Piketty is making a different argument. He’s saying “Yes, the developed world enjoyed phenomenal economic growth for three decades after the war, but that was because patrimonial capitalism was flat on its back.” Again, this was truer in Europe than in the U.S., where inherited wealth had never flowered to anything like the same extent. France’s Belle Époque (1871-1914), for instance, lasted longer than our Gilded Age (1873-1900), and the inequalities it generated were larger. But today all of Europe is more egalitarian than the U.S., not less, and inequality is growing there at a much slower pace.
The big driver of income inequality, Piketty says, isn’t labor income. It’s capital. A series of charts demonstrates this by comparing the extremely high inequality in the U.S. circa 2010 with the extremely low inequality in Scandinavia circa 1970-1990. If you just look at labor income, then income share for the middle class (defined as the middle 40 percent) differs by only five percentage points. Only when you add in capital income does the gap widen to 15 percentage points. Thus far, that probably doesn’t reflect inheritance so much as the tendency of America’s one percent—really, the 0.01 percent, a cohort Piketty dubs “supermanagers”—to receive much of its remuneration in the form of stock options and other capital holdings. Still, the relative consistency of the middle class’ share of labor income was news to me. (It’s still getting smaller, though.) Like most public-policy books, Capital is more satisfying in its diagnoses than in its prescriptions. Mainly, what Piketty would like to do is levy an international tax on capital—an idea even that he concedes is utopian. In general, Piketty’s approach toward policy strikes me as overly fatalistic (dare one say Gallic?). Although he notes repeatedly that income and capital distribution don’t just happen—they are shaped by what governments do—he tends to present those government actions as being determined by events. Thus when Piketty argues that World War I devastated private capital, he doesn’t just mean that that it exacted a high price in blood and treasure. He also means that the war made it politically possible to jack up income taxes on the rich in Europe and the U.S. The notion that this might have occurred under less dire circumstances, or at least different circumstances, is not one he chooses to consider. In an incisive review of Piketty’s book for the Huffington Post, economist Dean Baker points out that “a very large share, perhaps a majority, of corporate profit hinges on rules and regulations that could in principle be altered.” He then cites a few: drug patent rules, weak oversight of telecom monopolies, untaxed financial transactions, and corporate governance of executive pay. Baker also suggests that the tendency for large amounts of capital to realize a higher return isn’t solely attributable to the superior financial instruments they have access to; it may also have something to do with rampant insider trading, which could be policed more closely. full: http://www.psmag.com/navigation/business-economics/capital-21st-century-dead-wealthier-living-patrimonial-capitalism-77073/ _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
