Notices by Cory Doctorow (pluralistic@mamot.fr)

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Thomas Piketty's 2013 unexpected bestseller (a 750 page economics book translated from French!) *Capital in the 21st Century*, offers a very convincing explanation of our political decay, and it continues to serve this purpose as the decay undergoes alarming acceleration:

https://memex.craphound.com/2014/06/24/thomas-pikettys-capital-in-the-21st-century/

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If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2025/02/18/pikettys-productivity/#reaganomics-revenge

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Let me sketch out that argument really briefly for you here. Absent any kind of government intervention, markets make investors richer than workers (AKA "the rate of return on capital exceeds the rate of return from growth" or "r > g"). This is true even for extremely powerful workers who get very, very rich indeed. Piketty illustrates this in many ways, but my favorite is the Parable of Bill Gates, Liliane Bettencourt and Bill Gates (again).

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Now consider Liliane Bettencourt, who, during Bill Gates period as Microsoft CEO, was the richest woman in Europe. Bettencourt was born very, very rich, heiress to the L'Oreal fortune. Unlike Gates, Bettencourt didn't have a job. She just sat around, while financial planners invested her family money. Over the 25 years when Bill Gates was growing Microsoft from zero to the most successful company in planetary history, Bettencourt *made more money* than Gates.

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Gates founded Microsoft in 1975 and stepped down as CEO in 2000. In the intervening 25 years, he built the company into the most profitable firm in human history and grew very, very rich. This is Market Lore Canon: found a successful company, grow rich.

Now, Gates started with a bunch of money - he comes from a wealthy family - but he grew his personal fortune over those years in extraordinary ways, and not by investing it, but rather, by founding a company and working at it.

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Gates made his money by *doing something*. Bettencourt made her money by *emerging from a very lucky orifice* and just hanging around.

But here's the kicker: after Gates quit Microsoft, he became an investor. He stopped doing a job and started investing in companies where other people were working. Over the next 13 years, Bill Gates (investor) made more money than Bill Gates (Microsoft CEO) made in his 25 years of doing a job. He also made more than Liliane Bettencourt.

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Because they're getting wealthier faster than the economy grows, they come to command ever-larger shares of the economy, so even when the pie gets bigger, their slices gets bigger still, and the remainder that we all share isn't just proportionally smaller - it's *actually* smaller. We don't just have less relative to the rich - we have less relative to our parents.

For Piketty, this is an iron law of markets, born out by analysis of hundreds of years' worth of capital flows.

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That's what r > g means: that even the most successful worker in human history can't make as much as person who merely has a lot of money, and the more money you have, the more money you make.

If you think about this for a second, you can see how it'll play out: in economies both good and bad, the people who emerge from lucky orifices will get wealthier than anyone else, wealthier than the people who do things that grow the economy.

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He devotes many of those 750 pages showing how even the most profitable sectors of the economy at any given time are disproportionately benefiting investors, even relative to the most successful managers and workers at any given time. This is where oligarchy comes from: it is the natural end-state of a market economy.

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But (Picketty continues), oligarchy is intrinsically destabilizing. For one thing, once the fortunes of Bill Gates' or Liliane Bettencourt's are large enough, growing them by even, say 1% requires that some capital come from other rich people, because 1% of Bill Gates's holdings will eventually exceed 100% of the holdings of everyone who isn't insanely right. So, over time, rich people eventually have to fight with each other in order to keep getting richer - see, e.g., WWI.

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That's not the only way extreme wealth inequality creates political instability. Once the 1% are sufficiently wealthy, they capture government, and the only policies that can be enacted are those that don't gore some aristocrat's ox, and once the rich become *super* rich, they own all the oxen.

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So sensible policies that are needed to ensure an orderly, stable society (for example, limiting war bond repayments to a sustainable level that won't bankrupt the economy to make wealthy bondholders even richer) become impossible, and then you get societal collapse (see, for example, World War II).

The backbone of *C21* is a time-series of 300 years' worth of global capital flows, painstakingly assembled by Piketty and his grad students.

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This time series shows the same pattern emerging over and over: as the rich get richer, they capture more and more of the state's policy-making apparatus, triggering more wealth-friendly policies, which make them even richer, and makes their grip on policy stronger. This continues until inequality reaches a tipping point, and then you a rupture, like the French Revolution, or the World Wars.

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These are orgies of capital destruction, and because nearly all the capital is in the hands of the rich, when the dust settles, they emerge with much less capital and much less power. Society is shattered, but it is more equal, and this means that we can once again make good policies that help us rebuild a society that benefits everyone, not just the rich (the French call the 30 years following WWII "the 30 glorious years").

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But, if this society doesn't include some kind of mechanism to address the fact that capital is still growing faster than the economy - even a post-war boom economy - then eventually the share of wealth held by the rich will reach a tipping point, and we'll see policies that benefit the wealthy crowding out policies that support human thriving, and the rich will get richer, and they will feud with each other, and society will destabilize, and we will face collapse.

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So, let's talk about Ronald Reagan! By the late 1970s, the share of wealth held by the top 10% had grown significantly from its post-war low point. With all that excess capital, the rich started spending money to promote candidates and policies that would make them richer. At a certain point, they have enough money to buy Reagan's presidency.

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Then, we get a deregulalatory bonfire: lower taxes for the rich, looser rules for finance, fewer protections for workers, less spending on social programs.

This makes the rich richer, even as wages stagnate. The next 40 years are a procession of ever-more-wealth-friendly policies and politicians - not just the Bush years, but also Bill Clinton's welfare bill and Obama's foreclosure crisis - and the rich get richer and everyone else gets poorer.

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Monopolies consume the American economy. GDP goes up, because the corporate sector is super consolidated and it's jacking up prices and slashing wages, leaving more for profits and dividends.

Society grows progressively less stable. Policies that benefit the wealthy at the expense of everyone else - ignoring the climate emergency, slashing the safety net, starving infrastructure, etc - dominate. Inequality worsens. No one can afford a house, health care, or university.

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Your life's savings are stolen by a subprime mortgage, or a pension-fund raid, or bitcoin grift. Instability worsens. Policies that benefit the wealthy at the expense of everyone else - endless imperialist wars, noncompete agreements, private equity rollups - multiply. Wages stagnate. Inequality increases. The rich get richer. One political party is captured by finance ghouls.

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The other one is *also* captured by finance ghouls, but welds them into a coalition that includes virulent, apocalyptic racists.

Which brings us to today, and Trump, and imminent collapse, and Elon Musk and his child soldiers, and JD Vance, and the whole fucking thing.

Today, Piketty posted some pointed thoughts on the situation in Europe in the face of rising American fascism and belligerence:

https://www.lemonde.fr/blog/piketty/2025/02/18/trump-national-capitalism-at-bay/

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