I’m now reading Thomas Piketty’s already-heralded new tome Capital in the Twenty-First Century for a review of it that I’ll write for Barron‘s. The book’s a whopper: 655 pages including the substantive footnotes. I’m not yet even half-way through it.
My instinct is to avoid saying anything about the book until I’ve finished reading and reflecting on it. But I here succumb to the temptation to override that instinct. (Whether or not for the best I leave for you, the Cafe patron, to decide.) As I noted in an earlier post, Piketty says much with which I agree. But already it’s obvious to me that Piketty’s vision and understanding of economic reality is quite at odds with my own. Here’s an example – one that touches on what is perhaps the single most substantive difference between Piketty’s understanding of reality and my understanding of reality.
On pages 59-61 (page 60 is devoted entirely to graphs), Piketty writes
In other words, the lead that Europe and America achieved during the Industrial Revolution allowed these two regions to claim a share of global output that was two to three times greater than their share of the world’s population simply because their output per capita was two to three times greater than the global average.
At the risk of me being accused of stealing an effective pedagogical technique from David Henderson, I ask: Do you see what Piketty does here? Do you see in this passage Piketty’s questionable implicit assumption?
Piketty’s writes, first, that Europeans and Americans of 200-odd years ago ‘claimed’ a share of global output. Claimed? The impression conveyed, if only subtly, is that global output is somehow out there and then Europeans and Americans managed by some means to lay their hands on a disproportionately large share of that existing output, leaving people in other parts of the world with a disproportionately smaller share of this output.
Why not write instead – as I am certain is more accurate – “… the lead that Europe and America achieved during the Industrial Revolution allowed these two regions to produce a share of global output that was two to three times greater than the the population-adjusted amount of output produced by people in the rest of the world” ?
Europeans and Americans back then didn’t become wealthier than people elsewhere by seizing some disproportionately large chunk of a pot’o'prosperity that existed independently of these Europeans’ and Americans’ own productive and innovative efforts. Europeans and Americans created and produced the additional ‘disproportionate’ wealth that they then enjoyed.
With the exception of chattel slavery, almost none of this wealth was stolen from others. And even chattel slavery, while a vile institution that inhumanely transferred wealth from slaves to slave-owners, is not (contrary to the beliefs of some severely misinformed folks) remotely responsible for creating the great prosperity of the west. (Slavery hardly promotes dynamic economic growth, and the amount of wealth transferred from slaves to slave-owners is far too small to account for the substantial, widespread, and sustained-to-this-day rise in living standards that began during the industrial revolution – began, do not forget, not only for the relatively few slave-owners and their heirs but also and more importantly for the non-slave-owning masses.)
If you think that I’m nit-picking, read again the passage from Piketty quoted above. Isn’t it strange that he describes Europeans’ and Americans’ share of global output as being two to three times greater than their share of the world’s population “simply because their output per capita was two to three times greater than the global average.” ? Simply because their output per capita was two to three times greater than the global average? This wording suggests that Piketty thinks that there’s not much – or no necessary – connection between the amount of output that an entity produces and the amount of output that that entity then has available for itself to consume or invest.
Surely the reason Europeans’ and Americans’ share of global output was two to three times greater than their share of the world’s population is precisely and only because Europeans’ and Americans’ output per capita was two to three times greater than the global average. This higher output-per-capita – contrary to the impression conveyed by Piketty – isn’t an irrelevant or insignificant fact that is at best only tangentially related (or one that should be only or at most tangentially related) to the fact that Europeans and Americans also “claimed” a disproportionately large share of global output. Rather, Europeans and Americans “claimed” a higher portion of global output only because they produced a higher portion of global output! What these Europeans and Americans “claimed” simply would not have existed had they not produced it.
I emphasize that Piketty admits that Europeans and Americans back then did indeed produce a disproportionately large amount of global output. What’s mysterious is why he suggests that this higher production by Europeans and Americans is not the key to understanding why Europeans and Americans also “claimed” – that is, enjoyed as income – a higher amount of output than did people’s elsewhere on the globe.
Piketty’s world view (at least from what I’ve read so far in his book) seems to be that wealth and dessert are not so closely tied to individual effort, creativity, and innovationism as I believe them to be tied to these things.
Piketty wrote this book in his native French, and the translation into English was done by someone else (Arthur Goldhammer). It’s possible that my complaint above is a complaint more about the translator’s chosen wording than about Piketty’s meaning. But I believe this possibility to be remote, for the entire tenor of the book so far suggests that Piketty does indeed view material wealth as something that exists far more independently of human creativity, risk-taking, and effort than I believe is the case in reality.