Piketty’s ‘Capital’: Perspectives from the south. Thoughts on Capital in the Twenty-first Century

Several commentators have observed that their impressions of the value and meaning of Piketty’s (2014) work changed many times, especially if they read it at different times, in different geographies and in different contexts. Some were initially struck by the brilliance of its ambition and rhetoric, by the impressive use of long-run historical data, by the significance of its focus on growing global inequality, by its ability to appeal to scholars ranging from mathematical economists, to political economists, historians and sociologists, and by the way it captured the attention of politicians and policy-makers of both the left and the right all over the world, including even US republicans, who were forced publicly to engage with his ideas (for example, Gregory 2014). In the reviews I have read, a few of these same commentators saw in later readings only the banal and the obvious, and pointed to the limitations of his arguments, methodology and techniques. They noted its lack of any real explanatory power as compared to Marx, or Polanyi (who fails to get even a mention), and a lack of any economic policy relevance as compared say to Keynes, in the context of the current crisis of capitalism. This has been my experience too (see Padayachee and Bordiss 2015, for a somewhat more favourable view of Piketty). But let me start with a few comments on Piketty himself, before moving onto his main arguments.

Thomas Piketty is not a western Marxist of the early post-war variety, yet he has a quintessentially modern left-of-centre European outlook. By his own admission, he confirms that:

I belong to a generation that turned eighteen in 1989, which was not only the bicentenary of the French Revolution, but also the year when the Berlin Wall fell. I belong to a generation that came of age listening to the news of the collapse of the communist dictatorships and never felt the slightest affection or nostalgia for those regimes or for the Soviet Union. I was vaccinated for life against the conventional but lazy rhetoric of anti-Capitalism, some of which simply ignored the historic failure of communism and much of which turned its back on the intellectual means necessary to push beyond it.

(31)

Piketty may have been schooled amongst neo-classical economists, but his models, underpinned by intimidatingly impressive data sets, mined from tax records going back 300 years in some cases, go some way to reclaim mathematics from the grip of neo-classical economics. But he chooses to be really, really rude about the place and value of mathematics and econometrics in modern economic analyses, something guaranteed to make him popular among the left, in and out of academia, most of whom are neither willing or able or content to play this numbers game. George Cooper, an economist who has worked for Goldman Sachs, JP Morgan, and Deutsche Bank, makes the point that to his mind the best quote from Capital in the Twenty-First Century is: ‘To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics…’ (32).

To my mind, having studied but not much practiced a lot of mathematics and econometrics in my own economics, I find Piketty’s rudeness somewhat puzzling and contradictory given his own mastery and proficiency in this approach. He may well be right about the obscene degree to which economics has been driven by mathematical modelling and econometrics, to the exclusion of all other traditions or methodologies. But whether understood as a form of philosophy of reason, or as a neat set of constructs (equations) to explain complex real world economic phenomena, mathematics employed critically in the service of economics, not as its master, has been and remains useful.

Now to Piketty’s analysis

To date, economic data from the relatively short post-World War II period up until the end of the twentieth century, has been read mostly in sympathy with a neo-classical interpretation. In this period the hypothesis behind the Kuznets Curve was the dominant thinking about development...