Krugman on Piketty

from Edward Fullbrook

Now Paul Krugman has gotten into the Piketty act.  The just published issue of the New York Review of Books features a long  review essay by Krugman (it’s open-access) on Capital in the Twenty-First Century.   Here is how it begins.

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age—or, as Piketty likes to put it, a second Belle Époque—defined by the incredible rise of the “one percent.” But it has only become a commonplace thanks to Piketty’s work. In particular, he and a few colleagues (notably Anthony Atkinson at Oxford and Emmanuel Saez at Berkeley) have pioneered statistical techniques that make it possible to track the concentration of income and wealth deep into the past—back to the early twentieth century for America and Britain, and all the way to the late eighteenth century for France.

krugman_1-050814

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age—or, as Piketty likes to put it, a second Belle Époque—defined by the incredible rise of the “one percent.” But it has only become a commonplace thanks to Piketty’s work. In particular, he and a few colleagues (notably Anthony Atkinson at Oxford and Emmanuel Saez at Berkeley) have pioneered statistical techniques that make it possible to track the concentration of income and wealth deep into the past—back to the early twentieth century for America and Britain, and all the way to the late eighteenth century for France.

 

The result has been a revolution in our understanding of long-term trends in inequality. Before this revolution, most discussions of economic disparity more or less ignored the very rich. Some economists (not to mention politicians) tried to shout down any mention of inequality at all: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution,” declared Robert Lucas Jr. of the University of Chicago, the most influential macroeconomist of his generation, in 2004. But even those willing to discuss inequality generally focused on the gap between the poor or the working class and the merely well-off, not the truly rich—on college graduates whose wage gains outpaced those of less-educated workers, or on the comparative good fortune of the top fifth of the population compared with the bottom four fifths, not on the rapidly rising incomes of executives and bankers.

It therefore came as a revelation when Piketty and his colleagues showed that incomes of the now famous “one percent,” and of even narrower groups, are actually the big story in rising inequality. And this discovery came with a second revelation: talk of a second Gilded Age, which might have seemed like hyperbole, was nothing of the kind. In America in particular the share of national income going to the top one percent has followed a great U-shaped arc. Before World War I the one percent received around a fifth of total income in both Britain and the United States. By 1950 that share had been cut by more than half. But since 1980 the one percent has seen its income share surge again—and in the United States it’s back to what it was a century ago.

It’s a remarkable claim—and precisely because it’s so remarkable, it needs to be examined carefully and critically. Before I get into that, however, let me say right away that Piketty has written a truly superb book. It’s a work that melds grand historical sweep—when was the last time you heard an economist invoke Jane Austen and Balzac?—with painstaking data analysis. And even though Piketty mocks the economics profession for its “childish passion for mathematics,” underlying his discussion is a tour de force of economic modeling, an approach that integrates the analysis of economic growth with that of the distribution of income and wealth. This is a book that will change both the way we think about society and the way we do economics.

  1. William Neil
    April 15, 2014 at 7:44 pm

    I finished reading Piketty’s book about a week ago, saw his presentation this morning at the EPI, and the panel discussion afterword (online at Youtube) and now have just finished reading Krugman’s fair and generous assessment, which I agree with. Well done Paul.

    Let me begin by stating that it probably took an economist from within the mathematical fraternity and trends since the 1940’s to deliver a book like this that will not be assaulted out of the gates. Piketty’s handling of literature’s insights and confirmations was a wonderful breadth of fresh air, my own preferences would have run to Dickens and Hugo, in addition to those he covered. And Piketty has almost, point for point, echoed those made by Robert Skidelsky about the importance of economic history to ground the modeling, points made in his book “Keynes.” I think Pinketty’s handling of Britain in the 19th century, especially the way it was able to manage it’s enormous public debt run up by the Napoleonic wars without imploding – far from it – the reverse indeed, was great, an area I have written about, sent there by the urgency of the assertions made by the austerity folks, with their rigid triggers of troubles ahead for debt levels well below those run up by late 18th and early 19th century England.

    Piketty is also just marvelous in his handling of the French Revolution’s impact – which will be to the surprise of many. He shows wide reading and deep comprehension of one of those seminal events which have drawn so many scholars and volumes over the past two hundred years. To the best of my own knowledge of some of these works, his conclusions and handling are correct. And my admiration for his breadth outside his field went up.

    And now for the caveats. I am waiting to see and hear how the serious Marxist economists react. My dream panel for today’s EPI session might have included (with the non-Marxists first) Gar Alperovitz, Dean Baker, Michael Hudson// and then David Harvey and perhaps Richard D. Wolff.

    I happen to have re-read, in the wake of the financial crisis, secondary works by George Lichtheim and Michael Harrington (both of whom died when they were 61, as did Christopher Lasch to continue the strange sadness of that age). Especially Michael Harrington’s “Socialism” from 1972 and “The Twilight of Capitalism” from later in that decade. I raise these works because Harrington’s project in that decade was to revive the reputation of a more humanistic and less deterministic Marx, and a good deal of his time was spent refuting the rather snide snipings of the standing economic professionals dismissals of what they thought were Marx’s conclusions. If anyone cares to be more precise, go to chapter V of Socialism and look at Harrington’s handling in a chapter on Das Kapital. According to Michael he did take into account technological change, science and productivity, did not say that wages had to fall, said in fact they usually rise during booms…and so forth. So I think Piketty’s out of the gate on the big “M” leaves a little to be desired, especially since I think little determinisms are coming back in fashion with his treatments of r and g, and the suprisingly low productivity/growth numbers he gives to the 19th century, 1-1.5%, despite all the technological innovations in that century, and all the higher growth numbers I seem to recall from my own readings in economic history. W. Rostow,anyone?

    Harrington said Marx had set out to capture the laws of motion of capitalism, and wrote so much that he seems to be contradicting himself at numerous occasions in different works. I will leave that to the more professional Marxist economists and historians to straighten out for us, and to focus in on how Piketty distinguishes himself from “M” in these matters.

    I have to also note that I was engaged in parallel reading of Piketty and Michael Hudson’s “the Bubble and Beyond,” and it was hard not to note some little (with a lot of significance) iron laws of math arising in his treatment of how debt-interest gets compounded and grows exponentially, whereas the income of the debtors does not, meaning big trouble, which he documents as far back as recorded history grows, being especially hard on Ricardo’s role and sleights of hand to make interest and debt disappear from the large national and international “flows.” So Michael, I again urge you to enter the Piketty debate.

    And finally, there is the trouble that arises from the grandness of the altitude of Piketty’s perspective, from the high view from the three century’s of data he works up into his tendencies for r and g and oligarchy and inequality. He says don’t take this personally or ideologically, these seem to be the historical attributes of capital – and maybe, but not quite of capitalism itself. So coming down closer to ground level, of how did the owners of capital keep their returns at 4-5% over very different types of societies, the Ancien Regime the agricultural world of the 18th century getting the same returns based on land as the 19th century factory owners …was there nothing resembling “exploitation” in any of this? I would beg to differ and would ask anyone who has looked at Wal-Mart’s business model (and the ironic fact for history that now the giant retailer standing astride the world’s supply chains dictates to the manufacturers on quality, price and timing….) to say that a modern form of exploitation is not going on…the peasants in 18th century France and their reactions to the events of 1789-1795 would say otherwise, as would the reactions of the displaced ag workers flooding into the British midlands in the 1830-1840’s. None dare call it exploitation?

    Two phrases that Piketty uses which Krugman did not mention may indicate that he knows better, in the low key way he both writes and speaks, very consistent on that point. Perhaps because he knows he is sitting with a lighted candle and the latest in IT hardware on a large supply of ideological fireworks he uses two phrases instead of exploitation that hint at the possibility and in a very sophisticated way, how various regimes and societies skate the charge. And those are on page 264: “the effectiveness of the repressive apparatus” and the “effectiveness of the apparatus of justification.” (In American discourse, that would involve the realities and the myths of the American Dream, wouldn’t it, and the rise of the meritocracy and what they claim from their innate merits, and how much advantage, and wealth they pass along to their children…)

    One other potentially very important matter for future debate, possibly explosive debates that is clearly implied in Piketty’s data but not really touched upon by today’s panel: are we ever going to see growth rates approaching 4-5 percent again, if we ever did? All the mainstream economists call for more growth as the way out; in a very recent article Gar Alperovtize said that would be deadly from an environmental point of view…which is probably why he was not on the panel…that and the protest of a good friend of mine that the topic of global warming/climate change did not come up at all. Piketty handles it on pages 567-569, ably I think, but he does not give it prominence.

    With that I will pause and let others jump in, but I hope you can sense why I want to hear from Marxist scholars far more learned than myself.

    • guest
      April 15, 2014 at 8:57 pm

      “the suprisingly low productivity/growth numbers he gives to the 19th century, 1-1.5%, despite all the technological innovations in that century, and all the higher growth numbers I seem to recall from my own readings in economic history. ”

      Some 20 years ago, Paul Bairoch already dispelled the myth of a high-productivity-growth 19th century. I seem to remember that he arrived at similar figures in his memorable “Mythes et paradoxes de l’histoire économique”.

      • April 22, 2014 at 1:44 am

        Since the 19th century was the primary period of US outperformance of the rest of the world (and as an aside, its maximal disdain of the Smith/Ricardo consensus, a tradition launched by Alexander Hamilton and pursued with 30%+ tariffs through much of the century), is it possibly that the world growth rates and US growth rates have been mixed up?

    • April 22, 2014 at 1:48 am

      Regarding the 5% growth rates of Post WWII that everybody looks back fondly at, is there a reason that everybody ignores the even higher growth 1933-1945 period, when economic growth was 10% a year? It doesn’t take a scholar to investigate this; only access to the Bureau of Labor statistics GDP levels and the inflation multipliers.

  2. William Neil
    April 15, 2014 at 8:32 pm

    With a book of such sweep, it’s hard to do it justice in one brief review. At the end of today’s panel discussion at EPI, a question from the audience managed to make it through. The gist, if not the actual words were to Piketty: if you had one conclusion or warning to elevate from the all the others in your work, what would it be? His answer was that the rising inequalities, of wealth and income would work to threaten political institutions, democracy itself.

    Would it be fair to say then that there is a new Specter haunting the West, not quite yet again an angry proletariat, although that might be in the future too, but financial oligarchy’s threat to democracy?

    • April 15, 2014 at 9:15 pm

      “a question from the audience managed to make it through. The gist, if not the actual words were to Piketty: if you had one conclusion or warning to elevate from the all the others in your work, what would it be? His answer was that the rising inequalities, of wealth and income would work to threaten political institutions, democracy itself. ”
      Perhaps, just maybe this question was answered in 1921 and 1934.
      “The Role OF Money” by Frederick Soddy.
      PREFACE:

      It was recognized in Athens and Sparta ten centuries before the birth of Christ that one
      of the most vital prerogatives of the State was the sole right to issue money. How curious that
      the unique quality of this prerogative is only now being re-discovered. The” money-power ” which
      has been able to overshadow ostensibly responsible government, is not the power of the merely ultrarich,
      but is nothing more nor less than a new technique designed to create and destroy money
      by adding and withdrawing figures in bank ledgers, without the slightest concern for the interests of
      the community or the real role that money ought to perform therein.
      …(This book ) is concerned less with the details of particular schemes
      of monetary reform that have been advocated than with the general principles to which, in the
      author’s opinion, every monetary system must at long last conform, if it is to fulfil its proper role
      as the distributive mechanism of society. To allow it to become a source of revenue to private issuers
      is to create, first, a secret and illicit arm of the government and, last, a rival power strong enough
      ultimately to overthrow all other forms of government.

  3. BC
    April 15, 2014 at 9:02 pm

    “Would it be fair to say then that there is a new Specter haunting the West, not quite yet again an angry proletariat, although that might be in the future too, but financial oligarchy’s threat to democracy?”

    Mr. Neil, the “financial oligarchy” is (they are) “democracy” in the English-speaking world. Recall that Spengler in the 1930s correctly predicted that “democracy” would become “rule by money men”, eventually being supplanted by dictatorship, nepotism, and the like; we’re there.

    The rentier-oligarchic “democracy” is the “best gov’t LOTS of money can buy” and a system characterized by “no representation without taxation”, in that the top 10% pay 70-75% of all federal income taxes, and thus they perceive taxes as a kind of fee for services from the gov’t they purchase and own.

    The collapse of the Ancien Regime during the French Revolution is an apt analog for the West today. The Bourbon-like monarchical rentier elite top 0.01-0.1% employ the plundering oligarchic bankster and complicit technocratic intelligentsia enablers of the system of rentier extraction via the associated global militarist-imperialist trade regime.

    That is, the professional middle class next 1-9% below the top 0.1-1% continue to internalize the rentier-extractive values, expectations, ambitions, self-satisfied rationalizations, fallacious economic premises, behavior, machinations, and hierarchical system of power relations dominated by the rentier elite top 0.01-0.1%.

    Name one system in human history that did not decay, decline, and eventually collapse under similar circumstances, even excepting myriad related precipitants such as overpopulation, climate change, deforestation, loss of arable land, rising social instability from multiculturalism, etc., all of which, by they way, the US/West is experiencing in addition to the obscene wealth and income inequality.

  4. April 15, 2014 at 9:03 pm

    Quote
    William Neil commented on Krugman on Piketty.
    in response to Edward Fullbrook:

    ” …(A)lso note that I was engaged in parallel reading of Piketty and Michael Hudson’s “the Bubble and Beyond,” and it was hard not to note some little (with a lot of significance) iron laws of math arising in his treatment of how debt-interest gets compounded and grows exponentially, whereas the income of the debtors does not, meaning big trouble, which he documents as far back as recorded history grows…,”
    ^^^^^^
    Why do economists, “Not see that coming”?
    . “The greatest inability of the human
    race is our inability to understand the exponential function”(?):

    The most powerful force in the universe is being used against mankind,rather than for the benefit of mankind.
    “…. The Mathematics of Compound Interest
    A syndicate of less than one hundred American capitalists, if allowed to collect interest on their capital at a low rate and re-invest for 150 years or less, would at the end of that time own the earth and all real and personal property thereon. This is a simple mathematical proposition, capable of exact demonstration, and any one who doubts the truth of this statement may set all doubts at rest by computing compound interest on one and one-half billions of dollars for one hundred and fifty years, at five per cent per annum.
    …Flürscheim elaborated that “All exertions, all improvements in the methods and tools of labor, the strictest economy, the severest self-denial, are powerless to compete with the rapidity of self-increase possessed by capital placed at compound interest, and they cannot keep up with its demands.” To illustrate the dynamic at work, he composed an allegory (pp. 327ff.). Many ages after man was driven from Paradise and told “to earn his bread by the sweat of his brow, mercy began to prevail. A loving angel was sent down by the Great Master, charged with the task of lightening the burden. The angel’s name was Spirit of Invention. He began his work by teaching man to make useful tools” and tame animals, and in time to mobilize water power, air and wind power, fire and steam power to drive machinery.
    “It seemed that at last the golden era had come of which men had dreamed for ages past,” but “that envious spirit, that fallen angel, Satan,” was jealous that his own empire would soon be over for ever. Among the follies of man, one little imp, called Interest, managed to attract his attention. “‘What is the matter with you, Interest?’ he asked the saucy imp. ‘You don’t seem to be so dejected as your comrades are?'”
    “‘Why should I be dejected, master?’ replied the spirit, ‘Am I not one of your favorite soldiers? Haven’t I always been victorious under your august guidance?'”
    But Satan answered sadly, “Alas, You are no match for the Spirit of Invention.” The Interest imp, however, volunteered to demonstrate his prowess in a dual, helped by his son, Compound Interest.
    At this point, Flürscheim introduced an image that Napier had suggested at the outset of his second book on logarithms in 1617, the Robdologia, likening the principle of geometric increase to that of a chess-board on which each square doubled the number assigned to the preceding one. An old Persian proverb told of a Shah who wished to reward the inventor of chess, a subject, and asked what he would like. To the Shah’s surprise, the man asked “as his only reward that the Shah would give him a single grain of corn, which was to be put on the first square of the chess-board, and to be doubled on each successive square; which, to the surprise of the king, produced an amount larger than the treasures of his whole kingdom could buy. It is this kind of chess-game which capital is continually playing with labor.” The remarkable growth of compound interest soon swallowed “products, capital, the earth and even the workers.”
    This was in essence the ploy that Flürscheim’s Compound Interest demon used. “Look at this chess-board,” he told the angel against whom Satan had pitted him. “It seems just like any other chess-board, with sixty-four squares,” but it “had the peculiar quality of extending the dimensions of the squares, so as always to be large enough” to hold whatever was placed on them. Instead of asking for grains of wheat to be placed on them, the Interest Imp asked for soldiers. “Now, listen well to what I propose,” he said to the angel, pointing to the latter’s huge army.
    I enter the first square with my son, and you match one of your warriors against us. We enter the second square doubled in number; you send two more warriors – and so on every succeeding square. . . . When we arrive at the last square, and you have a single soldier left after occupying the same, we shall declare ourselves vanquished, and Satan with all his troops will leave this world for ever. If I win, you and your army are to be at the commands of my master. Are you agreed?
    The angel agreed, expecting his horde of soldiers to easily exceed the number that the Interest Imp and his son, Compound Interest, seemed likely to accrue.
    In the beginning the angel laughed, for, though twenty squares were passed, no noticeable diminution of his forces was perceptible. Demon Interest said nothing, but attended to business, quietly doubling his army on every succeeding square. At the thirtieth square the angel ceased to laugh, and soon saw he was lost.
    ‘I despised you, little fellow,’ he signed despairingly, ‘and I am punished for my vanity. I see there is no use fighting against you. Demon Interest is more powerful than the Spirit of Invention. I am your slave. Command your servant!'”
    (THIS IS THE TIPPING POINT ! (Where we went wrong)
    ‘I am the only servant of my great master,’ dryly replied the demon.
    “Here I see him coming. He will give you his orders.’
    And Satan gave his orders. He commanded that the angel was to continue in his work with all his troops, which were to be increased with all possible exertion, so that humanity – which did not know the nature of the antagonist it had to fight against – would always keep in fresh hope of final success when the new troops were forthcoming. But as fast as they appeared, Demon Interest was to send forth a larger army to capture the new forces, to enslave them, and – instead of their benefiting man – make them increase the slave-chains which weigh him down.
    WHAT IF DEMON INTEREST WERE TO ANSWER? (How we can fix it).
    I will now be the servant of a new master,one that will pursue happiness for all mankind.”
    READ More economics-of-compound-rates-of-interest-a-four-thousand-year-overview-part-ii/

    …As Soddy said, every monetary system must at long last conform, if it is to fulfil its proper role
    as the distributive mechanism of society. To allow it to become a source of revenue to private issuers
    is to create, first, a secret and illicit arm of the government and, last, a rival power strong enough
    ultimately to overthrow all other forms of government.”

    He got it wrong ! They are no longer secret and illicit !

    Frederick Soddy writings, namely “The Role Of Money”
    (Entire book as a free download… http://archive.org/details/roleofmoney032861mbp

    • April 22, 2014 at 1:55 am

      The fact that compound interest will grow to any unimaginable level given enough time is less a proof that unimaginable levels are reachable than a proof that compound interest is not sustainable. If you give free reign for capital dollars to accumulate at the expense of consumption dollars, then the only possible result according to the laws of supply and demand is for interest rates to head toward zero (and for all other investment proxies to head simultaneously toward zero). This is why Bonds and Stocks, with negative correlations before 1980 became heavily positively correlated since 1980 even as both headed to the moon.

  5. BC
    April 15, 2014 at 10:20 pm

    justaluckyfool, thank you for sharing Soddy’s work.

    As to the reference to Satan, the root of the word “evil” is “yfel”, which is often transliterated to mean “up from under”. Thus, one can infer that “evil” is the state of mind that informs the human to perceive himself as inferior or under threat from Nature, his fellows, and circumstances in general, which in turn compels him to act in such a way as to secure a position above his fellows, i.e., those from whom he perceives a threat to his well-being.

    Further, a system of meritocracy within a hierarchical system of upward flows of finite resources, production of goods and services, income, wealth, socioeconomic status and power is a system that encourages, enables, and rewards an elite few at the increasing cost of subsistence and well-being for the rest of the human population, and non-human species.

    That the highest value of such a system is to encourage those with advantage to be “above everyone else” is by the aforementioned concept by definition “evil”, i.e., it encourages a tiny elite who are self-selected to perceive themselves as potentially inferior and subject to oppression and privation to be particularly adept at constructing a system of rules, values, objectives, and beliefs that permit them to rise above everyone else.

    Yet, when those who experience the debilitating cost of such as system rise up to demand even a durable subsistence share of the production of such a system, they are referred to by the self-satisfied elite as maladjusted, unworthy, lazy, wanting “something for nothing”, “terrorists”, and “evil”.

    However, even in the Judeo-Christian-Muslim mythological motif of Satan, he is also referred to as “Lucifer”, the “Prince of Darkness”, i.e., Venus, the “light before the dawn”. One can even empathize with the character in that he was granted by the Creator a position “above” humans, and then required by that same Creator to accept humans as worthy of being “equal”, thereby reducing Satan’s position from “above” to “equal”, i.e., of similar worth and merit. That Satan rebelled against the Creator is among the principal lessons of the mythological tale: Satan rejected being equal and thus demanded to remain above humans, requiring that he go to war against the natural order of Creation, of which humans are part.

    Thus, those who seek to be “up from under” all others, and thus create a system based on such values, are themselves self-identifying, consciously or otherwise, with the rebellion of Satan against Nature’s Creator and the “evil” desire to rule over all other humans at their expense.

    One need not be a literalist/orthodox religious person to discern the perennial wisdom and morality of Judeo-Christian-Muslim, Hindu, Buddhist, tribal animist “religions”, i.e., the process of linking back to the source of being or existence.

    There is an optimal social, economic, financial, legal, political, and ecological system that reflects and ensures a sustainable thermodynamic/exergetic well-being for humans, non-human life, and the ecosystem on a finite spherical planet on which we depend; but we are perpetually conditioned by the elite and their apologists and enablers atop the “up-from-under” hierarchical system not to imagine it and work collectively to achieve and sustain such a system for the benefit of all.

    • April 15, 2014 at 11:21 pm

      BC,”we are perpetually conditioned by the elite and their apologists and enablers atop the “up-from-under” hierarchical system not to imagine it and work collectively to achieve and sustain such a system for the benefit of all.”
      But “They” can not take away our free will, “We” can ‘take away that most powerful weapon
      from “them” and use it for our benefit; for ourselves and even for all mankind.
      Surely the process of interest and compounding is not in itself ‘evil’, rather what one does
      with the proceeds determines whether it is for the benefit of mankind or a tool for servitude.
      WHAT IF…The most important video you will ever see. “The greatest inability of the human
      race is our inability to understand the exponential function”:
      https://www.youtube.com/watch?v=F-QA2rkpBSY this weapon were to be used “to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…”?
      What If….DO FOR OURSELVES WHAT WE HAD ALLOWED THE CENTRAL BANK TO DO FOR THE BANKS (PFPB) !
      LOAN OUR MONEY AND CHARGE (interest) A TAX ON IT.

      AMEND THE FEDERAL RESERVE CHARTER; TURN THE FED RESERVE INTO THE FEDERAL RESERVE BANK OF AMERICA (FRBA),RESTORE MONETARY POWER BACK TO THE PEOPLE ,OPERATE THE FRBA WITH ABSOLUTE TRANSPARENCY, (“GLINDA,the Good Witch, owns a Great Book of Records that allows her to track everything that goes on in the world from the instant it happens.”_The Road to Oz)

      Form a more perfect “capitalistic monetary ” circle: $100 trillion issued as loans to come back as $200 trillion as payment while at the same time as it returns creates $100 trillion in new loans while spending $100 trillion as Congressional appropriations for the benefit of the people.
      No inflation or deflation for there is zero change in the capital value of the sovereignty.
      There is zero change on the balance sheet of the Central Bank; a true zero net change.
      Comments by Justaluckyfool ( http://bit.ly/MlQWNs )
      ( “You are always welcome to share, copy, plagiarize, improve, etc..any comments.)
      Read and challenge:

      • BC
        April 15, 2014 at 11:58 pm

        ‘But “They” can not take away our free will, “We” can ‘take away that most powerful weapon
        from “them” and use it for our benefit; for ourselves and even for all mankind.’

        Do we have the popular collective institutional mechanism for “taking away” from the 0.01-0.1% rentier elite, “them”, to “use it for our benefit”? I would strongly suggest that we DO NOT have that mechanism, which is not unlike virtually all of our predecessors before us who desired to, and endeavored to, “reform” the system.

        If we can’t buy politicians to achieve what you propose, and professional middle-class intellectuals are too comfortable to oppose the system as it is, HOW do you, or anyone else, propose to achieve what you advocate?

        Stating the obvious, historically the entrenched elites have never voluntarily surrendered their disproportionate wealth, income, power, and control without a revolt by the buffer caste between the elites and the “unwashed masses”, which is to say that until the Krugmans, Stiglitzes, Shillers, Bernankes, Yellens, Obamas, vetted financial media influentials, et al., are themselves threatened by fear of loss of jobs, wealth, socioeconomic status, and public legitimacy and status, and that of their progeny, there will be no challenge to the rentier elite top 0.01-0.1% and the hierarchical system atop which they lord over the rest of the human species.

      • April 16, 2014 at 3:58 pm

        Absolutely correct, but today we have social media. A means of ‘compounding’ “one” into “millions”.
        “We” need only to agreed on just one or two issues as a rally point.

  6. William Neil
    April 16, 2014 at 5:32 pm

    OK, like I said, Piketty is sitting with a lighted candle and other more modern tools on a pile of ideological fireworks. I called for help from those serious Marxist scholars to take a look at some of Piketty’s assertions about Marx and his own findings. I noted that some of Piketty’s assertions on this score seem suspect and overdone to me, with my recollections of long ago read Michael Harrington works, attempts to give Marx a fairer treatment in that coming economic cauldron of confusion we call the 1970’s. And I should note that that I am not a practicing Marxist, I lean instead to Karl Polyani’s “The Great Transformation” for current guidance, but I want the dead, Marx and Harrington, to be treated fairly, even by rising intellectual stars like Piketty.

    So, on page 10 of his Introduction, Piketty says that “like his predecessors, Marx totally neglected the possibility of durable technological progress and steadily increasing productivity, which is a force that can to some extent serve as a counterweight to the process of accumulation and concentration of private capital.”

    And now here is Michael Harrington on pages 98-99 of his grand reconsideration of Marx, the book Socialism (1972), in the chapter “Das Kapital.” Just prior to the quote I am going to post, Harrington is talking about labor time, and the early industrial era’s attempt, in the British Midlands’ Satanic Cotton Mills (and Piketty’s concedes their horror, noting wages did not increase sig. until the last three decades of the century), to extend the working hours and force women and children into the workforce, which Marx deals with in Chapter 8 of Volume I of Capital. Harrington also quotes with understated irony Christopher Hill’s (a modern British scholar) point that “in 1530…a man could earn his yearly bread in fourteen or fifteen weeks of labor – and two and a half centuries later he had to toil fifty-two weeks a year.”

    Now the direct challenge to Piketty’s assertion above, from Harrinton: “At this point the system became much more ingenious. Instead of simply expanding the hours of labor, the capitalist increased the productivity of labor. Thus although a man still worked the same period of time, his output increased enormously and so did the surplus value appropriated by the owner of the means of production. Marx called this ‘relative surplus value’ and the search for it is a crucial aspect of the capitalist dynamic. As this process is described in Das Kapital in a wealth of historic detail, the machine, the concentration and centralization of capital, the application of science to technology all tend to make the economy more and more social and productive, but the decision-making and the limits of consumption are still privately determined.”

    Granted, as covered by Harrington, Marx’s term for capital, “constant” for machines, “variable” for the human component, and his insistence that there is a strong human component in all the machines (through today for the software coders, electronic engineers and so forth) which someone has designed and built, and the labor component of the owner as well, overseeing the process, gets confusing as they run into modern terms, built in and probably unavoidable confusions, but there is also deliberate confusion as the owners try to hide the increasingly social nature of the whole process (science and engineering are, after all, cooperative as both Marx and later commentators have stressed to not much effect upon the political economy realities of today) and want to hide the broader processes under the term “capital” and obscure the labor component. Yes, I am aware of all the ancient debates about surplus value, labor value and so forth…with points well made and taken by critics of Marx, but, as the above quote from Harrington shows, he was hardly unaware of productivity gains via new tools and science….the deeper question was who controls the overall process and the share of productivity gains labor gets…from the line worker to the manager to the scientist…a question of eminent current importance if you are following the debate on the minimum wage, where even linking it to inflation adjustments is difficult, having failed in the Maryland legislature which passed an increase to 10.10 per hour – by 2018! The revisions to the estate tax law, bringing it in line to the federal template, shielding increasing amounts up to 5 million dollars of wealth….are linked to inflation! Interesting development in the light of Piketty’s assignment of importance to estate taxes in his book….I also note that the “professional left” dropped the discussion of labor’s missing share of current productivity gains…because, I guess, when you add them in the minimum goes into even more difficult political terrain, between $15.00 to $22 per hour, depending on assumptions.

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