A Review of 10 Reviews of Piketty’s Capital
|May 3, 2014||Posted by Staff under Good Press|
Thomas Piketty, a 42-year-old professor at the Paris School of Economics, has scored a surprise publishing hit, Capital in the Twenty-First Century, which has been widely reviewed.
Three months ago we ran one from The Economist: Fortunes are from Land or Capital?
Here are nine more 2014 excerpts from: (1) Vox, Apr 8, by Matthew Yglesias; (2) Business Week, Apr 10, by Peter Coy; (3) Common Dreams, Apr 16, by Mark Weisbrot; (4) Wall Street Journal, Apr 21, by Daniel Shuchman; (5) New Republic, Apr 22, by Robert Solow; (6) Time, Apr 23, by Rana Foroohar; (7) Forbes, Apr 29, by Tim Worstall; (8) Huffington Post, May 1, by Ryan Grim; and (9) Salon, May 1, by Jesse Myerson.
The Short Guide to Capital in the 21st Century
Much of modern-day wealth appears to take the form of urban land (Silicon Valley houses are much more expensive than houses in the Houston suburbs, not because the houses are bigger but because the land is more expensive), control over oil and other fossil fuel resources, and the value associated with various patents, copyrights, trademarks, and other forms of intellectual property. Land and resources differ from traditional capital in that even a very high rate of taxation on them won’t cause the land to go away or the oil to vanish. Intellectual property is deliberately created by the government. Stiff land taxes, and major intellectual property reform could achieve many of Piketty’s goals without disincentivizing saving and wealth creation.
An Immodest Proposal: A Global Tax on the Superrich
The top hundredth of 1 percent of U.S. taxpayers—that’s 16,000 people—have a combined net worth of $6 trillion. That’s as much as the bottom two-thirds of the population.
Owners of assets such as empty lots might be more likely to put them to good use if capital [actually, land] were taxed.
He proposes a global tax on capital—by which he means real assets such as land, natural resources, houses, office buildings, factories, machines, software, and patents, as well as pieces of paper, such as stocks and bonds, that represent a financial interest in those assets.
The proceeds in Piketty’s view should not fund an expansion of government: “The state’s great leap forward has already taken place: there will be no second leap—not like the first one, in any event,” he writes.
Piketty in Washington: How to Reverse the Increasing Concentration of Wealth
In the U.S. we pay $380 billion per year for drugs whose price is composed of something like 80 or 90 percent monopoly rents.
The “too-big-to-fail subsidies” are 20 percent of after-tax corporate profits in the euro zone.
We have 40 percent of corporate profits going to financial sector, and “intellectual property” capturing a growing share of returns at the same time that technology is increasingly making much of consumption available at zero marginal cost.
Thomas Piketty Revives Marx for the 21st Century
Poverty, unemployment, and unequal opportunity are major challenges for capitalist societies.
Societies need markets and private property to have a functioning economy.
He says that his solutions provide a “less violent and more efficient response to the eternal problem of private capital and its return.” Instead of Austen and Balzac, the professor ought to read “Animal Farm” and “Darkness at Noon.”
Thomas Piketty Is Right
The very highest income class consists to a substantial extent of top executives of large corporations, with very rich compensation packages. (A disproportionate number of these, but by no means all of them, come from the financial services industry.) With or without stock options, these large pay packages get converted to wealth and future income from wealth. But the fact remains that much of the increased income (and wealth) inequality in the United States is driven by the rise of these supermanagers.
Executive pay at the very top is usually determined in a cozy way by boards of directors and compensation committees made up of people very like the executives they are paying.
Top management compensation, at least some of it, does not really belong in the category of labor income, but represents instead a sort of adjunct to capital, and should be treated in part as a way of sharing in income from capital. It is clear that the class of supermanagers belongs socially and politically with the rentiers, not with the larger body of salaried and independent professionals and middle managers.
Why This Bestseller Is Freaking Out the Super-Wealthy
The rich take a greater and greater share of the world’s economic pie. That’s because the gains on capital (meaning, investments) outpace growth of GDP. Result: people with lots of investments take a bigger chunk of the world’s wealth, relative to everyone else, with every passing year. The only time that really changes is when the rich lose a bundle (as they often do in times of global conflict) or growth gets jump started via rebuilding (as it sometimes does after wars).
Piketty credits his work to the fact that he didn’t forge his economic career in the States, because he was put off by the profession’s obsession with unrealistic mathematical models. “The truth is that economics should never have sought to divorce itself from the other social sciences and can only advance in conjunction with them,” he argues.
We can only hope that the politicians crafting today’s economic programs will take this book to heart.
Piketty’s Wealth Tax Would Require A Constitutional Amendment In The US
Piketty’s proposed wealth tax to solve the ills of unconstrained inequality would actually require a constitutional amendment for it to be legal.
We’d get much the same result in a reduction of societal inequality in wealth if we were to impose a proper land value tax and do some tinkering with patents and copyrights.
And given that we need to go and do some tinkering with patents and copyrights (the current system just isn’t fit for duty) and that a land value tax is an excellent idea in its own right, that’s probably the course we should take.
Why It Took Until Now For An Economist To Expose The Flaw In Capitalism
Cold War self-censorship prevented mainstream economists from diagnosing adequately the fundamental flaw in capitalism, Thomas Piketty said.
Returns on capital grow faster than the regular economy, meaning that without some policy intervention, the rich get richer, and richer, and richer.
“The existence of a counter model was one of the reasons that a number of reforms or policies were accepted,” he said, arguing that those in capitalist countries fared better thanks to the threat of communism.
Everyone is reading Piketty wrong — including Piketty!
Want to really shut down the chief engine generating inequality? Forget the author’s solution and do this instead.
The left response to this conundrum (including Piketty’s) is to try to grow g (growth of the economy) through more egalitarian taxation and stimulus and whatnot. But this concedes way too much, when we can actually solve the conundrum. The bulk of society doesn’t need to be devoted to accommodating the tiny number of people who capture r (rate of return) and ride capitalism’s natural flow, merrily, merrily, merrily. It is not necessary for everybody to keep bending over backward to grow the economy, just in order to help one another survive. There is a way out of this conflict, a way of generating equality as naturally as capitalism generates inequality.
Make sure the people who capture r is: everybody. If the stream of wealth flows to everyone, then the pressure’s off g to keep pace with r. We can just let r exceed g and focus on more meaningful things like availing ourselves of our inalienable right to the pursuit of happiness.
Rent and real estate value can flow to everyone by taxing (especially urban) land value, perhaps to ply a sovereign wealth fund with investment cash.
By liberalizing the intellectual property regime (i.e. stopping handing out all these monopolies), and moving to a Creative Commons structure, we can make sure that our society’s ideas and artworks aren’t just a source of cash for pharmaceutical companies, media conglomerates, and litigious vultures.
Ed. Notes: Funny how one can know so much and so little at the same time. Piketty suggested that taxing great wealth could make it possible to cut other taxes, such as the property tax on land and buildings. De-taxing buildings would be beneficial but you de-tax land, then you just let buyers, speculators, and assessors pump up the price of land. That only benefits sellers, flippers, and lenders, which widens the gap between rich and poor, the problem Piketty set out to solve.
Piketty and his reviewers talked about astronomical CEO pay but all failed to note it’s from corporate welfare — it’s not market success so much as lobbying success.
And even the best commentators left out a crucial key: disbursing the raised revenue to the populace in general. A tax might lower the highest incomes and fattest fortunes but a tax by itself does not put the money into the pockets of the rest of society. We need to have Citizen’s Dividend to do that.