Capital and Ideology by Thomas Piketty (review)

Piketty has long been engaged in a heroic and commendable attempt to bring history and economics into dialogue with each other, and to show how the result can address extremely urgent public policy problems, in particular, the rising inequality within countries and its implications for national political cohesion or solidarity. This volume follows Piketty’s monumental Capital in the Twenty-First Century (Cambridge, Mass., 2013), and it is even longer (and heavier). The earlier work had a simple message, buttressed by massive statistical work originally focused on France but then extended to a relatively few additional countries. It could be summed up in three characters—r >g. Because the rate of return on capital exceeded the long-run growth rate, capital’s share of income underwent a steady increase. Piketty did not invoke only statistics; he also made frequent references to literature, especially Honoré de Balzac’s Père Goriot (Paris, 1835).

The new book is an impressive extension of the theme, with a wider geographical range of statistical material, including many of the nonEuropean countries where Piketty’s work has served to galvanize teams of researchers. Capital and Ideology is more difficult to summarize than Capital in the Twenty-First Century, although the bottom line is still clear and obvious: Ideology matters; it is indeed decisive in shaping the outcome that Piketty described in the 2013 book. Rates of taxation can immediately change r but have little effect on g. What all societies need to do if they are concerned about inequality is to raise taxes. The 2013 book made that point at the conclusion; the 2020 book extends that message into a detailed blueprint for a utopia, or what Piketty terms participatory socialism and social federalism. If the solution to inequality is so easy, however, why do societies resist increasing tax rates? Piketty has a simple historical answer for the nineteenth century—because voting was constructed to be dependent on income or wealth (what Piketty calls a “censitary” suffrage). Britain’s exclusive franchise lasted longer than France’s, where the revolution of 1848 and the move to a republic after 1871 brought universal adult male suffrage. Sweden had a highly exclusive and inegalitarian franchise until World War I. Germany had universal male suffrage at a federal level, but since most fiscal decisions were made at a state level, what mattered was the state franchise, and Prussia (the dominant state) had one based on property.

In the late twentieth century wave of globalization, the obstacle to effective taxation is the hyper-internationalization of finance, and the fact (which Piketty illuminates brilliantly) that despite the much vaunted availability of big data, governments, central banks, and international institutions are failing to make that data available. Hence, it is easier to compile the historical data from the nineteenth century to the 1970s than to assess modern sources.

The beginning of the twentieth century was a turning point, when the balance began to turn against what Piketty terms the “proprietary ideology.” He focuses on the 1909 French law establishing the income tax and on Prime Minister Lloyd George’s nearly simultaneous People’s Budget and the constitutional conflict (reform of the House of Lords) that it produced in Britain. Joseph Caillaux, the French Finance Minister who launched his tax bill in 1907, becomes the key witness in Piketty’s thesis: He read out statistics in parliament to convince his audience that France was not really the country of smallholders that it pretended to be. Knowing statistics can be enough to change the world, or to impose taxes and reduce r.

Piketty develops another, historical, line of argument, concerned with the long-term persistence of what he terms “trifunctional logic,” the division of society into warriors (nobles), intellectuals (clergy), and the rest (the third estate or proletariat). A great deal of the book demonstrates not just the continuity of inherited wealth but also the dominance of aristocratic or noble wealth. Such an approach raises numerous comparative problems, since in some countries nobles...