without making you read 696 pages (though you should).
I’m just about done with The Wheel of Time series. It’s almost 12,000 pages. I’m not afraid.
Thanks for a great review/reading… you made me want to read the book even more, if only I had time.
A masterly summation of Thomas Piketty’s book. I listened to him as he was interviewed before a live audience, in Paris, in English, for the BBC World Service (http://www.bbc.co.uk/programmes/p01y76ws) and I think you have caught all the salient points in a very concise manner. My hope is that as many people as possible become aware of the contents of this book as it explains, with clarity, the inequality black hole we are currently descending and the social damage being caused. This is political.
I guess the goal of society isn’t opulence.
It’s probably time to get rid of my gilded things and drop naked into the sewers.
Cory, this is a really excellent summation/review. Thank you.
Thanks for this Cory. You’ve accomplished the unthinkable; you’ve caused me to explore some new ideas in, of all things, economics. Brilliant.
(A dry postscript on those who say that feckless descendants correct this problem on their own: “It would in any case be rather imprudent to rely solely on the eternal but arbitrary force of family degeneration to limit the future proliferation of billionaires.”)
That also creates unwise incentives for the grifter class who prey on the indolent douchebags of the later generations.
As ever, Vonnegut cut to the heart of it:
“It’s still possible for an American to make a fortune on his own.” said his father.
“Sure–provided somebody tells him when he’s young enough that there is a Money River, that there’s nothing fair about it, that he had damn well forget about hard work and the merit system and honesty and all that crap, and get to where the river is. ‘Go where the rich and the powerful are,’ I’d tell him, ‘and learn their ways. They can be flattered and they can be scared. Please them enormously or scare them enormously, and one moonless night they will put their fingers to their lips, warning you not to make a sound. And they will lead you through the dark to the widest, deepest river of wealth ever known to man. You’ll be shown your place on the riverbank, and handed a bucket all your own. Slurp as much as you want, but try to keep the racket of your slurping down. A poor man might hear.’”
Piketty is writing in the style of Darwin who slowly presented evidence and more evidence building a hard to refute case for the evolution of the species in his Origin. The general feeling today is that Darwin nailed it.
Another book that should be getting more circulation these days is Berle & Means “The Modern Corporation and Private Property” which was at the foundation of the New Deal reforms. It argues that the modern corporation introduces a new form of property as it divorces ownership, control and benefit. The book was based on the Pecora Report which led to decades of economic growth in the US, but is largely unknown today. Given its effectiveness in making a moral and capitalist case for reform, it should be on more reading lists.
I think we need to let Glen Beck know about the book, so he can exort his audience to buy and burn copies. Then enough people might read it out of curiosity to make a differnce.
Hey, can we get the Econocomix guy to make a comprehensive graphic version?
Certainly the excerpts here seem to show an insufficient appreciation for risk-weighting of returns…While political power and access are a BIG factor in the returns that one can get on capital, risk is also important. Of course it is the mis-estimation of risk that played a large part in the RE bubble and it’s subsequent crash. And that is why the bailing out of the big investment banks (and their counterparties) was such an ultimately counterproductive effort. It makes the “heads I win, tails you lose,” nature of big money explicit and plants the seeds of the next round of risky-investment bubble, crash, and bailout.
Isn’t that an argument to make sure we’re taxing excessive capital, so that those holding the capital are incentivized to properly educate themselves and their ‘capital managers’ to properly leverage things?
I mean, this entire argument might fall apart if there was a causation between capital size and the person(s) who own it. The example in the article/book was Gates vs L’Oreal heir.
If you’re forced to consistently generate growth to satisfy your capital needs (ie, interest/taxation), then those who understand the risk/reward system will remain.
Full disclosure: I have not yet read the book. So this is a question about it, not an attack.
If inequality grows, and the middle and working class standard of living stagnates, during periods when “R > G”, isn’t it equally as worthwhile an approach to encourage G, as it is to discourage R??
No, because the beneficiaries of R will use their gains to tip the political process in their favour. This necessarily is going to come at the expense of G, because a higher rate of G is cutting into what could go to R.
I believe the fixation on r > g is that it’s an axiom of the system.
If there is no growth, then r = g. No capitalist would argue we should reduce g
But that’s just my unreaded understanding.
Absoloutely. The contention behind the idea of the Reagan tax cuts was that there was insufficient money available for investment, which was slowing down growth. That may have been true at the time, but we have certainly passed that point and now we have too much money circling around Wall Street, looking for a place to go. Certainly we have more money that Wall Street can find productive use for, so instead it ends up being used to pump up serial bubbles and being loaned out at interest for consumer spending.
Gee Cory, I’m only half way through with the book, thanks for the spoilers! XD
I would actually agree that the “too big to fail” banks should have been allowed to fail, BUT the Federal government would still have to intervene somehow, because the cascading effect of those banks failing would have completely bankrupted so many people and destroyed so many businesses. Basically we would’ve needed a newer, bigger version of FDR’s “New Deal” to save America from descending into anarchy . . . except a large number of the people shouting that we should have let the banks fail are also the ones most opposed to increasing the size or power of the Federal government.
It actually reminds me of the last sentence in the article: “Piketty wants desperately to salvage captalism, even if that means proposing something that every capitalist will hate: a global wealth tax.” – the bailouts “saved” capitalism (or at least the version the most powerful capitalists are currently fond of) by resorting to something wholly un-capitalist.
kaleberg7 - You beat me to it. I was thinking about Modern Corporati0n as I read this article. One of the quotes…from 1938 that strikes me is the notion that under the structure of public corporations at the time, the authors predicted “a centripetal force that would concentrate wealth amongst a few individuals” (or something like that…typing from memory). Modern Corporation (and many landmark works from the 30s and 40s) could use a modern update.
Well, it’s an inequality. That’s not to say that it’s an identity of the universe, just a description of the way r relates to g in the current system regardless of what the particular value of g might be. Simply increasing g is a theoretical exercise, not a policy recommendation. Because r tends to outstrip g, it’s the outstripping effect that calls for examination.