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April 15, 2014 6:13 AM   Subscribe

Why We’re in a New Gilded Age Paul Krugman reviews Capital in the Twenty-First Century by Thomas Piketty, and discusses the renewal of the importance of capital in preserving inequality across generations.
posted by jaduncan (131 comments total) 85 users marked this as a favorite

 
Piketty's book is currently sold out at amazon. I dare say that this is the most important book on political economy/economics, since...? I don't know. Its huge. I can't wait to get my hands on it.

And goddamn Krugman is a master of making economics accessible and interesting.
posted by MisantropicPainforest at 6:29 AM on April 15 [8 favorites]


It seems to me this "wage income" Krugman mentions (the "supersalaries") are a modern form of Marx's "primitive accumulation of capital," and that this pillaging will set the stage for the next group of capitalists, not unlike the knights of industry overthrew the lords & guilds:

The industrial capitalists, these new potentates, had on their part not only to displace the guild masters of handicrafts, but also the feudal lords, the possessors of the sources of wealth. In this respect, their conquest of social power appears as the fruit of a victorious struggle both against feudal lordship and its revolting prerogatives, and against the guilds and the fetters they laid on the free development of production and the free exploitation of man by man. The chevaliers d’industrie, however, only succeeded in supplanting the chevaliers of the sword by making use of events of which they themselves were wholly innocent. They have risen by means as vile as those by which the Roman freedman once on a time made himself the master of his patronus.
posted by chavenet at 6:32 AM on April 15 [2 favorites]


This book sounds very Big and Important and Interesting. However, I am a dunce when it comes to economics. Would it be okay for me to jump right into Capital?
posted by Sticherbeast at 6:42 AM on April 15 [1 favorite]


needs a 'newgildedage' tag.

Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens [PDF]
Abstract

Each of four theoretical traditions in the study of American politics – which can be characterized as theories of Majoritarian Electoral Democracy, Economic Elite Domination, and two types of interest group pluralism, Majoritarian Pluralism and Biased Pluralism – offers different predictions about which sets of actors have how much influence over public policy: average citizens; economic elites; and organized interest groups, mass-based or business-oriented.
A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. This paper reports on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues.
Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.
posted by the man of twists and turns at 6:47 AM on April 15 [3 favorites]


Any chance that, when the inevitable class of the monied class happens (lets's call it WW I.0), we can just send the rich to fight it on their own?
posted by GenjiandProust at 6:50 AM on April 15


Would it be okay for me to jump right into Capital?

Read a bunch of the reviews. See if you get the argumentation. From what I understand, Piketty uses a lot of empirical data and not a lot of formal modelling, so if you have some knowledge of how to read data and stats you should be ok.
posted by MisantropicPainforest at 6:51 AM on April 15 [1 favorite]


Decent Guardian article on Piketty's book - Capitalism simply isn't working and here are the reasons why
posted by iotic at 6:53 AM on April 15 [10 favorites]


The Economist's two-part review of the Piketty is very handy.
A New Yorker article

A criticism
Some bullet points from the WSJ's blog
posted by chavenet at 6:59 AM on April 15 [7 favorites]


iotic, thanks for that Guardian article. I'm afraid the original article went a little bit over my head, but that one made it much clearer.

Very scary economic times we live in.
posted by xingcat at 7:00 AM on April 15


UC Berkeley economics prof Brad DeLong provides a somewhat wonkier analysis of Piketty's book. It's more of a number-crunching critique than a regular review, but it does provide a broader framework for discussing the topic of how/whether the return on capital is higher than economic growth, or, to oversimplify, the richer get richer faster than working stiffs.

Paging Mutant to the Blue!
posted by Doktor Zed at 7:01 AM on April 15 [3 favorites]


Does anybody have a workaround to the Economist review? I am at my monthly article limit there. I think those stingy bastards give you three free views a month or something.
posted by bukvich at 7:03 AM on April 15


Economic Policy Institute: Thomas Piketty on Wealth, Income and Inequality
This event will be webcast live on this page.

Please join the Economic Policy Institute and the Washington Center for Equitable Growth for a presentation by Thomas Piketty—economist from the Paris School of Economics and ground-breaking researcher on income inequality—of the findings in his new book, Capital in the Twenty-First Century. His presentation will be followed by a panel discussion moderated by Heather Boushey, Executive Director and Chief Economist of the Washington Center for Equitable Growth, with Josh Bivens, Research and Policy Director of the Economic Policy Institute, Robert M. Solow, Professor Emeritus at the Massachusetts Institute of Technology and Betsey Stevenson, Member of the White House Council of Economic Advisers, serving as discussants.

When:
Tuesday, April 15, 2014 from 9:30 AM to 11:00 AM (EDT)
posted by the man of twists and turns at 7:07 AM on April 15


Some economists (not to mention politicians) tried to shout down any mention of inequality at all: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution,” declared Robert Lucas Jr. of the University of Chicago, the most influential macroeconomist of his generation, in 2004.
Economics:
Ihe science that deals with the production, distribution, and consumption of goods and services, or the material welfare of humankind. - dictionary.com
The traditional concern of economics is to gain an understanding of the processes that govern the production, distribution and consumption of goods and services in an exchange economy. --wp
Broadly defined, economics is the study of how society allocates scarce resources. -- U of Chi website
Microeconomics is the study of the allocation of scarce resources. -- MIT OCW
Economics is the study of the production and consumption of goods and the transfer of wealth to produce and obtain those goods. -- whatiseconomics.org
Because wealth distribution is a central concern for us, we will continue to call our study Political Economy — which we define as: the science which deals with the natural laws governing the production and distribution of valuable goods and services. -- henrygeorge.org
The most concise, non-abusive, definition is the study of how society uses its scarce resources. -- The Economist
posted by Herodios at 7:12 AM on April 15 [2 favorites]


To be fair, Herodios, the general line of thinking that produced such quotes is the idea that the rising tide lifts all boats; figure out how to manage the economy so that it keeps growing steadily and everyone's economic circumstances will improve. And if you were looking at the post WWII period through the 1990s, there was frankly a lot of evidence for that proposition. That's precisely why Piketty's book is important; because he was able to use tax records to take a much broader view of economic history, something that's frankly incredibly difficult.
posted by Diablevert at 7:18 AM on April 15 [2 favorites]


This sounds like a very interesting book.
posted by fantabulous timewaster at 7:18 AM on April 15


The Nation: Thomas Piketty and Millennial Marxists on the Scourge of Inequality - "Capitalism’s new critics take on an economics run amok."
posted by the man of twists and turns at 7:21 AM on April 15


LOL @ that criticism. Right-wingers are going to have to try harder. I'm curious as to what actually intelligent conservative people have to say about this book. Terence Corcoran's review is just a collection of snide comments with no real substance. He actually complains that Piketty doesn't pay enough attention to Hayek and von Mises, as if that is a bad thing!
posted by MisantropicPainforest at 7:23 AM on April 15 [3 favorites]


Since wealth taxes are utterly off the table, is there another solution besides pitchforks?
posted by T.D. Strange at 7:26 AM on April 15


Since wealth taxes are utterly off the table, is there another solution besides pitchforks?

Abscond. To Mars or space generally at the first opportunity and work with a much smaller set of people to do things in a better way (or just the right way if anyone can agree as to what the right way is).
posted by Slackermagee at 7:29 AM on April 15 [1 favorite]


Put them back on the table*

*some pitchforks required
posted by fullerine at 7:31 AM on April 15 [41 favorites]


Wealth taxes shouldn't be off the table, if the super rich can heed the lesson. The idea is that the system as it is is unstable, leading to inevitable collapse in the form of war, depression or revolution. Hanging onto slightly less ridiculous forms of inequality might be preferable.
posted by iotic at 7:37 AM on April 15 [2 favorites]


Right-wingers are going to have to try harder.

Do you mean like Bill O'Riley's trenchant criticism of equality movements of all sorts?:

"People are different!"
posted by Mei's lost sandal at 7:37 AM on April 15


Wealth taxes shouldn't be off the table...

Somehow, though, I'm pretty sure they are off the table...
posted by Thorzdad at 7:43 AM on April 15 [1 favorite]


Wealth taxes shouldn't be off the table, if the super rich can heed the lesson. The idea is that the system as it is is unstable, leading to inevitable collapse in the form of war, depression or revolution. Hanging onto slightly less ridiculous forms of inequality might be preferable.

Well, that's what's interesting. Picketty proposes a global wealth tax; that seems like a heavy carry. Without global action, you'll get your Cayman Islands and your Monacos and your Lichtensteins; countries happy to offer a passport and a low tax rate to the world's billionaires. The question is, how many would really take advantage? It's not clear. Warren Buffett still lives in Omaha.
posted by Diablevert at 7:52 AM on April 15


Since wealth taxes are utterly off the table, is there another solution besides pitchforks?

Limit the power and influence of government which is the primary tool of these crony capitalists.

The only way to put an end to government subsidies for big business is to stop giving them tax dollars. Get rid of support for energy companies, tear up the "farm bill". Abolish all tax breaks for corporations. Get the government out of the business of business.

Abolish the 401k and Roth IRAs that encourage taxpayers to give tax deferred money to Wall Street. This robs the government of tax income and puts the money into the pockets of brokers.

But if you can't bring yourself to do that. By all means pick up the pitchforks. Those rich corporations will be happy to turn the chain guns on you.
posted by three blind mice at 7:55 AM on April 15


Wealth taxes shouldn't be off the table

But they are, even the mildest proposed increase (or even insufficient groveling from the President) engenders virulent rage from the oligarch class, Nazi rethoric, and billions of dollars poured into electing right-wing anti-tax candidates. The proposed solution of global wealth taxes to increasing inequality seems like clicking the rhetorical ruby red slippers, while in the real world power continues to be consolidated further in the hands of the billionaires by the day, with no real countervailing forces in sight.
posted by T.D. Strange at 7:55 AM on April 15 [7 favorites]


Sidebar: it's interesting to watch this book's reception pay out in light of the other study that came out recently about the only opinion that matters when it comes to shaping policy being elite opinion. This whole thread and all the links in it --- this is that. This is elite opinion being paradigm shifted in real time, via lots and lots of admiring words in the Right Places from Very Serious People. I'm watching the EPI webcast linked above right now; one of the panelists is from the White House Council of Economic Advisors.
posted by Diablevert at 7:59 AM on April 15 [9 favorites]


But if you can't bring yourself to do that. By all means pick up the pitchforks. Those rich corporations will be happy to turn the chain guns on you.

The problem with those structural reforms is they all require the consent and cooperation of the same corrupt corporate and government actors that benefit from the status quo.
posted by T.D. Strange at 8:00 AM on April 15 [7 favorites]


This is not unlike global warming in that large scale (very) serious issues will arise if the most affluent individuals don't pay attention and make some changes.

It's not impossible that changes will occur in the right direction. It really is in everyone's interest. It's just a question of if they will happen quick enough to avert disaster.
posted by iotic at 8:04 AM on April 15 [1 favorite]


Paging Mutant to the Blue!
posted by Doktor Zed


Here, let me. SUMMON MUTANT.
posted by workerant at 8:07 AM on April 15 [16 favorites]


Since wealth taxes are utterly off the table, is there another solution besides pitchforks?

Limit the power and influence of government which is the primary tool of these crony capitalists.


Those "crony capitalists" are currently engaged in intense efforts to limit the power and influence of government, themselves.
posted by clockzero at 8:08 AM on April 15 [2 favorites]


Those "crony capitalists" are currently engaged in intense efforts to limit the power and influence of government, themselves.

Not exactly. They're working to limit the power the government has over them specifically.
posted by Pope Guilty at 8:12 AM on April 15 [12 favorites]


Limit the power and influence of government which is the primary tool of these crony capitalists.

I really encourage you to read the link in the FPP. This has nothing to do with crony capitalism. In fact I don't know how you got to that conclusion other than being ignorant of Piketty's argument. Piketty finds that this level of inequality is endemic to capitalism because the rate of growth on capital is higher than the rate of return of economic growth. It has literally NOTHING to do with cronyism. Also, Piketty's target isn't rich bankers or what have you, its inherited wealth.

You're reviewing a different book.
posted by MisantropicPainforest at 8:15 AM on April 15 [18 favorites]


Sidebar: it's interesting to watch this book's reception pay out in light of the other study that came out recently about the only opinion that matters when it comes to shaping policy being elite opinion. This whole thread and all the links in it --- this is that. This is elite opinion being paradigm shifted in real time, via lots and lots of admiring words in the Right Places from Very Serious People. I'm watching the EPI webcast linked above right now; one of the panelists is from the White House Council of Economic Advisors.

Its also a crowning triumph of the Occupy Wall Street movement. They employed and popularized a really simple way to talk about inequality that enabled people to understand it.
posted by MisantropicPainforest at 8:17 AM on April 15 [5 favorites]


Not exactly. They're working to limit the power the government has over them specifically.

The alliance between fiscal and social conservatism explained in a nutshell.
posted by jaduncan at 8:18 AM on April 15 [2 favorites]


Diablevert: Eh? I apologize if you got the impression that I support Lucas' statement. I was -- perhaps clumsily (IANAE) -- attempting to point out the absurdity of an economist saying that distribution of wealth is an improper, nay, poisonous focus for economics. His quote is taken out of context, though, and the fact that he's a macro-economist may provide some. No rising boats were involved.

Wealth and inheritance taxes: Seems to me about the most prominent purely economic difference between the circumstances mid-20c and now is greater taxation on extreme wealth and income during the most prospersous decades. If higher taxes on where the actual money is concentrated is off the table, there is literally nothing to discuss. We might as well all go home and start stuffing gold into our mattresses.
 
posted by Herodios at 8:22 AM on April 15 [2 favorites]


You're reviewing a different book.

Yeah there are some other great RARARAR arguments against Capitalism, perhaps, but Piketty is making a pretty specific one. I thought the Guardian review of the book was worthwhile.
posted by jessamyn at 8:22 AM on April 15 [2 favorites]


Since wealth taxes are utterly off the table, is there another solution besides pitchforks?

Abscond. To Mars or space generally at the first opportunity and work with a much smaller set of people to do things in a better way (or just the right way if anyone can agree as to what the right way is).


So... no, then?
posted by entropicamericana at 8:24 AM on April 15 [11 favorites]


This has nothing to do with crony capitalism.

I don't know, I think there's a case under Piketty's arguments for looking at measures of corruption across different societies and suggesting that the lack of economic dynamism that being a corrupted capital-dominant society produces makes it steadily harder to stop being one due to the decrease in economic growth. The quality of resource allocation and resultant growth rate is likely to get worse and worse as things become more corrupt, after all. You're obviously right that it's not the point Piketty's making here though.
posted by jaduncan at 8:28 AM on April 15


You're reviewing a different book.

Yeah, Krugman in the link calls this out pretty clearly:

Capital in the Twenty-First Century is, as I hope I’ve made clear, an awesome work. [... but ...] The main reason there has been a hankering for a book like this is the rise, not just of the one percent, but specifically of the American one percent. Yet that rise, it turns out, has happened for reasons that lie beyond the scope of Piketty’s grand thesis.

Piketty is, of course, too good and too honest an economist to try to gloss over inconvenient facts. “US inequality in 2010,” he declares, “is quantitatively as extreme as in old Europe in the first decade of the twentieth century, but the structure of that inequality is rather clearly different.” Indeed, what we have seen in America and are starting to see elsewhere is something “radically new”—the rise of “supersalaries.”


(And Piketty doesn't treat that aspect in this work.)
posted by RedOrGreen at 8:40 AM on April 15


This has nothing to do with crony capitalism.

Crony capitalism enables the very thing Piketty is talking about. Politicians in the pockets of the wealthy are not going to increase inheritance or property taxes.
posted by Foosnark at 8:41 AM on April 15 [1 favorite]


LOL @ that criticism. Right-wingers are going to have to try harder. I'm curious as to what actually intelligent conservative people have to say about this book. Terence Corcoran's review is just a collection of snide comments with no real substance. He actually complains that Piketty doesn't pay enough attention to Hayek and von Mises, as if that is a bad thing!

Yeah, seriously. I was just about to say something similar. It sounds like there are a healthy number of ways to critique Piketty's arguments, and not just from a right-wing angle, but that article was noooooooot it. Bluster, blubber, and would-be scare tactics, plus the generous use of hollow, judgmental adverbs (e.g. if Piketty's argument is similar to Freelands, then it does so "slavishly").
posted by Sticherbeast at 8:46 AM on April 15


Well, that's what's interesting. Picketty proposes a global wealth tax; that seems like a heavy carry. Without global action, you'll get your Cayman Islands and your Monacos and your Lichtensteins; countries happy to offer a passport and a low tax rate to the world's billionaires. The question is, how many would really take advantage? It's not clear. Warren Buffett still lives in Omaha.

I recall articles about the 'stateless rich' back in the 1980s. I guess some do (take advantage) and some don't, so some will and some won't.

Yeah, Warren Buffet lives in the US, and so do the Koch Bros. I wonder where their money lives.

The global wealth tax is an interesting idea, but yeah, how to get there? As iotic pointed out, we have any number of global problems that require global solutions; difficult to execute with no global executive. We'll just have to work with the international community we have, rather than the one we might wish we had.
 
posted by Herodios at 8:52 AM on April 15


Krugman's recent op-ed Three Expensive Milliseconds is interesting, and runs along the same lines:

Even as one tunnel was being canceled, however, another was nearing completion, as Spread Networks finished boring its way through the Allegheny Mountains of Pennsylvania. Spread’s tunnel was not, however, intended to carry passengers, or even freight; it was for a fiber-optic cable that would shave three milliseconds — three-thousandths of a second — off communication time between the futures markets of Chicago and the stock markets of New York. And the fact that this tunnel was built while the rail tunnel wasn’t tells you a lot about what’s wrong with America today...

Who cares about three milliseconds? The answer is, high-frequency traders, who make money by buying or selling stock a tiny fraction of a second faster than other players...

How much waste are we talking about? A paper by Thomas Philippon of New York University puts it at several hundred billion dollars a year.

Mr. Philippon starts with the familiar observation that finance has grown much faster than the economy as a whole. Specifically, the share of G.D.P. accruing to bankers, traders, and so on has nearly doubled since 1980, when we started dismantling the system of financial regulation created as a response to the Great Depression.

What are we getting in return for all that money? Not much, as far as anyone can tell...

In short, we’re giving huge sums to the financial industry while receiving little or nothing — maybe less than nothing — in return. Mr. Philippon puts the waste at 2 percent of G.D.P. Yet even that figure, I’d argue, understates the true cost of our bloated financial industry. For there is a clear correlation between the rise of modern finance and America’s return to Gilded Age levels of inequality.

posted by Blazecock Pileon at 8:52 AM on April 15 [19 favorites]


Diablevert: Eh? I apologize if you got the impression that I support Lucas' statement. I was -- perhaps clumsily (IANAE) -- attempting to point out the absurdity of an economist saying that distribution of wealth is an improper, nay, poisonous focus for economics. His quote is taken out of context, though, and the fact that he's a macro-economist may provide some. No rising boats were involved.

You were implying that the quote from him was fatuous and absurd. Robbed of context, it is. I was attempting to supply some context. He was wrong, but he's not an idiot; there were reasons why he was wrong. Suggesting that distribution is obviously the central concern of economic theory actually demeans Picketty's accomplishment in returning academic and now popular attention to the issue.
posted by Diablevert at 8:55 AM on April 15


You're reviewing a different book.

I don't agree with this. Krugman is very clear in his review that inheritance has not been the primary cause of the recent rise in inequality. He attributes it to "the rise of the supersalary". Moreover, he attributes this rise to the idea that those at the very top, like CEO's of huge corporations, set their own salaries in a manner that has little connection to productivity or corporate earnings. He discusses "social norms"--the idea that taking a super salary might not be worth it, if marginal tax rates are so high that most of that supersalary goes to the Feds and then you have to deal with the public backlash for taking it in the 1st place. But decrease those tax rates and the calculus changes. You can now pocket a much larger share of that supersalary, so screw the backlash created by flipping the bird to social norms. And doesn't the battle over tax rates directly connect to crony capitalism? And what about the Boards that oversee these CEO's? When those Boards are just other members of the super rich with their own super salaries to justify, how can their be meaningful restraint? Isn't this another form of crony capitalism? I don't see how crony capitalism can be breezily dismissed or disconnected from the arguments in this book. It is built into the system. How do you untangle that as a force driving the numbers?
posted by Seymour Zamboni at 8:55 AM on April 15 [1 favorite]


It's great to see this book reviewed by so many different authors. They must've ransacked their supply to get reviewer copies out, since Amazon still hasn't shipped the copy I ordered last week. The Vox review presents a Cliffs Notes style overview of the key concepts and links to additional reviews in the last paragraph.
posted by antonymous at 8:58 AM on April 15 [1 favorite]


I'm really enjoying some of the related reviews. From the New Yorker one linked upthread:

Economists can debate whether a wealth tax would reduce incentives to invest and innovate, or whether it would be punitive enough to make a real dent in inequality. A more immediate problem is that it isn’t going to happen: the nations of the world can’t agree on taxing harmful carbon emissions, let alone taxing the capital of their richest and most powerful citizens. Piketty concedes as much. Still, he says, his proposal provides a standard against which to judge other proposals ...
posted by RedOrGreen at 9:01 AM on April 15


Crony capitalism enables the very thing Piketty is talking about.

I don't mean to harp on this, but misunderstanding it is misunderstand Piketty and to miss what makes his argument novel. Piketty is arguing that the problem is endemic to capitalism; that once capitalism reaches a sufficiently advanced stage anywhere, the problem of inequality will grow, because the rate of return on capital is higher than the rate of economic growth. This will occur regardless of if the capitalists are crony or not.
posted by MisantropicPainforest at 9:03 AM on April 15 [29 favorites]


I don't see how crony capitalism can be breezily dismissed or disconnected from the arguments in this book. It is built into the system.

At the risk of pointing out the obvious and/or sounding like a schoolmarm, it may depend on how one defines "crony capitalism". When many people refer to "crony capitalism", they refer to more literal, person-to-person corruption (e.g. Halliburton using improper connections to wrongfully secure contracts, contrary to the letter of the law), as opposed to a system in which the laws themselves have been designed to achieve a certain self-reinforcing effect (e.g. a system in which it is the default for the wealthy to stay wealthy).

If people think other people are using the phrase incorrectly, then that's understandable, but that's a semantic issue, not a substantive issue. There will be no progress in the argument unless either a) people agree on one definition of "crony capitalism" or b) people avoid the contentious word itself, in favor of only using fully agreed-upon terms.
posted by Sticherbeast at 9:08 AM on April 15 [2 favorites]


While I agree with you vis-a-vis crony capitalism I don't think (based on the reviews I've read) that Piketty makes the claim that r>g is a steady state in advanced capitalism.

From Krugman

Basically, Piketty sees economic history as the story of a race between capital accumulation and other factors driving growth, mainly population growth and technological progress.

To be sure, this is a race that can have no permanent victor: over the very long run, the stock of capital and total income must grow at roughly the same rate. But one side or the other can pull ahead for decades at a time.

posted by JPD at 9:08 AM on April 15 [2 favorites]


At the risk of pointing out the obvious and/or sounding like a schoolmarm, it may depend on how one defines "crony capitalism".

I don't think that is schoolmarmish at all. It is a good point. The way I think of it is when the super rich buy the politicians who set the tax and economic policies that allow for certain economic outcomes that benefit their personal interests. I totally concede that that may not be crony capitalism and I am using the term incorrectly. Perhaps what I am thinking of is just corruption within the political system.
posted by Seymour Zamboni at 9:13 AM on April 15 [2 favorites]


Pope Guilty >

Not exactly. They're working to limit the power the government has over them specifically.

You're right about the goals of the neoliberal crusaders, but let me explain why I wrote that.

Three blind mice proposed to "Limit the power and influence of government which is the primary tool of these crony capitalists." I don't think it's correct that crony capitalism is a function of the federal government's expansive power or influence, rather the opposite. A weak state, in fact, is one where significant regulatory capture or a deregulatory trend attains, which permits crony capitalism to flourish.

So advocating for the active curtailment of existing government capacity with respect to business means, and can only mean, more deregulation and more crony capitalism. That's what I meant to convey. If you advocate for the elimination of corporate welfare, it's a non-sequitur to then say that the federal government has too much power.

Now, in a pragmatic political vein with respect to deregulation-minded elites: yes, they want the government to let them do whatever they want in the pursuit of profit, and if you argue that the federal government has too much power, you're agreeing with them. Because of the way politics works, anyone who reproduces the overly simplified narrative that there's too much government or that it's too big or powerful or whatever is serving the interests of the wealthy neoliberal types. There's no point, in terms of likely outcomes or communicative action, in taking the side of the powerful who are actually effecting lots of sweeping changes but then say that you mean the slogan differently than they do.
posted by clockzero at 9:17 AM on April 15 [7 favorites]


I don't think that is schoolmarmish at all. It is a good point. The way I think of it is when the super rich buy the politicians who set the tax and economic policies that allow for certain economic outcomes that benefit their personal interests. I totally concede that that may not be crony capitalism and I am using the term incorrectly. Perhaps what I am thinking of is just corruption within the political system.

yeah - but the argument is that this relationship between the return on capital and economic growth is one that permits the sort of capital accumulation that allows a class of people to subvert democracy. Sure it becomes reinforcing - but the central idea is not that a lack of redistribution of capital is the root cause of the inequality.
posted by JPD at 9:20 AM on April 15


I don't agree with this. Krugman is very clear in his review that inheritance has not been the primary cause of the recent rise in inequality. He attributes it to "the rise of the supersalary".

The supersalary - Hedgies or CEOs - just represents the capital holding classes willingness to spread a taste around. It still represents the return on capital.
posted by JPD at 9:21 AM on April 15


Planet money gave it five minutes. Unfortunately short, but it's a good five minutes.
posted by Going To Maine at 9:24 AM on April 15 [1 favorite]


Perhaps what I am thinking of is just corruption within the political system.

Not to be too off-topic here, but another thing that becomes difficult to objectively assess is the influence of corruption inherent in the American political process versus that which can be found in other democratic countries. The American reluctance to tinker with democracy through reforms which allow for greater participatory influence (such as instant runoff voting or proportional representation as a couple of random examples) has allowed wealth to have a more powerful influence over the political process. Of course, this influence acts as a positive feedback loop for wealth, ensuring the stability of the system which generates its power.
posted by antonymous at 9:25 AM on April 15


But if you can't bring yourself to do that. By all means pick up the pitchforks. Those rich corporations will be happy to turn the chain guns on you.

Just wait til you see what a sufficiently large IED can do to a limousine--even an armored one. Or a nice homemade drone with a c-4 payload driven through the window of a luxury skybox.

Historically, those that seek to destroy egalitarian civil society often find themselves regretting that decision.
posted by Chrischris at 10:02 AM on April 15 [2 favorites]


[it is now officially time to stop the "kill the rich" derail before it starts.]
posted by jessamyn at 10:08 AM on April 15 [9 favorites]


I am certainly NOT advocating violence, just pointing out that targeted violence is pretty much the inevitable outcome of extreme wealth disparity; and that, regardless of one's resources, one consequence of participating in society is accepting a level of vulnerability that no amount of resources can completely dispel. Frankly, I would hope that today's tycoons realized that Bread and Circuses are much preferable to living in a security cage, no matter how gilded.
posted by Chrischris at 10:15 AM on April 15 [1 favorite]


Piketty's book is currently sold out at amazon.
Only if you insist on dead trees. My copy has been sitting on my Kindle since I heard about it last night.

(and a quick search suggests that pirate copies are already available in the usual dark corners of the internets)
posted by b1tr0t at 10:39 AM on April 15 [2 favorites]


I am...just pointing out that targeted violence is pretty much the inevitable outcome of extreme wealth disparity

Is this really true? Sadly, I think most of the violence in such places (of extreme wealth disparity) is poor-on-poor or perhaps poor-on-slightly-less-poor.
posted by Steely-eyed Missile Man at 10:41 AM on April 15 [1 favorite]


By this constitution [NY State 1777] the right of suffrage was, in several instances, restricted to freeholders; it being a favourite maxim with Mr. Jay, that those who own the country ought to govern it.

Son William Jay in Life and Opinions of John Jay (1833)
posted by bukvich at 10:43 AM on April 15


Well, that's what's interesting. Picketty proposes a global wealth tax; that seems like a heavy carry. Without global action, you'll get your Cayman Islands and your Monacos and your Lichtensteins; countries happy to offer a passport and a low tax rate to the world's billionaires. The question is, how many would really take advantage?

The current estimate is 4.5 trillion (8% of global household wealth) offshored. Only one quarter of that is declared. It is enough to make global economic indicators invalid.

I doubt it is all Mitt Romney's.
posted by srboisvert at 10:52 AM on April 15


Not yet it's not.
posted by Flunkie at 10:57 AM on April 15


I was just thinking about how family size influences the concentration of wealth through inheritance. The easiest way to become rich is to be an only child with wealthy parents. And it is even better if you have some uncles or aunts who are also childless...and as a result...very rich....who will also choose you in their will. That is a lot of wealth that gets concentrated into one person's hands. But if those same parents have 10 kids, not so much. Anyway, I am wondering how demographic shifts in the size of families--which I always heard tracks with education and wealth--works into this, if at all.
posted by Seymour Zamboni at 11:06 AM on April 15 [1 favorite]


It isn't necessary to tax wealth directly. As Krugman points out, what is important is not just r, return on capital. What is important is after-tax return. Since the 80s, taxes on capital gains and dividends have declined to record lows. Reducing the return on capital is simply a matter of taxing capital gains and dividends the same as ordinary (labor) income.

Fixing the problem of super-salaries requires a couple of extra tax brackets for the over $1 million salaries pushing them into the 60% and 70% range.

The next requirement is to tax and regulate the financial industry to within an inch of their lives. The financial industry is a parasite that siphons off the productive capacity of the economy, functioning as a tax on every monetary transaction in the economy. The financial industry is strangling the growth of the economy.

The final factor is to completely revamp or just eliminate intellectual property. IP is the source of much of the inequality -- super-salaries and wealth. Patents are government issued monopolies that prevent competition, decrease innovation, and vastly increase the cost of virtually everything you buy -- health care, housing, transportation, entertainment, etc. This amounts to a government collected tax that is then handed over to provide the wealth and super-salaries of the 0.1%.
posted by JackFlash at 11:08 AM on April 15 [8 favorites]


22 bucks for the ebook, he's lookin to get his share i guess.

Nonetheless this is an excellent post and a great topic. there are many discussions on the Blue that lead to questions of what to read or where to begin, and this book seems like a good candidate.

thanks to all for links to reviews and discussions as well. I will have a full evening digesting this.
posted by OHenryPacey at 11:31 AM on April 15


Reducing the return on capital is simply a matter of taxing capital gains and dividends the same as ordinary (labor) income.

We did that for all of 2 years in our century of taxation and, as far as I know, there is no country in the OECD that taxes capital gain & dividend income the same as labor. That's not to say it couldn't be done, but it's good reason to doubt it is feasible. If France or Norway doesn't tax capital as heavily as labor, it's unlikely the US will, either.
posted by jpe at 11:34 AM on April 15


22 bucks for the ebook, he's lookin to get his share i guess.

It would be pretty droll if he became one of the super rich as a result of sales of this book.
posted by iotic at 11:43 AM on April 15


Good thing there is no danger of that.
posted by Steely-eyed Missile Man at 11:48 AM on April 15 [3 favorites]


The final factor is to completely revamp or just eliminate intellectual property. IP is the source of much of the inequality -- super-salaries and wealth. Patents are government issued monopolies that prevent competition, decrease innovation, and vastly increase the cost of virtually everything you buy -- health care, housing, transportation, entertainment, etc. This amounts to a government collected tax that is then handed over to provide the wealth and super-salaries of the 0.1%.

This seems like a non-sequitur. How is intellectual property the "source" of much of inequality, as a unique factor unrelated to others like legalized rentiership in the medical industry? I can see it being not unrelated to broader processes, but how does it attain the distinction of having that immense causal power?
posted by clockzero at 11:50 AM on April 15 [1 favorite]


Kling on Krugman on Piketty: I think that Krugman correctly views Piketty’s scenario dominated by inherited wealth as offering a speculative analysis of the future. It does not well describe the present.

For example, suppose you look at the Forbes 500 or somesuch, meaning a list of the wealthiest Americans. Compare the list in 2010 to the list in the supposedly egalitarian era of 1950-1970. I will wager that the 2010 list has a smaller fraction of inherited fortunes as opposed to fortunes that were amassed by the wealthy themselves.

Moreover, looking at the low interest rate on risk-free assets today, I would say that the near-term future is one in which the inheritors shall be meek. The next generation of great entrepreneurs should easily surpass the heirs of current fortunes.

posted by Corinth at 11:52 AM on April 15 [1 favorite]


Isn't that a misreading of things though? If .01% of the population controls 30% of the invested capital in an economy the fact that the .01% today is a different cohort than the .01% 40 years ago doesn't really tell you much if they still control a similar level of invested capital. You still have the inherent inequality issue.

As for the r question I think DeLong's examination of risk premiums captures that. A super low real rate environment with largish risk premia (like today) is very very advantageous for large holders of capital.
posted by JPD at 12:03 PM on April 15


There are ways to curb the HFT advantage and practices though Blazecock Pileon. Here's one by the friend of a friend. Also to "Tobin Tax' but that contains the deadly word TAX so would I'm sure be excoriated by certain politicians.
posted by Carillon at 12:20 PM on April 15


by Piketty's logic HFT and that ilk are not really germane to the issue of wealth inequality. Its actually an activity that in theory requires very little capital.
posted by JPD at 12:29 PM on April 15


Wealth taxes shouldn't be off the table, if the super rich can heed the lesson. The idea is that the system as it is is unstable, leading to inevitable collapse in the form of war, depression or revolution. Hanging onto slightly less ridiculous forms of inequality might be preferable.

Indeed, when reading the book in the context of this study: "[Two] factors can lead to collapse when they converge to generate two crucial social features: "the stretching of resources due to the strain placed on the ecological carrying capacity"; and "the economic stratification of society into Elites [rich] and Masses (or "Commoners") [poor]". These social phenomena have played "a central role in the character or in the process of the collapse," in all such cases over "the last five thousand years."
posted by jokeefe at 12:31 PM on April 15 [1 favorite]


There are ways to curb the HFT advantage and practices though Blazecock Pileon. Here's one by the friend of a friend. Also to "Tobin Tax' but that contains the deadly word TAX so would I'm sure be excoriated by certain politicians.

Another method was discussed in Michael Lewis' recent NYT Magazine excerpt, in which a "fair" exchange is set up which uses spools of fiber optic line to artificially delay trades by geographic proximity, using basic physics principles to put all trades on an equal time footing.

Krugman's point seems to be that it costs a lot of money to set up HFT networks (and maybe, though not said, workarounds to HFT networks), money wastefully devoted purely to the exchange of capital that could perhaps be better spent on improving the well-being of people — say, railroads that move humans and physical goods, being one referenced example.
posted by Blazecock Pileon at 12:39 PM on April 15 [1 favorite]


bukvich: "Does anybody have a workaround to the Economist review?"

Save it to Pocket or similar read-it-later app. You can save and read from a web browser or mobile app.
posted by meehawl at 1:41 PM on April 15


Wait, wait. I know this one...

"THE ARISTOCRATS!"
posted by symbioid at 1:55 PM on April 15


Would it be okay for me to jump right into Capital?

Yes! No stats, no Greek letters, lots of stories. Read it!
posted by shothotbot at 2:09 PM on April 15


"Crony Capitalism" is redundant and Libertarianism is the campaign to make it permanent.
posted by oneswellfoop at 2:18 PM on April 15 [2 favorites]


As far as criticism goes, I dont think his historical digging and basic marshaling of the facts can be seriously challenged, though I guess it will be un-seriously challenged.

His key prediction for the future is that the rate of return on capital will exceed the growth rate, locking in inherited wealth. This is a contention which is more debatable.

A few other holes: he does not demonstrate that inequality is bad per se, or that we have passed some threshold where it is bad. Also, someone needs to try and gather up all the research and see to what degree the rich are able to shape the rules of the game to their advantage, allowing another political economy reason to expect increased inherited wealth to dominate the economy.
posted by shothotbot at 2:24 PM on April 15 [2 favorites]


For example, suppose you look at the Forbes 500 or somesuch, meaning a list of the wealthiest Americans. Compare the list in 2010 to the list in the supposedly egalitarian era of 1950-1970. I will wager that the 2010 list has a smaller fraction of inherited fortunes as opposed to fortunes that were amassed by the wealthy themselves.
Isn't that a misreading of things though? If .01% of the population controls 30% of the invested capital in an economy the fact that the .01% today is a different cohort than the .01% 40 years ago doesn't really tell you much if they still control a similar level of invested capital. You still have the inherent inequality issue.

I really wish this idea got more traction.

I saw Jaron Lanier of all people make this point on the Colbert Report recently. He said something like, "I've done really well in this system, I'm near the top of the pyramid, but I look at my daughter and ask, is this really what I want to leave to her? A privileged spot at the top of a dysfunctional and unstable system?"

A major plank in my (still nascent) philosophy of parenting is that parents who want to leave wealth to their kids, but are okay with also leaving them a world where labor is so poorly valued that their inheritance will likely be more valuable than anything they ever do themselves, are really incredibly shitty parents.
posted by bjrubble at 2:35 PM on April 15 [6 favorites]


Also, someone needs to try and gather up all the research and see to what degree the rich are able to shape the rules of the game to their advantage, allowing another political economy reason to expect increased inherited wealth to dominate the economy.

Most of human history?
posted by ryoshu at 3:05 PM on April 15 [1 favorite]


It's been touched on here, but I believe Piketty's point is that Gilded Age levels of (mal)distribution are the natural state. The 50 or so years of widespread prosperity in the mid-20th century was the fluke. Government is not (necessarily) the enabler, but it is the only effective bulwark.
posted by Benny Andajetz at 3:20 PM on April 15 [8 favorites]


In my opinion wealth is so in control of the legislative, regulatory and electoral processes that nothing proposed so far is achievable. So I would suggest giving them what they apparently want, but with a few itty bitty strings attached. Trust greed and avarice to prevail in the end.

The federal government would offer a binding contract to those in the top 1% to 5% wealth bracket. They would be provided with a 100% exemption from all personal federal taxes: income, capital gains and inheritance. In return they, their agents and entities they control would cease all political activity, funding and donations whether direct, indirect, covert or overt. Simply they would be handed their wet dream tax nirvana in exchange for complete political disengagement. Failure to disengage would forfeit their entire fortune to the public coffers and land them in Leavenworth for the rest of their life without parole. They could cancel the contract at any time but it would never again be available to them or their heirs.

This is probably no less likely or impractical than the other proposals on the table...
posted by jim in austin at 4:13 PM on April 15 [1 favorite]


Jesus christ, so we really can't just go back to the kinds of tax policies we had for the better part of half a century? Even when the effects of changing those policies have been more harmful to our system than anything the USSR ever managed to dish out during the cold war? Then we deserve what we get and I am officially done giving a fuck.
posted by saulgoodman at 4:26 PM on April 15 [6 favorites]


saulgoodman: “Jesus christ, so we really can't just go back to the kinds of tax policies we had for the better part of half a century?”
I'm right there with you, saulgoodman, but I remind you that we're dealing with people who couldn't agree on whether to call a 3% rise in the top marginal rate Taxmaggedon or The Taxpocalypse [PDF].
posted by ob1quixote at 6:27 PM on April 15 [3 favorites]


Jesus christ, so we really can't just go back to the kinds of tax policies we had for the better part of half a century?

The conditions that finally broke Gilded Age power of the oligarchs, instituted high tax brackets and eventually brought widespread middle class prosperity included a robust labor movement, and a vibrant left wing more than willing to resort to violence, on top of two major wars that provided massive stimulus to the working class though unlimited government spending. None of those things exist now, or are likely to exist again, as the rich have systematically laid waste to those institutions over 40+years, and have built new ones specifically designed to ensure those conditions are impossible to recreate again. They have their low taxes now, and the political and propaganda machines to keep them.
posted by T.D. Strange at 6:36 PM on April 15 [9 favorites]


The conditions that finally broke Gilded Age power of the oligarchs, instituted high tax brackets and eventually brought widespread middle class prosperity included a robust labor movement, and a vibrant left wing more than willing to resort to violence, on top of two major wars that provided massive stimulus to the working class though unlimited government spending. None of those things exist now, or are likely to exist again, as the rich have systematically laid waste to those institutions over 40+years, and have built new ones specifically designed to ensure those conditions are impossible to recreate again. They have their low taxes now, and the political and propaganda machines to keep them.

I enjoy being a pessimist, but that's just dumb. As all the best prospectuses say, past returns are not a guarantee of future results. I think there's a lot to worry about when it comes to the future economy and how it will tend to reward capital over labor. But it's foolish to presume that current political conditions will remain in place forever; they've never done yet. Even in Ancient Rome the patric
posted by Diablevert at 6:55 PM on April 15


Ooops, cut myself off. My bad. As I was saying, even in Ancient Rome patricians could not entirely immiserate the plebs without making some provision for their sustenance, and keep it coming, too, lest the mob burn the Senate. Again. The vibrant left of the 19th century didn't rise on the sufferance of the factory owners, it rose in opposition to them.

The defeatism in this thread is odd, when in some ways the very subtext, the meta message of this whole book, is "Maybe it's time to rethink our policy on bread and circuses, or Redistribution: not so bad after all, it turns out."
posted by Diablevert at 7:03 PM on April 15


If we're going to live in the Gilded Age or the Belle Époque, can we at least have the clothes?
posted by The Underpants Monster at 7:33 PM on April 15


The defeatism in this thread is odd, when in some ways the very subtext, the meta message of this whole book, is "Maybe it's time to rethink our policy on bread and circuses, or Redistribution: not so bad after all, it turns out."

The defeatism in the thread may be informed by the fact that the resources which fueled the mid-20th century "glory years" in the West are close to depleted, and the consequences of their rapid use are now evident (and will only continue to be so, and in much worse ways). The stress of climate change, the rise in oil prices, and the ruination of the environment pretty much ensure that without massive and focused political will we will never see their like again. And how much focused political will can there be when it goes against the interests of the rich and powerful? Millions marched against the invasion of Iraq, to no avail. I don't mean to sound hopeless-- there's always hope-- but the entrenched structures of power don't move without huge, even catastrophic, forces acting on them.

It's my greatest hope-- that word again-- that the story might change, that the parade of exploitation of the poor by the rich which has accompanied most of human history might somehow come to an end. But I'm not so sure that it's possible... though human ingenuity has solved a lot of problems. Perhaps it might solve this one?
posted by jokeefe at 7:58 PM on April 15 [2 favorites]


re: crony capitalism, see interfluidity (lightly edited)
  1. scarce, rent-producing assets can be untraded but correlated with claims on financial wealth[*]
  2. wealth ex ante can't expect to earn the good return, true.[*]
  3. but wealth may concentrate among those who hold the nontraded, scarce assets.[*]
Martin Wolf reviews Thomas Piketty
Perhaps the most extraordinary statistic is that "the richest 1 percent appropriated 60 percent of the increase in US national income between 1977 and 2007." Technology and globalisation can hardly explain this, since both were at work in all high-income countries. Indeed, the two most striking conclusions are the rise of the "supermanager" in the US and the return of patrimonial capitalism in Europe.

[T]he huge rise in labour earnings at the top of US income distribution is overwhelmingly explained not by sports stars or entertainers but by increases in remuneration of managers. He argues that this is the result of the falls in marginal taxation, which have increased the incentive to bargain for higher pay, reinforced by changes in social norms. The alternative view – that the marginal productivity of top managers has exploded – is, he asserts, unpersuasive, partly because the marginal product of a manager is unmeasurable and partly because overall economic performance has not improved since the 1960s.
also btw... -What Money Can't Buy
-Human After All (Chrystia Freeland dialogue with Larry Summers, starts at about 40:00.)
-New US capital proposals would restore traditions [1,2,3]
posted by kliuless at 8:08 PM on April 15 [12 favorites]


but does piketty advance a theory for how the rate of return on capital can exceed the growth of the overall economy for long periods of time?

if not it seems like just another demonstration of the thesis that studying economics makes you stupid. the fact that Krugman finds "super salaries" mysterious rather than an easy example of how the this magical return on capital is a form of looting just proves the point.

also, why do the French socialists not realize that their enemies are happy to seeb them commit political suicide with high taxes and low inflation?
posted by ennui.bz at 8:34 PM on April 15


Want to play along at home? All of his charts and data is on his website here.

The top world incomes database on which a good deal of the work is based is here.
posted by shothotbot at 5:26 AM on April 16 [2 favorites]


Can someone give a really basic overview of the concept? What I'm gathering from the thread is that it's something along the following.

"There is an ever widening gap between the top 1%. This is attributed to (a). This will lead to a new aristocracy of inherited wealth without productive labor generating value. This is because the value of capital gains is rising faster than income."

I'm getting two different readings though?

a) capital gains rising faster than the economy can actually sustain/create wealth via actual productivity

b) we are actually gaining more wealth via income/wages than wealth/finance?

Which is it? Finance or wages? Are the "wages"/salaries overcompensatory then? I don't get the central thesis, can someone just break it down in real simple terms?
posted by symbioid at 7:56 AM on April 16


symbioid,

This should be what you are looking for.
posted by MisantropicPainforest at 8:05 AM on April 16 [1 favorite]


What I understand his main thesis to be is right on page 1:
When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.
By capital he means both productive capital (factories) and wealth. Mainly wealth, actually. I have not gotten to the part where he says exactly where the extra returns have come from recently. But I dont think it matters to his argument whether the excess return to capital is called wages (ie of a CEO) or interest or capital gains.

While I think the criticism of his lack of clarity about the evolution of r is potentially on target, provisionally because I have not finished the book yet, I actually think it would have been reasonable for him to make a purely empirical argument: the share of income going to the 1% is back to where it was from 1800-1900 and it looks like lessening inequality was an aberration, not the natural state of capitalism.
posted by shothotbot at 8:08 AM on April 16


I am probably reading this from the exact opposite position as he is starting from - I don't think income inequality is necessarily bad or that government needs to be involved in regulating these distributions, and I think that capital accumulation/inheritance is a good thing, rather than a bad. However, reading his conclusions, they do seem quite compelling. My only critique would be that he points out inheritance taxes in the Belle Epoque, but doesn't mention that inheritance taxes in the United States and many other Western countries are actually quite high - he notes that they have fallen, but not what they have fallen to. If anything, I think he's too pessimistic on his own side's chances. Otherwise, it does seem like a potentially interesting read.
posted by corb at 8:19 AM on April 16


corb: inheritance taxes in the United States and many other Western countries are actually quite high

High relative to what? The average effective tax rate of the estate tax is 16.6%, less than the ~20% effective rate on capital gains. The top statutory rate is 40%, but almost nobody pays that because the current exemption level is over $5 million, and of course the wealthy have many ways to use deductions to avoid paying the statutory rate.
posted by tonycpsu at 8:31 AM on April 16 [3 favorites]


Yeah, I was referring to the top statutory rate - I know that using foundations, etc, they can get around paying tax, but either way it's still income that is leaving the family, even if it's going to the family's favorite art or what have you.
posted by corb at 8:33 AM on April 16


You didn't answer my question. You said the rate was high: relative to what? It's lower than the capital gains rate.
posted by tonycpsu at 8:34 AM on April 16 [2 favorites]


High relative to historical trends of inheritance taxes on estates and property for the last thousand or so years? I could pull you out a lot of historical data points if you really care. I mean, I think it's pretty obvious that American taxation and inheritance in particular exists to break up large estates and land parcels, but I'm certainly open to data if you think that's not the case.
posted by corb at 8:46 AM on April 16


that government needs to be involved in regulating these distributions

Since the government creates capitalism and the market, the government is necessarily involved in these distributions.
posted by MisantropicPainforest at 8:48 AM on April 16 [5 favorites]


corb: High relative to historical trends of inheritance taxes on estates and property for the last thousand or so years?

First off, I don't think it's appropriate to start the clock 800 years before the United States existed when making a statement about how high taxes are in the United States. And yes, I am requesting that you please show some kind of factual support for your statement.

corb: I mean, I think it's pretty obvious that American taxation and inheritance in particular exists to break up large estates and land parcels

OK, but that would be changing the subject, because this is a statement about why the tax exits, not about how high the rate of the tax actually is.
posted by tonycpsu at 8:55 AM on April 16 [5 favorites]


High relative to historical trends of inheritance taxes on estates and property for the last thousand or so years?

Yes, let's bring literal feudal landowners into this discussion
posted by Rustic Etruscan at 9:02 AM on April 16 [9 favorites]


Compared to the administration of Richard III, American expenditures on the welfare state are shocking
posted by Rustic Etruscan at 9:06 AM on April 16 [10 favorites]


I am requesting that you please show some kind of factual support for your statement.

I was halfway in the middle of writing up a cited history of how estate tax came to be in medieval England and the levels at which it arose, dating back to Cnut and the heriot, but then I realized that it probably wouldn't contribute much to the overall thread for anyone who's not obsessively interested in medieval history, as well as essentially being a pitched fight over whether or not I knew what I was talking about, which I'm trying to avoid doing. So I'm going to take a walk instead. If anyone is actually interested, I suggest research, and can memail a few starting points, it's a fascinating transition on how these things came about.
posted by corb at 10:08 AM on April 16 [1 favorite]


"Primitive Accumulation" is the term you're looking for, n'est ce pas?
posted by symbioid at 10:21 AM on April 16


corb: but then I realized that it probably wouldn't contribute much to the overall thread for anyone who's not obsessively interested in medieval history, as well as essentially being a pitched fight over whether or not I knew what I was talking about, which I'm trying to avoid doing. So I'm going to take a walk instead.

Hey, walks are always good, but I really don't think the depth of your expertise on Medieval history is all that important to this discussion, because it's really not an Earth-shattering revelation that the estate tax is higher in the United States than it was before there was an estate tax or a United States. I just don't see how this truism serves as any kind of critique against Piketty's thesis, which is how you pitched it.

If you think the genesis of the estate tax in late Anglo-Saxon England has any relevance to the discussion of inequality 800 years later in France or 1000 years later in the United States, then go ahead make that case explicitly. If you're not advocating a return to feudalism, then what is it you're advocating? Simply saying "but estate taxes are high now" without being explicit about what they're higher than leaves way too many opportunities for us to talk past each other.
posted by tonycpsu at 10:43 AM on April 16 [7 favorites]


One of the main criticisms from the Right seems to be that Piketty did not prove that inequality is undesirable, or at least a certain amount is undesirable. Ultimately, this is a normative question, a matter of politics and probably cannot be "proven," per se, without making certain assumptions. Having said that, I would make the proposition that inequality beyond some point is corrosive to democratic self rule in that at some point money is mostly about power. Hence, if enough money-power is concentrated into a small part of the population, that part will become the rulers, rather than the"People"
posted by JKevinKing at 10:52 AM on April 16


One of the main criticisms from the Right seems to be that Piketty did not prove that inequality is undesirable, or at least a certain amount is undesirable. Ultimately, this is a normative question

That is not necessarily true, it could be the case that high inequality leads to slower economic growth, in which case self interest and justice happily coincide.
posted by shothotbot at 11:19 AM on April 16 [3 favorites]


Krugman today: I was especially struck by the somewhat paradoxical contrast between Belle Epoque France and Gilded Age America: a notionally egalitarian society in which anything that might challenge the privileges of inherited wealth was beyond the pale, versus a society that celebrated financial success but in which it was considered reasonable and respectable to advocate high taxation for the explicit purpose of reducing inequality. It seems to me that we want some real scholarship — from political scientists, not (or not just) economists — to figure out that contrast, and learn lessons that might help us break the cycle of rising dynastic power we face today.

Thomas Piketty at the CUNY Graduate Center, followed by a panel discussion with Steve Durlauf, Joe Stiglitz, and Paul Krugman live stream at 6pm.
posted by T.D. Strange at 12:54 PM on April 16 [3 favorites]


Compared to the administration of Richard III, American expenditures on the welfare state are shocking

"Where is thy conscience now?"
"In the Duke of Gloucester's purse."
posted by Wallace Shawn at 2:10 PM on April 16


Relevant story from Greenwich CT. According to the real estate agent these sales are driven by a rising stock market and bonuses:

A 12-bedroom waterfront estate on 50 acres sold for $120 million this month in what the listing and selling agent, David Ogilvy, has called the most ever paid for a residential property in the United States. That was quickly followed by a $14.3 million sale Monday of a 52-acre estate in nearby New Canaan.
posted by Seymour Zamboni at 4:06 AM on April 17


Compared to the administration of Richard III, American expenditures on the welfare state are shocking

At least he did better than Richard II, whose approach was more like "work until you die or we'll hang you." Which, to be fair, does solve the pension problem nicely.
posted by GenjiandProust at 6:13 AM on April 17


posted by kliuless at 11:54 PM on April 23 [7 favorites]



Nice, Kliuless. But I think you missed a spot (if this is linked elsewhere in the thread, apologies, but I think it's useful):

Robert M. Solow's long long review of Piketty's book in the New Republic.
I had a friend, a distinguished algebraist, whose preferred adjective of praise was “serious.” “Z is a serious mathematician,” he would say, or “Now that is a serious painting.” Well, this is a serious book.

It is also a long book: 577 pages of closely printed text and seventy-seven pages of notes. (There is also an extensive “technical appendix” available online that contains tables of data, mathematical arguments, references to the literature, and links to class notes for Piketty’s (evidently excellent) lecture course in Paris. The English translation by Arthur Goldhammer reads very well.

Piketty’s strategy is to start with a panoramic reading of the data across space and time, and then work out from there. He and a group of associates [notably Emmanuel Saez and Anthony B. Atkinson have compiled] an enormous database that is still being extended and refined. It provides the empirical foundation for Piketty’s argument.

[. . . ]

Piketty’s foreboding vision of the twenty-first century remains to be dealt with: slower growth of population and productivity, a rate of return on capital distinctly higher than the growth rate, the wealth-income ratio rising back to nineteenth-century heights, probably a somewhat higher capital share in national income, an increasing dominance of inherited wealth over earned wealth, and a still wider gap between the top incomes and all the others. . . . suppose that Piketty is on the whole right. What, if anything, is to be done?

Piketty’s strong preference is for an annual progressive tax on wealth, worldwide if possible, to exclude flight to phony tax havens. He recognizes that a global tax is a hopeless goal, but he thinks that it is possible to enforce a regional wealth tax in an area the size of Europe or the United States. . . . He estimates that such a tax applied in the European Union would generate revenue equal to about 2 percent of GDP, to be used or distributed according to some agreed formula.

Annual revenue of 2 percent of GDP is neither trivial nor enormous. . . . it is the difference between the growth rate and the after-tax return on capital that figures in the rich-get-richer dynamic of increasing inequality. A tax on capital with a rate structure like the one suggested would diminish the gap between the rate of return and the growth rate by perhaps 1.5 percent and would weaken that mechanism perceptibly.

This proposal makes technical sense because it is a natural antidote to the dynamics of inequality that he has uncovered. Keep in mind that the rich-get-richer process is a property of the system as it operates on already accumulated wealth. It does not work through individual incentives to innovate or even to save. Blunting it would not necessarily blunt them.

Piketty writes as if a tax on wealth might sometime soon have political viability in Europe. . . . On this side of the Atlantic, there would seem to be no serious prospect of such an outcome. We are politically unable to preserve even an estate tax with real bite. If we could, that would be a reasonable place to start, not to mention a more steeply progressive income tax that did not favor income from capital as the current system does. But the built-in tendency for the top to outpace everyone else will not yield to minor patches.

if the United States were to become . . . the last refuge of increasing inequality . . . Would that work for you?
posted by Herodios at 1:57 PM on April 24 [1 favorite]


Capital in the Twenty-First Century: A Discussion with Thomas Piketty, Joseph Stiglitz, Paul Krugman, Steven Durlauf, and Branko Milanovic
posted by homunculus at 9:57 PM on April 24


Thomas Piketty Undermines the Hallowed Tenets of the Capitalist Catechism: Not only does capitalist growth not reduce inequality; it increases it.
posted by homunculus at 9:02 PM on April 25


What Would the World Look Like with Piketty's Global Tax on Wealth?
posted by homunculus at 10:56 PM on April 25


Piketty and Millennial Marxist s On The Scourge Of Inequality
posted by the man of twists and turns at 6:03 AM on April 26


How do you sound clever and au courant in 2014? Easy. You talk knowingly about Capital in the 21st Century...
posted by oneswellfoop at 3:00 PM on April 30


What Piketty Leaves Out: Despite some losses to financial capital during the Great Depression, the more powerful era of equality in the U.S. began during World War II.
posted by homunculus at 11:44 AM on May 2


Want a revolution? Left unchecked, parasitical capitalism WILL produce one
posted by homunculus at 1:18 PM on May 2


Inequality Has Been Going On Forever ... but That Doesn’t Mean It’s Inevitable
posted by tonycpsu at 9:01 AM on May 3


THE RULES OF THE NEW ARISTOCRACY
posted by homunculus at 12:39 PM on May 4


Warren Buffett's successor will be … his son
The striking thing about this is that Buffett's response isn't crazy. It is 100 percent plausible that Berkshire-Hathaway can continue to be a successful company under the stewardship of its founder's not-especially-qualified son.

That in many ways is the moral of the story of patrimonial capitalism. If not-especially-qualified children of rich people were necessarily destined to be disasters in the business world, then the unfair advantages they receive as a matter of birth wouldn't be a huge problem. Those advantages would simply dissipate due to incompetence. But while building an enormous diversified holding company like Berkshire is really hard, simply presiding over it without letting it collapse is a lot easier. Not idiot-proof by any means, but it's a lower bar. A reasonably intelligent, reasonably diligent person can do it. So maybe Howard Buffett can do it. Why not? But then again, why not any of the millions of other reasonably intelligent, reasonably diligent people kicking around in the United States?

Well, because Howard Buffett is Warren Buffett's son and you're not.
posted by tonycpsu at 2:07 PM on May 5 [1 favorite]


Omnivore: Piketty fever
posted by homunculus at 2:44 PM on May 6 [1 favorite]


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