French Economist Thomas Piketty’s Capital in the Twenty-First Century has been translated into English by Arthur Goldhammer, and it has made quite a stir. Paul Krugman’s review is probably the best, and Matt Yglesias’s is the best “TL;DR” version. To summarise briefly, Piketty studied wealth (capital) growth in the nineteenth and twentieth century and has concluded that without considerable government intervention the 21st century will look a lot like the Gilded Age. That is, wealth will continue to accrue only a very select few at the top of the wealth curve (the “.01%” you could say), and that eventually elites will inherit all of their wealth, with little chance of a change in social status between generations. Piketty says this undermine democracy and turn society into an oligarchy, if it already hasn’t.
What does this have to do with transportation? Well, capital and wealth accumulating to only a few is scary enough, but I think it also helps explain one of my pet subjects, the decline in infrastructure across the United States. Public infrastructure is capital as is any other. With all wealth accumulating to just a few, there’s less money left over for big public infrastructure projects, which is why the interstate system could be built in the middle of the 20th century, but a project of that scale is completely unimaginable today. Piketty does not go into any detail on this subject, nor does any of the commentary on the book, but it’s worth keeping in mind as an explanation for why it’s so difficult to even keep public buses funded.
As an aside, I do recommend Capital in the Twenty-First Century, even though it’s not the easiest read.
Answering the summary arguments of Yglesias:
The ratio of wealth to income is rising in all developed countries.
If you don’t believe in asymptotes, maybe this bothers you. However, it’s also been shown that happiness tops out after a person starts earning $75,000 a year. The point being that it may be irrelevant that a very few people have stratospheric amounts of cash. This may be a sign of the future obsolescence of excessive money (what a friend of mine calls financial obesity).
Absent extraordinary interventions, we should expect that trend to continue.
Rather than interventions, how about inventions. For example, social media. It’s only really become prevalent in the last 10 years. They mention the stratospheric values of superstars. Well, superstars are as much a creation of restricted access as superior talent. When there were only 3 TV networks, anyone who had even a short lived series became a millionaire. Today, we can make the same jokes they make on SNL — only faster — in comments on news articles. Any person can get on a soap box and start proclamating. At some point people are going to realize that the Sneeches with stars have only that…a star on their chest.
So, there are all sorts of communications and manufacturing (3-D printing) technologies which are de-leveraging centralized processes as we speak.
If it continues, the future will look like the 19th century, where economic elites have predominantly inherited their wealth rather than working for it.
In some sense Generation X during 1980-2010 “inherited” all its wealth. Even if someone had a job, very often they had more flexibility, a better environment, than at any other time in history. A job became more like a sinecure or grant award, especially in technology, than an actually payment for physical labor. Thus we are all trust fund babies. The trust fund being built from the wars fought, buildings built, roads laid, computers invented, cables strung all in the post-WWII era.
If there was a problem, it was the very high immigration rates during the last 30 years. Population went up by a third. Here in Washington State it went up 60% in two years. And yet few to none mention this as a hardship factor! A welcome trend is that immigration has ground to a halt, and the high birth rate nations are finally taking a breather and developing a middle class with a presumably lower birth rate.
The best solution would be a globally coordinated effort to tax wealth.
As Judy Tenuta said, “It could happen.”
But seriously, we now have one of the best taxes going right here in the US. The NIIT or Net Investment Income Tax, which taxes the revenue derived from wealth. That is almost better than taxing wealth itself (which is hard to estimate) because it taxes the hard dollars derived from assets. If WA state were add a fraction of percent to that tax (currently at 3.8%) you wouldn’t be scraping around with propositions trying to fund a bus route.
I’d prefer to see the tax rates seen in the early 20th century that caused the Vanderbelts et. al. to have to sell their mansions. When their take of the pie goes down to around 20% instead of 60% they take now, things might get better.
Then you should be supporting Plan C to raise property taxes instead of raising sales taxes like Prop 1 proposed.
I will support plan C but I’d rather the rest of the county value public transit as much as I do.
“When John Henry was a little baby
Sittin’ on his Daddy’s knee,
He picked up a hammer and a little piece of steel,
Said this hammer be the death of me, Lord, Lord,
This hammer be the death of me!”
Speaks to some other realities of inheritance, John, and also to the matter of balance sheet on immigration- starting with the early gift of prophecy about the inevitable reward of a life of hard work for people like himself, wherever born, for all of history.
Legend or history, subject of the song was what we’d call skilled labor in a critical trade: drilling blasting holes in solid rock. Tool was a long-handled hammer. Skill was being able to rapidly and repeatedly hit the blunt end of a drill about three quarters of an inch across, while another worker knelt pouring water in the hole and turning the drill after every whack. Also skilled. Lifespan same as his partner’s skill.
Citizen or immigrant? John Henry’s birth certificate, if he had one, said “Virginia.” Which mean that in late 19th century southern USA, his skin color meant he couldn’t vote or go to school, and was subject to prison for offenses like walking too close to a railroad track or being on the streets after dark. Sound like a citizen to you?
And in prison, being sold like property to private contractors who didn’t have to pay him anything. And after they’d worked and starved him to death, went back to the corrections department and replaced him. The Civil War really did teach the South slavery’s main evil: having to keep Blacks alive, like, for instance, cows. Lord, how the shareholders, likely south and north, must have loved this new system!
Same principle modern times? Lobby publicly to keep unauthorized immigration savagely illegal, but in lower tones to for God’s sake don’t let the apples rot. I wonder how much of the pre-2008 housing boom in Arizona sold houses built by people without papers but with major skills? Arrest and deportation for jay-walking- easy settlement for back wages.
Work landscaping in, say, Central Michigan alongside a Salvadoran farmer, and you’ll see an honest accounting of an unmentioned US inheritance from before 1776: all the skilled labor we got for free and clear due to wages earned but still owed. Whatever your ideology- learn to read all the columns on the sheet.
Mark
Unfortunately, it’s extremely relevant that a few people have stratospheric amounts of cash.
The problem is precisely that using the money *as* money doesn’t make people happier after about $75,000/year. So instead, the stratospherically rich start using money as *power* — they use it to buy politicians, buy judges, and generally reshape the world in the way they like.
Given that most of them got to their positions by inheritance, and are mostly complete dopes, this is *awful*. This is how we have the Koch Brothers spending billions to push very bad, destructive policies in the US.
“Piketty says this undermine democracy and turn society into an oligarchy,”
Oligarchy would be paradise compared to the Feudal system we are rapidly moving towards. I just wonder if our Feudal lords at Boeing, who left for IL, will be nice enough to build us a few bike lanes, fund a few bus routes, or resurface a few roads for our grandchildren. God knows the people they put in our state legislature have no interest in doing so.
That’s not feudalism. Feudalism is when the king owns all the land and gives perpetual leases to his vassals, who pay by being on-call for military service, who in turn sublease to lower-level nobles, and so on down to peasants, who pay in crops or labor or later money. All the levels are held together by reciprocal obligations, and the leases are hereditary.
It’s hard to see any comparison in the US. The President does not own all the land. People own individual houses in fee simple. Nobody except Boeing employees have to obey Boeing. The state gives Boeing tax breaks to stay here, but that is just trying to attract somebody who has a choice, and a decision that the company is worth attracting. Another response would be to just say to hell with companies that try to play that game… Although I have become convinced that Boeing’s tens of thousands of manufacturing jobs are worth something. Unlike the sports teams and their demands for publicly-funded stadiums.
The larger corporations often try to set up feudalism. They claim that employees owe loyalty to their corporate bosses, even to the point of getting angry when employees report their bosses for committing crimes.
Of course, the bosses rarely show any loyalty at all to their employees, which is why this doesn’t really create anything like feudalism.
…except, then, look at companies like Google. They’re engaged in deal with other feudal lords like Apple where they will not “poach” each others’ vassals, but they do promise their vassals a lot. Now, THIS looks like feudalism.
Karl Marx predicted the same thing a century and a half ago, and people treated him like he was nuts. The Truth keeps marching on!
It is no coincidence that the name of this book is Capital.
Yes, this is definitely a continuation.
Remember, though, that systems are created and run by people, whose lives are less than ten decades long, and subject to scores of critical changes they have no means to predict, and fewer more to control.
Feudalism and oligarchy both grew out of arrangements what started out widely beneficial. The nobility started out as families with the means and fighting skills to protect their neighbors who were farmers- a life-and-death necessity, which could spare limited time for self-defense.
But as conditions changed over the years, especially as foreign attacks tapered off, the nobility still had the weapons and the habits of getting their way by unquestioned force- and automatic respect through their titles. Many of which were originally combat military ranks, with little attention to learning the minuet.
And as farming improved and needed fewer workers, and as production and trade of now-affordable belongings became more common, many previously-contented subjects started resenting being robbed and ravaged by arrogant, ignorant, inbred thugs whose former beneficial purpose was long gone.
Above consideration was the main reason that- too bad, Ayn Rand- capitalists invented modern government, as their legitimate means for self-defense from shake-downs by their former rulers and protectors. Corporations began with the beneficial purpose of raising money for beneficial productive enterprise- and expected to stay beneficial.
Karl Marx? There’s a terrific passage in Solzhenitsy’s book “Lenin in Zurich”, with Lenin standing on a station platform, beside the huge wheel of a locomotive. What’s killing him isn’t the faults of the Czar, but the way the Russian people accept the regime as normal as winter, famine, and probably mosquitoes. That’s why God created vodka. Lenin’s only hope: He would go to America!
Karl Marx also would have had a 19th century “conniption” over the idea of Communism in Russia- by his whole theory you had to have the Renaissance first. Germany. And of course, the United States- not in spite of but because of the energy of capitalism here. To Marx, the absolute prerequisite for communism.
So you could probably sum it up by saying that freedom is a matter of transmitting habits of shared responsibility and ability to consider changing conditions normal and plan your lives accordingly. Reason for Scripture’s words about God remembering sins to the third and fourth generation: the time it usually takes for a bad habit of mind to take root.
But it also says opposite habits stay fresh a lot longer.
Mark
The fall of Soviet Russia is more evidence that Marx was right! I think the main problem with Communism in Russia was not going through a capitalist phase first. It’s interesting that East Bloc countries with a history of capitalism (DDR, Czechoslovakia) were more prosperous than Russia itself.
One of the few good things about capitalism is it teaches efficiency (albeit at an astronomical human cost) similar to how Metro makes its route structure more efficient in response to those horrid budget cuts.
When Communism comes to America, and I believe it will within 300 years, it will work and it will work well! Viva la Star Trek!
Your history of the origin of the feudalism and manorialism is essentially wrong. It was abusive from day one. In Western Euopre, feudalism arose during the corruption of the collapse of the Roman Empire. It was abusive from day one — basically mafia types saying “You need protection, no?”
The important point is that by the end of the Roman Empire, it was considered an improvement over the dysfunctional mess which the official Roman Imperial system had decayed into. If our official institutions get dysfunctional enough, even fedualism — mafia-like protection rackets — will seem like an improvement.
Perhaps it’s things like this that make the taxpayers reluctant to vote the administrators more money:
Documents: Seattle tunnel builder wants $190M more
Read more here: http://www.thenewstribune.com/2014/04/26/3167221/documents-seattle-tunnel-builder.html?sp=%2F99%2F289%2F&ihp=1#storylink=cpy
http://www.thenewstribune.com/2014/04/26/3167221/documents-seattle-tunnel-builder.html?sp=%2F99%2F289%2F&ihp=1#storylink=cpy
Remember, Seattle got to vote on the tunnel, but former Governor Gregoire and former Mayor McGinn cut a deal to impose “cost overruns” on the whole state. Yet none of us got to vote on the tunnel at the state level!
We should be pillorying these people, not giving them raises.
Seattle only sort of got to vote on the tunnel. The referenda were all structured badly so the results were misleading.
A referendum by approval voting, with *all* the alternatives listed, would have given a true sense of public opinion. (Google “approval voting” if you don’t understand what it means.)
With all wealth accumulating to just a few, there’s less money left over for big public infrastructure projects, which is why the interstate system could be built in the middle of the 20th century, but a project of that scale is completely unimaginable today.
It isn’t just less money to a broader population reducing the amount of revenue, but also the fact that tax rates are lower now.
http://www.businessinsider.com/history-of-tax-rates
Excerpt:
“….super-high tax rates on rich people do not appear to hurt the economy or make people lazy: During the 1950s and early 1960s, the top bracket income tax rate was over 90%–and the economy, middle-class, and stock market boomed.”
Particularly, tax rates are lower ON THE IDLE RiCH.
Tax rates have gone up on the working poor. But the idle rich now have extremely low tax rates — the top tax rate on dividends is now 15% at the federal level. It was over 30% when I was a kid, and it had already been cut repeatedly at that point.
Rather a myopic view of the world. While the Interstate and transit may be crumbling in the US, the wealthiest nation on earth, infrastructure is booming in China, the most populist nation on earth. And while people here may be complaining about how tough it is well educated people from India and China still want to come here. Maybe the US has peaked. Maybe that’s OK. Maybe Uncle Sam taking retirement is a good thing. Beware the nation building the next Autobahn.
China recently rose past a stalled out America, burning 21.3% of world energy, with the U.S. at 18.5% in 2011, a few percent off where it was in 2000. The mass of humanity aside, the Chinese craze likely has more to do with their burning scads and scads of coal (70% of energy use, mostly in manufacturing (junk for Walmart?)). One upside of these outsized energy appetites is that the weakest link should become apparent. Financial difficulties for the oil majors seem a nose ahead at the moment, though there are also ecological limits and limits on cheap concentrated energy—and with 1000+ new coal plants planned, one might say something about impatience and hubris, or instead get back to collapsing ahead of the rush.
(Piketty was a good read, though I’d reserve “not easiest” for Spengler’s “Decline of the West”.)
You have the order backwards—burning fuel does not beget economic activity. Rather, new energy sources are brought online to assuage the demand created by economic activity.
A largely senseless distinction that reminds me of the endless supply- versus demand-limited arguments ongoing over the last few affordable dregs of the old energy stores that now circle the drain: among the animals, there is no activity without burning fuel. Try thinking without burning sugar, or walking without burning energy. Or did the grand economist in the sky first beget economic activity, and only thus were animals able to move on demand?
The most energy-intensive activities are not necessarily the most useful or satisfying. Humans have brains and creativity: we should be able to come up with ways to raise the national happiness score while gradually reducing energy use. After all, it’s mainly the electricity/transportation energy that we’re talking about, not the food-energy we intrinsically need to survive. Although as everybody knows, we’re also eating more calories than our health can tolerate, so there’s room for reduction there too.
The biggest problem is not the existence of the rich. It’s whether, as wealth sucks more and more upward, and the bulk of people fall behind with rising prices and stagnant wages, and technology making jobs obsolete… will we end up with the bulk of the population unemployed and starving?
The problem is the attitude of the sort of people who end up becoming stupendously rich. I still say that _Theory of the Leisure Class_, by Veblen, is important in understanding *why* these rich people are dangerous.
We don’t have a system which elevates philsopher-kings to great riches., or which encourages those with great riches to become philospher-kings. Capitalism, rather, tends to elevate crooks and scoundrels to great riches, and to encourage those who attain great riches to become crooks and scoundrels.
Why do working-class Southerners hate unions? Have they always done so?
They don’t hate unions. They value independence. “I’ll come work at your auto plant but if you pull too much BS I’ll go back to living off the land. Don’t need your job Mr. boss man. Oh, and don’t need a BMW X5 to haul fire wood or moonshine.” Handing down land; that is important.
Working-class white southerners are afraid that black people will be helped by the unions.
For all I know, working-class black southerners may be afraid that the unions will be run by racist white people.
This is obviously not true of all working-class white southerners, but there’s scads of social-science data which shows that bigotry is probably the dominant reason for southern opposition to unions.
That’s true Bernie. Southerners are quite proud of their independence (as everyone should be). They in particular, don’t appreciate the unions sending them pre-marked ballots (like you are too stupid to decide for yourself).
For those who claim bigotry – cite your sources. I live here and it’s almost non-existent. Yet bigotry is endemic to humans, we aren’t perfect.
Not buying it. Is there racial divide in the south? absolutely. But there’s far more honesty about it than up north or on the clueless west coast. I have relatives in the south (me being a white boy). My take is that they (southerners) accept that it ain’t good, on both sides, but they also don’t hide behind an altruistic belief system that ain’t true. In short; they deal with reality which creates equality.
Look, I did the research on this a long time ago, but the social science is absolutely solid: racist attitudes have correlated *tightly* with opposition to unions.
Is racism slowly going away, over time in the South? Yes. Is opposition to unions slowly going away, too? Yes.
“And he lives in France, where they actually *have* high progressive taxes. Unlike the US. So.”
Bully for France. Their collection of progressive taxes sure hasn’t done much to help their national debt nor their impact as a an economic force.
“Look, I did the research on this a long time ago, but the social science is absolutely solid.” Link?
Most union folks I know despise the treatment by their union bosses/management and their attitudes, not the color of their skin.
Southerners just don’t need the higher incomes that Northerners do.
For one, they don’t need to heat their homes (much) in winter.
For another, houses and land are dirty cheap compared to expensive northern states.
In Cities you see people with high tech jobs struggling to afford a one bedroom apartment, but in the South you get some laborer guy with a 10 acre spread, a couple of girlfriends, maybe a passel of kids, and he still has money left over to afford the latest big truck and hunting/fishing equipment.
Not really true any more. Heating costs are lower, yes, but it’s pretty damn expensive to live in most of the South now.
Stereotype much? You left out that the Southerners can afford many more guns, too. Granted things are cheaper here and the salaries are reflected in that, too. Doesn’t mean that everyone can afford a 10 acre spread and all the gadgets they want. Been here lately to see the amount of folks using EBT cards?
I wonder if Piketty, who argues that worsening inequality is an inevitable outcome of free market capitalism, donated his income from this book to charity? Or maybe he hedged on capitalism and kept the profits.
Piketty calls for high progressive taxes. He supports capitalism, he just doesn’t support letting an elite few collect all the money.
And he lives in France, where they actually *have* high progressive taxes. Unlike the US. So.
I’m reading this book as well right now! I’ll report back when I’m done.
I just got the Piketty book a few days ago. It fully validates, using new data, the Marxist insight that inequality increases naturally under free market capitalism until some kind of crisis, such as WWII, has a leveling effect. However he does not take into account the critical role of energy, or limits to growth in general. This reflected in his definition of “capital” (p. 49), which he identifies with conventional wealth, including financial wealth, with no special role for critical resources and their associated technologies. It is also reflected in his identification of growth in productivity just with growth in knowledge and skills (p. 21).
Strangely, Piketty also sees no problem with inequality in and of itself (p. 19), despite the abundance of historical and social science research to the contrary, so he is certainly no Marxist or even a justice oriented person. He’s an economist, different from the others primarily in that he cares more about actual data than current ideology.
But his proposal for a strong global wealth tax is certainly right on, yet it seems utopian in the absence of a big crisis. And if the crisis is a global meltdown of debt (with government bailouts no longer feasible), that in itself will take care of much of the inequality. I would propose public or stakeholder ownership of large corporations and assets as far more important to reducing inequality in a sustainable way.
Nevertheless I look forward to reading more of his book, as it very welcome in comparison to mainstream economics.