Vorts,
A book recommendation: http://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/0674430 00X/ref=sr_1_1?s=books&ie=UTF8&qid=1398126885&sr=1-1&keywords=capital+in+the +twenty-first+century http://tinyurl.com/l77z5og I suspect we are likely to hear a lot more about a popular book on economics called "CAPITAL in the Twenty-First Century", by Thomas Piketty. The author has become somewhat of rock-star celebrity in many economic circles, as well as a pariah in others. The fact that his book has effected so many readers so quickly, both pro and con, suggest to me that Pketty is probably on to something serious, and we should take note. We in the USA have only begun to hear about Piketty's 700+ page book because it has only recently been translated from French (his native language) into English. In a nutshell, Piketty claims the growing inequality of wealth distribution is due primarily to a single economic action: When the rate of return on capital-the annual income it generates divided by its market value-is higher than the economy's growth rate, capital income will tend to rise faster than wages and salaries, which rarely grow faster than G.D.P. ...and where does all of this accumulated "capital" end up? Well, that is the question! To quote the New Yorker review: "If ownership of capital were distributed equally, this wouldn't matter much. We'd all share in the rise in profits and dividends and rents. But in the United States in 2010, for example, the richest ten per cent of households owned seventy per cent of all the country's wealth (a good surrogate for "capital"), and the top one per cent of households owned thirty-five per cent of the wealth. By contrast, the bottom half of households owned just five per cent. When income generated by capital grows rapidly, the richest families benefit disproportionately. Since 2009, corporate profits, dividend payouts, and the stock market have all risen sharply, but wages have barely budged. As a result, according to calculations by Piketty and Saez, almost all of the income growth in the economy between 2010 and 2012-ninety-five per cent of it-accrued to the one per cent." ... ... The New Yorker Review: http://www.newyorker.com/arts/critics/books/2014/03/31/140331crbo_books_cass idy?currentPage=all According to my understanding a major reason inequality of wealth in places like the United States is getting worse and will continue to get worse unless something is done about it soon, according to Piketty, is the fact that massive amounts accumulated wealth are now being passed down from generation to generation. The trend for inherited wealth is increasing. Those who have accumulated massive amounts of capital (and the power that goes along with it) have been able to successfully rewrite the tax code. Inheritance taxes and other taxation equalizer mechanisms that in the past helped redistribute the tendency for wealth to accumulate like cancerous tumors that could eventually kill the host have been rendered useless. How did this happen? Politics of course! Piketty states that economics and politics can't be separated from each other. More from the New Yorker: "Piketty believes that the rise in inequality can't be understood independently of politics. For his new book, he chose a title evoking Marx, but he doesn't think that capitalism is doomed, or that ever-rising inequality is inevitable. There are circumstances, he concedes, in which incomes can converge and the living standards of the masses can increase steadily-as happened in the so-called Golden Age, from 1945 to 1973. But Piketty argues that this state of affairs, which many of us regard as normal, may well have been a historical exception. The "forces of divergence can at any point regain the upper hand, as seems to be happening now, at the beginning of the twenty-first century," he writes. And, if current trends continue, "the consequences for the long-term dynamics of the wealth distribution are potentially terrifying." A real irony here is the fact that a couple of centuries ago our forefathers escaped Europe to get away from the unfairness inherited accumulated wealth wreaked on those who by birthright had not been bequeathed a pile of cash. And now, we are on the brink of recreating the very same specter we attempted to escape from. Needless to say, wealth inequality is one of the major causes of messy revolutions. A lot of people end up getting killed before the dust settles. Regardless of what side of the fence one might be on, I suspect we are going to hear a lot more about the ramifications of Piketty's observations very soon. I'm sure the debate will cause some interesting polarization. Regards, Steven Vincent Johnson svjart.orionworks.com
