(Community Matters) French economist Thomas Piketty’s (Paris School of Economics) book on wealth inequity and the shortcoming of unregulated free market economies was released in English earlier this month. The conclusions he draws from his analysis of 200+ years of data from 2o different countries – that wealth inequality will soar & that we could lose the middle class over the next 50 years – are dependent on assumptions of growth in population and in productivity, according to the Economist. As GDP growth slows, cumulative ROI on capital further concentrates wealth. If growth in wages slows as GDP and competition for labor slows and simultaneously productivity allows for gains in profits . . . I’m asking myself the likely outcome of these assumptions in order to test the intuitive soundness of his forumla.
Facts concede the slow down in growth of the former (population); I don’t think we have to concede the latter – though theories about the job-killing nature of productivity growth are a whole different debate (*MIT Professor Brynjolfsson and Andrew McAfee, Race Against the Machine).
Mr. Piketty as interviewed:
The market economy is great at producing new wealth but sometimes it can be quite bad at generating the distribution of wealth that is equitable in the long run. . . . it’s great to have entrepreneurs, it’s great to have new wealths being formed, but this has to be compatible with the size of the world economy. If the top of the distribution is rising 3 or 4 times faster then the world economy if you have that during the next 50 years, basically all the wealth will belong to a very small international elite and basically there will be no wealth middle class anymore. . . . and there will be a level of inequality which is simply not compatible with our democratic and meritocratic values.
Paul Krugman’s column this morning on Piketty’s book:
“Capital in the Twenty-First Century,” the magnum opus of the French economist Thomas Piketty, will be the most important economics book of the year.
The elimination of taxes on interest, dividends, capital gains and estates. Under this plan, someone living solely off inherited wealth would have owed no federal taxes at all.
In 1979 the top 1 percent of households accounted for 17 percent of business income; by 2007 the same group was getting 43 percent of business income, and 75 percent of capital gains.
* David Roth’s 6/13 MIT Review article, How Technology Is Destroying Jobs, is an excellent read on the debate.
We tax labor at a higher rate than we tax capital, and then we wonder why there is persistent unemployment and underemployment. We shouldn’t tax things we want more of. And then we listen to the plutocrats’ story about a dubious “skills gap” and run to work harder at training and education.