Capital in the 21st Century

This minute, the documentary “Capital in the Twenty-First Century” is playing at the SVA Theater as part of the DOC NYC film festival. Obviously, this review is behind the curve but you will still be able to see it in theaters in April 2020. It is based on Thomas Piketty’s 816-page book of the same name, with Piketty reprising the same arguments found there. Since I doubt that many of my readers, including me, have read Piketty’s book, the film is must-viewing if for no other reason that it will familiarize you with the post-Keynesian foundation upon which the book rests. Besides Piketty, you will hear from other economists and social scientists who are trying to figure out a way to combat neoliberalism without going the whole hog and becoming—god forbid—Marxists. This includes among others Joseph Stiglitz, Gillian Tett of the Financial Times, and Suresh Naidu, a youngish Columbia University professor who organized a conference there celebrating the work of Samuel Bowles and Herbert Gintis. Bowles and Gintis are famous (or infamous) for their criticisms of “orthodox Marxism”, i.e., Marxism. I have a strong suspicion that post-Keynesianism or post-Marxism (about the same thing really) will give you a leg up in a tight job market in the academy.

The film begins with Piketty reminiscing about a trip he took to Eastern Europe and Russia just after Communism collapsed. This weighed heavily on his mind since it dramatized the vulnerability of society when its economic foundations begin to be eaten away, as if by termites. The lessons he drew were a major inspiration for his book that essentially warned about capitalism’s vulnerability as its elites develop the same kind of indifference to the pain as that of the bureaucracy toward those on the bottom of the “Communist” world. To help him drive home these points, he includes another expert not ordinarily associated with post-Keynesian thought, namely Francis Fukuyama whose reputation was based on the idea that liberal capitalist democracies would soar above the wreckage of the USSR and other post-capitalist societies. In an interview with the New Statesman in October 2018, Fukuyama echoed the main idea found in Piketty’s writings, as well as Stiglitz, Krugman, et al. Asked how he viewed the resurgence of socialism in the USA, he replied:

It all depends on what you mean by socialism. Ownership of the means of production – except in areas where it’s clearly called for, like public utilities – I don’t think that’s going to work.

If you mean redistributive programmes that try to redress this big imbalance in both incomes and wealth that has emerged then, yes, I think not only can it come back, it ought to come back.

For the first half of the film (roughly 60 minutes), we get a history of capitalism from the 18^th century to the current day. It is very informative and of great use even to people like me, who believe that New Deal economics is never coming back.

The chief worry of Piketty is that we are returning to the 18^th century when the common folk lived in terrible conditions. Economist Kate Williams claims that the average life expectancy was 17 years at the time (it was probably more like 40, which of course is also a horrible sign of inequality). It was also nearly impossible for a commoner to become middle-class or wealthy, a function of fortunes being handed down from generation to generation. A large part of Piketty’s critique of capitalism is its susceptibility to dynasty-building of the kind that existed under feudalism. Drawing upon a rich trove of stock footage and old movies, we see a snippet of a scene from “A Tale of Two Cities” that shows Basil Rathbone as a French aristocrat sneering at the idea that ordinary people should get a fair share of society’s wealth. To reinforce this point, we see excerpts from “Les Miserables”, a very good film based on the Victor Hugo novel.

Finally, relief came in the form of new societies created in virgin territories in the British colonies like North America, New Zealand (where the film was produced) and Australia where the class system did not have the chance to consolidate, or at least not to the extent of Europe. Unfortunately, the film does not refer to the fate of the indigenous peoples but frankly there’s not much attention paid to them in Marx either.

As capitalism matured in the 19^th century, its growth slowed down because of rivalries between various empires, England and France the foremost. Eventually, the competition became so extreme that the solution took the form of intermittent warfare and, finally, the Great War that led to millions dying and capital going up in smoke. Piketty argues that one good thing came out of it: the dissolution of feudal privilege that had persisted under capitalism, particularly with the Junkers ruling class in Germany.

The Great Depression and WWII had the same contradictory effect. On one hand, it caused death and suffering. On the other, it led to social democratic reforms that allowed working people to be entitled to health, education and housing benefits that never would have existed in the 18^th or 19^th century. Once again, the film brackets out an important factor that would help make this understandable, namely the existence of the USSR as an alternative to the capitalist system. Would the New Deal, England under Labour, Sweden, et al have existed without the communist alternative putting pressure on the ruling classes? I would argue not. Suresh Naidu, the most impressive of the post-Keynesians heard from in the film, is also honest enough to say that the prosperity that made such programs possible owed a lot to WWII that put people back to work and fostered economic growth, a function of military Keynesianism, the only fruitful application of Keynes’s theories.

The second half of the film examines the worrisome tendency of capitalist economies to revert to the 19^th century and earlier as all of the gains of the welfare state are eradicated. A good part of this is devoted to a searing critique of the Reagan and Thatcher regimes that set in place the neoliberal model that has led to the gross inequalities of today, including under New Labour and Clinton-type presidencies. Piketty maintains that the model was built on a lie. Workers were told that even if the gap between their income and the capitalist class would grow as a result of trickle-down economics, they would still be better off because the pie would also grow exponentially. The workers slice might decrease from 25 percent to 20 percent but if the pie doubled, they’d still be better off. Piketty, Stiglitz, et al supply the statistical evidence that shows most workers living only slightly better than decades ago, with the poorest among them even having a loss of real income.

The film ends with an appeal for political action that might reverse the by now 50-year decline of working class security and income. In April of this year, Stiglitz sat down with the dreadful Andrew Ross Sorkin of the NY Times to discuss the renewal of interest in socialism. Stiglitz reassured Sorkin that Sanders’s agenda is not focused on “ownership of the means of production” or a statist system. Instead, “He’s really concerned about the social contract of health, education.” As for Stiglitz, he also supports a return to the good old days of liberal democracy but under private ownership as indicated by the title of his new book “People, Power and Profits: Progressive Capitalism for an Age of Discontent.”

What Piketty, Stiglitz, et al don’t seem to grasp (or grasping it, disavow it) is the structural barriers to liberal democracy or even social democracy that Stiglitz correctly described as having little to do with socialism. The film pointed out that the pie has not been growing, a function no doubt of the tendency of the rate of profit to decline. In areas where it has been growing, it has been at the expense of democracy such as in China. As Suresh Naidu pointed out in the film, it was WWII that broke the back of the Great Depression, not New Deal measures.

WWIII anybody? No thanks.