He’s been called the “rock-star economist”, French Economist Thomas Piketty’s “Capital in the 21st Century is a bona fide bestseller and have provided fodder for Progressives, the present scourge that will soon spell the death of our society. I was still under the impression that Global Warming, Climate Change, or perhaps Climate Disruption, as it has been recommended to be called now, was going to be the End of our Civilization but we have been misled; it is income inequality as Mr. Piketty’s thesis asserts that will do that.
Keynesian Progressive Economist, part-time lecturer for City University of New York and regular contributor to the New York Times Paul Krugman, has boasted that Piketty’s thesis has reduced those on the Right to name calling after failing to mount any substantive counterattack. If by name calling Mr. Krugman refers to people who have called the thesis a work of Marxism, then I guess he is correct. Of course, that is not all they are saying, in fact the book’s conclusions are being shredded by other economists and not just in the US but some of his contemporaries in Europe as well, we will get to that in a minute.
Piketty’s book is meticulously researched, he covers economic data from several countries for over 200 years and he has a flair for writing making his case. What is Piketty’s assertion? In essence his conclusion is that Karl Marx and communism were right, only that he was too early. His theory is that capitalism is a powerful force that eventually concentrates wealth of select few and widens the inequality gap. He arrives at this conclusion by noting that the growth of wealth (returns on capital) are outpacing economic growth (returns on labor). With the wealthy owning more of the capital the inequality between both will continue to grow uncontrollably.
For instance for the US, he uses IRS data from tax returns to illustrate his point. This becomes one of the many issues that plague his overall thesis. As Scott Winship of Forbes magazine;
“…omits any consideration of the welfare state — Social Security, Medicaid, Medicare, food stamps, public housing, school lunches, etc. Piketty’s analysis also excludes the value of health insurance that Americans typically earn as part of their compensation package. It hardly makes sense to measure poverty without including the payments that are being made to reduce it. Incorporating such factors, Winship estimated that the real median income of a four-person American household in the bottom 90 percent of earners rose by $26,000 between 1979 and 2012, or $13,000 for a one-person household, as against Piketty’s claim of minus $3,000 per household in that period.”
Rather telling that an advocate for redistributionist state ignores the very measures that the government uses to reduce the inequalities between the have and the have-nots. That is just one of the 6 ways that Forbes found that Piketty’s book is not holding up. Another and perhaps more important one the claim by Piketty that the wealthy can grow their capital by 4% doing nothing at all and just holding on to their capital.
As Kevin Williamson of the National Review points out;
“A huge pool of potential capital is widely available to the non-rich. If the growth of capital left to build upon itself is such an amazing unstoppable force, says Kevin Williamson in National Review, that’s an argument for turning Social Security into an individualized investment account like a 401(k). The Social Security withholding tax amounts to 12.4 percent of each paycheck (divided equally between employee and employer). If that money were put into individual accounts growing at a modest rate instead of providing a giant government slush fund to be used for general spending, every American with a paycheck would retire a successful capitalist. This principle holds true regardless of income. Even if you made only $20,000 a year and never got a raise, writes Williamson, investing $2,000 a year at 4.5 percent for 45 years leaves you with over $300,000, which could be converted into an annuity paying $1,800 a month, more than you made in your job.”
You can read the whole article, it list 6 ways the book is not holding up Forbes here:
Piketty’s book seems like an attack on the wealthy, how is that an attack on the Middle Class?
While hidden as an attack on the rich, the whole thesis is an attack on Capital, everything from real estate to financial assets to intellectual property. His recommendations of a Global Wealth tax or confiscatory wealth tax on the rich of 80% on earnings and inheritance are design to make capital disappear or be greatly diminished. His claim that these taxes will not affect overall growth are belied by historical data that show otherwise.
He uses the new Chinese oligarchy of Mega rich businessman as an example but completely ignores the millions of Chinese who have been lifted from abject poverty along with them. There is a reason why Communist China is now Capitalist Lite China now. Yes some have become obscenely rich, to Piketty, but there are many millions more who have also benefitted from a market economy.
In Europe, and especially France from where Mr. Piketty hails from and Socialism dominates most governments, yet not one has adopted communism and the full Marxist theories. The question is why, the answer is the large Middle Class that resulted from the neo-Capitalist societies there. As long as that large Middle Class exist, Marxism will remain as a fringe philosophy, tried and failing.
Piketty likes to note the large salaries given to top executives and claims such large salaries are not warranted, by their performance. He contrast that to the earnings at the bottom and sees this as untenable. His solution is to tax those earnings at a prohibitive rate even though he admits that this will do nothing to help the one at the bottom of the pay scale, while at the same time asserting that it would not affect growth and the prosperity which is what will ultimately keep lifting those at the bottom.
Confiscatory inheritance taxes means that your heirs will not enjoy the fruits of your labor, thus denying them a chance that they would continue to build on your assets. How many have heard of heirs that had to sell their parents’ home, or cash out other forms of capital to pay for inheritance taxes? This only ensures that raising their wealth, they have to start again accumulating wealth and are not allowed to enjoy the benefits of the previous generation.
The rich will find ways to ensure that their Capital is not confiscated in that manner, but how about the rest of us? What incentive is there for us to attempt to achieve, if we know that the government will take it back in the end?
The new Aristocracy
Piketty, Krugman and many others are the new “aristocracy”, highly credentialed individuals that share the same views and now largely in control of large portions society. They are the movers and shakers, although largely unseen they influence our Society in various ways. As they control the Media, they ensure that their Progressive views are the dominant one. They control most Universities campuses and stamp down any dissent, while punishing those that do not toe the Progressive line.
Much like in Great Britain during Victorian times many of the noble aristocrats found themselves penniless but titled them parlayed that into positions within government, industry the arts selling their noble titles to add a sense of respectability and gain some modicum of wealth in the process. Today we have these highly credentialed aristocrats who use their degrees to dictate and lend credibility to all sorts of schemes whose ultimate goal is to take from those that produce and redistribute it to themselves, first, and to others.
This is how we get the whole AGW mess, a massive burden that will ultimately only make everyone poorer, except those Aristocrats that will illuminate our way through the diminished or confiscated growth of everyone. This were we get schemes like Obamacare, another boondoggle that only serves as a massive tax on the Middle Class as more companies abandon Employer subsidized health care for a much less affordable and diminished product. The NPR recently ran this story “Employers May Start Paying You to Buy Health Insurance” trying to paint this in positive light, after years of denying that this would be a consequences of Obamacare. Ironic, now they tell us.
This is perhaps the most puerile form of diplomacy that I have witness is born. The #Bringbackourgirls hashtag diplomacy is so revoltingly asinine and useless that it brings tears to my eyes. The hashtag diplomacy was previously used during the Crimea annexation to force, convince beg the Russians not to take over in Crimea and divide the Ukraine. We know how effective that was.
In this case we are not talking about a country like Russia but about an Islamic terrorist group whose aim to wipe out Western education and influence in the country. While Nigeria’s cell phone coverage is vast and reaches even the most remote sections, do we really expect this group to see the First Lady of the United States or the PM of the UK with a placard saying #Bringbackourgirls and make a difference in their thinking or their actions? I’d suspect that are scheming on ways to further capitalize on our plight.
These are the same people who have vigorously maintained a campaign to portray the Tea Party group as racism, xenophobic, ignorant and of course White. This while at the same time claiming that although Boko Haram the group who had killed hundreds before they abducted the young over 250 girls in Nigeria was not an Islamic terrorist group.
Even now weeks after the abduction, there some in the State Department that are still denying the connection between Islam and Boko Haram or their previous atrocities. In their view, Nigeria was not tolerant enough and brought upon themselves for trying and failing to stop a group who sole purpose is to turn Nigeria into an Islamic Sharia State.
The New York Time who has become the voice and lead apologist for these enlightened aristocrats has declared that we do not have the ability to mount a rescue operation, gee you think. From the story;
The administration quickly offered its help to President Goodluck Jonathan of Nigeria in taking on the kidnappers, the extremist group Boko Haram. But the United States has not sent troops, and is unlikely to do so, in part because the girls are not believed to still be in one place, and because of the risks in attempting such a large-scale rescue over a vast expanse.
The story continues to blame the Nigerians for Boko Haram’s actions;
The problem, they said, rested more with Nigerian officials who ignored past American warnings to soften brutal tactics that only fueled Boko Haram’s insurgency.
If all we are going to do is pretend to help, what is with the hashtag diplomacy? It provides a safe, inexpensive and impotent way to pretend to care about events we are neither prepare or capable of attempting to correct. This is especially true in this case as the Administration fought for years to name Boko Haram a terrorist organization despite all their atrocities in the past.
Yes this new Aristocracy is very tolerant until they aren’t. The Boko Haram insurgency was tolerable, like Muslim Brotherhood in Egypt or the Al Qaeda insurgency in Benghazi Libya, they were are considered tolerable and worthy of our support. Yet, they have all ended up badly. The Maidan insurgency in Ukraine was also worthy, but not those in the Crimea or Donetsk or current protest in Venezuela something our Aristocrats media controllers have all but ignored.
Stephen B. Waters wrote in his book Individuals, Journalism, and Society
“Generations forget themselves and go stupid over time. Hubris grows. ‘Hey! I’m the center of my Universe and I must be right!’ Literature is called to refocus the magnifying glass of consciousness to remind humanity that the lessons of history are there for their benefit and, if forgotten, will bite them in the ass”
Mr. Piketty is fond of the French Revolution who he considers more significant because it appropriated more wealth. I hope he does not forget what happened to Aristocrats (both the educated and the nobility) that supported that revolution. Hopefully, he won’t lose his head thinking about it.