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Gender & Capital in the 21st Century
Thus far, discourse about this watershed book has been overwhelmingly male-dominated (the only feminist critique that I am aware of before this has been Zillah Eisenstein’s). Though Capital has many virtues, attention to gender, alas, is not one of them. Like most mainstream economists, Piketty does not deploy gender as a category of analysis, nor does he engage with the work of feminist economists. Nevertheless, he offers insights about the nature of economic inequality that feminists can build on to advance both gender and economic justice.
As the historian Stephanie Coontz recently observed, during the past forty years our economy has been shaped by two overwhelmingly important trends: the rise of gender equity on the one hand, and the decline of economic equality on the other. These phenomena may appear to be unrelated, but in fact they are linked. During the 1970s and ’80s, women’s labor force participation soared, driven in part by families’ needs for additional income as economic inequality began to spiral and most men’s wages declined. As women’s average educational attainment and years in the workforce increased, so did their wages. Even so, economists Francine Blau and Lawrence Kahn argue that during this period, women were “swimming upstream” in a context of rising wage inequality.
During the 1990s and 2000s, economic inequality continued to skyrocket, but gender equity began to stall. As leading feminist intellectuals such as Coontz, Arlie Hochschild and Paula England have noted, during this period the growth in American women’s labor force participation began to fall off, and so did their advancement in managerial and professional occupations. Low-income women also fared poorly, as they lost the right to welfare as an entitlement, and extreme poverty among female-headed households tripled. For a while, the gender pay gap continued to narrow, until progress there began to slow as well.
How can Piketty help us understand these important developments? Piketty’s argument is that absent extraordinary government intervention, economic inequality will continue to soar, because the return on capital is likely to outpace the rate of economic growth. In short, economic inequality is a feature of capitalism, not a bug.
If, as Piketty predicts, economic inequality continues to grow, this bodes ill for women. Evidence that suggests that there is a strong link between gender equity and economic equality, and that women are more likely to prosper in more egalitarian economies. As Blau and Kahn have shown, in countries with more equitable wage structures, women enjoy a narrower gender pay gap. Blau and Kahn have also found that women’s labor force participation in the United States is slowing relative to other economically advanced countries, and they identify our lack of family-friendly work policies as the chief culprit.
Blau and Kahn don’t directly link the decline in American women’s labor participation to rising economic inequality, but their findings suggest a possible pathway. A number of researchers, most notably political scientist Martin Gilens, have found that in America today the preferences of the rich overwhelmingly drive policy outcomes and that economic elites are disproportionately likely to oppose egalitarian, pro-worker economic reform. This suggests that as that the increasing concentration of wealth in our society is a major threat to feminist work and family policies. Growing economic inequality may well be the powerful obstacle blocking women’s economic advancement in our society.
Piketty suggests that to curb economic inequality, we need to reduce the rate of return on capital. He argues that the best way to do so would be via a tax on global capital, an idea that he admits is “utopian.” The other major remedy he advocates is a steeply progressive income tax. He doesn’t explicitly analyze other anti-inequality policies, but he suggests that they would not be nearly nearly as effective. Why not? This brings us to a fascinating question, which he doesn’t fully answer: What causes the rate of return on capital to be so high in the first place?
As economist Suresh Naidu has noted, there are, broadly speaking, two possible answers to this question. The neoclassical interpretation would be that the rate of return is mechanistically determined by the market: by the forces of supply and demand. If this is the case, then tax policy is the only effective remedy. According to Piketty, the elasticity of substitution between labor and capital is high; this theory, if true, implies that labor market reforms would have little impact on inequality. The enactment of a policy such as a high minimum wage would merely give the capitalist an incentive to replace workers with technology in order to maintain high profits.
But elsewhere, Piketty argues that the return on capital “is always in part a social and political construct” that “depends on national rules and institutions.” As he notes, in Germany, where worker representatives sit on corporate boards, the market value of firms’ capital is lower than in other advanced economies. If capital is indeed primarily a social and political construct, then consequently a much broader array of anti-inequality policies would be effective. On the whole, Piketty’s institutionalist analysis is more persuasive than the neoclassicist version, because it is a better fit for his evidence. He shows, for example, that war and progressive taxes weren’t the only factors that caused economic inequality to decline after World War I; political transformations such as the rise of labor unions also played a major role.
An institutionalist perspective suggests that one promising approach to fighting economic inequality would be labor policies targeted at women. A large body of research (including this study) shows that increasing female employment and earnings would reduce household income inequality. This suggests that anti-inequality advocates should champion policies that improve women’s labor force participation, such as paid family leave and other flexible work arrangements.
Increasing economic growth would also, as per Piketty’s analysis, reduce economic inequality. Economic growth, as he defines it, consists of two important factors: productivity growth and population growth. In economically advanced countries, the fertility rate is positively correlatedwith the female labor force participation rate. This suggests that besides increasing women’s employment, flexible workplace policies would offer the additional advantage of boosting economic growth by increasing the birth rate. There is also evidence that family-friendly policiesenhance productivity, which is another way they could increase economic growth.
Capital in the Twenty-First Century is an exciting and groundbreaking book that forces us to look at economic inequality in a new way. Unfortunately, it is seriously flawed by Piketty’s policy imagination, which is confined by the neoclassical straightjacket. Moving beyond the neoclassical framework suggests a richer array of anti-inequality policy alternatives, of which the feminist response I’ve described is just one subset. Opening up Capital to heterodox analyses such as those provided by feminist and institutional economics allows us to imagine a pro-equality political program that is a better match for the book’s bold vision.
Read the rest of this discussion featuring contributions by Kate Bahn, Joelle Gamble, Zillah Eisenstein, and Heather Boushey at The Nation.
Also about inequality on the Evatt site:
- Redressing inequality - 125 years ago
- Contesting inequality: an alternative to Hockey's budget agenda
- Budget fuels financial discomfort
- Battlers & billionaires
- Addressing inequality at root
- Stiglitz: the price of inequality
- Behind the chaste veil: inequality in Australia, post-Piketty
- Piketty v. Marx
- New inequality poll, Oxfam
- Capital in the 21st Century: review article
- Thomas Piketty: the book of the moment
- Australia's rich are on a roll
- The United States of Australia?