Review: Capital in the Twenty-First Century: The “Savior of Socialism” Proves the Worth of Capitalism 9
Capital In The Twenty-First Century by Thomas Piketty, translated from the French by Arthur Goldhammer, Belknap Press/Harvard University Press, 2014, 696 pages
“The distribution of wealth is one of today’s most widely discussed and controversial issues.”
Thomas Piketty, a 42 year old Frenchman and resident of Paris, has produced, his endeavor of 18 years, a 696-page hardcover book titled Capital In The Twenty-First Century. It is supposed to be an economics book. It is not. It is an assemblage of bad historical analysis, a compilation of worthless data, graphs, charts and equations and an incomprehensible, incomplete, contradictory and unworkable pseudo-scientific, fortunetelling-pretentious and socialistic narrative devoid of economics qua economics. Flatly, the book IS intellectually-purblind flapdoodle! So, it will appeal to populist economists stooging for their career politician patrons.
“Intellectual and political debate about the distribution of wealth has long
been based on an abundance of prejudice and a paucity of fact.”
Piketty’s purpose is to be the savior of socialism. Did I mention … Piketty is French. Culturally-embedded in socialism and steeped in Marxism, irrespective of the history of notoriously failed and failing socialist economies, across time and the world, Piketty unabashedly and unobjectively sets out to resurrect the Marxist dogma: Capitalism bad; redistribution of wealth – “From each according to his ability, to each according to his need“ – good. Indeed, Piketty asserts that the heretofore failures of socialism and government interventionism, which would include the deaths of millions and the loss of trillions of dollars in wealth, is merely the result of insufficient data; which he, serving the common good, has now provided. Na zda-ró-vye tovarish!
“I am interested in contributing, however modestly, to the debate about the best way to
organize society and the most appropriate institutions and policies to achieve a JUST social order.”
There are poor people around the world, and income inequality, and Piketty emotionally believes that governments SHOULD do something about it. Toward this end, Piketty gathered a couple of centuries worth of historic economic data, from 20 countries, in order to analyze and understand income inequality (not what causes it). He then manipulated, massaged and manicured the data, ran it through the “I am interested in contributing” filter, and created new definitions, theorems, a bank of formulae, indices, and other econometric gimmickry with which world-impacting “appropriate institutions” can then socially-engineer and impose mathematically-modeled economic policy on societies, in order to force a JUST social order into existence.
Putting the Distributional Question Back at the Heart of Economic Analysis
Piketty never questions the appropriateness, feasibility or consequences of government intervening in an economy. In fact, for him government economic central planning is an unquestioned MUST, whereas he lives by the 1789 code (it’s France … there are several versions) of the French Declaration of the Rights of Man and the Citizen, article 1, which essentially gives “society”, ie the government, the right to determine a citizen’s value: “Social distinctions can be based only on common utility.” Property rights and individualism are not part of a Piketty JUST social order! Piketty believes that wealth distribution should be at the heart of economic analysis. Make no mistake, distribution means taxation: worldwide wealth taxes, higher marginal income tax rates, 100% inheritance tax, etcetera. Piketty immorally and unethically endorses using government as a gun to steal from producers to give to takers. His only economic analysis is to ask how much ammo, what caliber, and whom to hit first. But, and again, the mainstream economists charged with fabricating cover for political plundering are clamoring all over Piketty’s savior-of-central-planning drivel.
Piketty’s Two Questions … But Why?
“Do the dynamics of private capital accumulation inevitably lead to the concentration of wealth in ever fewer hands, as Karl Marx believed in the nineteenth century? Or do the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater harmony among the classes, as Simon Kuznets thought in the twentieth century?
These are the questions I attempt to answer in this book.”
Piketty reveals, with his first question, a very deluded mindset and a total lack of economic qua economic thought (I will come back to this notion). Anyone … ANYONE … who would relate, quote, respect or in any manner or fashion consider anything Karl Marx would believe or say is beyond the bounds of credulity. In the body of his monolith Piketty doesn’t challenge Marx’s assertions about Free Market Capitalism. Rather, he accepts them as true, then claims that it is government application of econometric-based political economic designs, popularized and expanded by Simon Kuznets, that have mitigated, though not sustainably as yet, the capitalistic negatives predicted by Marx. Interestingly, Piketty never gathers data to evaluate the impact of government-econometric-designed economic interference on income inequality … hmmm? It’s called a blind spot. He has many.
The questions are very prominent in his presentation and yet this second question is also revealing of delusion and failed economic knowledge. The first question is to inject the idea of communism on-the-extreme-left. The references to Kuznets’s thoughts of “balancing forces of growth, competition, and technological progress” are implicitly and inferentially meant to convey Free Market Capitalism on-the-extreme-right; thereby feigning a fair and balanced presentation.
However, Kuznets is not a capitalist … he is a fascist. And he too is on the left. Piketty doesn’t seem to know the the near total similarity between communism and fascism (see the recommended reading list following the review). Basically, these political economic ideologies differ only by scope, world vs state, and methodology of economic control: communism – total ownership of the means of production; fascism – private ownership of productive means which are then controlled by statute, fees, taxation, regulation, etcetera. Kuznets’s ideas of hardcore government control of the economy by mathematical-modeling practices are far from capitalistic. Communism and fascism are two sides of the same coin: Socialism.
Though he is an adherent of Kuznets’s methodologies, Piketty does acknowledge his failed real-time results: index-driven fortuneteller-predictions that never come true … ”growth, competition and technological forces” not responding per formulae. Piketty, erroneously, attributes this failure-to-perform to an insufficiency of data. That the entire premise of measuring & manipulating static point-in-time economic history in order to effect future economic results is altogether bogus, is never addressed. Blind spot. It is, unfortunately, the methodology in practice by today’s mainstream economist central-planners. Incidentally, how many of them can you name that saw the 2007 – 2008 Great Recession, or any event, coming? Kuznets, by the way, is the godfather of the GDP, CPI and all manner of useless and easily-politicized, never-been-right and “whatever-you-want-it-to-mean” economic indices and other useless empirical junk!
Now, consider, Piketty believes mathematical-modeling of historic economic data is necessary and appropriate for government; it ought to, it SHOULD, control the economy. He thinks econometrics, as significantly instigated by Kuznets, failed only because of data insufficiency. He believes that more complex models can be constructed wherewith governments could manage (and predict, foresee, soothsay) the “growth, competitive and technological forces”; and with them constrain the Marx-envisioned inherent failures of Free Market Capitalism toward sustaining income equality … phew! Piketty’s 696-page data dump book IS econometric’s missing data … the putative salvation of prescriptive socialism.
So, why has Piketty posed these two questions? Because he had already decided the answers before he undertook the study 18 years ago. He merely constructed these supposedly fair and balanced questions as a pretense to scholarship. He’s a Hoax, Scammist, Flim Flam Econologue. He fits right in with mainstream economists who will use this pretend data as new cover to hide behind. Proven failed and empty, the Keynesian misdirections and excuses have run out of credibility. Piketty might be a saviour, not of socialism … that can’t be saved … but, it is seriously hoped, of the asses of mainstream economists. But sorry, no salvation is contained in Piketty’s data.
Piketty’s Failure: How Wonderfully Ironic!
If you don’t know what Free Market Capitalism is, you can be convinced it is the principle economic system at work in the world when it isn’t. And it isn’t.
If you don’t know what Free Market Capitalism is, you can be made to believe it is the source of all manner of economic adversity and social ills when it isn’t. And it isn’t.
Piketty would have you believe both of these false ideas. What follows is an example of Piketty’s ignorance of Free Market Capitalism and his readiness to blame income inequality on it. Typical of myopic socialists.
On page 31, of 696, of his study, Piketty presents his chart 1.1 which supposedly reflects the path of income inequality from 1910 to 2010. It charts the percent of national income held by the top 10% in the USA. Piketty’s entire study is about the analysis of this chart and it’s implications. He goes to great lengths to prove that his study is thorough beyond any question. It should be noted, however, that he never examines the period-to-period character of the 10%. What portion of the top decile earned their wealth as against being privileged by government? Is there mobility between the deciles? Aren’t these holes in his comprehensiveness”?
He sees a major “divergence” of incomes beginning around 1970, exceeding prior periods of inequality, and continuing until today: the rich getting richer at the expense of the poor. He attributes the disparity to Free Market Capitalism. Please consider, If Free Market Capitalism IS NOT the proximate cause of this divergence, his entire presentation is empty and false; merely falderal. It’s falderal!
Below is a chart which incorporates his data line of inequality, from chart 1.1, for the period 1955 to 2010 as compared to the FED funds rate for the same period. By the bye, I’m just a retired cabby and I figured this out in 18 minutes … wait ’til you read what the professional socialist Piketty came up with in 18 years. (Click on the chart to enlarge it.)
One of the most important economic events in history was Nixon’s (“We are all Keynesians now”) severing of the US dollar, the world’s reserve currency, from the gold standard. Fiat money and perpetual inflation was made the norm. And every economist ought know that this is an automatic transfer of wealth from the less fortunate to the largest financial institutions and those close to government. There is no other political or institutional factor in our time which has had a greater impact on the world’s economy. Yet Piketty absolutely ignores this event; let alone notices it’s effect on income inequality, as he conjures up one lunacy after another:
“The increase in inequality since 1970 has not been the same everywhere,
which again suggests that institutional and political factors played a key role.”
“We subsequently see a rapid rise in inequality in the 1980s, until by 2000 we
have returned to a level on the order of 45–50 percent of national income. The
magnitude of the change is impressive. It is natural to ask how far such a trend
“I will show that this spectacular increase in inequality largely reflects an
unprecedented explosion of very elevated incomes from labor, a veritable
separation of the top managers of large firms from the rest of the population.
One possible explanation of this is that the skills and productivity of these top
managers rose suddenly in relation to those of other workers. Another explanation,
which to me seems more plausible and turns out to be much more consistent with
the evidence, is that these top managers by and large have the power to set their
own remuneration, in some cases without limit and in many cases without any clear
relation to their individual productivity …”
“In particular, the very high level of private wealth that has been attained since the
1980s and 1990s in the wealthy countries … directly reflects the Marxian logic.”
“The process by which wealth is accumulated and distributed contains powerful
forces pushing toward divergence, or at any rate toward an extremely high level
These are but a few extractions of Piketty’s analysis about the period 1970 to 2010 … and they are all wrong.
Almost immediately one can see, per Piketty’s own inequality chart data as compared to unconstrained FED funds rate manipulation data, inequality rises near symmetrically with the intentional reduction in the FED rate. It isn’t just “suggested”; the FED IS the cause. Piketty, however, cannot acknowledge this because it would rip the bottom out of his entire “pitch”: Free Market Capitalism is not the cause of inequality … government intervention in the economy IS! Specifically, it is manipulation of the price structure (the interest rate is the primary price), through monetary policy, that unnaturally shifts wealth to those connected to financial institutions and those closest to government. Here is the irony: Piketty proves the validity of Free Market Capitalism while attempting to resurrect socialism! Thank you, Monsieur!
It can be shown that, for all periods, it IS government intervention that creates the inequality the interveners claim they want to end. Some words of Upton Sinclair come to mind: “It’s hard to get a man to understand something if his job requires he doesn’t understand it.” Piketty and the mainstream economist central planners would be out of work if they actually faced the truth. Incidently, 57% of all mainstream economists work directly for government; another 30%+ are indirectly dependent. Of course there’s a lot of “Yes, senator, I support your program”.
Piketty’s Marxian monster is one nonsensical – and previously discarded – economic notion after another. He doesn’t grasp that there is no distribution of income, favorably or negatively, in a Free Market Capitalistic system. All wealth is allocated by consumers … they are kings and queens of an economy and of a truly JUST society. They determine what producer satisfies needs and wants most successfully. It’s consumer meritocracy! Nobody from General Foods ever shows up at the door with a threat of imprisonment if you don’t buy. Further, Piketty holds to the long-ago-tossed idea that capital is homogeneous. Capital is heterogeneous, and it is the putting together, by an entrepreneur, of the right combination of capital to serve consumers’ demands, in an uncertain environment, that determines profit or loss. Remember, an entrepreneur pays wages well in advance of sales revenue. There is absolutely no such thing as a guaranteed or certain rate of return on capital such as Piketty chronically and erroneously incorporates in his formulations. Phooey on you, Piketty!
There are “Save My Restaurant” shows on TV these days (Kitchen Nightmares with chef Gordon Ramsey and Restaurant Impossible with chef Robert Irvine are two). The show’s chef hosts enter a failing restaurant, uncover the reasons for the failure, then make the corrections to set the business up for success. These reataurants always have multiple problems but always the primary one is that the food absolutely sucks … horrid fare … and the owner(s) and/or chef refuse to believe it. Nobody is eating in the esatblishment and they insist, “My customers love my food”. What customers? Piketty, and the mainstream economists (socialists) are like these restaurant owners.
Picketty recognizes socialism and its mechanisms aren’t working. Does he try to see a new and different way? Not on his life. He’s too intent on screwing with your life. Unlike in the restaurant shows, where there is a host with cash to induce the owner/chef to face reality, there is no easy way to change the perspective of the left – to convert its emotional irrationality into objective thought. Tough trick! For the indoctrinated believers in socialism there is only the drive to do more of the same “and maybe this time it’ll work”. Einstein had some thoughts on that: he called it insanity. It won’t ever work.
Freedom is always freedom from government.
Previously, I mentioned Piketty’s failure relative to economics qua economics. By this I mean, economics is the study of the processes, methods and interactions between humans as they go about satisfying their needs and wants. It is the study of human action. It is descriptive not predictive or action-driven. Piketty isn’t interested in studying economics. He is intent on studying how to control and manipulate humans as mere numbers through economic means. And he fails to see that this control and manipulation is the cause of why he seeks to control and manipulate in the first place. Piketty is too ignorant to see that he doesn’t see. Perhaps he’ll see the reading list below. (Something burns eternal?)
Now, in addition to the graphic and deductive evidence of Piketty’s failure to rehabilitate socialism, the primary reason he is doomed to fail; the primary reason socialism can never succeed; the irrefutable and unavoidable common sense reason why government management of the economy is an absurd impossibility is …
Friedrich Hayek gave it the name, “The Pretense of Knowledge Fallacy”: There is no person, career-politician, Chairman & Board, commission, panel, bureau, special committee or anyone or anything else that can ever possess the knowledge necessary to manage the entirety or any part of an economy. Further, any attempt to do so must be implemented through the politically-influenced and policy-driven bureaucratic system – thereby insuring failure … PERIOD!
Mr Piketty’s book, except for unintentionally proving that government causes income inequality, is worthless, and his endeavor is doomed. Piketty fails to comprehend that inequality arises when government economic intervention distorts free exchange into an unnatural 3-party, buyer-seller-government, lose-lose-win by coercion, framework. He just doesn’t understand that there can never be a sufficiency of data, nor a mathematical model, by which you can emulate the free and willing, person-to-person, win-win interaction of hundreds of millions of people making trillions upon trillions of decisions about what they think is best for themselves as they allocate dollars/wealth through natural exchange. Governments cannot legislate or impose a false reality.
“Socialism fails because it’s based on the emotion of SHOULD.
Free Market Capitalism succeeds because it’s based on the reality of IS.”
Ludwig von Mises
by Don L cabby #268