Home > inequality, Piketty's Capital, upward income redistribution > After Piketty the new question: Can we, should we, afford the rich?

After Piketty the new question: Can we, should we, afford the rich?

from Jamie Morgan’s “Piketty’s Calibration Economics: Inequality and the Dissolution of Solutions?” – an open access paper in current issue of Globalizations

In the neoliberal age, we have naturalised the rich. However, the success of Thomas Piketty’s Capital in the Twenty-First Century has done a great deal to legitimate a rather differently inflected concern. It is now permissible to ask: can we, should we, afford the rich? Growing income and wealth inequality have gradually become areas of public concern, but this concern has become more acute, and more politically febrile, in the wake of the global financial crisis. The election victory by Syriza in Greece, and the Occupy Movement speak directly to this. Austerity responses to the crisis have distributed the fallout costs to the many from the few who benefitted most from the preceding decades. Meanwhile, central bank policy responses have created new opportunities for the global rich to become even richer.1 To a large degree, the idea that the rest of us are dragged along in the wake of the wealthy has been exposed as a myth.

Returns captured (rather than created) by the rich have affected the many, and not just in a financial sense. The associated fiscal and policy effects on welfare, health systems, pensions, collective union activity, and our simple sense of community cohesion and quality of life, rather than quantity and materiality, have all been harmed. And this is just in the Global North. For the Global South, second best ‘development’ forms have fuelled the North in many ways, creating the underlying deflationary effects that have kept the North consuming as well as contributing to the current account imbalances that lead to capital flows for asset bubbles. In return, the Global South has experienced its own problems as its nation’s reproduce the same socio-economic cleavages as the North. In 2014, Forbes identified 2325 billionaires (an increase of more than 10% than on 2013); of these, 190 were in China.

Inequality now matters more to political and economic elites and the ordinary citizen, albeit from different ends of the same reasoning focused on the economics of political stability—–protection of the right to what is ‘mine’ within the status quo versus a deep sense of injustice. A great deal has now been written regarding Piketty’s work (see Fullbrook & Morgan, 2014). It is widely acknowledged to be the well-intentioned product of an engaged and highly reasonable social democrat; one unfairly demonised at various times as a data manipulating unreconstructed Marxist—in places where such an appellation is a pejorative term.

The key questions arising from Capital are: Can it galvanise opinion in an appropriate way or will it become more of a hindrance than a help in understanding contemporary capitalism, and in constructing alternatives? Yanis Varoufakis, Greece’s short-tenured finance minister, certainly thinks it will prove a hindrance (2014). In many respects, one might argue that Capital has become successful precisely because of its flaws. It is, as Robert Wade has noted, ‘reassuringly conventional in its analysis and prescriptions, and so less threatening to familiar ways of thought’ (2014: p. 11). It is radical, but principally in the conservative context of mainstream economics. Beyond that context, one might describe it as a palatable form of radicalism whose constructions, concessions, and omissions undermine its capacity to carry the weight of expectation placed upon it.   Read more

 


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Piketty’s Capital in the Twenty-First Century

edited by Edward Fullbrook and Jamie Morgan

WEA paperback from Amazon     $18.35

This collection of 17 essays by some of the world’s most prominent economists explores Piketty’s book at depth and from various vantage points.

“Indispensable reading for everyone who is interested in one of the most important challenges of our time.” – John King

  1. August 20, 2015 at 5:38 pm

    i think we can afford one more rich person–me. the rest can go. i hear stock market usa is down to near 17000. my area homicides and gun violence are up 30 percent. i can barely afford rent much less to support my neighbors.

    • BC
      August 21, 2015 at 3:50 am

      Ishi, obviously you did not choose your parents very well, and you merely “want” to be “rich” rather than having already been born there and “educated” to rationalize your “merit” and thus your unique worthiness for having achieved your status.

      Shame on you for aspiring to merit of which you are clearly unworthy by birth.

  2. BC
    August 20, 2015 at 5:57 pm

    The bottom 90%+ certainly CANNOT AFFORD the top 0.001-1%, not in terms debt service and net flows to the financial sector as a share of GDP, nor in terms of total net energy per capita required to support the top 0.001-1% who reside in the densely population, high-cost, high-tech, high-entropy, urban areas where the disproportionate financial, income, tax receipts, and energy flows go, including NYC, Boston, DC, Chicago, Dallas-Houston, Atlanta, Denver, Phoenix-Tucson, LA, SF Bay Area, and Seattle-Vancouver.

    Highly progressively taxing land resource scarcity rents (Geoism) AND embedded net energy consumption per capita/household of the top 0.001-1% to 10% while phasing out taxes on labor, production, corporate income, savings, and capital accumulation would be a reasonable place to start.

    The oil-, auto-, debt-, and suburban housing-based economic model results in COLOSSAL waste of resources and uneconomic incentives and outcomes.

  3. JdeV
    August 21, 2015 at 1:00 am

    BC.
    Also London (lots of empty “luxury” foreign/Tax-Haven owned towers sprouting by River Thames), Sydney etc etc. In Uk broadly centre/right blogs have comments predicting what they describe as the coming “Minsky Moment”
    crash.
    I wonder how many Greeks will now be voting “Golden Dawn” in forthcoming snap election?

  4. JdeV
    August 22, 2015 at 8:29 pm

    And partially completed US Embassy which at present bears a disconcerting resemblance to a “Borg Cube”by Thames. Plus gutted remnants of Battersea Power Station as per Pink Floyd Album cover (Animals). Now a sure fire investment opp’y for someone or an’r.

  5. August 22, 2015 at 9:14 pm

    From the abstract: “Concomitantly, it lacks a theorisation of capitalism,” well this is the point. Indeed, Piketty’s work is purely statistical. His laws are only statistical approximations, but they are correct in substance. What is missing is, as usual in economic work, the ability to correct physical modeling. The mathematics of economic growth and capital models is on not much more than primary school level. As long as no understanding of higher analytical mathematics is developed among economists, their models will not contribute to the real understanding of the interdependencies between capital and GDP. Even students of physics can do better. Of course his ratio of capital vs. national income plays in important role (1st law) and also his third law r>g is true. It can be derived analytically easily, see e.g. page 52-57 of http://arxiv.org/pdf/1407.6334.pdf . His ratio from his first law you will find at several places there in, and his first and second law is reflected in principle on page 19. What the modern economy is lacking is simply the most elementary knowledge of mathematical modeling, as developed in the physics and engineering for 300 years.

  6. BC
    August 22, 2015 at 11:32 pm

    http://questioneverything.typepad.com/question_everything/2010/10/work-exergy-the-economy-money-and-wealth.html

    http://steadystate.org/category/herman-daly/

    http://www.nytimes.com/2009/04/12/opinion/12zencey.html?pagewanted=all&_r=0

    https://gcep.stanford.edu/pdfs/DyUMPHW1jsSmjoZfm2XEqg/1.3-Hermann.pdf

    https://gcep.stanford.edu/research/exergy/flowchart.html

    Heribert, and the students of physics and ecological economics would no doubt be compelled by training to employ thermodynamics, net energy, and exergy (and Soddy, Daly, et al.) as principal factors.

    http://www.donellameadows.org/wp-content/userfiles/Limits-to-Growth-digital-scan-version.pdf

    http://www.theguardian.com/environment/earth-insight/2014/jun/04/scientists-limits-to-growth-vindicated-investment-transition-circular-economy

    https://aleklett.wordpress.com/2015/02/26/how-correct-were-colin-campbell-and-jean-laherrere-when-they-published-the-end-of-cheap-oil-in-1998/

    One of the great tragedies of our time is that Peak Oil and “Limits to Growth” (LTG) are largely misunderstood (not by chance or accident but by design) by the mass public but well understood by the fossil fuel industry principals, Wall St., Pentagon planners, principal political leaders, Saudis and other oil emirates, Israelis, German military, Japan’s leaders, and the PLA’s generals in Beijing.

    US oil production PER CAPITA is down 45% since 1970, and world production PER CAPITA is at the level of 2004-05 (“Peak Oil”) and not much higher than in 2001 for conventional crude oil and condensate. The world is now where the US was in the mid- to late 1970s WRT to oil production PER CAPITA, the point at which deindustrialization and financialization began in the US, resulting today in unprecedented debt to wages and GDP, a record low for labor share of GDP, and no growth of real PER CAPITA final sales since 2007.

    http://www.thehillsgroup.org/

    http://www.thehillsgroup.org/depletion2_018.htm

    Moreover, despite US “oil” production of costlier, lower-quality kerogen as a conventional crude oil substitute nearly doubling since 2008-09 and growing at the fastest 5- and 10-year rates since 1927-30, since 2012-13, 50-80% of marginal US “oil” production at an average 5- and 10-year price of $100-$105/bbl has been consumed by the energy and energy-related transport sectors in order to produce a net 500Kbd and at a current price of $40/bbl.

    That is to say, since 2012-13, the energy cost of US “oil” production is no longer profitable or economic in net energy AND financial terms (not even counting ecological costs). Therefore, it is inevitable that US “oil” production is poised to decline by 3 or 4Mbd in the years ahead, and along with it an associated decline in US “oil” consumption by as much as 2-3Mbd.

    The decline in “oil” production and consumption will reflect the long-term structural trend growth of GLOBAL real GDP per capita and “trade” of near 0%, which is the scenario anticipated by Hubbert, Campbell, Laherrere, Deffeyes, Soddy, Heinberg, Rubin, and the authors of “Limits to Growth”, i.e., Meadows, et al.

    If one does not ACTUALLY understand Peak Oil, LTG, population overshoot, and “secular stagnation” (you’re not alone because you’re not supposed to understand it), one is limited in one’s capacity to understand Japan’s “lost decades”, why the financial crisis of 2008-09 occurred, why China is facing a “hard landing”, why the so-called emerging markets are facing sovereign defaults and deflationary collapse, and why potential real GDP per capita for the world is effectively 0% indefinitely hereafter.

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