Das Kapital Lite for the 21st century.
One: Piketty’s Charge
If politics is a war by other means, then books often serve as the artillery. Take Herbert Croly’s The Promise of American Life, the foundational text of modern American liberalism. Its publication in 1909 was heralded as a revelation, when in fact it was more a synthesis of notions that had been floating around in the political ether for a decade. Theodore Roosevelt loved it. “I do not know when I have read a book which I felt profited me as much,” T.R. wrote to Croly. “I shall use your ideas freely in speeches I intend to make. I know you won’t object to my doing so, because, my dear sir, I can see that your purpose is to do your share in any way for the betterment of our national life.” But what Roosevelt loved most was that Croly was saying exactly what T.R. wanted to hear.
Christopher Lasch noted that “Croly did not so much influence Roosevelt as read into his career an intellectual coherence which Roosevelt then adopted as his own view of things.” Others found Croly similarly useful. Walter Lippmann dubbed him the “first important political philosopher” of the 20th century. Felix Frankfurter hailed The Promise of American Life as the “most powerful single contribution to progressive thinking.” Like Ferris Bueller, leaping in front of the parade and pretending he was leading it, Croly got out in front of an idea whose time had come.
This happens every decade or so. Writers as varied as the economic historians Charles and Mary Beard, the public intellectual Walter Lippmann, the economists Friedrich Hayek and John Kenneth Galbraith, the sociologist David Riesman, the legal scholar Charles A. Reich, the biologist Paul Ehrlich, the philosopher Allan Bloom, the historian of international relations Paul Kennedy, and political scientist Francis Fukuyama all captured sociological lightning in a bottle by publishing bestselling books that imposed some coherence on the national anxieties and ambitions of their moment in time.
Revisiting many of these works can lead to bewilderment. What on earth could all the fuss have been about? Reich’s The Greening of America is a miserable mess, replete with hippy-dippy nonsense and messianic gobbledygook that might have made some sense in 1970 but seems hilariously dated now. Riesman’s The Lonely Crowd divided people into psycho-sociological categories—inner-directed, tradition-directed, other-directed—that almost seem parodic today. Hayek’s The Road to Serfdom (1944) holds up much better, but unlike his other works, its significance is more sociological than analytical. Similarly, the analysis in Galbraith’s The Affluent Society (1958) is more valuable as an insight into the hubris of what would become Great Society liberalism than as a serious empirical guide to political economy. As for The Promise of American Life itself, it is a strange and tedious read, though fortunately for Croly’s reputation, few people actually read it anymore.
It remains to be seen what history will make of Thomas Piketty’s Capital in the Twenty-First Century, which was released in America in April. But it was so perfectly timed that it joined the ranks of those lightning-in-a-bottle books even before its publication. Piketty purports to offer a “general theory of capitalism,” in the words of the economist Tyler Cowen. His theory is that capitalism inherently leads to ever-widening income inequality that can be addressed only through heavy taxes on accumulated wealth. In December 2013, President Obama prepared the intellectual battlefield for Piketty by declaring that income inequality was now “the defining challenge of our time.” As the enormous and dense tome finally settled in at the top of the charts, Hillary Clinton previewed a presidential campaign stump speech of sorts, which largely focused on Piketty’s core theme: inequality. Even the pope got in on the act. Adding a religious dimension to Piketty’s theories on Twitter, he declared in late April that “inequality is the root of social evil” and called for “the legitimate redistribution of economic benefits by the State.”
In short, Capital in the Twenty-First Century provides some coherence to an idea whose time has come. And for those who already agreed with its thesis from reading the introduction, it has become not so much The Promise of American Life but the Democracy in America of our time. Indeed, no doubt because Piketty is French, the comparisons to Alexis de Tocqueville have been ubiquitous. In the words of Yale’s Jacob Hacker and Berkeley’s Paul Piereson: “Like Tocqueville, Piketty has given us a new image of ourselves.” They add: “This time, it’s one we should resist, not welcome.”
According to Boris Kachka of New York magazine, “One hundred and eighty years after Alexis de Tocqueville came back to France with the news that he’d found true égalité in America, his countryman has arrived on our shores to deliver the opposite news.”
Taken literally, the comparison between the two writers is ridiculous. Alexis de Tocqueville spent nine months (May 1831 to February 1832) traveling throughout America, talking to politicians, laborers, clergy, businessmen, jailers, and convicts. His journeys took him through most of the country, from the great population centers of the East to Georgia, Alabama, Tennessee, Louisiana, and the wilderness of Michigan. He sailed down the Mississippi River. Piketty, on the other hand, has seen very little of America. The 43-year-old French economist studied and taught briefly at MIT 20 years ago. (He describes it as a “university near Boston.”) By his own admission, until his book tour, he had barely left Paris since he was 25.1
There is one way in which the comparison to Tocqueville is revealing. Democracy in America’s lasting popularity derives from the fact that it describes a scrappy, idealistic, energetic America that many wanted and still want to believe in. Similarly, Piketty’s vision of America is one that his admirers very much want to believe is true—even though they say they do not want America to resemble Piketty’s description of it. This is why virtually none of his favorable reviewers has responded to his arguments with depressed and rueful shock at his deeply dystopic conclusions. Instead, they have greeted the publication with a triumphant “I told you so.”2 Capital in the Twenty-First Century is the artillery shell his supporters have long been waiting for to begin the war against “economic inequality.”
Two: Piketty’s Claim
Piketty’s overarching argument is that Karl Marx was essentially correct when he identified what might be called the original sin of capitalism: the problem of “infinite accumulation.” This is the idea that the rich get richer and the poor get poorer. According to Piketty, it’s what happened when capitalism was left to its own devices at the end of the 19th century, and it’s what is about to happen in the United States and Europe in the 21st. There was, he says, a brief flattening-out of inequality in the middle of the 20th century, thanks to the devastation of two world wars, which destroyed enormous amounts of wealth and fueled huge spikes in taxation. But otherwise the story has remained the same.
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? Or do the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater harmony among the classes…?
Given this either/or, Piketty essentially sides with Marx. I say “essentially” because there is much bickering about whether it is fair or right to call Piketty a Marxist. Paul Krugman, for instance, finds the idea ridiculous, despite the fact that the very title of the book is an homage to Marx’s Das Kapital and that Piketty says Marx asked the right questions even if some of his answers had “limitations.” Piketty himself rejects the Marxist label, presents his arguments in neoclassical terms, and describes himself as a social democrat.
Others have called Piketty’s approach “soft Marxism.” But with apologies to Stephen Colbert, I’d call it “Marxiness.” Piketty attempts to avoid Marx’s scientistic messianism by proffering caveats like “one should be wary of economic determinism.” Yes, one should. But Piketty has a grating habit of offering seemingly deflating qualifiers and “to be sures” only to proceed—à la an unreconstructed Marxist—to argue as if science and objective truth are unquestionably on his side.
He concludes that the problem with capitalism is that “there is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently.” Rather, capitalism is structurally (or objectively, as the old Marxists might say) inegalitarian. It is a rigged casino where the winners not only keep winning but don’t deserve their chips in the first place.
His proof comes in the form of r > g, already the most famous mathematical formula since E=MC2. R is the rate of return on capital (investments, interest on savings, rent from land). G is the growth rate of the broader economy. The problem, according to Piketty, is that the rate of return on capital is greater than the growth of the broader economy. He postulates that if capital grows faster than national income, specifically income earned through wages, over time the capitalists will come to own everything unless something stops that from happening.
Piketty dismisses the claim that the free market self-corrects. He essentially rejects the belief that the law of diminishing returns applies to capital. Most economists hold that if there’s too much capital chasing too few opportunities for investment, the return on capital will inevitably drop. Such corrections, in his view, are fleeting shifts in the current of an ever-rising tide of inequality. And even when they occur, they don’t amount to much:
Never mind that such adjustments might be unpleasant or complicated; they might also take decades, during which landlords and oil well owners might accumulate claims on the rest of the population so extensive that they could easily own everything that can be owned, including rural real estate and bicycles, once and for all. As always, the worst is never certain to arrive. It is much too soon to warn readers that by 2050 they may be paying rent to the emir of Qatar.
Piketty asserts that the return on capital (the r in r > g) holds steady at about 5 percent over time. This means that once you’re rich, you keep getting richer thanks to the miracle of compound interest. Inherited wealth, or old money, expands forever—or, as Piketty puts it in a memorable line, “the past devours the future.”
Piketty’s occasional concessions to uncertainty about his most dire predictions illustrate one reason he shouldn’t be considered an orthodox Marxist. He has no grand Hegelian theory of the ineluctable progression of History with a capital H. But who needs dialectical materialism when you have algebra?
Indeed, his primary claim to originality comes from a statistical tendency he discerns through masses of data, according to which the free market yields a society in which the rich not only get richer but get richer faster than everyone else and ultimately leave the poor behind. This is, he says, the “central contradiction of capitalism.” He goes on:
Once constituted, capital reproduces itself faster than output increases. The past devours the future. The consequences for the long-term dynamics of the wealth distribution are potentially terrifying, especially when one adds that the divergence in wealth distribution is occurring on a global scale.
According to Piketty, we are not only returning to levels of income inequality not seen since the 19th century. We are also looking at a potentially eternal future where the overclass rules at the expense of the ever-growing underclasses. It’s economic Morlocks versus Eloi all the way down.
Matters would appear to be hopeless. But not to worry. Piketty has hope. What gives him hope, and what excites so many of his fans, is that this central contradiction of capitalism can be overpowered by the state.
His key proposal is what he calls a “global wealth tax” of 5 to 10 percent off the top for billionaires, 2 percent for people worth 5 million euros or more, and 1 percent for millionaires below that. He also advocates a top marginal tax rate of 80 percent. And that ain’t the half of it—literally. It’s more like less than a quarter of it. “If one follows Piketty in assuming a normal return on capital of 4 percent for the 21st century,” Stefan Homburg of the University of Leibnitz has written, “a 10 percent tax on wealth is equivalent to a 250 percent tax on the resulting capital income. Combined with the 80 percent income tax, taxpayers would face effective tax rates of up to 330 percent.”
How and by whom this money would be collected is kept rather vague, in part because even Piketty concedes that this proposal is “utopian.” More interesting, he is not especially concerned about what to do with these revenues. Leveling the gap between the rich and the rest of us is a much larger priority for him than lifting up the poor. “Confiscatory tax rates on incomes deemed to be indecent” are worthwhile in their own right, he says. Such rates, which reached 90 percent in the United States at one point, were an “impressive U.S. innovation of the interwar years.” He says this even though he concedes that a high marginal tax rate on extremely high incomes actually “brings in almost nothing” (because the rich would simply stop taking proceeds in taxable form). He does concede in a wonderful understatement at the end of the book that “before we can learn to efficiently organize public financing equivalent to two-thirds to three-quarters of national income”—what his desired tax rates would amount to—“it would be good to improve the organization and operation of the existing public sector.” There’s a useful insight.
His comfort with punitive taxation is reminiscent of Barack Obama’s response in 2008 when asked if he would support a higher tax on capital gains even if he knew it would bring in less revenue. Obama answered that he would still favor raising such taxes for “purposes of fairness.” In short, some people don’t deserve the money they have, and the government should take it from them.
Is Piketty right about the fundamental contradiction of capitalism? And, if he is, how much should we care?
The first question has long been debated by nearly every major economist in the Western world. The second has received much, much less attention. Let’s focus on the first for now.
Three: Piketty’s Data
The general consensus even from very critical economists—and there are many—is that Piketty and his colleagues (chiefly his frequent writing partner, Berkeley economist Emmanuel Saez) have masterfully collected an amazing amount of data that describe some very interesting trends over the past 300 years. They have made massive databases with information culled from tax returns, estate records, and virtually every other source they could find. They plausibly argue that such records are more valuable and accurate than conventional surveys because the sample size of responses from the wealthiest individuals are simply too small to give a clear picture of inequality. Capital in the Twenty-First Century is largely a repackaging of that work. But for Piketty and his fans, it amounts to nothing less than the spread of the Big Data revolution to economic history. Maybe so. But his analysis of those data is far more controversial.
One reason for the controversy is that Piketty oversimplifies the concept of capital. He depicts it “as a growing, homogeneous blob which, at least under peaceful conditions, ends up overshadowing other economic variables,” in the words of economist Tyler Cowen. But different kinds of capital have different rates of return. Right now Treasury bills yield barely better than a 1 percent return, while equities historically have a return of about 7 percent. As Cowen notes in an essay for Foreign Affairs, this alone reveals a certain blind spot in Piketty’s analysis: the hugely significant role of risk-taking in a free-market economy.
The most common and strongest complaint is that Piketty’s arrangement of the data paints a false picture of rising inequality in the United States. Harvard’s Martin Feldstein noted in the Wall Street Journal that Piketty fails to take into account important—albeit arcane—changes in the tax code that have caused business income to be counted on personal tax returns. “This transformation occurred gradually over many years as taxpayers changed their behavior and their accounting practices to reflect the new rules,” Feldstein writes. As an example, “the business income of Subchapter S corporations alone rose from $500 billion in 1986 to $1.8 trillion by 1992.” This leads Feldstein to conclude that Piketty “creates the false impression of a sharp rise in the incomes of high-income taxpayers even though there was only a change in the legal form of that income.”
Feldstein and Scott Winship, of the Manhattan Institute, identify another methodological problem. By focusing on tax returns (instead of household surveys and the like), Piketty fails to take into account the already sizable redistributive elements of our tax code. One in three Americans receives some means-tested government aid today. And that percentage will only grow as people live longer in retirement than ever before. In other words, social security, housing assistance, food aid, etc. don’t show up in Piketty’s portrait of inequality. Winship also notes that his method lumps together many young workers who might live at home and spouses who work only part time. Perhaps more significant, in Piketty’s data, capital gains are registered as a one-time windfall. In other words, if you buy shares in a mutual fund and you hold onto that asset for 25 years, the gains you realize when you sell are counted as income in a single year. But in fact, they’ve been earned over a quarter century. And by “excluding non-taxable capital gains,” Winship wrote in National Review,“most wealth accruing to the middle and working class, which comes in the form of home sales or 401(k) and IRA investments, is invisible in Piketty’s data.”
Then there is Piketty’s use, or abuse, of r > g. “Pretty much every economics textbook will tell you that r > g,” writes American Enterprise Institute economist Andrew Biggs. “But none of the textbook models take from this that the capital stock will rise endlessly relative to the economy. Most of them hold that it stays pretty constant, and the historical evidence supports that view.”
Indeed, as Homburg notes, historical evidence shows that the divide between wealth and income doesn’t eternally widen simply because r is greater than g. The evidence for this can be found in Piketty’s own book, which shows that for the last two centuries, the wealth-to-income ratio in the United States and Canada has remained fairly stable. This North American exception is important because, unlike Europe and Japan, we were not subjected to the physical devastation of the world wars (a topic I will return to later).
Homburg, the American Enterprise Institute’s Kevin Hassett, and a team at the Sciences Po in Paris, moreover, argue that the recent widening of the wealth-to-income gap in the United States that Piketty reports is largely a function of a housing boom in the past 30 years. This fact complicates the story. The housing boom has benefited rich people, to be sure, but it has also been fueled by a massive expansion of home ownership among not only the wealthy but also the middle and lower classes (though not in proportion to gains by the wealthy). “The largest single component of capital in the United States is owner-occupied housing,” notes the liberal economist Lawrence Summers in his review of the book for Democracy. “Its return comes in the form of the services enjoyed by the owners—what economists call ‘imputed rent’—which are all consumed rather than reinvested since they do not take a financial form.”
Also, housing booms cannot go on forever. If you exclude housing from other forms of wealth or capital (Piketty explicitly uses the terms interchangeably), these economists argue, the return on capital is less robust. “In the U.S.,” the Sciences Po economists write, “the net capital income ratio of housing capital was the same in 1770 as it was in 2010 and there is neither a long run trend nor a recent increase of this ratio.” They add: “This type of situation, where a small share of the population owns most of the housing capital, appears to be far from the current situation of developed countries, where the homeownership rate varies between 40 percent and 70 percent. The diffusion of homeownership is likely to slow or even reverse the rise of inequality regardless of trends in housing prices.” Ultimately, the Sciences Po economists found that their conclusions about inequality in recent years “are exactly opposite to those found by Thomas Piketty.”
Other critics raise a different objection. According to Saez, the largest portion of rising wealth has been in the growth of pension savings, which is a very good thing by most accounts. This is important for two reasons. First, pensions, while disproportionately held by the wealthy, are nonetheless very widely held (by teachers, policemen, autoworkers, et al.). Second, as Forbes’s Tim Worstall notes, pension wealth is generally not inheritable. Indeed, by design, it is intended to be spent.
But in order for Piketty’s invincible confidence that “the past will devour the future” to hold, wealthy people can’t spend down their money, because then it would circulate through the broader economy, raise the fortunes of others, and reduce their own net wealth. But one needs only to look outside the window to see that they do. The wealthy spend their money on cars, houses, boats, and, of course, their own children. Doing so depletes their own wealth holdings and increases the incomes of the less wealthy who provide these goods. They also spend it on museum wings, hospitals, charities of all kinds (even this magazine, a 501(c)3 to which you should be donating if you’re not already), and even progressive reform efforts of the kind Piketty surely endorses. Whatever the motive, they spend down their capital stock relentlessly—a major reason, in the United States and Canada especially, the wealth-to-income ratio has stayed relatively constant. As Feldstein notes, Piketty’s assumption about the rich might be true if every individual rich person lived forever.
Another controversial critique emerged on May 22, when the Financial Times’s Chris Giles reported that his exhaustive examination of Piketty’s data revealed a host of errors or misjudgments—some minor, some potentially damning. According to Giles, Piketty’s data do not support his conclusions, and Piketty may have tweaked the numbers to make his trend lines go the way he wanted them to. The “combined result of all the problems,” Giles writes, “is to make wealth concentration among the richest in the past 50 years rise artificially.”
As of this writing, Piketty and Giles, as well as their various champions, were trying to adjudicate all the charges and defenses. The debates are extremely difficult to follow, to say the least. But it does seem that Giles overstated the lethality of his critique and that, some sloppiness or misjudgments notwithstanding, there’s little evidence that Piketty operated in anything like bad faith. Piketty has recanted nothing.
Still, if one takes all these critiques into account, one must conclude that what its supporters have hailed as an irrefutable mathematical prophecy might have to be downgraded by everyone else into the well-informed hunch from a left-leaning French economist—a significant drop in confidence level, as the statisticians might say.
And this is hugely inconvenient for those holding aloft Capital in the Twenty-First Century as though it were the Statistical Abstract of the United States—because that would mean all of Piketty’s policy proposals and dire predictions for the future are based on a guess about the future, a guess he has falsely portrayed as an immutable law.
Four: Piketty’s Faith
Appeals to scientific fact are powerful only if the science holds up. The problem is that Piketty’s whole case sits on what could be called a one-legged stool: Remove that leg and there’s nothing left to hold it up but faith. Marxism suffered from a similar weakness. So long as its “scientific” claims remained uncontested and unexamined, Marxism had a huge advantage. Once it became clear that the science in “scientific socialism” was nothing more than clever branding, all that was left was faith.
The radical philosopher Georges Sorel (1847–1922) recognized that Marx’s Das Kapital was next to useless as a work of scientific analysis. That’s why he preferred to look at it as an “apocalyptic text… as a product of the spirit, as an image created for the purpose of molding consciousness.” And for generations of revolutionaries, intellectuals, artists, and activists, it served that purpose well. Marxism lent to its acolytes a certainty they could call “scientific”—an indispensable label amidst a scientific revolution—but, as Sorel understood, that was a kind of psychological marketing, a Platonic “vital lie” or what Sorel called a useful “myth.” Indeed, Lenin’s most significant contribution to Marxism lay in using Sorel’s concept of the myth to galvanize a successful revolutionary political movement.
Marx tapped into the language and concepts of Darwinian evolution and the Industrial Revolution to give his idea of dialectical materialism a plausibility it didn’t deserve. Similarly, Croly drew from the turn-of-the-century vogue for (heavily German-influenced) social science and the cult of the expert (in Croly’s day “social engineer” wasn’t a pejorative term, but an exciting career). In much the same way, Piketty’s argument taps into the current cultural and intellectual fad for “big data.” The idea that all the answers to all our problems can be solved with enough data is deeply seductive and wildly popular among journalists and intellectuals. (Just consider the popularity of the Freakonomics franchise or the cult-like popularity of the self-taught statistician Nate Silver.) Indeed, Piketty himself insists that what sets his work apart from that of Marx, Ricardo, Keynes, and others is that he has the data to settle questions previous generations of economists could only guess at. Data is the Way and the Light to the eternal verities long entombed in cant ideology and darkness. (This reminds me of the philosopher Eric Voegelin’s quip that, under Marxism, “Christ the Redeemer is replaced by the steam engine as the promise of the realm to come.”)
For the lay reader of Capital, this might seem ironic, given Piketty’s own criticisms of the economics profession. He mocks his colleagues’ “childish passion for mathematics and for purely theoretical and often highly ideological speculation” and “their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.” He decries the “scientistic illusion” that emerges from statistical lightshows. “The new methods often lead to a neglect of history and of the fact that historical experience remains our principle source of knowledge,” he writes. It is true that the economists he’s talking about don’t deal with real-world data but with abstract mathematical models masquerading as economic theory. Nonetheless, he would be well advised to consider that towering trees of data can blind you to the more complex nature of the forest.
With almost the sole exception of left-wing Salon columnist Thomas Frank, virtually none of his reviewers—positive and critical alike—have commented on the fact that Piketty has a remarkably thumbless grasp of historical context. “Piketty’s command of American political history is, quite simply, abysmal,” Frank correctly declares. Many seem to have missed this because they are suckers for Piketty’s habit of using literary references to lend credence to his mathematical conclusions. In a section titled “the Rastignac’s dilemma,” Piketty highlights the plight of the penniless young noble Eugene Rastignac in Balzac’s Le père Goriot, who must choose between marrying a rich heiress or pursuing a mediocre and underpaid legal career. He then subjects us to long data-dissections showing that the return on inherited wealth outstrips the return on labor income and that we are destined to return to the “patrimonial capitalism” of 19th-century France. (Alain Bertaud of NYU makes a persuasive case that Piketty unfairly distorts the richness of Balzac’s character. His interpretation of Rastignac, Bertaud writes, “is so skewed that it seems that Piketty has been reading Balzac through inequality glasses.”)
Clearly some people go in for this sort of thing, but the weight of endless discursions into mathematical modeling and data collection can be lightened only so much by French Lit CliffsNotes. A spoonful of such sugar helps the medicine go down, but it doesn’t make Balzac’s famous dictum that “behind every great fortune is a great crime” any more valid.
Such techniques can also get an author into trouble. At times, it seems Piketty takes much of his early-20th-century history from the movie director James Cameron. He puts a good deal of stock in the historical value of Cameron’s 1997 blockbuster Titanic. At one point he says one need only note “that the dreadful [Cal] Hockney who sailed in luxury on the Titanic in 1912 existed in real life and not just in the imagination of James Cameron to convince oneself that a society of rentiers existed not only in Paris and London but also in turn-of-the-century Boston, New York, and Philadelphia.”
Well, no. In fact, the Billy Zane character was an entirely fictional creation of James Cameron’s imagination (and the proper spelling of his name is Hockley; Cameron invented Caledon Hockley’s name by joining the names of two towns in Ontario, where he spent some time in his youth). Still, let us concede that there were some rich jerks on the actual Titanic. So what? Many of the richest people on earth were passengers on the Titanic, including Isidor and Ida Strauss (owners of Macy’s), mining heir Benjamin Guggenheim, and John Jacob Astor IV (the wealthiest man on the ship). They, and numerous others, refused to get in lifeboats until all the women and children, including the poor women and children, got on first (Ida Strauss refused to leave her husband, preferring to die in his arms). After helping other passengers escape, Guggenheim and his secretary changed into their evening wear, saying they were “prepared to go down like gentlemen.” Meanwhile the most famous real-life cad on the ship was George Symons, a crewman who refused to let anyone else on his lifeboat even though there were 28 empty seats. Money, it seems, doesn’t tell you everything about a man.
This Titanic business on its own is trivial, but it demonstrates how Piketty sees the super rich as an undifferentiated agglomeration—a single static class bent on protecting its own collective self-interests. But the rich are not a static class, any more than capital can be reduced to a homogenous blob. Fewer than 1 in 10 of the 400 wealthiest Americans on the Forbes list in 1982 were still there in 2012. (Lawrence Summers notes that if Piketty was right about the stable return on capital, they should have all stayed on the list.) Of the 20 biggest fortunes on the Forbes list in 2013, 17 (85 percent) were self-made. Of the three remaining entries, only one—the Mars candy family—goes back three generations. The Koch brothers inherited the business their father created, but they also greatly expanded it through their own entrepreneurial zeal. The Waltons of Walmart fame inherited the family business from Sam Walton, a self-made billionaire from quite humble origins.
Nor are the poor and the middle class static. As a statistical artifice, there will always be a bottom 1 percent, just as there will always be a top 1 percent. But that doesn’t mean that if you are born in the bottom 1 percent, you will stay there. Some of Piketty’s fans seem confused about this, appearing to believe that economic inequality is synonymous with low economic mobility. There may indeed be a link between inequality and low economic mobility. After all, rich people by definition have advantages poor people do not. But there is no iron law that says any individual person must stay in his narrow economic bracket for life; the Morlocks can become Eloi. Indeed, there remains an enormous amount of churn in our economy; 61 percent of households will find themselves in the top quintile of income for at least two years, according to data compiled by economists Mark Rank and Thomas Hirschl. Just under 40 percent will reach the top 10 percent, and 5 percent will be one-percenters, at least for a while.
Piketty himself offers an extensive analysis of the Forbes list of the wealthiest people in the world in an attempt to prove that today’s richest people are much richer than they were in 1987 and that the “largest fortunes grew much more rapidly than average wealth.” He says the data show that wealth grew by an inflation-adjusted 7 percent, even higher than the normal 4-to-5 percent return implicit in r > g. In what seems a generous nod, Piketty even concedes that if you jigger the timespan—starting from, say, 1990 instead of 1987—the rate of return might drop a bit. But one problem remains: Piketty leaves out that the people on the list are almost all different people.3 The economist Stan Veuger, writing for U.S. News & World Report, looked at the same list and found that the top 10 individuals collectively earned about 0.5 percent on their capital during the period Piketty says “the rich” got richer. And, Vueger notes: “If it weren’t for Walmart, the wealthiest people in the world would actually have lost about half of their wealth in the last 25 years.”
Five: Piketty’s Warning
Piketty’s insistence that “historical experience remains our principal source of knowledge” and that economists need to get out of their abstract cocoons becomes all the more tone-deaf when we get to the question he barely addresses at all: Why should we care? So there’s income inequality. So what? For his part, Martin Wolf of the Financial Times raved about Capital, but conceded that the work has “clear weaknesses. The most important is that it does not deal with why soaring inequality…matters. Essentially, Piketty simply assumes that it does.”
The Economist’s Ryan Avent objected to Wolf’s criticism noting that Piketty finds income inequality “unsustainable” because it will either lead to a few (or even a single person) owning everything or to bloody revolution. Piketty does suggest as much—but he makes nothing resembling a sustained philosophical, historical, or ethical case to support his views. Rather, he breezily and unpersuasively assumes and asserts such conclusions as if they are the sorts of things everybody knows. Avent’s ultimate defense of Piketty is revealing in this regard: “Inequality matters because, like it or not, inequality matters.” The examples Piketty gives to explain why he thinks inequality—not poverty, not hunger, not disease, not human rights, not expanding liberty—should be the “defining challenge of our time” don’t make the argument any more convincingly than Avent does.
Piketty makes a great deal out of a platinum-mine strike in South Africa in 2012. That violent labor action was, in a sense, about inequality, since it featured poor workers attacking rich mining interests. The workers, it is true, did want better wages, and justifiably so. But they wanted better wages not because they were indignant about their salaries being too small a fraction of the profits; they felt they deserved better compensation for putting up with undeniably horrible working conditions. Piketty’s glib summation leaves out other important variables outside mere economics. For starters, most of the violence was attributable to a vicious and bloody rivalry between competing labor unions. There’s also what economists might call the legacy costs of this exogenous event called “apartheid.”
This distinction between objective, or absolute, poverty and subjective, or relative, poverty doesn’t matter very much to Piketty. In real life, however, it matters a great deal. There’s a significant difference between not being able to feed your family and not being able to feed your family as well as a wealthier man might. A millionaire might be poor in a world of billionaires, but he would not be a pauper.
Of course, America has poor people, though it has relatively few who go hungry because capitalism has failed them. The average poor person in America, in material terms, lives quite well in comparison with a poor person elsewhere in the world or the average American else-when in time. The “actual living conditions of people counted as living ‘in poverty’ in America today,” Nicholas Eberstadt recently explained in the Weekly Standard, “bear very little resemblance to those of Americans enumerated as poor in the first official government count attempted in 1965.” He continued:
By 2011, for example, average per capita housing space for people in poverty was higher than the U.S. average for 1980, and crowding (more than one person per room) was less common for the 2011 poor than for the nonpoor in 1970. More than three-quarters of the 2011 poor had access to one or more motor vehicles, whereas nearly three-fifths were without an auto in 1972–73. Refrigerators, dishwashers, washers and dryers, and many other appliances were more common in officially impoverished homes in 2011 than in the typical American home of 1980 or earlier. Microwaves were virtually universal in poor homes in 2011, and DVD players, personal computers, and home Internet access are now typical in them—amenities not even the richest U.S. households could avail themselves of at the start of the War on Poverty. Further, Americans counted as poor today are manifestly healthier, better nourished (or overnourished), and more schooled than their predecessors half a century ago.
That is the sort of historical context one would expect from an economist who claims to be interested in historical context. There’s nothing like that here. Instead, Piketty glibly segues from the South African strikers to the 1886 Haymarket Square riots in Chicago, asking: “Does this kind of violent clash between capital and labor belong to the past, or will it be an integral part of twenty-first century history?”
There’s not sufficient space here to get into the remarkably complex issues that were involved in the Haymarket Square affair. Suffice it to say that neither the initial protest (for an eight-hour work day) nor the bombing (by anarchists) that led to the deaths of seven policemen and four civilians were motivated by dissatisfaction over income inequality. What mattered were the objective conditions under which the protesting workers toiled and lived. They were earning too little to make a proper life for themselves and were forced to labor under intolerable conditions at the same time. As Thomas Frank notes, such conditions were ameliorated largely through the struggle for organized labor—a rich subject that holds almost no interest for Piketty.
Similarly, coal miners in early-20th-century America didn’t march to flatten out the curve of the distribution of income in a textbook’s appendix; they marched to work in safety and security, and for a decent wage. To the extent that coal miners are politically organized today, it is not to fight the alleged evils of income inequality but to keep Piketty’s fans on the left from erasing their jobs by waging the “war on coal.” (By the way, the average wage for coal miners in the United States is just over $81,000 per year.)
Six: Piketty’s Threat
Piketty is convinced that income inequality “inevitably instigates…violent political conflict.” Is that actually true? And if it is, is such violence justified? Skepticism is warranted on both counts, as history suggests.
For example, the French Revolution was about inequality, but not first and foremost economic inequality. Inherited titles, the power of the Church, the unjust rule of what Edmund Burke called “arbitrary power,” and other tangible examples of legal or formal inequality played enormous and mutually reinforcing roles. The American Revolution, likewise, was about political inequality, as were later fights in this country over abolition and civil rights. Economic inequality was a symptom, not the disease—at least according to countless revolutionaries, abolitionists, and civil-rights leaders.
The postwar history of the West actually makes a hash of Piketty’s sweeping presumption. He argues that the years 1950 to 1970 were a “golden age” of economic equality. If so, why did the greatest period of social unrest in Europe and the United States in the 20th century come at the height of this golden age in the 1960s? That unrest spilled over into the 1970s, but the domestic terrorists who roiled Germany and Italy and the crime wave that devastated the United States had an extremely tangential relationship to income inequality at best. Then, pollsters tell us, in the 1980s—when the West took a wrong turn, according to Piketty, thanks to the policies of Margaret Thatcher and Ronald Reagan—social contentment started to rise and continued to rise, with the usual dips, all the way into the 1990s. One small example: In 1979, 84 percent of Americans told Gallup they were dissatisfied with the direction of the country. In 1986, 69 percent were satisfied.
So, just looking at the historical record, the notion that greater income equality by itself yields social peace seems insane.
Seven: Piketty’s Capitalism
“The consequences for the long-term dynamics of the wealth distribution are potentially terrifying,” Piketty writes. For instance, Piketty fears that whenever the return on capital really starts to outstrip national growth, “capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.” That is open to debate, to put it mildly. Bill Gates, Sam Walton, Larry Ellison, Mark Zuckerberg, Sergey Brin, Fred Smith, and others became billionaires because they created goods and services of real value to consumers; there was nothing “arbitrary” about it. In fact, most of them didn’t achieve their wealth, strictly speaking, from “capital” in the Pikettyesque sense at all. They mostly earned it from technological innovation. Piketty seems to believe, without marshaling much if any evidence, that such accretions of wealth undermine meritocratic values—when in fact, in a very real sense, the wealth creation over the past 30 years collectively constitutes the most extreme example of meritocratic advancement the world has ever seen.
Do the masses resent their wealth? It doesn’t appear so, or if they do, it is not a major concern. As inequality has risen over the last 30 years, the share of the public who think that that the “rich are getting richer and the poor are getting poorer” has stayed fairly constant (80 percent told Harris pollsters they agree with that statement in 2013 compared with 82 percent in 1990). The number dipped a bit in the 1990s when inequality was increasing but wages were rising. But, in May, when Gallup asked voters what they saw as “the most important problem facing this country today,” a mere 3 percent volunteered the gap between rich and poor (which gives you a sense of how out of touch with the concerns of Americans some of Piketty’s biggest fans are and why, for instance, they wildly overestimated the significance of Occupy Wall Street at the time, and even in retrospect). Polls consistently find that Americans are much more concerned about creating jobs and making the economy grow than fighting income inequality or redistributing wealth. A poll in January conducted by McLaughlin & Associates (for the YG Network) found that Americans by a margin of 2:1 (64 percent to 33 percent) prefer expanding economic growth to narrowing the gap between rich and poor. In 1990, Gallup asked Americans whether the country benefits from having a class of rich people. Sixty-two percent said yes. In 2012, 63 percent said yes.
It seems that most Americans simply want a fair shake. They don’t really begrudge the success of others, and to the extent they do, they don’t want to do much about it. It’s hard to see how any of this amounts to an inequality-driven powder keg of social unrest waiting to explode.
A third claim—one can’t call them arguments because they don’t rise to that level—is that the super rich will rig democracy to their advantage. This, too, has a faint Marxist echo, featuring as it does the assumption that capitalist overlords form a homogenous political class bent on exploitation. One must only read the newspaper to know that this is nonsense on stilts. At this very moment, George Soros, Tom Steyer, and other liberal billionaires are in a hammer-and-tongs political battle with Sheldon Adelson, Charles and David Koch, and other conservative or libertarian billionaires. And the evidence that either side has the power to buy elections is discredited almost every November. This is not to say that our democracy couldn’t be healthier or that wealthy special interests do not cause real problems, but America is hardly being run today by characters out of a Thomas Nast cartoon. It’s being run, instead, by the son of a teenage single mother from Hawaii, the son of a barkeep from Ohio who became speaker of the House, and a miner’s son from Nevada who grew up in a shack with no running water before becoming majority leader of the Senate—none of them born into wealth, to put it mildly.
Eight: Piketty’s Choice
Piketty is shockingly unconcerned with the fact (which he acknowledges) that one of the driving forces of U.S. income inequality is rising global equality. The world’s poor are getting much richer, in large part because they are doing a lot of the sometimes backbreaking and manual labor that poor and middle-class people in rich countries once did. This clearly creates significant political and economic challenges for wealthy countries eager to maintain high domestic-living standards, but from the vantage point of someone who believes in universal economic rights, that is a small price to pay, no?
Thanks to capitalism, we have seen the single largest alleviation of poverty in human history. In 1981, 52 percent of humanity lived in “extreme poverty.” They could not provide for themselves and for their families such basic needs as housing and food. According to a recent study by Yale and the Brookings Institution, by the end of 2011, that number had fallen to 15 percent. They credit globalization, capitalism, and better economic governance (i.e., the abandonment of Marxism and similar ideologies). Even for economic nationalists, how is that not a staggering triumph for the ethical superiority of capitalism?
That is also the story of the West in the 19th and 20th centuries. Piketty might be right that whenever capitalism runs amok, the rich get richer faster than the poor get richer. Even so, the poor still get richer. The economic historian Deirdre McCloskey beautifully chronicles how for nearly all of history (and prehistory), the average human lived on the equivalent of $3 per day. What she calls the “great fact” of human advancement is that, thanks to the rise of democratic capitalism, that small figure no longer holds wherever democratic capitalism has been permitted to work its magic.
Even more troubling, Piketty places enormous emphasis on the role of the world wars as a great leveler of inequality and the primary driver of the postwar “golden age.” But ask yourself a question: If you were a remotely sane human in 1900 and you were given the choice of
(a) getting richer, though at a slower rate than the very wealthiest, so that in 1950 there was a lot of economic inequality but you and your kids were still much better off; or
(b) facing two horrendous and cataclysmic global wars in which whole societies were razed and a hundred million people died violently and you (along with the rich) were made poorer for it, and would die at a younger age,
What would you have chosen? It appears Piketty finds Option B awfully tempting. And that is madness.
Nine: Piketty’s Justice
In little more than a few throwaway sentences, Piketty asserts that confiscatory taxes on wealth are morally required as a matter of social justice. That an economist who has ensconced himself in the Parisian velvet of the social-democratic left for nearly all of his adult life believes such things is hardly surprising, particularly given his confidence that extreme wealth is essentially the arbitrary product of an “ideological construct.”
But this does not absolve him of the responsibility of making a case.
Piketty begins Capital in the Twenty-First Century with a quotation from the Declaration of the Rights of Man, the operating document of the French Revolution: “Social distinctions can be based only on common utility.” He concedes elsewhere in the book that the “social distinctions” to which it refers had to do with the hereditary “orders of privileges of the Ancien Regime” and not with economic inequality. Even so, he insists, we must breathe new life into the concept of “common utility”:
One can interpret the phrase more broadly, however. One reasonable interpretation is that social inequalities are acceptable only if they are in the interest of all and in particular of the most disadvantaged social groups. Hence basic rights and material advantages must be extended insofar as possible to everyone, as long as it is in the interest of those who have the fewest rights and opportunities to do so.
The notion that wealth—or, to put it another way, private property—is an arbitrary social distinction that can be erased for the betterment of the have-nots is incredibly radical. One might even call it Marxist (or at least “Marxy”). Given that, an argument on its behalf should be extended and defended. But aside from a perfunctory reference to the philosopher John Rawls’s “difference principle,” which says that justice should be weighted toward the least advantaged people in society, he does not do so. He is more than comfortable letting it sit as largely self-evident.
Where he breaks with Marxism is the means by which he would reward the have-nots: not the seizure of all property but the mere soaking of the rich in order to seize the returns on the means of production. Piketty’s obsession with tax hikes as a cure-all is almost a perfect mirror of how liberals see the supply-side obsessions with tax cuts. It is this idée fixe that allows him to summarily dismiss other proposals that might get us to his preferred destination without confiscating the ill-gotten gains of the well-to-do. For instance, Tyler Cowen and National Review’s Kevin D. Williamson point out that if Piketty’s assumptions about the long-term returns on capital are correct, then we would be crazy not to transform social security into a system of privately held investment accounts. Boldly expanding the Earned Income Tax Credit—which would necessarily increase the tax burden of the wealthy—might also do more to solve the problem, assuming it is a problem. An aggressive tax on consumption instead of income would, according to many economists, boost growth and have the added benefit of taxing the Gilded Age lifestyles of billionaires instead of merely taxing billionaires for the alleged crime of existing. But none of these has the satisfying bang of that 80 percent marginal tax rate—or, even more thrilling, the 10 percent “global tax” on billionaires’ filthy lucre.
And then, of course, there are the countless reforms that lie outside the realm of tax tables. The data are clear that marriage delivers roughly as much bang for the buck as going to college. Raising children in a stable two-parent home is a better guarantor of lifetime economic success than crude interventions by the state. But while Piketty is happy to opine at great length about the Gilded Age matrimonial lifestyles of the rich and famous, drawing deeply on Jane Austen and other sources to paint a vivid picture, he is uninterested in the same issues down the socioeconomic ladder.
Ten: Piketty’s Class
Why does Piketty reject the more romantic path of the classic Marxist? You know—“Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win”—that kind of thing?
One answer to this question explains not only Piketty’s thinking but the response to his work as well: Piketty is a member of the ruling class. Piketty’s way puts Piketty and his friends in charge of everything. A one-time adviser to the Socialist politician Ségolène Royal, a star academic and a columnist for Libération, Piketty is a quintessential member of what the economist Joseph Schumpeter identified as the “new class.” Schumpeter’s prediction of capitalism’s demise hinged on his brilliant insight that capitalism breeds anti-capitalist intellectuals. Educators, bureaucrats, lawyers, technocrats, journalists, and artists, often the children of successful capitalists, always raised in the material affluence of capitalism, would organize to form a class whose collective interest lay in seizing economic decisions from the free market. As Deirdre McCloskey writes: “Schumpeter believed that capitalism was raising up its own grave diggers—not in the proletariat, as Marx had expected, but in the sons of daughters of the bourgeoisie itself. Lenin’s father, after all, was a high-ranking educational official, and Lenin himself a lawyer. It wasn’t the children of auto workers who pulled up the paving stones on the Left Bank in 1968.” No, it was actually people like Piketty’s own parents.
There is a reason the most passionate foes of income inequality tend to be very affluent but not super rich, intellectuals like Paul Krugman and other journalists eager to set the threshold for confiscatory tax rates just beyond their own income levels. But this sort of class war—the chattering classes versus the upper classes—is only part of the equation. Power plays a huge part as well. A full-throated endorsement of classic leftist radicalism would set a torch to Piketty’s own tower of privilege. The State, guided by experts, informed by data, must be empowered to decide how the Rawlsian difference principle is applied to society. Piketty’s assurance that inequality “inevitably” leads to violence amounts to an implied threat: “Let us distribute resources as we think best, or the masses will bring the fire next time.” Once again the vanguard of the proletariat takes the most surprising form: bureaucrats (the true “rentiers” of the 21st century!). A revealing sub-argument running throughout Capital is that we need to tax rich people in ever more, new, and creative ways just so we can get better data about rich people! To borrow a phrase from James Scott, author of Seeing Like a State, Piketty is obsessed with making society more “legible.” The first step in empowering technocrats is giving them the information they need to do their job.
This is what places the Piketty phenomenon squarely in the tradition of Croly and, yes, Marx himself. Piketty’s argument, with its scientific veneer and authoritative streams of numbers, is a warrant to empower those who think they are smarter than the market—and who feel superior to those most richly rewarded by it.
1 As fate would have it, Piketty’s translator, Arthur Goldhammer, is also Tocqueville’s, and he assures us that the comparison is apt. “Because Tocqueville was such an assiduous researcher, who returned from his travels in the U.S. with trunkloads of documents filled with statistical data of all kinds, I have no doubt he would have found the data compiled by Thomas Piketty fascinating.” That may well be true, but it’s also irrelevant. Tocqueville probably found Plato fascinating, but that doesn’t mean he was a “19th-century Plato.”
2 Chief among them is New York Times columnist Paul Krugman, who has been leading an intellectual jihad on inequality for years and has written dozens of columns and articles explaining why we live in a new “Gilded Age.” Hence the unsurprising title of his lavish review in the New York Review of Books: “Why We Live in a New Gilded Age.”
Around the time he wrote the review, Krugman wrote on his New York Times blog that research showing that both liberals and conservatives suffer from confirmation bias—according to which one tends to believe facts supportive of one’s own worldview—didn’t ring true to him. After all, he mused, he couldn’t think of a major policy issue where he and his liberal friends hadn’t been right about everything.
3 By way of illustration, the super rich of 1987—Yoshiaki Tsutsumi, Taikichiro Mori, Sam Walton, Shigeru Kobayashi, Haruhiko Yoshimoto, Salim Ahmed Bin Mahfouz, Hans and Gad Rausing, Yohachiro Iwasaki, Kenneth Roy Thomson, and Paul, Albert, and Ralph Reichmann—are hardly household names today.
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Mr. Piketty’s Big Book of Marxiness
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Cut bait while there's still line.
Nearly three months ago, Donald Trump reaffirmed his status as a maverick who’s liberated from the conventions that shackled past presidents by giving a North Korean despot something North Korean despots have sought for decades. Today, the planned bilateral summit between Donald Trump and Kim Jong-un has collapsed. In the intervening weeks, those conventions of which Trump is so disdainful demonstrated their value.
In retrospect, it is a marvel that the prospect of a summit between the American president and the scion of the Communist dynasty in Pyongyang was taken so seriously. Initially, it took Donald Trump a whopping 45 minutes to accept Kim’s overture. In that timeframe, surely complex matters such as American grand strategy, Kim’s domestic position, our complex and conflicting regional alliances, and achievable objectives got short shrift.
Expectations for the summit were unreasonably high almost from the outset. Those high hopes were made physically manifest in the form of 500 collector’s coins commemorating the presumably historic event. For a time, though, those expectations did not seem entirely fanciful.
North Korea’s openness to secret contacts with Trump administration officials, including the CIA director and vice president, were welcome changes of heart. When Trump tweeted about Pyongyang’s willingness to denuclearize, North Korea did not correct him. The Democratic People’s Republic of Korea even appeared to drop its opposition to military drills on the Peninsula and the U.S. military presence in South Korea. Mutual concessions seemed to mark the start of a new era. For a time, progress seemed possible. But that progress was only illusory.
This week, North Korea formally closed its nuclear test site. But North Korea’s test site collapsed in October of last year, taking as many as 200 trained professionals with it. Closing a defunct installation isn’t much of a concession. Nor, for that matter, is the surrender of American hostages. Indeed, the only reason to take hostages is to be able to give them up in a negotiation to generate concessions from your interlocutor without having surrendered anything of strategic value. The “peace treaty” that South Korea negotiated with North Korea is likely invalid because the U.S. and China—both parties to the 1953 cease-fire—were not part of the process. Recently, North Korea has rediscovered its opposition to military drills on the peninsula and its commitment to maintaining a nuclear arsenal, and communications between Washington and Pyongyang had broken down. The only thing the two parties agreed upon after ten weeks of preparatory work was on the summit itself. That is a recipe for disaster.
With no clarity on core objectives, the best that anyone could have hoped for from this summit was amicable ambiguity. But the more likely scenario was confusion, mutual hostility, and the closing off of lines of communication. It was a mark of maturity for the president to cut his losses before any irreplaceable American interests were sacrificed. That is, after all, how summits like these tend to end.
There are not many historical examples of bilateral summitry between two hostile powers, but the examples that we have to draw lessons from are not encouraging.
“I have never been so proud of my President as I have been in these sessions and particularly this afternoon,” Secretary of State George Schultz told reporters moments after Ronald Reagan’s summit with Mikhail Gorbachev in Reykjavik, Iceland, failed. Schultz put a positive spin on this summit’s failure, just as Reagan officials had the year earlier when a similar meeting at Geneva, Switzerland, did not produce anything other than an exchange of familiarities. But Reagan’s expectations for the summit were not met, and we are all better off as a result. As I wrote in April:
Had Reagan succeeded on his terms, the deal struck between the two powers in Iceland would have badly strained American relations with its nuclear-armed European allies and provided an economic lifeline to Moscow that might have postponed the Soviet Union’s implosion. In retrospect, the president’s willingness to walk away from the table set the stage for one of the most astonishing events of the 20th Century: the peaceful end of the Cold War and the fall of European communism.
The perils of a failed summit have proved all too real. John F. Kennedy’s 1961 meeting with Soviet Premier Nikita Khrushchev in Vienna, Austria, stands as a warning to headstrong presidents seeking to leave their mark on the world. Kennedy studied closely the cataclysmic miscalculations made in Munich in 1939 and believed himself capable of avoiding the traps into which Neville Chamberlain had fallen, but he made his own unique mistakes. The young president allowed himself to be harangued by Khrushchev, which left the Soviet leader convinced of his weakness. “It was just a disaster,” said Assistant Secretary of State Paul Nitze. “I’m scared to death about what will happen next.” His trepidation was warranted. Within two months, Khrushchev ordered the walling in of East Berliners. One year after that, Soviet high command approved the deployment of nuclear missiles to Cuba, touching off the most dangerous nuclear crisis the world has ever known.
The collapse of a fraught summit between the leader of the free world and the abhorrent head of one of the world’s most repulsive regimes does not signal the end of diplomacy. Indeed, it is a hopeful sign; a failed summit between the two countries’ principals might have closed off pathways to further negotiations. Negotiations between functionaries at lower governmental levels do not carry that risk.
Nor should Western diplomatic professionals worry that Trump has undermined Kim’s domestic position to the point that he will have to adopt a more confrontational posture and appease his regime’s hardline elements. A confrontational North Korea is the status quo ante; not optimal, but not an unknown quantity either. From Soviet generals to the Iranian mullahs, Westerners are frequently in thrall to the idea that a given interlocutor is surely preferable to uncompromising alternatives waiting in the wings. That is the appeaser’s construct. A deal that preserves the longevity of this criminal regime without a verifiable and long-term solution to the threat that a summit is designed to address is far worse than no summit at all.
Trump deserves credit both for being open to outside-the-box solutions to the crisis on the Korean Peninsula and for recognizing when it was time to cut his losses on a bad idea. In the end, if maximum pressure on Pyongyang, Beijing, Moscow, and the rest of the rogues who support this disgraceful state convinces the Kim regime to make some hard choices about its survival, Trump may actually deserve that Nobel Prize.
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Podcast: The DPRK and the NFL.
The Trump-Kim meeting is off, and the question is this: If the announcement of thawing relations with North Korea helped Trump’s approval rating, will this hurt or harm it? And why won’t Trump trumpet the bipartisan legislative successes of the past few weeks? Give a listen.
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The great American novel.
Why won’t the child just listen? Why won’t she come to reason? Where did I do wrong with her?
Parents of difficult children have asked themselves such questions since time immemorial. For all of modern psychology’s advances, today’s parents are no more likely to have good answers than did their forebears a hundred or a thousand years ago. Indeed, modernity itself has compounded the ancient problem, by breaking taboos around honoring mother and father and spawning new reasons for children to rebel against parental order that would have been inconceivable under premodern conditions.
This tangle of themes is at the heart of Philip Roth’s American Pastoral, perhaps the darkest and most acrid novel about parenting in all of American letters.
Roth, who died Tuesday at age 85, never had children. Yet he wrote perceptively and with great empathy for Seymour “the Swede” Levov, the novel’s protagonist, whose love for his daughter, Merry, knows no bounds and is utterly unrequited. Handsome, affable, responsible, and wealthy, the Swede does everything right by the standards of the midcentury American bourgeoisie. He manages a successful enterprise, procures a trophy wife, owns a tasteful estate in the Jersey suburbs, and fathers a girl who brings ruin to it all. There is a rage within Merry, which, as she grows older, explodes (quite literally) in political radicalism before she smothers her inner flames under Far-Eastern asceticism.
Why does Merry go wrong? What is the source of her rage? She isn’t as beautiful as her mother, Dawn, for starters. Dawn is vapid and cold, and she holds Merry as a judgment against her husband; their marriage is loveless. Then there is Merry’s severe stuttering, which speech therapy fails to alleviate for many years. The Swede’s love doesn’t suffice to overcome these natural disadvantages. Nor can the father’s love keep away the ferment and collective rage roiling America in the late 1960s: race riots, assassinations, all manner of sexual and cultural degradation. Merry is disordered because disorder is in the American air she breathes.
So it is that, five years after Merry commits a Weather Underground-style terrorist attack in the name of stopping the American war machine in Vietnam, the Swede finds Merry living in an almost animal-like state on the streets of Newark. Merry is now a fanatical Jainist, filthy and wafer-thin. Having committed bloody acts of terror, she has now adopted the opposite extreme–total pacifism, veganism–perhaps as a form of expiation. The father-daughter exchange that follows makes for excruciating reading for anyone who has ever loved a child:
“You’re not my daughter. You’re not Merry.”
“If you wish to believe that I am not, that may be just as well. It may be for the best.”
“Why don’t you ask me about your mother, Meredith? Should I ask you? Where was your mother born? What is her maiden name? What is her father’s name?
“I don’t want to talk about my mother.”
“Because you know nothing about her. Or about me. Or about the person you pretend to be. . . . Tell me why you’re pretending to be my daughter!”
“If I answer the questions, you will suffer even more. I don’t know how much suffering you want.”
Though set in the turbulent 1960s, American Pastoral has a striking contemporaneity. We, too, are living through an age of intense intergenerational conflict. Today’s aging Boomers are as mystified by the zeal for abstract justice and romantic politics among the young as Roth’s Swede is by Merry’s Marxist and Jainist turns. True, Millennials aren’t, for the most part, setting off bombs at post offices and police stations.
But they mob their professors, ruthlessly discipline and punish their peers online, and take up all manner of secular substitute religions, from mindfulness to “clean eating” to identity politics. They are hungry for order and solidarity and transcendence. Their parents, who only know how to fight battles of cultural and sexual liberation, are no more capable of nourishing that hunger than the feckless, well-intentioned, all-too-sensible Swede.
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Both sides of the issue.
Canadian Prime Minister Justin Trudeau is “appalled.”
Crowned the “free world’s best hope” in 2017 by Rolling Stone, Trudeau has, since then, cut his foreign policy chops: heavy on gender equality, feminism, environmentalism and relatively light on security and geopolitics. He fancies soft-lens moments when he can tear up on cue, fun parades, dress-up extravaganzas and breezy feel-good stuff, all of which is reflected in his photo-posturing and official statements. His election slogan, when running against PM Harper in the 2015 federal election, was to promote “sunny ways.”
This naïve cheer has yet to resonate in the Middle East and, in particular along the Israel-Gaza border. Since withdrawing from the Gaza Strip in 2006, Israel has watched the Dante-esque destruction of what was a robust economy. Under Hamas rule, the Strip has become a theocratic terrorist state. Significant sums of foreign cash donated to develop and support civilian infrastructure are diverted to build terror tunnels, pay terrorist salaries, and produce of all manner of weapons. Incitement to violence against Jews and Israelis is fierce, endemic, and unrestrained. And every so often, a full-blown war breaks out.
Perhaps unaware of the long, complex, tragic backstory, Trudeau blasted Israel in a statement issued on May 16: “Canada deplores and is gravely concerned by the violence in the Gaza Strip that has led to a tragic loss of life and injured countless people.”
He pulls no punches, focusing on one individual who was injured in both legs by Israeli sniper fire at the border: “We are appalled that Dr. Tarek Loubani, a Canadian citizen, is among the wounded–along with so many unarmed people, including civilians, members of the media, first responders, and children.” For a leader who crows about his strong, principle-based support for Israel this is quite the invective. What seems to have stoked his previously dormant ire is the fact that Dr. Loubani was injured by Israeli fire on Monday, May 14, which was a very busy day: the 70th anniversary of the declaration of the state of Israel; the official ceremony opening the American Embassy in Jerusalem; and “Naqba” or “Disaster” Day, commemorated each year by Palestinians.
Each Friday since March, Hamas has staged a “March of Return” at multiple locations along the border fence. Billed as a “peaceful protest,” crowds tend to swell to the tens of thousands following midday prayers, during which Imams fire up the men to annihilate the Zionist occupiers and restore Palestinian and Arab honor.
Hamas recruits protest participants onto buses waiting outside mosques, throwing in financial incentives for attending, hoping to draw women and children as “extras” in this macabre, serial event. Many of the men show up with knives, Molotov cocktails, wire cutters, and other weapons and incendiary devices. A recent innovation is fire kites, which are launched and intended to burn Israeli farmers’ fields, and do. Pyres of car tires are lit, creating a dense, black, toxic screen to provide cover for physical border breaches and confuse Israeli snipers.
These “peaceful” protesters boast openly about their violent intentions, parroting Hamas leaders who, aside from one or two brief cameos well back from the fence, tuck away in their fortified bunkers under Shifa Hospital in Gaza City and other safe havens in the Strip.
Hamas leaders have exhorted these “peaceful” protesters to tear down the border fence and then proceed to remove various bodily organs from Israelis they kill and eat them. They tell Gazans, and anyone paying attention, of their intention to foment chaos at the border. Ideally, the smoke and confusion would facilitate a goal they commend openly: the capture of one or more Israeli soldiers, and, if things go particularly well, perhaps a murderous romp in one of the many civilian villages within a few hundred meters of the border.
For those martyred in this jihad to murder Jews and destroy Israel, Hamas assures, there is an exalted place in Paradise.
Now, all this bluster may sound and seem “peaceful” to PM Trudeau, but it is quite the opposite. There have been multiple fence breaches by terrorists armed with more and less crude weapons. It isn’t necessary to have a tank to kill. Knives, meat cleavers and grenades do the trick, as Israelis know well. This is Hamas, for goodness sake. Read their Charter. Follow their “media.” It’s all there. Zero ambiguity. And they mean it.
Why, Trudeau must be asking, does the IDF not resort to less extreme measures? Live ammunition, he has surely been briefed, is a last resort. Tear gas. Rubber bullets. Water cannons. Even leaflets, social media announcements and radio broadcasts warning people to stay well back from the border—all have been ineffective. And, for that, there is one reason: Hamas. Trudeau’s rage would more appropriately be directed at Hamas incitement, disregard for civilians and commitment to a hateful, murderous ideology.
And what about the “blockade” of Gaza, attributed solely to Israel? Reality check: Egypt enforces a much stricter blockade on the Strip, allowing almost nothing through. Israel, on the other hand, permits passage of truckloads of goods daily: medical supplies, food, even “dual use” materials like cement, gasoline and tires, which are more often than not taken for civilians and allocated to terrorist infrastructure.
Twice in recent weeks, “peaceful” protestors have torched the border checkpoint in Israel for the transfer of goods. It is destroyed.
The Gaza-Israel border is very hostile. Hamas has, in the last decade or so, dug 32 terror tunnels—complete with AC and internet wiring—with the sole intention of burrowing into Israel to launch murderous terror attacks. Jihad. This is not a nuanced struggle.
On this–all of this–Trudeau is silent.
Which brings us back to Dr. Loubani, the Canadian physician who has had at least one previous brush with misfortune in the region. During the protracted street violence in Egypt in 2013, following the coup in which General Sisi ousted Muslim Brotherhood leader Mohammed Morsi, Dr. Loubani was in Cairo with a film professor from Toronto, who was also a strident anti-Israel activist. En route to Gaza to volunteer in a hospital, the travelers took a travel pause in Cairo. One afternoon, as they tell it, they happened, coincidentally, upon a large, violent demonstration in Cairo’s Tahrir Square. Hundreds of protesters were arrested and jailed, among them the two Canadians.
Friends and family of the Canadian duo launched a vigorous public relations campaign to draw attention to their plight and pressure the Canadian government to advocate with Egypt for their release. They went out for a walk, their advocates said, and were enjoying ice cream cones. Before they knew it, were surrounded by mayhem. Once there, they felt compelled to administer first aid to injured protesters.
As they languished in prison, however, the initial version gave way to a more complex story. It seems that Loubani and his friend had sophisticated camera and recording equipment with them. Not necessarily eyebrow-raising for a film professor. More unusual, however, would be that they thought to grab the pro gear when heading out for a jet-lagged stroll to get ice cream. (And then there’s the small matter of military dictatorships tending to be sensitive about having violent rallies photographed.)
However, the really interesting part is what Loubani arranged to have his father share with the media while he was still in Cairo’s notorious Tora prison: that they were also in possession of drones. Why? To ferry medical supplies to and from hospitals in Gaza, of course. That drone twist certainly piques one’s interest. There is only one use for drones in the Gaza Strip, and it is neither peaceful nor in any way related to humanitarian or hospital work.
On Monday, May 14, Naqba Day to Palestinians, Dr. Loubani says that he was standing near the border among a cluster of orange-vested medics during a lull in the chaos. He was wearing green scrubs from the Ontario hospital where he works. After being injured by Israeli sniper fire in both legs, Loubani asserted that he was likely targeted by Israeli snipers. (The IDF advises that it is investigating the incident but has no specific information at the moment.)
In light of this backdrop, Trudeau continued to blast Israel: “Reported use of excessive force and live ammunition is inexcusable. It is imperative we establish the facts of what is happening in Gaza. Canada calls for an immediate independent investigation to thoroughly examine the facts on the ground—including any incitement violence and the excessive use of force.”
What we do know is that 50 of the 62 individuals killed that day at the border clash by Israeli sniper were Hamas operatives. We also know that Hamas regularly uses UNRWA schools, hospitals, and clearly marked ambulances to ferry fighters and weapons around the Strip. This is supported by documentary evidence collected over the years. Trudeau’s fury would be more appropriately directed at Hamas for its unconscionable leadership, encouraging extreme terrorist violence, and ongoing incitement against Jews and Israel. Hamas is, after all, listed as a terror organization in Canada and elsewhere for good reason.
The backlash to Trudeau’s statement was strong and quick. He seems, perhaps unwittingly, to have stumbled onto a hornet’s nest and turned to two Jewish MPs to clean up his mess—Michael Levitt and Anthony Housefather, representing electoral ridings in Toronto and Montreal, respectively, with large Jewish populations. They issued a peculiar statement. While not directly critical of the prime minister, they unequivocally condemned and held Hamas responsible for the deaths and injuries at border clashes.
It seems that Trudeau tapped two rookie Liberal MPs, of a total of 184 in his caucus, to be the fig leaves for what seems to be a rather bifurcated and confusing policy on Israel. Some observers speculate that Trudeau hopes to use this clumsy doublespeak to allow him to be “correct,” depending on where and how the chips fall. By dereliction, the prime minister has signaled that the Israel-Gaza issue is a “Jewish” one, as opposed to one of the most important geopolitical crises in the world. Hamas, like Hizballah, Syria, the Houthis, is yet another Iranian proxy. It is disturbing that two Jewish MPs, representing “Jewish” ridings, are the only ones in the Trudeau government speaking out in support of Israel.
On social media, Mr. Housefather, in particular, refers to Canada’s consistent pattern of supporting Israel in UN votes as clear evidence of the prime minister’s true support. Whereas UN votes are important, surely, so are Trudeau’s public comments explaining his support for Israel. He tends to express himself in a sweeping, imprecise manner, oft-repeating distaste for the obsessive bullying of Israel in international forums. All of which is laudable. And he likes to say things about what good friends Canada and Israel are, but that even good friends can, sometimes, disagree.
Indeed, and those are likely the lines he trotted out when he spoke on the telephone with Israeli Prime Minister Netanyahu one day after his written thrashing of Israel following the Loubani incident. Netanyahu’s office declined to comment on the exchange, but Trudeau issued a short readout on the call, reporting that he had expressed “thanks for the consular assistance Israel is providing . . . reaffirmed Canada’s call for a neutral process to ascertain how the actions of all the parties concerned . . . contributed to the events of May 14, including the reported incitement by Hamas . . .” And that they “agreed on the importance of addressing the economic crisis in Gaza and jointly affirmed the close and abiding friendship between Canada and Israel.”
In other words, PM Trudeau did nothing to walk back his perfervid criticism of Israel other than to acknowledge, as a possibility, “reported incitement by Hamas.” As if there is any doubt. What Prime Minister Trudeau does not say, in this case, is far more important than what he does.
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When Washington works.
It’s understandable that cynicism has become the default approach for average Americans navigating the political environment. Interpreting events as the product of a raw power contest rather than a clash between competing principles is not only simpler but often correct. Occasionally, though, a purely cynical understanding of how politicians conduct themselves can lead observers astray. Sneering pessimism alone would not have led anyone to conclude that bipartisanship would be breaking out in Washington in an election year. But, to a degree, it is.
In March, two-thirds of the U.S. Senate voted to repeal aspects of the Dodd-Frank Wall Street reform bill passed in the wake of the mortgage market’s collapse and the ensuing economic downturn. That bipartisan sentiment did not abate when the bill reached the House yesterday, where 258 members—hardly a party-line vote—approved the regulatory rollback measure. Predictably, progressive politicians allege that the vote was the culmination of a treacherous scheme hatched in backrooms between nefarious politicians and mustache-twirling special interests.
“Big banks have spent millions of dollars trying to roll back the rules we put in place after we bailed them out ten years ago,” Senator Elizabeth Warren wrote. “Today, they got what they paid for.” Rep. Keith Ellison called the vote indicative of America’s “full-on lurching towards plutocracy.” For Rep. Yvette Clarke, the rollback of Dodd-Frank regulations will facilitate “discrimination against African-Americans, Latinos, and other minority groups.” For Bernie Sanders, to whom everything looks like a nail, this was another indication that it was time to “break up the largest financial institutions.”
It is hard to square these hyperbolic reactions with the effects of this soon-to-be law. The bill reduces the number of large banks subject to onerous regulations imposed on them in 2010 and unburdens smaller banks with less than $250 billion in assets from complying with Dodd-Frank regulations. Progressive regulators have lamented the move as one designed only to improve the lots of America’s richest financiers, but this is a political message divorced from reality.
Critics of Dodd-Frank always noted that the risk to the foundations of the economy were not banks with relatively small assets but major institutions like JP Morgan Chase or Bank of America, which have well over $1 trillion in assets. It was the smaller community banks with $50 billion in assets and less that make up the vast majority of American financial institutions and once accounted for most small business loans. The balance has recently shifted in favor of big banks, though, as the regulatory environment has made it harder for smaller institutions to compete. Those institutions are the most burdened by the Consumer Financial Protection Bureau’s compliance costs, reporting requirements, and lending restrictions.
“Dodd-Frank costs the banking system a staggering 83 million man-hours and $39 billion in compliance costs over its lifetime,” historian and COMMENTARY contributor John Steele Gordon wrote recently. Ironically, the only institutions that could easily absorb the costs of regulations favored by progressives like Warren are the institutions that were once deemed “too big to fail.” As Gordon noted, the effect of Dodd-Frank was to direct more assets into fewer hands and make the financial institutions the reformers said were already too big bigger still.
This victory for common sense didn’t just happen overnight. The bipartisan consensus around the notion that Dodd-Frank was a well-intentioned debacle was forged over the span of years. Conservatives have been making their case against the stifling regulatory mechanisms in Dodd-Frank for nearly a decade. They campaigned on the issue and pursued incremental legislative strategies designed to address the problems they enumerated. What’s more, all of this occurred in the plain sight. Progressives who write the rollback of their achievement off as the flowering of some kind of conspiracy are doing their supporters no favors. That is paranoia, not politics.
It’s not just conservatives who are celebrating a hard-won victory today. Yesterday, the GOP-dominated House of Representatives passed a bipartisan bill aimed at improving the conditions in prison by a staggering 360 to 59 votes. The bill directs the Bureau of Prisons to increase access to and incentives to engage in inmate programs like education and vocational training, which reduce recidivism rates. If passed, the bill would also prohibit shackling pregnant inmates, provision feminine hygiene products, and limit the distance prisoners can be incarcerated to a maximum of 500 miles from their residences. The bill may not survive in the Senate as it is, but not because it goes too far. Rather, it doesn’t go far enough. Senate Judiciary Chairman and Republican Chuck Grassley told reporters that prison reform could not survive as is unless it includes broader sentencing reform.
Given Donald Trump’s tough-on-crime persona during the campaign and his choice for attorney general, few might have predicted at the start of the president’s term that Republicans would be charging ahead with a prison reform bill with Trump’s consent. Prison reform organizations are suspicious of the measure because it is not a comprehensive solution to the matter of over-incarceration, and the bill’s carve-outs for certain prisoners including immigrants raise civil libertarian eyebrows. But the bipartisan consensus about the necessity of criminal justice reform is bearing fruit, and those seeds were planted years ago by libertarian and progressive reformers. That consensus is also the product of years of labor by activists who refused to make the perfect the enemy of the good and who never scoffed at politics as the naïve preoccupation of the unenlightened.
The liberal and conservative activists who wallow hopelessly in the perception that the political process is irreparably broken should rejoice. Bipartisanship is not dead. Compromise is not impossible. These phenomena aren’t simply willed into existence on a whim; they take years and hard work to make manifest. Anyone who tells you otherwise is selling something.