The political economy of education and inequality: reflections on Piketty

ABSTRACT

Piketty’s Capitalism in the twenty-first century provides a superb, detailed historical analysis of the evolution of income and wealth inequality. Piketty demonstrates vast and increasing inequality that he argues might possibly be tempered in the future by economic growth and educational expansion supplemented by government redistributive policies. However, Piketty has little understanding of the reproductive nature of education, the limits of economic growth, or the fundamental problems of capitalism. In this paper, I depart from a political economy perspective to examine the bankruptcy of the underlying neoclassical economic theory he relies upon. In particular, I discuss how Piketty mistakenly sees capitalism as, in large part, a meritocracy, and the implications for education.

KEYWORDS:

• Piketty
• inequality
• political economy
• capitalism
• meritocracy

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 This paper was presented at the American Educational Research Association annual meeting, Chicago, 15–20 April 2015 and at the Comparative and International Education Society annual meeting, Washington, DC, 8–13 March 2015. I would like to thank Susanne Clawson and Jim Cobbe for comments on a draft.

2 These three frameworks, theories, or ideologies fit best in terms of views of economics, but they are really much broader than economics in terms of views of politics and society.

3 Piketty likes to think of himself as a ‘political economist’ (574) but in its historical sense, not as I use the term here.

4 As Wade (2014) points out, Piketty never really talks about why inequality is a problem (Stiglitz 2013; also see Wilkinson and Pickett (2009) for a very interesting analysis).

5 Krugman (2014, 15) is a notable exception to this critique who thinks that Piketty’s ‘principled empiricism’ (whatever that means) offers a ‘unified field theory’ on inequality. Krugman seems impressed with Piketty’s two laws, but one is simply definitional and the other, the now famous, r>g, where r is the return on capital and g is economic growth, has no theoretical base but is simply a description of Piketty’s data.

6 Piketty does recognize that education does not automatically lead to convergence:

The crucial fact is that no matter how potent a force the diffusion of knowledge and skills may be, especially in promoting convergence between countries, it can nevertheless be thwarted and overwhelmed by powerful forces pushing in the opposite direction, toward greater inequality. It is obvious that lack of adequate investment in [education and] training can exclude entire groups from the benefits of economic growth (22)

But this brief qualification does not dent Piketty’s belief in education; he appears to have no knowledge or understanding of the degree to which education is reproductive under capitalism, as discussed below.

7 This gets at the definition of Pareto or economic efficiency or optimality as a state of society where no one can be made better off without making someone else worse off.

8 Piketty recognizes, as do all economists, that we do not and cannot have a perfectly competitive economy (312, 332) but his analysis is still based on its conclusions about issues like marginal productivity (discussed below) or the benefits of free trade (but see his qualifications on 492, 534 and in Dolcerocca and Terzioglu 2015).

9 ‘Developing’ countries is a problematic term, but I will use it for want of a better alternative.

10 Piketty acknowledges the problem when he says ‘how futile and reductive it is to try to sum up all these changes with a single index, as in “the standard of living increased tenfold between date A and date B”’ (89), but goes on to use GNP measures anyway. There is considerable work examining alternative measures of societal well-being (e.g., Costanza et al. 2009).

11 Piketty argues that

these top managers by and large have the power to set their own remuneration, in some cases without limit and in many cases without any clear relation to their individual productivity, which in any case is very difficult to estimate in a large corporation (24)

Piketty adds: ‘It is only reasonable to assume that people in a position to set their own salaries have a natural tendency to treat themselves generously, or at the very least to be rather optimistic in gauging their marginal productivity’ (332). At a couple of points, he applies the same argument to academic economists: ‘Among the members of these upper income groups are US academic economists, many of whom believe that the economy of the United States is working fairly well and, in particular, that it rewards talent and merit accurately and precisely’ (296). He elaborates: ‘no hypocrisy is too great when economic and financial elites are obliged to defend their interests … .Some economists have an unfortunate tendency to defend their private interest while implausibly claiming to champion the general interest’ (514). On a personal note, I have observed that some of the strongest champions of earnings as equal to marginal productivity are the well-paid economists of the World Bank.

12 For example, Piketty argues that ‘increased wage inequality in the United States is due to a failure to invest sufficiently in higher education’ (306). Such simplistic reasoning rests on a supply-side understanding of education and jobs; neither does it understand why, under capitalism globally, such under-investment in education at all levels is widespread.

13 Piketty believes that with the exception of super-salaries and inherited wealth, income differences under capitalism reflect productivity differences and are therefore justifiable (263–265; 307–308, 333, 416). Two basic problems with this are the bankruptcy of marginal productivity theory, as above (also see Syll 2014) , and that the extremely low wages of the three billion people living at capitalism’s margins are in any way justifiable, as will be discussed further below.

14 Piketty does make an implicit reference to the related phenomenon of educational inflation (484).

15 Many years ago I saw a study (which I cannot find) that reported that the vast majority of jobs in the US could be performed by most high school graduates with 4–6 weeks of training. If this were true to any extent, where is the meritocracy?

16 This is not to deny that education can also challenge world system structures (Klees 2008b).

17 I agree with Syll (2014, 73): ‘A society that promotes unfettered selfishness as the one and only virtue erodes the cement that keeps us together, and in the end we are only left with people dipped in the ice cold water of egoism and greed.’

18 I do not mean to denigrate the huge amount of data analysis Piketty has done, but it is fair to say he is guilty of rather conventional and lazy pro-capitalism rhetoric given his admitted lack of reading of political economy from Marx to today.

19 When asked, in an interview, whether economic growth can be sustained in the long run, Piketty replied: ‘Yes. I do think we can make inventions forever. The only thing that can make it non-sustainable is if we destroy the planet in the meantime’ (Dolcerocca and Terzioglu 2015, 10).

20 While the market is a convenience that future, saner, societies may continue to rely on for some purposes, it has two fundamental flaws that render it problematic. First, it contributes to an abrogation of social responsibility, as today, when market outcomes of horrendous income inequality, spiraling food prices and hunger, or environmental destruction are seen as natural, not anyone’s fault. Second, markets are fragile. For example, millions of small decisions can contribute to economic or environmental crises. See Hahnel (2005) for a discussion of alternatives to competitive markets.

21 Both liberal and neoliberal economists see what they label ‘equity’ as an important societal issue and one that they can help inform by bringing to bear their theoretical and empirical tools but differ in the extent to which they see it as a problem, as I said initially. However, their perfectly competitive touchstone is basically about efficiency. A market system is efficient under ideal conditions, but there is no reason to believe it is equitable. A laissez-faire approach to markets can lead to efficiency under any distribution of income and wealth and the framework takes an initial distribution at any point in time, no matter how unequal, as a given.

22 As Foster and Yates (2014, 6) say, Piketty is a ‘highly credentialed member of the neoclassical economics elite’.

23 While Piketty sometimes writes like his ‘figures are incontestable’ (297), data analyses always are. The Financial Times (2014) argued that Piketty’s analyses were wrong and, in turn, their analysis was critiqued (Milanovic 2014).

24 Rothschild offers a more pointed critique of the mathematical models of neoclassical economics: ‘Extremely formulated one could say that societal power promotes the study of models of powerless societies’ (quoted in Yates and Foster 2014, 17).

25 Piketty comments: ‘When it comes to organizing collective decisions, the market and the ballot box are merely two polar extremes. New forms of participation and governance remain to be invented’ (569). In an interview, he elaborates a little: ‘[W]e also need to have new forms of governance and capital ownership’ with ‘sharing of power between those who own capital and those who own their labor … .’ (Dolcerocca and Terzioglu 2015).

26 In an interview, Piketty says that he is adding data from developing countries to his website as fast as he can (Dolcerocca and Terzioglu 2015).

27 In an interview, Piketty did say:

A large part of the inequality prior to the First World War had to do with the fact that colonial powers owned a big part of the rest of the world and received income from it … . the countries whose capital stock is still largely owned by the West today, typically African countries, have not been particularly successful. Part of the reason is that being owned by another country is mostly a source of huge political destabilization and devastation. (Dolcerocca and Terzioglu 2015)

28 It should be noted that even at the lowest levels of inequality from the 1950s to the 1970s, incomes and wealth under capitalism were still distributed very unequally.

29 It is both surprising and telling that Piketty never mentions the prominent role that the labor movement had in stemming inequality during the 1914–1945 period and afterwards.

30 The left has been caricatured as having a conspiracy theory understanding of capitalism’s operation and motives. Long ago, most of the left rejected the need for a conspiracy. World system structures maintain capitalism, racism, patriarchy, etc. But I would not reject the idea of collusion out of hand. What else is the World Economic Forum but a meeting of the global elite in an undemocratic forum to decide on global policies. What else is the Trilateral Commission? How many have even heard of the latter? In it are the most influential politicians and industrialists in the world, and it has been meeting in secret for decades. I don’t think of all this as a conspiracy to do harm. I believe that most of these people are well-intentioned. They are simply wrong, believing in a neoliberal economics that makes them better off but leaves the majority of humanity in dire straits.

31 While Capital in the Twenty-First Century offers hardly any vision of the struggle that would be needed to implement even a global wealth tax, in an interview, Piketty does recognize that such a policy change will not be easy. Such a ‘huge change requires a big fight and a big mobilization … . It would be a big mistake to think of progressive taxation as a technocratic process that comes quietly from a minister and experts’ (Dolcerocca and Terzioglu 2015).

32 There are many examples of progressive and critical education policies and programs doing just that (Klees 2008a; Klees 2008b; Apple 2013).