Reviewing Piketty (again)

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by Michael Roberts

I have just submitted a 6000 word review of Thomas Piketty’s book, Capital in the 21st century, to Historical Materialism journal.  Under HM rules,I cannot publish this anywhere else (unless they reject it) and so it may not see the light of day for a while.  It may not be the most perceptive of the now hundreds of reviews that have been published, but it is certainly vying to be the longest!

Anyway, here is a flavour of what is in the review from the abstract submitted.
Thomas Piketty’s magnum opus on the accumulation and distribution of wealth over the last 200 years has been greeted by the biggest noise from the great and good in mainstream economics (and by the heterodox ) of any economics book, possibly ever. Piketty shows compellingly that inequality of wealth and income is inherent in capitalism and it is getting worse. Most important, he shows that the reason for the rise in the inequality of wealth is a rise of income going to capital in the form of profits, rent and interest. Inequality is not due to higher skilled labour getting higher income than the lower skilled.  The unanswered question for Piketty’s thesis is this. Is rising inequality the central contradiction of capitalism and thus its grave digger?  Is it a tendency for a rising net return on capital (Piketty) or is it the tendency for a falling rate of profit (Marx) that is the key contradiction of capitalism in the 21st century?

A lot of reviews seem to suggest that Piketty’s book is ‘updating’ Marx’s Capital in some way.  When you read Piketty’s comments on Marx’s explanations of the contradictions in capitalism, it is clear that this is not so.  Here are some from the book:

Marx thought that capitalism would have an “apocalyptic” end but thanks to “modern economic growth and the diffusion of knowledge” that has been avoided. But there is still the problem of the “deep structures of capital inequality”.  p1

“either the rate of return on capital would steadily diminish (thereby killing the engine of accumulation and leading to violent conflict among capitalists) or capital’s share of national income would increase indefinitely until the workers went into revolt.” p9

“like his predecessors Marx totally neglected the possibility of durable technological progress and steadily increasing productivity, which is a force that can to some extent serve as a counterweight to the process of accumulation and concentration of capital” p10

“Marx’s theory implicitly relies on a strict assumption of zero productivity growth over the long run”. p27

“the rate of return on capital is a central concept in many economic theories. In particular, Marxist analysis emphasises the falling rate of profit – a historical prediction that has turned out to be quite wrong, although it does contain an interesting intuition.” p52

Marx’s r falls because in his model of capitalism, there is “an infinite accumulation of capital” and “as ever more increasing quantities of capital lead inexorably to a falling rate of profit (i.e. return on capital) and eventually to their own downfall, while growth in net income (g) falls to zero.” p252

This does not look like an updating but more a rejection.