You might be interested in our own local author, John Tuepkers interpretation of Pikettys tome. BTW, Tuepkers book will be available as a silent Auction offering at the JJH dinner on Friday! Here is his review: Friends near and far!! As promised, I am back at you with a review of Thomas Pikettys Capital in the 21st Century. One of at least a thousand reviews published on line. My review will not be the best, but it will be one of the easiest to read!! Let me extend a special thanks to the 17 people who took the time to RESPOND to my initial question of a week or so ago. I am hoping that a few more of the 250 receiving this have some thoughts about Piketty, and will read the review. I know it is summertime and almost everyone is on vacation, as am I. Nearly everyone who responded said that they agreed that great inequality of wealth is a very big problem, and that it is getting worse. Most had heard of Piketty, and a few were trying to stay with it. Remember, this is a book that spent three weeks at the top of the Non-Fiction Bestseller list, obviously a book of some importance. One respondent claimed to have actually read it all. I read an analysis (done by Amazon, on Kindle readers) that the average person who bought the book made it to page 26 before giving up. PIKETTYS THESIS: All around the world the very rich are getting much richer, this is a natural trend of Capitalism, people everywhere sense it, but governments no longer seem very interested in doing anything about it. Why not? Because great wealth translates into great political power, even in our so-called democracies. The trend throughout the last three hundred years is that return on capital is greater than economic growth, and this automatically increases the fortunes of those with the most capital---the super wealthy. We MUST begin with a global accounting of wealth---WHO OWNS WHAT-- and then have a small annual global tax on wealth. Not just on real property, but on financial wealth. An end to all off-shore tax havens would be a basic tenet of such a new system. Sure, a higher INCOME TAX would be a step in the right direction, and larger estate taxes within countries would also help, but nothing could stem the accumulation of more and more assets by the extremely rich like a global wealth tax. Well, maybe a revolution and the ensuing chaos would do the trick, but we really dont want that. WWI and WWII cut down the inequality, to give you another idea of what it takes!! As you can imagine, most of the worlds wealthiest people dont like this idea very much, and publications like the London Financial Times put out a merciless criticism, accusing Pitketty of every economists sin under the sun, even though almost all the criticisms were explained in the end notes of the book itself, or an even longer (and even more boring) on-line technical explanation of methods. Anti- tax propaganda, always sponsored by super-rich corporations, trusts, or billionaires themselves, seems to have swayed a lot of regular people against any and all taxes. OK. I found the book very difficult reading, quite tedious, and I was often put off by endless comparisons of economies in the 18th century. I simply do not believe the data for those times and places is accurate enough to have any purpose at all. And additionally, we are moving into a world of physical limits, which all the old economic formulas failed to take into account, but will impact us more and more. Maybe this is due to my ignorance of what economists do, but I must also say that I dont see the importance of the ratio between capital and income, yet Piketty goes for hundreds of pages explaining how that changed over time in first one country and another. I think most economists understand this and it is this very broad and detailed study of income and wealth over the centuries that makes this book (and Piketty) so important. Piketty is a radical in some respects, but in others he is pretty much mainstream, and has a worldwide reputation as someone who cannot be ignored. This reputation is what got me to read the book, and stay report on it. Piketty is French, and surely we all remember the story of the French Revolution from our World History class (you know, the one I TAUGHT!!) The nobility and the church controlled damn near all the land, the business, the resources, in short the wealth of the country, the peasants had miserable lives and the intellectuals of the Enlightenment (Rousseau, Voltaire) could see the problem (they had put up with the system for hundreds of years) and so they rose up and did the French Revolution in 1789, and of course the Reign of Terror followed and then Napoleon and the wars. BUT of greater importance to economists was the fact that the state seized much of the wealth of the church and the nobility, with the intention of setting up an economic system which would provide a bit more equitable income and opportunity for all Frenchmen. There was a lot of trouble over the next century or so, but the lives of Frenchmen did improve, and yet by the eve of WWI there was a return to great inequality in France. This inequality was one of the underlying causes of WWI, as the most wealthy and powerful families in France (and Britain, Germany also) thought they could increase their wealth even further and faster by a quick war. The average impoverished French citizen had little say in the matter, yet those were the ones who would do the dying. Wealth inequality in the United States was bad before WWII, but not quite as bad as in Europe. The United States still had a much faster rate of growth, which made it possible for more Americans to move into the middle class. So we had the horribly expensive WWI, Communist Revolution in Russia, and then all sorts of financial crises between the wars, the rise of Fascism, and finally WWII, which saw the deaths of 60 million people and the destruction of a large part of European wealth. In the aftermath of WWII a new financial order was created with the following important aspects: 1. Great debt caused by the war had to be dealt with. France had a 25% one-time wealth tax, plus a 100% tax on all profits made during the 4 year occupation. 2. Very high income taxes would remain in place. 91% in the United States (on income over a million dollars!) , both as a way of repaying debt but also to rebuild government infrastructure. 3. Colonies, which had been an important wealth stream before WWI, would be granted independence, and allowed to retain most of the wealth they produced. 4. The common people, who has fought, died, worked hard during the war would win new respect and be provided with higher wages, pensions, health care, affordable housing, quality education, etc. Unions would be empowered to protect workers (well, at least in Europe!) 5. Europe would take steps to unite economically, which would not only serve as a buffer to prevent future wars, but also spur trade, production, economic growth. Again and again, Piketty explains all of this in graph form, and shows that the middle of the 20th century, from 1930 to about 1975, was an aberration from economic history. The percentage of wealth held by the highest 10%, or 1% or esp .1% drastically decreased and for the first time, possibly in history, by 1970 income from labor was greater than income from wealth. It was the Golden Age of the Working Family, both in the US and to a lesser extent in Europe. But then the conservative politics of the extreme right took over and slashed taxes and gutted banking regulations that had served well for half a century and , suddenly great wealth once again began accumulating in the hands of the already very wealthy. While conservatives like to preach that these top 1% have EARNED the money, actually about 80% of the richest 1% have inherited their great wealth. About 5% of the very wealthy earned the money through entertainment, and about 15% discovered some new technology and ran with it (Bill Gates, for example) often using monopolistic practices or destroying traditional Main Street business in the process. I cover the same idea in my book pages 383-387. Here is a link to a longer review, if you are interested in learning more about the book without actually READING it: boingboing.net/2014/06/24/thomas-pikettys-capital-in-t.html I found the book a little too clinical for my taste, even though Piketty tried hard to make it readable for the common man (ME!) he stuck too closely to the academic economics track, though at the same time he was critical of the narrowness of almost all standard economic practice. He did not come close to describing in any detail the dangers of this runaway redistribution of wealth to the very rich. The review cited above says that Pikettys description of the economic problem associated with this grossly unequal distribution is like someone describing slavery as slave owners having more assets than slaves, without ever talking about life (and death) on a plantation. It all comes out pretty sterile. I also did not like the way he included all the income of everyone who works on Wall Street as Labor Income. Including bonuses, stock options, deferred salary, all that. I dont see that as labor at all. It is moving money around, it is capital income. You may not see this as a big deal, but after reading a couple hundred pages of a book where the main topic is labor income vs capital income, it begins to grate. Perhaps of greatest importance, Piketty devotes only two pages to considering the impact of future energy shortages and climate change on the economy, and has no suggestions other than it is a dangerous situation, and will likely limit our growth rate. IN SUMMARY: This is a very important book by a world-class economist, who at least got the attention of the world press, and perhaps briefly some influential people talked about the possibility of change in the direction Piketty suggests. I know that the French and other Europeans are busy working on a new economic index to replace the worthless GDP, so popular with the financial elites in America. Piketty has faith that sooner or later, at least in the wealthy western democracies, the voters will see the need to rewrite the entire tax structure, as well as regulations of the mega- banking system. I cant say that I share that faith. So long as the very wealthy increase their share of the overall wealth it means less and less for everyone else---forget all that about the larger pie, and a rising tide lifting all boats Look instead at the statistics and see where the wealth is really going, and where it will continue to go. For the last 40 years in the US the share of the bottom 90% of the economic pie has become smaller and smaller. It is now right at 50% for the top 10%, and 50% for the bottom 90%. And getting worse. I cant leave you without a list of ten, so here goes: FACTS FROM PIKETTY: , 1. There are right now about 1500 Billionaires around the world, with a net worth of about $6 trillion, or about 1.5% of total world wealth. The real growth (after inflation) of these fortunes over the last 26 years has been 6.8% annually. Harvards $30 Billion endowment has averaged 10.2%. Maybe those guys really are smart, after all!! 2. To make it into the top 1% of people on the planet, you need a fortune of about $4 million, which is about 50 times the average global net worth. 3. Sovereign Wealth Funds (mostly OPEC countries, but also China, Singapore) have a total of $5.3 trillion. 4. Over the last 30 years there has been a dramatic shift from Public Wealth to Private Wealth. This is because instead of governments collecting adequate taxes from the very rich, they have BORROWED from the rich instead, and run up massive debts, and are vulnerable to ruin if interest rates go up. So the Fed prints more and more money. 5. The half of the US population that is below median wealth owns only about 5% of the private wealth of the country. 6. The minimum wage in the United States is stuck at $7.25/hr. In France it is now $12.35. Germany and Sweden have no minimum wage, but give labor unions great power to negotiate fair wages, and the lowest wage is about $13/hr. 7. Right now, in France, about 66% of total wealth is inherited wealth. By the middle of this century (barring crash, revolution, major war, natural catastrophe, or God Forbid adopting Pikettys suggestions!!) about 90% of wealth in France will be inherited. 8. We have no official accounting of great fortunes. What information we have comes magazines like Forbes or Challenge (France), which have an ideological bias in favor of wealth accumulation. We also get some information from the multinational banks, which obviously represent their own interests. 9. The recording of international trade deficits is particularly sloppy, and if you add them all up it appears that the planet Earth itself is in debt to something!!! Piketty suspects that much of this money disappears into hidden offshore bank accounts. 10. According to the French Declaration of the Rights of Man (1789) equality of opportunity should be the norm of an Enlightened Democracy, and the only exceptions should be based on common utility. Allowing vast fortunes to grow unchecked has nothing to do with common utility. It is one fatal flaw of capitalism which the people have every right to correct. I thought a lot about the book and constantly compared Pikettys professional analysis to that offered in my own book Going Down: Connecting the Dots on the History, the Issues, and our Future. We are in nearly total agreement. I wish I had included a page or two about the importance of documenting global wealth, though I did talk about the great need to outlaw offshore banking and tax havens. I also should have suggested a global wealth tax, but my book was more about the United States, and I do call for much higher income and estate taxes. While I am at it I should add that I was WRONG on page 375 when I say that a transaction tax on Wall Street would not raise much money. Not only would it raise a lot of money, but it would put the brakes on a lot of the most careless trading that is done by computers amounting to hundreds of billions of dollars on a daily basis. So that, my friends, it THAT. Go to your library and get a copy and see how far you can get. You may like it, particularly if your Doctorate is in Economics. Always looking forward to what yall think about this. John
Posted on: Wed, 13 Aug 2014 00:30:14 +0000
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