An equal music

Thomas Piketty, the fifty-year old rock star of the international left, gathers in Time for Socialism his monthly columns in Le Monde; and in A Brief History of Equality (Une brève histoire de l’égalité, 2021), he considers the ups and downs of wealth inequality in a few countries over the past 200 years. Piketty’s global bestseller Le Capital au XXIe siècle (2013; Capital in the Twenty-First Century, 2014) was justly admired for its ambition, though many economists were less impressed by its contents. Piketty has also this century produced Capital et ideologie (2019; Capital and ideology2020), which argued that liberalism, defined in the correct and French sense of a system of society with no coercing masters, in effect supports inequality, and Les hauts revenus en France au XXème siècle (2001; Top Incomes in France in the Twentieth Century, 2018), which took aim at the very rich, in particular Liliane Bettencourt, heiress to the L’Oréal cosmetics fortune. In this pair of newly translated volumes, Piketty continues to make the case that any inequality is fearful and that the state is the right instrument to neutralize this fear.

Piketty’s ideas are not numerous: inequality of result heads up his calculations, leaving room for occasional comments on inequality of opportunity. He does not mention the liberal equality of permission, since 1789, and its astonishing fruits in allowing the poor to raise themselves up. Piketty concedes early in Time for Socialism: “I was more liberal [in the French sense] than socialist in the 1990s”. But now, he believes, “hypercapitalism has gone much too far … We need to think about a new way of going beyond capitalism, a new form of socialism, participative and decentralized, federal and democratic, ecological, multiracial, and feminist.” A majority of voters in the community are, and not you standing in the marketplace.

The author’s vision of the ideal society is one “where everyone would own a few hundred thousand euros [of financial capital, which is what most of his calculations concern], where a few people would perhaps own a few million, but where the higher holdings … would only be temporary and would quickly be brought down by the tax system to more rational and socially more useful levels”. Piketty does not, that is, understand the social use of unusual profit, such as the large profit earned from the popular new cafe in your neighbor, or the fortune of Jeff Bezos earned from your Amazon purchases. And that is because he does not understand that the entry of competitors from the liberal equality of permission soon drives down such unusual profits, the way the old local fortunes in department stores were eventually eroded by discount houses and mail order. He also does not seem to understand that equality of outcomes destroys incentives to become a nurse or a pilot or a professor of economics; Or that, considering the dizzying variety of human gifts and parents and chances, an exact equality of opportunity is impossible. He especially does not seem to understand that an exact equality of permission, the liberal ideal, is indeed possible, and that, in its admittedly partial and imperfect implementation since 1789, it has, over time, made the formerly poor of, say, Ireland or Finland or Botswana quite rich by historical standards.

The French liberal of the mid-nineteenth century, Frédéric Bastiat, distinguished what he called the seen from the unseen. The seen is the existing structure, estimated by Piketty to justify this or that scheme of regulation or expropriation. The unseen is the behavioral response of the people taxed, nudged, regulated, expropriated, subjected to the majority decisions of the commune. Bastiat declared that someone who does not carry the analysis beyond the seen, given, legal structures are “not an economist”. Piketty is in Bastiat’s terms not an economist but a quantitative lawyer, imagining this or that move on the seen board of a chess game. This many millionaires exist now, he says; tax them, with calculable, first-move results: it is a matter of arithmetic. Adam Smith wrote of “the man of system”, who is “enamored with the supposed beauty of his own ideal plan of government … He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard. He does not consider that the pieces upon the chessboard have no other principle of motion. A Bastiat economist does more than play chess.

Not being an economist, though professing economics and offering to arrange the pieces of the economy, is not the worst of sins. Some of my best friends are lawyers. But as an earlier liberal, Montaigne, noted, “anyone who meddles” with changing the laws “must be very sure that he sees the weakness of what he is casting out and the goodness of what he is bringing in”. Such prudence does not characterize Piketty.

Consider one example among dozens proffered in A Brief History of Equality. Piketty admits that inequalities within, say, France have in fact decreased since 1900. He attributes this decrease to social programmes. So far, so good, in lawyerly fashion: child allowance, council houses. Seen. But wait. Social programs take the place of private insurance and inside-family redistributions, to a degree to be determined by an economist recognizing the unseen. Piketty speaks of “investment in education, health, retirement and disability pensions, and social insurance (unemployment, family, housing, etc)”. All of these have private, especially familial, substitutes. When, in 1911, the UK introduced unemployment insurance, 9 million of the 11 million beneficiaries were already covered by trade union and other insurance. Or higher consider education in the US, which is largely financed directly by tuition payments from the beneficiaries and their parents, and not by taxes on the generality. Pensions in former times, and still everywhere in good part, were either self-financed by the beneficiary or provided by the children, such as the “grandfather house” for Amish retirees, or the three-generation family living under one roof. The rise of state financing of transfers, in other words, is not obviously a net gain. That’s merely accounting – the first thing seen that an economist needs to get right, on her way to the unseen.

Public expenditure – that is, the socialization of consumption by our coercing masters in Paris, London and Brussels – has since 1910 risen to between and 40 and 65 per cent of GDP (49 per cent, in the case of the UK; 62 per cent in the case of France, though this is set to come down as we emerge from Covid-19). Piketty laments that it does not continue to rise, declaring that “the stagnation of the welfare state since the 1980s and 1990s … shows that nothing can ever be taken for granted”. In other words, the substitution for individual, familial and commercial provision by the state is to go on and on. He wishes “the march toward the social state” to resume.

The most salient feature of Piketty’s obsession with the redivision of the social pie is that he never mentions the enormous increase in the per person size of the pie since 1800, 1900 or 1960. Pas une fois. This is an omission shared by most of the left, who prefer to ignore that the coming of liberalism in the early nineteenth century eventually raised the welfare of the poorest by a factor of thirty: 3,000 per cent over les miserables.

This is the main story of the past two centuries, not Piketty’s ups and downs in the envy-inducing shares of the pie going to Bettencourt and Bezos. Indeed, if we were to carry out the measurement person by person, and not in one country, such as France or the US, but across the world tout court, which is the ethically responsible way to do it, we would see that the Great Enrichment has caused inequality to fall like a stone. China and now even India are catching up.

Piketty wants a “participatory socialism”. But participation is more quickly achieved through bidding in the economy than through voting in politics. In the early days of modern liberalism, Herbert Spencer asked,

Which will be the most healthy community – that in which agents who perform their functions badly immediately suffer by the withdrawal of public patronage; Or that in which such agents can be made to suffer only through an of meetings, petitions, polling-booths, legal apparatus divisions, cabinet-councils, and red-tape documents? Is it not an absurdly utopian hope that men will be better when correction is far removed and uncertain than when it is near at hand and inevitable? Yet this is the hope which most political schemers unconsciously cherish.

It is Thomas Piketty’s hope.

Deirdre Nansen McCloskey‘s latest book is Beyond Positivism, Behaviorism, and Neo-Institutionalism in Economics2022

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