Nic Esposito Reads Thomas Picketty’s Capital in the 21st Century

I just started reading Thomas Picketty’s expansive tome on economics, Capital in the 21st Century, which some critics have called the modern day equivalent to Das Kapital by Karl Marx. When I say “critics,” I mean reviewers and not certain pundits who are rousing up fear that the book will start another cold war.

Picketty is a sober academic who relies on meta-data rather than meta-rhetoric to make his points. And when I say “just started” — I mean that I’ve been reading it for two months and have barely dented the 577-page book — although it is prominently displayed on my coffee table in my living room to impress all of my visitors with my intellectual prowess.

Picketty is one of those academics who writes in easy to understand storytelling prose (albeit with a ton of statistics thrown in there), making the book extremely accessible to someone like me with a lamentable understanding of economics. He also front-loads the book with each subject that he’s going to study so the reader knows how all of the main points will work together rather than going through each subject piecemeal and losing the reader within the analysis.

Some of those subjects include the difference between public and private wealth, as well as a really interesting explanation on “Gross Domestic Product” versus “Domestic Product,” which I hope to explore in another essay.

But what I would like to focus on in this article is his correlation between population growth and income inequality. Picketty studied income tax returns for countries such as England, Germany, France and the United States, among others, to get a data driven analysis of how much income was earned in a country, and how much of that income was then reinvested back into the country in the form of taxes.

In the easiest terms, one of the foundations of his analysis is that population growth is a natural regulation on capitalism in a democratic society, because prosperity in a capitalist democracy is created, in part, by a growing population. More people means a larger labor force, which equals more output and tax revenue. However, to keep these people content to continue growing output and production, there needs to be a base of income redistribution to ensure a certain quality-of-life.

He then posits that as population growth slows down, even as economic prosperity and output continue, the surplus starts being distributed in unequal ways. Put another way: When the established quality of life is being met, yet the prosperity is creating a surplus, those who initially had the capital to own the businesses that created the surplus keep that surplus thus creating more wealth for them and a stagnation in quality of life among the workers whose labor created the surplus.

This brings into sharp focus the issue of the current generation not inheriting a better quality of life than the previous generation. And as we have witnessed in America in the beginning of the 21st century, the growing gap between the rich and the poor has led to a disruption of our civic institutions (i.e. Philly’s public schools) and a disruption in buying power (i.e. getting a mortgage).

The idea of tying population growth to equity is also very interesting in terms of the sustainability movement. As a new parent and adherent to sustainable practices, I was mostly preoccupied with what kind of world I was bringing a child into. But I know people in the sustainability movement who wrestle with the dilemma of whether they should bring another person into this increasingly populated world at all, and I completely respect their reasoning.

I still have 500 more pages to go, but I have a hunch of where Picketty is going with all of this. I don’t think he’s going to be arguing for China-like regulations on family planning. As his income studies have shown thus far, the artificial (and much more realistic) safeguard against inequality in capitalist democracies is equitable taxation and then smart and effective redistribution of that money back into the public good. However, it does bring up an interesting question of child rearing and population growth. In one regard, of course, we can’t go on expanding the population on this planet with no analysis or study of the resources needed to sustain this population. We’re going to witness incredible events in this century as the middle class grows and expands in population juggernauts like China and India. So it may seem counter-intuitive to say that Americans need to keep having kids. But I wouldn’t count that out in the role of economic policy planning.

Although Philadelphia’s population loss is attributed to many other factors, and not due to declining urban birth rates, we have seen the devastation that population decline can unleash on a targeted area. And as the city’s population rebounds, hopefully in a sustainable way, keeping families in the city will be integral to repairing our civic institutions like our public schools and creating more equity in our city’s economy such as providing more people with an equitable path to home ownership.

Either way, I think that it’s an interesting thing to consider the next time you are at that pot luck full of sustainability-minded people and someone is making the case for not having children to improve the earth. Maybe having a few more kids is exactly what we need, at least here in Philadelphia.

Nic Esposito is a writer, novelist, urban farmer and founder of The Head & The Hand Press. His forthcoming book of essays Kensington Homestead is due out November 2014.