There has been a lot of discussion of Thomas Piketty’s new book Capital in the 21st Century, which argues that:
- The ratio of wealth to income is rising in all developed countries.
- Absent extraordinary interventions, we should expect that trend to continue.
- If it continues, the future will look like the 19th century, where economic elites have predominantly inherited their wealth rather than working for it.
- The best solution would be a globally coordinated effort to tax wealth.
The United States is now an outlier among western countries in terms of income inequality and you can bet your car elevator that the rich are going to be able buy off much of our government, especially with the current SCOTUS in place:
Wealthy people will be even better poised to influence the 2014 and 2016 elections than they were to influence the 2010 and 2012 elections. Now, wealthy people are not a single voting bloc, but most wealthy people would like to continue being wealthy. And so you see bipartisan movement towards policies that protect their wealth, most recently with the Democratic legislature in Maryland voting to eliminate the state’s estate tax.
Over time, a political system that gives the wealthy more power is a political system that is going to do more to protect the interests of the wealthy. It’s the Doom Loop of Oligarchy, and we’re seeing it daily.
Of course you know who else who thought that capitalism would go into a death spiral. And now writers as different as The Wire’s David Simon and National Review’s Jimmy P are wondering if that bearded Satanist was right after all, or at least many people will soon believe that he was.
I like capitalism (though I don’t like money or people bragging about how much they make or how cheaply then live), but if I wanted to hasten its demise, I’d be cheering Paul Ryan on. Maybe the neocons never really stopped being Trotskyites.
BGinCHI
Bring back the Anarchists! We get some good solid violence aimed at rich people and then maybe they’ll relax their death grip on our culture.
Poor people die every day (many of them) because they are poor. Rich people never die because they are rich.
Time for a change.
Linnaeus
Neofeudalism…it’s what’s for dinner!
ETA:
“And now writers as different as The Wire’s David Simon and National Review’s Jimmy P are wondering if that bearded Satanist was right after all, or at least many people will soon believe that he was.”
That bearded guy was right about a few things.
c u n d gulag
Marx was right about unregulated Capitalism eventually destroying itself.
Fortunately for the rich, they’ll be the last to go – unless we start to emulate the French Revolution, instead of our own American Revolution.
FDR saved Capitalism for the Capitalists. Too bad that was a long, long, time ago – and our filthy rich MFers have forgotten that lesson.
Maybe a few squeaky old tumbrels and dull guillotines will remind the rich that “We the People,” also want a decent life.
Why old tumbrels and dull guillotines?
Because some greedy MFers don’t deserve a quick and painless death.
Linnaeus
When I read Jimmy P’s column, I don’t get the impression that he’s wondering if Marx was right. He instead appears to be arguing that the Marxists are back and someone true to the theology of “the free market” needs to step up.
catclub
“Democratic legislature in Maryland voting to eliminate the state’s estate tax.”
Which would be fine if it meant that inherited income is taxed just like any other income.
DougJ
@Linnaeus:
Yeah, that’s why I added “or at least many people will soon believe he was”.
KG
@c u n d gulag:
In fairness the filthy rich MFers of today are not the filthy rich MFers of the 1930s. Some may be descendents (i.e. Paris Hilton, many of the political families like the Kennedys and Rockefellers), but a lot of them saw their wealth created in the various post-war booms. But most of those filthy rich MFers of the 1930s are long dead and even their children are dying off at this point. Still, you’d’ve hoped that the filthy rich MFers of today would’ve learned those lessons in history class.
kc
Failing that, PITCHFORKS, bitches.
ruemara
Haunting? Hahaha, it’s already enthroned, baby. The question is whether we’re ever going to have a full scale rebellion in the country or whether we’ll sell our children for a cup of clean water and the crumbs off the floor.
Comrade Bukharin
By “bearded Satanist” you mean Krugman, right?
kc
@Linnaeus:
Yeah, his last line: “Who will make the intellectual case for economic freedom today?”
Not him, apparently. But who WILL step up and make the intellectual case for gross economic inequality?
EWG Gestalt
For what it’s worth—the Islamic principle of zakat (compulsory charity) is based exactly on the principle of taxing wealth. It is not an income tax. More specifically, it’s a tax on “accumulated” wealth. Anything that you’ve held for a year or more is taxable. So it’s not going to affect active trade and commerce, but it’s going to hit the money sitting in your bank account, and your passive investments (bonds, real estate, etc.).
It’s only 2.5% per year, but that’s still a lot of money if you have tens of millions sitting in the bank.
Thoughtful David
@catclub:
Not so. Estates should be taxed at a far higher rate than regular income. The inheritor did nothing to earn the money except choose the right parents.
A $1B estate should be taxed at 99.5%. You won’t starve on $5M, but you won’t be an oligarch, either.
SatanicPanic
Jeez, when did BJ go full Teanut? I’ll pass on that revolution, thanks
BGinCHI
@SatanicPanic: Put a green balloon out front of your house so we don’t get you accidentally.
Linnaeus
@SatanicPanic:
Full teanut? Huh?
Jeremy
First of all Maryland did not get rid of the estate tax. They passed a minimum wage increase with the estate tax cut. That person who wrote that piece should get the facts straight. It took a few seconds to google the information.
Jeremy
it looks like the estate tax issue in Maryland didn’t have much to do with the influence of the wealthy. Maryland has also raised taxes on people making 100,000 a number of times. I do think it’s troubling that more money is being injected into politics but a lot of these things wouldn’t have happened if Bush never became president and selected two right wing judges for the court. So the emo liberals who said that it doesn’t matter who gets elected are feeling the pain from their stupidity.
srv
@Comrade Bukharin: lol
Anyone have a Krugman poster with a Lenin pose?
jl
When I read ‘if that bearded Satanist was right after alt’ I thought DougJ meant George Carlin.
As an obscure technocratic economist drone in the bowels of ‘the system’ I admire Piketty’s work at measurement, which is very careful and difficult. Piketty has been brave enough to do, you know, empirical type sciency stuff in a field where it is easiest to make a reputation building fancy model castles in the air. The mathematician’s joke I heard once, that economic theory is boring applied mathematics without the virtue of an application comes to mind.
I think his book is very weak on causal attribution. Dean Baker and CEPR makes the case that in fact, ‘extraordinary interventions’ are what have been responsible for the bulk of the increase in income and wealth inequality. You can follow Baker’s arguments at is blog
Beat the Press
http://www.cepr.net/index.php/beat-the-press/,
and at the CEPR site you can download some of Baker’s e-books that go into more depth.
Much of the extraordinary interventions over the last 30 years have been in financial market deregulation and restraint of trade efforts for high skilled professionals and corporate intellectual property that cuts across national borders, so it is not surprising that the increase in inequality is seen in different advance industrial nations.
Piketty’s book is great for history and measurement, I think weak in terms of analysis, and misleading when it concludes that increasing inequality is the natural course of things, and that extraordinary interventions are required to reverse it, which I think puts all of the burden of proof on those who wish to impose these supposed extraordinary interventions to reverse the trend.
If the financial market deregulation and increase in corporate intellectual property rights, and restraint of trade that protects high income professionals had produced some obvious benefit to the world economy, then those policies could be justified as necessary to increase economic efficiency and maximize welfare for the world’s population at large, and the increase in inequality is the necessary price that must be paid for those benefits. In the Washington Consensus neo-liberal world view, the neoclassical economics argument is that these policies are just the result of brave and intrepid economists sharing their wisdom to help society move towards the natural course of things.
But there is very little evidence that these policies have done anything to increase productivity, or help all workers receive the marginal productivity of their work effort, or done much of anything other than increase economic instability and inequality.
So, I think best to read Piketty for the facts, and read around widely for good analysis. Dean Baker is a good place to start. Also, Joseph Stiglitz.
roc
The data shows a clear path out of this — dialing the redistribution back up to finance making the whole ‘equal opportunity’ thing more reality than fairy tale. There’s no need to do anything rash. Study the data, return to what was shown to work.
Sensible centrists who claim any passing familiarity with history really have no basis to argue against it.
And though robber barons, lobbyists and their ilk are a persistent risk to democracy, their analogues drove every marx-inspired alternatives into the ground far, far faster and more efficiently.
Chris
@kc:
The sense of victimization and powerlessness of these people is fucking breathtaking, given that they really do own absolutely everything and want for nothing. I’ve read articles on right wing blogs by people tearing their garments about “WHY WON’T THE RICH FIGHT BACK?” Makes me want to puke every time I do.
Mnemosyne
@EWG Gestalt:
As more time goes on, I think it was a major mistake to remove all of the much derided “tax shelters” back in the 1980s, where people were pretty much forced to take their money out of savings-type accounts and invest it in actual projects where it would move around in the economy. IMO, it was in some ways more damaging than all of the anti-tax rhetoric since it allows people to sit on their excess money.
Jeremy
correction: Making over $100,000.
Goblue72
@BGinCHI: +1,000
The worst thing the Unions did was to stop bringing bats & bricks to the strike line.
SatanicPanic
@BGinCHI: Thanks! My teabagger uncle made me the same assurance, so either way I’m safe but I’d still love to see the plan
roc
@jl: If deregulation lead to increased inequality, wouldn’t that support the notion that the “natural” course of things is inequality and the original regulation was an intervention that stymied the natural (pre-regulation) course?
You seem to be conflating any change with intervention in the “natural” course, without considering how (un)natural the state of things was before and after said change.
Maybe your disagreement with Picketty is more about your choice to select an arbitrary historical position as “natural” and defining “interventions” as any change away from that position?
Goblue72
@BGinCHI: STRIKE!!!
Goblue72
Brogrammers of the world unite! The only thing you have to lose is your free soda & cereal bar!
Iowa Old Lady
@Thoughtful David: I agree. Also it would increase the likelihood that the people running things are there because they earned rather than inherited their position.
p.a.
@Linnaeus: they have stepped up: the Powell memo has led directly to today’s SCOTUS and the system that is emerging. It’s a feature not a bug. Pethukous(sp) is just disingenuous. But the fact that he’s not simply denying Piketty’s data is interesting. Like he’s trying to get ahead of the issue rather than repeat recent wing nut history of deny deny deny.
p.a.
@EWG Gestalt: doesn’t that incentivize speculation?
Kylroy
I think there’s one other thing that existed in the postwar world that Picketty (or at least these reviews) overlook – an existential threat to capitalism promising a credible alternative.
Not saying the Soviet Union was *remotely* good. But the threat of a world power promising to back any “worker’s uprising” meant capitalists had to a vested interest in keeping the plebes happy enough to not revolt.
Mike in NC
When the present shit in Ukraine started several weeks ago, someone on one of the cable networks identified the problem of a functioning democracy there being complicated by the fact that a couple dozen very powerful oligarchs actually controlled the country, and senior politicians were basically owned by those oligarchs.
Are we at that very same point or will it get worse, thanks to the Supreme Court?
jl
@roc:
“You seem to be conflating any change with intervention in the “natural” course, without considering how (un)natural the state of things was before and after said change.”
You will have to clarify, I don’t understand. Maybe I should have made myself clearer: I do not believe that there is an economic ‘natural course of things’, at least in neoclassical economics. The theory has to assume too much that is left unexplained. The neoclassical economics idea of the natural course of things exists within a framework of unjustified assumptions, whether it is general equilibrium theory, economic theory of property rights, co-operative game theory and the Coase theorem, whatever foundation you choose.
“Maybe your disagreement with Picketty is more about your choice to select an arbitrary historical position as “natural” and defining “interventions” as any change away from that position?”
No. To clarify, I do not think any period is ‘natural’. Conventional economic theory is constructed to explain economic activity in relation to the sum (usually a very complicated weighted sum) of the welfare of individuals. There is an infinite number of efficient outcomes where the sum of utilities cannot be increased for all. I argued that the changes, or interventions, or whatever you want to call them, that encouraged the increased inequality did not produce any obvious results that increased any weighted sum of individual utilities for all (even potentially), and did produce one obvious thing that reduces it (instability), and therefore, there is not a strong case that we should assume that the current policies produce the natural course of things (which I don’t think exists), or that they are justified by any welfare criteria that would be recognized by conventional economic theory.
SatanicPanic
@Kylroy: I agree with that analysis, but who wants to be a part of the world stuck with Communism? I’m not volunteering for that.
Mnemosyne
@Mike in NC:
It can easily get worse. Despite the rending heart-cries of various lefties, Obama is not actually directly in the pocket of oligarchs the same way the Ukranian presidents have been.
jl
@Mnemosyne:
I don’t think Obama is in the pocket of oligarchs either. I do think he has some mistaken beliefs about economics, particularly macroeconomics and finance (related to his feeling like a policy soul mate of Geitner) that will cause him trouble in formulating effective policies to counter the trends in inequality.
But, I hope Obama keeps trying his best, which I think he is.
jake the snake
We have been on the road to inequality perdition ever since the Agricultural Revolution led to hereditary aristocracies.
The Industrial Revolution destroyed most of the old aristocracies and created new ones. I think we are in the middle of another
revolution, but I am not sure where it should be called the Financial Revolution, or whether it is the Information Revolution and
the ascendency of the FIRE economy is just a symptom.
There was generally a lot of equality in the hunter-gatherer economy, but once land began to be stolen from the commons, growing inequality was inevitable. I suppose if you think agriculture or industrialization are natural states, then I suppose you would think great inequality would be natural.
Kilroy is at least partially correct. The threat of communism served on some levels to keep the Capitalists honest.
The problem is that communism has to exist somewhere to be a viable threat.
schrodinger's cat
The right wingers are in it to win it, while supposed liberals in the media like Nicholas Kristof are always giving GOP the benefit of doubt.
Kylroy
@SatanicPanic: You wouldn’t necessarily need it to be communism, but you would need there to be a credible alternative. It doesn’t need to wipe out or replace capitalism so much as remind the folks in charge that it’s not the only game in town and the man on the street needs a reason to feel invested in the current system.
How you *get* that credible alternative through means less depraved than communism did, I have no idea.
schrodinger's cat
@jl: Do you agree with lefty economists that financialization is the problem for the current gilded age.
Mnemosyne
@jl:
I think so, too. But also, it’s the difference between this house and this house.
schrodinger's cat
@Mnemosyne: That is not a house, a mansion or a palace is more like it.
SatanicPanic
@Kylroy: yeah, that’s the hard part
CONGRATULATIONS!
@Kylroy: Probably depraved and uncivil of me to point out that modern Islam provides precisely such an economic alternative. I suspect this is one reason why Those In Charge have been pulling out all the stops to make it look as bad as possible.
jl
@schrodinger’s cat:
I think poorly designed and unregulated financialization is responsible for a lot of the increase in inequality. I don’t think every economists who believes so can be called a lefty. Robert Shiller is an example, and he has some solutions that are free market oriented, and would not seem lefty at all to your typical Balllon Juice Trotskyite.
Edit: and financialization is not all evil. I’ve read studies with evidence that mortgage back securities did substantially lower the cost of buying a house. But, these things operated in a system that was so sketchy, that it become infested with fraud, caused a huge housing bubble (the pop of which is a big reason for the slow recovery), and caused a global financial panic. Too bad, huh?
@Mnemosyne:
I confess that somehow I can see myself living in the Yanukavitch digs more than the Obama cottage. However, I assure you that I would use the privilege to do good works and bring people together, not for evil. I guarantee that, and will invite you over to share some of my personalized brandy to explain it all to you. When I make it big, drop me a line!
Mnemosyne
@schrodinger’s cat:
Exactly.
Mnemosyne
@jl:
Kenwood’s an awfully nice neighborhood, though. Good restaurants, close to the lakefront, and convenient public transportation. Sure, Yanukavitch’s place is the way to go if you like being out in the country, but I’m more of a city girl.
jl
@Mnemosyne: OK, thanks. You convinced me.I’ll take both, thank you very much!
Edit: commenters, please observe how open minded I am.
Kylroy
@CONGRATULATIONS!: Well, it hasn’t really produced a world power, and it’s far more tied to a specific culture than communism. Plus it’s heavily religious component means it has no appeal to largely secular leftists. The reason we laugh every time a wingnut freaks out about “Sharia Law” is precisely *because* it is so far from being a credible alternative.
Pogonip
@ruemara: Most of them won’t even hold out for clean water. Freedom includes the freedom to drink dirty water and die of typhoid, and no liberal government is going to clean THEIR water.
PurpleGirl
@c u n d gulag: I am available to take the place of Madame Defarge, although I’ll crochet instead of knitting.
comrade nimrod humperdink
It’s not even about the specific ideology. It’s about finding the ideology that best fits the “permanent war” impulse, and then aligning with that. The economics are largely window-dressing, and relevant only to the extent that power can be projected from the chosen system. Neocons are unapologetic imperialists, who will use an army because it’s there, and because they can, against who they can get away with using it on. All else is details.
Nathanael
@SatanicPanic: Communism was actually pretty good some of the time.
Stalin was a genocidal maniac, and Pol Pot was a genocidal maniac. Mao was pretty bonkers in his later life.
If you managed to avoid those particular administrations, your odds of a decent life were way better under communism than in one of the murderous “capitalist” dictatorships such as were so common in Central and South America, or for that matter Franco or Salazar.
If the choice is between communist dictatorship and capitalist dictatorship, I would say you’re almost always better off under communism.
Democracy is what we have to save and preserve, not capitalism.
Nathanael
@Mike in NC: Yes we are at that point and yes it will get worse.
Honestly, in the US, we were in the same place in the 1920s. We only broke out of the cycle thanks to FDR and Ferdinand Pecora and a number of other rich, powerful people who decided to actually fight the other oligarchs on behalf of the 99%.
schrodinger's cat
@jl: I think financialization is definitely a problem but attributing all our current woes on it is a tad simplistic.
Chris
@Kylroy:
It’s far from being a credible alternative in our political context, because Muslims in America make up less than one percent of the population – and not an especially powerful percent at that (so we’re right to mock the “Sharia Law” freaks). But in the Muslim world? Definitely a credible alternative (or at least a large amount of the population sees it that way, which is what matters). Islamic movements have been a conduit for people to express their anger at the system for a while.
And I think that’s increasingly how opposition to globalized capitalism is taking shape – not a big one-size-fit-all alternative like communism, but a lot of much more localized, “culturally specific” ones. In Latin America, they don’t have World Socialism and Marxism-Leninism anymore. What they have now is “Bolivarism” – something a lot vaguer, that hits on a lot of the same themes, but is rooted in the mythology of the region’s George Washington figure. It’s not something you can export worldwide. Damn if it’s not running strong in places like Venezuela and Bolivia, though. To pick a different movement, in Europe you have the rise of all these far right movements screaming about national identity, who, yes, are driven by racial and anti-immigrant hate, but also use anti-globalization, anti-EU, anti-neoliberal rhetoric as a part of their platform, and it’s an important part of what helps them resonate. Etc.
How all these local nationalisms measure up to communism as “the anti-capitalism,” I don’t know, but it’s noteworthy that so many parts of the world are, in fact, experiencing anticapitalist backlash. And I only see that growing in the future.
richard w crews
I think there should be an estate tax aimed at the recipients. That will negate that tired adage of “being taxed twice”, so we don;t tax the dead guy. Have a $5Million dollar tax-free to every recipient – still allowing tax=exempt and charities to bulk up – then tax anything over that at about 65%. If a billionaire hates his country so much, hates paying so much, he can give $5M to 200 people without any taxes. No one knows 200 responsible people, so there will be plenty of stimuli in that dispersal.
Make the dynasties break up, or pay heavy for maintaining. Make it cost $3B to pass on $1B to one person.
Make our country a meritocracy, not an aristocracy!
Omnes Omnibus
@richard w crews: With some tweaks, I could buy into that. I’d allow a larger transfer at the bottom end – say $10 million – but then sock the high end at around 75%. One could pass on wealth and comfort, but not oligarch status.
EconWatcher
@Nathanael: you seem to be unaware of the Black Book of Communism and similar efforts to tabulate the body count of communism, just about everywhere it’s been implemented. Capitalism has many faults, which do seem to be getting worse lately. But it can function without the support of a murderous police state, and often has. Communism cannot and never has. That tells you something important.
tk
@BGinCHI: fukin A right.
Big Picture Pathologist
@EconWatcher:
Some Communists would tell you that those examples were not examples of true Communism. I am inclined to believe them, as I doubt there is anything in the Manifesto that specifically called for those measures.
Communism and totalitarianism are two different things. The question is, what will you do with those who don’t buy into the system? Don’t fool yourself that there is anything besides pure anarchism that doesn’t require some type of a police state to enforce whatever the laws demand.
Every time people bring up TBBoC, I always think to myself that the “Communists” should have been slave traders or sex traffickers. That way they would have been given by all these concern- troll historians.
Big Picture Pathologist
@EconWatcher:
Some Communists would tell you that those examples were not examples of true Communism. I am inclined to believe them, as I doubt there is anything in the Manifesto that specifically called for those measures.
Communism and totalitarianism are two different things. The question is, what will you do with those who don’t buy into the system? Don’t fool yourself that there is anything besides pure anarchism that doesn’t require some type of a police state to enforce whatever the laws demand.
Every time people bring up TBBoC, I always think to myself that the “Communists” should have been slave traders or sex traffickers. That way they would have been given by all these concern- troll historians.
Big Picture Pathologist
@EconWatcher:
Some Communists would tell you that those examples were not examples of true Communism. I am inclined to believe them, as I doubt there is anything in the Manifesto that specifically called for those measures.
Communism and totalitarianism are two different things. The question is, what will you do with those who don’t buy into the system? Don’t fool yourself that there is anything besides pure anarchism that doesn’t require some type of a police state to enforce whatever the laws demand.
Every time people bring up TBBoC, I always think to myself that the “Communists” should have been slave traders or sex traffickers. That way they would have been given by all these concern- troll historians.
Big Picture Pathologist
@EconWatcher:
Some Communists would tell you that those examples were not examples of true Communism. I am inclined to believe them, as I doubt there is anything in the Manifesto that specifically called for those measures.
Communism and totalitarianism are two different things. The question is, what will you do with those who don’t buy into the system? Don’t fool yourself that there is anything besides pure anarchism that doesn’t require some type of a police state to enforce whatever the laws demand.
Every time people bring up TBBoC, I always think to myself that the “Communists” should have been slave traders or sex traffickers. That way they would have been given by all these concern- troll historians.
Big Picture Pathologist
@Big Picture Pathologist:
Sorry for the multiple replies. And that sentence should read “given a pass”.
Big Picture Pathologist
@Big Picture Pathologist:
Sorry for the multiple replies. And that sentence should read “given a pass”.