Thomas Piketty: a fundamental supplemental

I have decided to start blogging sections of my book, particularly if they are topical or I need feedback. In this case, it is both. Keep in mind the following context for this blog: I had just completed, or so I thought, my work on what wealth inequality actually was, just two weeks before Piketty made himself known to me. This blog represents a messy first draft of what turned into a reformatting nightmare, but as you'll see, it was definitely worth it. Also, keep in mind this is just but one sub-section of my book, one application of the same theory applied across all of culture and history; you are thus missing all of the theoretical basis, and definitions/re-definition, that comprise chapters 1 & 2. Don't be surprised therefore if some terms seem to be used oddly, or in a new context.  If anyone wants to read them btw, 90% of the book is done, so feel free to ask.

Thomas Piketty - a fundamental supplemental.

I first heard about the nature of wealth's power law distribution, and I imagine its feedback-loop quality of money-begatting-money, a long time ago. Yet it wasn’t until coming to write this book that I began to express my idea as feedback loops. As a consequence of this, I wasn’t satisfied in the slightest by my attempt I showed you in the very first chapter of this book. What was influence? What was opportunity?

(NOTE: I have had to roughly recreate the flow-diagrams illustrating feedback loops, since they won't format in this blog...)

 WEALTH INEQUALITY

increases                     increases

OPPORTUNITY             INFLUENCE

increases

Why then did I leave it in? Well, I had intended to leave it in as evidence of my workings toward identifying the more fundamental feedback loop that almost immediately came to replace it. Then along came one Thomas Piketty.

Surprisingly, Piketty has managed to turn doctrinal, ideological, neoliberal economic mythology on its head using evidence. Only this time, he has used lots of evidence, in a way that simply cannot easily be dismissed. That it took this long for a book of this nature to come out is simply staggering, but not surprising. Even History has a way better track record in interpreting the past, but then, they have way more history of self-reflection, an entire academic field of it in Historiography, to draw upon. I don’t know if there is even such a thing as ‘economography’, is there? Nevertheless Piketty has done what someone else soon would have (there is probably a young economist or several currently shredding their research in despair at what might have been), and sufficiently convinced enough economists, using their own language and their own cultural identity, of at least the potential that their corporately derived beliefs might be false. This is why.

First, I have to make a confession. I haven’t read the book. How the hell could I? I didn’t hear about it until I was 55,000 words into this book, my work on wealth inequality supposedly complete. Now, please don’t take this for the arrogance that will inevitably appear in some of your minds, but when I read the expert commentary on Piketty’s book, I didn’t see anything new. What I did immediately see was that his findings corroborated exactly with my own, only inherently limited in a number of ways. Allow me to explain why it is that what Piketty has done is describe the dynamic of wealth inequality. What I have done, and will subsequently show, is to explain the dynamic of wealth inequality. In fact, complexity theory can, as ever, sum up what I mean best, and in one sentence:

You cannot explain emergent properties solely through recourse to the specific characteristics of said emergent properties; you must describe the complex system from which the emergent property emerges.

In other words, you cannot explain economics with economics. You can only describe it, in the best language we know how, the language economics uses to describe itself. This is called a category error, a logical fallacy prevalent within the field of economics; students are even revolting against the idea of doctrinal textbooks that don’t describe reality in university. You can only explain economics by describing society as a whole, for it is this from which the emergent properties, which all economic activity is, emerge. Economics does inherently realise this at a fundamental level, it is just that the doctrine that still survives to this day, the dichotomy of Keynesian and Freidmanite economics, was born of a time when we did not have complexity to outline the scale of what it was they thought they were achieving. It was pre-computers for crying out loud, what possible hope did they have of coming to non-ideological, non-politicised conclusions about the most complex sodding system known in the entire universe?!

You think climate modelling is hard? Economics is the emergent property of nested complex systems, that include the most complex object known in the universe, the brain, as each of its systemic nodes. The data required to understand it is potentially there, everything is digital bar the informal economies (a not unimportant point, as I will come to later), but we have such an incomplete conceptual framework analysing the data that it has taken until 2014 for an economist to prove what generations of activists have been screaming for years, globally: neoliberalism doesn’t work for the greater good. Period.

It is no coincidence that the two extremes so easily mirror the socialist tendencies of the state (the social contract, for what it was worth though in times of fundamental balance, it can lead to equality), and the profit-driven necessities of corporatism (Friedman's neoliberalist monster). Economics was never a science, and can never be hoped to be taken as one now that they are starting to get the tools so long as those economists embracing complexity continue to fail in speaking out against their powerful peers, the ones they read about in the textbooks… urgh, it’s hardly surprising is it?

Piketty’s inequality curve.

Anyway, I digress. The thing that really struck me about Piketty, though again more for the fact of the synchronicity than anything, was the fact that he had identified the same curve to inequality that I had, only he had identified just one transitional phase of inequality. Because Piketty is an economist, and not a sociologist, or psychologist, or historian, he has been pre-conditioned to think in terms of capitalism, not corporatism, or anything else for that matter, he attributes all of the emergent properties of ‘capitalism’ - that is, economics - to capitalism itself. Yet capitalism is just an idea, an unattainable, abstract ideal that somehow feels able to reduce within itself all of human behaviour. Yet trade, commerce, money, jobs; these are all but facets of the overall whole, society, from which the emergent property of economics, or capitalism if you prefer, emerges. Again, you cannot explain an emergent property by treating it as it’s own, closed system, which is exactly what economists are doing by reducing all of human behaviour into its own cultural identity framework, thus eliminating all other identities, from all the other scales, in all their various, complex forms, from their models.

Traditionally, economics, and in particular macroeconomics, had always assumed that equality would rise as developed nations reached a stage of mature capitalism. As with every established assumption about macroeconomics, it was based on flawed theory and/or inaccurate data/research, born of a time before we have the tools to adequate study such a complex system. And, as with every established assumption about capitalism, it strangely seemed to assume that the end goal of capitalism would fall on the side of the greater good. Well, what did you expect? That the rationale of power would conclude they they should tell the public that the theory that controlled and shaped their entire lives was no more than an ideologically-derived guess?

Either way, that assumption, and the highly technical concepts of rising tides and trickle-down BS that accompanies it, has done its job of convincing enough people enough of the time already. It is too late to stop corporatism becoming a fundamental identity. It doesn’t matter that Piketty has shown the dogma to be false, not for the States anyway; elsewhere will heed his and others calls after him - the Americans will just dismiss him as a French socialist, and move further into the clutches of evidence-free totalitarianism, with people clinging desperately to the myths that makes their position of inequality seem deniable (better than than admitting you were duped by your own ideological ‘brethren’ - at least, they told you they were your brethren), even as the inequality continues to rise. And as Piketty showed, rise it will continue to so.

The curve Piketty identified goes like this (according to Piketty’s theory): capitalism began highly unequally in terms of wealth inequality in the West, before entering a period of growing equality post-World War Two. Then, following free-market, neoliberal reforms in the1970’s, inequality began to rise once more until it was again at the peak of ‘early capitalism’. I will quote from Paul Mason, culture and digital editor at Channel 4 News and occasional contributor to the Guardian newspaper, on what Piketty found:

“Piketty accepts that the fruits of economic maturity – skills, training and education of the workforce – do promote greater equality. But they can be offset by a more fundamental tendency towards inequality, which is unleashed wherever demographics or low taxation or weak labour organisation allows it…

For Piketty, the long, mid-20th century period of rising equality was a blip, produced by the exigencies of war, the power of organised labour, the need for high taxation, and by demographics and technical innovation…

He notes that redistribution has become a question of "rights to" things – healthcare and pensions – rather than simply a problem of taxation rates. His solution is a specific, progressive tax on private wealth: an exceptional tax on capital, possibly combined with the overt use of inflation…

To challenge his argument you have to reject the premises of it, not the working out.”

Link here: http://www.theguardian.com/books/2014/apr/28/thomas-piketty-capital-surprise-bestseller

I have collected together this passage to deconstruct what I mean by Piketty’s category errors, and to take up Mason’s argument, correct as it goes, and to challenge the very premise of Piketty’s argument. The working out is fine; it is probably the first, substantial non-ideological examination of wealth inequality ever conducted, given that it has turned established “theory” on its head. Yet because of Piketty’s category error, the attribution of cause and effect is wrong. Capitalism didn’t start unequal because of capitalism, it started unequal because of the weakness of capitalism, or I should say, the weakness of corporate cultural identity.

A really simple way of showing this is as follows: if ‘capitalism’ was the ‘cause’ of high inequality pre-Second World War, when did it start being the cause of that high inequality? At some point in the past, it matters not when for this thought experiment, capitalism had to emerge; yet prior to that date, inequality was also really high, like, forever. Which begs the questions: What was the cause of inequality before capitalism? And how, where, when and why did capitalism manage to ‘take the baton’ so to speak, and become the cause?

Presented this way, and it becomes clear that there is a glaring hole, or at least a more fundamental layer to Piketty’s argument. It doesn’t matter what fundamental cultural identity holds power; if they gain a monopoly on cultural production for enough time, their rationales, justifications, and allure will inevitably, unavoidably form a constant influence in a populations cultural identity. This is the enabling environment, or lack thereof, from which economics emerges, and it should come as no surprise that a culture monopolised by exclusive propaganda creates, through the trillions of subconscious decisions made by millions of nodes, an environment that enriches themselves. It is not a conspiracy. It is not ‘evil’. It is the gradual, exponential drive to separatism caused by the ubiquity and universality of wealth's power (law) and its control over cultural production.

What Piketty meant to say, well, said but didn’t know it.

So how does one resolve the thought experiment I presented regarding capitalism's role in pre-World War Two inequality? If you were paying attention earlier in this chapter, you will already know the answer. I don’t need a graph; since the principle defies reduction, it is best put as plainly as complexity allows.

Until corporate cultural identity began to be produced on a mass scale, it necessarily follows that prior to this time, religious and state identities were more ubiquitous (there is only a limited amount of ideological capacity available). Since State emerged from Religion, and Corporate emerged from State as the monopolistic holder of cultural production on the way to becoming a fundamental cultural identity, it also follows that as corporatism grew, it diluted both state and religious cultural identity and at some point the three would have been in a period of balance. This is the post-War period Piketty speaks of. Yet before this time, corporate cultural identity could not have been responsible for high inequality. What Piketty labels as ‘capitalisms early phase’ was in fact the period of State monopolisation of cultural identity facilitating high inequality. It had been able to do so because Religion had been sidelined one way or another from public affairs, and corporatism was still in it’s early, non-threatening, subversive stage of pre-fundamental status. Yet it isn’t so clear cut as this; more nuance is required. There is more to society than the fundamental cultural identities, as I have just shown.

When the fundamental identities are balanced, acting as a check and balance through all requiring representation, it is not doing so through a solely top-down dynamic. It never is. Civil society and the fundamental cultural identities exist in cross-scale and intra-scale feedback, as one system. Given the space afforded by no one ideology holding a monopoly on power for enough time, bottom-up identities have greater freedom, emerge from a more facilitative enabling environment, to add to this drive toward more fully representative and inclusive reform. Trade unions were suppressed under the state, they are suppressed under corporatism, but in between they had influence, just one example of the many small-scale emergences that could have contributed to fair and equitable reform.

Notice, when Piketty describes the dynamics behind whether the system is trending toward equality or inequality, he uses many terms that are not category errors; he is not describing economics, but describing wider society - labour power, World War Two, demographics, etc. Yet when he is describing the solution, he returns to the category error, and instead of offering prescriptions at the societal level, can only turn to traditional tools of economics, other emergent properties. Now, to be fair, emergent properties can and do feedback across scales, and the emergent properties Piketty targets - extreme wealth tax, for example - do hold the most potential for initiating corrective feedback. But like Mason says of Piketty’s conclusion of his solutions:

“He calls some of them "utopian" and he is right. It is easier to imagine capitalism collapsing than the elite consenting to them”.

The reason such corrective measures are utopian is because we do not have the enabling environment to implement them. The reason why we don’t have the enabling environment is because our cultural environment consists almost entirely of homogenised, corporate cultural identity, having held a monopoly over cultural production for generations, and unsurprisingly it can draw on decades of doctrinal intellectual endeavour to make an intelligent case for why we should not take all their money they stole and give it to the poor.

Why Piketty had the impact he did

Piketty has been able to do what he did, and have the impact that he has, is because he backed up his general, unquantifiable references to wider society with quantifiable data. Lots and lots of quantifiable data, in a language economists share. Yet, despite his empirical work relying solely on data regarding emerging properties - that is, his work incorporated only those things economics measures, thus removing the rest of the vast, systemic influences and different scales from his workings - he still managed to come out with the same conclusions as I, with my more fundamental workings. Why was this the case? Piketty has essentially identified the most meta, quantifiable indicator there is in the field of economics for understanding large-scale social dynamics.

Money has increasingly become distilled as the primary indicator for success. It is a natural by-product of the corporate profit motive, nay, inherent duty to profit above, instead of, everything else. The quest for money is a universal necessity for survival these days as it is an aspirational tool; everyone needs it. Everyone wants it. Traditionally, economics interpreted this, somewhat tragically given their power status, as everyone acting in rational self-interest, unaware or unconcerned that power had enforced this interpretation of self-interest upon the people in the first place. Further, economists couldn’t conceive of the accumulation of money being anything other than a natural desire in-and-of-itself, as opposed to the unwelcome necessity many (especially artists) people view it as. That’s a conservative way of putting it - anti-fiat money thought is making some significant cultural gains recently thanks to Libertarianism, but more on that later.

Whatever the underlying, individual, subjective views on money that may emerge and die, or come to dominate, one thing is certain. Money is the lifeblood of the majority of societies on this planet now. It more than anything else determines success, and it more than anything else segregates and forces the divergence of sub-cultural systems. Wealth and power have always gone hand-in-hand, back to the earliest days of civilisation, probably back to when wealth was measured by how many pretty shells the chiefs mate wore around her neck. The reason why the two are so closely correlated is because, up until now, it has always required wealth to create large-scale, sustained, challenging, cultural production. I say always; the times when this control over the production of cultural identity by wealth slipped were those times when cultural evolution sped out of the hands of those in power e.g. the arrival of the printing press and the Enlightenment, the use of written language by merchants travelling across cultural systems in the time of the Greeks.

Yet wealth will always bring enough power to bare on the market to stamp out intolerable upstarts eventually, it will always simply recourse to whichever official legal and political powers wealth happens to control and influence, and bring money’s influence to bear to outstrip anything an individual could hope to achieve. Besides, the costs involved throughout the 20th century to produce mass-culture competitively grew immense. What’s more, and it should go without saying, but wealth sticks to its own, and since wealth determines the exclusivity, or not, of one’s cultural identity, “its own” in times of high inequality is proportionately highly defined, and highly selective - another feedback loop. This dynamic of diverging-yet-homogenising cultural identities between those at the bottom and those at the top, under the perceived notion that the latter is meant to represent the former, is a dissonance time-bomb waiting to happen.

Piketty demolished neoliberalism myths at their weak spot, the point that indicates its methodology, the source of its power; wealth.

The inherent immorality of wealth inequality; ideal for a good indicator.

But back to the curve and my point about Piketty’s major category error. Piketty thinks that the fruits of economic maturity “can be offset by a more fundamental tendency towards inequality”. Well, he is right, only it is not an inherent tendency of capitalism, or even simply corporatism. It is way more fundamental than that; my identical curve instead showed the level of homogeneity of fundamental cultural identity, of which i predicted wealth inequality would be the best indicator two weeks before I heard of Piketty. This is what leads to growth inequality; divergent cultural identity between the powerful, and the powerless, leading to sub-conscious (and sometimes conscious) moral divergence.

Why does wealth accumulate according to a power law, not just in the West, but everywhere? The answer lies in here, in morality, or more specifically, the inherent exclusivity of morality that asymmetry of power creates. Inequality is about more than someone being paid more than you; allowed to persist, it can create cultural segregation, as the wealthy cluster behind security-manned gates, take different routes through airports, and generally live a life of shared culture exclusive to only a few. This cultural divergence leads to a moral divergence, as the wealthy interpret and express their morality in unavoidably relative terms that, and to the extent to, their own cultural environment, their peers, define. Such a cultural and moral divergence as this underpins all of the favouristism, nepotism, cronyism, elitism and corruption that makes the feedback loop, and wealth’s power-law distribution, possible.  

If society were fair and just, a true meritocracy, then wealth would be distributed as a bell-curve (you hear me Libertarians?). Here then is an example of something mentioned earlier, a cultural indicator that correlates with cultural identity.  The extent to which wealth is not distributed by a bell curve - the severity of the power law distribution - is the most direct, quantifiable indicator for the homogeneity of a systems fundamental cultural identity. Not only does the dominance of one ideology as cultural producer allow for the wealth inequality feedback (moral corruption) to occur, the extent of that dominance directly correlates with how far the rest of society will allow inequality to grow.

WEALTH INEQUALITY

increases                  increase

LIKELIHOOD FOR               CULTURAL AND

SYSTEMIC CORRUPTION           MORAL DIVERGENCE

increases

This feedback loop represents the fundamental basis for Piketty’s thesis, the explanation of wealth inequality trends. In truth, he might well agree with this idea - it doesn’t contradict his findings, quite the contrary. His analysis of wealth always outstripping earned income is correct, it is just that the degree to which it does is not determined by economics alone - it is not some quality inherent to capitalism, and neither is economics the universal theory of cultural evolution and beyond. Complexity is. This fundamental, exponential dynamic explains exponential wealth inequality, the moral divergence between power and its subjects, and the inevitability of power to corrupt, all at once - at all scales, across all identities and communities, fundamental or not, and throughout civilisation.

Piketty glimpsed this when he said that he could not see a way to turn the present tide of rising inequality. Mason again:

                  “But, says Piketty, a repeat of the Keynesian era is unlikely: labour is too weak, technological innovation too slow, the global power of capital too great. In addition, the legitimacy of this unequal system is high: because it has found ways to spread the wealth down to the managerial class in a way the early 19th century did not.”

This is Piketty recognising one of the fundamental traits across the emergence of each fundamental identity; that power dilutes just enough each time to release the tension, and grant greater freedom for complexity to continue to grow. Yet it is not just wealth that has been devolved to more people; that is but one, albeit highly ubiquitous, metric by which to measure a cultural systems homogeneity at a specific moment. There are many inherently unquantifiable metrics that comprise the whole system - the entire subjective realm - that are required to understand the dynamics of a cultural system, how it is likely to change over time. For this, homogenisation of ownership over mediums of mass-cultural production is the best measure to use, not wealth inequality. For this is the very backbone, the very definition of the extent and depth of the top-down cultural identity that allows for society to continue to allow inequality to grow, to continue to hold the lid on the pressure-cooker, until something blows.

This suggests the not-too-pleasant prospect that, unless the monopoly of corporate control over shared cultural production is broken and severely rowed back, culture and morality between power and subject will continue to diverge in the West, inequality will continue to grow exponentially, and then snap. When it finally arrives, will almost certainly be violent. Please feel free to counter that power laws are natural, but in doing so be aware that you are claiming we have no free will whatsoever, that we are mere slaves to natural, instinctive forces. We are not. We have cultural evolution. We can use it to correct this indicator of ideological corruption if society chooses it.