Class struggle and income inequality

Thomas Piketty has become famous because he’s pointed out that there has been a significant increase in wealth inequality in the capitalist world.

“Capitalism in the 21st Century” by Thomas Piketty was published in French in 2013, very quickly and ably translated into English, and has created a major stir. Amazon and Barnes & Noble haven’t been able to keep it in stock; hundreds of articles in media as diverse as the Wall Street Journal and the New York Review of Books have analyzed it.

Multiple YouTube videos of Piketty speaking have drawn, by a rough count, well over 100,000 views since he began his U.S. book tour.

Before examining the book, it helps to look at the context of its appearance.

May 15 saw low-wage workers striking in over 150 U.S. cities, with co-ordinated strikes and demonstrations in major cities worldwide. Thousands of workers took part, responding to the call from groups like Fast Food Forward, Communities for Change, Make the Road and others. These are workers’ organizations that are not unions, even though some of them have ties to some big unions like the Service Employees and the Food and Commercial Workers.

Scores of workers and their supporters occupied fast food restaurants, handed out leaflets, played music, chanted, explained to the employees present that they came to support them and the call for a minimum of $15 an hour together with a union. And then they left for the next Occupy. In some cities, they marched and set up picket lines.

These tactics were inspired by the Occupy Wall Street movement, which burst onto the scene in the fall of 2011 with the occupation of Zuccotti Park in Manhattan’s financial district.

OWS raised the slogan “We are the 99%.” Although this slogan did not focus on the relation to the means of production and ignored major oppressions in the working class — racism, sexism and bigotry against lesbian, gay, bisexual, transgender and queer people — it did raise the question of the 1% richest people on an insistent, worldwide scale. Economists, journalists and members of OWS tied the question of the 1% into the fairness of income/wealth distribution in the United States and the major developed countries.

The focus on the 1% quickly became a focus on the richest 1 percent of the 1%. In January 2014, Oxfam published a report showing that 85 of the world’s richest individuals have as much wealth as the poorest 50 percent of the world’s population, around 3.5 billion people. In the U.S., the top 1% have more wealth than the bottom 90 percent of the population. Wealth and income are indeed concentrated.

The power of the top 1 percent of the 1%

The power of that 0.01 percent to keep wages low and keep workers from sharing the wealth that their labor produces can be very clearly seen even at the top of the wage scale. Some 64,613 software engineers, whose yearly wages run upwards from $90,000, are suing Apple, Google, Intel and Adobe for $3 billion, charging them with collusion to keep wages down. (AllGov, April 22)

If high-paid workers with extensive training and skills in high demand and with relatively high incomes have to sue for their “fair” share, low-paid workers without that training are going to have to do more than just sue. They obviously need unions as well as a raise.

Major politicians in the U.S., including President Barack Obama, have been raising the issue, which liberal economists like the Nobel laureates Paul Krugman of Princeton University and Joseph Stiglitz of Columbia University have been studying for a number of years. These reformist economists see extreme income inequality not just as “undemocratic,” but as a hindrance to the growth and maintenance of the capitalist system.

Piketty makes his rejection of Marxism and communism very clear in his introduction, despite the echoes of his title to Marx’s famous work “Capital.” Politically in France Piketty supports the French Socialist Party, which despite its name is a party that has served and still does serve French capitalism and imperialism. But he does from time to time work with the French Communist Party; for example, he participated in a debate on inequality at a major PCF event this past September.

The data behind the book

Piketty’s impact rests mainly in the data that he and his collaborators have collected over the past decade or more, data that push the record of wealth back into the 18th century and enable illuminating comparisons between countries and the development of their wealth. The World Top Incomes Database, which summarizes these data, is available online, and there are efforts under way to extend the information to percentiles other than the top ones.

Comparing the current income of various areas of the world, Piketty points out that the French gross domestic product of 2 trillion euros is greater than the GDP of all of sub-Saharan Africa, which is only 1.8 trillion euros. France has a population of 60 million, while sub-Saharan Africa has a population of 900 million.

Piketty’s central contradiction of capitalism

Picketty rests his explanation of income inequality on the assertion that it increases when the return on capital is greater than growth and decreases when growth is higher than the return on capital. He calls this “the central contradiction of capitalism,” which is far from the Marxist view that growth under capitalism depends on the exploitation of workers by the capitalists.

The solution that Piketty proposes to alleviate income inequality, one that Krugman and Stiglitz endorse more or less, is a global tax on wealth. While this measure, properly implemented, might reduce some income inequalities, it is unlikely that it would be accepted by the capitalists if it in any way cut into their profits. Eliminating wealth inequality, even so-called excessive inequalities, really can’t be done without overturning capitalism.

For anyone serious about eliminating this monstrous inequality and resolving it in favor of the vast majority of the population who have to sell their labor to survive, Piketty’s solution is undeserving of serious consideration. He ignores the effects of the class struggle, led by unions and other workers’ organizations, on income distribution.

For a Marxist analysis of the current situation in the world capitalist economy, read “Low-Wage Capitalism” and “Capitalism at a Dead End” by Workers World contributing editor Fred Goldstein. These books demonstrate that only a revolutionary solution that brings about socialism can resolve the problem.