Thomas Piketty’s big book: why Europeans love socialism

I’ve started to read Capital in the Twenty-First Century, by Thomas Piketty. My iPad already feels heavier…

There is too much in this book to cover in one blog entry so I am going to save my readers the trouble of reading this massive tome with multiple postings.

Piketty says that Europeans and Americans have differing views on state ownership of industry and a planned economy because they had different growth rates during the heyday of government involvement in the economy:

Continental Europe and especially France have entertained considerable nostalgia for what the French call the Trente Glorieuses, the thirty years from the late 1940s to the late 1970s during which economic growth was unusually rapid.

In fact, when viewed in historical perspective, the thirty postwar years were the exceptional period, quite simply because Europe had fallen far behind the United States over the period 1914–1945 but rapidly caught up during the Trente Glorieuses. Once this catch-up was complete, Europe and the United States both stood at the global technological frontier and began to grow at the same relatively slow pace, …

In North America, there is no nostalgia for the postwar period, quite simply because the Trente Glorieuses never existed there: per capita output grew at roughly the same rate of 1.5–2 percent per year throughout the period 1820-2012.

These very different collective experiences of growth in the twentieth century largely explain why public opinion in different countries varies so widely in regard to commercial and financial globalization and indeed to capitalism in general. In continental Europe and especially France, people quite naturally continue to look on the first three postwar decades—a period of strong state intervention in the economy—as a period blessed with rapid growth, and many regard the liberalization of the economy that began around 1980 as the cause of a slowdown.

Do these political beliefs make sense? Piketty adopts the conventional attitude of a French academic, i.e., “most people are idiots”:

neither the economic liberalization that began around 1980 nor the state interventionism that began in 1945 deserves such praise or blame. France, Germany, and Japan would very likely have caught up with Britain and the United States following their collapse of 1914–1945 regardless of what policies they had adopted (I say this with only slight exaggeration). The most one can say is that state intervention did no harm.

7 Comments

  1. valueprax

    May 15, 2014 @ 12:33 pm

    1

    Hi Phil,

    A quote from Ludwig von Mises’s “The Anti-Capitalistic Mentality” is perhaps insightful here with regards to Piketty’s claims:

    As they see it, there prevails in the course of human history a self-acting tendency toward progressing advancement of the experimental natural sciences and their application to the solution of technological problems. This tendency is irresistible, it is inherent in the destiny of mankind, and its operation takes effect whatever the political and economic organization of society may be. As they see it, the unprecedented technological improvements of the last two hundred years were not caused or furthered by the economic policies of the age. They were not an achievement of classical liberalism, free trade, laissez faire and capitalism. They will therefore go on under any other system of society’s economic organization.

    The doctrines of Marx received approval simply because they adopted this popular interpretation of events and clothed it with a pseudophilosophical veil that made it gratifying both to Hegelian spiritualism and to crude materialism. In the scheme of Marx the “material productive forces” are a superhuman entity independent of the will and the actions of men. They go their own way that is prescribed by the inscrutable and inevitable laws of a higher power. They change mysteriously and force mankind to adjust its social organization to these changes; for the material productive forces shun one thing: to be enchained by mankind’s social organization. The essential content of history is the struggle of the material productive forces to be freed from the social bonds by which they are fettered.

    Once upon a time, teaches Marx, the material productive forces were embodied in the shape of the hand mill, and then they arranged human affairs according to the pattern of feudalism. When, later, the unfathomable laws that determine the evolution of the material productive forces substituted the steam mill for the hand mill, feudalism had to give way to capitalism. Since then the material productive forces have developed further, and their present shape imperatively requires the substitution of socialism for capitalism. Those who try to check the socialist revolution are committed to a hopeless task. It is impossible to stem the tide of historical progress.

    Special emphasis should be given to the final line, “It is impossible to stem the tide of historical progress.”

    Piketty’s work is another attempt at historicist rationalization. The quote you’ve pulled is a brilliant demonstration of his principles. This growth is happening as a matter of fate, of economic destiny. It has nothing to do with the social framework within which it takes place.

    Curiously, we might wonder how this is an argument FOR the confiscatory regulation Piketty wants. If the growth happens regardless, why not the free market?

    It makes one wonder how Piketty knows that “the most one can say is that state intervention did no harm”. How has he divined that interventionism had no effect on growth, but if it did, it was not a harmful effect?

  2. philg

    May 15, 2014 @ 1:39 pm

    2

    valueprax: I haven’t finished the book, but due to the tremendous efforts that he went to in gathering historical data I am not sure that Piketty’s work can be dismissed in its entirety even by folks who don’t want to pay the new taxes that he supposedly proposes at the end (I haven’t gotten there). I interpret “the most one can say is that state intervention did no harm” as “At best, state intervention did no harm and it might in fact have slowed down growth.”

  3. valueprax

    May 15, 2014 @ 1:45 pm

    3

    Hi Phil,

    I see. I interpreted that differently but yours makes sense, too.

    I didn’t mean to be dismissive. I was trying to emphasize something about his perspective, again, from your quote, “regardless of what policies they had adopted (I say this with only slight exaggeration)”

    That is a pretty interesting philosophical position to take with regards to the cause-effect relationship between certain social institutions and certain social outcomes. I will leave it at that.

  4. Brian

    May 15, 2014 @ 2:00 pm

    4

    Maybe I am missing some context, but the policy differences between East and West Germany had an impact on the rate at which they caught up with the US and Britain…

  5. philg

    May 15, 2014 @ 2:10 pm

    5

    valueprax: I think Piketty has support for the irrelevance of political policy when a country is catching up in that the Soviet Union had a radically different political system and yet was able to grow quite nicely as long as they were far behind the West (but then they stalled out pretty badly, of course).

  6. valueprax

    May 15, 2014 @ 3:02 pm

    6

    Phil,

    “Catching up” is kind of a deterministic way to view economic events. It implies there is some kind of objective “development path” that everyone is on and you can get ahead or behind (how? if institutions don’t matter? must be exogenous?). Maybe my concern with Piketty’s view is not registering because you share this view of economic events.

    I think Piketty’s argument applied to the post-USSR era of economic history in Eastern Europe would be that it didn’t really matter which institution replaced the USSR as a social framework– these economies were determined to grow and “catch up”.

    But then doesn’t that beg the question “why didn’t they manage to keep up during the USSR era if institutions don’t matter?”

    Perhaps I am being an alarmist. I really don’t wish to cause or engage in an argument and I didn’t think I was being controversial in pointing out something I thought was obvious, and distressing, about how Piketty reasons about the evidence.

    I’ll keep quiet now at risk of being foolhardy.

  7. Joanmi

    May 20, 2014 @ 1:59 pm

    7

    Philip,

    If you understand spanish you should read Xavier Sala-i-Martin comments on Piketty’s theories:

    http://salaimartin.com/randomthoughts/item/720-piketty-y-capital-en-el-siglo-xxi.html

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