Branko Milanovic: There are significant differences between the 19th century and ours that Piketty does not fully acknowledge, although he mentions them. First, it is not obvious that the rate of return on private wealth will remain high enough to sustain Piketty’s prediction. Even if we look at the admittedly transitory situation of today, the rate of return is stuck barely above zero percent, less than the rate of growth of the rich world’s economies. The tendency toward a decreasing rate of return, possibly lower than the rate of growth, cannot be ruled out. [This sounds like a reference to the question I posted to PEN-L, namely whether the pie will continue to grow. Piketty's emphasis is on the growing inequality of division of the pie but what if the pie stops growing? To my catastrophist way of thinking poses revolutionary implications that he is uncomfortable with. As long as workers enjoy a reasonably stable life with income sufficient to maintain a reasonably comfortable existence, why would they mount the barricades? But if the conditions of life become unbearable, all bets are off.]
Second, the role of labor incomes has changed since the 19th century. As Piketty acknowledges (he writes about it in both this and earlier works), extraordinarily high labor incomes play a larger role in society today than in the past, even if they concern mostly the richest 1 percent through 5 percent of income recipients—not the top 0.1 percent, where “capital is still king.” A dose of “meritocracy” has been introduced into the distribution. The overlap between being rich and owning capital so evident in the 19th century will be less prominent in the 21st. Third—the convergence of China, and even more that of India, and even more that of Africa—may take a century or longer to complete. As long as the convergence is still ongoing, global growth will be higher than the steady-state rate of 2.5 percent due to the faster growth rate of “infra technological frontier” countries such as China, India, Nigeria, and Indonesia. This is an aspect of the problem that Piketty neglects. The former Third World might end up playing the same role in the 21st century that Europe, Japan, South Korea, and others played in the past 50 years—maintaining upward global growth as they were catching up with the United States. full: http://prospect.org/article/piketty%E2%80%99s-triumph _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
