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Why 21st Century Capitalism Can't Last

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The response to French economist Thomas Piketty's "Capital in the Twenty-First Century" has been surprising, to say the least. Though the Amazon best-seller is well written and artfully translated from French by Arthur Goldhammer, the 696-page[....]

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Kit B (276)
Tuesday April 29, 2014, 6:55 am
Photo Credit: The Nation (magazine)

The response to French economist Thomas Piketty’s “Capital in the Twenty-First Century” has been surprising, to say the least. Though the Amazon best-seller is well written and artfully translated from French by Arthur Goldhammer, the 696-page text is filled with enough charts and footnotes to occupy experts for months. Indeed, the work was based on decades of research conducted by an entire team of specialists tracking centuries of income and wealth patterns.

The book presents a simple thesis: Unchecked, capitalism’s natural dynamics lead to an unequal concentration of wealth. This trend is increasing at a rapid rate; absent a wealth-destroying catastrophe such as war or depression or powerful new egalitarian political movements, we can expect that to continue.

Piketty elegantly explains that when the rate of return on existing capital (r) exceeds the economic growth rate (g) ­— as has been the case through most of capitalism’s history — the wealthy will grow wealthier than society as a whole, with disastrous consequences for future social and economic development. In more technical terms: r > g = :-(

In America, as in Europe, the past century’s dynamic can be visualized by a U-shaped curve. Before the Second World War, the top 10 percent captured almost half the national income, before seeing their share dramatically eroded in the booming postwar years. Since the era of Reagan, however, we’ve stumbled into another Gilded Age.

Which leads to the obvious question: What can be done?

Money and power

Piketty, who’s active in the center-left French Socialist Party but resists being characterized as a Marxist, offers some solutions of his own. The assessment of a global wealth tax is his most notable. Not just stocks and bonds, but land, homes, natural resources, patents and more would be subject to this tax — making it more far-reaching than any progressive levy on income. The policy would have to be coordinated across the developed world to avoid the problem of capital fleeing across borders to escape it, a difficult proposition but not a technically impossible one.

Yet the implications of his analysis go deeper. It isn’t that the rich are getting richer; it’s that they’re also getting more powerful. Across the world, inroads against economic democracy — collective bargaining rights and robust social welfare programs — since the 1970s have undermined political democracy, and that’s going to make mere policy shifts even more difficult to achieve. Workers aren’t pushing for wealth redistribution anymore; in fact, they’re actually losing battles to preserve gains won in past generations. No longer threatened at the grassroots, the ability of the world’s wealthiest citizens to shape politics is nearly absolute.

Developments in the United States, such as the Citizens United and McCutcheon rulings eliminating limits on campaign fundraising restrictions, have made the connection between financial wealth and political influence even more apparent. But despite public outrage — almost 90 percent of Americans think there’s too much money in politics ­— reform appears to be a faint hope.

In fact, there’s plenty of evidence to suggest that the U-shaped curve of the past century will start to look like a fishhook, with two major “leveling” forces of the postwar years — namely, high rates of unionization and the growth of mass parties representing the interests of workers ­— in indefinite decline.

Productive power

Most people have come to associate capitalism with the advent of modern political democracy, on the theory that the growth of the market freed feudal minds and bodies. But while it’s true that capitalism’s productive power — new wealth from trade and investment, urbanization, advances in communications — made this democracy possible, the actual implementation of democratic reforms happened in spite of, not because of, capitalists themselves. As many modern scholars have argued, the roots of democratization were in the organized working class. Though workers needed the assistance of a host of allies from throughout society to triumph, these popular coalitions fought against yesterday’s oligarchs to secure suffrage and push for the social protections we take for granted today. Democratic reforms were foisted on resistant elites, from the English and French revolutions of the 17th and 18th centuries on to the struggles of the last. The results were by no means absolute ­— formal equality in the form of “one person, one vote” has never resembled anything close to actual equality — but these were major victories for ordinary people.

Elites are just as keen today as they were then to exclude others from the political process. The billionaire Koch brothers, who have funded many conservative and libertarian political causes, are little more than more banally dressed mirror images of the great estate holders and factory owners of the Industrial Revolution. They have the same compulsion to accumulate profits at the expense of their employees, and they’d like to do so with as few regulations in their way as possible.

Lucky for them, with the near disappearance of the international socialist movement and the organized working class in the past decades, the path has been opened for an anti-democratic counterrevolution of sorts.

Redistributionist conclusions

But perhaps there’s hope. That so many people are trying to tackle “Capital in the Twenty-First Century” is at least a testament to a growing public interest in capitalism — the force that shapes their lives. And even if they’re not reading all 700 pages, many are more than comfortable with endorsing its redistributionist conclusions. It’s possible that in the long term more of them will see that resisting capitalism is the only path out of a world where some can live on rents and interest, while many spend their whole lives working themselves to death.

And yet, as Piketty’s book alludes to, the more time passes, the more entrenched and powerful the scions of capital will become. We’ll need to muster the forces capable of challenging them sooner rather than later. And though “Capital in the Twenty-First Century” is more than welcome, it’ll take more than a best-selling tome to do so.

By: Bhaska Sunkara | Op-Ed | Al Jazeera America |

Bhaskar Sunkara is the founding editor of Jacobin and a senior editor at In These Times.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.

Sue Matheson (79)
Tuesday April 29, 2014, 6:58 am

Terry H (15)
Tuesday April 29, 2014, 7:10 am
Very interesting article though I am reminded of something I read a few days ago. 'Any form of socialism that is based on taxing the wealthy is a castle in the sky, the workers should simply own and control the means of production directly'.

Mitchell D (87)
Tuesday April 29, 2014, 10:26 am
Interesting, on point, and AGAIN, I recommend reading "Capitalism Hits the Fan," by Richard Wolff, and "Democracy for the Few," by Michael Parenti.

Mitchell D (87)
Tuesday April 29, 2014, 10:28 am
It would not hurt, also, to read Howard Zinn's "A People's History of the United States."

Pamela Tracy (5)
Tuesday April 29, 2014, 1:31 pm
After the Wall Street and bank debacle in this country and how they were bailed out and forgiven and how Americans who were suckered are libeled, proves that unchecked capitalism will never do a good thing for our country or citizens...we will always be the last helped thanks to our leaders. Our leaders could have warned citizens not to get caught up in this last wave of liberal credit.....most people were suckers more than myself....however I was a sucker and our government libels those of us who were suckers legally. Some were suckers illegally and that was not myself. I bought legally and paid off debts and had reestablished my credit and I was victimized because I was keeping up with my credit and balances were going down...I ended up unemployed two times which ruined my credit a second time in my life when our leaders could have been more honest to warn people away from these liberal opportunities from banks who crapped on all of us later. Now according to the last facts, it will take American 12 years to get back to where we were long before 2008 when our economy was stable. I blame our leaders and unchecked banks and wall street liars...who crapped on us later.

Joanne Dixon (38)
Tuesday April 29, 2014, 1:51 pm
Odd how the title of the article says it can't last, but the summation says it WILL prevail unless it is stopped soon. I agree with the summation, not the title.

Birgit W (160)
Tuesday April 29, 2014, 3:57 pm
Noted, thanks.

Lois Jordan (63)
Tuesday April 29, 2014, 4:09 pm
Noted. Many thanks for posting, Kit. This is the man who has conservatives melting down, which I'm really glad to see. Will it change things here in the U.S.? I truly hope so. I'll do my part in sharing this info; and all of us must do what we can. We are the People Power that can move mountains; we can't give up.

Bryan S (105)
Tuesday April 29, 2014, 4:26 pm
Thanks Kit, we certainly need more information like this to counter the myth that capitalism (especially unregulated) is just super for everyone.

As everyone here knows, another big problem with capitalism (ultimately worse than the others) is that it depends on infinite growth in a finite world. And of course it rewads "growth" even if that means the real world is being poisoned or destroyed in some way. The selling point that an accumulation of capital always represents some benefit provided is complete nonsense.

It's ironic that in the minds of many Americans capitalism is synonymous with America's "golden age" such that they support the very system that is abusing them, while failing to realize the growth of the middle class was dependent on hard-won worker rights and regulation of the market.

Pamela Tracy, i guess that goes to show who owns our leaders.

Past Member (0)
Tuesday April 29, 2014, 4:29 pm
Toxic, free market capitalism of the kind espoused by both capitalist parties in the US can't last because quite simply the planet cannot take much more punishment before conditions decline so precipitously that our species dies out. Long before that, however, we will see more and more uprisings around the world and in this country.

Ralph Brenze (1)
Tuesday April 29, 2014, 8:55 pm

Ralph Brenze (1)
Tuesday April 29, 2014, 8:55 pm

Craig Pittman (52)
Wednesday April 30, 2014, 4:18 am
It has run its course and must be replaced with a more equitable system while the transition can still be managed without it completely self-destructing. It's broken, not working, we need to move on. Thanks for this story Kit.

Sheryl G (360)
Wednesday April 30, 2014, 7:26 am
The article said the work was based on decades of research conducted by an entire team of specialists tracking centuries of income and wealth patterns.

That is good for those who need everything "proven" on paper.

The book presents a simple thesis: Unchecked, capitalism’s natural dynamics lead to an unequal concentration of wealth.

Well it doesn't take an academic or a brain surgeon to see what is taking place all around us. People may not all agree why this is taking place as some listen only to the "propaganda" being placed out there or they truly have so little time to learn as they scramble to keep their lives afloat, but I'd hardly say there isn't anyone that knows in their gut that many things are not going well.

Article states: Yet the implications of his analysis go deeper. It isn’t that the rich are getting richer; it’s that they’re also getting more powerful.

We can see this in our Justice system and Elections when we have the Supreme Court making the recent ruling with Citizens United and McCutcheon. When future elected swoon to one Billionaire for his approval to gain his money we are only able to caste a vote for the one that one Billionaire chose or another Billionaire had chose; it then becomes their parlor game against each other.

Workers aren’t pushing for wealth redistribution anymore; in fact, they’re actually losing battles to preserve gains won in past generations. No longer threatened at the grassroots, the ability of the world’s wealthiest citizens to shape politics is nearly absolute.

If people soon don't understand that concept and as Craig so points out, replace this system with a more equitable one while transition can still be managed without completely self-destructing, we'll be right back to the times before the Labor Movements began. In the future we will see starvation upon this land in mass if it is not crawled back, and we can't have it based on destroying the planet with commodities. Sustainable ways of living MUST be a way of living for all.

Awhile back Ralph Nader wrote a book titled "Only the Super Rich Can Save Us" and I hate to think that is the only way it can be done. That IF they finally feel it is worth it to themselves to be more sharing with all of us. I fear for those growing up today, my Grandchild and Twenty Something Children, I think they will have a rocky road ahead of them.

This is going to take years to turn around unless entire populations suddenly rise up to be demanding of a better way, but usually fills the space tends to be Fascists with their guns and might. This is why it is so important to change a system in ways that does not throw chaos into the situation, but it must be done soon, we have examples of history, even Iceland did a better job.

And before 2008 our economy was going through upheavals and was at a low point, this all didn't start at that time. We had the Rust Belt, Enron, an unsustainable Housing Boom, the constant dismantling of our economic protections that our ancestors had placed in like Glass-Steagall, NAFTA, the Bush Savings and Loan Scandal, I mean we can go on and on to place all the various things that happened BEFORE 2008 that got us here, that both Democrats and Republicans had their hand in. So once more, laying it at the feet on one date and one person isn't going to help any of us see the true goes well beyond that.

Justin Vale (13)
Wednesday April 30, 2014, 10:03 am
i read it, couldn't understand most of it, it's seems to be beyond my abilities to understand. i bought the book and the e-book. if anyone wants a pdf copy let me know and i'll send you one.

Mary Donnelly (47)
Wednesday April 30, 2014, 3:01 pm
Thanks again Kit--useful post, and comments.

Tracy G (3)
Wednesday April 30, 2014, 6:39 pm

Fiona Ogilvie (565)
Wednesday April 30, 2014, 9:36 pm
I think people said all of the crazy ideas in Adam Smith's book would go away. Did not. This will not either.

Jamie Clemons (282)
Thursday May 1, 2014, 5:45 am
Unsustainable. We are already getting most of our goods from communist countries.

Kit B (276)
Thursday May 1, 2014, 6:39 am

The problem is not Adam Smith but not really reading Adam Smith. He warns through out the book, "Wealth of Nations" that the government must keep a tight rein on corporations or live with the mess we have today.

Sheryl G (360)
Thursday May 1, 2014, 1:42 pm
When American colonists declared independence from England in 1776, they also freed themselves from control by English corporations that extracted their wealth and dominated trade. After fighting a revolution to end this exploitation, our country’s founders retained a healthy fear of corporate power and wisely limited corporations exclusively to a business role.

Corporations were forbidden from attempting to influence elections, public policy, and other realms of civic society.

My how things have changed.

Initially, the privilege of incorporation was granted selectively to enable activities that benefited the public, such as construction of roads or canals.

Gee, what a concept that seems to also be lost today.

If you would like to know more about early Corporations and how they were set up and how far we have moved away from the early part of our Countries Founding please go to the link below which is where I had pulled the above information.
Our Hidden History

Past Member (0)
Thursday May 1, 2014, 1:48 pm
I would tentatively suggest that our system today is very much what our founding fathers intended: they fought a revolution so that the wealthy elites wouldn't have to pay taxes on their property, specifically slaves. And thus, here we are in a system where a very small elite are the masters and, for all practical purposes, the rest of us are slaves. A revolution that fails to free people from bondage is not a revolution. It is merely a change of ruling class.

Panchali Yapa (26)
Friday May 2, 2014, 3:09 am
Thank you

Marija M (29)
Friday May 2, 2014, 4:25 am
interesting, tks

Nancy C (806)
Friday May 2, 2014, 6:49 am
Thanx Kit and ty to Dandelion too. The hidden history link gives a frightening detail of what's been brewing since the civil war. To think that the protection of a slave's personhood 14th ammendment) evolved into the same for corporations is mind-boggling and maddening. The original "place" for corporations gave citizens power, freedom, liberty and even some happiness. The civil war seems to mark a changed arena and the begiinning of the end for the single "personhood". Great info there-bookmarked pages. I know I won't read the book Kit, but I thank you for the discussion and possible hope..."r > g = :-( "

Thomas M (8)
Saturday May 3, 2014, 6:36 am
The message in all of this is the middle class and poor in this nation must become better informed and skilled to fight Oligarchy. The 1%ers know that most of the population will not have the knowledge and skills to stop the out of control capitalism and greed that exists and has existed for quite some time. Why do people believe capitalism, as it exists today, is a good thing for them? Capitalism does not equal democracy today, it is destroying it.

marie C (163)
Sunday May 4, 2014, 3:02 pm
Thank you Kit also Dandelion

Lin Penrose (92)
Sunday May 4, 2014, 9:07 pm
Thank you Kit. We humans need symbiotic lasting relationships; social, cultural, ecological balance, and with this planet - home, hope and possible positive futures...The earth and all changing inhabitants, must be symbiotic, (not parasitic nor viral in the negative forms) and in tune with the always chaos. We humans may have become an" un-tuned" string in the on-going music of this earth and universe. The melody basics are there though.
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