Thomas Piketty in conversation with Mike Savage (Part two)

capitallogo95x95This is the second part of this interview, the first part can be found here. Part three will be published next week on the TCS Website.

On the 8th of July 2015 Mike Savage interviewed Thomas Piketty about his work, his influential book Capital in the Twenty-First Century (which is sometimes referred to as “the book” in the interview) and the underlying methodological and conceptual frameworks in his research and writings. The interview has been transcribed from an audio recording. We will be publishing an edited version of the interview on the TCS Website in three parts.

MS. In your book where you talk about income inequality you talk very clearly about the way in which the pay at the very top, the pay of CEOs and the like is driven by corporate norms about top pay, by those setting top pay. And you talk about minimum wage at the bottom. You talk less about what’s happening in the middle, the differentiation of salaries and wages in the middle half, say, of the income distribution. Do you have a theory about that because they are actually dividing too aren’t they? It’s not just the top and the bottom pulling away?

TP. No, you’re perfectly right, that’s one of the many limitations of the book when I talk about labour income inequality, I provide a zoom into minimum wage, the zoom into the top, but it’s still very incomplete. You know, generally speaking I should say that my book is at best an introduction to the study of capital and inequality in the 21st Century. This needs to be pursued in many directions. It is impossible deal with all of these aspects of the history of inequality over three centuries, 30 countries in just one book. So the book gives a number of special foci and different parts of the distribution of labour income, and a stronger focus on the distribution of property and wealth and capital. But there is really a lot more to do.

MS. Sure, well you’ve done a huge amount. I’m interested in your relationship to two particular theories, the Marxist theory and Bourdieu’s theory, you cite them both and you refer to them both, you certainly make it clear you’re not a Marxist, and you’re obviously not a Marxist, but how would you describe your relationship to the Marxist tradition? Would you say you’ve learnt things from it?

TP. Well yes, as I say in the British Journal of Sociology article, we have to combine Marx and Bourdieu and you know, in a way I think that’s what I’m trying to do. What I mean by this is that Marx of course emphasised how the power relationship between the different social groups are shaped by the ownership of capital, the ownership of the means of production, also the ownership of the place where you live, housing, the relation between the owners and those who own their labour, this really is the centre of the inequality of power between social groups that is studied by Marx. Bourdieu when he starts writing about social inequality in the 1960s, he starts in 1950s, ‘60s, 1970s, in a way he writes exactly in the middle of the period, which I identify as a period of sort of low financial wealth, low real estate value. So all the old forms of capital ownership as they existed in the 19th Century until World War One have been largely weakened, some by nationalisation, some by rent control, some by the destruction of the war, so it’s both policy induced and war induced. But one of the messages of Bourdieu is to say, okay, well maybe this is gone or this is not exactly the same as what it used to be, but at the same time you now have new forms of sort of symbolic capital and cultural capital, which shape power relations between social groups, and that doesn’t mean a very, very violent relationship between social groups based upon power and based upon domination do not exist anymore. And I guess part of my message in my book is to say, well maybe in order to think about power and inequality relations in the 21st Century we need to combine the two. Because we have a return of capital in the sense of financial capital, real estate capital, in the sense that Marx was studying, which is playing a very big role today, much bigger in a way than the ‘50s, ‘60s, ‘70s when new institutions, changes in the legal system, the tax system, sort of domesticated a little bit property relations in the old sense. And at the same time of course we still have very much the symbolic capital, inequality of cultural capital that Bourdieu was stressing. So I think we need to think of a new paradigm to look at inequalities that combines the two in the order of discourse as much as in the order of economic and social relations.

MS. I’m very sympathetic to your line, and one of the things it seems to me, which you do, which is really, speaking as a sociologist is very powerful is, you know, Bourdieu talks about economic capital being important but he says very little about it in any of his work really, whereas he writes huge books on the cultural capital and social capital.

TP. But I think that’s partly because he writes at a time when indeed economic capital has been weakened. There are economists like Modigliani who write about wealth in the 1950s, 1960s, who observe that inheritance of private property has been weakened, and who then invent the life cycle theory of capital accumulation, which corresponds to a very harmonious view of the social world. Basically they say that old style dynastic ownership has disappeared and now we have entered the age of life cycle capital, so everybody becomes rich as you become old because capital accumulation is all about retirement. So you have a war of the ages if you want instead of a class war, which is much less damaging because everybody is young and then old so it’s just the war against lifecycle but it’s much less damaging than the war between class. And there’s another reaction in a way, which is that of Bourdieu, which amounts to say, okay, maybe the dynastic capital in the form of formal ownership rights over financial assets or real estates have been weakened but you have all this symbolic capital. People are always very much influenced by the world in which you live, and you know, myself, I am the product of a world where real estate price are very high and oil prices are very high and stock market prices are very high. All the booming asset prices of the 1980s, 1990s, 2000s, 2010, this is the world in which I have grown. And when you hear every morning on radios that the real estate or stock market has gone up five or six per cent when the wages have gone up one per cent, and this continues year after year, at some point you ask yourself, okay, where is that going to go and is it normal or what’s going on? And I guess the big part of my questioning came from this practical experience with income and wealth in the same way as Bourdieu and others were influenced by the ‘50s and ‘60s.

MS. That’s very interesting. I think to me, reading your work alongside Bourdieu’s gives us both sides, it gives us the research into economic capital, which you can then link to the cultural capital, which Bourdieu’s put on the table. And the same in the British context where most Bourdieusian sociologists tend to look at cultural capital. It would be really interesting to think about how your work can inspire a more multi dimensional approach where economic capital figures, so I think there are some very interesting collaborations around that, that’s really interesting. Can I talk a bit about, you know, your very interesting figures, partly because you’re an economist, trained as an economist and yet you’re in this book deliberately seeking a wider audience, you’re seeking to address the social sciences as a whole, and you make it very clear you don’t want to embrace a more technical view of economics. So in a way you did a very skilful dance between economics and the wider social sciences. Arguably that dance will get more difficult to continue in the future as the economists will want you to address more economics orientated issues, very technical issues, methodological issues, theoretical issues in their terms. And those would be issues, which the wider social science community wouldn’t be able to engage with. So I’m wondering whether you would try and move more towards a broader social scientific position or whether you still want to engage with the mainstream economics discipline. Can you do both or do you have to pick one or the other?

TP. I think for the most part I will move more and more toward a broader social science type of writing, and I think I am making progress in this direction, I think it would be still probably a bit too technical or a bit more of an economists book than I would like it to be. And I think in the future I will make progress, or at least I will try to make progress in the direction of more sort of a broader social science approach or broader historic approach. At the same time I think I will keep writing technical articles of 20, 30 pages for economics journals to try to engage with economics profession. To be honest I am not that optimistic about the possibility of really moving them, I think some of the economics profession is so much into sort of very technical approach to pretty much everything that it’s very difficult to engage in a dialogue with them. It’s not only that they don’t write books, it’s also that they don’t read books, so sometimes it’s very difficult to engage in a discussion. My view is that short articles can be useful, that’s a useful discipline to do that. But I think in the end you see much more and you ask much bigger questions when you write books. My feeling when I wrote this book is that I’ve put more thought into the book, I spent more time really thinking hard than I had ever spent in the ten years before writing articles for economic journals or all these supposedly top economic journals, when in fact you sort of escape from the big and difficult questions because the name of the game in the economics provision is that you’re going to redefine your question in such a way that you can answer to it according to the standards of what the profession means by answering the questions. So in the end you have to escape the big, difficult questions. People in economics are a bit obsessed with methods and whether mathematical modelling just proving theorems or econometric methods you know, trying to identify the true causal links between X and Y. And sometimes they just forget and they don’t care if in the process, they ask questions, which are of no interest sometimes and they are so narrow, you just add a little theorem and a pile of theorems, or you add a little econometric identification or a big pile of econometric identification, and they just escape the big questions. So I think I’m going to move more in this direction but at the same time I will keep writing economics papers.

MS. Sure, a few years ago, I’m not sure if this is still going but there was an attempt to develop what was called non-autistic economics, and there’s more heterodox economics, and so you can think of radical economists, obviously I guess Anthony Atkinson or Stiglitz would be part of that community. Do you think the way forward is to create an alternative economics grouping who are like that, kind of critical of the technical parts of economics but also in that traditional, knowing how that school works. Or do you think the attempt should be broader than that, to try and create a broader church of social scientists, including anthropologists, historians, etc?

TP. I strongly believe in this broader approach. That’s why I am interested in this international inequalities centre at LSE. I believe more in trying to bring more sociologists, historians, political scientists together with economists and try to contribute to a broader social science. I think the frontiers between our disciplines are not clear at all most of the time and I think we lose a lot of time just discussing about these frontiers, to me it looks more like identity politics. And within economics, the problem is that orthodox economics tends to generate its own opposition in the form of heterodox economics, who also sometimes lose a lot of time just trying to define themselves against the orthodox economics, and sometimes I feel that it’s better to try to talk about the issues and to take big issues about history of social class, the stock market, the pension system, you know, whatever central issue, and show what can be done rather than you know, just sometimes I feel lose time trying to define our self.

MS. I’ve been reading some other work by people like Stiglitz who obviously in some ways is doing very similar things to you, and obviously the U shape they agree with, and he agrees with a lot of your analysis. Also talking to my colleague David Soskice who wrote the paper in the BJS issue, which you responded to, and he also spoke at the LSE before you arrived on the Eurostar. And one of the points they make is you need to distinguish different capital from wealth, you know, certain kinds of capital, which are bound up in housing, assets, have very different functions to capital which is invested by companies or by direct investors. And that you know, I guess they’re arguing for a more refined approach to capital investment and stuff, I mean how would you respond to those sorts of questions.

TP. What I really tried to do in my book is to develop a multi dimensional approach to capital ownership and wealth, and this is why the book is so long to a large extent. In chapter three, four, five, six of the book, and overall it’s like 200 or 250 pages long, are exactly about the history of these different forms of ownerships and I indeed show that the history of real estate assets is very important and is different from the history of agricultural land, which is different from the story of public debt, which is different from the history of slave capital, which is different from foreign investment, which is different from–, so all these different forms of assets involve specific compromise, specific institutional and legal forces, specific bargaining between owners and workers. So I really tried to do it as much as I can because to me that’s absolutely central to understand what’s going on. So in particular, it’s a very big part of what’s happening in many countries in recent detail when you look at the evolution of the aggregate value of assets compared to income. Energy is also very important, plays a very big role and I talk about oil in the book quite a lot in different places. And now immaterial capital, intellectual capital, also matter a lot. In the future it could become a form of property and a form of assets, it becomes increasingly important, and for the time being the more important capital intensive sector, much more traditional sectors like housing or energy, but in the future that will become very important. So yeah, I fully agree.

MS. To me, I like the way you broke down capital in its different forms, and particularly bringing out the importance of housing, housing wealth in contemporary times because you know, if you’re thinking about emerging forms of political conflict it seems to be around housing and urban space, it’s extremely important and you know, you’re actually bringing that back and taking the–, there’s been so much fixation on labour struggles, which are informed, but in a way bringing housing back into it. And similarly the potential of thinking about the urban, because a lot of housing wealth is tied up in urban property rather than rural property. And going back to what we were saying earlier about how the new elite is different from the old elite, so I would say one of the differences too is the old elite was predominantly an agrarian rural elite, although they would often have townhouses too, but their power and wealth was based in the countryside. Whereas the elite today is much more of an urban class, that’s a really important shift change, and I think your work really underscores that.

TP. Yeah, that’s perfectly right if you compare to the early 19th Century or 18th Century. If you compare to Belle Époque, a big part of it is already in the city but with a concentration of housing property. In Paris until World War One, basically the cadastre does not allow you to own apartments, you either own the entire building or you don’t own anything, which gives you a sense of the relation, the social relation that comes with property. Basically in Paris in 1913, 70% of the population will die with zero wealth or you know, where they just have their sheets and a few little plates and a few little furniture and they basically die with sometimes not even enough to pay for their funeral like Pere Goriot in 1820. So one century has passed but in 1913 you still have 70% of the population in Paris who dies with no wealth. And then you have one per cent of the population who dies with 70% of the wealth. And I was seeing it’s not impossible… to have modern–, you know, like foreign investment or foreign financial assets, but if you look at the consumption of housing today in London, you know you will see the big properties that are bought by billionaires in London, it’s not the same as in 1913 Paris.

The third and final part of this interview will be published next week on the TCS Website.


Readers may also be interested in the Theory, Culture & Society Special Issue on ‘The Social Life of Methods’ that Mike Savage recently co-edited with Evelyn Ruppert and John Law (TCS 30.4, July 2013)

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