Complex inequalities in the age of financialisation: Piketty, Marx, and class-biased power resources (original) (raw)

Confronting inequality: review article on Thomas Piketty on ‘Capital in the 2st Century’

International Review of Applied Economics, 2015

This review article on Thomas P C st discussion of the trends in income and wealth inequality reported by Piketty and his coworkers. The significance of the rising trends of inequality after 1980 in contrast to the pre-1980 trends is elaborated. It is noted that rising inequality has been accompanied by slower growth. Piketty identifies the relationship between the rate of return on wealth and the rate of growth as a major issue. It is argued here that an excess of savings out of return on wealth over the rate of output growth is unsustainable. It may lead, following Piketty, to rising wealth inequality, but we argue the difference would be deflationary and cause high levels of unemployment. While Piketty favours high income and wealth taxation to address that difference (from which we do not differ), there are additional ways such as enhanced worker power, corporation tax on a coordinated basis to reduce tax competition.

Financialization and income inequality: bringing class struggle back in

Critical Sociology, 2021

Financialization and rising income inequality are two of the most pronounced economic developments of recent decades, and there is increasing evidence that these trends are somehow related. However, explanations of this link are still limited, and pay little attention to workers themselves. As a result, the impact of financialization on income inequality appears at most as an unfortunate side-effect. This article takes a different approach by investigating both financialization and income inequality from within the historical development of the class struggle in the United States economy. It shows that the economic problems of the 1970s that provided the impetus for financialization were closely related to the escalating conflicts between labor and capital, in which the state served as an increasingly important terrain of struggle. Viewed from this perspective, rising income inequality appears less as an unexpected outcome of financialization and more as its very raison d'etre.

Economic Inequality Matters: Thomas Piketty's Capital in the 21st Century

NOTE: for a review of Piketty's Capital and Ideology, see the forthcoming International Sociological Review article (also available on my academia.edu page) entitled "Sociology vs. Economics: Economic Life as Social Fact and Social Struggle" which compares Piketty's latest work with Mark Granovetter's Society and Economy. In Capital in the 21 st Century, Piketty takes a central liberal claim about economic inequality seriously and asks: does capitalism reward merit? If true, we would expect salaries, presumably rooted in the reward of merit in the workplace, to be more important to personal wealth than inherited money and property, which is just luck. He concludes that capitalism does not reward merit more than inherited wealth. Piketty suggests that this is at once a political and moral problem. As such, it cannot be resolved through economics alone, especially in the profession's current incarnation, characterized by mathematical fetishization. Instead, all of the social sciences and humanities should be mobilized to develop a full description and analysis of economic inequalities, which must then be made a central question for broad, public debate. This is an important epistemological and political argument, although Capital in the 21 st Century has critical weaknesses. These include an undertheorized empiricism, a tendency to treat economic inequality as a matter of money and not as a social relationship, and a failure to grasp how class, gender, race and age come together in social relationships of exploitation (and not merely as a statistical relationship of inequality).

Naturalizing Inequality: The Problem of Economic Fatalism in the Age of Piketty

Capitalism: A Journal of History and Economics, 2020

Using the unprecedented 2014 Science special issue on inequality as a conceptual guide, this article examines the recent return of an assortment of fatalist arguments which claim that high levels of economic inequality are a natural, inevitable, and basic characteristic of human civilization and that, therefore, it would be incredibly difficult and damaging—if not impossible—to significantly reduce such income and wealth gaps. Classifying these varying arguments into four natural “laws” of inequality—mathematical, neoclassical, historical, and genetic—this article seeks to unpack the internal logic and external politics of such claims by placing them in their broader historical context. In so doing, this article will also show how certain aspects of Thomas Piketty’s earlier work played a key—albeit unintended—role in the recent renaissance in naturalizing inequality. In conclusion, this article reflects on other aspects of Piketty’s analysis that can be used to “denaturalize” inequality and reveal its highly contingent, political, structural, and institutional basis. Finally, the article will end with a call for historians of capitalism to pick up the denaturalizing mantle and seek to explicitly disprove and challenge the contention that high levels of inequality are all but inevitable.

Review Article: Beyond Piketty: Economic History and Inequality

History, 2018

For decades, Americans of all stripes could be heard uttering a common word when they spoke about political economy: 'growth'. So prevalent was this sort of talk among politicians, intellectuals and citizens that an indexer of the half-century between the early 1950s to the mid-2000s would be hard pressed to list every major permutation of the theme. Public figures such as Dwight D. Eisenhower, Lyndon Johnson and Richard Nixon disagreed on much, but there was a consensus that economic development, not distribution, was the key to broad-based prosperity. Gone were the concerns of the 1930s among economists like Alvin Hansen that the United States had entered a stage of 'secular stagnation'. In vogue by the 1960s were theories such as Walt Rostow's stages of economic growth, which depicted the United States as reaching an 'Age of High Mass Consumption'. Citizens, meanwhile, saw proof of these discussions in their daily lives. The line between working-and middle-class households blurred as each enjoyed a new-found level of abundance, thanks in part to low global competition, government-backed mortgages, high wages secured by unions, and a buoyant consumer durables industry. Even the stagflation of the 1970s was followed by Reaganomics in the 1980s and the neoliberalism in the 1990s, the rhetoric of each of which was premised not only on the intrinsic good of boom times, but of their imminent feasibility. Sunny synonyms for economic progress could be found everywhere.

Top incomes under finance-driven capitalism, 1990–2010: power resources and regulatory orders

This article examines the impact of financialization on the income shares of the top 1% from 1990 to 2010, through a panel analysis of 14 OECD countries. Drawing together literatures stressing the dependence of income inequality on the structural bargaining power of capital relative to labour, and of the dependence of accumulation on underlying institutionalized modes of state regulation, it shows that financialization has significantly enhanced top income shares net of underlying controls. Whilst the income shares of the top 1% appear responsive to variables typical of wider studies of personal income inequality, we emphasize distinctive mechanisms of top income growth linked to the rising dominance of financial instruments and actors, facilitated by a historically specific regulatory order. These conditions were key to the emergence of a state of 'asymmetric bargaining' which disproportionately enhanced the fortunes of the wealthy. Results thus emphasize the importance of class-biased power resources and underlying regulatory structures, as determinants both of income concentration and of the distribution of economic rewards beyond growth capacity alone.

Income Distribution, Econophysics and Piketty

Review of Political Economy, 2016

Piketty, Atkinson and Saez have put the analysis of income distribution back on the center stage. The distinction between property income and labor income plays a central role in all of these frameworks. Property income derives from the rate of return on stocks of income-earning wealth and is more unequally distributed than labor incomes. Piketty argues that because the rate of return (r) is generally greater than the rate of growth of the economy (g), property income tend to grow more rapidly than labor income, so that rising income inequality is an intrinsic tendency of capitalism despite interruptions due to World Wars and Great Depressions. This paper argues the exact opposite. The rise of unions and the Welfare State were the fruits of long term historical gains made by labor, and the postwar constraints on real and financial capital arose in sensible reaction to the Great Depression. The "neoliberal" era beginning in the 1980s significantly rolled back all of these. The paper uses the econophysics two-class argument of Yakovenko to show that we can explain the empirical degree of inequality by two factors alone: the profit share and the degree of financialization of incomes. The rise of inequality in the neoliberal era then derives from a reduction in the wage share (rise in the profit share) in the face of assaults on labor and the Welfare State, and a sharp increase in the financialization of incomes as financial controls are weakened. These are inherently socio-political outcomes, and what was lost can be regained. Hence there is no inevitable return to Piketty's "patrimonial capitalism".

Inequality in Marx and Piketty - Theory and Policy Implications

https://www.reemslovenia.com, 2020

This paper explores Piketty's analytical model in contrast to the classical/Marxian approach. The main point raised herein is that Piketty's reliance on neoclassical growth theory is not suitable for the explanation of the dynamics of incomes and wealth. However, certain mainstream economists have attempted to attribute the shortcomings of Piketty's reasoning to some alleged methodological connection with Ricardo and Marx. I argue that Piketty's theory has nothing to do with the classical political economy and Marx. The latter associates endogenous technology and population growth with unemployment and class struggle in determining the wage and profit share. Recent econometric studies indicate that this approach provides a much more rigorous explanation of the dynamics of inequality. Moreover, contrary to the argument of Piketty, the classical approach suggests that labour can regain what it has lost during the neoliberal era through the class struggle. JEL Classification: O40, E24, B24