A Failed Critique of Piketty

You can order Thomas Piketty’s Capital in the Twenty-First Century directly from Truthout by clicking here. This nearly 700-page book has electrified the debate about capitalism because it argues, with persuasive statistical and historical analysis, that the current economic system insures the increase of economic inequality and undermines democracy.

The economist Thomas Piketty has replied at length to the attempted takedown of his work in Capital in the Twenty-First Century by Chris Giles, the economics editor at The Financial Times, and he has done it very effectively. Essentially, Mr. Giles tried to compare apples and oranges, and the result was a lemon.

The central point here is one that’s familiar to anyone who works at length on inequality issues. We have two kinds of data on distribution of both income and wealth: surveys, in which people are asked what they make or own, and tax data.

Survey data is better at describing lower-income families, who often aren’t covered by taxes; but the data notoriously understates top incomes and wealth, roughly speaking because it’s hard to interview billionaires. Also, survey data starts fairly recently – after World War II, and often much later than that.

So Mr. Piketty worked mainly with tax data, although he also made some use of survey data; when he combined them, he made adjustments for the known downward bias of top wealth estimates from surveys.

Mr. Giles, however, basically noted that some relatively recent survey estimates of large fortunes are smaller than some tax-based estimates for earlier periods, and used this to claim that there isn’t any clear trend toward wealth concentration.

Bzzzt! Error!

This should really settle the issue, but of course it won’t. Inequality deniers will pick up on the bad critique from the Financial Times, and it will become part of what they “know” to be true.

The Same Old Story

O.K., I don’t know what Mr. Giles thought he was doing – but I do know what he was actually doing, and it’s the same old, same old. Ever since it became obvious that inequality was rising – way back in the 1980s – there has been a fairly substantial industry of inequality denial on the right. This denial didn’t rely on any one argument, nor did it involve consistent objections. Instead, it involved throwing many different arguments against the wall, hoping that something would stick: inequality isn’t rising; it is rising, but it’s offset by social mobility; it’s cancelled by greater aid to the poor (which we’re trying to destroy, but never mind that); anyway, inequality is good. All these arguments have been made at the same time; none of them ever gets abandoned in the face of evidence – they just keep coming back.

Look at the article I wrote for The American Prospect 22 years ago, “The Rich, the Right, and the Facts” (it can be read here, and while it doesn’t say this on the Prospect site, it was indeed published in 1992). Every single bogus argument I identified there is still being made today. And we know perfectly well why: It’s all about defending the 1 percent from the threat of higher taxes and other actions that might limit top incomes.

What’s new in the latest round is the venue. Traditionally, inequality denial has been carried out on the editorial page of The Wall Street Journal and like-minded venues.

Seeing it expand to the Financial Times is something new, and is a sign that the F.T. may be suffering from creeping Murdochization.