As an oddly language-loving visual arts MFA student, I emerged from this hectic fall semester ready to read the library. In periods when I find myself with enough time, my optimal number of books to have going at once is three to five. This winter, after casting about in some Liberty Hyde Bailey essays (good reading), and savoring Rebecca Solnit’s lovely Field Guide to Getting Lost while sailing through Small is Possible by Lyle Estil, I was once again seized by my desire to fix all the ills of capitalist society (it’s a chronic thing), and decided to set my goal to read Thomas Piketty’s Capital in the Twenty-First Century before the spring semester. For a 700-page tome on economics, it is a surprisingly smooth read. (And in translation, no less. Hats off to Mr. Arthur Goldhammer.) I burned through the first four chapters in just a few days. Then Christmas hit, my reading went into a stall, and now with roughly 72 hours left in the break, and ten chapters left in Piketty, I think I have to concede that I’m not going to make it. However, my progress thus far has sparked a couple of realizations about the economic discipline that are worth mention.
Before getting to those, let me frame what Piketty is trying to do here. Piketty’s goal in his Capital is to trace the role of capital in the economy at the grand scale, from the late eighteenth century to the present day, and assess the risks that the current capitalist system poses for society in coming decades. The central problem in Piketty’s analysis is wealth inequality, which he claims the capitalist economy generates automatically and arbitrarily. He bases this claim on the fact, in simplest terms, that return on capital always outstrips the growth of the economy as a whole. This basically is to say that once a certain class of people becomes rich enough, their money makes money at a rate faster than the vast majority of working people could ever make money, creating a wealth gap that continually widens, save for when massive economic shocks (World Wars, the Great Depression, etc.) temporarily level the playing field.
This idea has heavy political consequence. As Piketty puts in in the introduction, these arbitrary inequalities “radically undermine the meritocratic values on which democratic societies are based.” If that is the case, and from what I see happening in my own country – corporations buying votes, wholesale destruction of environments without consequence, an intransigent racial wealth gap – I’m inclined to agree, then Piketty’s effort to understand these dynamics becomes something of a noble cause. This work may be of central importance to our time. And yet, the things that struck me the most as I first began to dig into it are the work’s glaring yet unacknowledged limitations. I’m not speaking of Piketty’s specific methods per se. He is working from the largest trove of data ever available and clearly striving for the most holistic view possible. He has clearly pulled off an impressive feat of research. Rather, as I read Piketty’s work as a novice to the economic discipline, I’m struck by what is taken for granted in the typical way we think about the economy.
By far the most glaring shortcoming of economics as a discipline is that it essentially deals exclusively with money. This may seem obvious. It likely seems unproblematic. I would argue not so. We should all remember from high school economics that the word economy is derived from the greek oikonomia, or household management. Anyone who has managed a household knows that cash flow is but one aspect of keeping a house in order. Yes, we have to purchase goods such as groceries and services like plumbing work, but what of all the labor that household members contribute without compensation- cleaning, cooking, maintenance, child-rearing, time spent procuring goods? If I’m of the eco-conscious homesteader bent, and I also manage a large garden and run chickens in the yard, my grocery bills won’t reflect the half of what I eat for a good part of the year. For the average person, many productive activities of household management are not monetized. If I wanted to analyze the economics of a household, I would have two options: ignore the non-monetized labor, or attempt to estimate its value in monetary terms. Both strategies have obvious problems. To ignore the non-monetized activities would be to have an incomplete view of household productivity, but to estimate the value of all activities in monetary terms is also a dubious exercise. How much should I pay myself for vacuuming? The amount I would have to pay a maid for the same work? Perhaps. But the fact remains that I wouldn’t pay a maid, and I probably, quite frankly, don’t do the same quality of work. My cooking could be worth what I would pay in a restaurant, but that price point varies drastically, and the fact remains that I cook at home exactly so I will not have to pay restaurant prices, and so I can eat healthier – the options are not really even the same in kind.
Expand the household to the global scale and we find that macroeconomics faces the same conundrum. Economics as a discipline deals with money not because it is the end-all measure of value, or the absolute standard of productivity, but simply because it is the most traceable. Money is tracked and recorded when it changes hands, leaving a trail of data for economists to analyze. That data of course does correlate to flows of goods and services. It would be a mistake, however, to assume that the money economy represents the whole of the real economy. By “real economy,” I mean the actual totality of real, material stuff and real activities by which human beings keep themselves alive and happy, the real management of our global household. Rightfully accounted, this would have to include goods and services we provide for ourselves and each other without monetary input, as well as non-monetized inputs from our natural environment. This seems to represent a deep layer of economic activity essentially unreachable by monetary analysis. Yet because economists lack any other standard of value broadly applicable across dissimilar goods and services, they are afflicted with a need to account for everything in monetary terms, even when it makes little sense. Hence we end up with such fashionable terms as “ecosystem services” to refer to hypothetically free environmental resources like waterways and breathable air, and plans make polluters pay for their emissions, as if the harm to life-supporting “ecosystem services” could ever be truly quantified. To his credit, Piketty seems to be staying out of this fray.
The passage in Capital that brought this into view for me was where, speaking of global distribution of production, the author claims, “From 1900 to 1980, 70-80 percent of the global production of goods and services was concentrated in Europe and America, which incontestably dominated the rest of the world.” That statement gave me pause. It just seems like an impossible split. Piketty is telling us that the entire rest of the globe – all of Asia, Africa, and (I believe) South America – accounted for only 20-30 percent of output. (Piketty tends to refer to “America” when speaking of the United States.) But, those numbers aren’t impossible at all, given the narrow scope of the statistic, which is measured solely by monetary value of consumer goods and services. The highly industrialized “West” was indeed pumping out buyable stuff at a rate that vastly exceeded the rest of the world. When we think of the paltry 20-30 percent of output spread thin across most of the globe’s surface (and most of the global population), what must we assume lies below that figure? Presumably a good deal of non-monetized production in the form of various subsistence activities, and numerous environmental factors that are not valued at all in the conventional economic calculus.
The second thing that struck me about the framework of economics is that it is inherently nationalistic. That is, economic activity is accounted in reference to political borders, usually due to the nature of the data available. This makes sense. The economic discipline emerged in the late 18th century, when scholars were charged with analyzing income across the populace to determine where more tax revenue could be raised. Modern state monitoring of the economy came about in response to the costs of war, and the shock of the Great Depression. Most of the information Piketty relies upon in Capital comes in the form of government records such as tax returns. Consequently, the resulting averages and trends correspond to land areas and populations that have been determined more or less arbitrarily. In this way, macroeconomics is disconnected from any meaningful consideration of land base, which must be the ultimate source of value in any economy. What insights might economic study yield if instead of countries as defined by government, economists analyzed bioregions? As it becomes clearer and clearer in the present day that human beings will soon need to source their goods and services much closer to home, it seems like it would be fruitful to analyze the economic standing not of countries as a whole, but of regions with similar climate and resource base.
Those are my thoughts of the day on Capital. No guarantees on when this journey will continue, as the spring semester is getting underway shortly, but I own my copy of this tome, and it will stare at me from my shelf until I finish it.
And I’ll have to get back to you about that fixing capitalism thing.