I am about three-quarters of the way through Thomas Picketty’s book on capital, enough so that I can talk about one of the themes of his book, and it is a mighty strange one. It is that we might return to the horrible past of a century ago when capital had a stranglehold on Europe’s wealth, leaving most people with nothing. Was this true back then, and is it likely to happen today?
Start with not a century ago, but with two centuries ago, and use Jane Austen to figure things out. Picketty singles out her novels and those of Honore Balzac as telling us about life in those days, and what he says is surely interesting, but it is also very difficult to determine what it would mean to be neither rich nor poor back then, to be what I am calling middle-class. (As I noted two days ago, he has his own definition of the middle class, which consists of those people in the 50th through the 90th percentiles.) I’ve never read Balzac, so I will have to refer to Austen only (spoilers ahead!).
In Pride and Prejudice, Wickham received £3,000 from Mr. Darcy, and based on what Picketty says, he could have invested that money in 5% bonds to get £150 per year. Since the average income back then was just £30 per year, he could have had a nice life. Instead, he seems to have squandered it (supposedly in studying law, but most likely in gambling), and then begged for more, which Mr. Darcy refused to give.
The question, though, is: Would it have been a nice life? Picketty would say no. As far as I can tell, Wickham probably could have had servants, but not a carriage. I say he could have had servants since the very poor Price family in Mansfield Park had a servant (Rebecca, about whom Mrs. Price is always complaining), but it seems he would not have been able to afford a carriage. I say this because the £3,000 given to him was in lieu of being given a “living” at Pemberly (that is, of being the resident clergyman), and Mr. Collins with his living does not have a carriage. This apparently was a serious problem. As Picketty puts it:
[Jane Austen] knew that to live comfortably and elegantly, secure proper transportation and clothing, eat well, and find amusement and a necessary minimum of domestic servants, one needed – by her lights – at least twenty to thirty times [as much as the average]. The characters in her novels consider themselves free from need only if they dispose of income of 500 to 1,000 pounds a year. [pp. 105-6]
So, if Wickham would only get £150 per year, then gambling away his £3,000 makes a certain amount of sense because he really needed more than that. By the time we meet him, he wants to marry into money, though in initially focusing on Elizabeth Bennet, he made a big mistake. Yes, she was living well when he met her, but her family’s large income would be cut off as soon as her father died (through what is called an entail, meaning it would go to the nearest male relative), and she would be left with 4% of £1,000, or just £25 a year, which was below average, and the average it seems was practically nothing.
On the other hand, the problem of not having a carriage, if Wickham were to live in London or (better yet) Bath, does not sound so bad. Distances to pubs and other enjoyable diversions were short enough that he wouldn’t need one. Plus, Elizabeth Bennet calls his £3,000 a considerable sum. So maybe £150 per year isn’t as bad as Picketty makes it seem. But let me take it as given that even an income above average had big limitations in the early nineteenth century.
According to Picketty, this state of affairs continued up until 1914, when everything fell apart for the very rich. In fact, as the nineteenth century wore on, things got worse for everyone but the rich, so that during what he calls the Belle Epoque life must have been truly hardscrabble and desperate for even the middle classes.
The year 1914 was the turning point because not only did the first of a couple of calamitous wars began in that year, wars that would drain the capital of the very rich, but that was also about the time when the progressive income tax was begun. The result of all that loss of capital is that we today in the middle class have lives that are quite pleasant.
To be middle class today means having a house (via a mortgage), at least one car, various appliances (washer, dryer, and central air), smart phones and computers, the ability to dine out a few times a week, and the ability to travel, sometimes across oceans. Forty years ago, an average income would help put a child through college, though today that is not as likely as it used to be (but on the other hand, few people traveled internationally back then). What is missing from this life? Only the very rich can afford to own even a small plane, but most people get along fine without owning one. If you have an average income, your home is not likely to have a pool or a gym or its own tennis court, and so on. But having a car means that you can drive to public pools, gyms, and tennis courts, so this isn’t a big problem.
Picketty worries that capital is again being concentrated at the top and that we will once again be stuck in an era like that of the Belle Epoque, and that would be horrible.
I say this is nonsense. Let me point out some of the problems here.
1. Was life getting worse for the middle class as the nineteenth century wore on? I say no. Think of Jerome K. Jerome’s Three Men in a Boat, which was written in 1889. Based on what Wikipedia says about him, Jerome was probably lower-middle class at the time he wrote this book, or at best middle-middle class. Yet, the life he describes seems pleasant enough. He doesn’t own his own home, but he seems to be able to get around London easily enough via cabs, and he was able to take train trips and sea voyages. Moreover, the boat trip he took up the Thames inspired plenty of other people to do the same, and if wealth was concentrated among the wealthy, only a few would have been doing this. Accordingly, life was not getting worse for the middle class, but better as the nineteenth century wore on.
2. The progressive income tax probably had less of an effect than Picketty thinks it did. While it became high – 73% in 1916 for the very wealthy – the question is whether the wealthy were actually paying that rate. When I came of age politically, the wealthy were paying 70%, but there were many bitter complaints from leftists that they weren’t paying their fair share, that they were socking away their wealth in Swiss bank accounts or using loopholes to evade that high rate.
3. Meanwhile, the high rates for the wealthy also were generally accompanied by comparatively high rates for the poor as well. The highest rate for the rich was 94% in the years 1944 and 1945, when it was also 23% for the poor (according to this website). How was destroying the wealth of the very richest helpful to the poor, given the comparatively high tax rates under which the poor suffered?
4. Finally, what really led to our pleasant, middle-class lifestyles of today? The destruction of capital? No, I say it was advancing technology. That is why Jerome K. Jerome’s life was more pleasant than those of his counterparts from earlier in the century. The Tube had already been started, and he could take trains and steamships to various places. Clothing had come down in price because of the factories (an effect that socialists seldom want to admit). Reading his book is like reading about a life that is not so very different from our own, while reading about Jane Austen’s era, with its "livings" and entails, is like reading about a distant and very foreign country.
What in fact is the threat to the middle-class lifestyle? It is not the growth of capital, but the growing power of the environmental movement. The environmentalists – some of them, anyway – want us all to live in apartments rather than owning homes and to use mass transit rather than owning cars. Others want us all to live in small villages or to return to a hunting-and-gathering society. They say that this is what they want for everyone, but it seems more likely that the society we will end up with will be one in which the very rich will have homes and cars (or maybe carriages), and the rest of us won’t.
That is the more credible threat to the middle-class lifestyle. The growing wealth of the rich, as far as I can see, doesn’t affect most of us at all.