David Harvey on Thomas Piketty's Capital

• Piketty proposals as to the remedies for the inequalities are naïve if not utopian. And he has certainly not produced a working model for capital of the twenty-first century. For that we still need Marx or his modern-day equivalent. He advocates progressive taxation and a global wealth tax as the only way to counter the trend towards the creation of a “patrimonial” form of capitalism marked by what he dubs “terrifying” inequalities of wealth and income. • He derives a mathematical law disguises more than it reveals about the class politics involved • If the rate of return on the capital that is being used is high then this is because a part of capital is withdrawn from circulation and in effect goes on strike. Money, land, real estate and plant and equipment that are not being used productively are not capital. Restricting the supply of capital to new investment (a phenomena we are now witnessing) ensures a high rate of return on that capital which is in circulation. The creation of such artificial scarcity is not only what the oil companies do to ensure their high rate of return: it is what all capital does when given the chance. • A central difficulty with Piketty’s argument mistaken definition of capital. Capital is a process not a thing. The whole of neo-classical economic thought (which is the basis of Piketty’s thinking) is founded on a tautology. The rate of return on capital depends crucially on the rate of growth because capital is valued by way of that which it produces and not by what went into its production. • As Alan Budd, an economic advisor to Margaret Thatcher confessed in an unguarded moment, anti-inflation policies of the 1980s turned out to be “a very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes…what was engineered there in Marxist terms was a crisis of capitalism which recreated a reserve army of labour and has allowed capitalists to make high profits ever since.” • He demolishes the widely-held view that free market capitalism spreads the wealth around and that it is the great bulwark for the defense of individual liberties and freedoms. Free-market capitalism, in the absence of any major redistributive interventions on the part of the state, Piketty shows, produces anti-democratic oligarchies. But he does not help us understand why growth is currently so sluggish in the US as opposed to China and why Europe is locked down in a politics of austerity and an economy of stagnation. • What Piketty does show statistically (and we should be indebted to him and his colleagues for this) is that capital has tended throughout its history to produce ever-greater levels of inequality. http://davidharvey.org/2014/05/afterthoughts-pikettys-capital/