What Piketty Gets Wrong About the Third World

02/25/2015 01:25 pm ET | Updated Apr 27, 2015
ASSOCIATED PRESS

LIMA -- As a "third worlder," I am sensitive to Westerners' rash guesswork when it comes to developing world statistics. Why? Because, when faced with information gaps, some Westerners fill their spreadsheets with their own prejudices and wishful thinking. That's called Eurocentrism. And it can lead to a damaging misunderstanding of reality for most people on planet.

Thomas Piketty's influential book, Capital in the 21st Century, is a case in point. Piketty, an economist, represents the definition of Eurocentrism at its most extreme. In the book, he admits he just can't get good numbers for most of the world, and therefore extrapolates the numbers from data from a few European countries, especially France.

On that distorted basis, sure enough, the whole world looks European -- as do its problems and the relevance of his Marxian solutions. His goal is to prove, on the basis of statistical analysis, that capital, understood as the accumulation of property, "automatically generates arbitrary and unsustainable inequalities."

Piketty transposes on the whole world his historical interpretation that capital provoked Europe's violence and two world wars. He predicts that if capital is not brought under control, the current discontent in the streets will, in the future, evolve into planetary violence.

In the future? What is he talking about? The wars over capital have already begun right under Europe's nose in the Middle East and North Africa. But, quite contrary to what may be true for Europe, the glaring evidence is that these wars are not revolts of the poor against capital, but of the poor for capital.

The Case of the Arab Spring

After Mohamed Bouazizi set himself on fire in Tunisia in 2010, the European press moved quickly to brand him as simply another unemployed worker.

We Peruvians, among others, had our doubts about that moniker. When I was invited to Tunisia along with a research team, we set out to investigate the causes of the turmoil sweeping the Arab world. We found that Bouazizi was no proletarian: since the age of 12, he had been working various jobs. We discovered 63 others around the region who, within two months, had attempted to replicate his suicide, mostly by self-immolation.

To find out what motivated those suicides, we spent two years organizing interviews with the families of some of the self-immolators, and even a few of those who survived their burns.

The common denominator was that they were entrepreneurs; all were outraged at having been robbed of or prevented from using what little capital they had. We searched through films of their public suicides for evidence of political or religious statements, to no avail. All their statements were about expropriation, deprivation and loss of control over their assets and livelihood.

According to most of the 37 survivors I interviewed for "Unlikely Heroes," which is now airing on PBS, the self-immolators' common grievances focused on being arbitrarily robbed and denied their due by the state. They had houses but no full property rights; they wanted investment but could not issue shares; they wanted financing but had no mortgages; they wanted partners beyond their families but had no access to contracts; they wanted to reduce risk but had no limited liability.

My colleagues and I have estimated that some 200 million Arabs live in the same circumstances as the self-immolators -- reliant on the informal economy for their livelihoods and unprotected by the rule of law. Their precarious situation, and the authorities' habit of expropriation and oppression, goes a long way in explaining why the masses took to the streets to protest their suffering -- not against capital but against those who have kept capital out of their reach.

Because official records are imprecise, my organization, the Institute for Liberty and Democracy in Peru, along with 120 Arab researchers, combed the property records of factories, buildings and other formal businesses that Piketty relied on to calculate the value of capital. We also knocked on doors for three years. Our research discovered that Egyptian workers were hardly strangers to capital.

In 2013, for example, Egypt had more than 23 million citizens categorized as "workers"; they earned about $21 billion in salaries. But they also owned $360 billion in illegitimate capital. That means Egyptian workers own capital worth 17 times more than their 2013 salaries. For perspective, that's eight times more than the entire value of foreign investment in Egypt since Napoleon invaded more than 200 years ago. (In fact, Egyptians aren't alone -- ordinary people throughout the developing world are sitting on trillions of dollars worth of potential capital.)

Back to Piketty

So, how relevant is Piketty when we look at the Middle East and North Africa and the rest of the third world? Well, his conclusions are irrelevant. In the end, his argument that capital is opposed to the interests of the poor makes no sense to non-Westerners.

Many citizens of the third world seem to be in a position that President Abraham Lincoln, in his epistolary exchanges with Karl Marx, described as "neither class" -- not capital or labor, but a mixture of both.

The problem is that worldwide labor statistics are Eurocentric and do not have a category that relates the poor to their entrepreneurial activities, nor to their aspiration to be part of the global market.