to abandon national economic strategies and all the traditional instruments of intervention in the economy, and to aim for transnational or supranational forms of economic governance—what Piketty accuses Left parties of having failed to do.

This view, however, doesn’t hold up to scrutiny. A closer look at globalization, says Adam Tooze, reveals it to be “an institution, an artifact of deliberate political and legal construction.”27 In other words, globalization was (is) largely the product of state-driven processes. All the elements that we associate with neoliberal globalization—delocalization, deindustrialization, the free movement of goods and capital, etc.—were (are), in most cases, the result of choices made by governments. Piketty himself notes that left-wing parties, and particularly the French Socialist Party, “played an important role, beginning in the 1980s and 1990s, in the movement towards the generalized liberalization of capital flows.”

There is scant evidence that governments were forced to do so by an “inexorable logic” of some kind or that such choices were inevitable. On the contrary, everything points to the conclusion that Left parties, during the so-called golden age of capitalism, lulled themselves into a false sense of security by thinking “that they had done much more than they actually had to shift the balance of class power, and the relationship between states and markets,” as Leo Panitch has said.28 More specifically, they failed to appreciate that the capitalist classes had lent their support to the Fordist-Keynesian “class compromise” only because the latter was a crucial component of that specific regime of accumulation, but these same classes were bound to relinquish their support for it if it were ever to become an obstacle to accumulation. This is exactly what happened in the 1970s, largely as a result of militant wage pressure and the rising expectations of the popular classes.

Thus Left parties found themselves lacking the necessary theoretical tools to understand—and correctly respond to—the capitalist crisis that engulfed the Keynesian model in the 1970s. They convinced themselves that the distributional struggle that arose at the time could be resolved within the narrow limits of the social democratic framework. The truth of the matter was that the labor-capital conflict that reemerged in the 1970s could only have been resolved one way or another: on capital’s terms, through a reduction of labor’s bargaining power, or on labor’s terms, through an extension of the state’s control over investment and production. As the experience of the social democratic governments in the 1970s and 1980s shows, however, the Left proved unwilling to go this way. The gradual gentrification of these parties also led to the marginalization of all dissenting voices (such as that of Tony Benn in the UK). This left them with no other choice but to “manage the capitalist crisis on behalf of capital,” as Stuart Hall wrote,29 by ideologically and politically legitimizing neoliberalism as the only solution to the survival of capitalism. And since the dismantling of national economic strategies was a crucial aspect of the neoliberal project, the Left came to see national sovereignty as the principle obstacle to modernization, and thus wholeheartedly embraced the emerging globalist ideology. This is particularly evident in the European context, where the French socialists abandoned their anti-capitalist program in the early 1980s. They traded their hostility to the European Monetary System for the cause of monetary union and supranationalism, thus spearheading the ruinous neoliberal transformation of Europe.

In other words, all evidence points to the fact that the electoral Left’s decline is not due to its failure to “go beyond the nation-state” but rather the opposite: that it embraced globalism and abandoned the only terrain where democratic politics and radical interventionist/redistributive policies are possible—the nation-state itself. This brings us to the final part of Piketty’s book, in which he outlines his vision of “participatory socialism” in the twenty-first century.

Beyond Private Property

In the last chapter of Capital and Ideology, Piketty makes his case for what he calls the “just society”—“one that allows all of its members access to the widest possible range of fundamental goods. Fundamental goods include education, health, 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.” Such a society would allow “its least advantaged members to enjoy the highest possible life conditions.”30 Achieving such a society, according to Piketty, requires going beyond the current sacralization of private property—and to a certain extent capitalism itself—and replacing it with a “just” property regime, centered upon not only adequate levels of taxation of capital/property, as one would expect, but also upon old and new forms of property. This would include, first, traditional forms of public property through the renationalization of key sectors of the economy (strategic industries, natural monopolies, vital public services). It would extend also to social property (employees’ participation in the ownership and management of firms) and what

Piketty calls “temporary property,” whereby “the wealthiest private owners must return part of what they own to the community every year to facilitate circulation of wealth and reduce the concentration of private property and economic power,” thereby preventing the latter’s permanent accumulation and consolidation over time.31

It is important to note that for Piketty it’s not just land and real estate property that should be made permanent but all forms of capital: “If one truly wants to diffuse wealth so as to allow the bottom 50 percent to acquire significant assets and participate fully in economic and social life,” he writes, “it is therefore essential to generalize and transform agrarian reform into a permanent process affecting the whole panoply of private capital.”32 The final and most original pillar of Piketty’s proposal is the establishment of a universal capital endowment to be given to each adult (at age twenty-five, say), equivalent to around 60 percent of the average wealth per adult. In wealthy Western countries, this would amount to around €100,000. This system would result in a form of de facto inheritance for all, which would seriously affect the real distribution of economic power in society. The combination of these elements, Piketty writes, would yield “a system of ownership that has little in common with today’s private capitalism; indeed, it amounts to a genuine transcendence of capitalism.”33 Private property would continue to exist but would be instrumentalized and subordinated to the general interest of society as a whole.

Piketty’s entire argument is premised on a radical critique of the very concept of private property itself:

The question is not so much whether an item of property is a shared natural resource or a private good developed by a single individual, as all wealth is fundamentally social. Indeed, all wealth creation depends on the social division of labor and on the intellectual capital accumulated over the entire course of human history, which no living person can be said to own or claim as his or her personal accomplishment.34

At a time when bold ideas are a rare commodity and even most self-proclaimed Marxists wouldn’t dare challenge private property, this represents the book’s greatest contribution to the current debate. It is a point on which I fully agree with Piketty. Without an overhaul of the current property regime and a drastic expansion of the state’s role—and an equally drastic downsizing of the private sector’s role—in the investment, production, and distribution system, we have no hope of offering a dignified existence to all citizens. We cannot expect markets, with their focus on short-term profits, to lead this transition. Two questions, however, come to mind. First, how can we expect a Left that’s become increasingly “Brahminized,” as Piketty notes, to adopt such radical views on property? Piketty completely sidesteps this question. Second, at what level should this socialist program be implemented? Alas, this is where Piketty’s biases once again get the best of him.

Overcoming Capitalism Without Overcoming Globalism?

As we have seen, Piketty subscribes to the conventional left-globalist wisdom, which holds that only forms of transnational or supranational governance can provide effective solutions to the problems created by hyper-globalization. But does the evidence support the assertion that national sovereignty—so often proclaimed dead throughout the twentieth century—has truly reached the end of its days?

Claims that the current stage of capitalism fundamentally undermines the viability of the nation-state often refer to Harvard economist Dani Rodrik’s famous trilemma. Some years ago, Rodrik outlined what he called his “impossibility theorem,” which says that “democracy, national sovereignty and global economic integration are mutually incompatible: we can combine any two of the three, but never have all three simultaneously and in full.”35 Rodrik qualified this argument by claiming that true international economic integration requires that we eliminate all transaction costs in cross-border dealings. Since nation-states are a fundamental source of such transaction costs, it follows that if you want true international economic integration you must be ready to give up democracy (by making the nation-state responsive only to the needs of the international economy) or national sovereignty (by creating a system of regional/global federalism, to align the scope of democratic politics with the scope of global markets).

Over the years, political forces spanning the entire electoral spectrum have skillfully used Rodrik’s trilemma to present neoliberal policies—entailing both a curtailing of participatory democracy and of national sovereignty—as “the inevitable price we pay for globalization.” Even those on the left that claim to oppose neoliberalism, such as Piketty, often invoke the impossibility theorem to justify the contention that the nation-state is “finished” and that financial markets will punish governments that pursue policies not in accord with the profit ambitions of global capital. But this is not what Rodrik meant.

Contrary to conventional wisdom, Rodrik acknowledges that international economic integration is far from “true”; in fact, it remains “remarkably limited.”36 He notes that even in our supposedly globalized world, despite the flowering of global firms and supply chains, there is still significant exchange rate uncertainty; there are still major cultural and linguistic differences that preclude the full mobilization of resources across national borders (advanced industrial countries still exhibit large amounts of “home bias”); there is still a high correlation between national investment rates and national saving rates; there are still severe restrictions to the international mobility of labor; and capital flows between rich and poor nations fall considerably short of what theoretical models predict.

The same points can be made today, almost twenty years after Rodrik’s article was published: national borders remain cogent because they “demarcate political and legal jurisdictions” that impose transaction costs and hinder “contract enforcement” rules.37 In other words, Rodrik’s trilemma is a tautology: of course, it is a definitional truth that if we want global capital to have no limits whatsoever, then nation-states have to disappear as legislative vehicles with enforceable jurisdictions (and confine themselves to being servants of global profit-making), or citizens must lose their democratic political rights. But, as noted above, that is not the current state of global capitalism (yet), nor is it one that we should aspire to. Therefore, the trilemma has little bearing on reality, except as a political tool or self-fulfilling prophecy.

Indeed, the Covid-19 global pandemic has revealed that nation-states, far from being powerless, can jettison pretty much every rule in the neoliberal book. Countries rapidly abandoned fiscal targets, unhampered trade flows, the superiority of private and liberal strategies over centralized economic planning and the welfare state, the sacredness of corporate property, etc.—and there’s nothing markets could do about it except beg governments for help. As some of us have been saying for years, neoliberalism has not entailed a retreat of the state but rather a reconfiguration of the state, aimed at placing the commanding heights of economic policy “in the hands of capital, and primarily financial interests.”38 But states remain firmly in the driver’s seat—in fact, they remain the only actors capable of taking control of the economy when push comes to shove, while on the other hand supranational organizations such as the EU are proving to be utterly useless or worse. The logical conclusion is that, if the rules of the game can be changed to fight a “war” against a deadly virus, they can be changed to wage “war” on poverty, unemployment, inequality, climate change. It’s simply a question of political will. It also follows that the struggle for democratic or participatory socialism today must necessarily take the form of a struggle in defense of national sovereignty, particularly where it has been most severely debilitated, such as in the EU. It is only on this basis—and on a radical rejection of globalism—that the Left can be refounded.

Regrettably, this point is completely lost on Piketty, despite his acknowledgement that individual states have much more leeway than is usually claimed (even by himself elsewhere throughout the book, funnily enough). Piketty writes that governments, in fact, “have considerable freedom to maneuver” and “can make progress toward reducing inequality and establishing more just forms of ownership without waiting for international cooperation to be achieved.”39 This is true not only for large states like the United States or China but also for “small nation-states like the countries of Europe.” This, he goes on to say, “applies not only to the establishment of new rules on the sharing of power and voting rights within firms (as shown by countries like Germany or Sweden, which have applied such rules for decades, without waiting for their international adoption), but also with regard to progressive property taxes and the reduction of income and wealth inequalities.” Interestingly, he notes that this is important because “it runs counter to the fatalistic view, common in recent decades, that globalization requires a single policy for everyone (which just happens to be the policy that proponents of this view favour), a discourse that is largely responsible for the abandonment of ambitious economic reforms.”

Piketty, however, himself falls victim to the same ideological fallacy when he claims that socialists, in spite of the above, should nonetheless aim to “go beyond the confines of the nation-state” and build forms of transnational or even global democracy. The only reason he offers is simply that in his view it would be a better alternative. Piketty’s globalist bias is evident in his approach to the EU. On the one hand he acknowledges that the EU is an institution that “benefits above all the most powerful economic actors and the most favoured social groups.” But then he laments the fact that the popular classes’ perception of the EU as such—which he admits is “largely justified”—“has contributed to the popular disaffection with the European construction.” He even claims that progressives should attempt to “save the EU from itself,” whatever the cost, without ever actually explaining why, except that the alternative must be worse.

Ultimately, Piketty is unable to resolve this constant tension between pragmatism and globalist idealism, which blinds him to the fact that transnational democracy, let alone transnational socialism, is absolutely unworkable, even if it were necessary (which it isn’t, as we have seen). Indeed, Piketty himself is unable to provide any concrete proposals as to how his vision of progressive globalism could or should be achieved in practice, except calling for the creation of a “transnational assembly” in charge of global public goods (climate, research, etc.). Yet it’s clear that in the absence of some form of “global government” capable of enforcing the assembly’s decisions worldwide—an absolutely unrealistic, not to mention terrifying, prospect—this would amount to little more than an international forum on the model of the UN. Even in the context of the EU, Piketty’s lofty ideals translate into the rather unassuming proposal for the creation of a sub-chamber within the European Parliament for those countries that wish to move forward on issues of climate action, tax harmonization, financial disclosure, etc. Such a chamber would include deputies coming partly from national parliaments and partly from the European Parliament. Ultimately, the fact that Piketty can’t bring himself to imagine a superseding of national parliaments even in the context of the EU would seem to indicate that he is subconsciously aware of the fact that progressive globalism is a practical impossibility, even though he doesn’t seem to know why.

The reason why has to do with the very nature of democracy itself. As the term suggests, and as history illustrates, democracy presupposes the existence of an underlying demos—a political community, usually (though not exclusively) defined by a shared and relatively homogeneous language, culture, history, normative system, etc. In a demos, “the majority . . . feel sufficiently connected to each other to voluntarily commit to a democratic discourse and to a related decision-making process,”40 and therefore to accept the legitimacy of government and majority rule. Furthermore, in modern states and national federations with highly developed welfare states, such an identification is crucial in generating the affective ties and bonds of solidarity that are needed to legitimize and sustain redistributive policies between classes and regions. Simply put, if there is no demos, there can be no effective democracy, let alone a social democracy. It is no coincidence that democracy evolved within the confines the nation-state, since historically this has been the only political entity capable of giving rise to communities sufficiently large, in demographic and territorial terms, to guarantee their reproduction, but also sufficiently homogeneous to guarantee democratic legitimacy. As the late Paul Hirst reasoned in his prescient book Space and Power:

Territorial states also remain our primary source of accountability and democracy in such a complex system of governance. . . . Cosmopolitan forms of strong democratic governance are unlikely to develop for the foreseeable future because we still operate in a world shaped by nationalism. Citizens still identify with nation-state. States are the largest bodies that can claim any sort of primary legitimacy. International bodies are the preserve of elites, and the international technocracy needs the check of politicians directly answerable to national politics. Accountability of international agencies through national publics is at best indirect and weak, but strong supra-national democracy is just impossible. There is no global “demos.” If democracy implies a substantial measure of homogeneity in the demos, then the world is just too unequal economically and too different culturally for the rich to submit to the decisions of the poor, or for one established culture to accept the internationalization of the norms of another.41

Indeed, Polanyi himself stressed the importance of the state as the locus of collective decision-making and excoriated early twentieth-century globalist intellectuals such as Toynbee and Mises for ignoring the centrality of national sovereignty. This is a telling reminder of the fact that there’s no one-size-fits-all socialism that can be applied uniformly to all countries, but that it’s up to each national community to decide, through collective and democratic deliberation, the system that best suits their culture, norms, and ethics. Ultimately, international collaboration between sovereign states remains the best instrument for addressing global concerns while respecting the political-cultural diversity of national communities. Globalism, on the other hand, by negating sovereignty and thus democracy, remains the main obstacle to any socialist project. It’s unfortunate that Piketty’s biases hinder him from drawing the natural conclusion from his otherwise fascinating analysis.

This article originally appeared in American Affairs Volume IV, Number 2 (Summer 2020): 145–67.


1 Thomas Piketty, Capital and Ideology, trans. Arthur Goldhammer (Cambridge: Harvard University Press, 2020), 120.

2 Piketty, 6.

3 Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Boston: Beacon Press, 2001), 234.

4 Piketty, Capital and Ideology, 175.

5 Piketty, 719.

6 Piketty, 154.

7 Piketty, 154.

8 Piketty, 418.

9 Piketty, 468.

10 Piketty, 416.

11 Piketty, 417, 434. 12 Guy Standing, “The Five Lies of Rentier Capitalism,” Social Europe, October 27, 2016.

12 Guy Standing, “The Five Lies of Rentier Capitalism,” Social Europe, October 27, 2016

13 Katharina Pistor, The Code of Capital: How the law Creates Wealth and Inequality (Princeton: Princeton University Press, 2019), 208.

14 Pistor, 229, xi.

15 Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Sector Myths, rev. ed. (Philadelphia: PublicAffairs, 2015), 93–119.

16 Piketty, Capital and Ideology, 28.

17 Piketty, 627.

18 Branko Milanović, “The Higher the Inequality, the More Likely We Are to Move Away from Democracy,” Guardian, May 2, 2017.

19 Piketty, Capital and Ideology, 3.

20 Piketty, 7–8.

21 John Maynard Keynes, The General Theory of Employment, Interest, and Money (London: Palgrave Macmillan, 1936), 33.

22 Piketty, Capital and Ideology, 7.

23 Piketty, 7.

24 William Mitchell and Thomas Fazi, Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (London: Pluto, 2017).

25 Barbara and John Ehrenreich, “The Professional-Managerial Class,” Radical America 11, no. 2 (March–April 1977): 7–31. See also Alex Press, “On the Origin of the Professional-Managerial Class: An Interview with Barbara Ehrenreich,” Dissent, October 22, 2019.

26 Nancy Fraser, “Progressive Neoliberalism to Trump—and Beyond,” American Affairs 1, no. 4 (Winter 2017): 46–64.

27 Adam Tooze, Crashed: How a Decade of Financial Crises Changed the World (New York: Penguin, 2018), 575.

28 Adaner Usmani, “The Left in Europe: From Social Democracy to the Crisis in the Euro Zone: An Interview with Leo Panitch,” New Politics 14, no. 54 (Winter 2013).

29 Stuart Hall, “The Great Moving Right Show,” Marxism Today 23, no. 1 (January 1979): 18.

30 Piketty, Capital and Ideology, 967–68.

31 Piketty, 494.

32 Piketty, 981.

33 Piketty, 989.

34 Piketty, 562.

35 Dani Rodrik, “The Inescapable Trilemma of the World Economy,” Dani Rodrik’s Weblog, June 27, 2007.

36 Dani Rodrik, “How Far Will International Economic Integration Go?” Journal of Economic Perspectives 14, no. 1 (Winter 2000): 178.

37 Rodrik, “How Far?,” 179.

38 Stephen Gill, “The Geopolitics of Global Organic Crisis,” Analyze Greece!, June 5, 2015.

39 Piketty, Capital and Ideology, 991.

40 Lars-Erik Cederman, “Nationalism and Bounded Integration: What It Would Take to Construct a European Demos,” European Journal of International Relations 7, no. 2 (June 2001): 224.

41 Paul Hirst, Space and Power: Politics, War, and Architecture (Cambridge: Polity, 2005), 46.

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