Piketty or Marx?
Capital in the Twenty-first century: a fundamental criticism
Piketty or Marx?
Capital in the Twenty-first century: a fundamental criticism
Part 1
Preliminary remarks
Thomas Piketty’s 2014 book, Capital in the Twenty-first Century, made a big splash among economists and the major media when it was released in 2013. Weighing in at over 750 pages, and with several appendices, it gave the appearance of being a solid piece of work. It shot to the top of the best-seller list of Amazon.com, the New York Times and the Wall Street Journal. It received many glowing reviews, and some critical ones. It seemed to focus on the growing gap between the rich and the poor, and offered a remedy. The problem with the book is that, in terms of its analysis of capitalism, it offers nothing new, and in terms of the remedy, there’s nothing new there either. By 2018 the hullaballoo had long since subsided, and millions of copies of Piketty’s book, perhaps partly read or leafed through, had been quietly set aside.
But, given that Piketty had called his book “Capital …” it led some to believe that, at last, here was book that could be regarded as an answer to that old, long-repudiated, yet not quite forgotten “Capital” of yesteryear, the one by Marx, published in 1867. But this, too, proved to be a forlorn hope since Piketty decided not to say much about Marx’s theories. But perhaps, at any rate, this is the occasion to compare the two Capitals, Piketty’s and Marx’s. So that’s the task before us in this essay. Naturally, the reader cannot expect a full explanation of Marx’s views, but there are many thumbnail sketches of Marx’s ideas included here, as well as a selection of relevant quotes from his works. These will have to serve the purposes of this essay. For a more complete understanding it’s good to go to the source, and read Capital.
Accumulation
Piketty begins with the question: “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?” Of course, he recognizes that the concentration of wealth in ever fewer hands has already advanced considerably in the capitalist world. But what Marx was explaining was not “whether private capital accumulation would inevitably lead to the concentration of wealth in ever fewer hands.” Marx recognized that such a process had already taken place in the development of capital, and would continue. He wanted to explain how and why this had developed. Marx also explained why it would turn out, in the long run and in the final analysis, such a process would run up against an insurmountable barrier. What Marx provided was the answer to why capital accumulation, and the concentration of wealth in ever fewer hands, had become a powerful social force, increasingly determining the fate of billions of human beings.
Indeed, Marx explained it, but Piketty's book does not. If an economist sets out to analyze the concentration of wealth or inequality of wealth, he or she should begin at the beginning: how did it get started in the first place? And what is it that keeps it going? This way we will have a better idea of what we are talking about. (By the way, Piketty does provide historical material, which, for many, will appear to satisfy the need to explain the origins of wealth accumulation. We will examine this below.)
Today most people are aware of this continuously growing gap between wealth and poverty. The growth of inequality in the world today, whether between nations or between classes, has elicited widespread commentary and alarm, including from Piketty, who indeed, documents it, quantifies it, and feels the need to do something about it. But he does not attempt to explain how it all got started. Having mentioned Marx in his Introduction he gives the impression that he knows something about Marx's theories. The reader who expects Piketty to provide a sketch, or summary, of Marx’s thinking on the topic will be disappointed. None of this appears in his book. It is probable that he has familiarized himself to a certain extent with Marx’s main economic work, Capital. In Volume I of that trilogy we find Chapter 25, “The General Law of Capitalist Accumulation,” wherein Marx indicates what drives accumulation:
“The law of capitalistic accumulation, metamorphosed by economists into pretended law of Nature, in reality merely states that the very nature of accumulation excludes every diminution in the degree of exploitation of labour, and every rise in the price of labour, which could seriously imperil the continual reproduction, on an ever-enlarging scale, of the capitalistic relation. It cannot be otherwise in a mode of production in which the labourer exists to satisfy the needs of self-expansion of existing values, instead of, on the contrary, material wealth existing to satisfy the needs of development on the part of the labourer.”
The capitalists abhor any mechanism that interferes with the expansion of the values they maintain as their property. Marx points to the exploitation of labor as a means to achieve “the needs of self-expansion of existing values.” If we limit ourselves, for the moment, to the assumption that capital is the property of the capitalist, then it is this capital Marx is talking about. It is existing value in the hands of the capitalist (any member of the capitalist class), and this capital must expand itself to satisfy his needs. If it does not expand, he eventually finds himself on the breadlines (or at least at the unemployment office). Another way of looking at it is that the capitalist is the personification of the capital that is his property. The capitalist, as an individual, finds himself immersed in social relations that he himself did not create, but were already established before he was born, and in order to become a full-fledged capitalist he must step into a role that stands ready-made for him. For the most part, which means the young people of capitalist families assume the roles of their parents. (Piketty also dwells on this topic.) Marx pointed to the relationship of the capitalist to his capital:
“But, so far as he is personified capital, it is not values in use and the enjoyment of them, but exchange-value and its augmentation, that spur him into action. Fanatically bent on making value expand itself, he ruthlessly forces the human race to produce for production’s sake; he thus forces the development of the productive powers of society, and creates those material conditions, which alone can form the real basis of a higher form of society, a society in which the full and free development of every individual forms the ruling principle.” (Capital, Vol. I, Chap. 24)
Note that Marx points to the long-term consequence of the growth of capital accumulation as the “real basis of a higher form of society.” We shall return to this theme later. But while enmeshed in capitalist relations of production, these “masters of the universe” are in reality prisoners of their own wealth; the rulers turn out to be the ruled, not by others, and not by their own desires, but by the social straitjacket that has been fastened around their lives. Driven to expand the value of their property, the owners of capital become permeated with the all-encompassing compulsion that is the nature of capital, their own property.
And thus, the capitalist cannot avoid exploiting labor power to the highest degree possible. His own imprisonment clamps an even more oppressive vise on the lives of the exploited wage laborers. The reality of everyday life in capitalist countries illustrates this: from India to Canada and from Belgium to Thailand, the boards of directors and the executive leadership of corporations ceaselessly search for ways to improve the return on investment for the company and for the shareholders. They employ armies of economists, accountants and planners to realize this end. They employ police and guards to keep the workers in check. They lengthen working hours, accelerate the pace of production and lower wages as they seek to expand the company, to maximize the return on investment. Marx argues:
“Use-values must therefore never be looked upon as the real aim of the capitalist; neither must the profit on any single transaction. The restless never-ending process of profit-making alone is what he aims at. This boundless greed after riches, this passionate chase after exchange-value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser. The never-ending augmentation of exchange-value, which the miser strives after, by seeking to save his money from circulation, is attained by the more acute capitalist, by constantly throwing it afresh into circulation.” (Capital, Vol. 1, Chap. 4)
Piketty, distinguished Centennial Professor at the London School of Economics, would not likely be comfortable using such irreverent terminology to describe the motives of the captains of industry, although he is certainly familiar with the concept of the “maximization of return on investment.” As he explains on p. 267,
“A capital market is said to be “perfect” if it enables each unit of capital to be invested in the most productive way possible and to earn the maximal marginal product the economy allows, if possible as part of a perfectly diversified investment portfolio in order to earn the average return risk-free while at the same time minimizing intermediation costs.”
Of course Piketty goes on to explain that through careful cost-accounting the master of production manages to work out the optimal ratios of capital to labor in the successive cycles of investment. Piketty never hints at any other motive than the maximum profit. He also points to the “imperfections” in market systems, and how capitalists often find themselves obliged to resort to “creative accounting” to achieve the sought-after maximization. Search as you might, you will not find Piketty pointing to any other motive than the accumulation of wealth, and not just accumulation at a leisurely pace, but at the highest possible pace. In this he confirms the impressions of millions of people, and at the same time fails to differentiate himself from Marx’s more forthright characterizations of just what kind of person is Mr. Moneybags.
Accumulation of Capital
Piketty has familiarized himself to some extent with Marx's analysis of productivity and the concentration of capital. However, he doesn't want to overtly contradict central positions that Marx elaborated in Capital. As for the accumulation of wealth into ever fewer hands, first we have to consider, in the words of Marx, the technological basis for the concentration of the means of production:
“In Part IV, it was shown, how the development of the productiveness of social labour presupposes co-operation on a large scale; how it is only upon this supposition that division and combination of labour can be organised, and the means of production economised by concentration on a vast scale; how instruments of labour which, from their very nature, are only fit for use in common, such as a system of machinery, can be called into being; how huge natural forces can be pressed into the service of production; and how the transformation can be effected of the process of production into a technological application of science. ... Everywhere the increased scale of industrial establishments is the starting point for a more comprehensive organisation of the collective work of many, for a wider development of their material motive forces — in other words, for the progressive transformation of isolated processes of production, carried on by customary methods, into processes of production socially combined and scientifically arranged.” (Capital, Vol. 1, Chap. 25)
It is pretty well recognized nowadays that production on a large scale allows for the realization of economies of scale. It allows for a more finely subdivided division of labor, for the most expeditious introduction of new productive methods and technology, and for the most rational allocation of the workforce to the tasks of production. But once we have a grip on these features of capitalist evolution, we should sit back and address the question of capitalism as a unique and distinctive system of social relations. How did it all get started in the first place? It exists as a part of history, and once its origin is explained, it can be clearly demarcated from previously existing systems of social relations. But Piketty does not do this; he avoids making distinctions between capitalism and previous forms of society.
In the Middle Ages in Europe feudal social relations prevailed, but that began to break down in the 16th century. Early forms of capitalism slowly evolved out of the pre-capitalist environment in Europe, then developed more rapidly in the 17th century, and then, in the late 18th century, with the industrial revolution, it took off with explosive speed. The early phase of capitalist development, viewed from the standpoint of production for the market, witnessed the growth of manufacturing from small workshops to larger factory operations. This occurred as merchants increasingly invested their profits in the workshops, mines and other productive operations. The capitalists, as managers of industrial processes, quickly learned how to acquire the most modern tooling, machinery, and productive methods they could find, and repeated cycles of modernization and upgrading of equipment were institutionalized. The capitalists, acutely aware of the new discoveries in science and technology, promoted these discoveries. This process provided an ever-improving foundation for the amassing of profits on an expanding scale. And of course, there is the question of the broad-based organization of this increasingly integrated, complex industrial edifice on a national and international scale. Marx again:
“Hand in hand with this centralization, or this expropriation of many capitalists by few, develop, on an ever-extending scale, the cooperative form of the labour process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labour into instruments of labour only usable in common, the economizing of all means of production by their use as means of production of combined, socialized labour, the entanglement of all peoples in the net of the world market, and with this, the international character of the capitalistic regime.” (Capital, Vol. 1, Chap. 32)
The gradual building up of a socialized productive apparatus is a great achievement in human history. In this way, capitalism has prepared the ground for a higher mode of production that will supersede it and build on its successes. With socialized production already achieved, the associated producers can utilize this as a foundation for consciously eliminating the inhuman atrocities caused by the dominion of the propertied ruling class, and can go ahead to form new humanized social relations. Today, more people than ever before recognize that production should be directed to serve human needs, not subordinated to the profit interests of the private owners of capital.
Inequality
Piketty continues, “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” (p. 1). Perhaps he should have said that this “apocalypse” has been avoided so far—the future of capital remains open for a range of possible outcomes. And in fact, this open future is his main concern. Furthermore, Marx's vision was not apocalyptic at all, but one of a future society that would make the wealth produced by workers available to all, thus ending poverty, and at the same time liberating the capitalists from the degrading enslavement to their own property.
Marx’s writings became widely popular among literate working people in the 19th and 20th centuries, not because he predicted an “apocalypse” but because he inspired the struggle of working people for a future social order that would inscribe on its banner: “from each according to his ability; to each according to his needs.” And it must be pointed out that, with all the much-touted glories of private ownership and the free market system, the propagandists of private wealth do not attempt to make the claim that capitalism will provide a good life for all, but rather that capitalism will provide a level playing field in which the more “talented” can rise to the top, leaving others behind. (And of course, the so-called “level playing field” never existed under the dominion of capital.)
Marx thought that the evolution of capitalist production would create the basis for overcoming the dog-eat-dog capitalist system and thus do away with the divisive competition among the workers. Instead of fighting each other, whether in the job market or in the wars between nations, workers can and do forge bonds of solidarity and mutual aid. We should add that within capitalist society various forms of social insurance, medical insurance and unemployment compensation have been developed, to a greater extent in the economically advanced capitalist centers. These have come about as the consequences of the advances provided by science, together with the struggles of working people, demanding a greater share in the wealth produced by their labor. The average level of wage and benefit compensation increased spasmodically throughout the 19th and early 20th centuries, until it began to stagnate in the 1970s throughout in the advanced capitalist countries. All these forms of social collaboration and mutual support can serve as starting points for an expansion of benefits for all in the society of the future.
Piketty is concerned about the quality of public discourse around these critical social issues, saying: “intellectual and political debate about the distribution of wealth has long been based on an abundance of prejudice and a paucity of fact.” And it is to his credit that he makes this observation. But whence comes all this prejudice—now that the science of economics has been developing for more than two hundred years? How is it that Alan Greenspan, former Chairman of the Federal Reserve, at one time considered to be one of the most responsible and knowledgeable guardians of capitalist wealth, could be so far off course as to act as cheerleader to the toxic assets bubble in the period preceding the 2008 crash? He was able to concede there was a distressing “flaw” in his thinking, as he stated in his testimony to a congressional committee under the chairmanship of Representative Henry Waxman in 2008:
“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?” Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.” (Atlantic magazine, March 11, 2009)
I'm sure many of us feel Mr. Greenspan's distress. Perhaps we should feel even more concern about the uselessness of Congressman Waxman’s committee. It turned out that Greenspan was perhaps the most authoritative acolyte worshipping at the altar of the “efficient market hypothesis,” which is just the sort of prejudice Piketty is talking about. The efficient market hypothesis is defined by Investopedia thusly:
“According to the EMH, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices.1
“Therefore, it should be impossible to outperform the overall market through expert stock selection or market timing, and the only way an investor can obtain higher returns is by purchasing riskier investments.”
So when it comes to “an abundance of prejudice and a paucity of fact,” it's not only a matter of the “intellectual and political debate,” it's a question of the beliefs and practices of those who hold the reins of the economic institutions of the modern capitalist state. These are the people whose decisions are no more than a smokescreen for their impotence in the face of market pressures that determine the fate of billions of workers around the world.
The prejudice that Piketty deplores is, to a greater or lesser degree, characteristic of all modern capitalist economic thinking, including Piketty’s own. Modern bourgeois economics has developed in the shadow of a capitalist ruling power, and has adopted the world-view and habits of thought of this class. Its mission is to provide authoritative support to the notion that capitalism is the only possible economic system in which all the individuals within the world's population can seek and find material satisfaction. This pro-capitalist economic theoretical tradition grew throughout the 19th century, breaking away from the scientific works of Smith, Ricardo and Marx, and then disintegrating into a variety of conflicting schools of thought with a range of scientific-seeming explanations for the continuing social and economic success of modern capitalism, as well as for its panics and crises. But all of these schools of thought developed the notion that capitalism is the permanent mode of existence of modern society, and because of this there can be no fundamental challenge to the social and political dominance of the capitalists, whom they refer to as “investors,” “business leaders,” “shareholders,” etc. Marx explained why, after Ricardo, there was a departure of bourgeois political economy from scientific inquiry:
“In France and England, the bourgeoisie had conquered political power. From this time on, the class struggle took on more and more explicit and threatening forms, both in practice and in theory. It sounded the knell of scientific bourgeois economics. It was thenceforth no longer a question whether this or that theorem was true, but whether it was useful to capital or harmful expedient or inexpedient in accordance with police regulations or contrary to them. In place of disinterested inquirers there stepped hired prizefighters, in place of genuine scientific research, the bad conscience and evil intent of apologetics.” (Capital, Vol. 1, Afterword to Second German Edition)
Value
The illusion that capitalist property relations bring prosperity to the masses clashes with the reality that the mass of the working population is subjected to oppressive conditions of life and labor. This discord between image and reality necessitated that the economists develop an elaborate cover-up, a socioeconomic ideology that flatters the capitalists and applauds their vital role in economic life, but at the same time camouflages their dominant political role, making it seem like economic issues are resolved through a democratic decision-making process. But economic analysis, if it is to be a scientific endeavor, must reject the biases that result from submissiveness to the ruling class. It must objectively examine the root causes, the “internal relationships,” the underlying currents that produce the day-to-day events of economic activity. To develop the theories that explained these forces, classical political economy, as Marx said, beginning with William Petty (1623–87), needed to comprehend basic elements, for example, value. What is value? Is it a thing, a quality, or a social relationship? How does money relate to value? What is production? What is exchange? How did these things develop? What determined the course of evolution of human societies from one stage to the next? What is capital? What is profit, rent, interest? Marx familiarized himself with world history and the history of economic thought, and made reference to the attempts in ancient society to arrive at a definition of value. Value appeared initially, in ancient Greece, as a question of how one should estimate the exchange ratios of two different products of labor. Marx singled out the efforts of Aristotle in this regard:
“In the first place, he clearly enunciates that the money form of commodities is only the further development of the simple form of value—i.e., of the expression of the value of one commodity in some other commodity taken at random; for he says:
‘5 beds = 1 house – (clinai pente anti oiciaς) is not to be distinguished from 5 beds = so much money. – (clinai pente anti ... oson ai pente clinai)’
“He further sees that the value relation which gives rise to this expression makes it necessary that the house should qualitatively be made the equal of the bed, and that, without such an equalisation, these two clearly different things could not be compared with each other as commensurable quantities. “Exchange,” he says, “cannot take place without equality, and equality not without commensurability.” (Capital, Vol. 1, Chap. 1)
As for commensurability, indeed the house and the beds have something in common, they are both the products of human labor. We recognize that human labor can be directed to a variety of useful purposes, but all products of human labor that enter into exchange, whether for money or as barter for other products, can be understood as representing varying quantities of human labor in the abstract. Abstract human labor is labor considered as labor in general, measured in units of time, without regard for its specific useful effect. The quantity of labor that serves as measure of value is determined by the time required for producing any given object, under normal conditions. The house can be exchanged for five beds because an equal amount of labor time is expended for the house as for the five beds (assuming Aristotle had the ratio right).
Marx pointed out that Aristotle was not able to identify human labor in the abstract as the source of the commensurability of products in exchange.
“There was, however, an important fact which prevented Aristotle from seeing that, to attribute value to commodities, is merely a mode of expressing all labour as equal human labour, and consequently as labour of equal quality. Greek society was founded upon slavery, and had, therefore, for its natural basis, the inequality of men and of their labour powers.” (ibid)
In a slave society, the labor of a slave cannot be considered as equal to the labor of a free artisan. The product of the slave is stamped with servility. This does not mean that the law of value is null and void in slave society; only that the theoretical interpreters of social phenomena were unable to fully appreciate it as long as the slave system was the dominant social form. Marx further explained that as commodity exchange developed more systematically in the European early modern period, and as the labor of free artisans more and more predominated in the markets, it became increasingly possible to recognize abstract human labor as the basis for the value of commodities. As the exchange of commodities evolved, economic theorizing was revived around questions of exchange and money. Mercantile economy developed in the 17th century out of the struggle among different maritime nations to attract wealth to their shores, and this process led to a more advanced stage of the economic analysis of production and exchange in the 18th century—first in France with the Physiocrats (Quesnay), later in England with the work of Adam Smith. As the forms of social production and exchange evolved, the capacity of educated persons to recognize the meaning of these changes developed in accord with the changing social reality. The activities of production and exchange became increasingly regularized, and the patterns of workshop and marketplace interactions impressed themselves more systematically on the minds of the participants and theorists alike.
Piketty attributes to Marx a genuine scientific intent, but then runs into difficulty trying to define just what Marx was getting at. He says:
“In fact, his principal conclusion was what one might call the “principle of infinite accumulation,” that 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.”
Piketty says, in trying to explain what Marx meant, “capital's share of national income would increase indefinitely (which sooner or later would unite the workers in revolt).” If it really were to increase indefinitely, then there would be endless millennia of capitalist growth. But if it increases until it produces a workers' revolt, then the growth process falls short of infinity. But if it is going to produce a workers' revolt, why would that be? In the first place, why would capital's share keep increasing that way? What was it that supposedly made Marx come to that conclusion? In the second place, why would the workers revolt? What would be the cause of such a revolt? What would be the workers' motivation? Furthermore, have there ever been “workers’ revolts” in the past? If so, then why not take the opportunity to explain why they arose, and whether they had any connection to capital accumulation, and what they portend for the future?
Marx did not project an indefinite increase in capital, or in capital's share of national income. Marx analyzed the process of capital accumulation, and pointed out that it spontaneously generated a barrier to its continued self-expansion. This barrier developed hand-in-hand with the normal progress of the capitalist system itself. Like the life of any society, any biological species, any individual animal—as it develops it generates the processes that end in its extinction. But fortunately, the processes of reproduction give rise to successor societies, to daughter species, and to animal offspring. So life goes on. For capital, this self-extinguishing barrier expresses itself as the tendency of the rate of profit to fall. It is this tendency that produces ever more threatening economic crises, which then find their expression in social and political conflict. And, as Marx indicated, capital prepares the ground for a higher form of society.
If it were merely a question of workers’ revolts, then the problem would not necessarily be a failure of capitalism itself, but a failure on the part of the workers to tolerate this kind of capitalism—i.e., there's something wrong with the workers themselves—which is an explanation favored by many. But if it’s a failure of capitalism itself, then one can more readily understand that a workers' revolt is produced as a result of the failure of capitalism. But what does this mean? What kind of failure? What would bring it about? Of course, Piketty does not believe in the failure of capitalism—on the contrary, he believes in the immortality of capitalism, at least in principle. However, he does believe it is faltering, primarily as a result of growing inequality in income, and that it is his task is to explain how to patch it up or reinvigorate it. This is to be done, in part, through taxation (a theme he introduces later in the book).
The question of whether and how the workers will continue to tolerate the forms of exploitation to which they are subjected is an important theme that needs to be taken seriously. Suffice it to say that we have a wealth of historical material available to us that can greatly illuminate our knowledge of the modern class struggle. It's not a question of a hypothetical “workers’ revolt,” but of understanding how the ongoing workers' revolt, in its many real forms, has developed up to this point so that we can recognize how it can develop in the future. We are still in the midst of an ongoing process, which not only involves the faltering, flagging and stagnation of capital’s reign, but the growth of the worker's resistance, unity and strength.
Then there is the other side of Piketty's characterization of Marx's analysis, that “the rate of return on capital would steadily diminish (thereby killing the engine of accumulation and leading to violent conflict among capitalists).” Yes, Marx did predict a decline in the rate of return on capital, as already noted. As for the violent conflict among the capitalists, if by this Piketty means destructive imperialist wars with the goal of destroying the power of rival nations to protect the position of the capitalists of each individual country, we have already witnessed this taking place several times, regardless of what Marx might have said on the topic: the colonial wars in the 18th century, the Spanish-American war, WWI, WWII, Vietnam and the Mideast. Again, Piketty speculates on the possibility of “violent conflict among the capitalists,” without mentioning these actual wars. But perhaps Piketty is thinking of different form of “violent conflict among the capitalists,” of cutthroat competition, cheating, bribing, insider trading, Ponzi schemes and fraudulent practices. Needless to say, we have seen plenty of that. Special luxury prisons are set up to house the capitalists whose crimes against their competitors have gone too far. Instead of worrying about the “violent conflict” of the future, we should be saying, yes, we see the wars, we see the cutthroat competition, we see the criminality—but Piketty doesn’t feel that he, as an award-winning Harvard economist, bears the responsibility of explaining why the world has come to be this way. Better to approach these ugly realities as if they were future possibilities.
In order to drive the wedge deeper between himself and Marx, Piketty reiterates, “Marx’s dark prophecy came no closer to being realized than Ricardo’s. In the last third of the nineteenth century, wages finally began to increase: the improvement in the purchasing power of workers spread everywhere, and this changed the situation radically, even if extreme inequalities persisted and in some respects continued to increase until World War I.” Piketty seems to be saying, Marx made a prediction, it didn't come true, capitalism thrived, the workers thrived—what a relief it is to relegate Marx's “dark prophecy” to the archive of failed theories—to the dustbin of history!
But the last third of the nineteenth century, here singled out by Piketty, witnessed some of the most massive and dramatic class struggles in the history of capitalism. The workers of North America and Europe built powerful trade unions that developed the practices of workers’ solidarity, striking again and again as they resisted the depredations of the robber barons and other exploiters. The U.S. Civil War, which emancipated the slaves, is the foundation stone for labor in subsequent years in the U.S.: the strike battles of 1877, the organization of the miners, the union fights of the rail workers, steel workers, miners and many others. In Europe the 1870 struggle of the workers of Paris that launched the Paris Commune established the first workers' government in the world. (See: The Civil War in France, by Marx.) The European workers not only forged labor unions, but also built the political parties that formed the First and Second Internationals. This process of workers’ resistance and combativity led to the Russian Revolution of 1917.
Productivity of labor
Piketty again (p. 428): “Like his predecessors, Marx totally neglected the possibility of durable technological progress and steadily increasing productivity, which is a force that can to some extent serve as a counterweight to the process of accumulation and concentration of private capital.” This notion has some basis in reality. As accumulation proceeds, the prices of commodities consumed by workers are cheapened. This occurs as a result of the growth in the productivity of labor which lowers the amount of socially-necessary labor required to produce these consumer goods. But this by no means implies that the wage increases which enable workers to enjoy an improvement in their standard of living flow automatically from the cheapening of consumer goods. The employers always strive to maximize value of the commodities issuing from the production process. There is no way to calm their urge to increase the level of exploitation. The apocryphal story about Henry Ford giving his workers a raise so that they could all buy a new Ford automobile is often taken to mean that all employers are, or were, inclined to give raises to help workers provide for their needs. But an article on the early years of Ford Motor Co. in Forbes magazine (March 4, 2012) explains that,
“At the time, workers could count on about $2.25 per day, for which they worked nine-hour shifts. It was pretty good money in those days, but the toll was too much for many to bear. Ford's turnover rate was very high. In 1913, Ford hired more than 52,000 men to keep a workforce of only 14,000. New workers required a costly break-in period, making matters worse for the company. Also, some men simply walked away from the line to quit and look for a job elsewhere. Then the line stopped, and production of cars halted. The increased cost and delayed production kept Ford from selling his cars at the low price he wanted. Drastic measures were necessary if he were to keep up this production.
“That level of turnover is hugely expensive: not just the downtime of the production line but obviously also the training costs: even the search costs to find them. It can indeed be cheaper to pay workers more but to reduce the turnover of them and those associated training costs. Which is exactly what Ford did.”
We should recall that during the same period when Henry Ford was agonizing over his labor problems, John D. Rockefeller forced the mobilization of the Colorado National Guard to crush the striking miners in southern Colorado at Ludlow. As Ben Mauk wrote in the New Yorker, April 18, 2014,
“On April 20, 1914, members of the Colorado National Guard opened fire on a group of armed coal miners and set fire to a makeshift settlement in Ludlow, Colorado, where more than a thousand striking workers and their families were camped out. … Today, the Ludlow massacre, which Caleb Crain wrote about in The New Yorker in 2009, remains one of the bloodiest episodes in the history of American industrial enterprise; at least sixty-six men, women, and children were killed in the attack and the days of rioting that followed, according to most historical accounts.”
In the same historical period, on March 25, 1911, a fire broke out at the Triangle Shirtwaist garment factory, killing 146 workers, according to a CBS report. The AFL-CIO website points out that,
“The next morning, throughout New York’s garment district, more than 15,000 shirtwaist makers walked out. They demanded a 20-percent pay raise, a 52-hour workweek and extra pay for overtime. The local union, along with the Women’s Trade Union League, held meetings in English and Yiddish at dozens of halls to discuss plans for picketing. When picketing began the following day, more than 20,000 workers from 500 factories had walked out. More than 70 of the smaller factories agreed to the union’s demands within the first 48 hours.”
And these conflicts are only some of the most noteworthy events occurring during one period in a century’s long war between capital and labor. As has been pointed out, Piketty does not mention the brutal treatment of workers, nor the struggles of working people to achieve a better life. The harsh realities of the labor battles that Piketty prefers not to mention condemn his own book as a paean to a fantasy capitalism, rather than a serious look at capital’s real historical record.