David Graeber and Thomas Piketty: An exchange on capital, debt, and the future

From The Baffler:

Moderators: You both appear to think that the prevailing economic and financial system has run its course, and cannot endure much longer in its present form. I would like to ask each of you to explain why.

Thomas Piketty: I am not sure that we are on the eve of a collapse of the system, at least not from a purely economic viewpoint. A lot depends on political reactions and on the ability of the elites to persuade the rest of the population that the present situation is acceptable. If an effective apparatus of persuasion is in place, there is no reason why the system should not continue to exist as it is. I do not believe that strictly economic factors can precipitate its fall.

Karl Marx thought that the falling rate of profit would inevitably bring about the fall of the capitalist system. In a sense, I am more pessimistic than Marx, because even given a stable rate of return on capital, say around 5 percent on average, and steady growth, wealth would continue to concentrate, and the rate of accumulation of inherited wealth would go on increasing.

But, in itself, this does not mean an economic collapse will occur. My thesis is thus different from Marx’s, and also from David Graeber’s. An explosion of debt, especially American debt, is certainly happening, as we have all observed, but at the same time there is a vast increase in capital—an increase far greater than that of total debt.

The creation of net wealth is thus positive, because capital growth surpasses even the increase in debt. I am not saying that this is necessarily a good thing. I am saying that there is no purely economic justification for claiming that this phenomenon entails the collapse of the system.

More here.