Sunday, 5 July 2020

The Do Re Mi

I’m occupied at present preparing a review of Thomas Piketty’s ‘Capital and Ideology’, which turns out to be one of the most important books I’ve read in many decades. Piketty makes perfectly plain that none of our current problems are soluble until we get to grips with a drastic economic restructuring. Call it reform, call it revolution, call it whatever, none of the other issues that keep presenting themselves as a way forward - gender, race, identity, even climate - are tractable until the power of big money is vanquished. Piketty acknowledges that both social democracy and state socialism have now failed, and offers suggestions for economic structures that could lead further.


He also analyses aspects of our current situation that made my blood run cold:

“Let me be clear about the meaning of negative public capital such as we find today in the official national accounts of the United States, United Kingdom, and Italy. Negative capital means that even if all marketable public assets were sold—including all public buildings (such as schools, hospitals, and so on) and all public companies and financial assets (if they exist)—not enough money would be raised to repay all the debt owed to the state’s creditors (whether direct or indirect). Concretely, negative public wealth means that private individuals own, through their financial assets, not only all public assets and buildings, on which they collect interest, but also a right to draw on future tax receipts.  

[...]

In strictly theoretical terms, there is no limit on how negative public wealth can go. Strictly speaking, one could reach a point where private individuals through their financial assets owned the totality of all future tax revenues or even the totality of everyone else’s income, so that everyone would de facto be working for the bond­holders. This happened frequently in ancient times (when slavery was a conse­quence of heavy debt or military tribute; see Chap. 6)"

[Thomas Piketty 'Capital and Ideology', p614]


In the end it’s still ‘The economy, stupid’, or as Woody Guthrie put it rather more nicely, the ‘Do Re Mi’:


1 comment:

  1. Dick, I think the missing point in Piketty's analysis here (I'm sure he must cover it somewhere in the book) is that governments are able to print their own money, or better still call it into existence with a few clicks on a keyboard. They are already printing the money to pay the debts incurred as a result of the 2008 crisis and it's clear they will print a lot more to pay for Covid-19. So far this has had only a partial effect on inflation - driving big increases in asset prices but not much on current expenditure (although I think there are hidden increases in terms of lower value for money which may bite us in the end). As long as governments still own the assets which have been financed by the capitalists' lending then it should end up ahead, with the assets generating higher nominal revenues while the debt is fixed and at historically low interest rates. But sooner or later inflation will rise sharply. So make sure you own real assets, where you can, rather than squiggles in a bank account, which is all that cash is in C21, ultimately.

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