Piketty’s main argument on the world’s economies, in highly condensed form, is that the rate of return on capital r (annual corporate profits divided by the market value of capital stock) exceeds the rate of growth of domestic economies g (the average annual change in net national income). As a result, income for the wealthy grows so that inequality (measured by distribution of either income or wealth) continues to grow. Further, where formation of capital is through inheritance rather than saving, this inequality is reinforced. Piketty proposes a tax on capital as a way to redress the balance and limit inequality.

The African continent, while often neglected in economic studies, is a region of growing population and economic transformation, though not of impressive growth. The design of this chapter is to assume considerable validity in Piketty’s assertions for the leading global economies, and to ask to what degree these assertions apply to Africa: to individual nations or to the continent as a whole. Is it the case that rates of profit in Africa exceed rates of economic growth? Is the level of inequality and the growth of inequality in Africa greater or lower than for leading economies? More generally, in what way does Africa contribute to global inequality?

We review the application of Piketty’s thinking on Africa and emphasize three main points. First, African levels of inequality seem generally high, and the temporal shifts of inequality in the undercapitalized countries of the African tropics seem to differ significantly from major economies. Our initial analysis suggests that inequality in African nations has been higher than for the major world economies highlighted in Piketty’s analysis and, in addition, that the shifting temporal patterns of inequality for most of Africa differ from patterns for leading economies. In many African economies, the peak of income inequality occurred around the 1960s, the very period of the lowest inequality in Europe and the US. Additionally, while inequality has risen in African economies from the 1990s, most African countries have avoided the rapid increase in income inequality that marked the economies in Piketty’s analysis.

Six decades ago, Nicholas Kaldor put forward a set of stylized facts on growth and distribution for mature industrial economies. The first and most prominent of these was the constancy of the share of capital relative to that of wealth in national income. At about the same time, Simon Kuznets put forward a second set of stylized facts: he stated that while the interpersonal inequality of income distribution might increase in the early stages of development, it declines as industrialized economies mature.

These empirical formulations brought forth a generation of growth and development theories, whose object was to explain the stylized facts. Kaldor himself presented a growth model that claimed to produce outcomes consistent with constancy of factor shares, as did Robert Solow. Kuznets also developed a model of rural–urban transition consistent with his prediction, as did many others.

KALDOR–KUZNETS FACTS NO LONGER HOLD

However, the Kaldor–Kuznets stylized facts no longer hold for advanced economies. The share of capital as conventionally measured has been on the rise, as has interpersonal inequality of income and wealth. Of course, there are variations and subtleties of data and interpretation, and the pattern is not uniform. But these are the stylized facts of our time. Bringing these facts to centre stage has been the achievement of research leading up to Piketty’s Capital in the Twenty-First Century.

It stands to reason that theories developed to explain constancy of factor shares cannot explain a rising share of capital. The theories developed to explain the earlier stylized facts cannot very easily explain the new trends, or the turnaround. At the same time, rising inequality has opened once again a set of questions on the normative significance of inequality of outcomes versus inequality of opportunity. New theoretical developments are needed for positive and normative analysis in this new era.

What sort of new theories? In the realm of positive analysis, Piketty has himself put forward a theory based on the empirical observation that the rate of return to capital, r, systematically exceeds the rate of growth, g; the famous r > g relation.

Rising inequality in the distribution of income in advanced economies became a widely debated issue in the wake of the financial crisis that began in 2008. The Occupy movement and demonstrations in leading global financial centres against the concentrated wealth of “the one per cent” reflected a widespread feeling that the bankers and financiers whose activities had prompted the crisis not only failed to accept any responsibility, they also suffered little from its effects, since troubled financial institutions across the world were propped up by national governments and their taxpayers. In this context, the novelty of Thomas Piketty’s Capital in the Twenty-First Century lay in his argument that an increasing polarization in the distribution of wealth and incomes was not simply associated with the wave of financial market liberalization that had taken place since the 1990s, culminating, but not ending, in the crash of 2008; but was instead part of a much longer-term, and global, trend. He presented his findings as a revision of the “Kuznets curve”: the idea that while industrialization in the nineteenth century had been characterized by increasing income inequality, during the first two-thirds of the twentieth century polarization had diminished, a sequence of events represented by an inverted U-shaped curve of income distribution over time.

Further, Piketty’s prime focus appeared to be on wealth rather than income, broadening the base of his analysis. The broad aggregates that he deploys conceal a great deal: who the holders of great wealth are, how those people came by their wealth, and of what that wealth consists; the range of incomes around the median, and their distribution by race, age and gender; the differing ways in which households are poor, and the differing costs of being poor between countries in terms of access to clean water, housing, health care and education. All the same, a focus on the existing distribution of wealth and income within a national economy as part of a long-run trend is a start, and the interest that Piketty’s book aroused demonstrated the extent of public concern.

Modern economists have generally paid relatively little attention to wealth, inequality and distribution; Piketty has moved these concerns up the public agenda, but his work is nonetheless rooted in research and publication by economists reaching back to the 1960s.

In closing this brief work, we want to call the reader’s attention to a few foundational questions. Our intention is simply to suggest a way that the discourse initiated herein might continue. We have encountered people and ideas that, while differing among themselves, have made up the harmonious blend of notes and colours of this short book. As the Canadian economist and historian Jacob Viner liked to say, “Economics is what economists do” and the civil economy is what civil economists did and do, always keeping well in mind that the civil economy is not a school, or a research programme, much less an ideology. Rather, it is a paradigm, or a particular way of seeing reality.

We like to live out and think about the civil economy as a process, an inclusive and heterogeneous cultural movement, whose protagonists are not the adepts of a “church”; rather, they are people belonging to different historical periods, traditions and schools of thought, who are academics, entrepreneurs and young people, but who all hold a common understanding of the economy as civil engagement, pluralistic and attentive to life – not dogmatic, interdisciplinary and historical. Thus the writers and thinkers we have included in this book are neither the only, nor the most obvious, or classic (considered by an entire tradition as the foundational figures). Not all contemporary authors in the civil economy would agree in considering our selection as the founders of the civil economy, apart from Genovesi, and perhaps Dragonetti.

This pluralism of sources is a protection against an ideological and sectarian drift that every movement or cultural process faces. The cultural biodiversity of the civil economy is at once its strength and its weakness. On the one hand it enriches the civil economy; on the other it makes the process of defining strong identities for the actors involved slow and complex, it exposes it to abuse, and it requires working within a chaotic reality in constant movement – fortunately, a movement that is still in full development.

As we have outlined, one of the central themes of the civil economy tradition of thought is interpersonal relationships. Economists and social scientists do a disservice to themselves and to others if they continue to ignore intersubjectivity in explaining economic phenomena.

Thomas Piketty has put long-run shifts in inequality, and their importance, back at the centre of economics. By addressing changes in income and wealth distribution over more than two centuries and across several parts of the globe, he has also given an important new impetus to the study of economic history. The first part of this chapter provides a commentary on Piketty’s major achievement, seeking to draw out some of the implications of arguments made in the earlier chapters of this book. More importantly, a critical approach to Piketty’s research and thesis is a necessary prelude to exploring the ways in which his work opens up new areas of debate for economists, economic historians and social scientists in general. In the second part of the chapter, we consider the “Piketty opportunity”: a chance to question and to rethink some long-established and entrenched approaches, measures, assumptions and methods of economic history and economics. Comparative measures of the success or failure of economies, growth theory, definitions and measures of capital and wealth, technological innovation, ideas about convergence and divergence, and the central importance of politics and ideology in economic change can all be placed in the spotlight created by Piketty, with salutary implications.

PIKETTY’S ACHIEVEMENT: A COMMENTARY

Inequality: elements and trajectory

Piketty forces us to put the meaning and measurement of inequality, as well as its trajectory, at centre stage when discussing the economic history of advanced economies over the past two centuries. In considering his achievement, one must be clear about the components of primary income and wealth inequalities. They comprise a flow (income) and a stock (wealth), although the latter might largely be seen as the result of historical and intergenerational income flows, hence the importance given to the former. But wealth differentials are generally higher than differentials in income, and this seems to have been increasingly the case in leading economies since the 1980s or so (as it was for sure in most economies of the nineteenth century and earlier).

Thomas Piketty’s Capital in the Twenty-First Century fully merits being the object of so much international attention and being the main topic of the present volume. While a critical approach is needed, and while many weak points of the book, or even errors, are discussed in this volume, I cannot start this commentary without asserting my full agreement and concurrence with many points of departure adopted by Piketty.

THE APPROACH

The central question of the book is very relevant today across the globe. Is capitalism always leading, as Marx suggested, towards a steadily increasing concentration of wealth, income and power? Or, on the contrary, are the forces that counteract these trends likely to prevail, making capitalism compatible with democracy and the ideal of an egalitarian society, as the badly interpreted Kuznets curve suggests?

When tackling this question, Piketty adopts some points of view that awaken my enthusiasm: he makes an effort to present an innovative theoretical framework; he bases his conclusions on impressive empirical work, accumulated by large numbers of scholars and with an important degree of methodological ingenuity; and he shows serious commitment, involving himself in controversial policy recommendations that are certainly not likely to be acceptable in the eyes of powerful actors in the economy, in politics and in academia. In short, he offers a precise definition and description of the problem, a theoretical framework to approach and explain it, and some courageous policy recommendations.

The way in which Piketty understands what economic science is about is entirely accurate. Departing from an abstract definition of a perfectly functioning economy and discussing the way in which we should approach this abstract model, the strategy is to see how things really work, what the real trends are, and to try to explain them with a set of tools that largely surpass what is often considered as pure economics. This necessarily involves knowledge generated by other social sciences. Using these different sets of tools is the way in which relevant, penetrating and realistic theories, deeply rooted in historical contexts, can be constructed.

The focus of Thomas Piketty’s analysis of modern capitalism is the tremendous growth during the last forty years or so of inequality in income and wealth in the advanced industrial economies. However, he places this forty-year period in the context of a much longer time frame; he argues that this divergence in the distribution of income and wealth is far from being a deviation from trend: it in fact represents a return to a normal path of development following a prolonged deviation during the twentieth century, especially during the long post-war boom ending in the mid 1970s. In approaching growth and inequality in this way Piketty has returned to the principal preoccupations of the political economy of the early nineteenth century: an attention to the long-term aspects of accumulation, distribution and growth associated with the writings of Robert Malthus, David Ricardo, John Stuart Mill and, of course, Karl Marx. Modern economists are on the whole forward looking, seeking to identify the trend of the next few years on the basis of data that has for the most part only been available since the middle of the twentieth century. While economic historians have sought to project a modern statistical framework backwards into the remote past, economists seek to extrapolate patterns from current data. In part, the attention that Piketty’s book has received is owed to the way in which he takes the standard analytical framework used by modern economists but looks back, rather than forward. However, he shares with modern economists a paramount interest in the policy framework of the present and immediate future. Using masses of long-period data – and betraying the French origins of his work by his reliance on long runs of tax and estate duty data dating back to the early nineteenth century – he presents a new profile for the accumulation of capital during the process of industrialization and urbanization that created the wealth of today’s advanced industrial nations. While he rejects the inferences about long-term growth drawn by nineteenth-century political economists, he nevertheless follows their lead in seeking to establish long-term laws of development (if not of motion) in modern economies.

Thomas Piketty’s Capital in the Twenty-First Century has been celebrated for bringing inequality to the forefront of political and policy discussions in the US and around the world. From the standpoint of the economic historian, the book, along with several earlier articles by Piketty and others, is also to be commended for compiling detailed data on the evolution of income and wealth across a number of nations, with a focus upon France, Britain and the US. France especially provides sources that are not found elsewhere, dating from the period of the French Revolution and allowing for a remarkable reconstruction of wealth and its distribution. For Britain and the US, abundant material allows for a detailed study of wealth and income over the long run.

In the case of India, Piketty has, along with Abhijit Bannerjee, assembled data on the evolution of top incomes from 1922 to 2000. Drawing upon income tax returns, which they note have several serious limitations, they identify some major shifts in the share of total income going to top earners. They find that this share followed a U-shape, with a decrease from the early 1940s until the early 1980s, when it began to increase. The fall in top incomes took place during the Second World War and the socialist planning period in India, while the rise begins about a decade before the implementation of neoliberal policies but accelerates with that economic policy shift.

Data on income and wealth comparable to what Piketty provides for France, Britain or the US will never be assembled for India for the period before 1922. The sources that provide the empirical material for such an exercise in France and elsewhere do not exist for India, and there is no way to get around this limitation. As a result, we will never be able to construct for the Indian case the striking graphs which trace the evolution of income and wealth that Piketty provides for nineteenth- and twentieth-century France. Even more importantly, there are critical forms of Indian wealth that are not amenable to the quantification in which he engages.

We have worked in the area of the civil economy for many years. We published a large work on this theme in 2007, which was a time of growth and enthusiasm for the new financial economy that promised widespread and inclusive well-being. Actually, even then we were pointing out the serious limits of a vision of the market and a conception of the company that was based on the individual rather than on the person, on compulsively seeking wealth rather than public happiness, and forgetting and destroying such fundamental economic goods as relational goods, common goods, and gratuitous goods. The crisis that exploded in 2007–8 only reinforced our diagnosis of the malady of a particular capitalist economic system that is wholly centred on rent seeking. The crisis confirmed yet again that the classic tradition of the civil economy still has a future for Europe and for everyone.

As well as witnessing the grave crisis of debt-based financial capitalism (private debt in the United States and public debt in Europe) the past ten years have been an important time for the civil economy. An unintended consequence of the crisis was to create cultural conditions suitable for understanding the economic, social and ethical relevance of a different, sustainable vision of the economy and finance. The “civil economy” is a tradition of thought that, in order to save the market economy, recalls it to its ancient, original vocation as an ally of the common good, representing a space for liberty, sociality and the expression of our capabilities and “vocations” as persons, particularly the vocation of work.

We will not exit this serious crisis, which goes much deeper than just the economic dimension, by eliminating finance and markets (assuming that someone were even able to do so), but only with civil and civilizing finance and markets.