The key and devastating idea in Thomas Piketty's masterpiece Capital in the Twenty-First Century, an idea that many missed or failed to appreciate, is that there is no law-like link between democracy and capitalism. As he points out at the beginning of the book, there was after the Second World War great belief in the Kuznets Curve. The economist Simon Kuznets devised this hypothesis, which was eagerly accepted by those on the right and the left of his time (the 1950s). By using tax records, he saw a movement in the history of capitalism that began with things being very unequal and brutal for the poor to, step by step, things being more equal and democratic. It was therefore a law of capitalism that, as it accumulated more wealth, more of this wealth was distributed downward.
But what did Piketty show? This curve was not a law but the result of a historical accident.
What happened is this: Inequality was pretty much the same between the emergence of capitalism (in the 17th century) and first half of the 20th century. What caused the change was this series of human-made catastrophes: the First World War, the Crash of 1929 (and the resulting Great Depression), and the Second World War. Those events were destructive enough to break the iron grip the rich had on wealth. And once loosened, a good part of this wealth was transferred to a large number of white Americans and Europeans (blacks never got their check, as MLK pointed out on the March on Washington for Jobs and Freedom). This redistribution formed the middle class and also the idea that capitalism was progressive, moving from primitive to civilized accumulation, from class conflict to class harmony. Kuznet's curve appeared at this time, which is also known as the Golden Age of Capitalism.
But then the 1970s happened. During this decade, there were several economic shocks, most related to profitability, that brought to an end the gains made by post-war social democracy in Europe and US. By the 1980s, levels of inequality began their return to pre-1914 levels. This movement (this restoration), called neoliberalism in the academic world, was not initiated by Ronald Reagan but actually Jimmy Carter, who was to the UK's James Callaghan what Margaret Thatcher would be to our Reagan. Carter was the US's first neoliberal president. And this is why there is a direct line from him to Obama.
It is now largely forgotten that it was Carter, not Reagan, who began deregulating the market. Indeed, during the 1976 democratic primary, there was an ABC movement–Anybody But Carter. Democrats who remained committed to the party’s egalitarian ideology rightly feared that Carter was too right wing and would effectively strip the party of its historical commitment to the continuation and expansion of the legacy of FDR and LBJ. However, they ran too many candidates against Carter, splitting the left vote and allowing Carter to win the nomination.
Hillary Clinton is in this line.
Piketty's point, and the point of this post: Kuznet's curve did not expose a law but an anomaly. There was no progress in the historical record. There was only a series of social and military disruptions that were powerful enough to shake the political and economic order of capitalism. This is Piketty's dark and depressing message. War and economic devastation, and not democracy itself, led to mid-century social democracy.
Bernie Sanders is running for president on nothing but democracy. Yet, democracy without destruction on a planetary scale has never changed a damn thing. If Sanders were to become president and successfully restore social democracy, which would mean peacefully weakening the iron grip the rich have on wealth, it would be as amazing as watching Jesus walk on water.
Though I'm a committed socialist, I'm also a realist. The return of social democracy will be a consequence of climate change and democracy and not democracy alone. If we supported Obama out of hope, we should support Sanders with pessimism.