I am usually an advocate of reading the book before the movie – or indeed of only reading the book and not spoiling it. But I haven’t yet been in the mood to delve into Thomas Piketty’s 570-page book analyzing the historical data on wealth and income, “Capital in the Twenty-First Century”. It does sound a bit dry.

So, this time, I jumped at the opportunity to watch the movie instead.

First observation: The film is anything but dry. It’s visually very appealing, much more than one would expect from an economics lecture. It blends historical footage, reenactments, excerpts from Hollywood movies, interviews and beautiful cinematography.

It’s an economic history of the last 230 years, since the French Revolution, always putting it into historical and political context. This provides a good overview and shows, counterintuitively perhaps, that both World Wars actually helped to fight inequality. After World War I, there was so much destruction and nothing to be gained by taxing the working class more that states finally had to tax the aristocracy. Workers and women, who had borne the brunt of the war, managed to attain a stronger role in society.

But it was only after World War II that social mobility became a real possibility. Only then did a middle class come into existence and the combination of growth and the welfare state offered a realistic chance to get ahead through hard work and study.

One reason this worked was that capitalism needed to serve the masses, not the few, because there was the alternative of communism. The competition between two economic and social models kept capitalism on its feet. But that competition came to an abrupt end in 1990.

And ever since, capitalism became unfettered, the rich became richer, they made the rules, they stopped paying taxes on large parts of their income, they were moving their assets around to evade taxation. Inequality has been growing to levels last seen a hundred years ago. In a few decades, we’ve lost all progress. Economically, in many countries, we are experiencing a quasi-feudal system, where inheritance largely determines one’s place in society, where the rich marry and mingle among each other, and the rest of society is toiling to make ends meet.

I found some of the historical lessons in the film too simplistic. For example, the role of reparations after World War I in bringing down the Germany economy is overstated. (Yes, the reparations burden was high, but Germany only paid a fraction of what was due.) And while poverty may have played (and continues to play) a role in the rise of fascism, this is by no means such a simple nexus. (In the US, extreme poverty led to the New Deal.)

But it still works because people want to believe in social mobility, against all facts and odds. Ironically, there is much more social mobility in societies that emphasize equality and have higher taxes (not least because you need good public services, especially education, for social mobility).

One eye-opening scene was the Monopoly Experiment done at UC Irvine. Participants were invited to play Monopoly (largely a game of luck, not of skill or wit), but the toss of a coin (luck again) determined that one of the two players got twice as much capital to start with, collected twice as much upon passing “Go”, and got to roll both dices instead of one. Now, that player knew that his position was only due to luck.

What happened? Not surprisingly, the player with all the privileges won. But what was surprising, and shocking even in some of the videos, was how cocky, mean, arrogant the privileged players became within minutes. They forgot almost immediately that it was merely a coin toss (like an inheritance or having rich parents) which had placed them in the privileged position. They seriously thought that they were better Monopoly players. As the psychologist says: “We translate the experience of being better off than others into thinking that we are better than other people.”

In summary, a movie well worth watching, and well worth thinking about it. But it doesn’t go into the necessary depth, and can thus only serve as a teaser for the book. Or for Mr Piketty’s new book, “Capital and Ideology”, another tome of 1150 pages. Too bad that there is a huge gulf of inequality between everything I want to read and the time I have.

Links:

• If you think that inequality doesn’t matter, I suggest this article.
• More film reviews.
• And more about economics.
• If you liked this movie, you will probably like the three tiers I set up on my Patreon. ;-)