There is a major new economics tome out this year that’s sending waves through the economics community like none since Friedman in the 70s.
Such is the impact that in a recent seminar at New York’s CUNY he was the headliner over Nobel-winning Krugman and Stiglitz.
Krugman’s review of his impact on conservatives in the New York Times is telling – they are warning that Mr. Piketty’s work must be refuted, because otherwise it “will spread among the clerisy and reshape the political economic landscape on which all future policy battles will be waged.”
And yet they cannot refute his superbly researched thesis, which spans hundreds of years of history and 700 pages.
So the conservatives – who have been focussing on denying the obvious and growing income and wealth disparity, and when that fails, insisting on the rich as job creators (except they’re not) – have resorted to name calling. Piketty, like any who acknowledge unequal wealth, must be ‘Marxist’.
That’s the sum of their refutation.
But Piketty’s argument is stronger than a bit of name-calling. The essence is that:
economic growth will always be smaller than the profits from any money that is invested. Economic growth is what we all benefit from, but profits from invested money accrue only to the rich. The consequences of this are clear: those who have family fortunes are the winners, and everyone else doesn’t have much of a shot of being wealthy unless they marry into or inherit money.
So Piketty is doing more than acknowledging that inequality exists or is growing – he says that capitalism dooms us to it. To combine it with a recent Nasa study shows us heading reasonably rapidly to societal collapse. We’re at pre-WWI levels of wealth disparity and quickly heading to nineteenth century levels (and aristocracy). That’s levels that hit beyond massive disparities in income, onto worryingly large disparities in equality of opportunity. The rest of us have very little to no chance of ever catching up, without inheriting from or marrying into the 1%.
Wealth is no function of a fictional meritocracy as the right would have us believe, but of inheritance.
And wealth is where it is at more than income – the top 10% in Europe & the US earn 25-35% of income; but have 60-70% of the wealth.
So a wealth tax is where we need our answer, along with inheritance taxes and high taxes for high incomes.
Those things are beyond our current orthodoxy, but maybe economics may yet lead us there.
And join Closing the Gap for a NZ focus on reducing inequality.