Thomas Piketty’s failed revolution Ten years on, society is governed for the wealthy

From the perspective of the trade publishing market, the book also had the merit of being beautifully simple to understand. Capital in the Twenty-first Century is ultimately a piece of historical statistical description, containing no real theory or mathematics to speak of. Its famous formula “R>G”, which even came to adorn t-shirts, refers to the long-standing tendency (Piketty has been adamant it’s not a “law”) of returns on capital being higher than growth in income from production. As anyone who has owned an asset (such as a house) might have noticed, its value tends to rise faster than one’s pay. Scale that up to an economy as a whole, and you have a situation where existing stocks of wealth are growing faster than GDP.

Piketty’s thesis clearly chimed with narratives about inequality that had been developing on the Left since the 2008 financial crisis. The book’s focus upon the rising incomes and wealth of the top “1%” echoed the language of the Occupy movement, language which had itself been borrowed from the study of “top incomes” that Piketty had helped pioneer some years earlier. One of Britain’s most eye-catching political reactions to the banking crisis was UK Uncut, which was founded in 2010 to campaign against corporate tax avoidance, at a time when brutal cuts to benefits, higher education and local government were being unveiled. Fred “the shred” Goodwin, the CEO of RBS that had been bailed out by the British taxpayer and who had then resigned with a knighthood and a £700,000 pension, became a symbol of something morally rotten in capitalism. There was a widespread sense of an economy that was rigged in favour of the rich, which Capital in the Twenty-first Century did much to empirically substantiate.

But the extraordinary success of the book cannot be wholly explained in terms of media hype or the immediate fall-out from 2008. No doubt, the sentiments expressed by Occupy and UK Uncut remained potent ones, contributing some years later to the unexpected rise of “Left populists” such as Bernie Sanders and Jeremy Corbyn. Piketty has expressed some political sympathy with those movements, but if one were looking for a rousing, polemical denunciation of neoliberal capitalism around which to mobilise, one probably wouldn’t turn to Capital in the Twenty-First Century. Its resonance requires some deeper explanation.

The scientific study of “top incomes” originated in the early 2000s, led by the late British economist, Tony Atkinson, who struck up a collaboration with Piketty, based in Paris, and Emmanuel Saez in Berkeley. This yielded a series of academic articles and edited volumes, which passed under the radar of general readers or the media, back when nobody had ever spoken of “the 1%”. One distinguishing feature of this programme was a willingness to use novel sources of empirical data, namely tax records. Another was the study of very long-term historical trends, over not just decades but centuries. “The Top Incomes Database”, which first presented the kinds of graphs with which Capital in the Twenty-First Century is littered, was launched at a conference hosted by Atkinson and Piketty in Paris in 2011.

Given the extraordinary historical reach of this research field, there was nothing explicitly contemporary about its findings or implications, especially during those years when few politicians or commentators were worrying about inequality. Most people had a general sense that inequality had been rising since Thatcher and Reagan came to power, but political attention under New Labour was squarely focused on alleviating poverty, and not on the other end of the income spectrum (which, famously, Peter Mandelson was “intensely relaxed” about).

The global financial crisis did disrupt that complacency, but not simply because of “Fred the Shred” or because George Osborne took an axe to various social safety nets. Piketty and his publishers lucked out because the macrofinancial paradigm of the post-2008 world suddenly rendered the “R>G” tendency (which Piketty argued had been around for at least 200 years) impossible to ignore. Britain in particular experienced its longest period of wage stagnation since the industrial revolution, while asset prices (including housing) soared. Quantitative easing poured boundless cheap money into equities, facilitating the sharp ascent of BlackRock and other giant asset managers. Fiscal tightening and unprecedented monetary loosening combined to offer as devastating a demonstration of Piketty’s thesis as he could possibly have imagined.

In this Pikettyan dystopia, the wealthy didn’t need to take any risks or become Gordon Gekko to swell their portfolios further; they simply needed to take advantage of the glut of cheap credit and hire a wealth manager. Capital in the Twenty-First Century arrived with a historical account of a phenomenon that had been largely forgotten about: the idle rich, living off passive investments and inheritances. Everything that Marx had admired about capitalism — its modernism, its upheaval, the insatiable hunger for productivity gains — was nowhere to be seen. In his rather nerdish, atheoretical manner, coolly tracing the ebbs and flows of wealth since the Enlightenment, Piketty held up an image of capitalism that was less characterised by class conflict, exploitation or upheaval, and more by the sheer durability of estates and portfolios over time.

Marxists scoffed. After all, where had all this wealth originated from, if not from relations of production that were essentially exploitative? But Piketty’s analysis spoke to a range of other struggles and injustices that often had little to do with production and employment, but which became increasingly prominent as the decade wore on. Piketty’s definition of “capital” (“the sum total of nonhuman assets that can be owned and exchanged on some market”) decentred productive capital, but shone a fresh light on how wealth in general is protected and passed on, via inheritance, tax avoidance, “philanthropy” and other forms of gift-giving, all of which were politicised in the 2010s. Social scientists were soon filling in the blanks, with fascinating studies of the legal services, “family offices”, elite schools and offshore trusts that insulated the new oligarchy from political interference.

Political-economic conflict now seemed less about class, in a Marxist sense, and more about intergenerational unfairness and the sheer luck of which family (with what sized “bank of mum and dad”) one happens to be born into. One of the remarkable implications of Capital in the Twenty-First Century is that, due principally to its very high levels of top marginal income and inheritance tax, the post-1945 Keynesian era is the one phase of capitalist history in which the promise of meritocracy has ever been close to being realised. By fiscally suppressing “R>G” for 30 years (and because so much capital had been destroyed by war), people were able to work their way towards wealth ownership. The baby-boomer generation that benefited from this was the same generation that would later benefit from surging house prices, pay off their modest mortgages, and vote for Brexit. It has taken a while to recognise how much societies such as Britain have been reshaped by long-run trends in asset ownership and asset prices, but Capital in the Twenty-first Century was a key moment in this awakening.

Where has this got the Left? Piketty identifies as a “socialist”, and has produced a number of thoughtful proposals to tackle wealth inequality, such as a global wealth tax and (in his subsequent Capital & Ideology) a “citizen’s inheritance”. One could no doubt build a political movement dedicated to reversing the power of rentiers and wealth elites, as Jeremy Corbyn occasionally hinted at, launching his 2019 manifesto with a promise to go after “150 billionaires”. Tactics oriented around asset ownership, such as rent strikes, might form part of such a movement.

But Piketty is also a mild-mannered liberal technocrat, an heir to Keynes rather than Marx. Piketty anticipated the anxiety of liberals today, who believe in “hard work” and “enterprise”, but can see quite clearly that this economy rewards neither. In the decade since Capital in the Twenty-First Century was published, that has virtually become an orthodoxy. Even some of capitalism’s most passionate defenders are concerned by the rising number of young people living with their parents into their 30s due to spiralling housing costs, by the creeping power of surveillance capital, or by the rise of “universal owners” such as BlackRock. These are all symptoms of a society governed wholly in the interests of asset owners. Some have even questioned whether it is still “capitalism”, given it no longer relies on productivity gains, or whether we are descending into “neo-feudalism”.

The political question, looking back on the decade that followed Capital in the Twenty-First Century, is why this groundswell of opposition has still not translated into a genuinely transformative political program that puts these tendencies into reverse. Piketty cannot be held responsible for that, and he has done his best to identify the necessary measures that might reduce inequality. But there is nevertheless a slight unworldliness about his perspective and its emphasis upon very long-term statistical trends, which while never inevitable, come to feel almost natural and unsurprising. Even if “R>G” is merely a trend, and not a law, it expresses a slight air of fatalism, that (combined with so much other environmental and political news over the past decade) makes progress feel impossible. Like the proverbial frog in the ever-heating water, there is no moment of crisis when it might become necessary to jump out. In one of Capital in the Twenty-First Century’s most evocative phrases, Piketty describes how the “past devours the future”, as past accumulations of wealth overshadow our options in the present. This is not a fertile mood for progressive politics.

When Occupy first raised their banners declaring “we are the 99%” in Zuccotti Park and on the steps of St Paul’s Cathedral, “the 1%” was felt to be nearby, in the banks of Wall Street and the City of London. These encampments were putative acts of democracy. But as empirical attention to wealth, asset management and “high-net-worth” individuals has grown, their distance from the rest of us has come to feel ever more unbridgeable. At their best, studies of the super-rich illuminate the impacts of extreme wealth upon cities, democracy and culture, to aid public understanding. But the sheer exoticism of Elon Musk, Mayfair hedge funds and Monaco superyachts can also become a spectacle, which reduces the observer to passivity.

Piketty was right to divert attention away from the sphere of productive capital, and towards wealth in general. But this means that political conflict evaporates into the ether of long-run tendencies, asset portfolios and offshore jurisdictions. One of the great strengths (or comforts, if you like) of Marxism is that it focuses political attention upon one specific locus of activity: the workplace. You know what to do and what to demand if you are a Marxist. The same is less true if you are a “Pikettyan”. A return to Sixties-era top marginal tax rates (at over 90% for income and inheritance, even in the United States) would be a start. Piketty has made many radical and optimistic proposals of this sort. The problem is that they suggest a faith in liberal democracy and the current assortment of political parties that few people share in 2024, given the influence of big donors and media. Meanwhile, the long-term tendencies roll on.