"Soak the Rich: An exchange on capital, debt, and the future"

From The Baffler:

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.

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?....

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HT: The Big Picture

If bored by Piketty here's more on the 1895 wreck at the Gare Montparnasse along with the iconic photo: