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Thomas Piketty's Capital in the Twenty-First Century has taken to U.S. by storm. It's been denounced as warmed-over Marxism, praised for its distinctly un-Marxist analytical coherence, denounced as insidious anti-Marxism, praised for its magisterial use of masses of data, denounced for sloppy and tendentious distortions of data, ... A surprisingly small fraction of the people discussing it seem to have actually read it.

I was lucky enough to pick up what seemed to be one of the last three copies for sale in Berkeley on a recent trip, so here's an attempt to distill the main argument briefly. I'll focus on some key economic facts that Piketty takes from data rather than from analysis, since understanding these facts is likely to be the key to understanding where we're headed and how we might change directions.

The first part of the book, told with numbing repetitiveness, does not directly concern inequality at all. It describes changes in the ratio of total capital to annual production. Piketty makes an overwhelming, unchallenged case that this wealth/income ratio has grown a lot in the last few decades, and is approaching values (say ~6) typical before WWI. The period in which some of us grew up, post WWII, was an anomalous result of the shocks of the wars, the depression, and the Russian revolution. These destroyed a lot of capital and constrained the behavior of capitalists.

It's a little hard initially for a reader to see why that growth of capital should be taken as a bad thing. Isn't it better to have more of our work done with enhanced productivity due to accumulated knowledge and machinery? Why wouldn't we want wealth to grow indefinitely?

Piketty's answer shows up next. Throughout the period for which we have records, wealth has always been much more unevenly distributed than income from labor. That's true even now in the U.S., despite our anomalously large wage inequality. Almost everywhere, the bottom half of the population owns almost nothing. Thus unless the fraction of capital in private hands shrinks or the rate of return (ROI) shrinks, a higher fraction of income will come from capital ownership, and this will be much more unequal than income from work.

Will the growing wealth be held privately? The data show that total public wealth (assets-debts) has converged to around zero, less than +/- a year's income, in modern market economies. So unless we somehow understand and change that general fact, the growing wealth will be held privately.

Will the ROI drop much as the wealth to income ratio grows? Marx thought it would. Classical economics predicts that it will, since when capital is plentiful people shouldn't have to promise much ROI to get some. Many economists have been fond of a simplified relation for that drop, in which the returns on capital stay at a fixed fraction of total income even as the wealth/income ratio increases. Piketty shows that in fact ROI tends to stay up near 5%/year regardless of such predictions. He discusses possible reasons briefly and without making any conclusions. The general impression, however, is that the radical inequality in power that goes with radical wealth inequality coupled with large wealth/income ratios allows a variety of exercises of political and social power to counteract the expected drop in ROI.

Thus putting together these empirical ingredients implies that income inequality will grow as the fraction of income coming from capital grows. Europe shows that pattern. In the U.S., extreme inequality in payment for work currently obscures that pattern except in the highest income brackets.

One stage of the argument is not purely empirical. Piketty refers to analytical work showing how a tail of very large fortunes tends to be generated by normal economic processes. As the quantity (r-g), annual ROI minus annual fractional growth of production, gets large, two things happen. Private wealth gains more rapidly on production, and, within realistically simplified models, the distribution of private wealth tends toward a more unequal steady-state. (For the last model-based argument, Piketty refers to some fairly obscure on-line notes. It is not hard to reproduce the result for very simple models, however.)

Piketty make an additional argument, based on common sense bolstered with some nice data, that ROI is largest for the biggest fortunes. That's just what classical theory would predict, since the biggest fortunes can withstand the highest short-term risk and pay for the most sophisticated information and analysis. They can also obtain the most favorable laws, regulations, and extra-legal maneuvers. Of course, this extra factor just worsens the trend toward greater inequality.

Finally, Piketty concludes with some proposals. The key one is to have some modest international wealth tax. This would be a more systematic way of getting at what Teddy Roosevelt intended with our estate tax- preventing the growth of a hereditary aristocracy.

Several important comments have been published on Piketty. I'll comment on a few of them.

Many people have noted that Piketty's remedy, a wealth tax, sounds reasonable and moderate but might be as hard to attain as a revolution. They have an obvious point, but the alternatives aren't so clear either.

DeLong has noted that the "r" used by Piketty is a short-hand for a collection of r's. One gives bare returns, and is important for directly calculating how much income is coming from a given amount of wealth. Another subtracts from that taxes and typical consumption expected for the rich, to get the quantity that enters into the growth of wealth and the form of the tail of the steady-state distribution. I doubt that Piketty would dispute this obvious point, implicit in some of his arguments, but it is true that most of his presentation mushes this up. (See also.)

Giles in the Financial Times has claimed a variety of data- handling errors, of which one would be consequential. Giles claims that wealth inequality hasn't grown recently in Britain the way that Piketty claims. Piketty has responded that in fact he has used more reliable and consistent data sources than Giles, and that his results are backed by independent analyses. Notice, however, that this dispute concerns only a detail on a detail- whether wealth inequality has already started to increase in one country. The central point, that wealth is already extremely unequal and that the importance of wealth is growing relative to wage income, is entirely untouched by this dispute, as others have noted.

I'm a bit worried about the relatively scanty attention Piketty pays to the growth rate (he guesses it will run about 1.5%) and the natural environment. Given our current effects on the climate, on water supplies, and so forth, it's by no means clear that a full accounting of our current growth would give a positive number. In other words, we're creating an environmental deficit, negative wealth, at a growing rate. Piketty is aware of these issues, which inform his choice of a fairly low expected growth rate, but I wonder if our uncertainty of the magnitude of them might swamp all other issues.

Analytical follow-ups to Piketty's work might focus on several key facts that appear empirically in Piketty's work.

Why does the net public wealth stay near zero, except in post-revolutionary societies, which have not been great economic successes?

Why is private wealth always so unequally distributed? (The simple models tend to describe the high-end tail more than the bulk of the population.)

How does ROI stay high even when there's lots of capital available?

What becomes of all this if environmental factors give a net negative growth?

The answers may in part lie in some fairly depressing behavioral economics. I suspect that the arguments of Robert Frank about how competitive arms races drive luxury consumption and suck resources into that zero-sum or negative-sum sector are relevant. It is interesting that Frank's suggested remedies (taxing consumption, not income) would probably  worsen the problems Piketty addresses. Some sort of unified approach to these problems is needed.

Originally posted to docmidwest on Sat May 31, 2014 at 01:56 PM PDT.

Also republished by Income Inequality Kos and Community Spotlight.

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Comment Preferences

  •  Tip Jar (150+ / 0-)
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    Michael Weissman UID 197542

    by docmidwest on Sat May 31, 2014 at 01:56:13 PM PDT

  •  The Unspoken Assumption About Piketty (35+ / 0-)

    Piketty notes time and again that it was the disasters of 1914-1945 -- a world war, a depression and another world war -- that destroyed capital and made the world (for a couple of decades) less inegalitarian.

    There is an unspoken assumption behind the worries that the general laws of capitalism will make the world as inegalitarian as is was during Belle Epoque.  That is that we won't soon face disasters at least as bad -- if not worse -- than those of 1914-1945.  And this is where even Paul Krugman engages in a little climate change denialism.

    What happened to Syria is directly tied to the unprecedented drought it suffered -- most likely brought on by global warming.  The farmers of Syria were driven from their land and the government was either unwilling or unable to help them.  Civil war soon followed.

    How is capital formation in Syria going these days?  Is Syria a more egalitarian place -- in terms of ownership of wealth and return on labor?  I would say it is.

    As the effects of climate change widen and become more severe, we can expect continuing environmental and economic disasters, as well as the wars and breakdowns in civilization attendant to these disasters.  We can count on it.

    And so I am optimistic -- from a Piketty-ist -- perspective.  There are not many more years for capital to increase at the levels it is.  There are not many more years -- maybe a decade or so -- before the world's capital stock begins to diminish.  Our world is soon to become much more egalitarian in the same way Syria has.

    We should not be fearing the return of Belle Epoque and and rule by an aristocracy of inherited wealth.  Rather, we should be facing a world the will more likely resemble the one Cormac McCarthy described in his recent novel, "The Road."

    This aggression will not stand, man.

    by kaleidescope on Sat May 31, 2014 at 02:28:28 PM PDT

    •  r-g (27+ / 0-)

      That figure, which Piketty shows leads to increased inequality, increases when g goes down, unless r goes down even more. So the key question about the possible coming disasters is whether they selectively destroy large private fortunes. The period right after WWII, in which the rich in Europe were vulnerable because they had collaborated with the Nazis, is not the sort of thing you can count on happening whenever there's a catastrophe. In particular if natural resources become scarce, as opposed to machines, you wonder if some medieval situation could arise.

      Michael Weissman UID 197542

      by docmidwest on Sat May 31, 2014 at 02:40:15 PM PDT

      [ Parent ]

      •  The Road (13+ / 0-)

        Medieval?  Perhaps pre-capitalist is more apt description.  And I still say that today's Syria is less inegalitarian than Syria of fifteen years ago.

        In claiming that America's atomic bombs were "paper tigers", Mao once wrote that nuclear war would be the end of capitalism.  He got that right.

        This aggression will not stand, man.

        by kaleidescope on Sat May 31, 2014 at 03:33:46 PM PDT

        [ Parent ]

        •  "The Road" a book/2008 movie by Cormac McCarthy. (12+ / 0-)

          May have more to do with redistribution's of wealth than Mr. Pickety expects.

          Conservatives, while not believers in climate change, evolution, or survival of the fittest  are convinced that things are getting bad in ways their government can't help them with as much as they can help themselves by burying caches of guns and beer in the back yard.

          Most northern Liberals still see climate change as meaning less snow and perhaps rich summer complaints losing their shore front property some hundreds of years in the future.

          Meanwhile U Maine has noted that the number of juvenile lobster in 2007 had diminished from previous years by 50%. Since lobsters take 8 years to grow to where they can be taken as a catch that doesn't bode well for 2015.

          Also suffering record die offs are cold water fish such as Hake, Halibut, Cod and Salmon. Fishermen expect they will just move to deeper colder water, but its going to affect the fishing industry globally.

          I expect that once we begin to lose our cities how much money you have socked away in the Bahamas won't matter unless you have a dive boat.

          Getting back to the conservatives worried that once the zombie apocalypse starts and hordes of urban minorities and diversities start leaving the cities intending to raid loot and plunder the suburbs and farms their radical untrustworthy government is going to round them up with drones and APC's and put them in FEMA camps, their medium of exchange is likely to replace dollars with weapons and ammo.

          "la vida no vale nada un lugar solita" "The Limits of Control Jim Jarmusch

          by rktect on Sun Jun 01, 2014 at 07:36:48 AM PDT

          [ Parent ]

          •  Oh, I dunno. (2+ / 0-)
            Recommended by:
            bnasley, JeffW
            I expect that once we begin to lose our cities how much money you have socked away in the Bahamas won't matter unless you have a dive boat.
            http://flood.firetree.net/...  Looks to me like it will take at least 9 meters of rise to put most of Nassau underwater, although after 4 meters things will get rather wet if a hurricane gets close.  

            "My country, right or wrong; if right, to be kept right; and if wrong, to be set right." -- Sen Carl Schurz 1872

            by Calamity Jean on Sun Jun 01, 2014 at 10:11:05 AM PDT

            [ Parent ]

            •  Once the poles melt we will have 60 m, 200 feet (3+ / 0-)
              Recommended by:
              Words In Action, lehman scott, JeffW

              Now I realize that won't happen by 2050 when we hit 2°C, .6 meters is just 2 feet and probably not by 2100 when we are at 4°C, and 1.2  meters, but if between now and 2100 projections rise as much as they have since 1990 when we were talking 1 mm a year perhaps you can see why curves going exponential is scary.

              Since that table is based on projected temperature, they are linked so that the more emissions the more temperature rises, the more temperature rises, the more methane hydrates get released and the faster we go, the faster we go the more we look like an exponential curve.

              Things go off the chart around 2150 somewhere in the 8°C, 21°C range. By then its all over

              "la vida no vale nada un lugar solita" "The Limits of Control Jim Jarmusch

              by rktect on Sun Jun 01, 2014 at 11:29:30 AM PDT

              [ Parent ]

      •  that's what i've been predicting: neo-feudalism. (28+ / 0-)

        Also there is a substantial difference between "fast crash" and "slow crash" scenarios.  

        Fast crash = the rate at which the catastrophe develops is faster than the general rate of change in economic and social institutions.  The institutions can't adapt, and become subject to the circumstances of the crash.

        Slow crash = the rate at which the catastrophe develops is slower than the rate at which economic and social institutions can adapt.  But the "adaptation" takes the form of those institutions maintaining or adding to their power vis-a-vis the society as a whole.  

        Ecological overshoot & collapse is subject to the inherent inertial lags of natural systems.  For example if we stopped emitting excess CO2 into the atmosphere today, we would still be in for +2 Celsius, and locked-in to a climate change regime lasting centuries or possibly millennia.  

        The Oligarchy has all the time they need to adapt to this.  Per the Citi report on "plutonomy," the top 1% only need 5% of the present general workforce to meet their needs.

        Thus what you get is 1% aristocracy, 5% guilds, 94% "surplus population" (to use Hitler's picturesque phrase for it).  A medieval society with a return to brutal serfdom.  

        This is the future that we're on track for if we don't somehow manage to produce a major political upheaval in the coming decade or two.

        We got the future back. Uh-oh.

        by G2geek on Sat May 31, 2014 at 11:42:04 PM PDT

        [ Parent ]

        •  Feudalism is sustinance in return for service (10+ / 0-)

          Anciently rulers who controlled the water controlled the land folk whose crops were irrigated by the water because that's where their food came from.

          Likewise for sea people control of the oceans meant control of the land and the sea.

          Without food and water, as well as a lot of other things we are likely to miss what will feudalism be based on. What can the rich give the mob of people described as surplus population. Science Fiction favors an answer of not much.

          One unlikely scenario favorite conservative fantasy would be for well armed, well trained ex military crews of mercenaries, brotherhoods to just take over.

          I'm doubting anybody gets much feudal service unless they  can preserve, protect and defend, sustenance for a large enough group of hunter gatherers  to keep everybody fed after we have killed off everything we are used to eating.

          "la vida no vale nada un lugar solita" "The Limits of Control Jim Jarmusch

          by rktect on Sun Jun 01, 2014 at 07:49:38 AM PDT

          [ Parent ]

          •  Global Warming will be dire, not apocalyptic. (0+ / 0-)

            There's no solid evidence it will lead to the end of all.

            Societies will be stressed, sure. And just as in the latest financial crisis, the rich will take advantage of that stress to try and turn the screws.

            In many ways, serfdom never ended. Global wealth distribution by percentile has changed very, very little over the last couple millennia. But it's a soft serfdom: we plebs today have got more rights, longer lives, and greater personal freedom than our ancestors in the mud.

            Global warming actually helps the 1%. The next generation will just keep talking like Dubya Bush, shrug, "Oh well, it's gettin' hotter, dunno why. We just gotta ADAPT." To them, "adapting" will mean cutting anything and everything while continuing to funnel the wealth up the supply line to the oligarchs.

            It's up to us to make it mean something else. No easy task.

            •  It's not just "getting hotter" (2+ / 0-)
              Recommended by:
              rktect, G2geek

              I's the loss of arable land in the current temperate zones; the loss of many major technological zones located on coastlines that will be underwater; the die off/destruction of the rain forests; the changing temperature in the oceans and lakes that may lead to large scale die offs of currently plentiful fish and the food chain they support (see puffins); and the riots and terrors that will undoubtably precede the worst of these things.

              Yes - the 1% are better off than most to ride it out. On the minus side their wealth and visibility position make them big targets.  They better hope they have enough hired guns to stave off the hungry, angry, and armed unwashed masses. Louis and Marie thought they did...

              • "But such is the irresistable nature of truth, that all it asks, and all it wants is the liberty of appearing." Thomas Paine
              • "The trust of the innocent is the liar's most useful tool." Stephen King

              by Tommymac on Sun Jun 01, 2014 at 04:17:29 PM PDT

              [ Parent ]

              •  Historically guards are the first to go plunder (2+ / 0-)
                Recommended by:
                G2geek, Woody

                The admonitions of Ipuwer

                [. .] The door [keepers] say: "Let us go and plunder."
                The confectioners [. . .].
                The washerman refuses to carry his load [. . .]
                The bird [catchers] have drawn up in line of battle [. . . the inhabitants] of the Delta carry shields.
                The brewers [. . .] sad.
                A man regards his son as his enemy. Confusion [. . .] another. Come and conquer; judge [. . .] what was ordained for you in the time of Horus, in the age [of the Ennead . . .]. The virtuous man goes in mourning because of what has happened in the land [. . .] goes [. . .] the tribes of the desert have become Egyptians everywhere.
                Indeed, the face is pale; [. . .] what the ancestors foretold has arrived at [fruition . . .] the land is full of confederates, and a man goes to plough with his shield.
                Indeed, the meek say: ["He who is . . . of] face is as a well-born man."
                Indeed, [the face] is pale; the bowman is ready, wrongdoing is everywhere, and there is no man of yesterday.
                Indeed, the plunderer [. . .] everywhere, and the servant takes what he finds.
                Indeed, the Nile overflows, yet none plough for it. Everyone says: "We do not know what will happen throughout the land."
                Indeed, the women are barren and none conceive. Khnum fashions (men) no more because of the condition of the land.           -the Nile overflows, yet none plough for it: The collapse of the Old Kingdom civilisation is generally attributed to a repeated failure of the Nile to inundate the flood plain. A few consecutive crop failures can result in many subsequent years of suffering, as all the grain that is grown and which is to serve as seed, will be consumed as food.
                 
                II

                Indeed, poor men have become owners of wealth, and he who could not make sandals for himself is now a possessor of riches.

                Indeed, men's slaves, their hearts are sad, and magistrates do not fraternize with their people when they shout.
                Indeed, [hearts] are violent, pestilence is throughout the land, blood is everywhere, death is not lacking, and the mummy-cloth speaks even before one comes near it.
                Indeed, many dead are buried in the river; the stream is a sepulcher and the place of embalmment has become a stream.
                Indeed, noblemen are in distress, while the poor man is full of joy. Every town says: "Let us suppress the powerful among us."

                Indeed, men are like ibises. Squalor is throughout the land, and there are none indeed whose clothes are white in these times.
                Indeed, the land turns around as does a potter's wheel; the robber is a possessor of riches and [the rich man is become] a plunderer.

                Indeed, trusty servants are [. . .]; the poor man [complains]: "How terrible! What am I to do?"
                Indeed, the river is blood, yet men drink of it. Men shrink from human beings and thirst after water.

                Indeed, gates, columns and walls are burnt up, while the hall of the palace stands firm and endures.
                Indeed, the ship of [the southerners] has broken up; towns are destroyed and Upper Egypt has become an empty waste.

                Indeed, crocodiles [are glutted] with the fish they have taken, for men go to them of their own accord; it is the destruction of the land. Men say: "Do not walk here; behold, it is a net." Behold, men tread [the water] like fishes, and the frightened man cannot distinguish it because of terror.
                Indeed, men are few, and he who places his brother in the ground is everywhere. When the wise man speaks, [he flees without delay].
                Indeed, the well-born man [. . .] through lack of recognition, and the child of his lady has become the son of his maidservant.

                "la vida no vale nada un lugar solita" "The Limits of Control Jim Jarmusch

                by rktect on Sun Jun 01, 2014 at 05:24:45 PM PDT

                [ Parent ]

            •  I think it is going to be cataclysmic. I think you (2+ / 0-)
              Recommended by:
              G2geek, monkeybrainpolitics

              Underestimate the interconnected nature of our planetary ecosystem.

              We are pulling key variables out at an absolutely alarming rate when it comes to biota, and they have unpredictable and immense effects upon the ecosystem. Bees for example.

              Democracy - 1 person 1 vote. Free Markets - More dollars more power.

              by k9disc on Sun Jun 01, 2014 at 08:12:02 PM PDT

              [ Parent ]

              •  You two aren't citing evidence for apocalypse. (0+ / 0-)

                The science on the future global warming holds that there will be drastic and unpleasant changes, but no cataclysm.

                I share your sadness at environmental devastation. I stand with you to fight for a sustainable way of life. We're nowhere near it, and face towering odds against implementing it.

                Post-apocalyptic revenge fantasies are gratifying, but pretty unlikely to come to pass in reality. If I had a nickel for every social revolutionary from antiquity to the present who mounted the soapbox to admonish "There's a storm a-coming!", why, I'd be richer than Croesus and Bill Gates combined.

                The storms can't be conjured on command and seldom take the predicted shape -- or have the outcomes anticipated.

              •  When dinosaurs were apex predators, earth had (0+ / 0-)

                nothing but ocean and hot dry desert between 50 S and 50 N latitude.  Between 50 N and north pole and between 50 S and south pole, there was temperate climate ranging from Mediterranean like southern California at 50 latitude to something like Maine right near poles.  Earth carrying capacity with that sort of climate should be about 2 billion humans.  If the RULING CLASS invests in a plan B they might manage to substitute boats for buildings to save space for agriculture under glass to save water with desalinated seawater, and they might manage to substitute barges filled with composted organic waste of some sort and topped with greenhouses for more agriculture.  Tropical crops might be grown with irrigation with desalinated seawater in strip just towards equator from 50 latitude.  Living space would be best under about ten feet of dirt for insulation with air conditioning and house plants under LED grow lights, both to freshen the air somewhat and to give people something green to look at.

              •  The Lord shall wax wroth (0+ / 0-)

                And lo, those who mocked the prophets (scientists) who warned of global warming were laid waste by the results of their mockery, for the Lord (Nature) was wroth with them for their arrogance and folly (wanton burning of petrochemicals.)

                Warren/Grayson 2016! Yes We Can!

                by BenFranklin99 on Tue Jun 03, 2014 at 02:02:29 PM PDT

                [ Parent ]

            •  apocalypse is fast crash. dire is slow crash. (0+ / 0-)

              But in the end, the result is the same: the elite living like royalty, the masses living lives that are "nasty, brutish, and short."

              Who would have predicted, in the 1960s, when "the future" meant an endless life of middle-class leisure for all, that "the future" was really going to be the 80+ hour work week (both spouses working full-time or more) just to barely make ends meet?  

              The shit has already hit the fan.  But it came on slowly enough that nobody noticed.

              We are already living in the times that some of us warned the rest of us about.  And it's going to get more-so unless there's some kind of mass political movement to call a halt to it.

              We got the future back. Uh-oh.

              by G2geek on Sun Jun 01, 2014 at 09:33:44 PM PDT

              [ Parent ]

              •  Yes, I completely agree and I'm all in. /nt (2+ / 0-)
                Recommended by:
                rktect, stitchingasfastasIcan
                •  You say drastic and unpleasant but no cataclysm (0+ / 0-)

                  We have already had a couple of cataclysms, Katrina and Sandy. Up until recently we considered those hundred year storms.

                  After we finish with the upcoming El Nino in which really bad storms are not expected, just a lot of heatstroke, drought, fires, mudslides, tornadoes  the usual stuff, I expect we are gonna see hundred year storms every 10 years. Then we are going to begin to lose barrier islands, by 2050 we will begin to lose East and Gulf coast cities, some are already regularly flooding.

                  Once we lose Boston, New York, Washington DC and Miami and flood insurance companies no longer provide flood insurance at any price (its already $2.10 per $100 of value every year for East Coast residential) people will begin to start considering moving cities back from the coasts.

                  The problem is large scale projects like that take about a twenty five year lead time for master planning. In 2005 I did a design for a new healthcare facility in Galveston and told them it should be at least ten feet above the existing high tide line. That was based on the IPCC's earlier reporting. This latest report V is worse than their worst case analysis then.

                  "la vida no vale nada un lugar solita" "The Limits of Control Jim Jarmusch

                  by rktect on Mon Jun 02, 2014 at 02:32:42 PM PDT

                  [ Parent ]

          •  Obviously the rich will try to exterminate the 94% (0+ / 0-)

            surplus population.  This has not worked with feral cats.  I wonder what makes the RULING CLASS believe they can succeed in exterminating the 94% surplus population any better than they have succeeded in exterminating feral cats.

          •  mixed up dates (1+ / 0-)
            Recommended by:
            docmidwest

            I agree with the spirit of your comment but not the fact.  You seem to have mixed up what is known as the "irrigation hypothesis" which saw inequality stemming from the need to organize in order construct large scale irrigation projects.  That is hypothesized to have happened some time after the invention of agriculture about 10,000 years ago.  Agriculture supplented hunting and gathering in most places on earth (but not all)

            Feudalism happened in European history and elsewhere. In Europe it went from about the 9th century till about the 16nth, but these official dates are misleading because the process was gradual and started earlier.  The end of the feudal era with the rise of absolute monarchies and the construction of states always by violent conquest was also a gradual process.   Regardless of how you count it, Europen feudalism gradually happened only about 1,000 years ago, well after agriculture in Europe -- so no Hunters and Gatherers!

              Look up for instance books that were breakthroughs in researching European medieval history from the standpoint of the people, as for instance Marc Bloch, MEDIEVAL SOCIETY and other fascinating books by other Medievalists that followed (Marc Bloch is my hero for many reasons which you'll find out when you look him up).  European feudalism happened gradually.  It was basically a racket system that eventually turned into a caste system.  "You'll give me the products of your labor and I'll protect you, first of all against myself." It is no surprise then that peasants forced into becoming serfs were constantly revolting.      

          •  mixes up dates (0+ / 0-)

            I agree with the spirit of your comment but not the fact.  You seem to have mixed up what is known as the "irrigation hypothesis" which saw inequality stemming from the need to organize in order construct large scale irrigation projects.  That is hypothesized to have happened some time after the invention of agriculture about 10,000 years ago.  Agriculture supplented hunting and gathering in most places on earth (but not all)

            Feudalism happened in European history and elsewhere. In Europe it went from about the 9th century till about the 16nth, but these official dates are misleading because the process was gradual and started earlier.  The end of the feudal era with the rise of absolute monarchies and the construction of states always by violent conquest was also a gradual process.   Regardless of how you count it, Europen feudalism gradually happened only about 1,000 years ago, well after agriculture in Europe -- so no Hunters and Gatherers!

              Look up for instance books that were breakthroughs in researching European medieval history from the standpoint of the people, as for instance Marc Bloch, MEDIEVAL SOCIETY and other fascinating books by other Medievalists that followed (Marc Bloch is my hero for many reasons which you'll find out when you look him up).  European feudalism happened gradually.  It was basically a racket system that eventually turned into a caste system.  "You'll give me the products of your labor and I'll protect you, first of all against myself." It is no surprise then that peasants forced into becoming serfs were constantly revolting.      

        •  Yo G2... Glad you're back.... (1+ / 0-)
          Recommended by:
          G2geek

          And this before, it's not going to be Neo feudal , it will be neocolonial.
          Neo-feudal implies that the people will be somewhat important.

          Neocolonial means that only the resources are important.
          I believe that is our future.

          Democracy - 1 person 1 vote. Free Markets - More dollars more power.

          by k9disc on Sun Jun 01, 2014 at 08:07:47 PM PDT

          [ Parent ]

          •  thanks, and you have a point there. (1+ / 0-)
            Recommended by:
            k9disc

            What I was thinking of re. "neo feudal" also involved the mix of church and state.

            But neo-colonial?, OK, I'll spend some time reading & thinking about it.  You may be right.  In which case I'll adjust my hypotheses & rhetoric accordingly.

            We got the future back. Uh-oh.

            by G2geek on Sun Jun 01, 2014 at 09:38:10 PM PDT

            [ Parent ]

            •  I think the only church will be corporate and the (2+ / 0-)
              Recommended by:
              G2geek, Rithmck

              altar will be erected to mammon.

              I see a push by corporate to push the left and right out of "respectable" positions.

              The right will be crazy, And the left will be naive. TINA to the corporate center.

              I think the religius people are becoming a drag on profits. They have to go.

              Democracy - 1 person 1 vote. Free Markets - More dollars more power.

              by k9disc on Sun Jun 01, 2014 at 09:51:28 PM PDT

              [ Parent ]

              •  agreed. corporate's use of religion.... (2+ / 0-)
                Recommended by:
                k9disc, stitchingasfastasIcan

                ... was to build a voting base.  "We'll give you money to push social issues, you give us votes."   It worked for 30 years, but corporate (credit to you for using the adjective as a noun, it works and I've adopted the meme) also made a monster that got out of hand.  Now they're trying to ditch the monster.  Republicans supporting marijuana legalization are one example; there are more.

                The left is still naive.  One of our tasks around here is to help overcome that naivete with facts & sound reasoning, and also with emotional contexts that make sense and stimulate action.

                Bottom line for corporate: the 2nd law of thermodynamics applied to social ecology.  Workers = energy-converters, corporate = harvesters of converted energy.  Once we understand that fully, the path forward becomes more clear.

                We got the future back. Uh-oh.

                by G2geek on Sun Jun 01, 2014 at 11:11:48 PM PDT

                [ Parent ]

      •  Very interesting! (6+ / 0-)

        What are the differences between Piketty and Keynes?

        I know Keynes focused on deficit spending to increase demand and thus lift the economy out of the depression. Also, Keynes no doubt favored the high marginal tax rates from the 1930's through the 1970's as a way to redistribute income and again increase consumption. Am I right that capital taxes taxes were never anywhere near the marginal tax rate that period?

        Would the difference be Piketty focuses on both restricting the growth of and on redistributing wealth as opposed to income & while he would probably favor deficit spending and jobs bill & all the Keynesian stuff it isn't his primary focus????

        And Piketty would say Keynesian economics worked so well partly - not totally - because WWII destroyed much capital?

        I'm learning all these economic models. There is the Chicago school which I hate, Keynes which I really like, Piketty which I like, and post capitalism which I like.

        Do I understand the difference in your view or no????

      •  Piketty uses the basic Solow Model for growth. (5+ / 0-)

        I won't belabor the details. But a superb high-points review is available from Robert Solow, himself, here:

        Thomas Piketty Is Right Everything you need to know about 'Capital in the Twenty-First Century'

        That's a professional survey of Piketty, his arguments and data, and where it all stands for understanding capitalist economics.

        Intellectually, a ball-buster for the politi-whxres, the David Brooks clones and elected servants, who have tilted the playing field even more toward inheritors and their allies.

        "Stealing kids' lunch money makes them strong and independent." -- after Paul "False Prophet" Ryan

        by waterstreet2013 on Sun Jun 01, 2014 at 10:30:19 AM PDT

        [ Parent ]

      •  The wealth tax is called the "Single Tax" (2+ / 0-)

        For years I've heard, "what do progressives stand for economically"..."what is their platform".

        Where is that platform that someone can read and stand behind.

        Trickle-down has been used as an economic theory / platform for 25 years by conservatives regardless that it's one of America's greatest failures and a scam. But there was never an alternative anyone could point to.

        We (as progressives) can and should be pushing for the Democratic Party to adopt the "Single Tax"...(tax assets. NOT INCOME) as their economic platform. The novelty alone would recruit millions of independent voters as an alternative to our ever widening income disparity producing fraud of a system we have now.

        The Single Tax destroys all asset bubbles and reduces immensely the great recessions and unemployment the nation endures when we allow parasites to hoard assets and create false bloated prices and therefore false economies (see Georgism).

        Progressives love the idea as it puts all burden of taxation on the controllers of the wealth producing assets of the community. Many economic (real) conservatives like it because it staunchly protects private property and eliminates income taxes on true wealth creators...not the hoarders and Wall Street speculator parasites.

        Imagine progressives calling to end income taxes. The Single Tax could very well divide conservatives for a generation the way trickle-down divided and was believed by independents and moderates.

    •  I have not seen any good forecasting of rain or (0+ / 0-)

      other vital points of climate for the next year, much less for the next 100 years, as climate disaster forecasters seem to do.  Human beings are immensely adaptable - people may build giant cities under the sea.  

      The economic points in this essay are independent of climate change, war, etc.  
      IF you do not want your children to be serfs, tax the rich.  
      Tax inheritance especially.  

      •  missing the point (0+ / 0-)

        Yes, in principle inequality and climate don't have to be discussed together. Piketty, however, is trying to seriously understand what will happen to our children in the real world. That requires some understanding of basic material conditions. Formally, these show up directly in his key parameter, (r-g). Don't you think that the need to "build giant cities under the sea" might have a noticeable impact on our overall productivity growth?

        Your point about unpredictable weather shows a deep misunderstanding of climate science. The distinction between short-term noise and long-term trends shows up in all sorts of time-series analysis in many areas. Typically the former is much less predictable than the latter.

        Stalin once proposed analyzing the economy of the USSR ignoring only two factors: the military situation and foreign trade. Trotsky countered that that was like deciding whether to go outside naked in a Moscow winter ignoring only two factors: the weather and the police.

        Michael Weissman UID 197542

        by docmidwest on Tue Jun 03, 2014 at 07:22:55 AM PDT

        [ Parent ]

    •  Destruction of capital (0+ / 0-)

      It seems to be pretty crazy to say that inequality was promoted by wealth destruction.  In a literal sense it would be true, but that has to do with bankrupt inequality, not prosperous inequality.

      The reason we had more prosperity was we had a large resource of people who experienced a depression first hand and who understood what caused it.  This enabled people to ignore the constant propaganda of the wealth and choose the best society to live in with an open awareness of how to build it.

      Actually prosperity went down after WWII.  We grew 10% a year from 1933-1945 and only 5-6% a year after the war.  This is simple to verify by downloading the data from bureau of labor statistics.  Yet the "post WWII" era is heralded as an unmatched golden age even by economists who should know better.   It wasn't destruction, but a commitment to creation that built that generation's future.

  •  Just bought the book this weekend (16+ / 0-)

    and it's very clear and lucid writng and it seems you don't have to have a lot of economic knowledge to follow his points and perspective.

  •  I'm looking for some Marxist criticism of it (0+ / 0-)

    actually, if anyone can link me.

    We want to build cyber magicians!

    by VelvetElvis on Sat May 31, 2014 at 09:26:35 PM PDT

    •  Real marxism? (5+ / 0-)

      Or the kind they did in Russia?  Or perhaps the Chinese version?  Which decade?

      Marx did pretty well given that he had almost no data to work with, although IMHO he got too attached to his initial impressions in 1848 and spent his life trying to prove his hypothesis instead of looking at how capital had changed in that period.

      Capital in the 21st century doesn't even try to model the kind of statist regime that was the Soviet Union, or China before the 1990s.  He does touch a bit on modern China but the data there isn't exactly transparent nor does it go back very far (the Cultural Revolution was rather hard on the Chinese historical record even if the govt was inclined to share).

      A society where the public capital is in the high 90% of all wealth instead of being nearly zero (as all modern advanced countries are, with assets being roughly equal to debt for the govt, and all real wealth actually being private) is too different from the data he's working with to draw any useful conclusions.

      •  Real Marxism is a dialectical process (5+ / 0-)

        of asking and answering questions about how to make it work that we take from each according to their abilities and provide to each according to their needs.

        Neither Marx nor Pickety takes into account our extremis once climate change starts dropping populations from Billions to millions overnight the way we are seeing with cold water fish.

        "la vida no vale nada un lugar solita" "The Limits of Control Jim Jarmusch

        by rktect on Sun Jun 01, 2014 at 07:53:34 AM PDT

        [ Parent ]

        •  spent my college years distinguishing (2+ / 0-)
          Recommended by:
          rktect, blueoasis

          between Marxian analysis and Marxism, lotta good that did me

          Marx got to the point of talking about prime movers, (those big lunking earth moving, massive things we have to share the highway with, eg, that tear up everything in their way), he almost got to climate change

        •  Well yeah, and he admits it (1+ / 0-)
          Recommended by:
          rktect

          His analysis is about what happened historically and what might happen in the future absent shocks as serious as the first half of the 20th century.

          His suggestions about what he'd recommend if there was such a shock that allowed politically impossible things to be done (like how WWI made income taxes higher than 10% suddenly possible everywhere) still assume that there is such a thing as capital, and that it can be usefully invested.

          A global die-off of 90% of the population is way outside of his theoretical framework.  However a sudden reallocation of priorities (eg, capital becomes things like sustainable power generation and building walls as Holland did to avoid having coastline flooded) is within the scope of historical data and some of his analysis.  Because he can't predict what the shock might be, he can't provide anything but a framework to stand on to discuss what next though.

          Absent shocks, he's warning that nothing but the will of people to regulate capital will prevent it from re-accumulating to a few very wealthy people.  The only natural limits are what people will tolerate without revolting - he postulates that to get much higher than historical levels of inequality you need unusually effective repression or unusually effective propaganda or both.

    •  Capital is a process, not a thing (11+ / 0-)

      according to Marx. David Harvey uses this view to critique Piketty. http://davidharvey.org/...

      "The one great principle of the English law is, to make business for itself." - Bleak House by Charles Dickens

      by lancecote on Sun Jun 01, 2014 at 06:14:20 AM PDT

      [ Parent ]

    •  Marxists are hard to find these days. (2+ / 0-)
      Recommended by:
      lehman scott, waterstreet2013

      Do any history or political science departments still teach it?

      I mean from a pro-marxist point of view?

      The symbol for the Republican party shouldn't be an elephant -- it should be a unicorn.

      by Deadicated Marxist on Sun Jun 01, 2014 at 08:30:38 AM PDT

      [ Parent ]

  •  Three comments on this (19+ / 0-)

    aside from - nice summary.  I'm about 80% through the book.

    1.  He's done a hell of a job making his case in terms of explaining the science behind it and the math, in terms pretty much anybody with grade-school education can understand.  That's impressive all by itself.  The data is the data, warts and all, and most of the book is just a presentation of it.  It's the data that leads to the conclusions.  One significant problem with the data is it flat doesn't exist anywhere prior to the 18th century, and outside of France, the data is very poor until the 20th century.  But he's got a hell of a lot more data than what was used to underpin pretty much all of the stupid economic theories driving our politics up to this point, even the ones arrived at honestly and not out of cynical advantage.

    2. His models of the future essentially assume the BEST CASE is that we're looking at another 19th century type wealth inequality situation globally barring radical remedies such as the wealth tax, especially combined with 1950s level progressive income taxes.  (I'm not all the way through the remedy section yet but I see where it's headed).   His model is even stronger if growth rate is lower than the 1.5%...the lower it is the faster we'll see the inequality.  Frankly, I'm of the opinion that we're not done with population growth and the "catch up" effect of all those developing countries out there having high rates of local growth, so absent shocks, we're very likely headed down the road he spells out but the rate is pretty unclear.  Invest in those developing countries if you want fast growth and can do so safely I guess.....

    however....

    3. Shocks are pretty likely, either from climate change and/or uprisings caused by rather visible (given internet, reality tv etc) inequality or both.  The best case for reducing inequality is unfortunately a global catastrophe that makes the period between WWI and WWII look like happy fun land.  I don't especially want to spend the last few decades of my life watching the world tear itself apart.

    The best thing about this book is some people are starting to talk from a bit of facts, and also that the author is exposing people to the actual scientific method+peer review process.  (seriously, his response to the Financial Times was a thing of beauty, essentially showing his mastery of the topic and his scientific process with links proving each of his rebuttals,  while accepting any valid criticism and directing them to more recent research etc...all in a polite but the kind of tone a teacher gives to a student who didn't do their homework and expected better of them.   I've done that sort of thing when laying out provable, technical facts to executives that didn't want to hear it but, seriously, it's a really great example of how to do it, especially if you'd been disrespected by the original criticism)

  •  Piketty's Definition: Wealth = Capital (7+ / 0-)

    Although he expresses some regret for the definition, this definition is important. Not all wealth is productive. For example, stashing gold bars in a vault is not productive. Thus, redistribution of wealth can improve the economy if most of the drop in wealth among the rich takes the form of nonproductive wealth. - Remember, much of the wealth distributed would go to the consumption of lower income families. Because lower income people have a higher marginal propensity to consume, such redistribution would increase aggregate consumption but reduce total wealth.

    Of course, if you believe in Keynesian economics, then an increase in aggregate consumption, increases economic growth. However, Piketty does not appear to be a Keynesian, and accepts the Neoclassical view that the economy is always in equilibrium.

  •  An excellent European analysis (13+ / 0-)

    REFUSAL TO COUNT RARELY HEPLS THE POOREST

    Can I recommend a four-part chapter by chapter analysis of Pickety on the European Tribune webpages? It is by a French-speaker using the original French texts as well as the English translation.

    The final part here includes links to the previous  parts.

    The analysis author (identified as Cyrille on the blog further information on that writers Anachonicles blog) raises a number of points of legitimate controversy.

    I take the liberty of reposting Cyrille's final paragraphs:

    Finally, we reach the conclusion. Piketty is clear that his work is not the final word and will be proven to contain weaknesses (several of which he has admitted in interviews). No surprise in those last few pages, which sum up the underlying points of the previous 900 or so, depending in which language you read it. He calls r>g the inherent contradiction of Capitalism, which is probably fair -whether it is an inherent, quasi-mechanical outcome or, as I reckon, an empirical observation of something that is in large part due to the ability of wealthy people and groups to get the social order that suits them, it is clear that it is and has been a major source of instability.

    Finally, a very relevant observation with the very last sentence: after having expressed his wish to see more economists (and other social science experts) make the effort to gather time series on which to back their studies (a call to empiricism which is long overdue), he notes that citizens should pay interest to questions of money and wealth, that those who hold a lot never forget to defend their interest and notes that "Refusal to count rarely helps the poorest".

    All in all, the book is very readable, and what took me long was reading it critically at every stage -however, one surely gets more from reading that way. By all mean don't content yourself with those notes and read the whole thing. Many a fascinating insight is mentioned almost in passing, and will not be found in a summary. If those notes have a strong proportion of apparent criticism, it is because none of the possible mistakes are trivial, and faced with such an impressive work, any disagreement needs to be well qualified. While Piketty is of course human and fallible, this is nothing like a facile, superfluous book. It is an extremely well argued and coherent body of thought, displaying a very high awareness of existing studies (while not accepting them at face value when their points are too unpersuasive). Like another book it evokes, Rawls' Theory of Justice, I believe it will prove enlightening to the reader but, even better, will make the active reader ask more questions and think by himself.

    Violence is the last refuge of the incompetent.

    by saugatojas on Sun Jun 01, 2014 at 12:16:33 AM PDT

  •  It's a pleasure (9+ / 0-)

    to see such thoughtful comments.

    Michael Weissman UID 197542

    by docmidwest on Sun Jun 01, 2014 at 05:39:56 AM PDT

  •  Too Much Inequality Is Bad For The Economy (7+ / 0-)

    Like to think of a premise from this work that can be politically advanced from this book to get a consensus from voters and reward politicians who offer prescriptions. If the voters accept that premise than progressive economic policies will be looked as being away to lessen the inequality and give us a more broad based economy. Minimum wage, union strengthening, taxing the wealthy to provide for broad based public programs and stem excessive wealth accumulation.  

    •  Unfortunately that doesn't seem to be (5+ / 0-)

      strictly true.  If you were in the top decile (10%) in pre-WWI France or Britain you thought the economy was working just fine, thank you very much, as you owned 90% of the wealth.

      This is what we're seeing in the USA today.  The difference between now and then is primarily that the middle 40% (top half excluding the top 10%) owns about a third of the wealth.  (the bottom half owns nothing, as it has throughout history.  We still suck at moving wealth beyond the middle class, even mid-century when inequality was lowest).

      That 40% still has political power should they choose to use it.  The only place the wealth is going to come from to siphon back into the upper class is from them, but they've been feeling the pain for my entire adult life and they still vote in the assholes.

      •  Those Feeling The Pain Have Been Voting Against (6+ / 0-)

        their interests for awhile. They absorb the GOP free market idiocy that only helps those in the 10% at the top. Some might swallow the GOP cultural bullshit. But they haven't seen inequality put forth as an issue in their lifetime. You have a party show how their policies can address the issue and we might see on balance a consensus toward progressive economics. It will ease their pain.

      •  You forget about class mobility (0+ / 0-)
        the bottom half owns nothing, as it has throughout history.  We still suck at moving wealth beyond the middle class, even mid-century when inequality was lowest
        You apparently assume these are the same people decade after decade..  they're not.

        While only about 8% of people born in to the lowest quintile can make into the top quintile in their lifetime (which is exactly the same for almost 50 years), generational mobility shows you are very unlikely to stay at the bottom as will your children.

        Income mobility has slowed somewhat in recent years, but it still exists.  Educational opportunities have a lot to do with where you will end up.

        All this talk of redistribution is stupid.  Anyone who bothers to look at the numbers can plainly see taxing wealth would only last a few years, then it's all gone!

        The solution to income inequality is jobs.. plentiful, good jobs.  And, maybe less people, since labor is no longer needed like it once was.

        •  not exactly (4+ / 0-)
          Recommended by:
          WB Reeves, TomP, Egalitare, lehman scott

          Piketty and others have addressed this point in some detail. Mobility is quite low, especially in the U.S. As you concede, it has gone down.

          The current distribution is not somehow written on the sky, so that any changes are some unnatural "redistribution". Our current taxes are far less progressive than they were when I was young. Net wealth grew much more quickly then, although I'm not claiming that the relation is necessarily causal.

          Where will those jobs come from? The key needs are in energy, infrastructure,... These sorts of things can be paid for for a while by deficit spending, given the current downturn, but in the long run require taxes. Who will pay? Only the radically richer top tier. But you'd say that's "redistribution".

          Michael Weissman UID 197542

          by docmidwest on Sun Jun 01, 2014 at 12:02:07 PM PDT

          [ Parent ]

        •  On your specific point (4+ / 0-)

          " Anyone who bothers to look at the numbers can plainly see taxing wealth would only last a few years, then it's all gone!" that is just what Piketty wrote a book about. Say that the current rate of re-invested returns on capital is 4%. Say that overall economic growth is 1.5%. Say you have a 1% yearly wealth tax. That still leaves the rate of reinvested return greater than the growth rate of the economy. In other words, the accumulation of private wealth would still proceed to the point where the whole pattern has to break down.

          To put it bluntly, your mathematical point is thus just flat-out wrong. That's one beauty of math, there are few other situations in which one be so sure that an assertion is in error.

          Michael Weissman UID 197542

          by docmidwest on Sun Jun 01, 2014 at 12:30:11 PM PDT

          [ Parent ]

          •  1% wealth tax is nothing (0+ / 0-)

            If you are only taxing the very wealthy, the amount that tax would bring in would be a pittance.

            Even if you can bring in $500 Billion revenue with such a tax, it would barely cover the current deficit, much less pay for massive jobs programs to reduce inequality.  

            •  $500 billion is nothing? (0+ / 0-)

              Dude- that's a major shift in the budget. Take whatever baseline budget was needed to try to keep the deficit in line. Add $500 bil/yr to it.  That's basically at the level of the peak of the stimulus spending, only ongoing. It should fund something like 5,000,000 ongoing jobs in basic infrastructure rebuilding and public services. Why are you saying that's "nothing"?  

              There's something driving your comments other than the explicit content, which has drifted from mathematical error to just plain silliness.

              Michael Weissman UID 197542

              by docmidwest on Sun Jun 01, 2014 at 07:31:52 PM PDT

              [ Parent ]

              •  No.. you are proposing $500B more in deficit (0+ / 0-)

                spending.

                So, you are saying if we could bring in an extra $500 Billion in revenue, we should not use it to offset the current $500 B in deficit spending.  You say we should simply add on another $500B in new programs?

                And, BTW - I pulled that exaggerated number out of my ass.. there's no way a wealth tax could bring in anywhere near that amount of revenue.

                •  That's a weird misinterpretation. (1+ / 0-)
                  Recommended by:
                  lizzyh7

                  I specifically said to start with a baseline of whatever budget and deficit you would have had without this new revenue. Then add the new revenue, and look at what social tasks could be accomplished with it, with explicitly zero change in whatever the deficit would have been.

                  As for the number you say you pulled out of your ass, it's ballpark reasonable. There's about $100 T private wealth in the U.S. Confining the progressive tax to the upper half of it, 1% gives $500 B.

                  Your ass seems more comfortable with quantitative reasoning than your head.

                  Michael Weissman UID 197542

                  by docmidwest on Sun Jun 01, 2014 at 09:32:42 PM PDT

                  [ Parent ]

        •  Actually not really. (4+ / 0-)
          Recommended by:
          docmidwest, TomP, peachcreek, lehman scott

          There's historical precedent.

          True nationalization (as was done in USSR, or what France did to a few companies as part of sanctions for collaborating with Nazis in WWII) is indeed a one-time redistribution...but it doesn't destroy the wealth.  The factories etc are still there, can still be worked, and unlike the USSR, the French nationalized companies did just fine until changing politics caused them to be reprivatized (for a USA example, see AT&T)

          The wealth tax suggested in the book is intended to be at a level that slows growth of capital, rather than actually destroying it.    Ie, you are taxing high enough to scoop off most of the "interest" but not damage the "principle".

          So no, the wealth won't go away, not as long as there is any growth in the economy.  And if you peg the tax to the economic growth, if growth is zero or negative, the wealth tax is also zero.  So again, no destruction of wealth.

          Also, he recommends the tax, even if it is at a miniscule amount, not enough to change wealth inequality, simply as a transparency measure.  A tremendous amount was learned by the extremely low estate/bequest tax introduced by the French Revolution simply because it meant wealth had to be declared from time to time (when somebody died, or gave out a dowry at marriage etc).

          As for jobs.  There are already more people able to work than there are "good paying jobs".  Absent a massive die-off that isn't going to change.  

          The book does talk about what happened in France when the minimum wage was aggressively increased.  It helps the hell out of the bottom 50% standard of living, but doesn't affect wealth inequality at all (they earn enough to live a lot better, but not enough to accumulate any wealth).    One would presume some kind of basic minimum income social program for people whom the economy leaves out of the job market would behave in a way similar to high minimum wage.

          Not to say this would be a bad thing, far from it.  This book isn't about the best outcomes for individuals or even social classes though, so he only touches on this.  It's about the tendency of capital to concentrate into the hands of the most wealthy, and the fact that labor in any form can eventually become "second class" compared to how those with sufficient wealth can live without working a day in their life.

          In the 19th century, no amount of achievement could let you live like those who were living off their wealth.  You just couldn't earn a salary large enough, your only hope of breaking into that class would be to marry in.

          The 20th century added a chunk of people who pass some wealth to their children, enough to help a lot in life but not enough to live without working (Middle class).

          We don't know if the 20th century change is durable, or whether we'll revert to the 19th century.  That's what the book is focused on.  The point of the book is that the 19th century option is more likely if nothing changes socially/politically and absent unpredictable shocks as damaging to capital and assumptions as the two world wars and the Russian Revolution.   Sadly, there doesn't seem to be any time in history where the bottom 50% get anything but screwed.  We'd have to find an alternative to capitalism, or simply get the global standard of living so high that even those without wealth would have the necessities of life and enough time to "pursue happiness".  (in that case inequality might not really matter to most people)

          •  Increase in minimum wage (0+ / 0-)

            This statement

            It helps the hell out of the bottom 50% standard of living, but doesn't affect wealth inequality at all (they earn enough to live a lot better, but not enough to accumulate any wealth).
            is only true with respect to those who are employed by companies making enough to offset the increases.  If you are a small business with small profit margins, increases in minimum wage can be devastating.  Moreover, these businesses are likely run by the middle class, resulting in a redistribution of wealth WITHIN said class rather than from class to class.
          •  There is some evidence that using transfer payment (0+ / 0-)

            to blunt the worst of poverty (housing the homeless feeding poverty stricken children from conception to high school graduation) pays for itself from taxpayer point of view.

      •  Not true. There is no moneyed middle 40%. (1+ / 0-)
        Recommended by:
        NM Ray

        There is no middle class in the USA.

        Depending on the study you prefer:

        The top 20% owns 85 to 93% of the wealth.
        The bottom 80% owns 7 to 15% of wealth.

        All three columns on the right belong to the top 10%, who own 75% of the wealth all on their own:

        The top 20% vote in their economic interest (GOP). They run the show in the USA. Then they flood elections with capital to sway enough lower-wealth, lower-information voters to vote for their lackeys, by hook or by crook.

        Oh, when the Prez or Senate goes Dem, the rich just play their ace in the hole. They've been busy buying the system and the Democratic Party as well to ensure the gravy train goes on.

        •  Piketty used the top decile as the boundary (1+ / 0-)
          Recommended by:
          docmidwest

          That means the 80-90% are in the middle class by his definition.

          His data said claimed the middle 40% had 25-33% of the wealth (depending on country).  It's enough to make a difference.  On the graph you show, that's enough to bring it up from 15% to 25-30%.  (the 80-90% cohort.

          Actually, in reality, most of the top decile is generally considered propertied middle class too, although for certain at the high end.  They lose their status if they stop working, and have no where near enough capital to stop working.

          In the 19th century, the top 10% had 90% of the wealth.  Now they're more like 60-70%.  The shift downward to the 40-90% has changed the political equation quite a bit.   At 1% you're an aristocrat, at 10% you're easily seen as "other", but at 50% owning at least something (perhaps a mobile home and a 401k) you're now part of the "ownership class" as Bush II would have called it.

          You don't get the French or Russian revolution with only 50% of the population oppressed, instead of 95%+ in those societies.

          •  That definition of 'middle class' is nonsense. (0+ / 0-)

            My point was that it is misleading to lump the (relatively) immense wealth of the 80-90 percentile with the lack of wealth of the 0-80 percentile.

            Why mask the fact that the bottom 80% of the population own nothing (7-15% of wealth)?

            They are not a "middle class"! They are in a "have-nothing" class. And they sure "have nothing" in common in any way with the 80-to-100 percenters who literally own virtually all the wealth.

            The top decile doesn't have enough capital for you? How much more do you feel they require to sustain their opulence?

            And you believe that the vast majority of Americans who own literally nothing, no wealth to speak of, feel they are in the "ownership class"? They don't own anything! Don't make me pull out charts on stock ownership by decile, because they tell a different, dismal and brutally repetitive story on the concentration of wealth at the top.

            The goal of economic policy should be to create better lives for working people. The goal should not be to avoid revolution by tossing them the minimal amount of concessions possible.

            I'd also add that neither the French nor the Russian Revolution occurred because of wealth distribution more unequal than today. Wealth inequality existed for centuries without serious political threat. The French Revolution was led by aristocrats and business elites against a monarchic system they came to feel had outlived its utility. The Russian Revolution, on the other hand, was led by a band of cutthroat sectarians against a czar whose bungling World War I policy turned into a smoldering disaster with over 3 million of his own people slaughtered.

            •  The reason was to distinguish them from (1+ / 0-)
              Recommended by:
              docmidwest

              the bottom 50%.  Which have always had nothing and still have nothing, even in the best times for them in the 20th century.  (the standard of living increased.  the wealth they owned did not).

              The only difference between 1913 and 2013 with respect to wealth structure is that wealth moved from the top 1% to the 50-10 percent.  The 9% stayed much where it was, although the composition changed a bit, as did the source of wealth (in 1913 there were no CEO's earning the equivalent of 70 million dollars a year, but it was easier to find stable, low risk investments for vast sums of capital)

              This shift was significant (25%-33% depending on the country) and most of the book is about the causes of that shift and whether that shift is permanent or likely to return to 18th and 19th century norms.  (sadly, nothing in structural capitalism seems to indicate more wealth will shift to the bottom 50% ever, or that anything other than more wealth move away from the top % without drastic policy and/or social changes)

            •  The French revolution was very much (1+ / 0-)
              Recommended by:
              docmidwest

              economic.  Pretty much the most privileged in society were also 100% exempt from taxes, and the bottom 97%, who had no wealth or privileges were already in a horrible standard of living even by 18th century standards (of their equivalents in other countries) and were getting hit with ever increasing taxes.

              Unrest got to the point where the King called their equivalent of parliament for the first time in ages and when they gridlocked, the people took things into their own hands.

              The very earliest reforms were to abolish privilege with respect to law, property rights and taxation.

              After the terror, Napoleonic wars and such they kept many of the institutions of the revolution, including the declaration of rights of man which was primarily about legal and property rights - and retained the first universal taxation system (which is why France is one of the best countries to study for this kind of thing, its records go back a century earlier than most other countries)

              Sadly, the French revolutionaries were wrong that simply removing privilege would also remove inequalities.  The trend of wealth concentrating was obvious enough by 1848 that you get Marx's writings (not to mention a series of revolutions that were all squashed, all across Europe).

              As for the Russian revolution, well, we don't know what might have happened if the provisional government hadn't voted to resume the war with Germany.  But it was the economic damage of the war that brought down the Tsars, and the post-revolutionary climate was so terrible economically that the idea of just nationalizing all capital seemed fine...it wasn't like many people still in Russia owned any of it anyway by then, and clearly the French hadn't gone far enough given how their society turned out.

              For that matter, France, Britain and Germany were all on the brink of revolution late in WWI, and for France and Britain, the primary aid the USA brought wasn't military, it was financial.  Germany agreed to the armistice that turned into a surrender largely because they didn't think they could sustain the war much longer without a revolution.

              And ALL of the modern income tax structures in the western world came out of the war debts, as did the use of inflation (up to and including hyperinflation in Germany) to reduce those debts.  Prior to WWI, the idea of a 2% inflation as we have now being normal and desirable was insane, and inflation on the continent was over 10% between WWI and WWII, with Britain and USA not as strongly affected due to different policy choices (and less debt in case of USA).

              •  My point here wasn't clear enough. (0+ / 0-)

                If 25-33% of the wealth was in the hands of the third estate, instead of nearly 0%, the French Revolution is far less likely to have played out as it did.

                If 25-33% of the wealth in Russia belonged to 50% of the people, they would never, ever, have voted to nationalize all wealth.

                •  Sounds like the old "buy social peace" saw. (0+ / 0-)

                  Again, I'm not for ceding just enough resources to the many in order to avoid revolution and maintain the luxury of the few.

                  I'm for pressing for a more equitable world.

                  We can change many variables of either Revolution (especially by importing anachronistic elements) and achieve alternate outcomes.

                  In France, if the peasants had 25-33% of the wealth, they would have made Revolution far earlier and destroyed feudalism long before 1789.

                  In Russia, no one voted to nationalize wealth. The Bolsheviks seized power, killed opponents, and implemented their own wild policy. Again, if serfs had 33% of the wealth, they would have risen up and made a Revolution against the czar long before 1917 ever rolled around.

                  •  Hitler was voted into power legitimately (0+ / 0-)

                    as were the 3rd Estate (they were representatives of their communities, generally the most important local non-nobles, mostly the wealthier etc, typical of MPs or hell, our current representatives today in terms of wealth)

                    Bolshevicks couldn't vote because they were excluded from power because the Februrary revolution's parliament was still all nobility.

                    So they organized their own groups, the Soviets.  The Soviets voted for the revolution, not the official government.  A distinction without a difference except with respect to the legitimacy of the new government outside of the USSR.

                    Prior to the revolution, there were massive strikes, seizures of factories by workers, peasant uprisings against landlords, you name a piece of capital, there were common folk taking it away from people.

                    Defaulting on the sovereign debt was also pretty much going to happen (attempts to stave this off lead to the aforementioned strikes and uprisings).

                    It isn't strictly a vote, but the "people" did in fact rise up, and take the means of production.  

                    That doesn't happen when half the people own about a third of that stuff.  They fight back.

                    •  Revolutions are often captured and led by elites. (0+ / 0-)

                      These elites purport to speak for "the people".  This is almost always propaganda, covering their exclusion of the people and furtherance of quite different goals.

                      The 1789 3rd Estate was elected with a non-radical (written!) mandate to lobby for taxes against the nobles in a consultative assembly in which the nobles and clergy dominated them by a voting edge of 2-to-1.

                      They were not "the people". They were rich local elites. Significantly, many left-wing nobles themselves joined the Revolution and became key leaders in government.

                      Once these elites got to Paris, started talking to each other, and the king and nobles started telling them to shut up, their ambitions and goals quickly transformed and radicalized. As for "the people", the peasants were very much for the abolition of feudalism, but indifferent or hostile to the litany of other Revolutionary measures passed in the years to come.

                      The Soviets were sham institutions of one-party domination. The Bolsheviks instructed them how to vote and killed anyone who disagreed.

                      Nowhere is it written in stone that a revolution must be a "Marxian social revolution" in which workers appropriate all property.

                      Since 1970, in nations where "half the people" own even more of the pie than the USA (using World Bank GINI stats), I quickly counted off 37 separate countries in which political revolutions occurred.

                      Political revolution, even in modern wealthy states, is always a possibility. Yes, when it occurs, and it does occur frequently, it is very unlikely to take on "classical Marxist social revolutionary" characteristics. Not because of moneyed middle classes, but because of the nature of the current political and economic system. Today's revolutionaries understand globalization intuitively, and shape their revolutionary practice accordingly.

                      And again, half the people in the USA do not own 1/3 of the wealth. The top 20% own 85-93% of the wealth. The bottom 80% do not and will not make common cause with the super-wealthy in the 80-90% range. "The people" have more in common with each other than they do with those at the top who have acquired the entire country.

                      •  Income != wealth (0+ / 0-)

                        World Bank doesn't have stats on wealth, which is why Piketty had to spend 20 years doing research.  NOBODY has good stats on wealth, because it generally isn't taxed except in narrow categories (eg real-estate) and people lie in surveys, especially richer people.  These lies aren't always even intentional - people just leave out decent chunks of their wealth because it isn't in a bank account or a house. (eg, a life insurance policy with annuities that don't kick in yet)

                        I never said it was a classic Marxist social revolutionary model when you didn't have it - indeed Russia's the only example even close (and it happened before Lenin's party came to power there).

                        I'm saying you are LESS likely to have a shooting civil war when a country is in economic difficulty if half the population owns a significant amount of the WEALTH.

                        Significant being 25-33%, because that's what we ended up with after the shocks of 1914-1945.  The society would likely be even more resilient against economic shocks if even more of the wealth was shared, and especially if you could bring the number of people with wealth closer to 100% instead of 50%.

                        •  Good catch on income vs. wealth. (0+ / 0-)

                          True. Debate is raging right now on how strong a correlation there is between income and wealth inequality.

                          Nonetheless, I'd wager you a princely sum that a goodly number of my 37 post-1970 revolutionary countries have wealth distribution more equal than that of the USA.

                          Further, since we know so little about precise wealth distribution, you must also admit we can't say that ownership of a certain fraction of it by the 50%-90% diminishes the risk of revolution.

                          And, again, shouldn't our question be how to contest power and create more equitable wealth distribution rather than how to avoid political revolution?

                          I'm suggesting that there are very likely plenty of shooting civil wars even when the wealth share of the 80-90 percenters rises to 10-20% of the total.

                          But regardless, I stand with you when you argue that spreading wealth throughout society is a key goal. Instead of arguing that doing so forestalls revolutionary violence, I'd argue simply that it is good in itself.

                          •  Yes, some redistribution is a worthy goal (0+ / 0-)

                            in itself, of course.  But the point greblos is making here is a good one.  There still is a middle class here in the US, and you'd be correct that it is smaller than 50% or even 30% maybe - many of these are the people right now making say $300K or more per year who currently are in the highest tax bracket of 39.6%.  That said, that is just enough income, in my mind, to basically co-opt that group into thinking that any raise in taxes would be bad for THEM.  Of course, in reality these are the people who probably really should be screaming about their high tax rates when comparted to what carried interest/cap gains are taxed at - but they don't.  They make just enough to see the status quo as all fine and good.

                            And they comprise roughly 10% of the population, at least in the income graphs I've run.  These are NOT the people who will revolt though.  It will be the bottom 90% left with almost nothing who will have nothing left to lose.  If this group owned 30% of the wealth, I propose to you that they would not revolt, but probably be fairly content, if not happy.  There would be little reason for them to be willing to die or be killed when they have enough to eat, etc.  But when they have nothing else to lose?  And they are armed?  I don't think it will be 'elites' who will revolt, they'd have no reason to.

                  •  I'd like a better world too (0+ / 0-)

                    But the fact is that so far, when you have about a quarter to a third of the wealth in the hands of half of "the people", you don't seem to get the pitchforks, absent some other pretty compelling reason (eg, Iran, see, Shah and lack of legitimacy).

                    The Third Estate was made up of people who'd been taxed heavily because the folks higher on the ladder than them weren't taxable.  The reps at the Estates General were wealthy, yes, but nothing like the lowest of the nobility.  In spite of their relative wealth to peasants, between them they lacked the 25%ish of capital that half of Americans now have, and of course their numbers were tiny even if they'd had that wealth.

                    So it really wasn't that shocking that they sided with the peasants and tossed out the nobility, in hindsight.  It just hadn't ever happened yet.

                    In Russia, the "vote" was taken by the actual workers and peasants.  Before October, there were million-man wildcat strikes, peasant uprisings against landlords and the primary point of contention was in fact that the country was about to go bankrupt and was thrashing around trying to raise revenue...so in very Marxian fashion, the proletariat really did start grabbing the means of production.   Without all that, the Soviets wouldn't have been bold enough to attempt a coup against the parliament (which was a bunch of left over aristocrats, deeply unpopular and who in spite of the fiscal crisis were still trying to continue the German war).

                    Enough of this was starting to happen in Germany that it had a profound impact on the choice to accept the cease fire terms.

              •  Your history is overly economically deterministic. (0+ / 0-)

                Economics shapes world events in many ways, but it doesn't call all the shots. We can't derive all wars, revolutions and dramatic events that occur from wealth distribution.

                There was no popular unrest in France in 1788.

                Read that again. And then read it again.

                In 1788 the only people really agitated were the nobility.

                Louis XVI inherited and spent his way into extreme debt. As you mentioned, regular people could not be taxed any further. So over the entire 1780s, the king kept demanding that nobles be taxed, and the nobles kept angrily refusing. By 1789, the conflict between the king and the nobility reached a climax.

                The king, desperate for funds and facing a nobility in open rebellion, called the Estates General, a traditional representative advisory board of sorts (and not a modern parliament) that had long since lapsed into disuse. He hoped to use the clergy and "third estate" to force the nobles to pay up. The nobles thought they could control the assembly and force the king to respect their privileges.

                Both turned out to be wrong. But the initial complaints did not reform anything. Nothing radical was proposed, and everyone thought the nobles and king would work out a tax compromise.

                The people NEVER took things into their own hands. Instead, the "third estate" took over, and, infused with Enlightenment ideology, demanded a rational government be formed. Who was the "third estate"? 100% rich lawyers, businessmen, clerks, even wealthy land-owners. No peasants. No 97%.

                To the shock of all, they immediately turned on the nobility and abolished feudalism first off, which the tax-strapped peasants were thrilled to welcome. But the Revolutionaries went much further. After that, they embarked on many years of radical, complex political, military, social, economic and cultural overhauls of France ostensibly in the name of the "people" -- but actually in the service of an economic "individualism" that served their own interests.

                I'll stop there for now. All of that said, I don't disagree with your reading of 1802-1848, except to say that the Declaration of Rights of Man goes far beyond "legal and property rights" to set out the scope of human freedom generally, and how state and society ought work to cultivate that freedom.

                You misread the Russian Revolution in similar fashion. "The people" did not rationally craft policy and rise up to dictate their economic will, no, a vicious and murderous band of plotters seized power in a time of military and political turmoil and simply killed all opponents and dictated their will. Many leftist revolutionaries proposed other alternatives to capital and other matters. They were slaughtered.

                Germany faced a catastrophic series of military setbacks in 1917-18. Those defeats and the pinch they put on Germany's supplies led to their surrender. Neither France nor the UK faced revolution at the end of World War I.  The story of modern income tax structure emerging from WWI war debt is really interesting, but I don't see the connection to the rest of our conversation.

                •  Economics isn't everything but without it (0+ / 0-)

                  going sour it's pretty hard to get anybody to come to the revolutionary dance.  The only country I can think of offhand that didn't appeal to economic issues and tossed out its government anyway was the Iranian revolution.  That seems to have been mostly a legitimacy thing...the Shaw was a puppet of a foreign power and everybody knew it.

                  With respect, I have to differ.   Germany's case is pretty well documented here.  Where did you think the Weimar republic came from?  The Kaiser certainly didnt' set it up.  It was a hell of a lot more than "a pinch on German supplies" and the govt was under seige from the right and the left
                  https://en.wikipedia.org/...

                  France and the UK didn't face revolution primarily because their economies were saved by US investment both prior to and when they entered the war.  Without that cash, which mattered much more than the troops we fielded, the Germans likely would have won WWI, because they'd have outlasted their enemies (they did take Russia out of the war, and didn't face serious revolutionary pressures until 1918)

                  In 1916, Britain ran out of cash, literally.  Remember, they're on a gold standard, can't just make more.  They were paying for most of the war (pretty much for themselves, all of the minor allies except France, and a decent chunk of France's finances).   Without a 4 billion dollar loan from the USA, WWI likely would have ended right there, with the war engine grinding to a halt with a 1930ish credit crunch.  Without Britain propping it up, the French wouldn't have been able to do things like pay their troops, or provide ammunition.

                  France's military nearly did rebel anyway, although it chose to express its dissatisfaction as a refusal to take orders, rather than marching on the government.
                  https://en.wikipedia.org/...

                  •  Revolutions happen in more equal countries too. (0+ / 0-)

                    See my previous comment. Beyond Iran, there have been dozens of revolutions since 1970 in countries with a more equal distribution of wealth than the USA.

                    Crappy economic times do not inevitably lead to revolution. Crappy wealth distribution doesn't either.

                    Revolutions occur for many complex reasons. The common denominator is probably some sort of crisis (and the type can vary widely) during which the government demonstrates dramatically it has lost legitimacy as the people's representative. Even that's not enough in itself. You also need a politicized elite of one sort or another thirsty for political power and poised to step in when the government falters and at least appear momentarily to take its place -- and represent the people.

                    I contended that Germany ended WWI for military/supply reasons and so they did. The mutinies, revolts, and revolution occurred after the war's end was announced, not before.

                    The US pumped money into France and the UK for its own European policy ambitions. There was simply no threat of revolution in either country in WWI or thereafter (the mutinies were minor and not tied to large political unrest). To make a long story short, the US simply worked via investment to get all three industrial economies (UK, France, Germany) back on their feet. This was not to forestall revolution, but so that the UK and France would repay the WWI loans they owed the USA. Thus the USA made massive loans to Germany (!) to fund their reparation payments to France/UK, who used some of the money to stimulate their own economies but funneled much of it right back to the USA to repay their own loans. Crazy stuff.

                •  No popular unrest in 1788 - except (0+ / 0-)

                  for the unrest caused by the drought that year.    And the bad harvests since 1783.  

                  then in 1789 there was this little thing called "The Great Fear".  It started in 1788 actually, but didn't really take off until 1789

                  https://en.wikipedia.org/...

                  Peasant uprisings don't spring up from nothing.  If half of those peasants had some wealth, it would not have played out the same way.

                  •  Peasant unrest was the norm for centuries. (0+ / 0-)

                    Nothing going on in the 1780s was at all unusual.

                    That's how old-regime monarchies worked. Peasants periodically rebelled, rioted, attacked royal officials, burned castles and crops, stole bread and grain, and joined mass insurrections led by a peasant who declared himself God, Jesus, a prophet, a saint, a czar, an unfairly deposed monarch or his son, nephew, uncle or fourth cousin seventeen times removed...

                    Peasant uprisings were normal. And normally crushed.

                    The only reasons that 1789 was any different were:
                    (1) foolish and indecisive monarch who idiotically misread the political situation.
                    (2) foolish nobility who over-reached in their demands.
                    (3) smart and organized local rich elites who crafted an opportunity to snatch power and remake France in their image.

                    Those 3 factors made the revolutionary moment. If it had been left to the peasants alone, they would have aimlessly destroyed a bunch of stuff and then been beaten back into submission just as they had been for centuries and centuries all over Europe.

                    •  Without the crisis you have no 3rd Estate elites (0+ / 0-)

                      able to work together and make use of the generalized unrest, and make a real freaking military out of the lower classes (the other big innovation of the French Revolution was conscription and rapid-training of non-professional soldiers)

                      Without the food shortages you don't get the Arab Spring.

                      You need a crisis of legitimacy, agreed.  You almost always need an economic problem too, and how bad an economic shock is depends generally on how much wealth you have.

                      If you lose your job and have wealth, you can survive until the cycle or crisis ends.  If you lose your job and don't have wealth you're homeless and your kids starve, very quickly.

                      Which of these two people is more likely to support a revolution?  Especially if there's any kind of safety net at all, supporting the person experiencing the shock.  (most income insurance doesn't replace all of it and is limited duration, but it stretches your ability to not consume your wealth, and for those without wealth it might help enough to keep the food/shelter going for at least a while.  If this income is coming from the government how likely exactly is that person to rebel?)

                      •  Revolutions require more than hard times. (0+ / 0-)

                        Economists can't predict revolutions. No one can.

                        Revolutions come out of a tangle of social, economic, political and cultural factors. Experts aren't even good at saying which governments are vulnerable. Over and over and over again, today's bastion of stability suddenly crumbles overnight.

                        Sometimes food shortages lead to revolutions. Most of the time they lead to nothing. Why? It's not easy to answer, but always involves a complex stew of local particularities.

                        Revolutions aren't made by homeless, starving desperadoes. They're made by educated, politicized elites who nominate themselves spokespeople for larger groups who feel their attained status is no long protected by the government, but assaulted and undermined by it.  

                        That can happen anywhere, even in societies where the top 20% (instead of the top 10%) owns ~90% of the wealth.

                        •  I like your second to last paragraph (0+ / 0-)

                          Yeah.

                          If those educated elites are pretty happy with their lot, they don't tend to lead revolutions.  Which is how you get stable societies with high inequality (see, Britain, 19th century).

                          The structural change in wealth that happened in the 20th century expanded the number of those "elites" to a much larger portion of the population...and siphoning the wealth back away from them seems like a recipe to get the kind of "feel their attained status is no longer protected by the govt" situation.   Barring especially effective propaganda and/or coercion by the govt.

                          •  Possibly...that could happen somewhere. (0+ / 0-)

                            To my mind, the "wealth transfer" only involves the top 20% of the population and is of no consequence to most.

                            As you say, though, both elites and their clients will respond if they feel their acquired wealth being re-appropriated.

                            But will that response turn revolutionary? Most of the time, no. Even in 19th-century England, there were plenty of elite radicals. The revolutionary moment just never quite crystallized.

                            I don't myself advocate revolution. I suppose I advocate working for what is good in the world without trusting too much in any particular human institution (including revolution) to embody that good.

    •  There seems to be some evidence that at least some (0+ / 0-)

      efforts to treat the poor decently by government pay for themselves.  We should get the Congressional Budget Office to do cost/benefit analysis of the entire federal budget line item by line item and also make some attempt to do cost/benefit analysis on some alternatives.  Housing the homeless and feeding poor children from conception to high school graduation in particular seem to pay for themselves within ten years.

  •  Yes, thanks everyone. (5+ / 0-)

    Pressed for time right now, but this is a very important topic, dense and complicated, but one that has everything to do with how we move forward as a civilized community.

    I've got the book upstairs and hope to tackle it over the course of summer.  But, kudos to Piketty for turning over all the stones in capitalism's cemtary and adding up the numbers.  We are, after all, well on our way to making human life on the planet unsustainable, trashing eco-systems and whole societies in the process.  

    There has to be a better way.  The sooner we can all come to that conclusion and work together to balance out the impacts dictated to the many by a relatively few, the better.

    Industrial food production in America ruins our health, our environment and consumes more fossil fuel than any segment of our economy.

    by Mi Corazon on Sun Jun 01, 2014 at 07:50:48 AM PDT

  •  Of course the Brits went after Picketty (5+ / 0-)

    He is French. Ten centuries after 1066, and the UK still can't get over it.

    Just downloaded Capital in the Twenty-First Century as an ebook. Seems that Picketty is young. That might contribute to the criticism--pure envy on the part of the older generation of economists.  

    "The will must be stronger than the skill." M. Ali

    by awhitestl on Sun Jun 01, 2014 at 08:00:40 AM PDT

    •  The older economists never learned stochastic (3+ / 0-)
      Recommended by:
      peachcreek, lehman scott, mightymouse

      calculus or means to use large-scale databases (instead of spreadsheets) or the mechanics of growth models.

      Outside MIT and a handful of other schools and the engineering school econ departments, it's been dreary.

      LSE is pretty good. The Japanese are excellent, generally.

      You can tell who's up for the math by where the reviews fall.

      I'm waiting for the Koch's Florida State econ bottom-lickers to get to paper on Piketty. I need to experience a series of howler monkey laughs.

      "Stealing kids' lunch money makes them strong and independent." -- after Paul "False Prophet" Ryan

      by waterstreet2013 on Sun Jun 01, 2014 at 10:54:42 AM PDT

      [ Parent ]

  •  Here's a good comment I found on Naked (8+ / 0-)

    Capitalism:

    craazyman
    May 26, 2014 at 11:56 am
    In Theory

    There was a guy on TV a long time ago named Jed Clampett. he lived in a cabin in Kentucky, I think it was Kentucky, and went out hunting one day and shot at a raccoon and missed, and the bullet went into the ground and up from the ground came bubbling crude oil.

    Evidently, he lived on top of an oil field. That made him rich even though he didn’t have capital C or income (I). So he moved to Beverly Hills and bought a mansion and hired a banker to help him manage all his money, which now was Capital.

    it’s no wonder r > g. Since you have to work to get “g” but you don’t have to do anything to get C except shoot at a raccoon and miss. “Wait minute!”, the thoughtful critic interrupts. “You said he shot at a raccoon and the bullet went into the ground and up came bubbling crude oil. That’s not a return on capital, that’s just good luck with a bad shot!” Well, it was nature first, then it became capital instantaneously when somebody bought his land and put oil wells on it and then it became r when the oil was sold. So you can call it Nature or you can call it Capital, but it’s the same thing. Of course if somebody hadn’t invented oil wells and engines it would have stayed N and not transformed into C.

    That’s why r > g, because to get g requires labor and that N be transformed into C, but to get r only requires that N–>C, and wealth at time n+1 is C + C’ and (C+C’)/C .> g when N–>C since N = O until it’s transformed into C, which is a infinite return on C at time t-1.

    However, you could say this doesn’t work unless they paid him for the land rather than just took it. But If they took it, then it’s still N–>C and it just makes r even more bigger than g since Jed Clampett didn’t get any of the C. That happens a lot too, which no doubt is part of the problem"

    And, a post in comment to this:

    Jim Haygood
    May 26, 2014 at 12:41 pm

    "And the theme rolled on when the Clintons left the White House and grossed $109 million in the decade that followed:

    Well, first thang ya know ol’ Hill’s a millionaire
    The kinfolks said, Hill, move away from there!
    They said, Old New Yorky is the place you oughta be
    So they loaded up the truck, and they crossed the Tappan Zee …

    To Westchester, that is: swimmin’ pools, movie stars!"

     

  •  Wealth is not limited to material consumption (4+ / 0-)

    ...it is also measured by "security" and "choice".

    The American middle class is wealthy enough in terms of "food, clothing and shelter" but they're sorely lacking in economic security: That's the confidence that we can stay employed, that our expenses will remain predictable, that our savings won't evaporate without warning, and that insurance will restore us in the event of accident or disaster.

    It goes without saying that America's poor have never experienced financial security.

    Wealth is also realized as choice: work or leisure, where you work, where you live, how you get back and forth, public or private school for your children, vacations in Florida or at the lake... as well as the selection of consumer goods by variety and quality.

    In the conservative view, security is determined by how much money you have saved, and choice is determined by how much money you have to spend. It's all up to the individual.

    But acceptable levels of security and choice can be achieved without amassing a pile of "capital"... if these are social & political priorities. It's much more about cash flow than assets.

    “It is useless to attempt to reason a man out of a thing
    he was never reasoned into” - Jonathan Swift

    by jjohnjj on Sun Jun 01, 2014 at 08:32:50 AM PDT

    •  Yes. Piketty touches on this (1+ / 0-)
      Recommended by:
      lehman scott

      when he describes the impact of raising minimum wage sharply in France during certain periods.

      Didn't really budge the wealth of the lower 50% but put the floor on wages, so the average wage of the lower class was much closer to what the middle class earned and reduced wage inequality quite a bit (via wage compression, rather than shifting the wage ratios).

      There's also the matter of the economy as a whole growing does in fact provide some material benefit even as inequality decreases.   A bottom 50% person has some access to education and healthcare in most developed countries, a century ago this was much more restricted and a century before that most people didn't even have basic literacy.   Things like books and clothing are vastly cheaper compared to a working person's wages than they were in Jane Austin's time, as are things like affordable disposable cell phones and broadcast television compared to, say, hiring a messenger to send your mail (and somebody to write it, since you are illiterate, and somebody else on the other side to read it) or attending the theatre, assuming your community has one that you don't need to ride a horse for days to get to.

      I can certainly imagine a world that has tons of inequality in wealth but nobody cares, because the basic needs of everybody are being met, and most folks don't care enough about owning "stuff" to spend their productive years focusing on acquiring it, rather than pursuing whatever interests them.

      A world like Star Trek with replicator technology falls into that paradigm (any physical thing you want, from food to a tool you can punch a button and get).  There would still be a huge market for services and entertainment, but not much of the wealth earned by being good at those would be something easily owned.  (although maybe not.  Owning copyright on a story or a performance is within our current economic system)

      So there'd be stuff "rich" folks could access that "poor" folks could not, maybe.  Actually owning a performance and controlling rights to view it, for example.  Whether that kind of wealth inequality would lead to a revolution isn't clear.   It seems more likely that any revolution that occurred would be more along the Iranian model, a society whose leaders and values are out of step with the major population to the point where the leaders seem illegitimate.

  •  Great diary, docmidwest, and excellent (4+ / 0-)

    comments, everyone!  I'm so glad that the conversations that Piketty has initiated continue.

    A brief suggestion re the comments on capital.  Y'all might want to check out Capital as Power: A study of order and creorder by Jonathan Nitzan and Shimshon Bichler.  Here's the abstract of the book (pdf of Ch 1 here,  and the whole book can be downloaded as a pdf here):

    Conventional theories of capitalism are mired in a deep crisis: after centuries of debate, they are still unable to tell us what capital is. Liberals and Marxists both think of capital as an ‘economic’ entity that they count in universal units of ‘utils’ or ‘abstract labour’, respectively. But these units are totally fictitious. Nobody has ever been able to observe or measure them, and for a good reason: they don’t exist. Since liberalism and Marxism depend on these nonexisting units, their theories hang in suspension. They cannot explain the process that matters most – the accumulation of capital.

    This book offers a radical alternative. According to the authors, capital is not a narrow economic entity, but a symbolic quantification of power. It has little to do with utility or abstract labour, and it extends far beyond machines and production lines. Capital, the authors claim, represents the organized power of dominant capital groups to reshape – or creorder – their society.

    Written in simple language, accessible to lay readers and experts alike, the book develops a novel political economy. It takes the reader through the history, assumptions and limitations of mainstream economics and its associated theories of politics. It examines the evolution of Marxist thinking on accumulation and the state. And it articulates an innovative theory of‘ capital as power’ and a new history of the ‘capitalist mode of power’.

    Jonathan Nitzan teaches political economy at York University in Toronto.

    Shimshon Bichler teaches political economy at colleges and universities in Israel.

    I haven't finished reading it yet but so far i've found it very insightful.  Let's keep the convos going on this!  :)

    If you like the work I'm doing please consider pledging, we have much to do together and I need your help. Thanks bunches if you can! :) "Pessimism of the intellect; optimism of the will." - Antonio Gramsci

    by lehman scott on Sun Jun 01, 2014 at 09:22:46 AM PDT

  •  Great diary, timely as I am now reading Capital. (4+ / 0-)

    One reason Capital is so popular...I have it on ebook since I could not get it in paper, is that we are presently experiencing a huge societal shift/change and the whole economics of the world is shifting. Where to, we can only speculate, but it is interesting and we are all struggling to find out where we are, how we got there and where we might be going. And, yes, this is what is so upsetting to "conservatives" who try to resist change in all its forms.

    I am not an economist, but I am finding the Piketty book very interesting and the discussion here very enlightening.

    Character is what you are in the dark. Emilio Lizardo in Buckaroo Bonzai

    by Temmoku on Sun Jun 01, 2014 at 10:06:46 AM PDT

  •  "Remember, (4+ / 0-)
    Recommended by:
    TomP, lehman scott, Egalitare, lizzyh7

    when they tell you that you have never had so much,
    that is only the slogan of those who still have that much more than you."

    Nothing human is alien to me.

    by WB Reeves on Sun Jun 01, 2014 at 12:50:01 PM PDT

  •  Misconception of the Solow Model (3+ / 0-)

    The misconception is that capital accumulation is responsible for perpetual economic growth. While capital accumulation is responsible for explosive growth in the intitial stages of development it is not in the long run.

    Capital stock accumulation is a concave function (An infinite series that converges to a finite number because depreciation is greater than zero but less than one). Thus, what's responsible for long term growth in the Solow model is technology or productivity shocks to capital or labor.

    The Solow model is not only used to analyze long term growth, but also business cycle fluctuations. The Solow model is used by both New Classical and New Keynesian economists, although it was pioneered by Edward Prescott who is definitely in the New Classical camp.

    Piketty is no radical, but used equilibrium conditions in his model. However, it is unclear from what I have read in the book whether Piketty believes that disequilibrium effects are important in the short run.

    •  Piketty doesn't focus much on the short run. (3+ / 0-)
      Recommended by:
      docmidwest, Edward Song, lehman scott

      The data is far too noisy in that area, as it's subject to a lot of short term political and economic activities that seem to damp out over periods measured in decades.

      A lot of what is wrong with modern economic theory is much of it was developed in a very strange period of history (1950-1970) on very little data.   Earlier economic theory was worse, for similar reasons (Marx extrapolated from a few company balance sheets and anecdotal observations, Pareto had about 10 years of data during the late 19th century in a period of zero inflation and stable ROI/growth and pretty deliberately obfuscated data that didn't fit his theory.)

      One thing Piketty things would help with a global tax on capital would be to actually make wealth measurable, which means people who looked at the data could come up with better economic models of what really occurs than they can with the crappy data he had to work with.

  •  Is this the ACA in action? (1+ / 0-)
    Recommended by:
    waterstreet2013
    The general impression, however, is that the radical inequality in power that goes with radical wealth inequality coupled with large wealth/income ratios allows a variety of exercises of political and social power to counteract the expected drop in ROI.
    I csn think of a few of these gifts. Banking - glass steagall.

    Telecom and internet policy. ME policy. Outsourcing...

    Shit, the whole turd way movement is this, is it not?

    Democracy - 1 person 1 vote. Free Markets - More dollars more power.

    by k9disc on Sun Jun 01, 2014 at 08:01:12 PM PDT

    •  The buying and selling of politicians (3+ / 0-)
      Recommended by:
      docmidwest, k9disc, lehman scott

      via campaign contributions and also things like what Charles Koch did - providing funding to make a fringe idea like Libertarianism respectable.

      I mean...I like some of the things the Green party wants to do, but I can't just fund a think tank, a magazine, a presidential candidate etc by just deciding to, as he did in the 70s.

      Not to mention the damage that is done with relentless advertising, talk radio, etc.

      So yeah.  One problem with wealth inequality is that it tends to lead to turning democracies into "democracy in name only".  Even if it fails to do that it puts a huge thumb on the scales.

      One reason Gay Marriage got Republican votes in New York is that Wall Street types reassured the Rs that they'd provide cash to beat off any primary challenges from the right as a result of the vote.

      Good luck getting that kind of weight on your side for any kind of regulation that affects pocketbooks.

  •  I need a "Piketty for Dummies" for Dummies (0+ / 0-)

    Thanks.

    This whole world's wild at heart and weird on top....Lula

    by anninla on Mon Jun 02, 2014 at 09:41:31 AM PDT

    •  Haha, I know what you mean... (2+ / 0-)
      Recommended by:
      greblos, lehman scott

      Basically...

      Those who have the $$$ to invest it will, in the long run, slowly gain a higher percentage of wealth than those who work to make $$$ thru wages.

      Thus, the rich get richer and the poor get poorer, is a real problem.  

      The symbol for the Republican party shouldn't be an elephant -- it should be a unicorn.

      by Deadicated Marxist on Mon Jun 02, 2014 at 12:54:16 PM PDT

      [ Parent ]

      •  Yeah (1+ / 0-)
        Recommended by:
        lehman scott

        Add to this sound bite version (as opposed to the wall of text I posted below, which still is briefer than the original poster, or the nearly 800 page book) two thoughts.

        1.  This changed in the 20th century due to shocks in the first half, but is reverting to its normal state, and the gains in the middle class may not be permanent.

        2.  Piketty's preferred solution is an annual global tax on capital, preferably tied to growth rate and progressive to account for the fact that folks with more capital get higher rate of return on their investments.   (Not a tax on income, not an infrequent inheritance tax, not inflation, not austerity, not magical "educate everyone and the problem will go away" or pretty much any other remedy you've ever heard of.  He tried all those out in his book and found them wanting, mathematically speaking.)

  •  Let me try. (3+ / 0-)
    Recommended by:
    docmidwest, pashber, lehman scott

    1.  We looked at all the existing records on wealth and taxation.  We can do that now with computers and modern methods in a way never before possible. The records are incomplete and imperfect and only go back 200 years even with the best of them (France).  Still they say interesting things.

    2.  The data shows that the natural tendency of capital is to accumulate and grow, and it grows faster than any other way of generating wealth, even overcoming massive shocks.  The trend to accumulate to the top is what happens absent major shocks or policies designed to retard this effect.  This even in societies that thought equality of opportunity and property before the law would solve this problem (see France).

    3.  The models that we've used most of our lives, and that the current Boomer economists in power were trained to use were based on a period of history that is proving to be a major aberration, with the last 50ish years being a return to the norm, that is mostly completed.   It's all pretty much nonsense, the data doesn't support any of the ideas economists have been spouting based on theories generated in the 50s-60s.

    4.  The middle class appears to exist mainly because of the shocks between 1914 and 1945, and it is defined by owing some wealth/capital.  About 1/4 to 1/3, where up to 1914, it was zero, same as the lower 50%.

    5.  The top 10% are really the top 9% (who must still work to keep their standard of living) and the top 1% or a fraction of that (which can live entirely off investments).  The 50-90% have more in common with the 9% than with the actual poor (0-50%) or the 1%, although you can divide society up various ways (how much wealth is enough to make you believe you are middle class and act that way varies, it can be zero net eg "I have negative net worth but own a house and have a white collar job...I'm actually in the bottom half but think I'm middle class").

    6.  Discussions of sovereign debt, potential future scenarios and ways to limit the natural tendency for the rich to get richer.   Boils down to a recommendation for a wealth tax instead of an income tax, which can start out at a tiny rate just to force the reporting of what wealth is out there, and can increase if societies refuse to put up with inequalities past a certain point.  This tax must be global to be truly effective, because of tax havens and a race-to-the-bottom in tax rates that is already well underway now to attract capital.

    7.  The main purpose of government is to provide services that everybody should have. (security and he adds health care and education, based on how govts spend their money in rich societies).

    8.  Growth past about 1.5% doesn't happen unless you're "catching up" to the richest, most technologically advanced societies or your population is growing at a fantastic rate.   The huge growth in Europe/Japan between 1945 and 1975 was war recovery, the huge growth in India/China now is them catching up.  It'll be somebody else next.  When you hit the front of the curve, 1.5% seems to be the limit so far, and the odds are this will decrease in future as populations stabilize.

    •  Excellent Summary (1+ / 0-)
      Recommended by:
      lehman scott

      You explain why the "middle-class" is a term of art.

      Either working-class, or you're....well...you're just working class.

      The symbol for the Republican party shouldn't be an elephant -- it should be a unicorn.

      by Deadicated Marxist on Mon Jun 02, 2014 at 12:58:04 PM PDT

      [ Parent ]

      •  By Piketty's definition (1+ / 0-)
        Recommended by:
        lehman scott

        Poor means "the group that owns less than 5% of the capital".   Which prior to WWI was 90% of the population, it is now 50%.

        Middle Class in his book  means "the group that has gained wealth since 1914, mostly from the 1%"  That's the 50-90% bracket.  

        The 91-99% has held roughly steady since 1914 in terms of overall wealth, although they have a higher % of folks who earn money through work rather than investments (this is also true of the lower end of the 1%, although the latter don't usually need to work).

        It is far less an income bracket than a wealth bracket in his books.  You can have very high income and still not own anything as you have debt equal to assets and a lifestyle that requires your income to break even - in his analysis that would put you in the bottom 50%.

        He also does an income breakdown which looks more familiar when talking about income inequality.   He's very careful to define his terms all through the book as he's aware that he is sometimes using concepts that have baggage and are misleading if you don't remember how he defined them.

  •  a carbon tax is a wealth tax (0+ / 0-)

    A global carbon tax, which is needed for other reasons, would also serve very well as a global wealth tax: to be productive capital, as we know it today, must generate CO2 -- lots of it.

    It should also be noted that a wealth tax is a broad-based form of demurrage, which tends to drive down the cost of capital and hence discount rates. A wealth tax large enough to drive the baseline cost of capital negative would therefore cause economic planners to take a long-term (aka sustainability) point of view. Which would also solve the CO2 problem along with a great many others ...

    Finally, if the money collected from a wealth tax were plowed back into the economy by providing everyone with a guaranteed basic income (and basic health care), as advocated for example by John Kenneth Galbraith and Martin Luther King, abject poverty would be eliminated as well. At which point we might actually have the leisure to all work together on repairing instead of merely controlling the damage wrought be laissez-faire capitalism, and all within a market economy that is at least as "free" as what we have now.

    What fun!

    •  One danger with a targeted wealth tax (0+ / 0-)

      is that those with the most wealth have the easiest time shifting assets.  Which is why he recommends the tax be both global and on all asset types.

      But yes, you've got a point about a carbon tax.  It is a kind of asset tax on some especially nasty kinds of capital. Shifting assets away from high carbon-emitting things has an obvious social good even if it doesn't reduce inequality or generate much tax revenue (eg, finally funding alternative energy).

      It would be kind of like addressing the problem of slavery by taxing slaves.   You could still own the slaves but a lot of people would switch to either free or mechanized labor unless having a slave was so much an advantage that they'd pay the tax anyway.

      In a way, that's what most of the North hoped would happen with slavery in the first half of the 19th century.  That it would become economically a failure and wither away.  When it started instead expanding to new states that's when the Whig party split over the issue and eventually lead to Lincoln, Civil War, etc.

      I'm a lot more comfortable with having carbon emitting capital than slaves, of course.  Our equivalent of a civil war for ignoring it will be a climate disaster worse than we're already likely to encounter.

    •  A carbon emissions tax (0+ / 0-)

      would be an excellent thing. It has enormous advantages:
      1. It taxes an activity which we need to strongly discourage.
      2. It can easily be collected at a few centralized points (refineries,...)

      It isn't a capital tax of any kind, however. A wealth tax is not based on whether capital is "productive" or not. Taxes that are based on that are called income taxes or capital gains taxes.  I don't see how a carbon tax addresses the drift toward hereditary aristocracy.

      You could easily see how replacing complicated current taxes with a carbon tax and other pollution/resource taxes together with a modest wealth tax, a small financial transaction tax, a simplified income tax with larger exemptions., etc.  would go a long way toward solving a number of problems.

      Michael Weissman UID 197542

      by docmidwest on Mon Jun 02, 2014 at 01:54:23 PM PDT

      [ Parent ]

    •  Carbon tax = wealth tax would explain Koch brother (0+ / 0-)

      temper tantrum about the very thought of a carbon tax.  Not only do they have much wealth, their wealth is even more tied up in carbon than bankers' or brokers' wealth.
      Demurrage was a medieval tax to pay for maintaining the walls of a walled town--thus its national defense?  Since capitalists today get more benefit from our military than those of middle income almost all from work do, it would make sense for capitalists to have to pay most of the cost for national defense.   I do not want to drive the cost of capital below zero, just low enough to get investors to look at 30 years instead of only 10.  As for trying to fund transfer payments to cut down on poverty--forget it.  The wealthy have used their wealth to buy HUGE political power.  They OWN our government, certainly at the national level, in many areas also at state and local level.  In order to get permission to have a carbon tax at all, it will be necessary to use much of the revenue to buy otherwise likely to become stranded assets fossil fuel reserves as mineral rights to keep it underground and NOT burned for centuries.  We will also need an energy tax to finish buying all those fossil fuel reserves as carbon tax dwindles due to destroying its tax base.  Best hope for better anti-poverty policy is to have Congressional Budget Office do cost/benefit analysis on all line items in federal budget.  Then hope Congress can be persuaded to increase funding for items that save enough to pay for themselves in 10 years and cut funding for items that do not seem to have any offsetting savings, much less enough to ever pay for themselves.  There is some evidence that housing the homeless, feeding starving children, and Medicaid as a public health measure do pay for themselves.

  •  Syndicalism? (0+ / 0-)
    Why is private wealth always so unequally distributed?
    Because workers do not own the businesses that they work for. The tendency will always be in the direction of concentrated wealth in the hands of those who own the business.

    Mondragon, a business cooperative based in Spain sets the example of where we should go.

    Syndicalism might provide a much more stable and equitable economy than what we now have.

    A million Arcosantis.

    by Villabolo on Mon Jun 02, 2014 at 01:33:15 PM PDT

  •  Time to change the model (0+ / 0-)

    "inequality"

  •  Even Dumber... (0+ / 0-)

    The reality is that there is a "monopoly" on $.

    A new definition of monopoly, but a monopoly none the less.

  •  Piketty (0+ / 0-)

    Pickett's conclusions maybe be far off course for closing the income gap but what is lost in the great debate is his promise in the beginning of the book is "spot on". Capitalism is in big trouble and headed for another depression of biblical proportions. The race for dwindling customer base has forced companies to supply goods at lower cost which has created fewer workers which results  in fewer buyers. The creep of income gap will bring down the house of cards we call the economy. Capitalism is dying before our eyes. If a correction isn't made soon the billionaires billions will be worth nothing more than ass wipe.

    •  Piketty believes you'd have a revolution (2+ / 0-)
      Recommended by:
      docmidwest, Villabolo

      before you have high enough inequality for there to not be any customers.  "barring an especially effective method of coercion or persuasion".   Which we maybe have.

      The problem with normal financial collapses is that if there are any safe place to put assets, the billionaires will be the first there (see "we shorted the economy" in 2007).

      Inflation as a strategy has a similar issue, it's great for clearing up debt, but the wealthy will shift their resources from debt into real estate or stocks which tend to go u with inflation.

      Some change happened in 1914-1945 because of multiple shocks, and also significant changes by national governments in regulating income (as a strategy to pay off war debts) with some actual confiscations (USSR, France nationalizing several industries, etc).

      That level of repeated shock may well be in the cards but I think we'd all prefer to find another way, if there is one.  I certainly don't want to live the last 30-40 years of my life in a period anything like the first half of the 20th century, especially with nukes in the equation.

    •  Extremely unequal societies (0+ / 0-)

      have shown a lot of stability. Piketty describes many such cases. So perhaps what's dying is not capitalism as such but the relatively egalitarian consumer-oriented capitalism we have taken for granted. Piketty suggests that 1800's-style capitalism may be closer to the typical steady-state.

      Michael Weissman UID 197542

      by docmidwest on Mon Jun 02, 2014 at 07:19:06 PM PDT

      [ Parent ]

  •  This is hardly for dummies! (0+ / 0-)

    You condense the book. But you don't simplify it.

  •  In commenting on an NPR debate (0+ / 0-)

    about Piketty's theory of inequality, I found I had to make two points that I thought should have been obvious to everyone:  (1) wealth is never productive; (2) wealth confers power.

    It's amazing how people can launch into an economic discussion without distinguishing between income and wealth.  Wealth measures what I own; income measures what I earn, i.e. derive from my own labor, the labor of others, gifts people give me, dumb luck like gambling winnings, gains from sales of assets, dividends and rents (including interest, which is just rent on money).

    The natural world is productive.  Labor is productive.  Ownership never is.

    Consider a wilderness area; we still have a few, and prior to civilization much of the world was wilderness.  In this wilderness nature produces valuable items such as fruit, edible plants, and animals which can be converted to food with some degree of human labor.  Once we divide up that wilderness and say who owns what parts of it, what we've added is a collection of agreements about who gets to deny the products of nature to everyone else, unless those other people are willing to offer something else of value in return.  Ownership equals power to control allocation of resources.

    This makes ownership sound totally negative.  Actually, it is not, but right-wingers so completely equate ownership with virtue that they overlook its main benefit:  it tends to prevent the tragedy of the commons.  If enough people find out about the goodies in the wilderness area, and government does not prevent them from going in, picking all the fruit, digging up all the edible plants and hunting down all the animals,  the wilderness area will become an unproductive desert rather quickly.  We see this all over the place, especially in the oceans, where one fishery after another gets depleted because nobody owns the fish until after they are caught.

    •  Oversimplified (0+ / 0-)

      I see what you're getting at, but it's oversimplified. Ownership also provides an important part of economic motivation aside from the natural-commons issue. For example, you want to provide some motivation for people to put extraordinary effort into building something, designing something, etc. Then the effort is over. If they don't get something to own (money, a factory,..) then their compensation is over. That wouldn't work well.  Situations like that are so common that we take them for granted. In general, some motivation for deferred consumption is needed.
      The problem, of course, is that the standard motivations (ownership, ROI) give a terrible socioeconomic instability, Piketty's theme. So we need some way of keeping the micro motivations without falling into the gross inequality trap. Piketty's tax would help. The issue is how to implement it, since we're already so unequal in power that such moves don't seem politically possible.

      Michael Weissman UID 197542

      by docmidwest on Tue Jun 03, 2014 at 07:02:48 AM PDT

      [ Parent ]

  •  say what??? (0+ / 0-)

    "The first part of the book, told with numbing repetitiveness, does not directly concern inequality at all. It describes changes in the ratio of total capital to annual production."

    If you would understand why inequality is bad from an economic GDP growth perspective (as opposed to a moral perspective), then the first thing you have to understand is that rich are savers and poor are spenders and each has a different effect on the economy when they have money.

    Specifically, the poor and middle class can drive price inflation when they have too much money, but they can never drive asset inflation.  Meanwhile, the rich can drive asset inflation when they have too much money, but they can never drive price inflation.

    Asset inflation is another way of describing the process where interest rates go to zero and return on every other investment head toward zero even as the price of every investment increases.

    So, my reaction to "does not directly concern inequality at all [, but rather] changes in the ratio of total capital to annual production" is, what exactly is it that you thought inequality was?

    •  Inequality is not really (0+ / 0-)

      discussed in the first part of the book. That's why the bad implications of the effects described there are not "direct"- they require some additional background facts that come from other types of data, which Piketty gets to later.

      One of the strengths of Piketty's analysis is that he looks at real data. Thus he does not repeat the sorts of assertions you make about "asset inflation" and the ROI without checking if the real world behaves that way. His key point is that it doesn't.

      As for your claim that wealth and inequality mean the same thing and can't be discussed even in the abstract as separate categories, it's not empirically true. Although all private wealth  has been unequal, Piketty describes significantly different degrees of inequality in different societies. So yes, you need two or more parameters (and hence two or more words) to describe things.

      Your claim that GDP is objective while distribution is merely "moral" implicitly takes a religious attitude toward GDP. Both GDP and distribution, and many other parameters, are reasonably quantifiable. They all have effects, none of which would matter except that we have moral feelings about starvation, humiliation, a nice day on the porch with neighbors and beer and peanuts, etc.

      The economic parameters also have effects on each other as part of a dynamical system. One of the effects of extreme inequality is that a large fraction of the population never gets much opportunity to become very productive. So that hurts GDP. One effect of shifting income from wages toward ROI is that it undermines motivation to be productive, especially as wealth becomes more inherited.

      Michael Weissman UID 197542

      by docmidwest on Tue Jun 03, 2014 at 08:49:15 AM PDT

      [ Parent ]

      •  Your last paragraph about extreme inequality (0+ / 0-)

        stifling opportunity to be productive should somehow be made to argue in favor of being somewhat more generous towards the poor in an effort to improve overall productivity in the economy, some of which would come back to the rich.

        •  agreed (0+ / 0-)

          But I think what we're seeing now is that a punitive streak is coming out that cares more about making the poor suffer than about prospering. I've heard that explicitly in some conversations with conservatives. That's not quite as irrational as it sounds, since absolute income has very little effect on happiness except under ~$75k/year. Above that it's pretty much just a competitive game, even if not consciously. Rate of income growth for even most of the rich is at least as high under D's as R's, yet they tend to prefer R's because under R's the income growth of the poor and middle is lower. From their point of view, that's a feature not a bug.

          Michael Weissman UID 197542

          by docmidwest on Wed Jun 04, 2014 at 06:52:45 AM PDT

          [ Parent ]

  •  wealth dominance (0+ / 0-)

    I like the term "hereditary aristocracy" ... and we should all start using the term until it becomes another term understood by everyone. Just like the teabagging nutwings who constantly harp on their "values" issues.

    hereditary aristocracy. So much against the grain of American equality and justice, and fairness.

  •  Thanks (0+ / 0-)

    I voted Tuesday, May 6, 2014 because it is my right, my responsibility and because my parents moved from Alabama to Ohio to vote. Unfortunately, the republicons want to turn Ohio into Alabama.

    by a2nite on Sun Jun 08, 2014 at 05:52:41 AM PDT

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