Is the world heading for patrimonial capitalism?

Thomas Picketty inequality,

It probably is and with inequality causing major problems in the world it is lamentable. Not least since voters all over the world are truning to authoritarian demagogues who will not improve the lives of anybody but themselves. Thomas Piketty’s book “Capital in the Twenty-First Century” looks at how patrimonial capitalism has the upper hand. Listen to BBC Newsnight’s Policy Editor Chris Cook explaning the main points:

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Isn’t it great that a book could rattle clichés, upend dogma and, if correct, give the majority of human beings the knowledge necessary to stop the top 1% robbing them of their rights as citizens.

Paul Krugman: What Piketty's done now is he said, "Even those of you who talk about the 1 percent, you don't really get what's going on. You're living in the past. You're living in the '80s. You think that Gordon Gekko is the future."
Paul Krugman: What Piketty’s done now is he said, “Even those of you who talk about the 1 percent, you don’t really get what’s going on. You’re living in the past. You’re living in the ’80s. You think that Gordon Gekko is the future.”

In his bestseller Thomas Piketty claims we are heading into a future dominated by inherited wealth, giving the few very rich ever greater power over politics, government and society.

It’s called “Patrimonial capitalism” and has potentially terrifying consequences for democracy. If you work for a living, the level of inequality in the United States is, according to Piketty “probably higher than in any other society, at any time in the past, anywhere in the world.” If he’s correct, patrimonial capitalism will spread globally. And already by 2030, according to Piketty’s predictions.

Doing a “Gordon Gekko” a thing of the past

To quote Krugman: “Gordon Gekko is a bad guy, he’s a predator. But he’s a self-made predator. And right now, what we’re really talking about is we’re talking about Gordon Gekko’s son or daughter. We’re talking about inherited wealth playing an ever-growing role. So he’s telling us that we are on the road not just to a highly unequal society, but to a society of an oligarchy. A society of inherited wealth, “patrimonial capitalism.” And he does it with an enormous amount of documentation and it’s a revelation. I mean, even for someone like me, it’s a revelation.” In other words, it will not be possible for anyone working for a living to become rich. You can watch Bill Moyer’s whole  interview with Paul Krugman about the book here

Is “Capital in the Twenty-First Century” the watershed reviewers call it? Do you agree with Piketty and Krugman that the world is heading for patrimonial capitalism? If so, do you believe it’s positive or negative for society? If patrimonial capitalism rules the world what will happen to democracy? Do you agree with Krugman that if the US were behind Pikett’s idea of a global tax on wealth it could happen in the future? Would you like to live in a world of patrimonial capitalism? Perhaps you are of the opinion that society as a whole will benefit from patrimonial capitalism?

Video: BBC Newsnight – Picture: Thierry Ehrmann

55 thoughts on “Is the world heading for patrimonial capitalism?

  1. I have never heard of the phrase patrimonial capitalism, but it certainly makes sense. We, however, have seen this in the past. Once someone made millions there families became dynasties, such as Carnegies, Rockefellers etc. In England, there were always lords over areas of properties. We are simply changing HOW, they become dynasties. Your article did make a very good argument, this is an onslaught on democracy. Unfortunately, their are many, and political parties, that think this is alright and proper. They actually believe that money, will and should create an American royal class. If this continues, the only solution is a form of revolution, it can be political, or economical, but it will be the only thing to tip the scales back.

  2. An imbalance of flow towards one direction cannot be right, like in maths we will never find an equation imbalanced so must be in our society. Also, I haven't heard of the book you have mentioned but now will love to find a copy and read it.

    1. The book is really thick so I read a short version. But do read it. The world today is really similar to what Europe was like between the two world wars. If politicians don't get their act together and start reducing inequality there will be upheavals. Maybe even revolutions. The Russian revolution took place between the two world wars and Hitler was elected. Similar scenarios will unfold now. Already has in the Philippines, actually.

  3. This post is very thought provoking and poses an interesting dilemma. i do believe that we are moving in the direction of having a global tax on the wealthy. however, the the overall global impact on such a tax would need to be carefully researched. It will be interesting to see if, when and how this all comes about.

    1. Glad, but not surprised, we agree something needs to be done, Susan. If patrimonial capitalism increases we will get into a period in history where demagogues get into power, make the situation even worse and revolutions/uprisings will follow. Sigh..and all because of the greed of the top 1%

  4. What a sorry state of affairs privilege and its mind set, along with greed, create in our world. Is the notion of “equality” a fairy tale? Perhaps George Orwell’s pigs summed it up best? “All animals are equal but some animals are more equal than others.”

    It’s getting harder and harder for many “non-privileged” people to make much, if any, headway. [I recall hearing that in terms of income and buying power, we were best off in the 1970’s.] We hear of the working poor. Some work two or three jobs and can hardly make ends meet. Food banks, at least here in British Columbia, are seeing more and more employed people who struggle to feed their kids.

    Many governments routinely cut services, which leads to more social problems. For instance, in BC, many facilities for the mentally ill were shut down to save money. Where did many of those people go? On to the streets. Homelessness is a big issue, not to be easily written off with a judgement of “those people are all lazy.” As for politics in “democratic” nations, who calls the shots? Elected officials or the moneyed interests who support them?

    In closing, Catarina, I see nothing good about patrimonial capitalism for the vast majority of people.

    1. We agree completely, Ramona. Or as Erasmus of Rotterdam put it in the 1500s the rich are in conspiracy to make to make money at the expense of the poor while pretending it's benefits the poor and not them. Sigh, and poor people are voting for politicians who will make them even poorer. If they understood economics they would not. that't the drawback of democracy.

  5. Interesting topic. Would taxing the ultra rich really make a difference when there are many who are so very poor? Will they get their needs fulfilled or will this extra money go to a government that is wasteful with their spending? The taxes in the US need a major overhaul. And, I bet other countries do too.

    1. It would make a difference to tax the mega rich. Lowering taxes for them in countries where poverty is rising is a disgrace. Besides it would make patrimonial capitalism an even bigger problem than it is today.

  6. Patrimonial capitalism in a democracy creates something of a fake democracy, because policy is bought by the rich. It is absolutely maddening in the U.S. to see the people who are the victims of inequality, the people who have lost, in many cases, their ability to make a decent living, rally to a right-wing party whose policies will only serve to further benefit the rich and expedite the growth of patrimonial capitalism.

    1. We are in total agreement, Ken. Isn't it lamentable that the majority of voters don't understand economics and believe a demagogue who is a compulsive lier and will make their lives even worse.

  7. Interesting topic Catarina.

    Gordon Gekko – the self-made money tycoon. He was one ruthless man. Money was his drive as it is for many people today. The question is how much is too much?

    1. There is no limit to greed, unfortunately. Can guarantee you that you know people who if they could would try to grab as much as they can. It's been like that throughout history and it will lamentably never change. The problem with democracy is that the vast majority of voters don't understand economics and hence without knowing it vote for people who are pro patrimonial capitalism

  8. The one thing that came through loud and clear was the possible solution of a Global Wealth Tax. The problem with that is that I think this could lead to the corruption of the people who are to distribute the funds generated and likely do little to bridge the gap between rich and poor and maybe even widen it. Here in Canada we have a proposal that the middle class pay a bit less in tax while the rich pay a little more. Probably a good idea but what no one seems to recognize is the fact that the rich have access to the best accountants and tax lawyers who know all the loopholes and often pay very little tax if any.

    1. Lenie, in my opinion it's much better that all countries start taxing the mega rich more. Sure there are loopholes, not least in the United States but they have to be closed. If the world doesn't address the problem of inequality an abundance of Trumps will be elected and that will make the situation even worse. If that happens, evolutions will take place it's just a question of where and when.

  9. This does make me think. To me, living in a patrimonial capitalist society isn't always the best for all you live there. Having had a Russian foreign student one leaned that Russia/Russians understood the patrimony part down. Capitalism, although desired, was quite another matter. Unfortunately corruption has and is part of the norm there and they live with it, whether they like it or not. That said it is a question that poses an interesting dilemma. How would we approach a global tax on the wealthy and what would be the overall impact would something to ponder. In the end I do believe we are moving in that direction. Where we will land in all of this will a very interesting thing to see. Just my thoughts. ☺
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    1. Russia has always been partimontial one way or another, Susan. Even during the Soviet era. The Russian people have throughout history never really had an opportunity to become self-made. A few oligarchs managed at the end of the Soviet Union but the people never had a chance.

  10. Patrimonial capitalism is something that can not be avoided and it seems that we will repeat the history where the most of wealth and power will flow to few.

    In few countries we see capitalism and in others patrimony. It is becoming hard to be wealthy with hard work , there are few examples around the world and luck also counts , but mostly the wealth penetrating through generations counts.
    Thomas Piketty is right in saying that few powers will be above politics etc. and in such situation , I believe people have to suffer as armies are loyal to leaders not people.
    The Idea of Global health tax is good in a sense as it will help to regulate the wealth.

    I am happy book is best seller , but a person like me , do not know where to use all this knowledge.

    1. Andleeb, we didn't have patrimonial capitalism in the West during the 20th century. So it can be avoided. That it now, according to Piketty, is making a step back is lamentable. Glad you agree that it's not good for society.

  11. I certainly don't think the world benefits from patrimonial capitalism. But inherited wealth has always played a role in society. I guess I'd have to read his book to find out what he thinks is new about the situation.

    1. Yes, Donna, but during the 20th Century it was possible to become a self made millionaire. Now thanks to neo liberalism that can become a thing in the past. And the worst thing about it that we, the voters in the West, have since the 70s allowed it to happen. In other words now it's time to put a stop to this phenomena and make sure people have equal rights.

  12. Patrimonial capitalism has happened numerous times before.
    We now notice how much harder a person of normal wealth has to work just to maintain his standard of living.
    Worse is the wealthy throw crumbs down to people working for a living, like you would a dog sitting at a table. And these wealthy people are called “Job Creators” and are protected and promoted by some political parties.

    1. Throughout history the world has mainly been a patrimonial capitalistic society, William. But in the 20th Century it was possible for anybody to become a selfmade man/woman. And now neo liberalism is , according to Piketty, about to take equal rigthts away from all but approximately 0,1 percent of the population of the world. Glad you agree that's not progress.

  13. Personally, i think corporate taxes are too low and that there are too many concessions regarding holding tax assets. The worlds asset base will always increase due to shortage of resource. So why do we attract assets. Our world requires us to fo what we do best, to consume (without waste). Economic activity is a great way to distribute. So perhaps – if we make concessions about investing in community well being rather than capturing and protectingexcessive wealth assets. There will still be plenty of people targetting increased wealth, its a natural power reality for survival… However, its a great way to redistribute wealth in the economy and govt does not have to fork out as much. Hmmm : a self correcting society wealth, truer retail spending and fair corporate tax bases (around the world) might help us reduce the effect talked about in the book.

  14. I would like to believe that everyone has the ability to work and succeed on their own, but I suppose that’s naive. It’s the notion that I learned growing up, as if that were the way it will always be in the US, but unless we pay attention we may be headed down the wrong road.

  15. Makes me sad to say it, but patrimonial capitalism feels inevitable. I grew up in an environment where I was absolutely expected to do better than my parents. That I would have a better job, better home, better lifestyle were taken for granted. I don’t have the same sense of certainty for my children and more oncern for my (future) grandchildren and it has nothing to do with them and everything to do with the disappearing opportunities.

    Because the middle class became so much the focus of marketing and pop culture, we took for granted that we were dictating the direction of government policy. The truth is, while many of us were watching reality television, those with an eye on power were shifting policy to increasingly favour and protect the wealthy. As to Piketty’s solution, I regularly hear people speak about taxing the wealthy as an outdated and not very useful idea…the funny thing is, the middle class are generally the ones saying that because they think they are the wealthy. 🙂

    1. Debra, you bring up a point that has been startling me as well i.e. that it's the middle class that is defending policies that will make them poor long term. You are right that they believe they are wealthy but I also think it's because they don't understand economics.

  16. Well in the USA, we had the Gilded Age when all kinds of innovation lead the wealthy to give us railroads, banks and more. They too became so wealthy that we still have their mansions that most of us cannot relate to, in places like Rhode Island. These were usually their second "mansions" for the summer! My point is. We have been here before, where the wealthy were so wealthy they often even created their own "cities" just for their employees. I've read about the rich getting richer elsewhere, and it is true it's a challenge. But in USA as long as the wealthy also pull the strings in our government officials, we're doomed.
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  17. Yes, Patrimonial capitalism seems obvious to me. With fewer good jobs and higher prices, it is and will be increasingly more difficult for anyone without inherited money, to save enough money to get ahead. This disparity is discussed in many documentary films I have seen on Netflix. I’m not fond of the term however, how about Matriarchal capitalism?

  18. Today many American baby boomers had become asset owners, through retirements accounts.They have been able to make more money through investing than labor. So when we concentrate on capital income it will be be in the hands of those that have inherited their wealth. The generation of today is not creative and have become a nation of entitlement. We criticize inherited wealth but most of us want it.
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    1. Arleen, you are talking about the baby boomers who are well off, not the top percent of mega wealthy. Can't help wondering if you believe what is outlined in the book is a good idea? Take into account that what is predicted hasn't yet happened.

  19. I don’t view patrimonial capitalism as having any redeeming features. I admire Warren Buffett and Bill Gates for their generous actions but they are in the minority of course. I deplore the state of politics in the U.S. where the very wealthy have so much influence. There is the occasional worker who becomes wildly successful but it doesn’t happen often. Enjoyed the video which was well put together.

    1. Neither Buffett nor Gates inherited their wealth, Beth, They are self-made so we are not talking about patrimonial capitalism here. Apart from that, glad you agree that patrimonial capitalism.is detrimental to society as a whole.

  20. The funny thing is that the world moves in cycles – natural, political, economic, and so on. As Piketty points out, we've been in the position before where the vast majority of global wealth was owned by relatively few people. Then wars intervened and redressed this. If you go further back in history you will see that wars frequently occurred when a section of society started to wield too much power, and this will happen again – even more quickly through the rapid spread of information.

    Add to this The Giving Pledge, started by Warren Buffett and Bill Gates, where super-rich people pledge to give the vast bulk of their wealth to philanthropic causes and you can see that redistribution is also happening voluntarily.

    There's plenty of room for new "Gordon Gekkos" to build their own wealth, in my view…

  21. I think it will be interesting to see how it all plays out. We have seen the wealthy get wealthier and the poor remain poor. We have also seen the poor become wealthy through hard work and the wealthy become poor through the mismanagement of their wealth. We have also seen how history can and does repeat itself. He may very well be right about this theory and it's a scary thought…
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  22. I’m not sure what to think about this Catarina. From what I’ve seen in the past with inherited wealth, in many cases it is squandered by the heirs, rather than used to gain power. Of course, there are always exceptions but I would think that they would only be 1% of the 1% – would that number be large enough patrimonial capitalism – who knows – but it is good that people like Piketty bring this kind of information to the forefront so others, like us, can at least become aware of it. What we can do with the knowledge, I’m not sure.
    Lenie

    1. Lenie, don't know about you, but I know a lot of mega wealthy people. They have so much money they simply cannot squander it all. And it's managed for them by an abundance of experts. Sure a few upstarts manage to squander it all but it's only a small percentage of rich people that lose it all.

  23. It seems like we have been down this road before in the Middle Ages. Working was never going to make you wealthy. Being wealthy was going to perpetuate wealth for generations. In the West we lifted ourselves out of that rut. Can we go back in? Absolutely. Will it hurt society? Absolutely. Can we get out of it again? Who knows.

  24. Oh, no. I feel like I need to read this book now, but then what? Is there a practical course of action to prevent this likely future or is it just more important than ever to be happy with what you have?
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  25. Seems to me that living in a patrimonial capitalist society wouldn't bode well for the majority. Russia appears to have the patrimony part down…but hardly the capitalism. Corruption rules there. But for all of our talk of inequality with the wealthiest having the most influence in all ways, we should be thinking of ways to elevate folks of lesser means via education and motivation. There have always been wealthy folks, but I seem to notice more envy of them these past years. I remember aspiring to get an education and work hard so that I could be wealthy too! I'm not convinced that the 1% is robbing American citizens of their rights. We still have the right t vote, are free to work, and free to accumulate wealth. To impose a global wealth tax, removes motivation and encourages corruption….just my opinion.
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    1. Jacqueline, according to Thomas Piketty, we are not yet a patrimonial capitalist society. It's still possible to become wealthy through work. But will it be in the future?

  26. I believe the world has a strong element of patrimonial capitalism and that in political terms it is more influential than what many like to think of as a meritocracy. I doubt that Thomas Piketty underestimates the difficulty of making any real impact via capital taxes and probably fully realizes that just stimulating the debate is very important. It is unfortunate that economics is so politicized in that those who reject the proposed solutions will also fail to acknowledge the problems that do affect the security and therefore the absolute quality of life for even the extremely wealthy and powerful.

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