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Capital in the Twenty First Century
What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In Capital in the Twenty-First Century, Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings will transform debate and set the agenda for the next generation of thought about wealth and inequality.
Piketty shows that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. But we have not modified the deep structures of capital and inequality as much as we thought in the optimistic decades following World War II. The main driver of inequality—the tendency of returns on capital to exceed the rate of economic growth—today threatens to generate extreme inequalities that stir discontent and undermine democratic values. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, Piketty says, and may do so again.
Piketty shows that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. But we have not modified the deep structures of capital and inequality as much as we thought in the optimistic decades following World War II. The main driver of inequality—the tendency of returns on capital to exceed the rate of economic growth—today threatens to generate extreme inequalities that stir discontent and undermine democratic values. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, Piketty says, and may do so again.
685 pages, Hardcover
First published August 30, 2013
About the author
Thomas Piketty
82 books2,115 followersThomas Piketty (French: [tɔma pikɛti]; born May 7, 1971) is a French economist who works on wealth and income inequality. He is the director of studies at the École des hautes études en sciences sociales (EHESS) and professor at the Paris School of Economics. He is the author of the best selling book Capital in the Twenty-First Century (2013), which emphasizes the themes of his work on wealth concentrations and distribution over the past 250 years. The book argues that the rate of capital return in developed countries is persistently greater than the rate of economic growth, and that this will cause wealth inequality to increase in the future. To address this problem, he proposes redistribution through a global tax on wealth.
Piketty was born on May 7, 1971, in the Parisian suburb of Clichy. He gained a C-stream (scientific) Baccalauréat, and after taking scientific preparatory classes, he entered the École Normale Supérieure (ENS) at the age of 18, where he studied mathematics and economics. At the age of 22, Piketty was awarded his Ph.D. for a thesis on wealth redistribution, which he wrote at the EHESS and the London School of Economics under Roger Guesnerie.
After earning his PhD, Piketty taught from 1993 to 1995 as an assistant professor in the Department of Economics at the Massachusetts Institute of Technology. In 1995, he joined the French National Centre for Scientific Research (CNRS) as a researcher, and in 2000 he became director of studies at EHESS.
Piketty won the 2002 prize for the best young economist in France, and according to a list dated November 11, 2003, he is a member of the scientific orientation board of the association "À gauche, en Europe", founded by Michel Rocard and Dominique Strauss-Kahn.
In 2006 Piketty became the first head of the Paris School of Economics, which he helped set up. He left after a few months to serve as an economic advisor to Socialist Party candidate Ségolène Royal during the French presidential campaign. Piketty resumed teaching at the Paris School of Economics in 2007.
He is a columnist for the French newspaper Libération, and occasionally writes op-eds for Le Monde.
In April 2012, Piketty co-authored along with 42 colleagues an open letter in support of then-PS candidate for the French presidency François Hollande. Hollande won the contest against the incumbent Nicolas Sarkozy in May of that year.
In 2013, Piketty won the biennial Yrjö Jahnsson Award, for the economist under age 45 who has "made a contribution in theoretical and applied research that is significant to the study of economics in Europe."
Piketty specializes in economic inequality, taking a historic and statistical approach. His work looks at the rate of capital accumulation in relation to economic growth over a two hundred year spread from the nineteenth century to the present. His novel use of tax records enabled him to gather data on the very top economic elite, who had previously been understudied, and to ascertain their rate of accumulation of wealth and how this compared to the rest of society and economy. His most recent book, Capital in the Twenty-First Century, relies on economic data going back 250 years to show that an ever-rising concentration of wealth is not self-correcting. To address this problem, he proposes redistribution through a global tax on wealth.
Piketty was born on May 7, 1971, in the Parisian suburb of Clichy. He gained a C-stream (scientific) Baccalauréat, and after taking scientific preparatory classes, he entered the École Normale Supérieure (ENS) at the age of 18, where he studied mathematics and economics. At the age of 22, Piketty was awarded his Ph.D. for a thesis on wealth redistribution, which he wrote at the EHESS and the London School of Economics under Roger Guesnerie.
After earning his PhD, Piketty taught from 1993 to 1995 as an assistant professor in the Department of Economics at the Massachusetts Institute of Technology. In 1995, he joined the French National Centre for Scientific Research (CNRS) as a researcher, and in 2000 he became director of studies at EHESS.
Piketty won the 2002 prize for the best young economist in France, and according to a list dated November 11, 2003, he is a member of the scientific orientation board of the association "À gauche, en Europe", founded by Michel Rocard and Dominique Strauss-Kahn.
In 2006 Piketty became the first head of the Paris School of Economics, which he helped set up. He left after a few months to serve as an economic advisor to Socialist Party candidate Ségolène Royal during the French presidential campaign. Piketty resumed teaching at the Paris School of Economics in 2007.
He is a columnist for the French newspaper Libération, and occasionally writes op-eds for Le Monde.
In April 2012, Piketty co-authored along with 42 colleagues an open letter in support of then-PS candidate for the French presidency François Hollande. Hollande won the contest against the incumbent Nicolas Sarkozy in May of that year.
In 2013, Piketty won the biennial Yrjö Jahnsson Award, for the economist under age 45 who has "made a contribution in theoretical and applied research that is significant to the study of economics in Europe."
Piketty specializes in economic inequality, taking a historic and statistical approach. His work looks at the rate of capital accumulation in relation to economic growth over a two hundred year spread from the nineteenth century to the present. His novel use of tax records enabled him to gather data on the very top economic elite, who had previously been understudied, and to ascertain their rate of accumulation of wealth and how this compared to the rest of society and economy. His most recent book, Capital in the Twenty-First Century, relies on economic data going back 250 years to show that an ever-rising concentration of wealth is not self-correcting. To address this problem, he proposes redistribution through a global tax on wealth.
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October 6, 2014
Given the amount of hype and misinformation around this book, I'll start by saying what Capital in the 21st century is not about.
This book is NOT:
1. A work of opinion journalism or punditry. Though, obviously, it does contain the views of its author
2. A prescriptive manifesto trying to explain how to utterly eradicate inequality worldwide, though its author does feel constructive steps can be taken to reduce such inequalities.
3. A work of Journalism written in response to the recession of 2007-2008 or to cheaply capitalize on the surge of public interest in matters financial in recent years, though obviously anyone interested in those topics will find it intensely engaging.
This book is a staggeringly in-depth, wide-ranging, rigorously researched, endlessly quantified and qualified work of economic history. Thomas Piketty is interested in wealth. Where does it come from, how do we talk about, how can we understand its history in a modern context and what does its distribution at different levels tell us about our world, and perhaps most of all, how might that distribution be problematic?
In order to attempt to answer these questions, he has collected, organized and presented an unprecedented volume of data, not merely about where wealth is concentrated now, but where it has been concentrated using data from multiple countries going back to the 19th century (and in the case of his native France, even a bit further than that). The real power of this book, and I suspect one reason its been praised/condemned so militantly in recent months lies in its macro-economic, longitudinal perspective. Piketty is interested in what the broadest net of information possible tells us about capital in the modern age. And what it tells is powerful, disillusioning and ultimately humiliates economic dogma of every ideological stripe.
He's so concerned about explicating this information, with breaking it down with a litany of analogies and concrete examples, and with talking about its limitations and potential pitfalls, that at times the reader almost doesn't see the intimidatingly complete picture of modern wealth inequality he has built up. Reading this is like watching an adult walk into a room full of people who have long since forgotten how to be adults. He synthesizes the best ideas from economic thinkers as diverse as Marx, Ricardo, Kuznets, etc while at the same time utterly humiliating their worst ideological tendencies with the sort of data they either didn't have or were simply too driven by their own dogmas to even consider assembling.
The picture he paints of the state of inequality of wealth in our world is harrowing precisely because of how pragmatically clinical it's put together. There is precisely no observable economic force (no free-market, or growth rate or invisible hand) or principle or idea, that will prevent wealth from continuing its already stratospheric concentration into fewer and fewer hands at levels which we haven't seen since the 19th century. Indeed, one suspects the reason so many of the book's historical and cultural references (Jane Austen and Honre de Balzac show up in this book, much to the shock and delight of this overly-humanistic reviewer) come from the 19th century is because, as Piketty shows, we are quickly returning to a world where economic inequality resembles and quite likely will exceed the sort of stratification seen in 1800's europe. In short, all the indicators he presents show a possible future where personal initiative and hard-work will be worth nothing compared to the power of returns on super-concentrated and largely inherited securities and private fortunes.
That any sincere economic analysis could even hint (and this book goes way beyond hinting) that the future of capital would look like the hyperbolic plane of unfathomable wealth and unbearable poverty that animated so much of the 19th century, should give a pause to even the most militant neo-liberal policy advocate. Piketty's conclusions, rooted as they are in a wealth of historical data drawn over a century and a half, are dramatic, alarming and above all, profound. There is no historical example to be found of a society whose concentration of wealth has continued to grow unabated at the level ours has without inevitably facing some profound, usually gruesome sociopolitical upheaval.
Whether the extremely pro-active, and as he admits, pie in the sky, idea of a global tax on wealth is really possible will probably remain to be seen. But the real point is that meaningful, coordinated international action on transparency and taxation is worth attempting. As the book constantly reiterates with a slew of compelling data, the only other force which has ever stemmed the tide of such wealth disparities was the chaotic, murderous world war period from 1914-1945. Surely attempting to address this problem now is superior to waiting for a global blood-bath, or a French Revolution round 2 to tip the scales back. As Piketty's pragmatic reading of economic history proves, no outcome is guaranteed, but numbers can tell you a lot more than nothing.
This is a demanding book, maybe not Hegel or Heidegger-level demanding, but it requires discipline and a willingness to be lead through some very important, brilliantly elucidated data. Piketty has attempted a grand synthesis of economics and history which also incorporates ideas from literature, sociology, politics and psychology. What's more, he has done so in a way which virtually anyone with a high school diploma and a bit of patience can find accessible.
Capital in the 21st century is that rarest of things; a non-fiction book of the moment which could very well prove to be the book of its age. It will certainly haunt my perspective for some time to come. I recommend this book unconditionally.
This book is NOT:
1. A work of opinion journalism or punditry. Though, obviously, it does contain the views of its author
2. A prescriptive manifesto trying to explain how to utterly eradicate inequality worldwide, though its author does feel constructive steps can be taken to reduce such inequalities.
3. A work of Journalism written in response to the recession of 2007-2008 or to cheaply capitalize on the surge of public interest in matters financial in recent years, though obviously anyone interested in those topics will find it intensely engaging.
This book is a staggeringly in-depth, wide-ranging, rigorously researched, endlessly quantified and qualified work of economic history. Thomas Piketty is interested in wealth. Where does it come from, how do we talk about, how can we understand its history in a modern context and what does its distribution at different levels tell us about our world, and perhaps most of all, how might that distribution be problematic?
In order to attempt to answer these questions, he has collected, organized and presented an unprecedented volume of data, not merely about where wealth is concentrated now, but where it has been concentrated using data from multiple countries going back to the 19th century (and in the case of his native France, even a bit further than that). The real power of this book, and I suspect one reason its been praised/condemned so militantly in recent months lies in its macro-economic, longitudinal perspective. Piketty is interested in what the broadest net of information possible tells us about capital in the modern age. And what it tells is powerful, disillusioning and ultimately humiliates economic dogma of every ideological stripe.
He's so concerned about explicating this information, with breaking it down with a litany of analogies and concrete examples, and with talking about its limitations and potential pitfalls, that at times the reader almost doesn't see the intimidatingly complete picture of modern wealth inequality he has built up. Reading this is like watching an adult walk into a room full of people who have long since forgotten how to be adults. He synthesizes the best ideas from economic thinkers as diverse as Marx, Ricardo, Kuznets, etc while at the same time utterly humiliating their worst ideological tendencies with the sort of data they either didn't have or were simply too driven by their own dogmas to even consider assembling.
The picture he paints of the state of inequality of wealth in our world is harrowing precisely because of how pragmatically clinical it's put together. There is precisely no observable economic force (no free-market, or growth rate or invisible hand) or principle or idea, that will prevent wealth from continuing its already stratospheric concentration into fewer and fewer hands at levels which we haven't seen since the 19th century. Indeed, one suspects the reason so many of the book's historical and cultural references (Jane Austen and Honre de Balzac show up in this book, much to the shock and delight of this overly-humanistic reviewer) come from the 19th century is because, as Piketty shows, we are quickly returning to a world where economic inequality resembles and quite likely will exceed the sort of stratification seen in 1800's europe. In short, all the indicators he presents show a possible future where personal initiative and hard-work will be worth nothing compared to the power of returns on super-concentrated and largely inherited securities and private fortunes.
That any sincere economic analysis could even hint (and this book goes way beyond hinting) that the future of capital would look like the hyperbolic plane of unfathomable wealth and unbearable poverty that animated so much of the 19th century, should give a pause to even the most militant neo-liberal policy advocate. Piketty's conclusions, rooted as they are in a wealth of historical data drawn over a century and a half, are dramatic, alarming and above all, profound. There is no historical example to be found of a society whose concentration of wealth has continued to grow unabated at the level ours has without inevitably facing some profound, usually gruesome sociopolitical upheaval.
Whether the extremely pro-active, and as he admits, pie in the sky, idea of a global tax on wealth is really possible will probably remain to be seen. But the real point is that meaningful, coordinated international action on transparency and taxation is worth attempting. As the book constantly reiterates with a slew of compelling data, the only other force which has ever stemmed the tide of such wealth disparities was the chaotic, murderous world war period from 1914-1945. Surely attempting to address this problem now is superior to waiting for a global blood-bath, or a French Revolution round 2 to tip the scales back. As Piketty's pragmatic reading of economic history proves, no outcome is guaranteed, but numbers can tell you a lot more than nothing.
This is a demanding book, maybe not Hegel or Heidegger-level demanding, but it requires discipline and a willingness to be lead through some very important, brilliantly elucidated data. Piketty has attempted a grand synthesis of economics and history which also incorporates ideas from literature, sociology, politics and psychology. What's more, he has done so in a way which virtually anyone with a high school diploma and a bit of patience can find accessible.
Capital in the 21st century is that rarest of things; a non-fiction book of the moment which could very well prove to be the book of its age. It will certainly haunt my perspective for some time to come. I recommend this book unconditionally.
May 15, 2014
This book is basically the Harry Potter of Economics – I mean in terms of blockbuster sales and turning its author into a rock star. He is being credited with giving new life to the left. The book is very long. I’m not sure if you really need to read the whole thing, either. Depending on what you want to get out of this, you really could get by with reading the Introduction and the Conclusion. If that doesn’t seem enough, then you could read Chapter 14 and 15 – pretty much where he outlines his ‘solutions’.
I’m going to give you the layperson (that’s me) version of this book. Marx (and to be fair Ricardo before him) believed in the total impoverishment of the working class. Essentially, Capitalism works by deskilling people. Adding technology to factories removes skills from workers. The greater the amount of technology, therefore the greater the displacement of labour, thus the less labour you need to make the same amount of stuff. But that means you need more capital to make that stuff, machines and so on. As Galbraith points out in The New Industrial State, when Ford started making cars he did so from an old farm shed. If you are thinking of starting a car company today I don’t suggest you buy yourself a shed. In fact, unless you are already a billionaire a few times over I don’t suggest you even start. Production has become so mechanised that the capital investment needed is mind blowing.
Marx saw this process as producing an inevitable contradiction for Capitalism – for Marx Capitalism’s problem was always over supply of goods and services. Eventually, and inevitably, the concentration of wealth in the hands of the few would mean no one would be left able to buy what was produced and this would then shut down factories – no point producing stuff no one can buy it. Marx didn’t see revolution as being morally inevitable because Capitalism was bad, but rather that Capitalism would inevitably put a limit on the growth of production and Marx believed that any system that did that would be swept aside.
And while there have been clearly times when this looked like exactly what was going to happen, and not just in the 1930s or 1890s, it never quite has happened. Capitalism has proven much more resilient than Marx predicted.
Part of the reason for this, as explained in this book, is that Marx based his model of Capitalism on a steady state economy. That is, one that doesn’t grow. I find this almost impossible to believe – but that is what this guy says so we’ll go with that. He does make it clear that the economy in the 19th Century didn’t grow as we are now used to seeing it grow. He talks about novels as his proof here – you know, grab a Jane Austin and people are always talking about how you can live really well with 1000 or 5000 pounds a year – and he explains that this was as true by the end of the century as it was at the start. I couldn’t dream of living on my first wage now – thirty years later – and no one really talks about millionaires anymore. So, he suggests that the steady state economy wasn’t such a crazy approximation as it might seem to us now.
In the middle of the 20th century economists were predicting that Capitalism had changed its ways. All of that stuff Marx was worried about were just teething problems. In fact, once Capitalism really got into its stride it tended towards ever greater equity. The proof was in the numbers. Following the wars equity had spread about the place like a magical fairy distributing good will. All was well in the garden. In fact, these economists were certain that increasingly equity was as inevitable to Capitalism as Marx had thought revolution was.
Then came 1980 and that evil bastard Reagan and his vicious twin sister Thatcher. They took as much money as they could squeeze out of the poor and gave it all to the rich in what they called trickle down economics, but that was really gush up economics.
This is where the book becomes interesting. What this guy has done is track income records for about three centuries. Mostly from France, but from elsewhere too. He explains that it doesn’t make too much sense to take the US as an example over this period. Why? Because over this timeframe France’s population doubled. Over much the same period the US population grew by 100 times. Different rules apply to countries in these very different circumstances. It is also fairly unlikely that the US population is going to grow by another 100 times anytime soon. Given that, France probably makes a better model than the US does.
Ok, so what do we find if we look at the relationship between income and capital over that period? This is important because everyone is currently certain that the path to wealth is through developing your ‘human capital’. That is, if you have smarts and get qualified and get a good job you will be wealthy – welcome to the joys of meritocracy. But this hasn’t always been true in human history (in fact, it has only been true for a very short time) and it probably isn’t all that true today any longer. The problem is that what happened in the middle of the 20th century – the time when society became more equal – was a direct consequence (not of Capitalism becoming inevitably more egalitarian) but of two world wars and a depression. You see, when you have a world war shit gets blown apart. Houses, factories, roads – what you would call Capital. And the people who own this Capital are the Capitalists. Them losing capital makes society more equal, but this is a sick way to make the world more equal. Large amounts of their fortunes disappeared as a consequence of these devastations and people after the war made sure that gross fortunes couldn’t be made from rents. Taxes were imposed everywhere on rent capital and this too made society much more equal.
When you go out to work you make stuff and gain an income. GDP is all of the stuff that the economy makes in a year. But not all of that stuff disappears at the end of the year. Lots of it does, but not all. You know, every year we produce lots of milk and it is either used up or it is thrown out. But we also produce houses and, unless you are in certain parts of the US or Europe, those houses are still around at the end of the year and even for years to come and they more or less hold their value. The total wealth of a country isn’t what it produces in any given year, but is always much greater than that. Government are always very keen to see the economy grow. But what this guy has found is that the rate of growth of income is less than the rate of return on capital. This needs explained.
Let’s say the economy is growing at between 1-2% a year. What he has been able to show is that the rate of return on capital under this growing economy can be say 5%. Right, so there is the problem. If the economy is growing at 2% and capital is growing at 5% then people who own capital are getting richer at a faster rate than the economy is growing. So, they have to be gaining more and more of the total wealth of an economy, not just income, but also the reserves from the general capital of the economy. And with this greater share of everything they are increasingly able to claim rent, rather than income for creative deployment of their capital. Rent, as he repeatedly says, is the past eating the future. This is part of the reason why we taxed it so heavily in the middle of the 20th century. When we privitise public assets we are giving these to private persons, ultimately, and if it is school buildings or roads or hospitals, you then get to pay those private person rent for the use of these assets.
The lesson, then, is that if you allow it, Capital will concentrate into fewer and fewer hands. Ok, so what’s the problem with that? Well, just look at the US. It can hardly be called a democracy any more. The rich are so obscenely wealthy that they simply buy the political system. The transfer of wealth has been so extreme that there is virtually no possibility of any social mobility anymore. This has brought about the crisis of the prison system, a crushingly unequal education system, a health system that is the most expensive in the world and yet leaves millions of people excluded from it, a remarkable lack of a social safety net and the list goes on and on. Gross inequity has been repeatedly shown to cause gross social dysfunction. This book is written from the concern that gross inequity will quite literally end democracy.
The solution offered is an international tax on capital. This needs to be international, as we live in a global economy and we need to make sure that those with capital don’t just shift it about to avoid paying the tax. He makes the very interesting point that the whole world is currently in debt and that this is due to us paying rents to capital. When what we ought to be doing is taxing that capital.
Now, I’m not as optimistic as this guy is. I read an article about this book today by three economists – or rich men’s arse wipes, which I believe is the technical name for them - http://theconversation.com/pikettys-b... They quite misrepresent Piketty’s argument, but that isn’t what is important. What they also do is prove that no one is giving up their own position without a damn good fight. The only way such a tax would be possible is �� well – there is no way such a tax could be possible. The rich are never going to just agree to such a thing. Such arse wipes as the three gentlemen above are in over abundant supply. They will create endless reasons why equity is impossible. Eventually things will become intolerable and then, in the words of a dead Irish poet, the people will ‘take what you would not give’. This taking what would not be given, so far, has never worked out all that well. In fact, it generally works out appallingly badly. But, like I said, I’m a pessimist. I’m not proud of my pessimism, but if someone could show me anywhere where the rich have agreed to hand over even the smallest part of their obscene wealth for the common good, then I will shut up. They will go on blaming the poor while gorging themselves sick. The planet will continue on its way to wherever catastrophe unsustainable development is planning to lead us. None of it is pretty in any direction, as far as I can see.
If there is one service this guy provides us, it is to see that capitalism needs to be saved from itself, much as Galbraith said in the 1950s. That democracy needs to be extended and that non-productive capital needs to have its arse taxed off it. I don’t particularly hold out all that much hope for anything of these outcomes, but at least we can’t say we weren’t warned.
I’m going to give you the layperson (that’s me) version of this book. Marx (and to be fair Ricardo before him) believed in the total impoverishment of the working class. Essentially, Capitalism works by deskilling people. Adding technology to factories removes skills from workers. The greater the amount of technology, therefore the greater the displacement of labour, thus the less labour you need to make the same amount of stuff. But that means you need more capital to make that stuff, machines and so on. As Galbraith points out in The New Industrial State, when Ford started making cars he did so from an old farm shed. If you are thinking of starting a car company today I don’t suggest you buy yourself a shed. In fact, unless you are already a billionaire a few times over I don’t suggest you even start. Production has become so mechanised that the capital investment needed is mind blowing.
Marx saw this process as producing an inevitable contradiction for Capitalism – for Marx Capitalism’s problem was always over supply of goods and services. Eventually, and inevitably, the concentration of wealth in the hands of the few would mean no one would be left able to buy what was produced and this would then shut down factories – no point producing stuff no one can buy it. Marx didn’t see revolution as being morally inevitable because Capitalism was bad, but rather that Capitalism would inevitably put a limit on the growth of production and Marx believed that any system that did that would be swept aside.
And while there have been clearly times when this looked like exactly what was going to happen, and not just in the 1930s or 1890s, it never quite has happened. Capitalism has proven much more resilient than Marx predicted.
Part of the reason for this, as explained in this book, is that Marx based his model of Capitalism on a steady state economy. That is, one that doesn’t grow. I find this almost impossible to believe – but that is what this guy says so we’ll go with that. He does make it clear that the economy in the 19th Century didn’t grow as we are now used to seeing it grow. He talks about novels as his proof here – you know, grab a Jane Austin and people are always talking about how you can live really well with 1000 or 5000 pounds a year – and he explains that this was as true by the end of the century as it was at the start. I couldn’t dream of living on my first wage now – thirty years later – and no one really talks about millionaires anymore. So, he suggests that the steady state economy wasn’t such a crazy approximation as it might seem to us now.
In the middle of the 20th century economists were predicting that Capitalism had changed its ways. All of that stuff Marx was worried about were just teething problems. In fact, once Capitalism really got into its stride it tended towards ever greater equity. The proof was in the numbers. Following the wars equity had spread about the place like a magical fairy distributing good will. All was well in the garden. In fact, these economists were certain that increasingly equity was as inevitable to Capitalism as Marx had thought revolution was.
Then came 1980 and that evil bastard Reagan and his vicious twin sister Thatcher. They took as much money as they could squeeze out of the poor and gave it all to the rich in what they called trickle down economics, but that was really gush up economics.
This is where the book becomes interesting. What this guy has done is track income records for about three centuries. Mostly from France, but from elsewhere too. He explains that it doesn’t make too much sense to take the US as an example over this period. Why? Because over this timeframe France’s population doubled. Over much the same period the US population grew by 100 times. Different rules apply to countries in these very different circumstances. It is also fairly unlikely that the US population is going to grow by another 100 times anytime soon. Given that, France probably makes a better model than the US does.
Ok, so what do we find if we look at the relationship between income and capital over that period? This is important because everyone is currently certain that the path to wealth is through developing your ‘human capital’. That is, if you have smarts and get qualified and get a good job you will be wealthy – welcome to the joys of meritocracy. But this hasn’t always been true in human history (in fact, it has only been true for a very short time) and it probably isn’t all that true today any longer. The problem is that what happened in the middle of the 20th century – the time when society became more equal – was a direct consequence (not of Capitalism becoming inevitably more egalitarian) but of two world wars and a depression. You see, when you have a world war shit gets blown apart. Houses, factories, roads – what you would call Capital. And the people who own this Capital are the Capitalists. Them losing capital makes society more equal, but this is a sick way to make the world more equal. Large amounts of their fortunes disappeared as a consequence of these devastations and people after the war made sure that gross fortunes couldn’t be made from rents. Taxes were imposed everywhere on rent capital and this too made society much more equal.
When you go out to work you make stuff and gain an income. GDP is all of the stuff that the economy makes in a year. But not all of that stuff disappears at the end of the year. Lots of it does, but not all. You know, every year we produce lots of milk and it is either used up or it is thrown out. But we also produce houses and, unless you are in certain parts of the US or Europe, those houses are still around at the end of the year and even for years to come and they more or less hold their value. The total wealth of a country isn’t what it produces in any given year, but is always much greater than that. Government are always very keen to see the economy grow. But what this guy has found is that the rate of growth of income is less than the rate of return on capital. This needs explained.
Let’s say the economy is growing at between 1-2% a year. What he has been able to show is that the rate of return on capital under this growing economy can be say 5%. Right, so there is the problem. If the economy is growing at 2% and capital is growing at 5% then people who own capital are getting richer at a faster rate than the economy is growing. So, they have to be gaining more and more of the total wealth of an economy, not just income, but also the reserves from the general capital of the economy. And with this greater share of everything they are increasingly able to claim rent, rather than income for creative deployment of their capital. Rent, as he repeatedly says, is the past eating the future. This is part of the reason why we taxed it so heavily in the middle of the 20th century. When we privitise public assets we are giving these to private persons, ultimately, and if it is school buildings or roads or hospitals, you then get to pay those private person rent for the use of these assets.
The lesson, then, is that if you allow it, Capital will concentrate into fewer and fewer hands. Ok, so what’s the problem with that? Well, just look at the US. It can hardly be called a democracy any more. The rich are so obscenely wealthy that they simply buy the political system. The transfer of wealth has been so extreme that there is virtually no possibility of any social mobility anymore. This has brought about the crisis of the prison system, a crushingly unequal education system, a health system that is the most expensive in the world and yet leaves millions of people excluded from it, a remarkable lack of a social safety net and the list goes on and on. Gross inequity has been repeatedly shown to cause gross social dysfunction. This book is written from the concern that gross inequity will quite literally end democracy.
The solution offered is an international tax on capital. This needs to be international, as we live in a global economy and we need to make sure that those with capital don’t just shift it about to avoid paying the tax. He makes the very interesting point that the whole world is currently in debt and that this is due to us paying rents to capital. When what we ought to be doing is taxing that capital.
Now, I’m not as optimistic as this guy is. I read an article about this book today by three economists – or rich men’s arse wipes, which I believe is the technical name for them - http://theconversation.com/pikettys-b... They quite misrepresent Piketty’s argument, but that isn’t what is important. What they also do is prove that no one is giving up their own position without a damn good fight. The only way such a tax would be possible is �� well – there is no way such a tax could be possible. The rich are never going to just agree to such a thing. Such arse wipes as the three gentlemen above are in over abundant supply. They will create endless reasons why equity is impossible. Eventually things will become intolerable and then, in the words of a dead Irish poet, the people will ‘take what you would not give’. This taking what would not be given, so far, has never worked out all that well. In fact, it generally works out appallingly badly. But, like I said, I’m a pessimist. I’m not proud of my pessimism, but if someone could show me anywhere where the rich have agreed to hand over even the smallest part of their obscene wealth for the common good, then I will shut up. They will go on blaming the poor while gorging themselves sick. The planet will continue on its way to wherever catastrophe unsustainable development is planning to lead us. None of it is pretty in any direction, as far as I can see.
If there is one service this guy provides us, it is to see that capitalism needs to be saved from itself, much as Galbraith said in the 1950s. That democracy needs to be extended and that non-productive capital needs to have its arse taxed off it. I don’t particularly hold out all that much hope for anything of these outcomes, but at least we can’t say we weren’t warned.
July 29, 2015
It's amazing to me how often Marxism gets repackaged and sold as if it was something new. Piketty's book is a prime example of this. It attempts to resell the already disproven lie about post WWII growth being caused by taxing the rich when in fact very few of the wealthy elite actually paid the 70-90% tax rates. Post WWII growth was the result of the U.S. holding excess gold reserves from Europe and the Bretton Woods conference that made the U.S. dollar the world's reserve currency. Anyone who tells you any different is an idiot, a liar or both.
Economic illiteracy has resulted in the rising support of socialism, even though socialism has failed over and over again. And even though no country has ever allowed pure capitalism to exist, capitalism gets blamed by those who have no idea WTF they are talking about.
What we have today are central banks who micromanage the global economy, screwing over all of the small countries, setting off all kinds of market distortions, and causing one boom-bust cycle after another. Instead of allowing a nation's economy grow at natural rates, the nations of the world have allowed the ruling class to instill various forms of cronyism and corporatism while calling it capitalism.
Save your money and skip over this book. Go straight to F.A. Hayek's The Road To Serfdom, a book that set the record straight back in 1944. You will learn about the roots of socialism and understand that such ideas are not new and will never work, no matter how it gets repackaged.
Economic illiteracy has resulted in the rising support of socialism, even though socialism has failed over and over again. And even though no country has ever allowed pure capitalism to exist, capitalism gets blamed by those who have no idea WTF they are talking about.
What we have today are central banks who micromanage the global economy, screwing over all of the small countries, setting off all kinds of market distortions, and causing one boom-bust cycle after another. Instead of allowing a nation's economy grow at natural rates, the nations of the world have allowed the ruling class to instill various forms of cronyism and corporatism while calling it capitalism.
Save your money and skip over this book. Go straight to F.A. Hayek's The Road To Serfdom, a book that set the record straight back in 1944. You will learn about the roots of socialism and understand that such ideas are not new and will never work, no matter how it gets repackaged.
December 9, 2014
This is my five stars of "this book changed the way I look at something," not five stars of flawlessness or five stars of thinking everyone in the world should read it. Since I didn't have an opinion before, it would be more accurate to say this book gave me a way of looking at the structure of wealth in economies over time.
First things first, for people who read reviews of the book rather than the book itself. This book is not about slamming the rich; Piketty doesn't talk very much about morality, instead viewing everyone as making rational, yet obviously self-interested, decisions in the environment they see before them. On the flip side, he is not as concerned about the poor as you might think, although he exhibits worry about the hollowing out of the post-war middle class, which benefitted from the capital that drifted away from the very rich, but is now losing their share. The charge that Piketty is a Marxist is risible. Part of his concern is to alleviate inequality and thus prevent the kind of revolution that a true Marxist would consider necessary. He has some unflattering things to say about Marx (Piketty's an academic, so it's not "GODLESS COMMIE!!1!1!!" but pretty darn scathing) and even less nice things to say about the Soviet attempt to run a Communist state.* Piketty suggests some rather utopian measures, but in principle, they're not much more than extensions of concepts and structures that already exist. And the principle, by the way, derives from 18th century documents. He refers to the Declaration of Independence, but being French, what he's really building on is the Declaration of Rights of Man. If you're an adherent of the Club for Growth and reading this book in order to be infuriated, it's going to be a long slog with very little to keep your furnace going from one stats-filled chapter to the next.
On the highest level, the argument of this book is that the structure of wealth that the rich Western countries experienced in the mid 20th century was an anomaly. Unfortunately a lot of the laws of economics were formulated then and are flawed tools for analyzing the world today. Piketty explores the circumstances under which the return on capital is higher than the growth rate, and what distribution of wealth results when that (r > g, in his shorthand) is true. This is hard to explain without writing a review as long as his book. Suffice to say that when r > g, money socked away in the past earns faster than a worker can earn through his labor today, which means that wealth snowballs in the hands of a small number of people without others having a chance to catch up. G was unusually high in the 20th century due to a variety of factors: immigration in the U.S., new technology, war, inflation in the post-war period intended to melt away national debts, and so forth. Growth is likely to slow compared to the mid-20th century and returns on capital are likely to increase as wealthy people and institutions have access to more efficient investment vehicles, so Piketty predicts that capital inequality will grow, such that eventually society looks more like it did in the Belle Epoque. Despite the faith of post-war economists, "there is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently." Through the bulk of the book, Piketty's aim is to document the structure of who in society held what wealth, and what kind of wealth, when--and to systematically demonstrate how the present day is more like (say) the 1910s than the 1970s and on a trajectory to become even more so. Relatively few pages are devoted to his prescriptions for getting back on a more sustainable path, which is why I would recommend this book even if you are dead-set against his ultimate conclusion.
An additional flourish on this argument is the difference between rentiers and what Piketty calls "supermanagers," generally corporate leaders who earn huge salaries. Whereas in the past the most wealthy were rentiers, who owned and inherited things like land or bonds and collected rents or interest on them, the wealth of supermanagers comes through their present labor. Or at least it starts there, but their income is so large that it quickly becomes a traditional fortune, so that these people can be rentiers and supermanagers at once. I found myself wondering as I read these parts whether we in the U.S. would tolerate a non-working class of the very rich. Generally we Americans feel obliged to make a nod towards work; even Paris Hilton claims to be an actress. Do we really want our own class of Bertie Woosters? Piketty doesn't ask this question, but it quickly came to me as an American reader and seems representative of the kinds of questions of the spirit of fairness and democracy that underpin the whole enquiry.
One of my favorite things in the book is how Piketty uses literature to illustrate his historical points, particularly the writing of Balzac and Austen. Since I don't personally know anyone from the 19th century outside of books, his use of familiar characters really brought those points alive for me. Piketty manages to shed light on economics and history at once. For example, there's a worthwhile discussion of how it's difficult to talk about quantities of money in the past in a way that is consistent, due to changes in the marketplace; "French purchasing power expressed in terms of oranges increased tenfold, and expressed in terms of bananas, twentyfold." Elsewhere, he talks about how Austen could specify a young lady's fortune and be confident that any reader would know what annual income would derive from it and what kind of lifestyle she could afford. Not only that, but the size of the fortune would mean the same thing to a reader fifty years later, due to the lack of inflation at that point in history. (Contrast that with a hilarious ad I once found in the Forbes magazine library while interning there. In a 1978 issue, a young man was posed leaning on a sports car with the bold headline: "Can you believe this man makes $34,000 a year?")
I'm sure other readers found all the literature stuff a distraction, but I didn't, and in fact one of my favorite things about the book was how wide-ranging it was and how it caused my mind to spark off in other directions while reading. I have few critiques to offer and I don't think nitpicking individual datasets can undercut the concepts the author is trying to introduce. I would say that he is more invested in offering a data set and a way of looking at the history of wealth than he is in actually getting the reader to embrace a global tax on capital. He doesn't talk very much about the fact that a poor person in an affluent Western country today has far more material comfort than a poor person in the 19th century, which strikes me as both an interesting question and an obvious way to counterargue that present day inequality isn't hurting anyone. He also takes it as a given that the reader views Belle Epoque societal stratification as something we want to avoid in the future, which is true in my case but possibly a little lazy.
At this point, I will admit defeat in my attempt to wrangle the huge variety of facts and arguments into a brief review and leave you with part of the author's conclusion: "If we are to regain control of capitalism, we must bet everything on democracy."
* "[Marx] probably suffered as well from having decided on his conclusions in 1848, before embarking on the research needed to justify them. Marx evidently wrote in great political fervor, which at times led him to issue hasty pronouncements from which it was difficult to escape." And much later, both a burn and a good insight: "Unfortunately for the people caught up in these totalitarian experiments, the problem was that private property and the market economy do not serve solely to ensure the domination of capital over those who have nothing to sell but their labor power. They also play a useful role in coordinating the actions of millions of individuals, and it is not so easy to do without them. The human disasters caused by Soviet-style centralized planning illustrate this quite clearly."
First things first, for people who read reviews of the book rather than the book itself. This book is not about slamming the rich; Piketty doesn't talk very much about morality, instead viewing everyone as making rational, yet obviously self-interested, decisions in the environment they see before them. On the flip side, he is not as concerned about the poor as you might think, although he exhibits worry about the hollowing out of the post-war middle class, which benefitted from the capital that drifted away from the very rich, but is now losing their share. The charge that Piketty is a Marxist is risible. Part of his concern is to alleviate inequality and thus prevent the kind of revolution that a true Marxist would consider necessary. He has some unflattering things to say about Marx (Piketty's an academic, so it's not "GODLESS COMMIE!!1!1!!" but pretty darn scathing) and even less nice things to say about the Soviet attempt to run a Communist state.* Piketty suggests some rather utopian measures, but in principle, they're not much more than extensions of concepts and structures that already exist. And the principle, by the way, derives from 18th century documents. He refers to the Declaration of Independence, but being French, what he's really building on is the Declaration of Rights of Man. If you're an adherent of the Club for Growth and reading this book in order to be infuriated, it's going to be a long slog with very little to keep your furnace going from one stats-filled chapter to the next.
On the highest level, the argument of this book is that the structure of wealth that the rich Western countries experienced in the mid 20th century was an anomaly. Unfortunately a lot of the laws of economics were formulated then and are flawed tools for analyzing the world today. Piketty explores the circumstances under which the return on capital is higher than the growth rate, and what distribution of wealth results when that (r > g, in his shorthand) is true. This is hard to explain without writing a review as long as his book. Suffice to say that when r > g, money socked away in the past earns faster than a worker can earn through his labor today, which means that wealth snowballs in the hands of a small number of people without others having a chance to catch up. G was unusually high in the 20th century due to a variety of factors: immigration in the U.S., new technology, war, inflation in the post-war period intended to melt away national debts, and so forth. Growth is likely to slow compared to the mid-20th century and returns on capital are likely to increase as wealthy people and institutions have access to more efficient investment vehicles, so Piketty predicts that capital inequality will grow, such that eventually society looks more like it did in the Belle Epoque. Despite the faith of post-war economists, "there is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently." Through the bulk of the book, Piketty's aim is to document the structure of who in society held what wealth, and what kind of wealth, when--and to systematically demonstrate how the present day is more like (say) the 1910s than the 1970s and on a trajectory to become even more so. Relatively few pages are devoted to his prescriptions for getting back on a more sustainable path, which is why I would recommend this book even if you are dead-set against his ultimate conclusion.
An additional flourish on this argument is the difference between rentiers and what Piketty calls "supermanagers," generally corporate leaders who earn huge salaries. Whereas in the past the most wealthy were rentiers, who owned and inherited things like land or bonds and collected rents or interest on them, the wealth of supermanagers comes through their present labor. Or at least it starts there, but their income is so large that it quickly becomes a traditional fortune, so that these people can be rentiers and supermanagers at once. I found myself wondering as I read these parts whether we in the U.S. would tolerate a non-working class of the very rich. Generally we Americans feel obliged to make a nod towards work; even Paris Hilton claims to be an actress. Do we really want our own class of Bertie Woosters? Piketty doesn't ask this question, but it quickly came to me as an American reader and seems representative of the kinds of questions of the spirit of fairness and democracy that underpin the whole enquiry.
One of my favorite things in the book is how Piketty uses literature to illustrate his historical points, particularly the writing of Balzac and Austen. Since I don't personally know anyone from the 19th century outside of books, his use of familiar characters really brought those points alive for me. Piketty manages to shed light on economics and history at once. For example, there's a worthwhile discussion of how it's difficult to talk about quantities of money in the past in a way that is consistent, due to changes in the marketplace; "French purchasing power expressed in terms of oranges increased tenfold, and expressed in terms of bananas, twentyfold." Elsewhere, he talks about how Austen could specify a young lady's fortune and be confident that any reader would know what annual income would derive from it and what kind of lifestyle she could afford. Not only that, but the size of the fortune would mean the same thing to a reader fifty years later, due to the lack of inflation at that point in history. (Contrast that with a hilarious ad I once found in the Forbes magazine library while interning there. In a 1978 issue, a young man was posed leaning on a sports car with the bold headline: "Can you believe this man makes $34,000 a year?")
I'm sure other readers found all the literature stuff a distraction, but I didn't, and in fact one of my favorite things about the book was how wide-ranging it was and how it caused my mind to spark off in other directions while reading. I have few critiques to offer and I don't think nitpicking individual datasets can undercut the concepts the author is trying to introduce. I would say that he is more invested in offering a data set and a way of looking at the history of wealth than he is in actually getting the reader to embrace a global tax on capital. He doesn't talk very much about the fact that a poor person in an affluent Western country today has far more material comfort than a poor person in the 19th century, which strikes me as both an interesting question and an obvious way to counterargue that present day inequality isn't hurting anyone. He also takes it as a given that the reader views Belle Epoque societal stratification as something we want to avoid in the future, which is true in my case but possibly a little lazy.
At this point, I will admit defeat in my attempt to wrangle the huge variety of facts and arguments into a brief review and leave you with part of the author's conclusion: "If we are to regain control of capitalism, we must bet everything on democracy."
* "[Marx] probably suffered as well from having decided on his conclusions in 1848, before embarking on the research needed to justify them. Marx evidently wrote in great political fervor, which at times led him to issue hasty pronouncements from which it was difficult to escape." And much later, both a burn and a good insight: "Unfortunately for the people caught up in these totalitarian experiments, the problem was that private property and the market economy do not serve solely to ensure the domination of capital over those who have nothing to sell but their labor power. They also play a useful role in coordinating the actions of millions of individuals, and it is not so easy to do without them. The human disasters caused by Soviet-style centralized planning illustrate this quite clearly."
May 29, 2014
The Economist magazine rightly calls French professor Thomas Piketty the new Marx, although a watered-down version. Piketty’s bestseller (rated #1 on Amazon) is a thick volume with the same title as Karl Marx’s 1867 magnum opus, “Kapital.” The publisher, Harvard University Press, appropriately designed the book cover in red, the color of the socialist workers party.
Piketty cites Karl Marx more than any other economist, even more than Keynes. The professor barely mentions Adam Smith. Instead of the modern scientific name “economics,” he prefers the old term “political economy,” a favorite of radical professors.
And most importantly, Piketty’s focus is on the distribution of income and capital, not the creation of wealth. He’s not so much concerned with the size of the economic pie, but how it’s cut up.
His main thesis is that inequality grows under capitalism, that unfettered free markets make the rich richer and the poor poorer — a standard Marxist position — and that the only solution is to tax the dirty, filthy, stickin’ rich with highly progressive taxes on their income and wealth.
I don’t want to be picky, but Piketty often ignores data that contradicts his theory of growing inequality. For instance, he selectively chooses members of the Forbes magazine billionaires’ list to show that wealth always grows automatically faster than the average income earner. He repeatedly refers to the growing fortunes of Bill Gates in the United States and Liliane Bettencourt, heiress of L’Oreal, the cosmetics firm. “Once a fortune is established,” he claims, “the capital grows according to a dynamic of its own, and it can continue to grow at a rapid pace for decades simply because of its size.”
Come again?
I guess he hasn’t heard of the dozens of millionaires and billionaires who lost their fortunes, like the Vanderbilts, or to use a recent example, Eike Batista, the Brazilian businessman who just two years ago was the seventh-wealthiest man in the world, worth $30 billion, and now is practically bankrupt.
Piketty conveniently ignores the fact that most high-performing mutual funds eventually stop beating the market and even underperform. Take a look at the Forbes “Honor Roll” of outstanding mutual funds. Today’s list is almost entirely different from the list of 15 or 20 years ago. In our business, we call it “reversion to the mean,” and it happens all the time.
The professor seems to have forgotten a major theme of Marx, and later Joseph Schumpeter, that capitalism is a dynamic model of creative destruction. Today’s winners are not necessarily next year’s winners. IBM used to dominate the computer business; now Apple does. Citibank used to be the country’s largest bank. Now it is Chase. Sears Roebuck used to be the largest retail store. Now it is Wal-Mart. GM used to be the biggest car manufacturer. Now it is Toyota. And the Rockefellers used to be the wealthiest family. Now it is the Walton family, who a generation ago were dirt poor.
Piketty is no communist and is certainly not as radical as Marx in his predictions or policy recommendations. Many call Piketty “Marx Lite.” He doesn’t advocate abolishing money and the traditional family, confiscating all private property or nationalizing all of the industries. But he’s plenty radical in his soak-the-rich schemes, a punitive 80% tax on incomes above $500,000 or so, and a progressive global tax on capital with an annual levy between 0.1% and 10% on the greatest fortunes.
Why assess a tax of even 0.1% on wealth? It destroys a fundamental sacred right of mankind — financial privacy and the right to be left alone. An income tax is bad enough. But a wealth tax is worse. A wealth tax is Big Brother at his worst. Such a tax would require every citizen to list all his or her assets. The intent is to prevent any secret stash of gold and silver coins, diamonds, artwork or bearer bonds. Suddenly, the privacy guaranteed to Americans by the Fourth Amendment would be denied and produce an illegal and underground black market.
Equally important, a wealth tax is a tax on capital — the key to economic growth. The worst crime of Piketty’s vulgar capitalism is his failure to understand the positive role of capital in advancing the standard of living in the world. As Andrew Carnegie simply said, “Capitalism is about turning luxuries into necessities.” The latest example is the smartphone. It’s the great equalizer. Virtually everyone rich and poor has one, thanks to the ingenuity of entrepreneurs like Steve Jobs. This is democratic capitalism at its best. Income inequality may be growing, but when it comes to goods and services, inequality may be shrinking.
To create new products and services and raise economic performance, a nation need capital, lots of it. Contrary to Piketty’s claim, it is good that capital grows faster than income, because it means people are increasing their savings rate. The only time capital declines is during war and depression, when capital is destroyed.
Piketty blames the increase in inequality on low growth rates. He says return on capital tends to be higher than the economic growth rate. Good, let’s increase economic growth with tax cuts, sensible deregulation, better training/education, productivity and opening trade.
Even Keynes understood the value of capital investment and the need to keep it growing. In his “Economic Consequences of the Peace,” Keynes compared capital to a cake that should never be eaten. “The virtue of the cake was that it was never to be consumed, neither by you nor by your children after you.”
If the capital “cake” is the source of economic growth and a higher standard of living, we want to do everything we can to encourage capital accumulation. Make the cake bigger, and there will be plenty to go around for everyone. This is why increasing corporate profits is good — it means more money to pay workers. Studies show that companies with higher profit margins tend to pay their workers more. Remember the Henry Ford $5-a-day story of 1914? (In honor of its centennial, I’m telling this story again at FreedomFest this July 9.)
If anything, we should reduce taxes on capital gains, interest and dividends, and encourage people to save more and thus increase the pool of available capital and entrepreneurial activity. A progressive tax on high-income earners is a tax on capital. An inheritance tax is a tax on capital. A tax on interest, dividends and capital gains is a tax on capital. By over-taxing capital, estates and the income of our wealthiest people, including heirs to fortunes, we are selling our country and our nation short. You can never have too much capital.
What country has advanced the most since World War II? Hong Kong, which has no tax on interest, dividends or capital.
The great Scottish economist Adam Smith once said, “Little else is required to carry a state from the lowest barbarism to the highest degree of opulence but peace, easy taxes and a tolerable administration of justice.” Moreover, his system of easy taxes and natural liberty would reduce inequality and result in “universal opulence, which extends itself to the lowest ranks of the people.”
My hope is that Professor Piketty will see the error of his ways and write a sequel called “The Wealth of Nations for the 21st Century,” which will quote Adam Smith instead of Karl Marx. Perhaps he will quote this passage: “To prohibit a great people… from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind.”
Piketty cites Karl Marx more than any other economist, even more than Keynes. The professor barely mentions Adam Smith. Instead of the modern scientific name “economics,” he prefers the old term “political economy,” a favorite of radical professors.
And most importantly, Piketty’s focus is on the distribution of income and capital, not the creation of wealth. He’s not so much concerned with the size of the economic pie, but how it’s cut up.
His main thesis is that inequality grows under capitalism, that unfettered free markets make the rich richer and the poor poorer — a standard Marxist position — and that the only solution is to tax the dirty, filthy, stickin’ rich with highly progressive taxes on their income and wealth.
I don’t want to be picky, but Piketty often ignores data that contradicts his theory of growing inequality. For instance, he selectively chooses members of the Forbes magazine billionaires’ list to show that wealth always grows automatically faster than the average income earner. He repeatedly refers to the growing fortunes of Bill Gates in the United States and Liliane Bettencourt, heiress of L’Oreal, the cosmetics firm. “Once a fortune is established,” he claims, “the capital grows according to a dynamic of its own, and it can continue to grow at a rapid pace for decades simply because of its size.”
Come again?
I guess he hasn’t heard of the dozens of millionaires and billionaires who lost their fortunes, like the Vanderbilts, or to use a recent example, Eike Batista, the Brazilian businessman who just two years ago was the seventh-wealthiest man in the world, worth $30 billion, and now is practically bankrupt.
Piketty conveniently ignores the fact that most high-performing mutual funds eventually stop beating the market and even underperform. Take a look at the Forbes “Honor Roll” of outstanding mutual funds. Today’s list is almost entirely different from the list of 15 or 20 years ago. In our business, we call it “reversion to the mean,” and it happens all the time.
The professor seems to have forgotten a major theme of Marx, and later Joseph Schumpeter, that capitalism is a dynamic model of creative destruction. Today’s winners are not necessarily next year’s winners. IBM used to dominate the computer business; now Apple does. Citibank used to be the country’s largest bank. Now it is Chase. Sears Roebuck used to be the largest retail store. Now it is Wal-Mart. GM used to be the biggest car manufacturer. Now it is Toyota. And the Rockefellers used to be the wealthiest family. Now it is the Walton family, who a generation ago were dirt poor.
Piketty is no communist and is certainly not as radical as Marx in his predictions or policy recommendations. Many call Piketty “Marx Lite.” He doesn’t advocate abolishing money and the traditional family, confiscating all private property or nationalizing all of the industries. But he’s plenty radical in his soak-the-rich schemes, a punitive 80% tax on incomes above $500,000 or so, and a progressive global tax on capital with an annual levy between 0.1% and 10% on the greatest fortunes.
Why assess a tax of even 0.1% on wealth? It destroys a fundamental sacred right of mankind — financial privacy and the right to be left alone. An income tax is bad enough. But a wealth tax is worse. A wealth tax is Big Brother at his worst. Such a tax would require every citizen to list all his or her assets. The intent is to prevent any secret stash of gold and silver coins, diamonds, artwork or bearer bonds. Suddenly, the privacy guaranteed to Americans by the Fourth Amendment would be denied and produce an illegal and underground black market.
Equally important, a wealth tax is a tax on capital — the key to economic growth. The worst crime of Piketty’s vulgar capitalism is his failure to understand the positive role of capital in advancing the standard of living in the world. As Andrew Carnegie simply said, “Capitalism is about turning luxuries into necessities.” The latest example is the smartphone. It’s the great equalizer. Virtually everyone rich and poor has one, thanks to the ingenuity of entrepreneurs like Steve Jobs. This is democratic capitalism at its best. Income inequality may be growing, but when it comes to goods and services, inequality may be shrinking.
To create new products and services and raise economic performance, a nation need capital, lots of it. Contrary to Piketty’s claim, it is good that capital grows faster than income, because it means people are increasing their savings rate. The only time capital declines is during war and depression, when capital is destroyed.
Piketty blames the increase in inequality on low growth rates. He says return on capital tends to be higher than the economic growth rate. Good, let’s increase economic growth with tax cuts, sensible deregulation, better training/education, productivity and opening trade.
Even Keynes understood the value of capital investment and the need to keep it growing. In his “Economic Consequences of the Peace,” Keynes compared capital to a cake that should never be eaten. “The virtue of the cake was that it was never to be consumed, neither by you nor by your children after you.”
If the capital “cake” is the source of economic growth and a higher standard of living, we want to do everything we can to encourage capital accumulation. Make the cake bigger, and there will be plenty to go around for everyone. This is why increasing corporate profits is good — it means more money to pay workers. Studies show that companies with higher profit margins tend to pay their workers more. Remember the Henry Ford $5-a-day story of 1914? (In honor of its centennial, I’m telling this story again at FreedomFest this July 9.)
If anything, we should reduce taxes on capital gains, interest and dividends, and encourage people to save more and thus increase the pool of available capital and entrepreneurial activity. A progressive tax on high-income earners is a tax on capital. An inheritance tax is a tax on capital. A tax on interest, dividends and capital gains is a tax on capital. By over-taxing capital, estates and the income of our wealthiest people, including heirs to fortunes, we are selling our country and our nation short. You can never have too much capital.
What country has advanced the most since World War II? Hong Kong, which has no tax on interest, dividends or capital.
The great Scottish economist Adam Smith once said, “Little else is required to carry a state from the lowest barbarism to the highest degree of opulence but peace, easy taxes and a tolerable administration of justice.” Moreover, his system of easy taxes and natural liberty would reduce inequality and result in “universal opulence, which extends itself to the lowest ranks of the people.”
My hope is that Professor Piketty will see the error of his ways and write a sequel called “The Wealth of Nations for the 21st Century,” which will quote Adam Smith instead of Karl Marx. Perhaps he will quote this passage: “To prohibit a great people… from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind.”
December 17, 2016
“Indeed, the distribution of wealth is too important an issue to be left to economists, sociologists, historians, and philosophers.”
― Thomas Piketty, Capital in the Twenty-First Century
This is one of those scholarly books that seem to end up being accidental cultural markers of time and place. I'm pretty sure Piketty wanted his book to be read/discussed/debated, and Belnap/Harvard Press certainly wanted it to be bought. But, I'm pretty sure neither the author nor the publisher was expecting it to do sell like it did (whether it gets read is another matter). My guess is this book will stimulate a lot of debate about the real nature and scope of income and capital inequality AND debate about the proper roll of government in addressing these issues.
What I loved about this book was Piketty's voice, his narrative style. The fact he rejected the theoretical speculation favored by a lot of modern economists and instead went with a historical and data-centric narrative, gave this book juice. He wrote an economics book that demands to be read. I loved how he used literature (Balzac and Austen) as reference points for his thesis about the challenges with income and capital disparities between the 1% and the lower 50%. I loved his boldness. I mean really, it takes some scholarly, economic balls to name your book 'Capital'. It is like walking into a Liverpool pub with a Manchester Untied shirt on. Piketty was provocative right from the start.
Why didn't I rate this higher? I thought his proscriptive approach (Part IV) was a bit naive. I get what he is trying to do. He is setting the flag at the ideal point and letting the politics take care of itself, but his ideal isn't really even on this planet (not even on Planet France). I'm not sure the governing class in any of the major nations he dealt with will ever be ready for a large-scale capital tax, or a global system of taxing and studying incomes. There just isn't any stomach for that. Perhaps I'm a pessimist, but I think we are already governed by system of economic élite domination. It is more likely that a natural disaster, world war, or years of inflation are way more likely to change the current and growing capital inequality in the US and Europe than any preventative, rational, or progressive tax on wealth.
We can barely politically stomach a slight increase to capital gains/dividend tax rates without shutting down government and calls to impeach our president. A one-time, double-digit tax on wealth just won't happen in my lifetime. When 97% of scientists warn us about global warming, but because of vested energy interests and media complicity we find half of our nation believing it is all hype as the poles melt, what hope do we have in preventing millionaires and billionaires from accumulating more wealth? Most will remain ignorant of the problem, apathetic about how that type of income disparity harms democracy, and mostly antagonistic about changing what is perceived to be a meritocracy for a redistributive tax solution. Just not going to happen. I can't see it happening in France, let alone Britain, China or the US.
But that is just me venting my frustrations. The future IS the sole property of the future. I might be wrong. For the most part the book is already doing what he wanted. He's got FT writing and challenging his data. He has Paul Krugman giving supporting data. I'm reading his book instead of a Dan Brown novel. So, my bitching aside, his book has already done 10x what it had every practical right to do. It might just end up being the next John Rawls tome, read by economists, politicians and those tired of Dan Brown novels. I sure hope so.
― Thomas Piketty, Capital in the Twenty-First Century
This is one of those scholarly books that seem to end up being accidental cultural markers of time and place. I'm pretty sure Piketty wanted his book to be read/discussed/debated, and Belnap/Harvard Press certainly wanted it to be bought. But, I'm pretty sure neither the author nor the publisher was expecting it to do sell like it did (whether it gets read is another matter). My guess is this book will stimulate a lot of debate about the real nature and scope of income and capital inequality AND debate about the proper roll of government in addressing these issues.
What I loved about this book was Piketty's voice, his narrative style. The fact he rejected the theoretical speculation favored by a lot of modern economists and instead went with a historical and data-centric narrative, gave this book juice. He wrote an economics book that demands to be read. I loved how he used literature (Balzac and Austen) as reference points for his thesis about the challenges with income and capital disparities between the 1% and the lower 50%. I loved his boldness. I mean really, it takes some scholarly, economic balls to name your book 'Capital'. It is like walking into a Liverpool pub with a Manchester Untied shirt on. Piketty was provocative right from the start.
Why didn't I rate this higher? I thought his proscriptive approach (Part IV) was a bit naive. I get what he is trying to do. He is setting the flag at the ideal point and letting the politics take care of itself, but his ideal isn't really even on this planet (not even on Planet France). I'm not sure the governing class in any of the major nations he dealt with will ever be ready for a large-scale capital tax, or a global system of taxing and studying incomes. There just isn't any stomach for that. Perhaps I'm a pessimist, but I think we are already governed by system of economic élite domination. It is more likely that a natural disaster, world war, or years of inflation are way more likely to change the current and growing capital inequality in the US and Europe than any preventative, rational, or progressive tax on wealth.
We can barely politically stomach a slight increase to capital gains/dividend tax rates without shutting down government and calls to impeach our president. A one-time, double-digit tax on wealth just won't happen in my lifetime. When 97% of scientists warn us about global warming, but because of vested energy interests and media complicity we find half of our nation believing it is all hype as the poles melt, what hope do we have in preventing millionaires and billionaires from accumulating more wealth? Most will remain ignorant of the problem, apathetic about how that type of income disparity harms democracy, and mostly antagonistic about changing what is perceived to be a meritocracy for a redistributive tax solution. Just not going to happen. I can't see it happening in France, let alone Britain, China or the US.
But that is just me venting my frustrations. The future IS the sole property of the future. I might be wrong. For the most part the book is already doing what he wanted. He's got FT writing and challenging his data. He has Paul Krugman giving supporting data. I'm reading his book instead of a Dan Brown novel. So, my bitching aside, his book has already done 10x what it had every practical right to do. It might just end up being the next John Rawls tome, read by economists, politicians and those tired of Dan Brown novels. I sure hope so.
August 19, 2020
The central thesis of this book is:
An apparently small gap between the return on capital and the rate of growth can in the long run have powerful and destabilizing effects on the structure and dynamics of social inequality.
An apparently small gap between the return on capital and the rate of growth can in the long run have powerful and destabilizing effects on the structure and dynamics of social inequality.
March 31, 2014
Spoiler alert....
Holy smokes, this was a tour de force of political economy & economic history. Piketty explains why a tax on capital is so much preferable than taxes on income, the need for global cooperation and why inequality in America will only get worse unless policymakers address higher education affordability, tax policies, especially on inheritance, and minimum wage laws. A brutally long read, yet well worth the effort.
Holy smokes, this was a tour de force of political economy & economic history. Piketty explains why a tax on capital is so much preferable than taxes on income, the need for global cooperation and why inequality in America will only get worse unless policymakers address higher education affordability, tax policies, especially on inheritance, and minimum wage laws. A brutally long read, yet well worth the effort.
Shelved as 'deferred'
July 17, 2020This book is too big and too dense to swallow in one shot - so I am going to review it chapter by chapter. This will not sound actually like a review, but rather like reader's notes, as I try to gather my thoughts.
Introduction
Thomas Piketty plans to attack the knotty problem of capital - the slippery concept that has avoided the determined efforts of great brains such as Malthus, Marx and Adam Smith to collar it and place it in a compartment where it can be studied and analysed scientifically. More specifically, this is an effort by him to understand the dynamics of income inequality - the most wretched problem affecting humanity ever since it became "civilised". It is Piketty's aim to dispassionately study a subject, the debate on which has "long been based on an abundance of prejudice and a paucity of fact."
The income gap was huge in the pre-industrial society; land was the source, and it was owned by very few people. Theoreticians like Malthus and Ricardo gave gloomy predictions of systemic collapse as the land got dearer and dearer. However, with the industrial revolution, the agrarian economy gave way to the industrial: and the landowners were no longer the lords of all they survived. Upward mobility was no longer hampered by accidents of birth.
The industrial society, however, lead to large accumulation of wealth in the hands of a few entrepreneurs, and the income disparity began to skyrocket, setting the stage for the entry of Marx and his theory of the collapse of the capitalist society. It did not happen, as wages began to increase towards the end of the nineteenth century and the two world wars proved to be great levellers.
Simon Kuznets in the twentieth century changed the Marxian horror story into a fairy tale, where the income disparity would keep on decreasing until it stabilised at an acceptable level at advanced stages of capitalism. Sadly, that also did not happen, and we are once more in the era of increasing wealth gap.
On addressing this vexatious problem, Piketty has based his analysis on the conclusion he has arrived at by the study of his historical sources.
1. Be wary of "economic determinism". The distribution of wealth has always been deeply political.
2. The dynamics of wealth distribution reveal powerful mechanisms pushing alternately toward convergence and divergence.
The second point, the author says, is at the heart of the book. While the focus on training and increasing skills of the populace is a force of convergence, nepotism and protectionism which exclude certain groups from acquiring skills and those who survive just by increased returns on capital, are forces of divergence. The author says:
Part One
Chapter One
The basic concepts presented in this chapter that of the national income and capital; and how they define the economic structure of a country. National income is defined as the sum of all income available to the residents of a given country in a given year, regardless of the legal classification of that income: it is the Gross Domestic Product (GDP - which is the goods and services generated) minus the depreciation of capital which made this possible. Capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market. Capital includes all forms of real property (including residential real estate) as well as financial and professional capital (plants, infrastructure, machinery, patents, and so on) used by firms and government agencies.
“National wealth” or “national capital” is the total market value of everything owned by the residents and government of a given country at a given point in time, provided that it can be traded on some market. It consists of the sum total of nonfinancial assets (land, dwellings, commercial inventory, other buildings, machinery, infrastructure, patents, and other directly owned professional assets) and financial assets (bank accounts, mutual funds, bonds, stocks, financial investments of all kinds, insurance policies, pension funds, etc.), less the total amount of financial liabilities (debt). To summarise, income is a flow and capital is stock.
The author then defines his "first fundamental law of capitalism" as:
The share of income from capital in national income (α) is capital to income ratio (β) multiplied by the rate of return on capital(r); i. e. α = r × β. That is, if the capital/income ratio is 600% and the rate of return is 5%, then the share of income from capital is 30% (the author says these figures are typical for developed countries).
The second fundamental law of capitalism is stated as: the higher the savings rate and the lower the growth rate, the higher the capital / income ratio (β).
Thus higher capitalisation leads to inequality (because more income is generated from capital). Inequality is also spread across the globe because the developed countries own more capital across the globe than the undeveloped ones. According to classic economic theory, this excess capital of the rich will lead to investments in poor countries, boosting their productivity and closing the gap. The major flaw in this logic is that the increase in output in the poor countries need not necessarily lead to an increase in income, because of low wages (which is why most of the global manufacturing giants put up their manufacturing units in third-world countries).
The only way the poor can catch up with the rich is through the diffusion of knowledge; by the learning of technical know-how, skills and education. This goes for countries as well as people.
Chapter Two - Growth: Illusions and Realities
Demographic growth (or population) was stagnant mostly until 1700, after which it began to rise significantly; the rate peaked at around 2% per year between 1950 and 1970. Since then, it has been declining steadily and is expected to reach less than 0.2% by the end of the century. In pessimistic forecasts, it could even become negative in the developed countries. This has an impact on the structure of capital as a growing country would have to generate than a country in which population is stagnant, because there simply wouldn't be enough inherited wealth to go around. Thus, a growing demographic profile inherently plays an equalising role. There is also the neoliberalist argument that a growing economy inherently reduces inequality by providing upward mobility, but the author says this argument has to be taken with a pinch of salt (he promises to explain it further ahead).
When we come to economic growth, the corresponding spurt took place in the Twentieth Century, with substantially higher generation of wealth and considerable increase in the standard of living across all populations. In Europe, the growth peaked in the time immediately following the world wars - In Asia, a few decades afterwards. Surprisingly, neither the European Welfare State Model, nor the neoliberalist model had any specific impact on the growth spurt. Global growth rates are, however, steadily declining and the author expects it to bottom out at 1.5% at the end of this century.
Significant changes that occurred in the Twentieth Century is the delinking of currency from the gold standard, and the increased contribution of services to the economy (from 13% in 1800 to 80% in 2012), with a consummate fall in the contribution of agriculture.
Part Two - The Dynamics of Capital/ Income Ratio
Chapter Three - The Metamorphoses of Capital
As the title says, this chapter explores how capital in England and France have shifted from mostly agricultural land to buildings, business capital and financial capital invested in firms.
With the collapse of colonialism following the two disastrous wars, the returns from foreign holdings of both Britain and France fell drastically. However, it did not drastically affect the capital structure - the long term change was the transformation from agricultural land to real estate and capital stock. Also, in both these countries, the capital owned by the government is negligible compared to the capital owned by its citizens (1% in Britain and 5% in France): this has not changed over the years. This is a characteristic of all free market economies.
This brings us to the subject of public debt. Both the British and French governments borrow from their citizens. In Britain, the public debt rose to huge levels at the end of the Napoleonic wars in the Nineteenth century and at the end of the Second World War, because Britain chose to meet the governmental needs through debts. In contrast, France met this through increased taxes so its debt burden remained relatively the same. According to the author, this helped to enhance the power of private wealth in British economy. Also, the public debt of France was largely controlled after the wars through redistribution via inflation (around 13% per year) while in England, inflation remained relatively low (3% per year) and the debts were paid back more slowly.
Also, there is the curious phenomenon in France of "capitalism without capitalists". The Great Depression and World War II destroyed the country's faith in moneyed individuals, and many industries and enterprises were nationalised. However, the neoliberalist wave in the 1980's resulted in many of these nationalised assets being privatised again, through the selling of shares - France has returned to capitalism without really understanding why, as the author says. (The same thing happened with India under the Narasimha Rao government in 1991. From then on, each successive government has been outdoing the previous one in aggressive privatisation. This has almost become an obsession with the second stint of the BJP under Modi.)
Introduction
Thomas Piketty plans to attack the knotty problem of capital - the slippery concept that has avoided the determined efforts of great brains such as Malthus, Marx and Adam Smith to collar it and place it in a compartment where it can be studied and analysed scientifically. More specifically, this is an effort by him to understand the dynamics of income inequality - the most wretched problem affecting humanity ever since it became "civilised". It is Piketty's aim to dispassionately study a subject, the debate on which has "long been based on an abundance of prejudice and a paucity of fact."
The income gap was huge in the pre-industrial society; land was the source, and it was owned by very few people. Theoreticians like Malthus and Ricardo gave gloomy predictions of systemic collapse as the land got dearer and dearer. However, with the industrial revolution, the agrarian economy gave way to the industrial: and the landowners were no longer the lords of all they survived. Upward mobility was no longer hampered by accidents of birth.
The industrial society, however, lead to large accumulation of wealth in the hands of a few entrepreneurs, and the income disparity began to skyrocket, setting the stage for the entry of Marx and his theory of the collapse of the capitalist society. It did not happen, as wages began to increase towards the end of the nineteenth century and the two world wars proved to be great levellers.
Simon Kuznets in the twentieth century changed the Marxian horror story into a fairy tale, where the income disparity would keep on decreasing until it stabilised at an acceptable level at advanced stages of capitalism. Sadly, that also did not happen, and we are once more in the era of increasing wealth gap.
On addressing this vexatious problem, Piketty has based his analysis on the conclusion he has arrived at by the study of his historical sources.
1. Be wary of "economic determinism". The distribution of wealth has always been deeply political.
2. The dynamics of wealth distribution reveal powerful mechanisms pushing alternately toward convergence and divergence.
The second point, the author says, is at the heart of the book. While the focus on training and increasing skills of the populace is a force of convergence, nepotism and protectionism which exclude certain groups from acquiring skills and those who survive just by increased returns on capital, are forces of divergence. The author says:
This fundamental inequality, which I will write as r > g (where r stands for the average annual rate of return on capital, including profits, dividends, interest, rents, and other income from capital, expressed as a percentage of its total value, and g stands for the rate of growth of the economy, that is, the annual increase in income or output), will play a crucial role in this book. In a sense, it sums up the overall logic of my conclusions.The remaining part of the introduction lays out the structure of the book, and is basically an exposition of how he will evaluate the concepts briefly touched upon in the introduction.
Part One
Chapter One
The basic concepts presented in this chapter that of the national income and capital; and how they define the economic structure of a country. National income is defined as the sum of all income available to the residents of a given country in a given year, regardless of the legal classification of that income: it is the Gross Domestic Product (GDP - which is the goods and services generated) minus the depreciation of capital which made this possible. Capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market. Capital includes all forms of real property (including residential real estate) as well as financial and professional capital (plants, infrastructure, machinery, patents, and so on) used by firms and government agencies.
“National wealth” or “national capital” is the total market value of everything owned by the residents and government of a given country at a given point in time, provided that it can be traded on some market. It consists of the sum total of nonfinancial assets (land, dwellings, commercial inventory, other buildings, machinery, infrastructure, patents, and other directly owned professional assets) and financial assets (bank accounts, mutual funds, bonds, stocks, financial investments of all kinds, insurance policies, pension funds, etc.), less the total amount of financial liabilities (debt). To summarise, income is a flow and capital is stock.
The author then defines his "first fundamental law of capitalism" as:
The share of income from capital in national income (α) is capital to income ratio (β) multiplied by the rate of return on capital(r); i. e. α = r × β. That is, if the capital/income ratio is 600% and the rate of return is 5%, then the share of income from capital is 30% (the author says these figures are typical for developed countries).
The second fundamental law of capitalism is stated as: the higher the savings rate and the lower the growth rate, the higher the capital / income ratio (β).
Thus higher capitalisation leads to inequality (because more income is generated from capital). Inequality is also spread across the globe because the developed countries own more capital across the globe than the undeveloped ones. According to classic economic theory, this excess capital of the rich will lead to investments in poor countries, boosting their productivity and closing the gap. The major flaw in this logic is that the increase in output in the poor countries need not necessarily lead to an increase in income, because of low wages (which is why most of the global manufacturing giants put up their manufacturing units in third-world countries).
The only way the poor can catch up with the rich is through the diffusion of knowledge; by the learning of technical know-how, skills and education. This goes for countries as well as people.
Chapter Two - Growth: Illusions and Realities
The central thesis of this book is precisely that an apparently small gap between the return on capital and the rate of growth can in the long run have powerful and destabilizing effects on the structure and dynamics of social inequality. In a sense, everything follows from the laws of cumulative growth and cumulative returns, and that is why the reader will find it useful at this point to become familiar with these notions.Saying thus, Piketty in this chapter concentrates on what is meant by growth. The two aspects he considers are: demographic growth and economic growth.
Demographic growth (or population) was stagnant mostly until 1700, after which it began to rise significantly; the rate peaked at around 2% per year between 1950 and 1970. Since then, it has been declining steadily and is expected to reach less than 0.2% by the end of the century. In pessimistic forecasts, it could even become negative in the developed countries. This has an impact on the structure of capital as a growing country would have to generate than a country in which population is stagnant, because there simply wouldn't be enough inherited wealth to go around. Thus, a growing demographic profile inherently plays an equalising role. There is also the neoliberalist argument that a growing economy inherently reduces inequality by providing upward mobility, but the author says this argument has to be taken with a pinch of salt (he promises to explain it further ahead).
When we come to economic growth, the corresponding spurt took place in the Twentieth Century, with substantially higher generation of wealth and considerable increase in the standard of living across all populations. In Europe, the growth peaked in the time immediately following the world wars - In Asia, a few decades afterwards. Surprisingly, neither the European Welfare State Model, nor the neoliberalist model had any specific impact on the growth spurt. Global growth rates are, however, steadily declining and the author expects it to bottom out at 1.5% at the end of this century.
Significant changes that occurred in the Twentieth Century is the delinking of currency from the gold standard, and the increased contribution of services to the economy (from 13% in 1800 to 80% in 2012), with a consummate fall in the contribution of agriculture.
Part Two - The Dynamics of Capital/ Income Ratio
Chapter Three - The Metamorphoses of Capital
As the title says, this chapter explores how capital in England and France have shifted from mostly agricultural land to buildings, business capital and financial capital invested in firms.
With the collapse of colonialism following the two disastrous wars, the returns from foreign holdings of both Britain and France fell drastically. However, it did not drastically affect the capital structure - the long term change was the transformation from agricultural land to real estate and capital stock. Also, in both these countries, the capital owned by the government is negligible compared to the capital owned by its citizens (1% in Britain and 5% in France): this has not changed over the years. This is a characteristic of all free market economies.
This brings us to the subject of public debt. Both the British and French governments borrow from their citizens. In Britain, the public debt rose to huge levels at the end of the Napoleonic wars in the Nineteenth century and at the end of the Second World War, because Britain chose to meet the governmental needs through debts. In contrast, France met this through increased taxes so its debt burden remained relatively the same. According to the author, this helped to enhance the power of private wealth in British economy. Also, the public debt of France was largely controlled after the wars through redistribution via inflation (around 13% per year) while in England, inflation remained relatively low (3% per year) and the debts were paid back more slowly.
Also, there is the curious phenomenon in France of "capitalism without capitalists". The Great Depression and World War II destroyed the country's faith in moneyed individuals, and many industries and enterprises were nationalised. However, the neoliberalist wave in the 1980's resulted in many of these nationalised assets being privatised again, through the selling of shares - France has returned to capitalism without really understanding why, as the author says. (The same thing happened with India under the Narasimha Rao government in 1991. From then on, each successive government has been outdoing the previous one in aggressive privatisation. This has almost become an obsession with the second stint of the BJP under Modi.)
January 9, 2018
Fresh confirmation. Piketty likely underestimated the growth of extreme inequality
https://www.washingtonpost.com/news/w...
*
feed the poor. eat the rich
https://www.theguardian.com/business/...
*
The introduction includes one of the most gratifying paragraphs ever written
Neo-classical economics is morally and intellectually repulsive pseudo-science. Economists are not actually experts in anything.
*
Not perfect but incredibly important. Every thinking person in the 21st century needs to read this book.
As I read him, Thomas Piketty's major disadvantage is political. He delineates a radical problem, then offers a liberal solution. A global tax on wealth does indeed make sense - indeed it makes so much sense he can't possibly account for the fact that it doesn't exist already. He refuses to consider such things as class struggle and ideology.
*
Piketty claims that Marx was too apocalyptic in claiming that inequality could only be ended through revolution (ie, and not a peaceful transition). However, Piketty also acknowledges that in the 20th century wealth inequalities were wiped out only due to world war; from this perspective, it would seem Marx actually wasn't nearly apocalyptic enough in his predictions. The violence of the first and second world war far exceeded anything a Victorian intellectual could have conceived.
If war is ultimately what destroyed inequality, can it also be said that inequality contributed to or even caused world war? The implications here are clearly very radical. It's a question Piketty leaves unexplored. He hints that inequality can have disastrous social consequences, but then treats the major man-made conflicts of last century as if they were random accidents.
https://www.washingtonpost.com/news/w...
*
feed the poor. eat the rich
https://www.theguardian.com/business/...
*
The introduction includes one of the most gratifying paragraphs ever written
To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex problems of the world we live in. There is one great advantage to being an academic economist in France: here, economists are not highly respected in the academic or intellectual world or by political and financial elites. Hence they must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.
Neo-classical economics is morally and intellectually repulsive pseudo-science. Economists are not actually experts in anything.
*
Not perfect but incredibly important. Every thinking person in the 21st century needs to read this book.
As I read him, Thomas Piketty's major disadvantage is political. He delineates a radical problem, then offers a liberal solution. A global tax on wealth does indeed make sense - indeed it makes so much sense he can't possibly account for the fact that it doesn't exist already. He refuses to consider such things as class struggle and ideology.
*
Piketty claims that Marx was too apocalyptic in claiming that inequality could only be ended through revolution (ie, and not a peaceful transition). However, Piketty also acknowledges that in the 20th century wealth inequalities were wiped out only due to world war; from this perspective, it would seem Marx actually wasn't nearly apocalyptic enough in his predictions. The violence of the first and second world war far exceeded anything a Victorian intellectual could have conceived.
If war is ultimately what destroyed inequality, can it also be said that inequality contributed to or even caused world war? The implications here are clearly very radical. It's a question Piketty leaves unexplored. He hints that inequality can have disastrous social consequences, but then treats the major man-made conflicts of last century as if they were random accidents.
April 17, 2017
دوستانِ گرانقدر، این کتاب به نوعی پرفروش ترین کتاب در زمینهٔ "سرمایه" است.. امّا در این زمینهٔ خاص کتابی کاملاً تخصصی بوده و نیاز است که پیش از خواندنِ آن اطلاعاتی در موردِ نظام های سرمایه داری و سیاست های کشورهایِ مختلف در این خصوص و همچنین مطالعات در زمینهٔ اقتصاد و البته تاریخِ سیاسی ملل و جنگهای جهانی را نیز داشته باشید
تلاش من این است که در این ریویو تا جایی که میتوانم با بیانی ساده، مطالب را بیان کنم و البته تا پایان ریویو اطلاعاتِ خوب و مناسبی در خصوصِ "سرمایه" در اختیارِ شما ایرانیانِ خردگرا، قرار دهم
-------------------------------------------
عزیزان، زمانی که سخن از "سرمایه" و کتابی که در موردِ این موضوع به چاپ رسیده میشود، ذهنها ناخودآگاه به سویِ کتابِ مشهورِ "سرمایه" نوشتهٔ <کارل مارکس> میرود... امّا جالب است که نویسندهٔ این کتاب، <توماس پیکتی> تأکید کرده است که برای نوشتنِ این کتاب از <مارکس> الهام نگرفته و حتی کتابِ <مارکس> را نیز نخوانده است
نویسندهٔ کتاب،<توماس پیکتی> معتقد است که "سرمایه" جمعِ کلِ دارایی هایِ غیر انسانی است که بتوان آنها را در یک بازار صاحب شد و مبادله کرد... "سرمایه" شاملِ تمامیِ اشکالِ گوناگونِ ملکی و مسکونی شخصی و اشکالِ گوناگونِ ملکی در بخشِ مالی و حرفه ای میباشد که توسطِ دستگاه ها و شرکت هایِ اداری استفاده میشود... آقای <پیکتی> بر خلافِ <مارکس> سرمایهٔ مولد و غیر مولد را با یکدیگر در هم می آمیزد و به عنوانِ مثال خانهٔ مسکونی و جواهرات و آثارِ هنری را نیز "سرمایه" به حساب می آورد... از طرفی ایشان ویژگی هایِ "سرمایه" در نظامِ سرمایه داری را در مقایسه با نظام هایِ اقتصادیِ پیشین مشخص نمیکند
کتاب از چهار بخش اصلی تشکیل شده است... بخش نخست، مربوط به درآمد و سرمایه میباشد --- بخش دوم مربوط به پویاییِ نسبتِ سرمایه به درآمد است --- بخش سوم مربوط به ساختار نابرابری در کشورها میباشد ---- بخش چهارم در مورد اعمالِ مقررات بر سرمایه در قرن بیست و یکم است
آقایِ <پیکتی> با جمع آوری دیتا و اطلاعات مربوط به آرشیو مالیات بر درآمدِ 20 کشورِ بزرگ، از جمله: آمریکا، آرژانتین، استرالیا، چین، کانادا، هندوستان، ژاپن و کشورهای اروپایی... و بررسی و پژوهش های بسیار در اوراق مربوط به مالیات هایِ آنها، به این نتیجه رسیده است که سرمایه داری به صورتِ خودکار، نابرابری هایی خودسرانه و ناپایدار ایجاد میکند که ارزش های شایسته سالاری را که جوامعِ مردم سالار بر آن بنا نهاده شده است، تضعیف میکند
تزِ اصلی <پیکتی> این است که: در طولِ تاریخِ مکتوب، به غیر از سالهایِ 1914 الی 1948 (سالهای مربوط به جنگ های جهانی).. نرخِ رشدِ ثروتِ انباشته شده از نرخِ رشدِ درآمدها بیشتر بوده است
در زیر چکیده هایِ مهّم را از سرتاسرِ کتاب تهیه کرده و برایتان نوشته ام
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کاهش شدید نابرابری درآمدها که در اغلب کشورهایِ ثروتمند بین سالهای 1914 و 1945 مشاهده کردیم، بیش از هرچیزی نتیجهٔ دو جنگِ جهانی و شوک هایِ خشونت آمیزِ اقتصادی و سیاسیِ ناشی از آنها بوده است.. این کاهش چندان ارتباطی با فرآیندِ آرامِ طبقاتی نداشته است
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در حالِ حاضر بخشِ عمدهٔ سرمایهٔ جهان در دستانِ سرمایه دارانِ خصوصی قرار دارد و در کشورهای غربی، حتی آن بخش از سرمایه که عمومی محسوب میشود نیز معادل با بدهی های هر کشور است، لذا سرمایهٔ عمومی این کشورها معادل با صفر میباشد
امّا باید بپذیریم که امروزه نفوذِ دولت ها بر اقتصادهای جهانی، بیش از گذشته است
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رشد بی سابقهٔ اقتصاد اروپا و آمریکا و کاهشِ نابرابری در این کشورها در سالهای 1945 الی 1975 نتیجهٔ اِعمالِ مالیات های سنگین بر درآمدها و سرمایه ها، به منظورِ بازسازی پس از دو جنگِ جهانی بوده است. امّا از اواسطِ سال 1970 به بعد نابرابری درآمدها در کشورهای مرفه، به نحوِ برجسته ای افزایش پیدا نموده است و نتیجه آن میشود که: در آغازِ قرنِ بیست و یکم ما در همان موقعیتِ پیشینیانمان در اوایل قرنِ نوزدهم قرار گرفته ایم
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اگر سودِ حاصل از سرمایه گذاری دوباره صرفِ سرمایه گذاری شود، سرمایهٔ اولیه میتواند به نحو چشمگیری افزایش پیدا کند.. این روند همراه با رکود در رشدِ درآمدها، منجر به رشدِ نابرابری ها خواهد شد
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پس از جنگهای جهانی، هر کشور در کشور دیگری سرمایه گذاری کرده است و در واقع هر کشور متعلق به کشورهایِ دیگر است... این میزان سرمایه گذاری های متقابل سبب شده است تا کمتر کشوری امروزه مستعمره محسوب شود و در عوض تضادهای طبقاتی افزایش یافته است... لذا با این پیشرفت، در آینده هیچ نیرویِ طبیعی نمیتواند اهمیتِ سرمایه را کاهش دهد
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در طول این سه دهه، در کشورهای مرفه، طبقه ای در حال رشد است که طبقهٔ متوسط میراثی یا ملک دار، نام دارد... فرزندان این طبقه میتوانند با سرمایه ای که به ارث برده اند، دوباره سرمایه گذاری کنند.. یعنی روندی که در قرن نوزدهم انجام میشده، دوباره انجام خواهد شد
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یکی از عوامل مهم در نابرابری طبقاتی، افزایشِ درآمد مدیرانِ شرکت های بزرگ بوده است که دولت ها برای پیشی گرفتن از سایر کشورها از این مدیران مالیات های کمتری دریافت نموده و درآمد بیشتر را برای آنها مجاز میشمارند
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زمانی که عده ای زمیندار هستند و با ارث و میراث پدران خود سرمایه گذاری میکنند و عده ای از مدیران نیز درآمدهای بسیار بالا دارند و مالیات های پایین پرداخت میکنند، پدیده ای خطرناک به نامِ "افراط باوری سزاوار سالاری" پیش می آید و باعثِ نابرابری و بحرانِ اقتصادی میشود.. چراکه نود درصد سرمایه ای که در کشور جریان دارد، برای این گروه است
این موضوع در آینده سببِ انقلاب و اغتشاشاتِ سیاسی، خواهد شد
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عزیزانِ من... با استفاده از مقررات و شکلهایِ جدید از مالکیتهای عمومی و خصوصی و کنترل دموکراتیکِ سرمایه، با درگیر کردنِ نمایندگانِ اتحادیه هایِ کارگری در تصمیم گیری شرکتها، میتوان با مسائل و مشکلاتی که در بالا بیان شد و با نابرابری ها، مقابله کرد... آیا میتوانیم قرنی را تصور کنیم که در آن از سرمایه داری به صورتی صلح آمیز و برابر استفاده شود!؟؟ و یا باید در انتظار بحرانی بزرگ و جنگ جهانی دیگری باشیم؟؟؟
امیدوارم این ریویو برایِ شما خردگرایان مفید بوده باشه
<پیروز باشید و ایرانی>
تلاش من این است که در این ریویو تا جایی که میتوانم با بیانی ساده، مطالب را بیان کنم و البته تا پایان ریویو اطلاعاتِ خوب و مناسبی در خصوصِ "سرمایه" در اختیارِ شما ایرانیانِ خردگرا، قرار دهم
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عزیزان، زمانی که سخن از "سرمایه" و کتابی که در موردِ این موضوع به چاپ رسیده میشود، ذهنها ناخودآگاه به سویِ کتابِ مشهورِ "سرمایه" نوشتهٔ <کارل مارکس> میرود... امّا جالب است که نویسندهٔ این کتاب، <توماس پیکتی> تأکید کرده است که برای نوشتنِ این کتاب از <مارکس> الهام نگرفته و حتی کتابِ <مارکس> را نیز نخوانده است
نویسندهٔ کتاب،<توماس پیکتی> معتقد است که "سرمایه" جمعِ کلِ دارایی هایِ غیر انسانی است که بتوان آنها را در یک بازار صاحب شد و مبادله کرد... "سرمایه" شاملِ تمامیِ اشکالِ گوناگونِ ملکی و مسکونی شخصی و اشکالِ گوناگونِ ملکی در بخشِ مالی و حرفه ای میباشد که توسطِ دستگاه ها و شرکت هایِ اداری استفاده میشود... آقای <پیکتی> بر خلافِ <مارکس> سرمایهٔ مولد و غیر مولد را با یکدیگر در هم می آمیزد و به عنوانِ مثال خانهٔ مسکونی و جواهرات و آثارِ هنری را نیز "سرمایه" به حساب می آورد... از طرفی ایشان ویژگی هایِ "سرمایه" در نظامِ سرمایه داری را در مقایسه با نظام هایِ اقتصادیِ پیشین مشخص نمیکند
کتاب از چهار بخش اصلی تشکیل شده است... بخش نخست، مربوط به درآمد و سرمایه میباشد --- بخش دوم مربوط به پویاییِ نسبتِ سرمایه به درآمد است --- بخش سوم مربوط به ساختار نابرابری در کشورها میباشد ---- بخش چهارم در مورد اعمالِ مقررات بر سرمایه در قرن بیست و یکم است
آقایِ <پیکتی> با جمع آوری دیتا و اطلاعات مربوط به آرشیو مالیات بر درآمدِ 20 کشورِ بزرگ، از جمله: آمریکا، آرژانتین، استرالیا، چین، کانادا، هندوستان، ژاپن و کشورهای اروپایی... و بررسی و پژوهش های بسیار در اوراق مربوط به مالیات هایِ آنها، به این نتیجه رسیده است که سرمایه داری به صورتِ خودکار، نابرابری هایی خودسرانه و ناپایدار ایجاد میکند که ارزش های شایسته سالاری را که جوامعِ مردم سالار بر آن بنا نهاده شده است، تضعیف میکند
تزِ اصلی <پیکتی> این است که: در طولِ تاریخِ مکتوب، به غیر از سالهایِ 1914 الی 1948 (سالهای مربوط به جنگ های جهانی).. نرخِ رشدِ ثروتِ انباشته شده از نرخِ رشدِ درآمدها بیشتر بوده است
در زیر چکیده هایِ مهّم را از سرتاسرِ کتاب تهیه کرده و برایتان نوشته ام
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کاهش شدید نابرابری درآمدها که در اغلب کشورهایِ ثروتمند بین سالهای 1914 و 1945 مشاهده کردیم، بیش از هرچیزی نتیجهٔ دو جنگِ جهانی و شوک هایِ خشونت آمیزِ اقتصادی و سیاسیِ ناشی از آنها بوده است.. این کاهش چندان ارتباطی با فرآیندِ آرامِ طبقاتی نداشته است
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در حالِ حاضر بخشِ عمدهٔ سرمایهٔ جهان در دستانِ سرمایه دارانِ خصوصی قرار دارد و در کشورهای غربی، حتی آن بخش از سرمایه که عمومی محسوب میشود نیز معادل با بدهی های هر کشور است، لذا سرمایهٔ عمومی این کشورها معادل با صفر میباشد
امّا باید بپذیریم که امروزه نفوذِ دولت ها بر اقتصادهای جهانی، بیش از گذشته است
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رشد بی سابقهٔ اقتصاد اروپا و آمریکا و کاهشِ نابرابری در این کشورها در سالهای 1945 الی 1975 نتیجهٔ اِعمالِ مالیات های سنگین بر درآمدها و سرمایه ها، به منظورِ بازسازی پس از دو جنگِ جهانی بوده است. امّا از اواسطِ سال 1970 به بعد نابرابری درآمدها در کشورهای مرفه، به نحوِ برجسته ای افزایش پیدا نموده است و نتیجه آن میشود که: در آغازِ قرنِ بیست و یکم ما در همان موقعیتِ پیشینیانمان در اوایل قرنِ نوزدهم قرار گرفته ایم
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اگر سودِ حاصل از سرمایه گذاری دوباره صرفِ سرمایه گذاری شود، سرمایهٔ اولیه میتواند به نحو چشمگیری افزایش پیدا کند.. این روند همراه با رکود در رشدِ درآمدها، منجر به رشدِ نابرابری ها خواهد شد
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پس از جنگهای جهانی، هر کشور در کشور دیگری سرمایه گذاری کرده است و در واقع هر کشور متعلق به کشورهایِ دیگر است... این میزان سرمایه گذاری های متقابل سبب شده است تا کمتر کشوری امروزه مستعمره محسوب شود و در عوض تضادهای طبقاتی افزایش یافته است... لذا با این پیشرفت، در آینده هیچ نیرویِ طبیعی نمیتواند اهمیتِ سرمایه را کاهش دهد
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در طول این سه دهه، در کشورهای مرفه، طبقه ای در حال رشد است که طبقهٔ متوسط میراثی یا ملک دار، نام دارد... فرزندان این طبقه میتوانند با سرمایه ای که به ارث برده اند، دوباره سرمایه گذاری کنند.. یعنی روندی که در قرن نوزدهم انجام میشده، دوباره انجام خواهد شد
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یکی از عوامل مهم در نابرابری طبقاتی، افزایشِ درآمد مدیرانِ شرکت های بزرگ بوده است که دولت ها برای پیشی گرفتن از سایر کشورها از این مدیران مالیات های کمتری دریافت نموده و درآمد بیشتر را برای آنها مجاز میشمارند
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زمانی که عده ای زمیندار هستند و با ارث و میراث پدران خود سرمایه گذاری میکنند و عده ای از مدیران نیز درآمدهای بسیار بالا دارند و مالیات های پایین پرداخت میکنند، پدیده ای خطرناک به نامِ "افراط باوری سزاوار سالاری" پیش می آید و باعثِ نابرابری و بحرانِ اقتصادی میشود.. چراکه نود درصد سرمایه ای که در کشور جریان دارد، برای این گروه است
این موضوع در آینده سببِ انقلاب و اغتشاشاتِ سیاسی، خواهد شد
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عزیزانِ من... با استفاده از مقررات و شکلهایِ جدید از مالکیتهای عمومی و خصوصی و کنترل دموکراتیکِ سرمایه، با درگیر کردنِ نمایندگانِ اتحادیه هایِ کارگری در تصمیم گیری شرکتها، میتوان با مسائل و مشکلاتی که در بالا بیان شد و با نابرابری ها، مقابله کرد... آیا میتوانیم قرنی را تصور کنیم که در آن از سرمایه داری به صورتی صلح آمیز و برابر استفاده شود!؟؟ و یا باید در انتظار بحرانی بزرگ و جنگ جهانی دیگری باشیم؟؟؟
امیدوارم این ریویو برایِ شما خردگرایان مفید بوده باشه
<پیروز باشید و ایرانی>
November 6, 2020
In any case, truly democratic debate cannot proceed without reliable statistics.
For such a hefty book, so full of charts and case studies, the contents of Capital in the Twenty-First Century can be summarized with surprising brevity. Here it goes:
For as long as we have reliable records, market economies have produced huge disparities in income and wealth. The simple reason for this is that private wealth has consistently grown several times faster than the economy; furthermore, the bigger your fortune, the faster it grows. As a result, in the 18th and 19th centuries, inequality was high and consistently grew: most of the population owned nothing or close to nothing, and a small propertied class accumulated vast generational wealth. This trend was only reversed by the cataclysms of the 20th century—the World Wars and Great Depression—as well as the resultant government policies, such as social security and progressive taxes. But all signs indicate that the general pattern is re-emerging, and we are reverting to levels of inequality not seen since the Belle Epoque.
This is a relatively simple story, but Piketty goes to great lengths to prove it. Indeed, the value of this book consists in its wealth of data rather than any seismic theoretical insights. Piketty is an artist on graph paper; and with a few simple dots and lines he cuts to the heart of the matter. The large time scales help us to see things invisible in the present moment. For example, while some economists have thought that the ratio of income going to labor and capital was quite stable, Piketty shows that it fluctuates through time and space. Seen in this way, the economy ceases to be a static entity following fixed rules, but something all too human—responding to government policy, cultural developments, and historical accidents.
Given the title of this book, comparisons to Marx are inevitable. Piketty himself begins with a short historical overview of the thinkers he considers his predecessors, with Marx given due credit. Piketty even concurs with the basic Marxian logic—that capitalism inevitably leads to a crisis of accumulation, with the capitalists siphoning off more and more resources until none are left for the rest of the population (with revolution inevitable). If we have avoided such a crisis, says Piketty, it is because Marx based his analysis on a static economy, not a growing one. The twentieth century was exceptional, not only because of its many calamities, but also because it saw enormous rates of economic growth, which also helped to offset the basic logic of capitalist accumulation. Growth rates have significantly slowed in this century.
In summarizing Piketty this way, I fear that I am not doing justice to his appeal. This book is at its most enjoyable when Piketty is at his most empirical—when he is taking the reader through historical trends and case studies. This is extremely refreshing in an economist. I often complain that economics, as a discipline, is needlessly theoretical, getting lost in abstruse debates about how certain variables affect one another, rather than focusing on observable data. Piketty explicitly rejects this style of economics, and puts forward his own method of historical research. This has many advantages. For one, it makes the book far easier to understand, since Piketty’s point is always grounded in a set of facts. What is more, this way of doing economics can be integrated with other disciplines, like history or sociology, rather than existing apart in its own theoretical realm. For example, Piketty often has occasion to bring up the novels of Jane Austen and Honoré de Balzac to illustrate his points.
Well, if Piketty is even approximately correct, then we are left in a rather uncomfortable situation. As Piketty repeatedly notes, vast inequality leads to political instability and the undermining of democratic government, as the super-wealthy are able to accumulate ever-larger influence. So what should we do about it? Here, the difference in temperament between Marx and Piketty is especially apparent. Instead of advocating for any kind of revolution, Piketty puts forward the decidedly wonkish solution of a global tax on wealth. The proposed tax would be progressive (only significantly taxing large fortunes) and would extend throughout the world, so that the rich could not simply hide their money in tax havens. Yet as Piketty himself notes, this solution is nearly as utopian as the Proletariat Revolution, so I am not sure where that leaves us.
As much as I enjoyed and appreciated this book, nowadays it is somewhat difficult to see why it became so wildly popular and influential. This had more to do with the historical moment in which it was published than the book itself, I suspect. The world was still reeling from the shock of the 2008 crash, and the public was just coming to grips with the scale and ramifications of inequality. Specifically, while most people tend to think of inequality in terms of income—partly, because most people do not have much wealth to speak of—Piketty’s emphasis on wealth, specifically generational wealth, added another dimension to the debate. Piketty evidently succeeded in getting his message across, since I did not find anything in this book shocking. Now we all know about inequality.
While I am no economist, it does seem clear to me that Piketty’s argument has several weak points. For one, his narrow focus on income and wealth distributions lead him to ignore other important factors—most notably, for me, unemployment rates. Further, the major inequality that Piketty identifies—that wealth grows faster than the economy, or r > g—could have used more theoretical elaboration. I wonder: How can private wealth grow so much faster than the economy, if it is a major component of the economy? At one point, Piketty argues that the super rich can afford to hire the best investors and financial consultants; but from what I understand, professional investors do not, on the whole, outperform index funds (which grow along with the economy). Clearly, there is much for professional economists to argue about here.
Whatever its flaws, Capital in the Twenty-First Century is an ambitious and compelling book that made a lasting and valuable contribution to political debate. Piketty may be no Marx; but for a man who loves charts and graphs, he is oddly compelling.
July 14, 2023
پیشگفتار
احساس میکردم به مرور به یک لیبرال تبدیل شدهام. نگرانی من از این بود که به یک لیبرالِ متعصب تبدیل شوم (گرچه تعصب شاید با روح لیبرالیسم در تضاد باشد)، به همین خاطر تصمیم گرفتم خودم را به چالش بکشم و یک بار دیگر ببینم حرف حساب چپها و سوسیالیستها چیست و تا چه حد حرف حساب است.
بنابراین تصمیم گرفتم به سراغ یکی از کتابهای ترجمهشده توسط «ناصر زرافشان» بروم، که سوسیالیست کاردرست و با تجربهای است و چندین کتاب و مقاله دربارهی سوسیالیسم و نقد نظام سرمایهداری منتشر کرده است.
و این کتاب هم حاصل تحقیقات یک نویسندهی چپ فرانسوی است: توماس پیکتی (یا با تلفظ فرانسوی نامش: توما پیکتی) که ظاهراً جان تازهای به کالبد سوسیالیستهای جهان بخشیده و این کتاب احتمالاً معروفترین اثر اوست. پیکتی از حامیان حزب سوسیالیست سگولن رویال فرانسه است و همچون بسیاری از سوسیالیستهای جهان، دغدغهی اصلیاش نابرابری در توزیع ثروت است.
دربارهی کتاب
خلاصهی این کتابِ حدوداً ۹۰۰ صفحهای، توزیع سرمایه در جهان و تلاش برای رفع نابرابری ثروت است.
• در مقدمه، نویسنده چندین متفکر و اقتصاددان که پایهگذاران عقاید سوسیالیستی هستند(یا حداقل در میان نظریاتشان عقاید سوسیالیستی به چشم میخورد) به اختصار معرفی میکند. مالتوس، یونگ، ریکاردو، مارکس و کوزنتس از جمله این متفکراناند.
• در بخش اول نویسنده به تعاریف مهم اقتصادی کتاب میپردازد. اصطلاحاتی مثل سرمایه، ثروت، درآمد، قدرت خرید و رشد اقتصادی. همچنین به رابطهی رشد اقتصادی با رشد جمعیت و درآمد سرانه اشاره میکند.
• فصل دوم دربارهی توزیع ثروت در کشورهای مختلف از جمله فرانسه، بریتانیا، آمریکا و کاناداست. نویسنده هم توزیع سرمایه را از نظر جغرافیایی در این کشورها بررسی کرده و هم از نظر تاریخی.
• در فصل سوم نویسنده به توضیح انواع نابرابری ثروت در جهان میپردازد.
• و سرانجام در فصل چهارم، راه حلهایی را برای رفع نابرابریها ارائه میدهد، راه حلهایی از جنس سوسیالیسم. مثل دولتی کردن صنایع و خدمات، تشکیل دولت رفاه، مالیاتهای تصاعدی و شاهکارتر از همه: مالیات جهانی!
نقدِ شخصیِ من بر کتاب
به نظر من کتاب به طور خلاصه چیزی نیست جز: مارکسیسم در لباسی نو!
کتاب تقریباً در فرم آکادمیک نوشته شده که به نظر من برای مخاطب عام خستهکننده است و باید خورهی این گونه مسائل باشید تا از کتاب لذت ببرید.
در عین حال پیکتی آمار ارزشمندی در مورد توزیع ثروت در سراسر جهان جمعآوری کرده که از نظر من بزرگترین نقطه قوت کتاب است.
مشکل از آنجا شروع میشود که نویسنده از دلِ این آمار، به نتیجهگیریهایی میرسد که دلش میخواهد: رفع هر��ه بیشتر نابرابری از راهِ ایجاد یک نظم سوسیالیستی.
سوسیالیستها معمولا از این سوال طفره میروند که چرا اجرای سیاستهای سوسیالیستی باعث کاهش انگیزه و راندمان تولید و کاهش رشد اقتصادی و افزایش فقر میشود.
برای سوسیالیتها همیشه نابرابری مهمتر از فقر بوده است. آنها از این واقعیت چشمپوشی میکنند که سیاستهای لیبرال اگرچه نابرابری را در دل خود دارند، ولی این سیاستها توانستهاند با افزایش رشد اقتصادی به کاهش فقر و افزایش ثروت جوامع مختلف کمک کنند.
تجربههای تاریخی به ما نشان میدهد سیاستهای سوسیالیستی با افزایش فقر همراه بودهاند، اما انگار برای سوسیالیستها مهم نیست که همهی مردم فقیر باشند، مهم این است که نابرابر نباشند.(رجوع کنید به کتاب سوسیالیسم: ایدهی شکست خورده)
نظریهی مالیات جهانی به راستی یکی از شاهکارهای دیگرِ نویسنده است. تصور کنید از دسترنج مردم کشورهای ثروتمند مثل ژاپن و کرهی جنوبی مالیات بگیریم و آن را به کشورهای فقیر مثل کرهی شمالی یا پاکستان بدهیم! (تجربهی کمکهای بشردوستانهی سازمان ملل نشان میدهد چنین پولهایی تقریباً به دست مردم نمیرسد و توسط مسئولین فاسد غارت میشود)
یکی دیگر از نکات بامزهی کتاب نارضایتی مترجم از نویسنده است. ظاهراً از نظر جناب زرافشان، توماس پیکتی به اندازهی کافی سوسیالیست نیست و دوز انتقاد از نظام سرمایهداری در کتابش کم است! به همین دلیل مترجم در جایجایِ کتاب در پاورقیها و در مصاحبهی پایانیِ کتاب به نویسنده بارها طعنه میزند که چرا آن طور که باید و شاید نظام سرمایهداری را نکوبیده و چرا «اخلاق خردهبورژواییِ» نویسنده باعث شده کمتر از نظام سرمایهداری انتقاد کند!
به طور خلاصه از نظر من کتاب در طرح بسیاری از نظریاتش پرمغلطه است و به همین دلیل نتوانست در ذهن من چالشی در مورد سیاستهای لیبرال ایجاد کند.
پینوشت: ظاهراً کتاب به قدری مشهور است و به قدری در جهان سر و صدا کرده که دکتر موسی غنینژاد(از لیبرالهای معروف ایران) کتابی فقط در نقد این کتاب نوشته است(با عنوان پیکتی: مغالطهی قرن بیست و یکم) این کتاب را هم به زودی خواهم خواند و بررسیاش را خواهم نوشت.
احساس میکردم به مرور به یک لیبرال تبدیل شدهام. نگرانی من از این بود که به یک لیبرالِ متعصب تبدیل شوم (گرچه تعصب شاید با روح لیبرالیسم در تضاد باشد)، به همین خاطر تصمیم گرفتم خودم را به چالش بکشم و یک بار دیگر ببینم حرف حساب چپها و سوسیالیستها چیست و تا چه حد حرف حساب است.
بنابراین تصمیم گرفتم به سراغ یکی از کتابهای ترجمهشده توسط «ناصر زرافشان» بروم، که سوسیالیست کاردرست و با تجربهای است و چندین کتاب و مقاله دربارهی سوسیالیسم و نقد نظام سرمایهداری منتشر کرده است.
و این کتاب هم حاصل تحقیقات یک نویسندهی چپ فرانسوی است: توماس پیکتی (یا با تلفظ فرانسوی نامش: توما پیکتی) که ظاهراً جان تازهای به کالبد سوسیالیستهای جهان بخشیده و این کتاب احتمالاً معروفترین اثر اوست. پیکتی از حامیان حزب سوسیالیست سگولن رویال فرانسه است و همچون بسیاری از سوسیالیستهای جهان، دغدغهی اصلیاش نابرابری در توزیع ثروت است.
دربارهی کتاب
خلاصهی این کتابِ حدوداً ۹۰۰ صفحهای، توزیع سرمایه در جهان و تلاش برای رفع نابرابری ثروت است.
• در مقدمه، نویسنده چندین متفکر و اقتصاددان که پایهگذاران عقاید سوسیالیستی هستند(یا حداقل در میان نظریاتشان عقاید سوسیالیستی به چشم میخورد) به اختصار معرفی میکند. مالتوس، یونگ، ریکاردو، مارکس و کوزنتس از جمله این متفکراناند.
• در بخش اول نویسنده به تعاریف مهم اقتصادی کتاب میپردازد. اصطلاحاتی مثل سرمایه، ثروت، درآمد، قدرت خرید و رشد اقتصادی. همچنین به رابطهی رشد اقتصادی با رشد جمعیت و درآمد سرانه اشاره میکند.
• فصل دوم دربارهی توزیع ثروت در کشورهای مختلف از جمله فرانسه، بریتانیا، آمریکا و کاناداست. نویسنده هم توزیع سرمایه را از نظر جغرافیایی در این کشورها بررسی کرده و هم از نظر تاریخی.
• در فصل سوم نویسنده به توضیح انواع نابرابری ثروت در جهان میپردازد.
• و سرانجام در فصل چهارم، راه حلهایی را برای رفع نابرابریها ارائه میدهد، راه حلهایی از جنس سوسیالیسم. مثل دولتی کردن صنایع و خدمات، تشکیل دولت رفاه، مالیاتهای تصاعدی و شاهکارتر از همه: مالیات جهانی!
نقدِ شخصیِ من بر کتاب
به نظر من کتاب به طور خلاصه چیزی نیست جز: مارکسیسم در لباسی نو!
کتاب تقریباً در فرم آکادمیک نوشته شده که به نظر من برای مخاطب عام خستهکننده است و باید خورهی این گونه مسائل باشید تا از کتاب لذت ببرید.
در عین حال پیکتی آمار ارزشمندی در مورد توزیع ثروت در سراسر جهان جمعآوری کرده که از نظر من بزرگترین نقطه قوت کتاب است.
مشکل از آنجا شروع میشود که نویسنده از دلِ این آمار، به نتیجهگیریهایی میرسد که دلش میخواهد: رفع هر��ه بیشتر نابرابری از راهِ ایجاد یک نظم سوسیالیستی.
سوسیالیستها معمولا از این سوال طفره میروند که چرا اجرای سیاستهای سوسیالیستی باعث کاهش انگیزه و راندمان تولید و کاهش رشد اقتصادی و افزایش فقر میشود.
برای سوسیالیتها همیشه نابرابری مهمتر از فقر بوده است. آنها از این واقعیت چشمپوشی میکنند که سیاستهای لیبرال اگرچه نابرابری را در دل خود دارند، ولی این سیاستها توانستهاند با افزایش رشد اقتصادی به کاهش فقر و افزایش ثروت جوامع مختلف کمک کنند.
تجربههای تاریخی به ما نشان میدهد سیاستهای سوسیالیستی با افزایش فقر همراه بودهاند، اما انگار برای سوسیالیستها مهم نیست که همهی مردم فقیر باشند، مهم این است که نابرابر نباشند.(رجوع کنید به کتاب سوسیالیسم: ایدهی شکست خورده)
نظریهی مالیات جهانی به راستی یکی از شاهکارهای دیگرِ نویسنده است. تصور کنید از دسترنج مردم کشورهای ثروتمند مثل ژاپن و کرهی جنوبی مالیات بگیریم و آن را به کشورهای فقیر مثل کرهی شمالی یا پاکستان بدهیم! (تجربهی کمکهای بشردوستانهی سازمان ملل نشان میدهد چنین پولهایی تقریباً به دست مردم نمیرسد و توسط مسئولین فاسد غارت میشود)
یکی دیگر از نکات بامزهی کتاب نارضایتی مترجم از نویسنده است. ظاهراً از نظر جناب زرافشان، توماس پیکتی به اندازهی کافی سوسیالیست نیست و دوز انتقاد از نظام سرمایهداری در کتابش کم است! به همین دلیل مترجم در جایجایِ کتاب در پاورقیها و در مصاحبهی پایانیِ کتاب به نویسنده بارها طعنه میزند که چرا آن طور که باید و شاید نظام سرمایهداری را نکوبیده و چرا «اخلاق خردهبورژواییِ» نویسنده باعث شده کمتر از نظام سرمایهداری انتقاد کند!
به طور خلاصه از نظر من کتاب در طرح بسیاری از نظریاتش پرمغلطه است و به همین دلیل نتوانست در ذهن من چالشی در مورد سیاستهای لیبرال ایجاد کند.
پینوشت: ظاهراً کتاب به قدری مشهور است و به قدری در جهان سر و صدا کرده که دکتر موسی غنینژاد(از لیبرالهای معروف ایران) کتابی فقط در نقد این کتاب نوشته است(با عنوان پیکتی: مغالطهی قرن بیست و یکم) این کتاب را هم به زودی خواهم خواند و بررسیاش را خواهم نوشت.
February 2, 2020
To nie jest książka popularno-naukowa. To nie jest książka która w prostych słowach wyjaśnia, jak działa światowa gospodarka. To nie jest ekonomiczne NO LOGO. Ta książka nie ma wielkich ambicji publicystycznych. To jest pozycja raczej naukowa i dość specjalistyczna. Nie ukrywam, że były momenty, kiedy skanowałem tekst. Aż doszedłem do ostatniej części...
W niej (wcześniej także) autor wyjaśnia bardzo klarownie, chłodno i bez emocji skąd biorą się nierówności. Umieszcza to zjawisko w kontekście historycznym i politycznym. Pokazuje, dlaczego gospodarka były kiedyś bardzo niesprawiedliwa dla biednych i bardzo przychylna dla bogatych. Pokazuje, dlaczego na jakiś czas to się zmieniło. I wyjaśnia, dlaczego od pewnego czasu znowu bogaci robią się coraz bogatsi a biedni coraz biedniejsi. Ilustruje to za pomocą liczb, wykresów, równań. W większości bez komentarza - same fakty. Ale te fakty - same w sobie są dość przerażające. Bo:
- wynika z nich, że podobna jak teraz sytuacja była w przededniu I Wojny Światowej
- wynika z nich, że jeżeli nic się nie zmieni, to nie ma wielkich szans na odwrócenie tego trendu - bogaci będą coraz bogatsi kosztem biednych, bo system nie może inaczej funkcjonować.
No i w tej sprawie proponuje też rozwiązania. Utopijne - co podkreśla sam autor - ale takie, które zastosowane nawet częściowo mogą pomóc w zmniejszeniu nierówności a nawet w takich sprawach jak ekologia. Ta książka zmienia punkt widzenia na parę spraw. Podważa pewne rozwiązania, które uważa się za niewzruszone. Na przykład to, że bogacenie się, gdy się nic nie robi (bo się jest bardzo bogatym gościem z wielką kasą w banku) - niekoniecznie jest normalne. Dlatego kapitał, który sam rośnie (szybciej niż gospodarka) należy opodatkować tak samo, jak inne dochody (czyli dochody zwykłych pracujących ludzi), bo to jest w interesie całego społeczeństwa.
Podobno świat traktuje przemyślenia autora coraz poważniej. Także z tego powodu warto przeczytać. (Daję ⭐⭐⭐⭐⭐ nie dlatego, że to pasjonująca książka, ale dlatego, że wydaje mi się bardzo ważna)
W niej (wcześniej także) autor wyjaśnia bardzo klarownie, chłodno i bez emocji skąd biorą się nierówności. Umieszcza to zjawisko w kontekście historycznym i politycznym. Pokazuje, dlaczego gospodarka były kiedyś bardzo niesprawiedliwa dla biednych i bardzo przychylna dla bogatych. Pokazuje, dlaczego na jakiś czas to się zmieniło. I wyjaśnia, dlaczego od pewnego czasu znowu bogaci robią się coraz bogatsi a biedni coraz biedniejsi. Ilustruje to za pomocą liczb, wykresów, równań. W większości bez komentarza - same fakty. Ale te fakty - same w sobie są dość przerażające. Bo:
- wynika z nich, że podobna jak teraz sytuacja była w przededniu I Wojny Światowej
- wynika z nich, że jeżeli nic się nie zmieni, to nie ma wielkich szans na odwrócenie tego trendu - bogaci będą coraz bogatsi kosztem biednych, bo system nie może inaczej funkcjonować.
No i w tej sprawie proponuje też rozwiązania. Utopijne - co podkreśla sam autor - ale takie, które zastosowane nawet częściowo mogą pomóc w zmniejszeniu nierówności a nawet w takich sprawach jak ekologia. Ta książka zmienia punkt widzenia na parę spraw. Podważa pewne rozwiązania, które uważa się za niewzruszone. Na przykład to, że bogacenie się, gdy się nic nie robi (bo się jest bardzo bogatym gościem z wielką kasą w banku) - niekoniecznie jest normalne. Dlatego kapitał, który sam rośnie (szybciej niż gospodarka) należy opodatkować tak samo, jak inne dochody (czyli dochody zwykłych pracujących ludzi), bo to jest w interesie całego społeczeństwa.
Podobno świat traktuje przemyślenia autora coraz poważniej. Także z tego powodu warto przeczytać. (Daję ⭐⭐⭐⭐⭐ nie dlatego, że to pasjonująca książka, ale dlatego, że wydaje mi się bardzo ważna)
February 24, 2015
Thomas Piketty is a relatively young economist who has spent most of his professional career teaching at the Paris School of Economics and the École des Hautes Études en Sciences Sociales after brief stints at MIT. He has collaborated with fellow École Normale Supérieure graduate Emmanuel Suez on comprehensive studies on income and wealth inequality. A chart of their data is a frequently-used graphic (the one that looks like the Golden Gate Bridge) in Robert Reich's current documentary film, Inequality for All. This figure shows the income of the top 1 percent of income earners as a ratio of the national income from the period from 1910 to 2010. It shows a dramatic peak just prior to the 1929 crash followed by a collapse in the years up to 1980 and then a dramatic rise back up to the same level of approximately 24 percent of national income that the one percent took home in the roaring twenties.
In March 2014 the English translation of Piketty's latest book, Capital in the Twenty-first Century, hit the streets in the US. It contains over 600 pages (including notes) of remarkable data and graphics depicting the historic evolution of income and wealth in our world. It has been making quite a splash in the United States, it's English translation coming as it has on the heels of Inequality for All. It has been enthusiastically reviewed by prominent Nobel Prize winning economist and New York Times columnist Paul Krugman in a recent issue of the New York Review of Books and by another Nobel-winning neoclassical economist, Robert Solow, in the New Republic. Scores of other reviews have come out since it's publication by Harvard Press in March from both right and left. Martin Feldstein, the chairman of Ronald Reagan's Council on Economic Advisers, felt it necessary to attempt to debunk Piketty from the right in a Wall Street Journal column recently. Michael Roberts has been regularly working at debunking Piketty in the pages of his blog from a Marxist perspective. Someone who has raised such praise and ire from both left (Roberts), middle (Krugman and Solow), and right (Feldstein) must be on to something.
Piketty's book provides comprehensive documentation of the growing inequality that has the United States and Europe in its grip. But the forgotten element in this that Piketty brings to the discussion (if you have not read Ricardo and Marx) is that extreme inequality, in Europe at least, is not new. The inequality that has now established itself in both Europe and the United States is more like a return to the normal state of extreme concentration of wealth and income that ruled in the nineteenth century. It was only the great capital destruction of the inter-war years (and the threat posed by the success of socialist revolution in Russia - not so much emphasized by Piketty) that reduced inequality in the West in the twentieth century. Since then capital / GDP ratios have been steadily climbing back to the ratios that were common in the Gilded Age. Piketty calls this new reality "patrimonial capitalism" in that as economic growth chronically lags behind the rate of return that owners of capital can receive on their wealth, a tiny rentier class eventually emerges over generations that controls significant portions societal wealth and influence. This picture contradicts the story told by free market economists from Hayek to Kuznets to Milton Friedman and Paul Ryan that unregulated markets open doors to everyone to gain wealth. Instead, Piketty shows, the supposed triumph of capitalism in the wake of the fall of the Soviet empire, is more likely trending towards an entrenched structure of societal control by inherited wealth.
Piketty's title seems to be modeled after that of the famous book by Karl Marx, but Piketty is no revolutionary, rather a socialist of the contemporary French type which much more resembles the Democratic Party of FDR than any nineteenth century socialist party. Not that he thinks that this enormous inequality is a good thing, far from it, but his solution is rather a (modest) tax on capital than overthrow of the capitalist system. In other writings in the recent past Piketty has also recommended a return to the high top tax rates used in the United States and Europe in the period from the Great Depression prior to the Reagan / Thatcher putsch.
Key concepts in the book:
1) Kuznets was wrong (Ricardo and Marx were right)
2) A return to simple models of the macro economy
3) The rise of patrimonial capitalism
A more detailed discussion of these topics is on my blog
In March 2014 the English translation of Piketty's latest book, Capital in the Twenty-first Century, hit the streets in the US. It contains over 600 pages (including notes) of remarkable data and graphics depicting the historic evolution of income and wealth in our world. It has been making quite a splash in the United States, it's English translation coming as it has on the heels of Inequality for All. It has been enthusiastically reviewed by prominent Nobel Prize winning economist and New York Times columnist Paul Krugman in a recent issue of the New York Review of Books and by another Nobel-winning neoclassical economist, Robert Solow, in the New Republic. Scores of other reviews have come out since it's publication by Harvard Press in March from both right and left. Martin Feldstein, the chairman of Ronald Reagan's Council on Economic Advisers, felt it necessary to attempt to debunk Piketty from the right in a Wall Street Journal column recently. Michael Roberts has been regularly working at debunking Piketty in the pages of his blog from a Marxist perspective. Someone who has raised such praise and ire from both left (Roberts), middle (Krugman and Solow), and right (Feldstein) must be on to something.
Piketty's book provides comprehensive documentation of the growing inequality that has the United States and Europe in its grip. But the forgotten element in this that Piketty brings to the discussion (if you have not read Ricardo and Marx) is that extreme inequality, in Europe at least, is not new. The inequality that has now established itself in both Europe and the United States is more like a return to the normal state of extreme concentration of wealth and income that ruled in the nineteenth century. It was only the great capital destruction of the inter-war years (and the threat posed by the success of socialist revolution in Russia - not so much emphasized by Piketty) that reduced inequality in the West in the twentieth century. Since then capital / GDP ratios have been steadily climbing back to the ratios that were common in the Gilded Age. Piketty calls this new reality "patrimonial capitalism" in that as economic growth chronically lags behind the rate of return that owners of capital can receive on their wealth, a tiny rentier class eventually emerges over generations that controls significant portions societal wealth and influence. This picture contradicts the story told by free market economists from Hayek to Kuznets to Milton Friedman and Paul Ryan that unregulated markets open doors to everyone to gain wealth. Instead, Piketty shows, the supposed triumph of capitalism in the wake of the fall of the Soviet empire, is more likely trending towards an entrenched structure of societal control by inherited wealth.
Piketty's title seems to be modeled after that of the famous book by Karl Marx, but Piketty is no revolutionary, rather a socialist of the contemporary French type which much more resembles the Democratic Party of FDR than any nineteenth century socialist party. Not that he thinks that this enormous inequality is a good thing, far from it, but his solution is rather a (modest) tax on capital than overthrow of the capitalist system. In other writings in the recent past Piketty has also recommended a return to the high top tax rates used in the United States and Europe in the period from the Great Depression prior to the Reagan / Thatcher putsch.
Key concepts in the book:
1) Kuznets was wrong (Ricardo and Marx were right)
2) A return to simple models of the macro economy
3) The rise of patrimonial capitalism
A more detailed discussion of these topics is on my blog
April 4, 2014
*A full executive summary of this book is available here: http://newbooksinbrief.com/2014/04/04...
The main argument: The unequal distribution of wealth in the developed world has become a significant issue in recent years. Indeed, the data indicate that in the past 30 years the incomes of the wealthiest have surged into the stratosphere (and the higher up in the income hierarchy one is, the greater the increase has been), while the incomes of the large majority have stagnated. This has led to a level of inequality in wealth in the developed world not seen since the eve of the Great Depression. This much is without dispute.
Where there is dispute is in trying to explain just why the rise in inequality has taken place (and whether, and to what degree, it will continue in the future); and, even more importantly, whether it is justified. These questions are not merely academic, for the way in which we answer them informs public debate as well as policy measures—and also influences more violent reactions. Indeed, we need look no further than the recent Occupy Movement to see that the issue of increasing inequality is not only pressing, but potentially incendiary.
Given the import and the polarizing nature of the issue of inequality, it is all the more crucial that we begin by way of shedding as much light on the situation as possible. This is the impetus behind Thomas Piketty’s new book Capital in the Twenty-First Century.
One of Piketty’s main concerns in the book is to put the issue of inequality in its broader historical context. Specifically, the author traces how inequality has evolved from the agrarian societies of the 18th and early 19th centuries; through the Industrial Revolution and up to the First World War; throughout the interwar years; and into the second half of the twentieth century (and up to the first part of the twenty-first).
With this broad historical context we are able to see much more clearly the causes of inequality. As we might expect, what we find is that inequality is influenced by a host of societal factors—including economic, political, social and cultural factors. However, what we also find is that inequality is influenced by a broader set of factors associated with how capital works in capitalist societies (and market economies more generally).
Specifically, we find that capital (and the wealth it generates) tends to accumulate faster than the rate of economic growth in capitalist societies. What this means is that capital tends to become an increasingly prevalent and influential factor in these societies (at least up to a point). What’s more, wealth not only tends to accumulate, but to become more and more concentrated at the top (mainly because those with more capital are able to earn a higher rate of return on their capital investments). For these reasons, capitalism on its own tends to produce a relatively high degree of inequality.
The natural tendency of capital to accumulate and to become ever more concentrated largely explains the high degree of inequality that was witnessed in the developed world in the early part of the twentieth century. This inequality was largely dashed, however, in the interwar years. The reason for this is that the major events of the first half of the twentieth century (including the two world wars, and the Great Depression) thwarted capital’s natural tendency to accumulate, and also destroyed large stocks of wealth. The end result was that by the time World War II was over, inequality in the developed world had reached an all-time low.
After the Second World War, the natural tendency of capital to accumulate resumed. However, various political and economic measures (including progressive taxation, rent control, increasing minimum wages, and expanded social programs) worked to redistribute this growing capital, thus preventing inequality from growing as quickly as it would have otherwise.
In the 1980s, though, the developed countries did an about-face, and began eliminating many of the measures that had prevented inequality from rising according to its natural tendency. The consequence was that inequality reasserted itself in a major way, such that it is nearly as extreme today as it was on the run up to the Great Depression. Furthermore, the historical evidence indicates that capital will likely continue to accumulate and become ever more concentrated, such that we will witness an even greater level of inequality moving forward.
As far as justifying the growing inequality that we are currently seeing, Piketty raises serious doubts as to whether it may rightly be considered fair. What’s more, as inequality continues to grow, it is increasingly likely that large parts of the population will also come to see it as unfair and unjustified—thereby increasing the likelihood of political opposition.
For Piketty, the best and fairest solution to these problems would be to steepen the progressive taxation applied to the wealthiest individuals. The problem, though, is that in a world of financial globalization (where there is a high degree of competition for capital—as witnessed by tax havens), it is extremely difficult to apply the appropriate tax scheme without the cooperation and coordinated efforts of the international community—and this is simply not something that is easy to achieve.
The alternative, however, is much more troubling for it is likely that it will involve reverting to protectionism and nationalism—and this is really in no one’s interest.
This book is an absolute tour-de-force. The broad time-frame that Piketty explores, and the enormous body of data that he brings together, makes this study extremely comprehensive (no one will even think of accusing Piketty of cherry picking the data). Also, the reader is struck by how dispassionately Piketty analyzes the evidence he brings to the table. Indeed, while the author does have a position on inequality, one never receives the impression that this is corrupting his analysis (I consider myself to be a pragmatist politically, and often find that writers on both the left and the right massage the truth, but that was never the case here). Finally, it should be said that the book is very long, and just as dense, with the author often delving into extreme detail, so be prepared for a challenge. A must read for anyone with a serious interest in economics. A full executive summary of the book is available here: http://newbooksinbrief.com/2014/04/04...
The main argument: The unequal distribution of wealth in the developed world has become a significant issue in recent years. Indeed, the data indicate that in the past 30 years the incomes of the wealthiest have surged into the stratosphere (and the higher up in the income hierarchy one is, the greater the increase has been), while the incomes of the large majority have stagnated. This has led to a level of inequality in wealth in the developed world not seen since the eve of the Great Depression. This much is without dispute.
Where there is dispute is in trying to explain just why the rise in inequality has taken place (and whether, and to what degree, it will continue in the future); and, even more importantly, whether it is justified. These questions are not merely academic, for the way in which we answer them informs public debate as well as policy measures—and also influences more violent reactions. Indeed, we need look no further than the recent Occupy Movement to see that the issue of increasing inequality is not only pressing, but potentially incendiary.
Given the import and the polarizing nature of the issue of inequality, it is all the more crucial that we begin by way of shedding as much light on the situation as possible. This is the impetus behind Thomas Piketty’s new book Capital in the Twenty-First Century.
One of Piketty’s main concerns in the book is to put the issue of inequality in its broader historical context. Specifically, the author traces how inequality has evolved from the agrarian societies of the 18th and early 19th centuries; through the Industrial Revolution and up to the First World War; throughout the interwar years; and into the second half of the twentieth century (and up to the first part of the twenty-first).
With this broad historical context we are able to see much more clearly the causes of inequality. As we might expect, what we find is that inequality is influenced by a host of societal factors—including economic, political, social and cultural factors. However, what we also find is that inequality is influenced by a broader set of factors associated with how capital works in capitalist societies (and market economies more generally).
Specifically, we find that capital (and the wealth it generates) tends to accumulate faster than the rate of economic growth in capitalist societies. What this means is that capital tends to become an increasingly prevalent and influential factor in these societies (at least up to a point). What’s more, wealth not only tends to accumulate, but to become more and more concentrated at the top (mainly because those with more capital are able to earn a higher rate of return on their capital investments). For these reasons, capitalism on its own tends to produce a relatively high degree of inequality.
The natural tendency of capital to accumulate and to become ever more concentrated largely explains the high degree of inequality that was witnessed in the developed world in the early part of the twentieth century. This inequality was largely dashed, however, in the interwar years. The reason for this is that the major events of the first half of the twentieth century (including the two world wars, and the Great Depression) thwarted capital’s natural tendency to accumulate, and also destroyed large stocks of wealth. The end result was that by the time World War II was over, inequality in the developed world had reached an all-time low.
After the Second World War, the natural tendency of capital to accumulate resumed. However, various political and economic measures (including progressive taxation, rent control, increasing minimum wages, and expanded social programs) worked to redistribute this growing capital, thus preventing inequality from growing as quickly as it would have otherwise.
In the 1980s, though, the developed countries did an about-face, and began eliminating many of the measures that had prevented inequality from rising according to its natural tendency. The consequence was that inequality reasserted itself in a major way, such that it is nearly as extreme today as it was on the run up to the Great Depression. Furthermore, the historical evidence indicates that capital will likely continue to accumulate and become ever more concentrated, such that we will witness an even greater level of inequality moving forward.
As far as justifying the growing inequality that we are currently seeing, Piketty raises serious doubts as to whether it may rightly be considered fair. What’s more, as inequality continues to grow, it is increasingly likely that large parts of the population will also come to see it as unfair and unjustified—thereby increasing the likelihood of political opposition.
For Piketty, the best and fairest solution to these problems would be to steepen the progressive taxation applied to the wealthiest individuals. The problem, though, is that in a world of financial globalization (where there is a high degree of competition for capital—as witnessed by tax havens), it is extremely difficult to apply the appropriate tax scheme without the cooperation and coordinated efforts of the international community—and this is simply not something that is easy to achieve.
The alternative, however, is much more troubling for it is likely that it will involve reverting to protectionism and nationalism—and this is really in no one’s interest.
This book is an absolute tour-de-force. The broad time-frame that Piketty explores, and the enormous body of data that he brings together, makes this study extremely comprehensive (no one will even think of accusing Piketty of cherry picking the data). Also, the reader is struck by how dispassionately Piketty analyzes the evidence he brings to the table. Indeed, while the author does have a position on inequality, one never receives the impression that this is corrupting his analysis (I consider myself to be a pragmatist politically, and often find that writers on both the left and the right massage the truth, but that was never the case here). Finally, it should be said that the book is very long, and just as dense, with the author often delving into extreme detail, so be prepared for a challenge. A must read for anyone with a serious interest in economics. A full executive summary of the book is available here: http://newbooksinbrief.com/2014/04/04...
August 19, 2014
In a world that is increasingly blinded by ideological polarization, where we first decide what we believe we should believe in and then try to find facts to justify our cherished ideas, Piketty’s book comes as a surprise and a reminder that there is no substitute of good scholarship. The first requirement of honest scholarship is to be suspicious of all past ideas and question every single data source. Piketty does just that. He shows respect towards past economists while critically questioning each of their conclusions. He takes advantage of the longer time perspective that he has, and lays out a compelling array of powerful data. His conclusions that are logically sound and extremely sobering in their scope.
When it comes to capital accumulation, wealth disparity, and economic policies, we are as polarized as we could be. Within that environment Piketty has been able to take a few very simple ideas and build a convincing string of factual evidence and impeccable logic to build his argument. He does not have the audacity to believe that economics is a hard science that can dive into complex mathematics and pull out pearls of pure wisdom. He does not believe that economics can really stand apart from all other social sciences and history. The result is a narrative that is convincing, both intellectually and emotionally.
I am no economist, and I do not have the training to say anything definitive about his conclusions. I must admit that when I read articles written by his smart critics, criticizing the book, I find their arguments also powerful and almost convincing. Real arguments should only happen between experts, those who spent a lot of time mastering the complexities of the subject, so that the rest of us can listen to both sides and make up our mind. Piketty’s book is powerful enough to unsettle the right. Unfortunately, it has also disturbed the left. The important thing is that the book reignited a debate that was long overdue.
When it comes to capital accumulation, wealth disparity, and economic policies, we are as polarized as we could be. Within that environment Piketty has been able to take a few very simple ideas and build a convincing string of factual evidence and impeccable logic to build his argument. He does not have the audacity to believe that economics is a hard science that can dive into complex mathematics and pull out pearls of pure wisdom. He does not believe that economics can really stand apart from all other social sciences and history. The result is a narrative that is convincing, both intellectually and emotionally.
I am no economist, and I do not have the training to say anything definitive about his conclusions. I must admit that when I read articles written by his smart critics, criticizing the book, I find their arguments also powerful and almost convincing. Real arguments should only happen between experts, those who spent a lot of time mastering the complexities of the subject, so that the rest of us can listen to both sides and make up our mind. Piketty’s book is powerful enough to unsettle the right. Unfortunately, it has also disturbed the left. The important thing is that the book reignited a debate that was long overdue.
May 11, 2015
I will steal my short version review of this book from the fictional review of a "Cones of Dunshire" (Parks and Recreation) review: Punishingly intricate.
What makes this book so effective is what makes it such a difficult read: Math. Piketty shows his work by going through all of the statistical, economic, sociological, etc etc etc, data he could get his hands on. He correctly anticipated the criticism he would receive from the right wing and thusly he makes no claims without laying EXTENSIVE foundation for them.
That makes the book a bit of a Catch-22. For those that like his conclusions, the massive amount of foundation laid out getting there is unnecessary. Many of the recommendations he has in his introduction and conclusion are remedies that the left has been recommending for years. However, for those that don't like these conclusions, no amount of foundation would be enough. I dare say many of the negative reviews on this sight clearly didn't read the book and seemed to read only the introduction and conclusion. Here is my impression of those reviews: "How can he possibly make these claims??!!" To those I say, read the book. It's long and you'll be angry the whole time, but it's the only intellectually honest way to make your argument.
This one was a slog at times but in this age of misinformation, I appreciate an author treating me like an adult and for once saying, here's how I got my answer, here are all of my assumptions and why. It seems like a small thing, but as this 685 page monster can attest to...it's not.
What makes this book so effective is what makes it such a difficult read: Math. Piketty shows his work by going through all of the statistical, economic, sociological, etc etc etc, data he could get his hands on. He correctly anticipated the criticism he would receive from the right wing and thusly he makes no claims without laying EXTENSIVE foundation for them.
That makes the book a bit of a Catch-22. For those that like his conclusions, the massive amount of foundation laid out getting there is unnecessary. Many of the recommendations he has in his introduction and conclusion are remedies that the left has been recommending for years. However, for those that don't like these conclusions, no amount of foundation would be enough. I dare say many of the negative reviews on this sight clearly didn't read the book and seemed to read only the introduction and conclusion. Here is my impression of those reviews: "How can he possibly make these claims??!!" To those I say, read the book. It's long and you'll be angry the whole time, but it's the only intellectually honest way to make your argument.
This one was a slog at times but in this age of misinformation, I appreciate an author treating me like an adult and for once saying, here's how I got my answer, here are all of my assumptions and why. It seems like a small thing, but as this 685 page monster can attest to...it's not.
May 26, 2014
Piketty will be picked apart in the months and years ahead, and his unprecedented depth of research will be turned against him where the holes in available documents exist. But he intended that criticism. The point of the book is to reshape the conversation, and that he has thoroughly achieved by forcing economists, politicians and the public to face the reality of income inequality and inherited wealth worldwide. Arthur Goldhammer deserves considerable credit for his English translation. The book may be more elegant in French, but you wouldn't know from the translation's clear, compelling language. Six hundred pages is a lot - and not for everyone, even those interested in the book's central arguments - but six hundred pages of arcane economics and history are rendered remarkably readable, itself an achievement as grand as its thesis.
July 9, 2014
I finished this several weeks ago now, but with all of the reviews in the media, I keep putting off writing my own because I feel like it needs to be really good! I am going to avoid doing a comprehensive review, since you can read many of those on the internet. Instead, here are some of my idiosyncratic observations on the book:
-First, I highly recommend this book to anyone who is interested in the subject matter. Yes, it is long, but Piketty's writing (jointly, Goldhammer's translation) is extremely clear and very much appropriate for the non-specialist. There are only a few equations in the whole thing, and all of them are quite straightforward (3 terms at most, all in some kind of standard algebraic relationship). If you are interested but have been feeling daunted, don't!
-My biggest personal takeaway from the book was how much the economic patterns of the 20th century appear to be a historical anomaly. Nearly every graph in the book shows a fairly steady state over the course of the nineteenth century, a huge downward shock in the twentieth century (due to the Great Depression and the World Wars), followed by a near-complete recovery to the steady state. It is largely thanks to Piketty's work that we can observe the 20th century in this historical context. The most significant "interrupted pattern" of the 20th century was the dominance of inherited capital over labor income. Before the twentieth century, there was so much accumulated capital in Europe that a striver would have no chance of reaching the upper echelons of economic resources just by getting an education and working hard (as Piketty illustrates by examples given in Balzac). In the twentieth century, there was such wholesale destruction of capital by the depression and the world wars that this ceased to be true, and a decent job and hard work could land you near the top. As capital has recovered over the second half of the 20th century, however, this is decreasingly the case. At any rate, Piketty's interesting global observation is that much of modern economic theory and empirical work has been based on observation of time series collected during an anomalous historical period, and thus it may have limited "external validity." We should try to make some kind of rough mental correction for this fact when looking at statistics such as, for example, the average annual return of the stock market. What is the "average number of wars per century"?
-Another finding that jumped out at me was Piketty's claim that the data clearly contradict Modigliani's life-cycle savings hypothesis. Briefly, M's hypothesis is that saving behavior is generally motivated by intent to spend down savings during retirement, so that the lifetime pattern of wealth would look like a triangle--rising from zero during a working career, peaking at retirement, then falling back to zero at death. (As a side note, Nick Rowe has perceptively argued that the phenomenon of "retirement" itself presents a puzzle for economic theory: http://worthwhile.typepad.com/worthwh...) What Piketty shows is that the lifetime pattern of wealth does not resemble this kind of triangle; rather, wealth tends to increase monotonically over the life cycle. (This type of behavior can be consistent with bequest motives, but Piketty says it also holds for those with no identifiable heirs.) In line with what I was discussing above, Piketty points out that M's hypothesis was likely consistent with the data in the immediate postwar period when M was writing, with very little role for inherited capital, but not in general. I think this is an important point, because for most upper-middle class people, M's hypothesis is consistent with their intuitive understanding of capital, because it is consistent with their own lived experience of wealth accumulation. But the fact is that the aggregate amount of capital held by the 99% is relatively insignificant, and the dynamics of capital above the level of the upper middle class change dramatically.
-Piketty discusses the question: do larger fortunes earn better returns? As a small-time investor, believer in index funds, hedge-fund skeptic, etc., I am interested in the answer to this question. Do the rich really have access to "better opportunities" than the rest of us? (David Swensen, the investment manager for Yale's endowment, believes that the answer is affirmative--he set out to write a book about how individuals could use Yale's investing strategies, but concluded that they cannot.) Unfortunately, it is one of the areas where Piketty (avowedly) has the least data to bring to bear. The main data source he looks at for this question are the annual returns on university endowments. He sorts endowments by size and documents the pattern of returns by size category. In general, Piketty's answer to the question is affirmative, with larger endowments showing better returns. I was able to look at the underlying Excel files he has posted to his website (thanks!) and my general conclusion is that this phenomenon is probably mainly due to larger endowments being able to take more equity (or equity-like) exposure. Smaller endowments need to be somewhat more defensive, so they have higher percentages of lower-returning fixed-income assets. Historical returns are more or less consistent with near-100% equity exposures for larger endowments, and lower exposures for smaller ones. However, the main anomaly I observed, and don't have a good explanation for, is that endowments by and large seemed to avoid significant losses in the tech bubble burst (though they later had significant losses in the subprime crisis). With some casual Googling, I have not been able to find documentation of why and how university endowments were able to avoid that particular collapse--sectoral position limits maybe?
Many reviewers have presented critiques of Piketty's arguments, and I think at least some of them have some validity. However, I don't think that any of them invalidate the broad arguments he puts forth. Which is all very sobering, especially since his policy prescription of a global wealth tax is (again, avowedly) quite unrealistic politically.
-First, I highly recommend this book to anyone who is interested in the subject matter. Yes, it is long, but Piketty's writing (jointly, Goldhammer's translation) is extremely clear and very much appropriate for the non-specialist. There are only a few equations in the whole thing, and all of them are quite straightforward (3 terms at most, all in some kind of standard algebraic relationship). If you are interested but have been feeling daunted, don't!
-My biggest personal takeaway from the book was how much the economic patterns of the 20th century appear to be a historical anomaly. Nearly every graph in the book shows a fairly steady state over the course of the nineteenth century, a huge downward shock in the twentieth century (due to the Great Depression and the World Wars), followed by a near-complete recovery to the steady state. It is largely thanks to Piketty's work that we can observe the 20th century in this historical context. The most significant "interrupted pattern" of the 20th century was the dominance of inherited capital over labor income. Before the twentieth century, there was so much accumulated capital in Europe that a striver would have no chance of reaching the upper echelons of economic resources just by getting an education and working hard (as Piketty illustrates by examples given in Balzac). In the twentieth century, there was such wholesale destruction of capital by the depression and the world wars that this ceased to be true, and a decent job and hard work could land you near the top. As capital has recovered over the second half of the 20th century, however, this is decreasingly the case. At any rate, Piketty's interesting global observation is that much of modern economic theory and empirical work has been based on observation of time series collected during an anomalous historical period, and thus it may have limited "external validity." We should try to make some kind of rough mental correction for this fact when looking at statistics such as, for example, the average annual return of the stock market. What is the "average number of wars per century"?
-Another finding that jumped out at me was Piketty's claim that the data clearly contradict Modigliani's life-cycle savings hypothesis. Briefly, M's hypothesis is that saving behavior is generally motivated by intent to spend down savings during retirement, so that the lifetime pattern of wealth would look like a triangle--rising from zero during a working career, peaking at retirement, then falling back to zero at death. (As a side note, Nick Rowe has perceptively argued that the phenomenon of "retirement" itself presents a puzzle for economic theory: http://worthwhile.typepad.com/worthwh...) What Piketty shows is that the lifetime pattern of wealth does not resemble this kind of triangle; rather, wealth tends to increase monotonically over the life cycle. (This type of behavior can be consistent with bequest motives, but Piketty says it also holds for those with no identifiable heirs.) In line with what I was discussing above, Piketty points out that M's hypothesis was likely consistent with the data in the immediate postwar period when M was writing, with very little role for inherited capital, but not in general. I think this is an important point, because for most upper-middle class people, M's hypothesis is consistent with their intuitive understanding of capital, because it is consistent with their own lived experience of wealth accumulation. But the fact is that the aggregate amount of capital held by the 99% is relatively insignificant, and the dynamics of capital above the level of the upper middle class change dramatically.
-Piketty discusses the question: do larger fortunes earn better returns? As a small-time investor, believer in index funds, hedge-fund skeptic, etc., I am interested in the answer to this question. Do the rich really have access to "better opportunities" than the rest of us? (David Swensen, the investment manager for Yale's endowment, believes that the answer is affirmative--he set out to write a book about how individuals could use Yale's investing strategies, but concluded that they cannot.) Unfortunately, it is one of the areas where Piketty (avowedly) has the least data to bring to bear. The main data source he looks at for this question are the annual returns on university endowments. He sorts endowments by size and documents the pattern of returns by size category. In general, Piketty's answer to the question is affirmative, with larger endowments showing better returns. I was able to look at the underlying Excel files he has posted to his website (thanks!) and my general conclusion is that this phenomenon is probably mainly due to larger endowments being able to take more equity (or equity-like) exposure. Smaller endowments need to be somewhat more defensive, so they have higher percentages of lower-returning fixed-income assets. Historical returns are more or less consistent with near-100% equity exposures for larger endowments, and lower exposures for smaller ones. However, the main anomaly I observed, and don't have a good explanation for, is that endowments by and large seemed to avoid significant losses in the tech bubble burst (though they later had significant losses in the subprime crisis). With some casual Googling, I have not been able to find documentation of why and how university endowments were able to avoid that particular collapse--sectoral position limits maybe?
Many reviewers have presented critiques of Piketty's arguments, and I think at least some of them have some validity. However, I don't think that any of them invalidate the broad arguments he puts forth. Which is all very sobering, especially since his policy prescription of a global wealth tax is (again, avowedly) quite unrealistic politically.
November 12, 2014
Questo bellissimo, documentato e ben scritto saggio – ho molto apprezzato lo stile chiaro e estremamente divulgativo, che rimanda le tabelle più prettamente tecniche a margine e sul sito dell'autore, oltre che gli esempi letterari per mostrare l'evoluzione del capitale nella società occidentale, nei secoli – farà inacidire i neoliberisti che cercheranno in ogni modo di smantellarne l'impianto teorico. I fautori di Ludwig von Mises, Frederich von Hayek e i Chicago Boys cercheranno di smontarne le tesi dicendo che il moderno capitalismo senza regola premia gli imprenditori capaci e fa fare bancarotta a quelli meno bravi (citando, en passant, l'esempio dei Vanderbilt) e come un neoliberismo senza regole e controlli crei benefici a pioggia per tutti. Bla bla bla.
Questa la tesi dell'ultradestra americana, iniziata a circolare in ristrettissimi circoli finanziari (Rockfeller, per dirne uno) agli inizi del XX secolo e che è stata diffusa come il Verbo in tutto l'Occidente, grazie alla cooperazione di Think Tank, i quali infiltrando suoi adepti (mi si passi il tono messianico) nei gangli vitali della società: giuslavoristi, politici, professori universitari, sociologi, giornalisti e quant'altro, ha predicato la politica neoliberista come l'unica efficace, coaudivata dall'introduzione della Globalizzazione all'alba degli anni 2000.
Il Capitalismo senza regole aka neoliberismo, che Piketty mette sotto esame e in discussione, ha raggiunto in pieno gli scopi che si prefiggeva. Il risultato è sotto gli occhi di tutti: meno diritti, diseguaglianze feroci, insicurezze sociali, partiti di estrema destra che tornano a germogliare, accentramento di capitali ingentissimi nelle mani di pochi. Questa deriva plutocratica è – come ben sottolinea Piketty – pericolosissima per la democrazia e per la tenuta sociale, oltre che per il benessere e le tutele a cui ormai ci si è, giustamente, abituati ad avere, in Occidente. Chi è più potente di una Banca d'affari, per esempio, che senza regole, controlli e poca trasparenza, con un click può disinvestire miliardi e mandare in fallimemto intere nazioni, o attività produttive o banche? E che merito c'è nei bonus miliardari di AD di banche o attività finanziarie, anche se falliscono o non vincono da anni (Montezemolo ... in sette anni la Ferrari non ha mai vinto un campionato, premio di uscita miliardario e nuovo AD di Alitalia, la spintarella che le mancava per crollare).
Il cittadino mediamente informato queste cose le vede, le medita, il suo stomaco ne risente. Finché, nasce l'alba di un giorno nuovo e un discreto professore francese, giovane e smart conme il miglior Renzi, dà voce articolata, pacata ma informatissima, un vero panzer da combattimento filosofico dialettico, al malcontento globale del cittadino occidentale.
Orsù, tappatevi le orecchie di fronte alle ultime sirene neoliberiste, ascoltate il canto del nuovo Marx. Marx? Ma per piacere, non più marxiano di Roosvelt o di HRM the Queen, sì, Lei.
Infatti, infatti...Il saggio di Piketty è importante perché rimette in discussione, in maniera non ideologica ma sensata, ben documentata e con argomenti incontrovertibili, un intero sistema di pensiero imperante da oltre trent'anni, in occidente: il neoliberismo.
La prima parte è un lungo excursus storico sulla produzione, la detenzione e la distribuzione del capitale, molto interessante. Nella terza e quarta parte si arriva al nocciolo dell'attualità.
Leggendo, si imparano mote cose interessanti che sono credo, sconosciute ai più: proponendo come mezzo per abbattere le enormi diseguaglianze, una tassazione progressiva mondiale sul patrimonio (si parla per i patrimoni in miliardi di un massimo del 2%, o del 5%, cosa che non intaccherebbe affatto lo stile di vita dei detentori di cotanto patrimonio, ma abbatterebbe il capitale improduttivo, autolievitante come il lievito per la pizza...che crea squilibrio e potenzialmente pericoloso), ci ricorda come tassazioni progressive fino all'80% per i grandi patrimoni siano state introdotte negli USA da Roosvelt (il più elitario, per origine, dei presidenti moderni e non certo un bolscevico...) per quasi 25 anni, alle soglie dell'era Regan. E come il massimo di tassazione sui grandi redditi sia stata attuata in Gran Bretagna, pari al suo massimo picco, al 98%: vere e proprie espropriazioni che evidentemente avevano lo scopo di intaccare patrimoni immensi e improduttivi, visti come dannosi per lo svolgimento delle attività dello Stato. Quasi un intervento di angioplastica, fatto per evitare che il sistema paese collassasse.
Un testo e una proposta molto coraggiosi e sensati, questo di Piketty, già per il fatto di uscire dal coro neoliberista che ancora si sente cantare per ogni dove, proposta tuttavia, per stessa ammissione dell'autore, ad oggi piuttosto utopica ma un primo passo per iniziare un dibattito democratico. Solo conoscendo si può discutere, si possono vagliare alternative, si possono schivare gli inghippi di un sistema e smascherare chi ce lo vuol vendere per buono. Poi occorre trovare politici altrettanto coraggiosi (onesti?) da mettere in atto questi progetti di equità, trasparenza, efficienza e merito vero.Io in giro non ne vedo molti, dopo l'Obama ormai dump Duck.
oluzione è iniziata in Francia?
Comunque, in caso di bisogno... io mi rendo disponibile per il prossimo ventennio. ;-)
Breaking News: leggo che il Financial Times ha deciso di assegnare a questo saggio il Financial Times Mc Kinsey Book of the Year Award; Il tempio del Capitalismo incorona il miglior critico del Capitalismo. Vuoi vedere che un'altra rivoluzione è iniziata dalla Francia? :)
Questa la tesi dell'ultradestra americana, iniziata a circolare in ristrettissimi circoli finanziari (Rockfeller, per dirne uno) agli inizi del XX secolo e che è stata diffusa come il Verbo in tutto l'Occidente, grazie alla cooperazione di Think Tank, i quali infiltrando suoi adepti (mi si passi il tono messianico) nei gangli vitali della società: giuslavoristi, politici, professori universitari, sociologi, giornalisti e quant'altro, ha predicato la politica neoliberista come l'unica efficace, coaudivata dall'introduzione della Globalizzazione all'alba degli anni 2000.
Il Capitalismo senza regole aka neoliberismo, che Piketty mette sotto esame e in discussione, ha raggiunto in pieno gli scopi che si prefiggeva. Il risultato è sotto gli occhi di tutti: meno diritti, diseguaglianze feroci, insicurezze sociali, partiti di estrema destra che tornano a germogliare, accentramento di capitali ingentissimi nelle mani di pochi. Questa deriva plutocratica è – come ben sottolinea Piketty – pericolosissima per la democrazia e per la tenuta sociale, oltre che per il benessere e le tutele a cui ormai ci si è, giustamente, abituati ad avere, in Occidente. Chi è più potente di una Banca d'affari, per esempio, che senza regole, controlli e poca trasparenza, con un click può disinvestire miliardi e mandare in fallimemto intere nazioni, o attività produttive o banche? E che merito c'è nei bonus miliardari di AD di banche o attività finanziarie, anche se falliscono o non vincono da anni (Montezemolo ... in sette anni la Ferrari non ha mai vinto un campionato, premio di uscita miliardario e nuovo AD di Alitalia, la spintarella che le mancava per crollare).
Il cittadino mediamente informato queste cose le vede, le medita, il suo stomaco ne risente. Finché, nasce l'alba di un giorno nuovo e un discreto professore francese, giovane e smart conme il miglior Renzi, dà voce articolata, pacata ma informatissima, un vero panzer da combattimento filosofico dialettico, al malcontento globale del cittadino occidentale.
Orsù, tappatevi le orecchie di fronte alle ultime sirene neoliberiste, ascoltate il canto del nuovo Marx. Marx? Ma per piacere, non più marxiano di Roosvelt o di HRM the Queen, sì, Lei.
Infatti, infatti...Il saggio di Piketty è importante perché rimette in discussione, in maniera non ideologica ma sensata, ben documentata e con argomenti incontrovertibili, un intero sistema di pensiero imperante da oltre trent'anni, in occidente: il neoliberismo.
La prima parte è un lungo excursus storico sulla produzione, la detenzione e la distribuzione del capitale, molto interessante. Nella terza e quarta parte si arriva al nocciolo dell'attualità.
Leggendo, si imparano mote cose interessanti che sono credo, sconosciute ai più: proponendo come mezzo per abbattere le enormi diseguaglianze, una tassazione progressiva mondiale sul patrimonio (si parla per i patrimoni in miliardi di un massimo del 2%, o del 5%, cosa che non intaccherebbe affatto lo stile di vita dei detentori di cotanto patrimonio, ma abbatterebbe il capitale improduttivo, autolievitante come il lievito per la pizza...che crea squilibrio e potenzialmente pericoloso), ci ricorda come tassazioni progressive fino all'80% per i grandi patrimoni siano state introdotte negli USA da Roosvelt (il più elitario, per origine, dei presidenti moderni e non certo un bolscevico...) per quasi 25 anni, alle soglie dell'era Regan. E come il massimo di tassazione sui grandi redditi sia stata attuata in Gran Bretagna, pari al suo massimo picco, al 98%: vere e proprie espropriazioni che evidentemente avevano lo scopo di intaccare patrimoni immensi e improduttivi, visti come dannosi per lo svolgimento delle attività dello Stato. Quasi un intervento di angioplastica, fatto per evitare che il sistema paese collassasse.
Un testo e una proposta molto coraggiosi e sensati, questo di Piketty, già per il fatto di uscire dal coro neoliberista che ancora si sente cantare per ogni dove, proposta tuttavia, per stessa ammissione dell'autore, ad oggi piuttosto utopica ma un primo passo per iniziare un dibattito democratico. Solo conoscendo si può discutere, si possono vagliare alternative, si possono schivare gli inghippi di un sistema e smascherare chi ce lo vuol vendere per buono. Poi occorre trovare politici altrettanto coraggiosi (onesti?) da mettere in atto questi progetti di equità, trasparenza, efficienza e merito vero.Io in giro non ne vedo molti, dopo l'Obama ormai dump Duck.
oluzione è iniziata in Francia?
Comunque, in caso di bisogno... io mi rendo disponibile per il prossimo ventennio. ;-)
Breaking News: leggo che il Financial Times ha deciso di assegnare a questo saggio il Financial Times Mc Kinsey Book of the Year Award; Il tempio del Capitalismo incorona il miglior critico del Capitalismo. Vuoi vedere che un'altra rivoluzione è iniziata dalla Francia? :)
October 27, 2018
Notes:
Inherited wealth dominates amassed wealth, the shore of capital income in national income is equal to the average rate of return on capital, there exists unequal returns as a function of portfolio size, social spending can amplify inequalities of social origin, in low growth societies the rate of return on capital is 'markedly and durably higher than the rate of growth', an apparently small gap between return on capital and rate of growth can in the long run have powerful and destabilizing effects on growth, 21st century capital is different from the capital of the preceding centuries (agriculture → industrial, financial), private capital dominates historically, the principle of infinite accumulation: capitalists accumulate increasing quantities of capital leading inexorably to a falling rate of profit, bulk of public debt is held by a minority of the population, revival of private wealth is partly due to the privatization of national wealth, capital is always distributed more unequally than labor, public saving is negative in most countries, low demographic growth rate → greater accumulation and concentration of capital, slower growth (esp. demographic growth) + high rate of saving → structural increase in long-run capital income ratio.
"When an aging population is combined with a stabilization of cohort size as in France, or even a reduced cohort size as in a number of rich countries, very high inheritance flows are possible."
"Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy, it is all but inevitable that inheritance (of fortunes accumulated in the past) predominates over saving (wealth accumulated in the present)."
"Rent is a reality in any market economy where capital is privately owned."
"Since the 1980s, global wealth has increased on average a little faster than income, and the largest fortunes grew much more rapidly than average wealth."
"The inequality r > g amplified by inequality in the returns on capital as a function of initial portfolio size, can potentially give rise to a global dynamic of accumulation and distribution of wealth characterized by explosive trajectories and uncontrolled inegalitarian spirals...only a progressive tax on capital can effectively impede such a dynamic."
"Once a fortune is established, the capital grows according to a dynamic of its own, and it can continue to grow at a rapid pace for decades simply because of its size."
"The main effect of inflation is not to reduce the average return on capital but to redistribute it."
"The net asset position of the rich countries relative to the rest of the world is in fact positive (the rich countries own on average more than the poor countries and not vice versa, which ultimately is not very surprising), but this is masked by the fact that the wealthiest residents of the rich countries are hiding some of their assets in tax havens."
"Inflation is in a way a tax on idle capital and an encouragement to dynamic capital."
Inherited wealth dominates amassed wealth, the shore of capital income in national income is equal to the average rate of return on capital, there exists unequal returns as a function of portfolio size, social spending can amplify inequalities of social origin, in low growth societies the rate of return on capital is 'markedly and durably higher than the rate of growth', an apparently small gap between return on capital and rate of growth can in the long run have powerful and destabilizing effects on growth, 21st century capital is different from the capital of the preceding centuries (agriculture → industrial, financial), private capital dominates historically, the principle of infinite accumulation: capitalists accumulate increasing quantities of capital leading inexorably to a falling rate of profit, bulk of public debt is held by a minority of the population, revival of private wealth is partly due to the privatization of national wealth, capital is always distributed more unequally than labor, public saving is negative in most countries, low demographic growth rate → greater accumulation and concentration of capital, slower growth (esp. demographic growth) + high rate of saving → structural increase in long-run capital income ratio.
"When an aging population is combined with a stabilization of cohort size as in France, or even a reduced cohort size as in a number of rich countries, very high inheritance flows are possible."
"Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy, it is all but inevitable that inheritance (of fortunes accumulated in the past) predominates over saving (wealth accumulated in the present)."
"Rent is a reality in any market economy where capital is privately owned."
"Since the 1980s, global wealth has increased on average a little faster than income, and the largest fortunes grew much more rapidly than average wealth."
"The inequality r > g amplified by inequality in the returns on capital as a function of initial portfolio size, can potentially give rise to a global dynamic of accumulation and distribution of wealth characterized by explosive trajectories and uncontrolled inegalitarian spirals...only a progressive tax on capital can effectively impede such a dynamic."
"Once a fortune is established, the capital grows according to a dynamic of its own, and it can continue to grow at a rapid pace for decades simply because of its size."
"The main effect of inflation is not to reduce the average return on capital but to redistribute it."
"The net asset position of the rich countries relative to the rest of the world is in fact positive (the rich countries own on average more than the poor countries and not vice versa, which ultimately is not very surprising), but this is masked by the fact that the wealthiest residents of the rich countries are hiding some of their assets in tax havens."
"Inflation is in a way a tax on idle capital and an encouragement to dynamic capital."
December 30, 2016
Uma longa, longa leitura sobre a distribuição de dinheiro atual. Piketty passa pela história dos países com uma economia mais bem documentada (principalmente Inglaterra e França, mais vários outros), naquela abordagem comparada do Porque Falham as Nações e As Origens da Ordem Política: Dos Tempos pré-humanos até à Revolução Francesa. E em seguida destrincha como acontece o acúmulo de capital na parcela mais rica da população, como esse acúmulo flutuou (diminuiu depois da Segunda Guerra e agora subiu novamente) e o que guiou as mudanças.
É um livro bastante longo e um tanto repetitivo, mas muito bom por ser escrito fora do eixo americano, o que dá uma refrescada nas ideias. Gostei bastante de entender o que acontece quando a economia deixa de crescer, como o capital se acumula nas mãos de quem já tem muito e para onde estamos indo.
É um livro bastante longo e um tanto repetitivo, mas muito bom por ser escrito fora do eixo americano, o que dá uma refrescada nas ideias. Gostei bastante de entender o que acontece quando a economia deixa de crescer, como o capital se acumula nas mãos de quem já tem muito e para onde estamos indo.
May 3, 2014
This book has extraordinary presence on the American scene today. Reviewing it is tricky, since there are so many competitors, along with so much bad discussion.
Here, I won't summarize the tome, since others have already done so (Doug Henwood does the best job I've seen). Instead I'd like to note some key elements of content and style, which might be useful for other current or would-be readers.
(I already did this from a half-way point, so this post is really a revision taking into account the whole book.)
I think the book's main impact is to drive public discussion about economics to pay more attention to capital, and not just to income. I'm not sure if this will take hold in American conversations for various reasons, starting with the stark horror of our tv "news", but such is the book's central charge.
Piketty's style is fascinating, and helps enliven what could otherwise be a dry study of statistics. He writes with humor, mocking his own profession:
The prose is occasionally elegant, ambitious, and even poetic:
Yet for all of its ambitious Piketty frequently undercuts himself, qualifying and hedging his arguments. Even his ultimate call for a global, progressive tax on capital appears as utopian, in his own words.
At times the book is mordant: "The top 10% [of a future America] could therefore use a small portion of their incomes to hire many of the bottom 50% as domestic servants" (257) Or
Key terms resonate, like patrimonial capitalism (173), society of rentiers (264), or inheritance society (351). George Lakoff should be impressed. I'm not sure if rentier (defined 422) will enter English.
Capital is also meticulously organized, offering frequent organizational statements to locate the reader within its argument and materials. Its introduction neatly lays out the book's argument.
One way the book makes itself more accessible to those unaccustomed to living within data is its use of literary examples. Capital repeatedly turns to Balzac and Austen novels for examples of capital-driven life. It also dives into pop culture, most entertainingly through Disney's The Aristocrats (365-6).
The key image of the book is a U-shaped curve (starting on 23). It occurs through chart after chart, showing different aspects of the same story: economic inequality being high before WWI, dropping for the middle of the 20th century, then rising up after 1980. That curve is a kind of multimedia aid, heuristically helping readers through mountains of data.
Re: data, Piketty stashes much of the book's research online. That's a very useful way to combine digital with analog scholarship. We should expect more of this in academic publishing.
There's an interesting politics to the book so far. Piketty clearly finds gross inequality abhorrent, and wants to address it. Its first words are a quote from the 1789 French revolutionary Declaration of the Rights of Man and Citizen. The first chapter starts with an account of an armed battle between miners and management (39). And yet Piketty constantly distances himself from leftist thought and, with respect, Marx (8, 10) ("Marxist economists liked to show that capital's share was always increasing... even if believing this sometimes required twisting the data" (219)) ("I was vaccinated for life against the conventional but lazy rhetoric of anticapitalism... much of which turned its back on the intellectual means necessary to push beyond [Communism]", 31). He smacks down the liberal Gini coefficient (243) ("it is impossible to summarize a multidimensional reality with a uni-dimensional index without unduly simplifying matters and mixing up things that should not be treated together", 266) ("statistical indices such as the Gini coefficient give an abstract and sterile view of inequality", 267). This nontraditional politics appears in the book's final statements:
One aspect of Piketty's politics that goes against today's grain is its stance towards technology. He sees tech as powerfully shaping capital's powers (212-213), but also as deeply unpredictable. He dismisses those who see technology as democratic, arguing that new inventions can empower capital as easily as those lacking capital (233-4). He also sees tech as ultimately *not* driving inequality. The evidence for this last point is found in a brace of countries each experiencing similar rates of technological transformation, yet also seeing wildly different levels of economic distribution (321).
One piece of the book's argument which hasn't won much attention is its emphasis on demographics. For all of Piketty's emphasis on two formulas about economic distribution, changes in the number of people in a nation matter deeply. "[A] stagnant or, worse, decreasing population increases the influence of capital accumulated in previous generations" (84) Demographic growth keeps American inequality from soaring to even higher levels (154). "[T]he return to a historica regime of low growth, and in particular zero or even negative demographic growth, leads logically to the return of capital" (233; emphasis mine)
Predicting the future: Piketty hedges on this with every opportunity, despite the book's putative ambitions. He qualifies his extrapolations, offering multiple options at each point.
Who are the 1%? Piketty is clear that this is mostly C-suite executives, or "supermanagers", especially in Britain and the United States. Athletic or cultural superstars barely count for 1/20th of that group, and financiers only 20%. (302-303)
Overall, Capital is very convincing. Piketty's meticulous attention to data, steady re-examination of his own argument, and engagement with alternative models are, together, persuasive.
There are flaws and unfortunate limitations.
First, the book largely focuses on three countries: France, the United Kingdom, and the United States. Early on Piketty admits this is a problem, largely driven by the fact that these nations have the best data for his purposes. But this should give the reader pause when he draws global conclusions. "In the long run, unequal wealth within nations is surely more worrisome than unequal wealth between nations" (432) "[I]t is by no means certain that inequalities of wealth are actually increasing at the global level" (438)
Second, while being very well organized, the books tends towards repetition. This has some good pedagogical effects, especially as policies, datapoints, and concepts pile up, but eventually the repetitions are too much.
Here, I won't summarize the tome, since others have already done so (Doug Henwood does the best job I've seen). Instead I'd like to note some key elements of content and style, which might be useful for other current or would-be readers.
(I already did this from a half-way point, so this post is really a revision taking into account the whole book.)
I think the book's main impact is to drive public discussion about economics to pay more attention to capital, and not just to income. I'm not sure if this will take hold in American conversations for various reasons, starting with the stark horror of our tv "news", but such is the book's central charge.
Piketty's style is fascinating, and helps enliven what could otherwise be a dry study of statistics. He writes with humor, mocking his own profession:
[E]conomists like simple stories, even when they are only approximately correct (218)
[T]he discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation (32)
...particularly when one belongs to the upper centiles of the [wealth] distribution and tends to forget it, as is often the case with economists (267)
When we say that a distribution of wealth is a Pareto distribution, we have not really said anything at all. (368)
For far too long economists have sought to define themselves in terms of the supposedly scientific methods. In fact, those methods rely on an immoderate use of mathemetical models, which are frequently no more than an excuse for occupying the terrain and masking the vacuity of the content. (574)
The prose is occasionally elegant, ambitious, and even poetic:
Capital is never quiet: it is always risk-oriented and entrepreneurial, at least at its inception, yet it is always tends to transform itself into rents as it accumulates in large enough amounts - that is its vocation, its logical destination (115-6)
Thoughout most of human history, the inescapable fact is that the rate of return on capital was always at least 10 to 20 times greater than the rate of growth of output (and income). Indeed, this fact is to a large extent the very foundation of society itself (353)
[In the 1970s] [f]or the first time in history... wealth accumulated in the lifetime of the living constituted the majority of all wealth (402)
Private wealth rests on public poverty (567)
Once constituted, capital reproduces itself faster than output increases. The past devours the future. (571)
Yet for all of its ambitious Piketty frequently undercuts himself, qualifying and hedging his arguments. Even his ultimate call for a global, progressive tax on capital appears as utopian, in his own words.
At times the book is mordant: "The top 10% [of a future America] could therefore use a small portion of their incomes to hire many of the bottom 50% as domestic servants" (257) Or
It may be excessive to accuse senior executives of having their "hands in the till", but the metaphor is probably more apt than Adam Smith's metaphor of the market's "invisible hand" (332).
In the United States the Supreme Court blocked several attempts to levy a federal income tax in the late nineteenth and early twentieth centuries and then blocked minimum wage legislation in the 1930s, while finding that slavery and, later, racial discrimination were perfectly compatible with basic Constitutional rights (653 n49)
Key terms resonate, like patrimonial capitalism (173), society of rentiers (264), or inheritance society (351). George Lakoff should be impressed. I'm not sure if rentier (defined 422) will enter English.
Capital is also meticulously organized, offering frequent organizational statements to locate the reader within its argument and materials. Its introduction neatly lays out the book's argument.
One way the book makes itself more accessible to those unaccustomed to living within data is its use of literary examples. Capital repeatedly turns to Balzac and Austen novels for examples of capital-driven life. It also dives into pop culture, most entertainingly through Disney's The Aristocrats (365-6).
The key image of the book is a U-shaped curve (starting on 23). It occurs through chart after chart, showing different aspects of the same story: economic inequality being high before WWI, dropping for the middle of the 20th century, then rising up after 1980. That curve is a kind of multimedia aid, heuristically helping readers through mountains of data.
Re: data, Piketty stashes much of the book's research online. That's a very useful way to combine digital with analog scholarship. We should expect more of this in academic publishing.
There's an interesting politics to the book so far. Piketty clearly finds gross inequality abhorrent, and wants to address it. Its first words are a quote from the 1789 French revolutionary Declaration of the Rights of Man and Citizen. The first chapter starts with an account of an armed battle between miners and management (39). And yet Piketty constantly distances himself from leftist thought and, with respect, Marx (8, 10) ("Marxist economists liked to show that capital's share was always increasing... even if believing this sometimes required twisting the data" (219)) ("I was vaccinated for life against the conventional but lazy rhetoric of anticapitalism... much of which turned its back on the intellectual means necessary to push beyond [Communism]", 31). He smacks down the liberal Gini coefficient (243) ("it is impossible to summarize a multidimensional reality with a uni-dimensional index without unduly simplifying matters and mixing up things that should not be treated together", 266) ("statistical indices such as the Gini coefficient give an abstract and sterile view of inequality", 267). This nontraditional politics appears in the book's final statements:
The bipolar confrontations of the period 1917-1989 are now clearly behind us. The clash of communism and capitalism sterilized rather than stimulated research on capital and inequality by historians, economists, and even philosophers. It is long since time to move beyond these old controversies... (576)This isn't simply a left, liberal, or Marxist book, as some have charged. Perhaps it's a claim for a new politics based on data, an ideology for the world of 538.com.
One aspect of Piketty's politics that goes against today's grain is its stance towards technology. He sees tech as powerfully shaping capital's powers (212-213), but also as deeply unpredictable. He dismisses those who see technology as democratic, arguing that new inventions can empower capital as easily as those lacking capital (233-4). He also sees tech as ultimately *not* driving inequality. The evidence for this last point is found in a brace of countries each experiencing similar rates of technological transformation, yet also seeing wildly different levels of economic distribution (321).
One piece of the book's argument which hasn't won much attention is its emphasis on demographics. For all of Piketty's emphasis on two formulas about economic distribution, changes in the number of people in a nation matter deeply. "[A] stagnant or, worse, decreasing population increases the influence of capital accumulated in previous generations" (84) Demographic growth keeps American inequality from soaring to even higher levels (154). "[T]he return to a historica regime of low growth, and in particular zero or even negative demographic growth, leads logically to the return of capital" (233; emphasis mine)
Predicting the future: Piketty hedges on this with every opportunity, despite the book's putative ambitions. He qualifies his extrapolations, offering multiple options at each point.
[B]y 2100 the entire planet could look like Europe at the turn of the twentieth century, at last in terms of capital intensity. Obviously, this is just one possibility among others. (196)
The history of the past two centuries makes it highly unlikely that per capita output in the advanced countries will grow at a rate above 1.5% per year, but I am unable to predict whether the actual rate will be 0.5%, 1%, or 1.5% (95)
If the twenty-first century turns out to be a time of low (demographic and economic) growth and high return on capital (in a context of heightened international competition for capital resources), or at any rate in countries where these conditions hold true, inheritence will therefore probably again be as important as it was in the nineteenth century. (378)
Who are the 1%? Piketty is clear that this is mostly C-suite executives, or "supermanagers", especially in Britain and the United States. Athletic or cultural superstars barely count for 1/20th of that group, and financiers only 20%. (302-303)
Overall, Capital is very convincing. Piketty's meticulous attention to data, steady re-examination of his own argument, and engagement with alternative models are, together, persuasive.
There are flaws and unfortunate limitations.
First, the book largely focuses on three countries: France, the United Kingdom, and the United States. Early on Piketty admits this is a problem, largely driven by the fact that these nations have the best data for his purposes. But this should give the reader pause when he draws global conclusions. "In the long run, unequal wealth within nations is surely more worrisome than unequal wealth between nations" (432) "[I]t is by no means certain that inequalities of wealth are actually increasing at the global level" (438)
Second, while being very well organized, the books tends towards repetition. This has some good pedagogical effects, especially as policies, datapoints, and concepts pile up, but eventually the repetitions are too much.
December 19, 2014
Piketty has accomplished much with this work. Despite claims that it represents a Neo-Marxism it is anything but that, rather it is a return to Classical economics in the tradition of Adam Smith, Ricardo, and Marx synthesized with the rigor of 20th-century economics in the tradition of Fisher, Keynes, and Schumpeter. It is as its title implies a study of the nature of Capitalism not just economics or business but rather the whole system we find ourselves enmeshed in today.
He begins the book with a critique of Classical economists and highlights the importance of Ricardo's and Marx' work in the following passage:
"...the principle of infinite accumulation that Marx proposed contains a key insight, as valid for the study of the twenty-first century as it was for the nineteenth and in some respects more worrisome than Ricardo's principle of scarcity. If rates of population and productivity growth are relatively low, then accumulated wealth naturally takes on considerable importance, especially if it grows to extreme proportions and becomes socially destabilizing....In particular, the very high level of private wealth that has been attained since the 1980s and 1990s in the wealthy countries of Europe and in Japan, measured in years of national income, directly reflects Marxian logic."
Piketty goes on to establish two fundamental laws of Capitalism:
Capital's Share of National Income = Rate of Return on Capital X Capital/Income
and
Capital/Income = Savings rate/growth rate
As he says "The rate of return on capital is a central concept in many economic theories. In particular, Marxist analysis emphasizes the falling rate of profit - a historical prediction that turned out to be wrong, although it does contain an interesting intuition....in a quasi-stagnant society, wealth accumulated in the past will inevitably acquire disproportionate importance."
Clearly Piketty is no Marxist apologist but rather a student of Capital willing to ponder the insights of Marx the economist rather than Marx the revolutionary. This is a position that needs to be better understood in the fields of economics and business. Piketty concludes that Marx' analysis of Capitalism was a description of the Second Fundamental Law of Capitalism at the point where the growth rate approaches zero. Marx' conclusions were based on the nature of 19th-century capitalism where "...output increased solely because every worker was backed by more machinery and equipment and not because productivity as such...increased." However, he firmly criticizes Marx who "...usually adopted a fairly anecdotal and unsystematic approach to the available statistics."
As he evolves his argument for a society balanced between capital and labor he cites no less a figure than Irving Fisher, the father of Monetarism. As president of the American Economic Association Fisher addressed the organization in 1919 stating when "...2 percent of the population owns more than 50 percent of the wealth [and] two-thirds of the population owns almost nothing [there exists] an undemocratic distribution of wealth". He also reflects on the importance of immigration to the American and increasingly the world experience:
"For a fair proportion of of Americans in the bottom 50 percent of the income distribution, these inequalities are of secondary importance for the very simply reason that they were born in a less wealthy country and see themselves as being on an upward trajectory."
The author backs his arguments with a wealth of data within the book and online. His analysis of the nature of Capital ranks with David Hackett Fischer's work in "The Great Wave: Price Revolutions and the Rhythm of History". Piketty focuses on the internal dynamics while Fischer explains the externalites. Together with Smith, Ricardo, Marx, Fisher, Keynes, Schumpeter, and Minsky these works form the core of human understanding of Capitalism.
He begins the book with a critique of Classical economists and highlights the importance of Ricardo's and Marx' work in the following passage:
"...the principle of infinite accumulation that Marx proposed contains a key insight, as valid for the study of the twenty-first century as it was for the nineteenth and in some respects more worrisome than Ricardo's principle of scarcity. If rates of population and productivity growth are relatively low, then accumulated wealth naturally takes on considerable importance, especially if it grows to extreme proportions and becomes socially destabilizing....In particular, the very high level of private wealth that has been attained since the 1980s and 1990s in the wealthy countries of Europe and in Japan, measured in years of national income, directly reflects Marxian logic."
Piketty goes on to establish two fundamental laws of Capitalism:
Capital's Share of National Income = Rate of Return on Capital X Capital/Income
and
Capital/Income = Savings rate/growth rate
As he says "The rate of return on capital is a central concept in many economic theories. In particular, Marxist analysis emphasizes the falling rate of profit - a historical prediction that turned out to be wrong, although it does contain an interesting intuition....in a quasi-stagnant society, wealth accumulated in the past will inevitably acquire disproportionate importance."
Clearly Piketty is no Marxist apologist but rather a student of Capital willing to ponder the insights of Marx the economist rather than Marx the revolutionary. This is a position that needs to be better understood in the fields of economics and business. Piketty concludes that Marx' analysis of Capitalism was a description of the Second Fundamental Law of Capitalism at the point where the growth rate approaches zero. Marx' conclusions were based on the nature of 19th-century capitalism where "...output increased solely because every worker was backed by more machinery and equipment and not because productivity as such...increased." However, he firmly criticizes Marx who "...usually adopted a fairly anecdotal and unsystematic approach to the available statistics."
As he evolves his argument for a society balanced between capital and labor he cites no less a figure than Irving Fisher, the father of Monetarism. As president of the American Economic Association Fisher addressed the organization in 1919 stating when "...2 percent of the population owns more than 50 percent of the wealth [and] two-thirds of the population owns almost nothing [there exists] an undemocratic distribution of wealth". He also reflects on the importance of immigration to the American and increasingly the world experience:
"For a fair proportion of of Americans in the bottom 50 percent of the income distribution, these inequalities are of secondary importance for the very simply reason that they were born in a less wealthy country and see themselves as being on an upward trajectory."
The author backs his arguments with a wealth of data within the book and online. His analysis of the nature of Capital ranks with David Hackett Fischer's work in "The Great Wave: Price Revolutions and the Rhythm of History". Piketty focuses on the internal dynamics while Fischer explains the externalites. Together with Smith, Ricardo, Marx, Fisher, Keynes, Schumpeter, and Minsky these works form the core of human understanding of Capitalism.
April 12, 2017
كيف ينشأ تراكم رأس المال وكيف يتم توزيعه؟ وماهي القوى المحرّكة الحاسمة في ذلك؟
وهل توماس بيكيتي حقاً كارل ماركس القرن الحادي والعشرين ؟
رأس المال في القرن الحادي والعشرين هو نتاج 15 عاما من البحث المستمر. الذي شمل على مدى ثلاثة قرون البلاد ذات الدخل المرتفع، مع أخذه بعين الاعتبار بالتاريخ السياسي والاقتصادي والاجتماعي وما صاحبه من تغييرات وتأثيرات انعكست على توزيع الدخل والثروة
( المساواة واللامساواة في توزيع الحقوق والفرص.) الذي لا يشكل تحدياً سياسياً واجتماعياً فقط بل اقتصادياً كذلك . ينتقد بيكيتي وبوجه صارخ السياسيات الرأسمالية العالمية الحالية، التي تنبئ باتساع الفجوة أو الفوارق الطبقية بين الأغنياء والفقراء اذا ما استمرت السياسات الاقتصادية ع هذا النحو. الكتاب عمل في التاريخ كما هو في الاقتصاد، وهو دائماً في العمق سياسي وفوضوي ولا يمكن التبؤ به كما يخبرنا بيكيتي.
يعد أحد أهم الكتب في المجال الاقتصادي والأكثر مبيعاً، وترجم لعدة لغات. وأثار منذ صدوره العديد من النقاشات في الأروقة السياسية والاقتصادية والاجتماعية كذلك.
من أهم الأسئلة الواردة في الكتاب :
ماذا نعرف فعلاً عن تطور توزيع الثروة عبر الزمن؟ وهل تؤدي ديناميّة تراكم رؤوس الأموال الخاصة بالضرورة إلى تمركز شديد ودائم للثروة والسلطة في أيدي عدد قليل من الناس، كما اعتقد كارل ماركس في القرن التاسع عشر؟ أم أن القوى االموازِنة للنمو الاقتصادي والتنافس والتقدم التقني ستؤدي تلقائياً إلى تقليص اللامساواة وإلى استقرارٍ منسجم في جميع مراحل التطور المتقدمة، كما اعتقد سيمون كوزنِتس (Simon Kuznets) في القرن العشرين؟ ماذا نعرف بالفعل عن كيفية تطور توزيع الدخول والثروة (الأصول) منذ القرن الثامن عشر؟، وما هي الدروس التي يمكن استقاؤها منها للقرن الواحد والعشرين؟*
لا يقدم الكاتب اجابات قطعية وشافية، بقدر بغيته في إثارة قريحة القارئ في البحث والتساؤل حول حقيقة مايحدث خلف الأروقة المغلقة.
" يبيّن لنا بيكيتّي أن النمو الاقتصادي في العصر الحديث وانتشار المعرفة قد مكّنانا من تفادي حدوث اللامساواة بالشكل التناحري الذي تنبّأ به كارل ماركس. إلا أننا، من جهة أخرى، لم نغيِّر بنى رأس المال واللامساواة بشكل عميق كما بدا عليه الأمر في عقود الرخاء التي تلت الحرب العالمية الثانية. فالقوّة الدافعة لللامساواة – وخصوصاً توجّه أرباح رأس المال إلى أن تفوق معدل النمو الاقتصادي – تهدد اليوم بإحداث لامساواة شديدة التطرف قد تزعزع في نهاية المطاف الأمن الاجتماعي وقيَمنا الديموقراطية. إلا أن التوجهات الاقتصادية ليست أحكاماً إلهية. والعمل السياسي قد صحَّح في الماضي لامساواتٍ عديدةً خطيرة، وهو قادر على فعل ذلك لاحقاً."*
أكثر ما كان يؤرق بيكيني هو السبل لتحقيق نظام اجتماعي عادل. كما أكد في أكثر من موضع أن الاقتصاد والعلوم الاجتماعية لا يمكن فصلها، اذ لا يجد أي مكان للاقتصاد خارج العلوم الاجتماعية.
كتاب ع��ى الرغم من ضخامته وسعة معلوماته المؤرقة للفكر والروح حتى أنك تلمح "الشياطين في تفاصيله " إلا أنه ذو لغة سهلة وبسيطة وتحاكي عقلية القارئ البسيط والغير متخصص .
ان كنت باحثاً في المجال الاقتصادي أو متخصص في ذلك ، عليك بقراءة هذا الكتاب المثير جداً .
وهل توماس بيكيتي حقاً كارل ماركس القرن الحادي والعشرين ؟
رأس المال في القرن الحادي والعشرين هو نتاج 15 عاما من البحث المستمر. الذي شمل على مدى ثلاثة قرون البلاد ذات الدخل المرتفع، مع أخذه بعين الاعتبار بالتاريخ السياسي والاقتصادي والاجتماعي وما صاحبه من تغييرات وتأثيرات انعكست على توزيع الدخل والثروة
( المساواة واللامساواة في توزيع الحقوق والفرص.) الذي لا يشكل تحدياً سياسياً واجتماعياً فقط بل اقتصادياً كذلك . ينتقد بيكيتي وبوجه صارخ السياسيات الرأسمالية العالمية الحالية، التي تنبئ باتساع الفجوة أو الفوارق الطبقية بين الأغنياء والفقراء اذا ما استمرت السياسات الاقتصادية ع هذا النحو. الكتاب عمل في التاريخ كما هو في الاقتصاد، وهو دائماً في العمق سياسي وفوضوي ولا يمكن التبؤ به كما يخبرنا بيكيتي.
يعد أحد أهم الكتب في المجال الاقتصادي والأكثر مبيعاً، وترجم لعدة لغات. وأثار منذ صدوره العديد من النقاشات في الأروقة السياسية والاقتصادية والاجتماعية كذلك.
من أهم الأسئلة الواردة في الكتاب :
ماذا نعرف فعلاً عن تطور توزيع الثروة عبر الزمن؟ وهل تؤدي ديناميّة تراكم رؤوس الأموال الخاصة بالضرورة إلى تمركز شديد ودائم للثروة والسلطة في أيدي عدد قليل من الناس، كما اعتقد كارل ماركس في القرن التاسع عشر؟ أم أن القوى االموازِنة للنمو الاقتصادي والتنافس والتقدم التقني ستؤدي تلقائياً إلى تقليص اللامساواة وإلى استقرارٍ منسجم في جميع مراحل التطور المتقدمة، كما اعتقد سيمون كوزنِتس (Simon Kuznets) في القرن العشرين؟ ماذا نعرف بالفعل عن كيفية تطور توزيع الدخول والثروة (الأصول) منذ القرن الثامن عشر؟، وما هي الدروس التي يمكن استقاؤها منها للقرن الواحد والعشرين؟*
لا يقدم الكاتب اجابات قطعية وشافية، بقدر بغيته في إثارة قريحة القارئ في البحث والتساؤل حول حقيقة مايحدث خلف الأروقة المغلقة.
" يبيّن لنا بيكيتّي أن النمو الاقتصادي في العصر الحديث وانتشار المعرفة قد مكّنانا من تفادي حدوث اللامساواة بالشكل التناحري الذي تنبّأ به كارل ماركس. إلا أننا، من جهة أخرى، لم نغيِّر بنى رأس المال واللامساواة بشكل عميق كما بدا عليه الأمر في عقود الرخاء التي تلت الحرب العالمية الثانية. فالقوّة الدافعة لللامساواة – وخصوصاً توجّه أرباح رأس المال إلى أن تفوق معدل النمو الاقتصادي – تهدد اليوم بإحداث لامساواة شديدة التطرف قد تزعزع في نهاية المطاف الأمن الاجتماعي وقيَمنا الديموقراطية. إلا أن التوجهات الاقتصادية ليست أحكاماً إلهية. والعمل السياسي قد صحَّح في الماضي لامساواتٍ عديدةً خطيرة، وهو قادر على فعل ذلك لاحقاً."*
أكثر ما كان يؤرق بيكيني هو السبل لتحقيق نظام اجتماعي عادل. كما أكد في أكثر من موضع أن الاقتصاد والعلوم الاجتماعية لا يمكن فصلها، اذ لا يجد أي مكان للاقتصاد خارج العلوم الاجتماعية.
كتاب ع��ى الرغم من ضخامته وسعة معلوماته المؤرقة للفكر والروح حتى أنك تلمح "الشياطين في تفاصيله " إلا أنه ذو لغة سهلة وبسيطة وتحاكي عقلية القارئ البسيط والغير متخصص .
ان كنت باحثاً في المجال الاقتصادي أو متخصص في ذلك ، عليك بقراءة هذا الكتاب المثير جداً .
May 22, 2014
The idea in Capital in the Twenty-First Century is that in most circumstances the return on capital is larger than the growth rate of the economy. This in turn means that wealth generates wealth faster than labor does, so the resources of a society become concentrated in large fortunes passed from generation to generation.
This dynamic can be interrupted by major shocks such as hyperinflation and war, as happened in the first part of the twentieth century. More recently, however, the developed world has returned to the regime of low growth--high return on capital, and consequently in some ways the distribution of wealth at the beginning of 21st century approaches the extremes that were prevalent in France and Britain at the end of nineteenth century. To remedy this Piketty suggests a global (or at least continental-level) progressive tax on wealth.
Piketty uses a variety of data in some cases going back all the way to eighteenth century to support his findings. The writing is very approachable for someone with no training in economics. He illustrates the realities of capital in the nineteenth century with examples taken from the novels of Balzac and Austen. He translates the somewhat unfamiliar and abstract concepts into real-world scenarios with actual realistic euro amounts. You can thus situate your own wealth and your own income against the wealth and income distributions of past and present societies.
For a lay reader such as myself the findings seem solid, and the proposed remedies reasonable. I learned a lot from this book: highly recommended.
This dynamic can be interrupted by major shocks such as hyperinflation and war, as happened in the first part of the twentieth century. More recently, however, the developed world has returned to the regime of low growth--high return on capital, and consequently in some ways the distribution of wealth at the beginning of 21st century approaches the extremes that were prevalent in France and Britain at the end of nineteenth century. To remedy this Piketty suggests a global (or at least continental-level) progressive tax on wealth.
Piketty uses a variety of data in some cases going back all the way to eighteenth century to support his findings. The writing is very approachable for someone with no training in economics. He illustrates the realities of capital in the nineteenth century with examples taken from the novels of Balzac and Austen. He translates the somewhat unfamiliar and abstract concepts into real-world scenarios with actual realistic euro amounts. You can thus situate your own wealth and your own income against the wealth and income distributions of past and present societies.
For a lay reader such as myself the findings seem solid, and the proposed remedies reasonable. I learned a lot from this book: highly recommended.
February 4, 2015
I wouldn't want to hazard a guess at how many millions of words have been written about Picketty's Capital. Nor would I want to guess at how many copies will sit unread, right there on the shelf between Marx's Das Capital (vol I) and Joyce's Finnigan's Wake.
GR doesn't need another in depth review. Basically, the book was written for the relatively educated reader who is ready to plow through 700 pages of dense, but clear, writing. The author wants to get his message to a wide audience and wrote with that purpose in mind.
For me, the challenge was keeping everything he wanted to teach me in the first 4 chapters in mind throughout the book.
The purpose is clear. Inequality in income and wealth is built into the system. That inequality naturally grows to the point where it creates social instability. That instability threatens everyone. Picketty's suggestion to resolve this is basically to tax wealth, not income. Picketty agrees with all of his critics that bringing this about will not be easy. Being an eternal pessimist, my inclination would be to say impossible. But then, if we were back in 1950, I would say that the creation of a globalized American economic system was impossible too. Who knows?
Picketty's book has started a conversation. Let's see where it ends. Unlike many economists intent upon changing our worldview in the past, Picketty offers us no grandiose system: just an analysis, with whatever faults, and a suggestion
GR doesn't need another in depth review. Basically, the book was written for the relatively educated reader who is ready to plow through 700 pages of dense, but clear, writing. The author wants to get his message to a wide audience and wrote with that purpose in mind.
For me, the challenge was keeping everything he wanted to teach me in the first 4 chapters in mind throughout the book.
The purpose is clear. Inequality in income and wealth is built into the system. That inequality naturally grows to the point where it creates social instability. That instability threatens everyone. Picketty's suggestion to resolve this is basically to tax wealth, not income. Picketty agrees with all of his critics that bringing this about will not be easy. Being an eternal pessimist, my inclination would be to say impossible. But then, if we were back in 1950, I would say that the creation of a globalized American economic system was impossible too. Who knows?
Picketty's book has started a conversation. Let's see where it ends. Unlike many economists intent upon changing our worldview in the past, Picketty offers us no grandiose system: just an analysis, with whatever faults, and a suggestion
December 3, 2017
Reading this book is quite a chore for layperson not well versed in economic theory. But I think Piketty gets it right in presenting his arguments. One just has to be patient and persistent in order to reap the rewards of the message he is trying to convey.
His conclusion also underscores why the first three parts of his book are so important. Globally we must work to create reliable, honest sources of data so that policy makers and citizens can accurately judge and make decisions about complex issues based on empirical information and not ideology or misinformation that is designed to benefit the few at the expense of the many. Ultimately his plea is in support of democracy, egalitarianism and equal opportunity.
Those familiar with macroeconomic theory can, if they want, peruse or skip most of the first three parts and go directly to hundred or so pages of Piketty’s views on regulation of capital in the 21st century and the conclusion. These are the most readable parts. But it’s worth putting in the effort to better understand those arguments.
The introduction is an overview of basic economic theory that puts the concept of capital at middle of the discussion. Part one introduces useful—and new to me—concepts of how to think about and categorize capital, mostly in Western Europe and the United States since the best records exist in those places. The notion that capital will always grow at a faster rate than income, the categorizations of wealth in deciles and centiles to better understand the nature of wealth, using national incomes and years of national incomes to compare the actual relative size of capital and the role that the social and economic catastrophes that occurred between 1914-1945 are all key to understand context of what is to come later in the text.
Part two focuses on the relationship between capital, labor and income. Again, I believe the detail of the argument is intended to provide non-economists with a context to better understand part four. Part three , without being too flippant, takes about 240 pages to provide context to a lesson imparted by the character Vautrin in Balzac’s novel, Père Goriot, in which he explains to Rastignac that he should marry into wealth if he wants to be truly wealthy, work alone, no matter how successful, will not lead to the riches he desires. Piketty uses the next six chapters to drive home that argument quite successfully. As a non-economist, I also appreciated Piketty’s forays into the literature of Jane Austen to illustrate his points.
In part four, Piketty considers some of the basic needs to provide for functioning “social state for the twenty-first century” and how capital might be treated to make a fairer, more prosperous state as well as one that can be productively proactive to address expected and unexpected social, political and economic issues. The fact that “The pragmatic policies adopted after the crisis of 2008 no doubt avoided the worst, but they did really provide a durable response to the structural problems that made the crisis possible, including the crying lack of financial transparency and the rise of inequality” should serve as an important cautionary tale for the future.
Piketty’s recommendations—and this summary does not do them justice—include stronger policies to enact and implement progressive taxes on income and capital. He also strongly urges a global tax on capital, which is not some pseudo-Marxist panacea. Instead, he argues that such a tax would necessarily force governments to come up with relatively simple criteria to measure and compare wealth, capital and income—something that does not exist now. Additionally, Piketty addresses public debt: its misinterpretations, the role that inflation can play in lowering it and how debt functions to transfer wealth from the poor to the wealthy.
As cogent and constructive as his arguments are and deserved to be debated, I fear that Picketty's views, like those of, for example, Joseph Stiglitz, will be ignored by policy makers. As we have seen with the timidity of the Obama administration's financial policies and the prevailing austerity policies being pushed in Europe, it will take a tidal wave of informed public opinion—something in very short supply today—to give these ideas a fair chance of being heard.
His conclusion also underscores why the first three parts of his book are so important. Globally we must work to create reliable, honest sources of data so that policy makers and citizens can accurately judge and make decisions about complex issues based on empirical information and not ideology or misinformation that is designed to benefit the few at the expense of the many. Ultimately his plea is in support of democracy, egalitarianism and equal opportunity.
Those familiar with macroeconomic theory can, if they want, peruse or skip most of the first three parts and go directly to hundred or so pages of Piketty’s views on regulation of capital in the 21st century and the conclusion. These are the most readable parts. But it’s worth putting in the effort to better understand those arguments.
The introduction is an overview of basic economic theory that puts the concept of capital at middle of the discussion. Part one introduces useful—and new to me—concepts of how to think about and categorize capital, mostly in Western Europe and the United States since the best records exist in those places. The notion that capital will always grow at a faster rate than income, the categorizations of wealth in deciles and centiles to better understand the nature of wealth, using national incomes and years of national incomes to compare the actual relative size of capital and the role that the social and economic catastrophes that occurred between 1914-1945 are all key to understand context of what is to come later in the text.
Part two focuses on the relationship between capital, labor and income. Again, I believe the detail of the argument is intended to provide non-economists with a context to better understand part four. Part three , without being too flippant, takes about 240 pages to provide context to a lesson imparted by the character Vautrin in Balzac’s novel, Père Goriot, in which he explains to Rastignac that he should marry into wealth if he wants to be truly wealthy, work alone, no matter how successful, will not lead to the riches he desires. Piketty uses the next six chapters to drive home that argument quite successfully. As a non-economist, I also appreciated Piketty’s forays into the literature of Jane Austen to illustrate his points.
In part four, Piketty considers some of the basic needs to provide for functioning “social state for the twenty-first century” and how capital might be treated to make a fairer, more prosperous state as well as one that can be productively proactive to address expected and unexpected social, political and economic issues. The fact that “The pragmatic policies adopted after the crisis of 2008 no doubt avoided the worst, but they did really provide a durable response to the structural problems that made the crisis possible, including the crying lack of financial transparency and the rise of inequality” should serve as an important cautionary tale for the future.
Piketty’s recommendations—and this summary does not do them justice—include stronger policies to enact and implement progressive taxes on income and capital. He also strongly urges a global tax on capital, which is not some pseudo-Marxist panacea. Instead, he argues that such a tax would necessarily force governments to come up with relatively simple criteria to measure and compare wealth, capital and income—something that does not exist now. Additionally, Piketty addresses public debt: its misinterpretations, the role that inflation can play in lowering it and how debt functions to transfer wealth from the poor to the wealthy.
As cogent and constructive as his arguments are and deserved to be debated, I fear that Picketty's views, like those of, for example, Joseph Stiglitz, will be ignored by policy makers. As we have seen with the timidity of the Obama administration's financial policies and the prevailing austerity policies being pushed in Europe, it will take a tidal wave of informed public opinion—something in very short supply today—to give these ideas a fair chance of being heard.
November 15, 2015
True or false? "Modern CEOs get paid far in excess of their actual contribution to the companies they run." Your feelings on this issue probably say a lot about what you feel about the economy, wealth inequality, and the merits of free markets in general. Top executives receiving huge salary packages for doing what seems like a pretty cushy job instinctively feels unjust to many - but then, no-one is forcing companies to pay such high salaries, so where exactly is the issue?
This sort of highlights the tension between social justice and neoliberalism ongoing in political debates. This book is, on the one hand, a rigorous academic tome, with what is for non-economists a daunting amount of equations and terms of art. Yet it is also in a sense a work of economic history (with a smattering of references to Austen and Balzac, and the film Titanic), dating back to the political economy tradition of the nineteenth century, when the young field was (or aspired to be) more about polemic and ideology than quantitative models. That tradition also includes Marx, who Piketty seeks to emulate, though he dispenses with the former's Hegelian Grand Theories of History.
Fundamentally, Piketty's platform much more resembles that of a far less divisive figure: Henry George, whose Progress and Poverty was one of the revolutionary works of economics of the late nineteenth century. George saw the greatest source of economic injustice as the collection of rent by land-owners, whose wealth rises without any investment, simply as land becomes more useful. He proposed a land-value tax, to soak these profiteers (who comprised the bulk of the upper class of his time) and provide a basic income for all.
Piketty, more cautiously, seeks to apply the same principle to all capital, be it securities, trust funds or houses in the Hamptons. Following Marx, he claims that the fundamental equation of capitalism is r > g; that is, the growth of capital exceeds that of the economy as a whole, and thus the growth of income from labour. In a sweeping look at financial records from the developed world over several centuries, he shows that - although at many times this has not obtained, due to exogenous shocks (world wars, say) or periods of rapid growth (France's Trente Glorieuses) - in periods of regular growth, capital will tend to aggregate more quickly than the rest of the economy; particularly when the wealthy are able to hire investment whizzes who can beat the market, while "the average man receives investing advice from his brother-in-law".
Without a change in course, a new Gilded Age such as ours might continue to produce skewed outcomes, leading to increased social unrest and ultimately the system burning itself out (if capital's share of growth continues to increase, some point must be reached at which there is nothing left, and the only choices are imperialism or collapse). Piketty thus proposes a global wealth tax, which would prevent the incentives for capital flight to offshore tax havens (the reason that so many corporations are headquartered in Delaware or Dublin is not because of their love of Guinness and Riverdance).
What's most notable about Piketty is how radical he isn't: no David Graeber or Harvey, he is a former MIT professor who stands firmly in the French centre, though not the American one. He understands why economists believe so firmly in markets, and his case against them is built firmly on empirical data. Of course, predictions are always inexact, and the next few decades could confound any model we could imagine. But this book is a superbly researched, clear-headed addition to the conversation on inequality, and the questions it raises demand urgent answers. It may soon to be late.
This sort of highlights the tension between social justice and neoliberalism ongoing in political debates. This book is, on the one hand, a rigorous academic tome, with what is for non-economists a daunting amount of equations and terms of art. Yet it is also in a sense a work of economic history (with a smattering of references to Austen and Balzac, and the film Titanic), dating back to the political economy tradition of the nineteenth century, when the young field was (or aspired to be) more about polemic and ideology than quantitative models. That tradition also includes Marx, who Piketty seeks to emulate, though he dispenses with the former's Hegelian Grand Theories of History.
Fundamentally, Piketty's platform much more resembles that of a far less divisive figure: Henry George, whose Progress and Poverty was one of the revolutionary works of economics of the late nineteenth century. George saw the greatest source of economic injustice as the collection of rent by land-owners, whose wealth rises without any investment, simply as land becomes more useful. He proposed a land-value tax, to soak these profiteers (who comprised the bulk of the upper class of his time) and provide a basic income for all.
Piketty, more cautiously, seeks to apply the same principle to all capital, be it securities, trust funds or houses in the Hamptons. Following Marx, he claims that the fundamental equation of capitalism is r > g; that is, the growth of capital exceeds that of the economy as a whole, and thus the growth of income from labour. In a sweeping look at financial records from the developed world over several centuries, he shows that - although at many times this has not obtained, due to exogenous shocks (world wars, say) or periods of rapid growth (France's Trente Glorieuses) - in periods of regular growth, capital will tend to aggregate more quickly than the rest of the economy; particularly when the wealthy are able to hire investment whizzes who can beat the market, while "the average man receives investing advice from his brother-in-law".
Without a change in course, a new Gilded Age such as ours might continue to produce skewed outcomes, leading to increased social unrest and ultimately the system burning itself out (if capital's share of growth continues to increase, some point must be reached at which there is nothing left, and the only choices are imperialism or collapse). Piketty thus proposes a global wealth tax, which would prevent the incentives for capital flight to offshore tax havens (the reason that so many corporations are headquartered in Delaware or Dublin is not because of their love of Guinness and Riverdance).
What's most notable about Piketty is how radical he isn't: no David Graeber or Harvey, he is a former MIT professor who stands firmly in the French centre, though not the American one. He understands why economists believe so firmly in markets, and his case against them is built firmly on empirical data. Of course, predictions are always inexact, and the next few decades could confound any model we could imagine. But this book is a superbly researched, clear-headed addition to the conversation on inequality, and the questions it raises demand urgent answers. It may soon to be late.
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