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Has capitalism run its course?

Moderators: You both appear to think that the prevailing economic and financial system has run its course, and cannot endure much longer in its present form. I would like to ask each of you to explain why.

Thomas Piketty: I am not sure that we are on the eve of a collapse of the system, at least not from a purely economic viewpoint. A lot depends on political reactions and on the ability of the elites to persuade the rest of the population that the present situation is acceptable. If an effective apparatus of persuasion is in place, there is no reason why the system should not continue to exist as it is. I do not believe that strictly economic factors can precipitate its fall.

Karl Marx thought that the falling rate of profit would inevitably bring about the fall of the capitalist system. In a sense, I am more pessimistic than Marx, because even given a stable rate of return on capital, say around 5 percent on average, and steady growth, wealth would continue to concentrate, and the rate of accumulation of inherited wealth would go on increasing.

But, in itself, this does not mean an economic collapse will occur. My thesis is thus different from Marx’s, and also from David Graeber’s. An explosion of debt, especially American debt, is certainly happening, as we have all observed, but at the same time there is a vast increase in capital—an increase far greater than that of total debt.

The creation of net wealth is thus positive, because capital growth surpasses even the increase in debt. I am not saying that this is necessarily a good thing. I am saying that there is no purely economic justification for claiming that this phenomenon entails the collapse of the system.

Moderators: But you still say the level of inequality has become intolerable?

Piketty: Yes. But there again, the apparatus of persuasion—or of repression, or a combination of the two, depending on what country you are considering—may allow the present situation to persist. A century ago, despite universal suffrage, the elites of the industrialized countries succeeded in preventing any progressive taxes. It took World War I to bring about a progressive income tax.

David Graeber: But the indebtedness of one person has to imply the enrichment of another, don’t you think?

Piketty: That is an interesting question. I loved your book, by the way. The only criticism I would have is that capital cannot be reduced to debt. It is true that more debt for some, public or private, is bound to increase the resources of others. But you do not directly address possible differences between debt and capital. You argue as if the history of capital were indistinguishable from that of debt. I think you are right to say that debt plays a much more significant historical part than has been assumed—especially when you dismiss the fairy tales retailed by economists concerning capital accumulation, barter, the invention of money, or monetary exchange. The way you redirect our attention by stressing the relationships of power and domination that underlie relationships of indebtedness is admirable. The fact remains that capital is useful in itself. The inequalities associated with it are problematic, but not capital per se. And there is much more capital today than formerly.

Graeber: I do not mean to say that capital is reducible to debt. But the absolute opposite is what everybody is told, and it is our task to fill in the blanks left by that account with respect to the history of wage labor, industrial capitalism, and early forms of capital. Why do you say that resources increase even as debt increases?

Piketty: Net wealth has increased—“wealth” meaning resources inasmuch as we can calculate them. And this is true even when debt is taken into account.

Graeber: You mean to say that there is now more wealth per capita than before?

Piketty: Clearly, yes. Take housing. Not only is there more housing now than fifty or a hundred years ago, but, by year of production, housing, net of debt, is increasing. On the basis of annual GNP, if you calculate national capital (defined as all revenue engendered by economic activity) and then the total indebtedness of all public and private actors in the country, the former will be seen to have increased relative to the latter in all the rich countries. This increase is somewhat less spectacular in the United States than in Europe and Japan, but it exists nevertheless. Resources are increasing much faster than debt.

Graeber: Getting back to the original question, the possible collapse of the system, I think that historical forecasts of this kind are a trap. What is certain is that all systems must end, but it is very hard to predict when the end might come. Signs of a slowing down of the capitalist system are visible. So far as technology is concerned, we no longer have the sense, as we did in the 1960s and 1970s, that we are about to see great innovations. In terms of political visions, we seem to be very far from the grand projects of the postwar period, such as the United Nations or the initiation of a space program. U.S. elites can’t act on climate change, even though it puts our ecosystem and human life itself in jeopardy. Our feelings of helplessness stem from the fact that for thirty years the tools of persuasion and coercion have been mobilized to wage an ideological war for capitalism, rather than to create conditions for capitalism to remain viable. Neoliberalism places political and ideological considerations above economic ones. The result has been a campaign of fantasy manipulation, a campaign so effective that people with dead-end jobs now believe that there is no alternative.

It is quite clear that this ideological hegemony has now reached its limit. Does this mean that the system is on the point of collapse? It’s hard to say. But capitalism is not old. It hasn’t been around forever, and it seems just as reasonable to imagine it can be transformed into something completely different as to imagine it will necessarily continue existing until the sun blows up, or until it annihilates us through some ecological catastrophe.


This exchange is from a conversation in Paris between David Graeber and Thomas Piketty, discoursing on the deep shit we’re all in and what we might do about climbing out. It was held at the École Normale Supérieure; moderated by Joseph Confavreux and Jade Lindgaard; edited by Edwy Plenel; first published by the French magazine Mediapart last October; and translated from the French for The Baffler by Donald Nicholson-Smith. The extract is reproduced with kind permission. To read the full discussion, go to: 'Soak the rich' at The Baffler.


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