THE CRUCIFICATION AND CANONISATION OF THOMAS PIKKETY When the Romans usually crucified someone, the very brutality of this act had more to do with the need to make a public statement against challenges to its imperial authority than merely punishing the transgressor, irrespective of how ineffectual the transgression might have been. In other words, crucify the message. Thomas Pikketys crucification titled Flawed data on rich weaken Pikettys main argument published in his cross of the FT WEEEKEND (Financial Times Saturday May 24/Sunday May 25 2014), is aptly relevant in this regard. Having read Thomas Pikketys book CAPITAL In the Twenty-First Century(2014), I found the misrepresentation of his arguments in the article both intellectually dishonest and disingenuous. The article quotes Lord King, a former governor of the Bank of England as follows - ... the principle weakness of the book is that the carefully assembled data do not live up to Pikketys rhetoric about capitalism. This statement is then claimed to be supported by the findings of an investigation by the Financial Times, which, it is argued, ... has revealed many unexplained data entries and errors in the figures underlying some of the books key charts. With a leap of faith, the article then expects us to accept that the errors in question ... are sufficiently serious to undermine Prof Pikketys claim that the share of wealth owned by the richest in society has been rising in recent years. The article then confidently hammers the following last polemical nail in Pikketys intellectual crucification: Together, the flawed data produce long historical trends on wealth inequality that appear more comprehensive than the source data allow, providing spurious support to Prof Pikketys conclusion that the central contradiction of capitalism is the inexorable concentration of wealth among the richest individuals. In all fairness, in my reading of Pikketys book, right at the outset, he does clarify how he relates to the data he uses to support his findings as follows: Let me say at once that the answers contained herein are imperfect and incomplete. But they are based on much more extensive historical and comparative data than what were available to previous researchers, data covering three centuries and more than twenty countries, as well as on a theoretical framework that affords deeper understanding of the underlying mechanisms. Neither the Financial Times article or its online investigation report on the issue at ft/moneysupply offers any alternative historical data and statistics to Pikketys to support their counter-argument against his findings. Nor does it argue an alternative theoretical framework to Pikketys within which to interpret the data and statistics in question. Thomas Pikkety also appears to have been canonised by Nobel Prize winning pro-market economists such as Professor Paul Krugman, who proclaimed that his book CAPITAL In the Twenty-First Century - will be the most important economics book of the year - and maybe of the decade. Even the Nobel Prize winning neo-Keynesian economist Professor Joseph Stiglitz bestowed the intellectual honour on Pikkety that his fundamental contribution was the provision of data on the distribution of wealth. While such intellectual sanctification was to be expected from from these circles, it was the reaction from within that vacillating circle loosely self-designated as the western Left to Pikketys book which was even more puzzling in its theoretical sophistry. With responses ranging from exalting Pikkety as the Karl Marx of the 21st Century to his book as Das Kapital revisited for capitalism today it was clear that they neither read and understood Pikketys CAPITAL In the Twenty-First Century properly, nor Karl Marxs Das Kapital. Pikketys notion of what he calls the principal destabilizing force of capitalism in his book, differs fundamentally from both what the Financial Times incorrectly attributes to him as the central contradiction of capitalism in the manner in which the article describes it, as well as some the Western Lefts claims that he has discovered the central contradiction of capitalism. Pikketys CAPITAL In the Twenty-First Century supports neither claims, but it describes what it terms the principal destabilizing force as follows (p 571): The principal destabilizing force has to do with the fact that the private rate of return on capital, r, can be significantly higher for longer periods of time than the rate of growth of income and output, g. The inequality r > g implies that wealth accumulated in the past grows more rapidly than output and wages. This inequality expresses a fundamental logical contradiction. .... Once constituted, capital reproduces itself faster than output increases. The past devours the future. As for some western Left claims, Pikettys fundamental logical contradiction and his characterisation of the principal destabilizing force capitalism differs substantively from Karl Marxs arguments on systemic instability and crises in capitalism in his (Marx) crisis theory of the falling rate of profit or overaccumulation of capital, described by David Harvey as follows: ... the capitalists necessary passion for surplus-value producing technological change, when coupled with the social imperative accumulation for accumulations sake, produces a surplus of capital relative to opportunities to employ that capital. Such a state of overproduction is called the overaccumulation of capital. If the a amount of capital in circulation is to remain in balance with the limited capacity to realize that capital through production and exchange - a condition implied by the stabilization of the rate of profit - then a portion of the total capital must be eliminated. If equilibrium is to be re-established, then the tendency towards overaccumulation must be counterbalanced by processes that eliminate the surplus capital from circulation. [Harvey, David (2006), Limits to Capital (London, Verso)] Thomas Pikketys solutions to address this principal destabilizing force of capitalism does not propose any fundamental systemic change in the revolutionary sense envisaged by Karl Marx and he(Pikkety) in fact asserts that - Modern economic growth and the diffusion of knowledge have made it possible to avoid the Marxist apocalypse but have not modified the deep structures of capital and inequality.... As for the solution; Picketty does tend to idealistically overrate the stabilising potential of democracy when he argues: There are nevertheless ways democracy can regain control over capitalism and ensure that the general interest takes precedence over private interests, while preserving economic openness and avoiding protectionist and nationalist tendencies. Perhaps both the Financial Times and some of the Left commentariat misread this part, and in the process both crucified and canonised the wrong message.
Posted on: Sat, 31 May 2014 12:26:39 +0000
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