Suresh Naidu analyzes Thomas Piketty's groundbreaking economics book Capital in the 21st Century (previously), disagreeing with one of Piketty's core assumptions: that the rate of profit is a given, not the product of things like trade union law, global treaties, and other political decisions. This is wonkier than last night's post about Piketty, but a lot more interesting, in my view.
The everyday encounter most people have with accumulated wealth is not through prices in the market for shoes, or the society pages, but instead the control and threats inﬂicted by their employers, landlords, and bankers. Inequality of income and wealth means that some people live off unjustly earned income, but it also means a lot more people are on the short-end of an asymmetric exchange, toiling away as personal assistants and Mechanical Turks.
This is where Piketty’s Walrasian conventions dampen his contribution: he discusses the ﬁrst, but not the second. It’s like saying slavery is an inequality of assets between slaves and slaveholders without describing the plantation.
Even Adam Smith suggested measuring a person’s income by the “quantity of that labor which he can command.” This has normally been taken to mean income of the rich relative to the wage. But it also means looking at “command”: what privileges and obligations can one demand from the soul purchased (or rented)?
An economy that allows indentured labor means that wealth can purchase more power over people; an economy with robust union contracts means that capital is trammeled in its control over the shop ﬂoor. From sexual harassment on the job to the indignities of gentriﬁcation and nonproﬁt funding, a world of massive inequality is a world where rich people get to shape environments that everybody else has to accept.
Piketty repeatedly announces that politics plays a large role in the distribution of income. But he neglects that the distribution of income and wealth also generates inequalities of larger privileges and prerogatives; wealth inequality together with a thoroughly commodiﬁed society enables a million mini-dictatorships, wherein the political power of the rich is exercised through the market itself.
In a thoroughly marketized world, the wealthy can purchase educational reform, the charity of their choice, think-tanks, legislative language, and faceless TaskRabbiters willing to work for a pittance. While feudal lords were wealthy, the absence of certain types of markets made their social power somewhat independent of wealth; the regalia and mounted vassals were an independent basis of status and were not simply purchasable.
But there is an important and nasty complementarity between massive inequality in income and wealth and a commodiﬁed, “fully-incentivized” world. When every action can have pecuniary rewards attached to it, and every source of well-being can be priced at exactly a person’s willingness to pay, the social power commanded by the rich is magniﬁed in a way that is diﬃcult to see when comparing a dollar in 1920 with a dollar today.