Books, Books:Economics, Books:History, Economics, Poverty, Wealth
Several commentators take a look at, and are impressed, with the new English translation of Thomas Picketty’s French published book, Capital in the Twenty First Century [Capital au XXIe siècle, translated by Arthur Goldhammer.]” The most prominent for many readers might be Eduardo Porter in the business section of Tuesday’s New York Times (3/12/14) [See Update below]
“In his bracing “Capital in the Twenty-First Century,” which hit bookstores on Monday, Professor Piketty provides a fresh and sweeping analysis of the world’s economic history that puts into question many of our core beliefs about the organization of market economies.
His most startling news is that the belief that inequality will eventually stabilize and subside on its own, a long-held tenet of free market capitalism, is wrong. Rather, the economic forces concentrating more and more wealth into the hands of the fortunate few are almost sure to prevail for a very long time.
…income from wealth usually grows faster than wages. As returns from capital are reinvested, inherited wealth will grow faster than the economy, concentrating more and more into the hands of few. This will go on until capital owners decide to consume most of their income and stop reinvesting as much.
A growing share of national income will go to the owners of capital. Of the remaining labor income, a growing share will also go to the top executives and highly compensated stars at the pinnacle of the earnings scale.”
For a longer, more substantive look at the book and the arguments here are four scholars, writing at the American Prospect, Long Form, where the book is called a ‘triumph,’ beginning with Jacob S. Hacker and Paul Pierson:
Piketty’s startling numbers show that the share of national income coming from capital—once comfortingly believed to be stable—is on the rise. Private wealth has reached new highs relative to national income and is approaching levels of concentration not seen since before 1929. Piketty’s powerful intellectual move is to place the subject of American income inequality in a broader historical and cross-national context. The forces most responsible for our egalitarian past, Piketty reminds us, were rapid growth—both of the population and of the economy overall.
…another Frenchman with a panoramic vista—and far more precise evidence—wants us to think anew about the progress of equality and democracy. Though an heir to Tocqueville’s tradition of analytic history, Thomas Piketty has a message that could not be more different: Unless we act, inequality will grow much worse, eventually making a mockery of our democratic institutions. With wealth more and more concentrated, countries racing to cut taxes on capital, and inheritance coming to rival entrepreneurship as a source of riches, a new patrimonial elite may prove as inevitable as Tocqueville once believed democratic equality was.
And here, a snip from Heather Boushey’s article:
Among other conclusions, the data lead Piketty to describe the popular argument that we live in an era where our talents and capabilities matter most as “mindless optimism.” The data also lead him to reject the idea that wage inequality has grown as technological change increased the demand for higher-skilled, college-educated workers.
Piketty agrees that in the long run, investments in education are an important component of any plan to reduce labor-market inequalities and improve productivity.
Instead, Piketty’s evidence suggests it is the rise of what he calls the “supermanager” among the top 1 percent since 1980 that is driving the rise in earnings inequality.
Brad Delong, at UC Berkeley, adds his take:
If I had to summarize the lessons that I drew from Piketty’s book powerpoint presentation for his Helsinki Lecture, I would say that they are four.
+ he links us to Picketty’s own lecture/PowerPoint in Helsinki, November 2013. There are some econometric equations included, but the gist is understandable — as it is from the reviews above.
His solution, if there is one? Progressive tax schemes, estate taxes – rigorously enforced, which he thinks is unlikely. I don’t think he mentions the R word.
Update: John Cassidy takes a long look at Picketty”s book, and has some questions, in the March 31, 2014 issue of The New Yorker.
…according to calculations by Piketty and Saez, almost all of the income growth in the economy between 2010 and 2012—ninety-five per cent of it—accrued to the one per cent.
That’s a pretty shocking figure. Piketty calls the tendency for inequality to rise during periods when the rate of return on capital is higher than the economy’s rate of growth “the central contradiction of capitalism.”