Toward a Critical Theory of Capital in the 21st Century: Thomas Piketty between Adam Smith and the Prospect of Apocalypse

Introduction

In the first paragraph of the introduction to his massive and impressive work, Piketty lists three questions that guided his research relating to the distribution of wealth:

Do the dynamics of private capital accumulation inevitably lead to the concentration of wealth in ever fewer hands, as Karl Marx believed in the nineteenth century? Or do the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater harmony among the classes, as Simon Kuznets thought in the twentieth century? What do we really know about how wealth and income have evolved since the eighteenth century, and what lessons can we derive from that knowledge for the century now underway? (p. 1)

Due to his (and his collaborators’) efforts, the answers he arrived at are based on far more ‘extensive historical and comparative data’ than earlier researchers were in any position to rely on; still, given the scale and scope of the challenge, he concedes that the answers remain ‘imperfect and incomplete’. In addition, Piketty was able to develop and take advantage of ‘a new theoretical framework that afforded a deeper understanding of the underlying mechanisms’.

In Capital in the Twenty-First Century (2014), Thomas Piketty has provided a comprehensive analysis of historical and current developments in economic inequality, focusing especially on trends that have accompanied the rise and spread of modern societies since the 18th century. ¹ Given the response to its publication so far, especially in academic and policy circles, his labor promises to have a concrete and imminent bearing on attempts to assess and tackle the role of inequality, not merely in those regions of the planet that are manifestly capitalist and industrialized, but well beyond. Referring to the role of wealth, Piketty (2014: 26) writes:

When the rate of return on capital significantly exceeds the growth rate of the economy (as it did through much of history until the nineteenth century and as is likely to be the case again in the twenty-first century), then it logically follows that inherited wealth grows faster than output and income. People with inherited wealth need save only a portion of their income from capital to see that capital grows more quickly than the economy as a whole. Under such conditions, it is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor by a wide margin, and the concentration of capital will attain extremely high levels – levels potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies.

Piketty goes on to point out that the process of wealth accumulation and distribution ‘contains powerful forces pushing toward divergence, or at any rate toward an extremely high level of inequality’ (p. 27). He notes that his ‘conclusions are less apocalyptic than those implied by Marx’s principle of infinite accumulation and perpetual divergence’, and that in his model, ‘divergence is not perpetual and is only one of several possible future directions for the distribution of wealth’. Piketty does admit, though, that ‘the possibilities are not heartening’: with r standing for the rate of return on capital, and g for the economy’s growth rate, ‘the fundamental r > g inequality, the main force of divergence in [his] theory, [not only] has nothing to do with any market imperfection’, but ‘the more perfect the capital market (in the economist’s sense), the more likely r is to be greater than g’. The dynamics of income inequality in recent decades, especially since the return during the early 1980s to the pattern of expanding inequality that had been in place until the First World War, is consistent with a logic that Piketty contends only can be restrained by politics – by ‘democratic control of capital’ (pp. 569–70).

[I]t is possible to imagine public institutions and policies that would counter the effects of this implacable logic: for instance, a progressive global tax on capital. But establishing such institutions and policies would require a considerable degree of international coordination. It is unfortunately likely that actual responses to the problem – including various nationalist responses – will in practice be far more modest and less effective. (p. 27)

Piketty does not thematize, though, whether the values and principles of democracy and social justice in fact, empirically speaking, are fundamental to what we think of as modern democratic societies. Despite debates that have been raging for decades, Piketty does not acknowledge explicitly that the relationship between democracy and capitalist economics may be (and in fact is) of a more complicated and counterintuitive sort, and that there is a more or less profound gap, depending on individual instances, between the official story of modern societies regarding the role played by democracy and capitalism, and the de facto reality that is involved. After all, it is certainly conceivable that the relationship between democracy and capitalism is less one of natural affinity and more akin to a field of tensions such that the effective expansion of markets has been contingent on the proliferation of formally democratic conceptions, practices, institutions, and processes (see Wood, 1995), in the interest of generating or maintaining what Habermas (1989 [1985]: 67) and others have referred to as ‘mass loyalty’. Piketty appears to take for granted that modern societies are democratic and conducive to the advancement of social justice. ²

In Part Four of the book, Piketty examines several potential opportunities for regulating capital in the next decades, in terms of (1) a social-state of the 21st century, (2) a rethinking of the progressive income tax, (3) a global tax on capital, and (4) a novel conception of public debt (pp. 469–570). What these strategies for slowing the rapid expansion of inequality have in common is that they are tools provided from within the same institutional and organizational framework that also has been facilitating expanding inequality – the combined regime of corporate capitalism and at least nominally democratic institutions. If democratic politics would have to be responsible for containing rising inequality, and if only politics has the tools for doing so effectively, to whatever degree this might be the case, then we must ask what the necessary preconditions would be for politics to be in the position to pursue effective strategies to confront the challenge of increasing inequality. After all, while the latter poses an array of threats to democracy, from a variety of vantage points, it was purportedly democratic political institutions and processes that facilitated the process of increasing economic inequality since the 1980s. It is precisely this neoliberal regime that has abandoned and even actively undercuts the value and validity of democratic principles and efforts to reaffirm their rationale (see Block and Somers, 2014; Crouch, 2004, 2011; Dahms, 2009).

In what follows, I will take this opportunity to situate Piketty’s interest in understanding the underlying mechanisms of the distribution of wealth, and his new framework pertaining to the relationship between the rate of return on capital and the rate of economic growth, in a broader social-theoretical constellation. His allusion to Marx will serve as the occasion to illuminate the basic orientation that distinguishes mainstream economics from sociology, and especially from the kind of sociology that is inspired by critical theory. ³ Piketty’s interest in the underlying mechanisms of the dynamics of increasing economic inequality will be contrasted to an initial rendering of what I will refer to as the ‘logic of capital’ – a logic that is likely to be inconceivable from the vantage point of mainstream economics. ⁴ Although Piketty genuinely may be interested in grasping the dynamics of rising inequality, economics is much less well-suited than social theory and sociology to conceive of the need to analyze the contradictory and highly counterintuitive dynamics as the theoretical challenge of reconstructing the emergence and history of modern societies in terms of such a logic of capital.

Accordingly, rather than engaging Piketty on his own terms and turf, I will treat the latter as the mainstream economics study of a non-mainstream theme, with post-Keynesian neoclassical theory as the reference frame of his analysis and arguments. Despite his criticism of several of the flaws of neoclassical economics, my interest is in a blind-spot that relates to the economic study of inequality and its diverse social, political, and cultural corollaries and consequences, and in highlighting the type of contributions that the kind of sociology that is inspired by critical theory is uniquely situated to provide. The distinction between surface appearances and underlying forces (suggested by Piketty) will serve to illustrate how the study of rising inequality provides access to the symptomology of the logic of capital, rather than engendering an actual analysis and causal explanation of rising inequality. ⁵

Adam Smith and the Social Logic of Capital

Especially with regard to the issue of economic inequality in the context of modern society, economists from the start could have taken advantage of observations by one of the earliest political economists in order to rigorously examine how an economically oriented society must pay a non-negligible social ‘price’ for the attainment of wealth. If we were to look for early efforts to begin identifying the logic of capital as a force shaping modern economies that points beyond economics and cannot be grasped with the categories of economics alone, Adam Smith’s founding text of modern economics, An Inquiry into the Nature and Causes of the Wealth of Nations (1937 [1789]), whose first edition appeared in 1776, would have been a prime reference point. Indeed, Smith foreshadowed the rise of sociology as the discipline above all concerned with the non-economic costs resulting from the pursuit of the prosperity in what by the mid-to-late 19th century across western Europe and North America undeniably had taken shape as capitalism: Marx, Durkheim, as well as Weber, began their careers as serious diagnosticians of the modern condition with an interest in the sociology of the economy (though Marx was not interested in sociology in the disciplinary sense). Especially if we consider that The Theory of Moral Sentiments (2009 [1759]) preceded the famous book on prosperity by 17 years, Smith saw economics as a discipline compelling economists to include the problematic aspects of the political economy he advocated in their considerations in a consistent manner. In many regards, Smith undeniably was a precursor of social theory in the strict sense (see especially Hill and Montag, 2014), including especially in two specific instances that economists, including Piketty, rather would (and apparently did) ignore.

The first instance appears at the beginning of Book V, ‘Of the Revenue of the Sovereign or Commonwealth’, in the first chapter – ‘Of the Expences of the Sovereign or Commonwealth’ (pp. 651–768) – where Smith identified the responsibilities of government that, aside from national defense and maintaining a justice system, often were neglected in the reception of Adam Smith in economics. As he explains, the ‘system of natural liberty’ (p. 651) requires that the sovereign fulfill one additional ‘duty’ beyond defense and justice – functions that would not be fulfilled if the sovereign did not take responsibility for them:

the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect or maintain; because the profit could never repay the expence to any individual or small number of individuals, though it may frequently do much more than repay it to a great society. (p. 651)

The section on public works and institutions, which makes up the bulk of the chapter, in addition to defense and justice includes ‘the expence’ of institutions for facilitating the general commerce of society and particular branches of commerce, education, instruction of people of all ages, and of the dignity of the sovereign (pp. 682–767). In the part ‘Of the Expence of Justice’, starting out from observations about nations of hunters, Smith spells out intriguing implications for what he refers to as ‘civilized nations’:

[A]varice and ambition in the rich, in the poor the hatred of labour and the love of present ease and enjoyment, are the passions which prompt to invade property, passions much more steady in their operation, and much more universal in their influence. Wherever there is great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many generations, can sleep a single night in security. He is at all times surrounded by unseen enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate continuously held up to chastise it. The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary. (p. 670; emphases added)

If we take Smith at his word, and generalize and extrapolate from his observations, he appears to be suggesting the following: prosperous societies require an expansive state, the more prosperous, the more expansive; the only viable strategy to reduce the size of government, whose purpose is the protection of private property, is to reduce the extent of inequality, if public order and security are to be maintained. Taking an additional step, Smith implied that reducing the size of government without reducing the extent of inequality will aggravate tensions between the rich and the poor, and decrease especially the security of the former.

Consequently, the neoliberal strategy (‘austerity’) of allowing or fostering increases of inequality in society, while cutting both taxes on the rich and government expenditures for the poor (really, everyone else), is not consistent with Smith’s system of natural liberty, but bound to weaken public safety, and presumably requires draconian measures, such as the expansion of the prison-industrial complex and policies that punish individuals who are not willing to buy into the logic of capital, which manifests itself as a most peculiar regime of labor (Shapiro, 2014). Capitalist market economies have become more and more productive, which in principle should make work less and less important for survival, but the opposite is the case: workers are becoming more and more productive, yet work is becoming more and more important (measured in terms of productivity per labor hour), following the logic Marx observed in 1844, especially when applied to workers’ control over how to spend their life time: ‘The worker becomes all the poorer the more wealth he produces, the more his production increases in power and wealth. The worker becomes an even cheaper commodity the more commodities he creates. With the increasing value of the world of things proceeds in direct proportion the devaluation of the world of men’ (Marx, 1978 [1844]: 71) – and animals, nature, and the planet, one might add.

Today, as the rich want to reduce their financial ‘burden’ further and further; the preferred approach to maintaining order and stability is to disproportionately fund systems of legal, police, and military control, financed with taxes paid by members of the middle and working class; progressively less of the state’s tax income is allocated to the expense of constructive social programs that foster public rather than private security and safety.

The second passage alluded to earlier is located in an earlier section of the work, in the conclusion of Chapter IX, ‘Of the Rent of Land’ (pp. 144–259), the last chapter of Book I, ‘Of the Causes of Improvement in the productive Powers of Labour, and the Order according to which its Produce is naturally distributed among the Ranks of the People’, and presents what might be referred to as Smith’s ‘class theory’ – his depiction of the ‘three great, original and constituent orders of every civilized society, from whose revenue that of every other order is ultimately derived’ (p. 248). In relation to the three factors of production, the corresponding ‘different orders of people’ are: ‘those who live by rent … those who live by wages, and … those who live by profits’ (p. 248). Smith goes on to determine the connection between the economic interests of these ‘three great orders’ and ‘the general interest of the society’ (p. 248). He first details how the interests both of those who live by rent and those who live by wages are directly connected to the general interest of the society – meaning that if economy and society are doing well, so are the landowners and workers, and if the economy and society are not doing well, these two ‘orders’ also suffer: ‘The order of the proprietors may, perhaps, gain more by the prosperity of the society, than that of labourers: but there is no order that suffers so cruelly from its decline’ (p. 249). He then turns to those who live by profits: the workers’

employers constitute the third order, that of those who live by profit. It is the stock that is employed for the sake of profit which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. (p. 250)

So far, so good. Yet Smith continues:

But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin. (p. 250)

Evidently, the interest of those who live by profit is not, as neoliberal ideology would have it, ‘naturally’ beneficial to society. Rather, the economic interest of members of this ‘order’, or class, is directed at making sure that the economy in regular intervals (i.e., via business cycles) takes a turn for the worse, because those who live by profit are not in business for the good times, but for the bad times, when profit rates skyrocket. To put it bluntly, they put up with good times, when wages and rent of land go up, and profit rates go down, because without the periodical good times, the general interest of the society would really suffer, and at least some of its members might begin to refuse tolerating the bad times. As Smith, the Scottish Enlightenment moral philosopher, illuminates, contrary to neoliberal dogma, the public would be well-advised to refrain from naively trusting the claims made by those who live by profit that they are driven by the desire to act in the general (and even the best) interest of the society:

The interest of the dealers … in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. (p. 250; emphasis added)

Evidently, the focus on benefits resulting from the pursuit of profits did not have to be – and, per Smith, certainly should not have been – the exclusive mantra of economics as a social science, both from the perspective of, and with regard to, economists. Piketty’s difficulties with accepting the fact that the logic of capital goes hand in hand with growing inequality was anticipated by Smith, as was the likelihood that business interests, far from having related misgivings, from the outset were intent on instrumentalizing society, politics, and culture, in whatever which way will work for their own purposes, regardless of whether doing so was or was not in the general interest of the society. The latter is there to serve those who live by profits, rather than vice versa, while neoliberal dogma suggests the reverse. Rather than identifying rising inequality as the deviation to be explained, Piketty might have focused more explicitly on explaining in greater detail the exceptional period from 1950 to 1980, when business was willing to put the general interest of the society ahead of their own or, to be more precise, to recognize that in the context of the Cold War, the general interest of the society was converging with their own. ⁶ Nonetheless, given the range of benefits resulting from the self-regulating market economy for real people in real societies, compared to the conceivable alternatives at the time when he presented and refined The Wealth of Nations as the blueprint for a political economy that would enable society to more effectively tackle the ‘economic problem’ (as Keynes would later refer to it), Smith strongly advocated the liberation of the economic process from government. ⁷ However, he did not suggest that support for market economics required blindness with regard to the problems of the ‘dark side’ that predictably would accompany the successful implementation of his design.

While explicit and especially rigorous concern with the ‘dark side’ of modern societies, and modernity more generally, has been a marginally recurring theme in social theory (above all Horkheimer and Adorno, 2002 [1944]; also Mignolo, 2011; much less effectively, Alexander, 2013), and to a much lesser degree in sociology, especially in post-Second World War economics, there is little room, if any, for related considerations. As classical and neoclassical economics evolved, economists refined their focus on the benefits resulting from the pursuit of prosperity and their preconditions. This traditional preoccupation with benefits, and the development of related categories and tools, precluded consideration, and even more so the development of categories that would have been conducive to examining social, political and cultural costs accompanying the process of pursuing economic prosperity in the form of capital. Ironically, neoclassical economics, the approach that turned out to be victorious among the competing traditions of economic theorizing – several of which were less incompatible with confronting the so-called ‘dark’ or darker side, including socio-economics, institutional economics, the German Historical School, Schumpeterian economics, Keynesianism, and Marxist economics – never made a serious attempt to apply cost-benefit analyses, as one of its central devices, at the societal level, except as a function of its own categories and tools, in the sense of public choice.

Thomas Piketty between Socio-Economic Apocalypse and the Logic of Capital

When setting out to assess any effort to illuminate the configuration and vicissitudes of a phenomenon as complex and intricate as the ‘mighty cosmos of the modern economic order’ (Weber, 2002 [1905]: 120), it helps to determine first whether such an effort was informed, at some level perhaps even motivated, by a concern not centrally stated and consistently revisited, such as the threat of a future assiduously to be avoided. With regard to an effort as expansive as well as detailed as Piketty’s Capital in the Twenty-First Century, such a determination would be especially important to keep in mind, particularly if it goes beyond the explicitly stated concern. In the case at hand, the concern in the foreground is the apparent likelihood of economic inequality continuing to increase according to the pattern that has been in force since the early 1980s. While this explicitly stated worry about rising economic inequality and its origins sparked Piketty’s desire to conceive of the above-mentioned vast data set and new framework designed to facilitate ‘a deeper understanding of the underlying mechanisms’ (p. 1), there is evidence of a secondary concern in view of which it is advisable to read Piketty’s work. This concern would appear to be the prospect of ‘apocalypse’ – the danger that rising inequality might follow a dynamic logic bent to spiral out of control, and in the process threatening, if not destroying, many of the achievements of modern society qua modern capitalism, such as democracy and social justice. In fact, it may not be far-fetched to posit that this latter concern was Piketty’s primary concern and attempt to confront the dark side of modern capitalism, and the explicitly stated worry about inequality the official rationale for the overall project, properly credentialed and legitimated to be recognized as a contribution to mainstream economics. In what follows, I hypothesize that ‘apocalypse’ stands for Piketty’s difficulties (if not inability) to come to terms with the ‘dark side’ of modern societies, and his futile effort to theorize related issues as they are expressed in the prospect of continually rising economic inequality.

There are six references to apocalypse in Capital in the Twenty-First Century. The first reference, tellingly, appears on the first page of the work, in continuation of the passage cited earlier:

Modern economic growth and the diffusion of knowledge have made it possible to avoid the Marxist apocalypse but have not modified the deep structures of capital and inequality – or in any case not as much as one might have imagined in the optimistic decades following World War II. When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based. (Piketty, 2014: 1)

It is instructive that Piketty’s view of Marx and, presumably, of the entire literature relating to Marx’s critique of political economy, both Marxian and Marxist, is limited to what Carl Freedman depicted as deflationary Marxism (especially in the sense of Marx’s theory), as ‘represented by the attempt to destroy all illusions necessary or useful to the preservation of class society in general and of capitalism in particular’ (Freedman, 2009: 72). There is no acknowledgment by Piketty that Marxism also and eminently is inflationary in nature in that it ‘ultimately aims at the positive project of human liberation and self-realization, rather than only at the negative task of destroying capitalism and other forms of class (and other) oppression’ (p. 72): ‘Even in Capital – not only Marx’s most important work but also his most elaborately deflationary – Marx provides glimpses of the liberated, classless future that beckons as a concrete possibility after the supersession of the capitalist property relations he exposes’ (p. 73). Piketty’s stance regarding Marx’s purportedly apocalyptic tendencies is drawn entirely from those of Marx’s predictions that pertain to what was likely – but not certainly! – to occur if the inevitably intensifying tension between productive forces and relations of production would be allowed to play out so as to permit the self-destructive dimensions of capitalist economics to run their course, as outlined in the well-known preface to A Contribution to the Critique of Political Economy (1978 [1859]). There is not even a slight hint in Piketty that the point of Marx’s deflationary critique of political economy is to prepare the inflationary overcoming of the limitations and costs the logic of capital imposes on modern societies, and human civilization in general. Instead, Piketty subscribes to the notion that democratic societies are (or at least should be) based on meritocratic values, without irony or qualification, and that, if inequalities continue to increase, those meritocratic foundations will be threatened.

The second reference to apocalypse is on p. 5, in the introduction’s section on Ricardo’s principle of scarcity, suggesting that apocalyptic predictions were not the sole domain of Marx:

In retrospect, it is obviously easy to make fun of [the] prophecies of doom [of Malthus and Young]. It is important to realize, however, that the economic and social transformations of the late eighteenth and nineteenth centuries were objectively quite impressive, not to say traumatic, for those who witnessed them. Indeed, most contemporary observers – and not only Malthus and Young – shared relatively dark or even apocalyptic views of the long-run evolution of the distribution of wealth and class structure of society.

To be sure, the gloomy perspectives on the ‘dark’ future of modern capitalism turned out to have been wrong, at least in the medium term. Yet if we adopt a more long-term view on the development of capitalism, a more subtle picture emerges. The warnings of economists like Malthus and Ricardo, and critics of political economy like Marx, may well have prevented the unadulterated logic of capital from kicking into full gear, by inducing actors and advocates of capitalism to engage in a type of reflexivity regarding its self-destructive tendencies toward which they would not have been inclined on their own behalf, thus engendering a logic more conducive to its long-term prospects. From this angle, the warnings were noted by those who benefitted most from the arrangements of political economy as the integrated regime of politics and economics – to use Parsonian as well as Habermasian language, the systems running on the steering media of money and power (see Habermas, 1987 [1981]: 153–197) – and measures taken to diminish the likelihood that the dire predictions would turn out to be accurate. In this sense, the apocalypse did not occur because the affinity between the interests of those who have been benefitting from the economic process, and those who benefit from ensuring that the institutional arrangement in modern societies is conducive to the continuation of the economic process, is too great to knowingly allow either the deflationary or the inflationary prognoses to come to bear.

The next mention in the subsequent section relates to Marx’s ‘principle of infinite accumulation’ (pp. 7–11). Piketty observes that throughout the 19th century and until 1914, inequality was stable ‘at an extremely high level, and in certain respects an endless inegalitarian spiral, marked in particular by increasing concentration of wealth’ (p. 8). This was the historical context to which Marx was trying to respond. Piketty cites The Communist Manifesto (first published in German in 1848; Marx and Engels, 1978 [1888]) as Marx’s work (not acknowledging Engels as co-author), and refers to the first volume of Capital (1967 [1867]) as ‘the first scientific analysis of capitalism and its collapse’ (p. 9). Curiously, Piketty comments that ‘[l]ike Ricardo, Marx based his work on an analysis of the internal logical contradictions of the capitalist system’, and that ‘Marx took the Ricardian model of the price of capital and the principle of scarcity as the basis of a more thorough analysis of the dynamics of capitalism in a world where capital was primarily industrial … so that … there was no limit to the amount of capital that could be accumulated’ (p. 9). The ‘principle of infinite accumulation’, then, is

the inexorable tendency for capital to accumulate and become concentrated in ever fewer hands, with no natural limit to the process. This is the basis of Marx’s prediction of an apocalyptic end to capitalism: either the rate of return on capital would steadily diminish (thereby killing the engine of accumulation and leading to violent conflict among capitalists), or capital’s share of national income would increase indefinitely (which sooner or later would unite the workers in revolt). In either case, no stable socioeconomic or political equilibrium was possible. (p. 9)

What may be most notable about this passage is the one-dimensionality with which Piketty processed Marx’s dialectical critique of political economy, thus illustrating the self-contained character of mainstream economics. There is no mention of Marx’s contention that this logic of capital can be turned constructively so as to benefit humanity, on the basis of a suitable understanding of the congruity between the spread of capitalism, which itself is a most revolutionary process (Marx and Engels, 1978 [1888]), and the qualitative revolutionizing of capitalism as a transformative process which – in terms of Marx’s rigorously theoretical rather than political writings – will be a project involving more than one generation of human beings.

Piketty points out various limitations and ‘errors’ in Marx’s theory, including such matters as that Marx ‘devoted little thought to the question of how a society in which private capital has been totally abolished would be organized politically and economically’ (p. 10). He ignores (or is unaware) that Marx the theorist (as opposed to the political activist and co-author of the Manifesto) did not refer to private property in all of its forms, but to the private property of the means of production as it enabled the few to determine the conditions under which the many labored, existed, lived and died, for what purpose, to whose benefit and, not least, what they produced. Not surprisingly, the section on Marx ends with another reference to apocalypse:

[L]ow growth cannot adequately counterbalance the Marxist principle of infinite accumulation: the resulting equilibrium is not as apocalyptic as the one predicted by Marx, but is nevertheless quite disturbing. Accumulation ends at a finite level, but that level may be high enough to be destabilizing. In particular, the very high level of private wealth that has been attained since the 1980s and 1990s in the wealthy countries of Europe and in Japan, measured in years of national income, directly reflects a Marxian logic. (pp. 10–11)

However, in addition to the meaning of this passage being somewhat unclear, and what evidence these observations might be based upon, there is also the problem of the text being a translation. After consulting the original, it is evident that the distinction between Marxist principle and Marxian logic does not appear explicitly, as the passage concludes with a somewhat cryptic reference to ‘that logic’, there not having been a reference to logic (logique) in the preceding passages, but to principle (principe) of infinite accumulation, which the translator evidently concluded logique referred to, probably correctly (Piketty, 2013: 29–30). In addition, in the same sentence, Piketty did not refer to the wealthy countries of Europe and Japan, but to ‘all rich countries – especially in Europe and in Japan’. These are minor issues, to be sure, but in terms of the loaded theoretical comments Piketty makes with regard to Ricardo and Marx, in particular, there may be a lack of precision at work to begin with, compounded by the unavoidable problem of translation.

The final two references are in the subsequent section, ‘From Marx to Kuznets, or Apocalypse to Fairy Tale’, on p. 11. Piketty reiterates a point he made earlier, that it is necessary to examine assessments of the prospects of capitalism in relation to the socio-historical contexts which they reflect and express:

Turning from the nineteenth-century analyses of Ricardo and Marx to the twentieth-century analyses of Simon Kuznets, we might say that economists’ no doubt overly developed taste for apocalyptic predictions gave way to a similarly excessive fondness for fairy tales, or at any rate happy endings. According to Kuznet’s theory, income inequality would automatically decrease in advanced phases of capitalist development, regardless of economic policy choices or other differences between countries, until it eventually stabilized at an acceptable level. … Kuznet’s position was thus diametrically opposed to the Ricardian and Marxist idea of an inegalitarian spiral and antithetical to the apocalyptic predictions of the nineteenth century.

And finally, referring to the ‘Trente Glorieuses’ – the ‘glorious thirty’ years from approximately 1950 to approximately 1980, or what in the US is commonly referred to as the Golden Age of Capitalism (see, e.g., Webber and Rigby, 1996, Marglin and Schorr, 1992) – he writes that ‘[i]t is quite understandable that the Trente Glorieuses fostered a certain degree of optimism and that the apocalyptic predictions of the nineteenth century concerning the distribution of wealth forfeited some of their popularity’ (p. 15); yet, he also concedes that:

In a way, we are in the same position at the beginning of the twenty-first century as our forebears were in the nineteenth century: we are witnessing impressive changes in economics around the world, and it is very difficult to know how extensive they will turn out to be or what the global distribution of wealth, both within and between countries, will look like decades from now. (p. 16)

To be sure, there is one most profound difference between the situation two centuries ago and our situation today: the logic of capital has been playing out for two centuries, influencing and shaping and reshaping the world we live in. As a consequence, we are the descendants of the descendants, etc., of those who experienced first-hand the consequences of the capitalist mode of production spreading, including children whose conscious lives began as workers (p. 8). To presume that, after two centuries of the logic of capital molding the layers of our individual and collective existence, we would be the same humans as they were then would not only be problematic, but in fact highly spurious. While this is not to say that the logic of capital determines our existence and way of living, it has been functioning as the center of a force-field that makes it all but impossible to analyze and interpret forms of social, political, and cultural life on their own, respective terms. Rather, what appears as the latter is the result of processes of compounded mediation for whose illumination Marx’s theory is a superb starting point, but not in the end entirely sufficient.

Instead, Marx’s critiques of alienation and commodity fetishism, as two of the processes of mediation on the basis of which what has been referred to as ‘modern society’ has been taking shape, provide the best foundation from which to examine how the logic of capital has been playing out socially, politically, and culturally (including intellectually and artistically) – as well as environmentally/ecologically. Although approaches have been developed in various areas of research to tackle the mutually reinforcing and amplifying processes between capital and other spheres of social and natural life – including in political theory, social anthropology, and even Marxist economics – sociology is the discipline that has, in principle, the foundations, the tools, and the interest to rigorously examine the phenomena and issues involved. However, to date only critical sociology – including especially sociology that is informed by critical theory – has had the inclination to begin to confront in their specificity in time and space the mechanisms and dynamics through which we are who, what, and how we are or appear to be, and to turn this inclination into a long-term agenda that is reflexively cognizant of the impact concrete societal conditions, as they reflect the logic of capital, have had on efforts to trace the transformations of what in the tradition of political liberalism used to be referred to as ‘human nature’.

Toward a Critical Theory of the Logic of Capital

Studies that purport to provide the definitive analysis of a key issue – such as the dynamic of wealth distribution – inevitably stress the importance of certain aspects of social, political, cultural, and economic life, along with the linkages between related dimensions of modern societies, at the expense of other aspects whose relevance is being downplayed or neglected, if not willfully ignored. Patterns of neglect may be especially pervasive when the issue at hand – such as economic inequality – refers to a nexus of the intricacies, dilemmas, paradoxes, and contradictions of the modern age, a nexus that, especially when compared to the meta-narratives of the modern age, from a critical-sociological vantage point, may well be constitutive of modern social life in general.

Any stable society is the preliminary result of continuous adaptive processes that occur on the society’s terms rather than in terms of how we humans, either in everyday life or in the social sciences, or both, interpret them. Societies also constitute incentive structures that encourage certain types both of enlightenment and obfuscation; research that ignores this condition is bound to replicate established practices and patterns that are synchronous with modern society’s needs as a system, rather than the norms and values that prevail among individuals in modern society so as to facilitate its stability and functioning. Depending on the specific issue to be examined, rigorous research may not be possible without focusing on one set of dimensions at the expense of others, if the matter at hand is too complex to consider exhaustively, such as the nature and extent of economic inequality. Still, just as reducing complexity may be a requisite for making tangible (and more or less testable) observations, so, too, a particular analysis may purport to adequately illuminate a key issue on the basis of a clear-cut, limited, perspicuous and carefully chosen set of categories or distinctions. Concordantly, we may surmise that whether the perspective is convincing and the observations are sound largely depends on the successful selection of specific categories or distinctions applied.

If the study produces a strong public response that exceeds what is typical for publications on closely related research themes and objects by a large margin, as is the case with Capital in the Twenty-First Century, we may wonder whether the distinctions employed, the conclusions reached, and the concerns emphasized might be inversely related to the categories that would be needed to effectively illuminate the gravity and nature of the phenomena involved. Accordingly, the public response could be indicative of early 21st-century ‘modern society’ as an incentive structure that is able to tolerate and withstand critical scrutiny, and may employ the latter in inverse fashion to solidify prevailing dynamics of wealth distribution and patterns of inequality, and strengthen what used to be referred to as ‘dominant ideology’ – the hegemony of neoliberalism in the early 21st century (see Block and Somers, 2014).

Accordingly, while I find Piketty’s argument and analysis in terms of explicitly stated goals and on its own terms utterly convincing, as soon as we depart from the specific perimeter that is categorially grounded by mainstream economics, and recognize the latter as the discipline that has been endowed with illuminating processes that are not merely formally economic in nature, but substantively capitalist in character, his work turns out not to be directed at an analysis of how capitalism works, in terms of the logic of capital. Instead, Piketty has analyzed the dynamics of increasing economic inequality in terms of how the capitalist economy is supposed to work, and how it appears to work, when viewed from within, inferring a highly problematic degree of authenticity as far as economic and social processes are concerned.

The specific societal reality of a world configured by capital is a world that exists, as it were, on two levels. On one level, it is the world of real actors and decision-makers, from individuals who try to make a living, to households that try to maintain life-chances for members of their family, to small-business owners who are competing with other small-business owners, medium-sized businesses, large corporations, multinational corporations, and transnational corporations, all the way to the institutions of more or less expansive nation-states which, contrary to forecasts made in the 1990s, are far from having ‘ended’ (Ohmae, 1996; Guéhenno, 1995). On the other level, our social universe is configured by a process whose foundations were laid by the late 18th century and which, in combination with industrialization, has been following a logic and producing consequences that actors and decision-makers in society hardly are aware of, in part because the process determines actors’ lives and modes of making decisions in ways that are largely inconceivable to actors, in the absence of the necessary critical and theoretical tools and categories, and in part because this process is characterized by a mode of causality that is not compatible with everyday assumptions about how modern societies function. This is not to say that actors are unaware of many, if not most, of the consequences of this logic; but grasping the latter is a different matter entirely, as its force is elusive to researchers working with the tools of mainstream approaches in the social sciences (see Dahms, 2011). To access this second level, we need theories of the role modern capitalist economies fulfill in national societies and in global civilization which enable us to discern the specificity of the conditions in which we exist, their driving forces, and the ways in which they predetermine outcomes of actions and decisions that are in conflict with the assumptions and intentions of actors and decision-makers, especially in the First World, as it runs on a peculiar combination of ideology, idealism, and fatalism. To the extent that present conditions in their specificity are problematic, we cannot access this second level of reality without the support of critical theory, not as a philosophy, but as research oriented toward capturing the concrete conditions of our lives, which is to say: critical theory as sociology.

In analogy to Marx’s observation that it is more constructive to conceive of political economy as the ideology of the capitalist economy rather than its explication (Marx, 1978 [1844]: 70), Horkheimer laid the foundations of critical theory not merely in the sense that it is oriented towards the liberation and emancipation of human beings from systems of control that determine their existence and shape their identities. Instead, the thrust of Horkheimer’s (1972 [1937]) programmatic conceptual distinction between traditional and critical theory was directed at confronting in radical fashion the need to examine the gravity concrete socio-historical conditions exert on the process of illuminating those conditions (esp. p. 197). Critical theory may matter more today than almost 80 years ago in the sense that human beings and forms of social association from families to friendship, social groups, organizations, institutions, social movements and political parties now embody to a far greater extent the logic of capital (pp. 199–200). Horkheimer tried to convey that unless there is explicit and systematically critical consideration of how concrete and specific arrangements of social, political, cultural and especially economic life have a bearing on how we exist and do our research as social scientists, our lives and our research are bound to replicate and regenerate patterns that are prevalent in modern societies, including especially those that are most problematic, and least understood along such lines.

Conclusion

Viewed in terms of the distinction between traditional and critical theory, the main problem with Piketty’s book is that – despite its undeniable achievements, which were not at issue here, including his commendable acknowledgement of the importance of socio-historical contexts, as with regard to the work and perspective of Kuznets – he subscribes to far too many assumptions that are problematic insofar as they are entwined with, embedded in, and expressive of the concrete condition of post-Second World War and Cold War modern societies in their specificity. This condition has not only persisted to our time, but shaped – if not increasingly determined (or at least excluded alternatives to) – the direction of socio-historical change since then, and at the expense of strategies that not only might have been preferable, even if in limited fashion, but urgently necessary, as with regard to environmental destruction. What Piketty has in common with Kuznets’s harmonious attempt to paint a picture of the place and role of the capitalist economy in modern society that was comforting both to people in general, and to those who represented the proverbial powers that be, is the desire to posit that the capitalist economy is consistent with the democratic and social-justice oriented principles of modern societies, despite the fact that the longer capitalism and modernity have been co-evolving, the more modern societies have become consistent with the principles of capitalist economies and economics, and the logic of capital, at the expense of democracy and social justice.

A prime case in point is how Piketty treats Marx’s purportedly apocalyptic perspective on the future. There are lots of reasons to be apocalyptic today, and the accelerating rise in inequality around the globe may well be one of the main reasons for apocalyptic conditions to become more likely sooner, even if, statistically speaking, the absolute level of income and living-standards is well above 19th-century conditions, including at the bottom in most countries. The more important question is who will be in the position to influence how humanity maintains and sustains itself, at what cost to us, the planet and other creatures. The reason may be simple: the more inequality there is in society, the more unlikely to promotion of the general interest of the society will be, in the language of Adam Smith.

Piketty appears to be both disinterested in and oblivious to the thrust and especially the finer points of Marx’s critiques of political economy which was directed at pointing out how political economy assumes the validity of the categories economists use, without being able to explain and illuminate them or their empirical validity under changing socio-historical circumstances. Marx and his contemporaries needed the tools for the rigorous critique of political economy precisely because, in their absence, there was no way of accessing if, when, where and how changing socio-historical circumstances constitutionally reflect the logic of capital in a social world whose centerpiece and driving force is the capitalist market economic system. In the absence of those tools, it also was impossible to weigh the economic and industrial – and later, technological – benefits resulting from the continuous reconfiguration of the business-labor-government link against the social, political, cultural and psychological costs, from the individual to the societal level.

As long as the debate about Piketty continues on his terms, the exercise will not be productive. Rather, his work must be scrutinized and studied as it is symptomatic of the logic of capital and, ironically and against his own intentions, of the underlying mechanisms of the dynamics of increasing economic inequality. The debate will have to focus on the problematic nature of economics in its specificity, rather than work with its categories. Only then will the door be opened to examining the issues involved on the basis of categories that may allow for constructive engagement of the material and the processes at hand. The primary impediment remains the fact that the vicissitudes of modern societies in the 21st century, as they are burdened, channeled and utilized by capital, are more troubling than most of those involved and affected are willing to confront in a manner that is contrary to taking refuge in simple and seemingly straightforward responses to exceedingly intricate challenges. Of necessity, for such confrontation to be effective it must not only have to be collaborative in nature, but collaborative in a manner that is cognizant of how the logic of capital is likely to undercut success in ways that necessitate mutually reinforced related critical reflexivity.