I’m about halfway through a light summer read—French economist Thomas Piketty’s Capital in the Twenty-First Century, which so far has been thoroughly accessible and engaging.
Piketty’s surprise bestseller, which in 577 heavily footnoted pages analyzes centuries of data, is an important new assessment of economic growth, capital formation, wealth and income distribution. As you might expect from the title’s nod to Karl Marx’s Das Kapital, the book has been praised by liberals and attacked by conservatives, although it seems to me those who have nitpicked Piketty’s data are overlooking the forest for the trees.
As Piketty says numerous times in the book, even if you disagree with the exact percentages, the trends are difficult to refute. Over time, the distribution of wealth has followed a U-shaped curve. From the start of the Industrial Revolution to the eve of World War 1, wealth and income inequality remained at consistently high levels. Then, between 1913 and 1970, due to the century’s political, social and economic cataclysms, both values declined to their lowest levels. But since 1980 they have risen again, according to Piketty to levels approaching those at the end of the 19th century. Whether inequality is good, bad or inconsequential remains to be seen, but I suspect Piketty will spend the second half of the book arguing that it’s bad.
My appreciation of Piketty’s presentation has been enhanced by his use of literature to supplement his research, in particular Jane Austen’s Sense and Sensibility and Mansfield Park and Honoré de Balzac’s Père Goriot. There’s something reassuring about an economist who finds anecdotal evidence for his thesis in the humanities.
The point Piketty makes is that Austen and Balzac demonstrated an acute awareness of money—especially the amounts of wealth and income needed to be a person of means—that readers of the time would not fail to understand implicitly.
“In eighteenth- and nineteenth-century novels, money was everywhere,” Piketty writes, “not only as an abstract force but above all as a palpable, concrete magnitude. Writers frequently described the income and wealth of their characters in francs or pounds, not to overwhelm us with numbers but because these quantities established a character’s social status in the mind of the reader. Everyone knew what standard of living these numbers represented.”
Austen’s protagonists, for instance, fully understood the levels of wealth and kinds of income, whether from rents or investments (certainly not from labor among the upper class), their suitors possessed. Piketty asserts that modern-day writers, after a century of inflation and the consequential loss of our monetary bearings, cannot assume their readers share the same understanding of money. (I remember worrying about this when writing Under a False Flag; the 1972 dollar amounts of CIA covert actions in Chile seemed so paltry, I was afraid they would look ludicrous to the reader.)
Piketty continues: “One could easily multiply examples by drawing on American, German and Italian novels, as well as the literature of all the other countries that experienced this long period of monetary stability. Until World War I, money had meaning, and novelists did not fail to exploit it, explore it, and turn it into a literary subject.”
Money does sometimes play an important role in modern novels, but in a way that probably strengthens Piketty’s argument. Think The Great Gatsby, where Gatsby’s wealth must be shown through the commodities consumed—shirts and cars and house size. And in more contemporary novels, money is often imbued with nebulous, shifting, post-modern meaning. Think JR by William Gaddis or Money by Martin Amis. Money becomes a concept, an illusion, that has little to do with defining social status and everything to do with gaming the system or the reader.
Piketty is not arguing for a return to the gold standard; he is simply making the point, in preparation for other more important points to come, that economic growth before World War 1 was slower, inflation was virtually non-existent, and investment income (the return on capital) grew faster than income from labor, thus enabling wealth and income inequality to remain high. It’s a situation he fears we are returning to, as most economic forecasts for developed nations indicate a slowdown in growth to rates approximating those of earlier centuries.
It’s complicated stuff, and there’s much more to it than I have touched on here. Piketty does a fine job explaining his thesis, building a persuasive argument in clear, logical steps, but perhaps what we need is a new Austen or Balzac to show us what this rise in wealth and income inequality really means to society. Or is one already out there? If you think so, please let me know. Meanwhile, I may go back to the originals with newfound appreciation.