This and other posts titled “Resurrected” are reposts from an earlier blog I kept that now, thanks to no longer being affiliated with UNC–Chapel Hill, I cannot continue to use. I’m adding them to jumpstart the process, and to provide some examples of the kind of commentary I envision adding in the coming weeks and months. The posts will be edited from their original form only to correct any errors of grammar and style I might find.
I originally posted this on April 25, 2014.
As it turns out, the economics community is abuzz about French scholar Thomas Piketty and his Capital in the Twenty-First Century. And now the New York Times opinion page is a clearinghouse for responses to the book. Paul Krugman has been at it for a while on his blog, and has devoted today’s column to it as well. So too has everyone’s favorite “conservative” “public intellectual,” David Brooks.
Brooks’s take is, to no one’s surprise, facile. Economists, Brooks tells us, are not very good at predicting the future.
Piketty predicts that growth will be low for a century, though there seems to be a lot of innovation around. He predicts that the return on capital will be high, though there could be diminishing returns as the supply increases. He predicts that family fortunes will concentrate, though big ones in the past have tended to dissipate and families like the Gateses give a lot away. Human beings are generally treated in aggregate terms, without much discussion of individual choice.
Except these are not idle predictions of a Marxian dreamer, but are instead conclusions based on current trends, extrapolated using decades—and in some cases centuries—of income, tax, wealth and related data.
Tellingly, each of the UNC library’s two copies have three holds on them, so I decided to plunk down my $21.99 for the Kindle edition. Thus far, I’ve made it through the introduction of what is a cogent and accessible piece of economic history.
I am a historian of the twentieth century in general, and of the postwar Soviet Union in particular. From my perspective, Piketty’s most intriguing argument is this: in the long run, the rate of return on capital investment (r) has exceeded that of economic growth (g). He expresses this as an inequality, r > g. Wealth—not income, per se, but also capital, investments, property, etc.—tends to concentrate in fewer and fewer hands, bringing with it immense influence over society and politics, all of which is handed down to subsequent generations. This was true before 1914. In my lifetime, that is, since about 1980, the world and America, in particular, have entered a new age, but one with all of the familiar markers of the Gilded Age—or the Belle Epoque, if you privilege the history of France, as Piketty does—in which massive inequality, already apparent, is giving rise to inherited wealth and massive family fortunes, all ow which have an outsized influence on the economy and politics. Where, we might ask, did all those Waltons and Kochs on the Forbes list get all their money?
The intervening period, was an exception. Two world wars, the Great Depression, strong labor unions, social democracy, and related forces combined both to lower r and raise g. Between 1945 and 1970, high taxation and explosive growth as advanced economies recovered from wartime destruction allowed the share of national wealth that went to the working and middle classes to meet or exceed that which went to holders of capital.This made everyone richer, and capitalism more stable and just than it was before, and has been since.
This was when the Soviet Union stepped into the ring with this exceptional form of capitalism. With all of the deep flaws in its command economy and unjust political system, the Soviet Union attempted to best the American-led capitalist world not only in the geopolitical arena, but in what Nikita Khrushchev termed a “peaceful competition” to see whether state socialism or market capitalism could secure for the average citizen a sure path to a comfortable standard of living and stable way of life.
In the 1970s, economic shocks led to an energy/inflation/unemployment crisis, coupled with the end of the fordist mass-production manufacturing economy that had supported postwar prosperity in the West. The Soviet Union, for its part, suffered through what Mikhail Gorbachev would later call the “period of stagnation” in that decade. By the time Gorbachev started to reform that system (1985–91), the gap was too large. At the same time, the postwar capitalist political economy that had enabled Western Europe, Japan, and the United States to keep and build its impressive lead in output, productivity, and high living standards was already fading into the past, replaced after 1980 by the trends that have brought us Gilded Age 2: Electric Boogaloo.
This is not to say that the Soviet system should have, or even could have continued to stumble along. However, as historians come to more deeply appreciate its postwar successes in educating and providing for an increasingly affluent, urban society, it will be necessary also to consider what historians are learning about the western—usually American—benchmarks against which we have always measured the Soviet experiment. Valid because they was the measuring stick the Soviet leadership chose for themselves for ideological reasons, those comparisons require us to be very aware of where the Soviet Union fit in the broader framework of postwar global history.