Is this the most important book that you (and I) will never read?
It’s called “Capital In The Twenty-First Century” and it is authored by the French economist Thomas Piketty. Politicians and economists around the world are calling it a stunning critique of the capitalist system. But you and I will never read it because it is more than 700 pages long with footnotes, graphs and mathematical formulae.
In an interview for today’s “Observer” newspaper, Piketty states:
“I began with a straightforward research problematic. I began to wonder a few years ago where was the hard data behind all the theories about inequality, from Marx to David Ricardo (the 19th-century English economist and advocate of free trade) and more contemporary thinkers. I started with Britain and America and I discovered that there wasn’t much at all. And then I discovered that the data that did exist contradicted nearly all of the theories including Marx and Ricardo. And then I started to look at other countries and I saw a pattern beginning to emerge, which is that capital, and the money that it produces, accumulates faster than growth in capital societies. And this pattern, which we last saw in the 19th century, has become even more predominant since the 1980s when controls on capital were lifted in many rich countries.”
He goes on to explain:
“When I began, simply collecting data, I was genuinely surprised by what I found, which was that inequality is growing so fast and that capitalism cannot apparently solve it. Many economists begin the other way around, by asking questions about poverty, but I wanted to understand how wealth, or super-wealth, is working to increase the inequality gap. And what I found, as I said before, is that the speed at which the inequality gap is growing is getting faster and faster. You have to ask what does this mean for ordinary people, who are not billionaires and who will never will be billionaires.
Well, I think it means a deterioration in the first instance of the economic wellbeing of the collective, in other words the degradation of the public sector. You only have to look at what Obama’s administration wants to do – which is to erode inequality in healthcare and so on – and how difficult it is to achieve that, to understand how important this is. There is a fundamentalist belief by capitalists that capital will save the world, and it just isn’t so. Not because of what Marx said about the contradictions of capitalism, because, as I discovered, capital is an end in itself and no more.”
So what’s the answer? As a solution to inequality, Piketty proposed an annual global wealth tax of up 2%, combined with highly progressive income tax reaching as high as 80%.
His advocacy of a wealth tax reminds me of a short story I wrote five years ago called “The PM And The MP”. I know you won’t read Piketty’s book but you might like my short story which you can access here.
April 13th, 2014 at 4:43 pm
Hello Roger,
Hope you are well. I enjoyed your story #9. As for the book, it’s been widely discussed since at least 2006 that the capitalist system based on existing concepts of money and debt is flawed and doesn’t lead to common well-being. On the other hand, I think that socialism aimed to care about the public good is doomed to limit the political freedom of individuals. Once the majority agrees to follow a certain path, it becomes extremely difficult to debate alternative options with them. Which eventually stalls the progress, as we saw.
To resolve the issue of excessive wealth in a few hands, I would rather look at the example of Bill Gates, who switched from business to philanthropy once he reached a certain level. I think it makes sense to let such people decide on how they want to give back to the society rather than deprive them of their wealth in favour of an intrinsically inefficient governmental system. So what the world needs at this point is a new (?) set of moral principles to be accepted by the rich for us to see more Gates and fewer Rothschilds.
Kind regards,
Alexei
April 13th, 2014 at 4:54 pm
Hi, Alexei.
The alternative to unbridled capitalism does not have to be totalitarian communism or preside socialism. The regulation of markets through strong national and international institutions backed by a social democratic political system that tackles acute inequality is my preference.
The problem with leaving the distribution of wealth to philanthropists is that there is no transparency or accountability about such expenditure. It simply comes down to the personal preferences of the philanthropist. They might fund a battle against malaria, but they could equally fund a campaign against climate change.
Governments do not have to be inefficient – many corporations ate too – and at least governments are more accountable to electorates who can express preferences for public expenditure. Let voters decide whether the money goes to education, health or defence.
Roger
April 13th, 2014 at 6:33 pm
Roger, my support goes to Alexei rather than voters and governments.
Coalition Governments are even less accountable, as we have seen.
The inefficiency of Government lies mainly with unelected, incompetent, poorly selected and poorly trained Civil Servants at all levels, rather than politicians any way.
Any state in control of more than 30 % of GDP is inherently inefficient given the calibre of the civil service which is not fit for purpose.
It is not that the individual civil servants are lazy, or stupid or malicious, it is more they lack the right skill set to manage and deliver what they are asked to do.
April 13th, 2014 at 10:30 pm
There’s an excellent overview of the book and topic in the New Yorker 31 March 2014. p 69 – 73
“The proper role of public intellectuals is to question accepted dogmas, conceive of new methods of analysis and expand the terms of public debate. “Capital in the Twenty-first Century” does all these things. As with any such grand prognostications, some of it may not withstand the test of time. But Piketty has written a book that nobody interested in a defining issue of our era can afford to ignore.”
Review author John Cassidy.
April 14th, 2014 at 2:36 pm
Roger, Albert,
One important consideration that comes to my mind is the capability of a given culture to grow its citizens with a sense of personal responsibility for public good. If an individual grows with a feeling that he only owns stuff up until his doorstep, it doesn’t matter if he ends up being a senior official or a major businessman. His path to personal success will be based on exploitation of the others.
I think, many West-European countries were able to implement this kind of culture way better than the rest of the world. Recent developments in Ukraine gave me a lot of hope when I saw people’s moral values and sense of personal responsibility grow by the day. It remains to be seen what comes out of it in the end, but for a moment it looked like a social miracle.