Saturday, August 30, 2014

Piketty's Capital in the Twenty-First Century

I feel like I don't have to read this one with all the press it's getting. Maybe next summer.  This is the gist I've gotten so far:

 Michael Rozworski wrote a piece about it recently. In brief: the basic thesis of the book is that capitalism has a tendency towards the concentration of wealth in few hands.  And there's a discrimination inherent in the system that ensures whites are better able to make it at least into the middle.

In Canada right now, our distribution looks like this:
* the top 10% owns 58.2% of the wealth, up from 51.7% in 1984, and it's largely in businesses and enterprises
* the middle 40% owns 38.6%, down from 43% in 1984, and it's mainly in their own homes
* the bottom 50% owns 3.2% of the wealth, down from 5.3% in 1984

Since the bottom third owns nothing, the continuation of this concentration will come at the expense of the middle class.  If it's the case that capitalism demands concentration, then some of the middle class will move into the top bracket, but, because most middle class get there through good wages, rather than through investments in land or stocks, most of them are in danger of slipping in with the bottom bunch if anything threatens those wages.  We're doing better than the U.S. in part because of our socialist leanings. And the middle class can be saved with a tax agenda that takes from the rich and gives to the poor.

Rozworski calls for "seeing the middle class as a sputtering anomaly," and "toning down the dream of individualize patrimony, while reigniting a vision of a common wealth and a democratic franchise over it." I'd vote for that, but I have no idea how we get there from here.

But then I came across an older discussion of the book by Paul Krugman (from last April).  I've read a few of his articles about the book, but this 26 minute interview - What the 1% Don't Want You to Know - flushes it out more fully:

We tend to think of the 1% as largely self-made millionaires, but more and more they are, or are becoming, wealthy from inherited wealth:  an oligarchy, patrimonial capitalism, dynasties.  Krugman says he hadn't noticed it before, but I'm pretty sure Chomsky's spoken about all of this.

If a family has a fortune, they can live well and still put money into investments that will grow faster than the economy.  It's no longer the case - or will soon no longer be the case - that the wealthy are getting rich from high incomes and bonuses - it's just their money making money, not them.  When returns on capital are higher than economic growth, as they are now, they can pass on an even higher share to their children, until a tiny fraction of the population dominates.

Usury used to be a bad word.

And like they said in Ethos, when you have a few people so wealthy that they can buy the system, the system will serve their interests.

Piketty: "Wealth is co concentrated that a large segment of society is virtually unaware of its existence."  Krugman points out that, "You'll never meet these people - most people have no idea how far the commanding heights are from you and me."

The U.S. is more unequal than other countries. The average American makes more than the average person in France and has a higher disposable income because of higher wages, but to be in the bottom fifth in France is a far better place than to be in the bottom fifth in America because of the governmental programs.  The U.S. gets away with the inequity with mass media that "hammer against any suggestion of redistribution."

Piketty suggests a global tax on wealth, which, Krugman adds, would be feasible if the U.S. supported it which is actually possible.  PIketty thinks we only escaped from the oligarchy briefly due to wars and depressions that disrupted the system, but Krugman points out that the U.S. invented serious progressive taxation.  If we look at the history of the new deal, there was a progressive movement building for some time, and a readiness to take on inequities long before FDR was elected.

It is possible for things to change again.

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