Part 5/5 Piketty or Marx?

Piketty or Marx? Capital in the Twenty-first century: a fundamental criticism Part 5 (last)

James Miller

Piketty does not mention the growth of credit, except in one instance, where he says,

"Broadly speaking, the 1970s and 1980s witnessed an extensive "financialization" of the global economy, which altered the structure of wealth in the sense that the total amount of financial assets and liabilities held by various sectors (households, corporations, government agencies) increased more rapidly than net wealth. In most countries, the total amount of financial assets and liabilities in the early 1970s did not exceed four to five years of national income. ... I should also point out that these international positions are in substantial part the result of fictitious financial flows associated not with the needs of the real economy but rather with tax optimization strategies and regulatory arbitrage (using screen corporations set up in countries where the tax structure and/ or regulatory environment is particularly attractive)."

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Part 4 of 5 of: Piketty or Marx? Capital in the Twenty-first century: a fundamental criticism by James Miller

Part 4

Wages

Marx explained that the source of bourgeois wealth was the ability of capital to capture and retain a portion of the value created by workers in the production process. This portion is called surplus value (which can be broken down principally into profits, interest and rent). The workers subsist on a limited wage, usually sufficient to maintain their living conditions and raise children. The value of the products pouring out of the process of production, on average, exceeds the value that the capitalist has advanced for their production. When the products are sold in the market, the part in excess of the capitalists' expenses of production is pocketed by the owner of the means of production as surplus value (a portion of which might be paid to the banker as interest, and to the landlord as rent). The surplus value is the portion of value that the capitalist collects without having had to pay any equivalent….

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Piketty or Marx? Capital in the Twenty-first Century: a fundamental criticism -- Part 3

Piketty or Marx? Capital in the Twenty-first Century: a fundamental criticism

Part 3 Transition to capitalist production

For his part, Piketty doesn't mention the transition from feudalism to capitalism, which was a very slow process until the late 18th century, impeded by the persistent strength of medieval traditions, protected by the monarchy and the aristocracy. He does, however, provide statistical evidence of a passage from a more-or-less economically stagnant world to a world of accelerated national growth, although he doesn't recognize capitalism as fundamentally different from feudalism. Nor does he consider "capital" something uniquely associated with capitalism. Marx and Engels, on the other hand, did explain the historical transition to capitalism.

The underlying assumption in Piketty's analysis is that "capital" has existed since ancient times; indeed he has a chart showing the ratio of the rate of return on capital to the growth rate of the economy starting at the year zero. He explains in Chapter 10 (p. 446): "In order to illustrate this point as clearly as possible, I have shown in Figure 10.9 the evolution of the global rate of return on capital and the growth rate from antiquity to the twenty-first century." But this ignores the basic facts of the evolution of social systems since the birth of civilization. In previous forms of society (barbarism, slavery, feudalism) capital either did not exist, or existed only in primitive forms (merchant's and usurer's capital). In these earlier stages of social development, the basic needs of the population were met by traditional practices of production and distribution that did not involve money. In slave societies production was carried out by slaves, and a portion of the product was given to them as survival rations. In feudal society, the work was done by serfs who provided labor services or a share of the product to the aristocratic landowners….

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Piketty or Marx? Capital in the Twenty-first Century: a fundamental criticism

Part 2: Technology and productivity

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Piketty or Marx? Capital in the Twenty-first century: a fundamental criticism by James Miller

Piketty or Marx? Capital in the Twenty-first century: a fundamental criticism

Part 1

Preliminary remarks

Thomas Piketty's 2014 book, Capital in the Twenty-first Century, made a big splash among economists and the major media when it was released in 2013. Weighing in at over 750 pages, and with several appendices, it gave the appearance of being a solid piece of work. It shot to the top of the best-seller list of Amazon.com, the New York Times and the Wall Street Journal. It received many glowing reviews, and some critical ones. It seemed to focus on the growing gap between the rich and the poor, and offered a remedy. The problem with the book is that, in terms of its analysis of capitalism, it offers nothing new, and in terms of the remedy, there's nothing new there either. By 2018 the hullaballoo had long since subsided, and millions of copies of Piketty's book, perhaps partly read or leafed through, had been quietly set aside….

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