Piketty misinterprets Balzac on money, and he should read Rand on the subject…
French economist Thomas Piketty has become the new guru, or idol, of the Left, replacing American philosopher John Rawls. Piketty’s Capital in the Twenty-First Century—where the title consciously echoes Marx’ Capital—was a bestseller in 2014 although it could be observed on Kindle that few of the buyers read more than the introduction. Piketty’s message is, in brief, that in the West inequality of wealth and income has been increasing during the last few decades to such an extent that we are practically returning to early nineteenth century society, described by Honoré de Balzac in his novels, primarily Père Goriot, published in 1835. Piketty quotes extensively from Père Goriot. The novel takes place in 1819–1820. It is about a young nobleman from the South of France, Eugène de Rastignac, who studies law in Paris. He lives in a modest boarding house with some other people, including old Goriot who used to be a wealthy merchant but has been relegated to poverty, because he has spent almost all his fortune on his two ungrateful daughters, both married to noblemen. Goriot is consumed by his unrequited love of his daughters. He knows that they would not ignore him if he had some money left, which leads him to exclaim on his sickbed: ‘Money is life. Money does everything.’ Piketty comments that Rastignac ‘discovers the cynicism of a society entirely corrupted by money’. Modern capitalism is just as bad, Piketty believes.
Not Money, but the Lack of It, Corrupts People
This is not plausible, neither as an interpretation of Balzac nor as an account of modern capitalism. It has to be said for money that on its own it has never harmed anyone. It is a medium of exchange which facilitates the division of labour and thus the creation of real wealth. Money is a social contrivance, not an independent agent. It is true that avarice is a vice, but avarice is the excessive and abnormal pursuit of money for money’s sake. Normal people want money because they can use it to buy goods and satisfy their needs. If their needs are immoral, we may say that they are corrupt, but they are not corrupted by money but rather by their own immorality. They are not bad because of their money, but because they have tried to obtain it by fraud or violence or because they have put their money to bad or frivolous use. Old Goriot was for example trying to buy something which cannot be bought, the affection of his daughters. Usually, money is a liberating force. It enables choice, but it does not replace it. In the early twentieth century, the first demand by Icelandic labour unions was that workers should be paid in money, not in goods or in coupons. If they were paid in money, they could decide how to dispose of it. What is however corrupting is the debasement of money, practised by governments from time immemorial. It usually has two kinds of victims, the thrifty and the poor. The thrifty see their savings shrink in value, and the poor have no means of defending themselves against the depreciation of the currency: they possess no gold bars like the rich, only a few banknotes worth ever less. Sound money is imperative in a free society.
Money does not corrupt people, but it may well be that the lack of money corrupts them. This is how I read Balzac’s Père Goriot. Not all of the protagonists in the novel are poor, but they are almost all short of money, either because their ambition exceeds their resources as in the case of Rastignac, or because they are in the thrall to a passion like Goriot, or because they are reckless. Some are just unlucky. Balzac has a keen eye for the frailty of human beings, and indeed also for the fragility of wealth (which is something Piketty seems to deny). When Balzac describes the role of money in society, he is really observing human nature, or as he put it himself, the human comedy. Another novelist, Ayn Rand, has however more to say about the social function of money. In The Fountainhead, published in 1943, the architect Howard Roark has a discussion about money with a press lord, Gail Wynand. Roark abhors serving either the masses or the millionaires: he values his independence at any cost. Wynand observes that paradoxically he, the press lord, could be seen as an embodiment of the selflessness applauded by socialists (such as Piketty), because he is just concerned with keeping his customers happy, not with asserting his own self. Roark comments that people who live second-hand have no self. They live within others. ‘I don’t see anything evil in a desire to make money. But money is only a means to some end. If a man wants it for a personal purpose—to invest in his industry, to create, to study, to travel, to enjoy luxury—he’s completely moral. But the men who place money first go much beyond that. Personal luxury is a limited endeavor. What they want is ostentation: to show, to stun, to entertain, to impress others. They’re second-handers.’
Fortune by Work—Or Conquest
Rand also discusses money in Atlas Shrugged, published in 1957. A journalist says to the businessman Francisco d’Anconia that money is the root of all evil. D’Anconia protests: ‘Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce.’ He stresses the difference between offering money and using force: ‘Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss—the recognition that they are not beasts of burden, born to carry the weight of your misery—that you must offer them values, not wounds—that the common bond among men is not the exchange of suffering, but the exchange of goods. Money demands that you sell, not your weakness to men’s stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best that your money can find.’
D’Anconia comments on the uniqueness of America: ‘To the glory of mankind, there was, for the first and only time in history, a country of money–and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man’s mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being–the self-made man–the American industrialist.’ D’Anconias’s final words in this speech are: ‘When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns—or dollars. Take your choice—there is no other—and your time is running out.’ Piketty speaks about the cynicism of a society corrupted by money. But he would do well to explore the cynicism of a society corrupted by power, as in eighteenth century France under both royal absolutism and revolutionary terror. Piketty would do even better to read the works of the eloquent French thinkers who have presented profound arguments for the liberal order, based on private property, free trade, and limited government: Benjamin Constant, Frédéric Bastiat, Alexis de Tocqueville, and Bertrand de Jouvenel.