Encyclopedia Plutonica

This work is licensed under the Creative Commons | © Anush Kapadia. ISSN 2049-1115 (Online). DOI: http://dx.doi.org/10.14318/hau5.1.026


Encyclopedia Plutonica

Anush KAPADIA, City University London

Comment on Piketty, Thomas. 2014. Capital in the twenty-first century. Translated by Arthur Goldhammer. Cambridge, MA: The Belknap Press of Harvard University.

There is much to say about the methodological shortcomings of this work of vaulting ambition. There is also much to say about why it has garnered the public reception it has. More still can be said of the questions it begs; this will be the burden of what follows.

Yet it must be said at the outset that, for all its ahistoricism masking as history, all its gestures toward methodological ecumenicalism, its nomothetic essence poorly balanced by good faith humility, this is an unmistakable breaking of rank. Only a deeply cynical reader would see this as a rearguard action by a discipline of cracking legitimacy.

No, Piketty’s (2014) is a genuine apology for the scientism of his colleagues, a long-awaited, mainstream acknowledgement of the political situatedness of intellectuals, and perhaps above all, an attempt to make facts available for public debate and discussion in the best spirit of the European Enlightenment, a set of ideals to which the author frequently refers. This is a work that proudly associates itself with the encyclopedic tradition of its Gallic forbearers, explicitly citing Diderot, for example (Piketty 2014: 269). As Piketty proudly proclaims, “I have presented the current state of our historical knowledge concerning the dynamics of the distribution of wealth and income” (571).

But tragically, social science outside of economics rarely lends its ears to the sorts of facts Piketty is presenting. As he rightly notes in a parting shot to social scientists, the old left in the academy have completely outsourced the study of the economic to the economists they love to hate.

[510]Our allergic reaction to even the most basic numerical facts is deeply disabling in more than one way. Methodologically, it suppresses that central lesson of Capital (the original), that the capitalist economy is a massive engine of commensuration, rendering radically diverse branches of a bewilderingly capillary social division of labor legible to each other in quantitative terms. We might be able to repeat this catechism to our students, but if we are not actually producing and consuming the thick institutional descriptions that outline exactly how the plethora of contemporary capitalist formations actually do this work—work that is never purely economic but never purely uneconomic—we really can’t afford to throw stones.

Economists continue to have the ear of the prince because they tell better stories about how the world works. And by better, I mean they exist. The old social science left, with its debilitating fear of the metanarrative, has both forgotten the political potency of the metanarrative while mistaking all macro stories for essentializing ones.

In various ways, Piketty points the way to another kind of anthropology that genuinely folds in the macroeconomic. He makes excellent use of the shifting social meanings of inflation, for instance, noting how money was so solid in the eighteenth and nineteenth centuries as to be taken to be a naturalized fact rather than the instrument of class rule it was. When inflation is drafted in to dilute war debt, money loses this solidity and reference points switch over. Or again, when he points to the return of kinship in many advanced nations as an organizing principle of capitalism with the atrophy of the state and the reassertion of the patrimonial fundamentals of capitalism. Could this be a wake-up call for a kind of economic anthropology we haven’t seen in a while?

Surely one of the most depressing ironies of the last generation of work in anthropology—there are always honorable exceptions—is that the discipline served as the bizzaro mirror image of the discipline of economics that is equally unhinged from economic reality and equally incentivized to produce the baroque and pass it off as knowledge. At opposite ends of the intellectual division of labor, anthropology and economics both produced show dogs rather than hunting dogs.1 For all his infelicities, Piketty wants to hunt.

Nomos or idios?

For Piketty, what started as a substantial but modestly empirical attempt to map out contemporary inequality has now flowered into a stab at that holy grail of political economy, namely the equations of motion of capitalism itself. The language of laws and central contradictions abounds, even as the laws in question are really accounting identities posing as transhistorical regularities and the contradictions are arithmetical rather than fundamentally social.

The story of contemporary inequality is a story of deep, tectonic tendencies interrupted by “shocks” that, by construction, come from outside the system: war, [511]taxation. But if the generational arithmetic of accumulated savings is left to do its work, the story goes, it produces the stark inequalities that are native to capitalism.

One doesn’t have to be a Marxist to see the primacy of the arithmetical over the socio-structural in this work. How can it be otherwise when the bland categorical “decile” replaces the real world formation that is class? This is altogether more political arithmetic than political economy.

The generational-arithmetical logic is best displayed in the section entitled “The law of cumulative growth” (Piketty 2014: 74). Here, the drip-drip of the long durée is rendered as a world-historical force:

The central thesis of this book is precisely that an apparently small gap between the return on capital and the rate of growth can in the long run have powerful and destabilizing effects on the structure and dynamics of social inequality. In a sense, everything follows from the laws of cumulative growth and cumulative returns, and that is why the reader will find it useful at this point to become familiar with these notions. (Piketty 2014: 75–77)

In a phrase, “Money tends to reproduce itself ” (Piketty 2014: 440).

Well, not quite. This is almost literally the definition of what Marx called the commodity fetish, namely exploitative social relations between people taking the systematic appearance of autonomous relations between things.

Capital has indeed reproduced itself as stark inequalities in wealth, this much Piketty has documented. But that is merely a what, a statistical description. The holy-grail question is how and why, and in what historically contingent forms, a set of theoretical and historical questions.

It is a measure of how deeply we are lacking in the social sciences that what is in the end a grand statistical compendium is being read and written up as grand theory. Piketty is quite right to chastise other social sciences for abandoning the ground to economists. But having the field to themselves has apparently got the better of even the best of them. There is perhaps a supereconomist phenomenon at work here that parallels the rather thin driver of inequality that Piketty identifies, namely the rise of the supermanager.

This highly abstracted account obviously strips out all kinds of social realities, and our author is not naive enough to completely run roughshod over them. Just so, he repeatedly invokes the idiographic as kind of methodological disclaimer: “Are there deep reasons why the return on capital should be systematically higher than the rate of growth? To be clear, I take this to be a historical fact, not a logical necessity” (Piketty 2014: 353). And again, “To my way of thinking, the inequality r > g should be analyzed as a historical reality dependent on a variety of mechanisms and not as an absolute logical necessity” (361). And yet these good-faith disclaimers seem to be repeatedly washed away by inexorable logic: “wealth originating in the past automatically grows more rapidly, even without labor, than wealth stemming from work, which can be saved” (378). Consider, further:

When growth is slow, it is almost inevitable that this return on capital is significantly higher than the growth rate, which automatically bestows outsized importance on inequalities of wealth accumulated in the past. This logical contradiction cannot be resolved by a dose of additional [512]competition…. The inequality r > g implies that wealth accumulated in the past grows more rapidly than output and wages. This inequality expresses a fundamental logical contradiction. The entrepreneur inevitably tends to become a rentier…. The past devours the future.” (Piketty 2014: 423, 571)

For all the putative adherence to the historical method, the underlying logic of this work shows a deep lack of historical imagination. It is as if the only template to think about the present is the past. The liberal citations of Jane Austen, Henry James, and the Aristocats (yes, the cartoon) illustrate that Piketty’s imaginary is very much under the influence of the belle époque.

Here he has committed the sin of thinking that two social structures that have similar statistical properties necessarily have similar social dynamics. This is the quantitative error par excellence.

Is it really the case that contemporary capitalism, in all its luxuriant local variety, can be thought of as a return to the preshocked norm that was the belle époque? Do we really have a return of patrimonial capitalism in the rich world, or is it something altogether more institutionally interesting?

Patrimony or technostructure?

Capital is basically used here as a synonym for wealth: “I use the words ‘capital’ and ‘wealth’ interchangeably” (Piketty 2014: 47). This “theory of value” is actually a step back from classical political economy. It also leads to a misconstrual of the dynamics of overmature capitalism.

Recall that Adam Smith’s definition of capital stock in the Wealth of nations was written up as an advancement on the existing mercantilist epistemology because all things that could generate value had … value. The mercantilist focus on moneystocks was a dangerous distraction and a radical narrowing of the idea of wealth.

Piketty takes this Smithian view of capital as a past accumulation of assets, where an asset is basically an ownership right in law to the fruits of something that can be used either as a store of value or a factor of production. This includes financial and nonfinancial assets, land, equity, and everything in between. Piketty’s work is ultimately a historical inventory of ownership of wealth.

Yet this is ultimately a step back from classical political economy because, from Smith onward the question is, why is X worth something? What value mechanism undergirds social wealth? This question is not asked in this work; it is apparently obvious why the things in Piketty’s wealth inventory have value in the first place.

Not so, of course. Smith and Marx alike had labor theories of value but used them to radically different effect. For Marx, his theory of value was also a theory of politics. If value comes from social labor, then we have a political target in the elimination of capitalist property relations that generate a systematic surplus for some on the backs of others. Even if this was a radically inaccurate theory of value—a long and tortuous question—at least Marx asked the question.

By not having a theory of value then, Piketty’s politics is radically truncated to the ameliorative form of a global wealth tax rather than something more transformative. In his therapeutic narrative, the deep drives of the capitalist system have to be permanently repressed by a global fiscal superego.

[513]Further, “value” here just comes from time: savings magically augment themselves apparently so long as there are no shocks, all we really need is the passage of time. Without a theory of value, there is no need to invoke a structure of exploitation that is definitional of capitalism.

To be sure, there is much talk of the rentier as the eventual fate of the entrepreneur. Yet “rent” is just the flow that accrues from legal ownership of capital assets. If the dynamics of capital ownership lead to excessive rent, the solution is not the extreme one of abolishing private property but the Continental one of repressing it.

Here we come to the nub of the structural blindness that this mode of analysis generates. Ownership is ownership, the nature of the underlying assets—real or financial—as well as the mechanisms of ownership are really just superstructural, “surface disturbances, crests of foam that the tides of history carry on their strong backs,” as Ferdinand Braudel —apparently a source of inspiration for Piketty—renders events in his Mediterranean world (1995: 21). According to Piketty:

Rent is a reality in any market economy where capital is privately owned. The fact that landed capital became industrial and financial capital and real estate left this deeper reality unchanged. Some people think that the logic of economic development has been to undermine the distinction between labor and capital. In fact, it is just the opposite: the growing sophistication of capital markets and financial intermediation tends to separate owners from managers more and more and thus to sharpen the distinction between pure capital income and labor income. (2014: 424, emphasis added)

There is a real cost to this institutional blindness. For one, we get the magicality of interest as mentioned above. But further, we cannot really account for the blistering rise of inequality that Piketty has so strenuously documented if we don’t have an epistemology that brings the institutional structures of contemporary capitalism into view.

Just so, we are told that the real driver at the top is the rise of the so-called supermanager. Two things govern historically unprecedented levels of compensation for this group: social norms that tolerate higher compensation (Piketty 2014: 332) and the rise in the “bargaining power” of supermanagers in the light of uncertainty over the valuation of their true contribution to the firm (512).

Yet none of these features bespeaks any deep change in the structure of capitalism; they merely pave the way for a return to the statistical norm.

In truth, managers have captured organizational forms in which capitalist power is now formatted, but it is organizations that have this power to begin with. As such, managerial capitalism is something quite distinct from patrimonial capitalism, a qualitative difference that is of some moment.

Who actually owns American capitalism? Piketty glosses over the vital fact that direct household ownership of financial assets—the main assets in contemporary capitalism, we are assured—has, as of the 1980s, declined to a mere third in the United States and Canada, and even less in other advanced nations.2

[514]In other words, households do not directly own American capitalism, even the “patrimonial” ones of the second Gilded Age that he believes we are now living through. Pension funds and mutual funds do, along with other “institutional investors.” The financial wealth that Piketty is talking about is therefore predominantly shares that rich households have in these institutional investors who in turn own equity in actual productive firms.

Figure 1
Figure 1: From Rydqvist, Spizman, and Strebulaev (2014).

Why is this seemingly low-level piece of institutional plumbing important? Because it gives us a purchase on the institutional dynamics that have created our own inequality as something very much in their own time, not Aristocats redux.

With just a passing reference, Piketty glosses over perhaps the central fact of contemporary capitalism, that is, capitalism since about the late nineteenth century. The revolution that is the modern corporation completely altered the grammar of capitalism through “the dissolution of the atom of property” by separating ownership and control in the joint-stock company.3

The gripping phrase is that of American Institutionalist lawyers Adolf Berle and Gardiner Means from the locus classicus on the subject, their 1932 The modern corporation and private property. In the modern corporation, a sprawling Weberian bureaucracy, the owners—the shareholders—do not run the show. They are, by construction, dispersed equity buyers having to hire managers to run the affairs of the company.

As such, ownership of capital and control over the resource were fundamentally sundered, creating an entirely new institutional weather system that has led us to the impasse that Piketty documents. This tectonic shift is massaged in a few paragraphs as a rise in “bargaining power” of the managers.

That is precious understatement. The entire regime of corporate governance, the rise of the narrative of shareholder value, and the very flourishing in the financial industry as a domain for professionals rather than well-connected placemen, [515]owes its origin to the rise of the institutional investor as the owner who struggled to get control over its capital.

How to stem the tide of managers taking over the shop in a manner that threatened American productivity as it waned in the 1970s? Have strong, independent corporate boards that supervise their work, give them stock options to align their incentives with that of the real owners, make them focus incessantly on the quarterly stock price as a neutral measure of their worth.

Out of this matrix comes the supermanager, which says one thing: the direct owners of American capitalism, the institutional investors, are getting a raw deal, and a crisis to boot. Power is with the controllers, not the owners. Capitalism is in the grip of what John Kenneth Galbraith (1967) called the technostructure, operated by the supermanager.

Unlike in Rhenish capitalism, the head of an American firm is something of an autocrat, but still something less than a Schumpeterian entrepreneur. He is an administrator, really a private bureaucrat.

Modern capitalism is an ecology of organizations. These large, complex bureaucracies, public and private, have a logic of operation that is sui generis; it cannot be reduced to some grand narrative of the return of the rentier. Corporate governance and shareholder value have failed to put back together the sundered fact of modern property.

What managers have control over, therefore, is capital in the modern sense: an organizationally-channeled social force that releases huge amounts of human potential and creates along with it human and ecological degradation. Capital as wealth-ownership simply does not get at either the specific institutions of capitalism nor the deep reasons why it can reproduce itself.

Back to the future?

The problem is that, by personalizing the problem, one personalizes the solution. Piketty has obviously tapped straight into the moral outrage of our postcrisis moment, but the solutions he proposes bring the state into play in a manner that again belies the reality of how contemporary capitalism is formatted.

It is, at this late juncture, almost tiresome to repeat the lesson that the state is constitutive of capitalism, not some external encumbrance; Piketty’s foundational reliance of the legal-political fiction of property should make this obvious. Yet the state only really makes an appearance at the end of the book as a deus ex machina. Since “there is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently,” (2014: 21), the state solves the problem by forcing itself on capitalism.

Right at the end, we are offered another, to my mind more fruitful route. When Piketty ends by pointing to “new forms of property and democratic control of capital” (2014: 569), he is breaking from his own script and charting out a more endogenous response to contemporary capitalism that does not merely rely on ex post tax-and-transfer but ex ante democratization of real control. It is perhaps no coincidence that this kernel of an alternative vision occurs around his brief digression intro central banking (547–53).

[516]The magic of bank debt is that it opens out the future, allowing us to truly bootstrap our energies by using the future fruits of a production process to get it off the ground today. But credit is pharmakon: both medicine and, if used in excess, poison. The fact of having the people’s bank as the central bank means that we have more institutions at our disposal to forge a postcapitalist economy than Piketty allows for.

For all his righteous indignation, Piketty sees only the repressive hand of the state where he might see, in the form of the people’s bank, an enabler of new horizons. The rage is shared, but a conjuncture has arrived that demands more of our political imagination than economics has to offer. Will social science rise to the occasion?


Banaji, Jairus. 2010. “Islam, the Mediterranean and the Rise of capitalism.” In Theory as history: Essays on modes of production and exploitation. Leiden: Brill.

Berle, Adolf, and Gardiner Means. 1932. The modern corporation and private property. New York: Harcourt, Brace, and World, Inc.

Braudel, Ferdinand. 1995. The Mediterranean and the Mediterranean world in the age of Philip II. Berkeley: University of California Press.

Colander, David. 2010. “The Keynesian method, complexity, and the training of economists.” Middlebury College Economics Discussion Paper, No. 10–35. http://sandcat.middlebury.edu/econ/repec/mdl/ancoec/1035.pdf

Galbraith, John Kenneth. 1967. The new industrial state. Princeton, NJ: Princeton University Press.

Piketty, Thomas. 2014. Capital in the twenty-first century. Translated by Arthur Goldhammer. Cambridge, MA: The Belknap Press of Harvard University.

Rydqvist, Kristian, Joshua Spizman, and Ilya Strebulaev. 2014. “Government policy and ownership of equity securities.” Journal of Financial Economics 111 (1): 70–85.


Anush Kapadia
International Politics
Social Sciences Building
City University London
Whiskin Street London EC1R 0JD United Kingdom


1. This is David Colander’s phrase; see Colander (2010).

2. For recent numbers on this well-known trend, see Rydqvist, Spizman, and Strebulaev (2014).

3. “Partnerships remained the most common and dominant form of capitalist organisation down to the nineteenth century” (Banaji 2010: 259).