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"The People" Vs. Piketty

Tyler Durden's picture




 

Submitted by Erico Matias Tavares via Sinclair & Co.,

Thomas Piketty is getting a lot of attention these days. The French economist has seen the recognition for his lifelong work on the study of inequality skyrocket after publishing “Capital in the Twenty-First Century” in August 2013. The book is a best-seller, which is quite an achievement for anything with 696 pages on economics (even if by some accounts the majority of readers don’t make it much beyond page 12).

Here’s what Paul Krugman, the don of neo-Keynesian economics, had to say about Piketty’s book back in April 2014:

“Other books on economics have been best sellers, but Mr. Piketty’s contribution is serious, discourse-changing scholarship in a way most best sellers aren’t. And conservatives are terrified. (…)The really striking thing about the debate so far is that the right seems unable to mount any kind of substantive counterattack to Mr. Piketty’s thesis.”

That turned out to be incorrect. Barely a month after his glowing review of Piketty’s opus magnum, Krugman had to come out in his defense after several scholars and commentators highlighted some “clear errors” in facts and figures.

And it wasn’t just from the right either. Yanis Varoufakis, economics professor turned finance minister of Greece – and self-proclaimed Marxist – is also a critic of Piketty’s work.

Undeterred, Piketty has joined forces with other like-minded economists to come up with actual proposals to tackle the inequality issues he wrote so extensively about.

As that brave intellectual effort takes shape, we would venture a sneak preview: assemble a huge ledger of all financial transactions, tax the “rich” and their unfair capital gains and make sure that they leave nothing for their kids.

This of course is music to any politician’s ears. It provides an aura of tackling one of humanity's great problems, while providing yet another reason to tax private property.

So in spite of all the publicity, there are two sides of the story here. Should we the People be in favor or against Piketty’s argument?

Inequality and Economic Systems

Where would you prefer to live: in a society with obvious economic and social inequalities but with an abundance of choices and opportunities, or in another with much greater equality and less choices?

The answer greatly influences why societies end up adopting a particular economic and political system – although not always by choice. Of course there are societies that neither feature equality nor opportunity, but in most cases there is a prevalence of one over the other.

To see why we can use a simple example that illustrates this dynamic. An economic system is in fact a set of incentives that drive behaviour, with varying degrees of personal input and liberty. Let’s assume that there are four tribes in a large forest (we did say it was simple) trying to get from point A to point B. Each tribe has the same mix of individuals with different physical and psychological attributes but decides to adopt a different economic system in pursuit of their goal:

  • The first tribe adopts capitalism in its “rawest” form: those who can run the fastest (or by sheer luck find a great shortcut) are allowed to get ahead quickly, while the others in spite of their efforts are progressively left behind. This is how inequality is measured in this example: basically the distance between those who are ahead versus hose who are behind. This tribe on the whole will cover a lot of ground, although very unevenly: the fast runners will get very far (possibly even well beyond point B, if they so desire), while the ones in the back hope that the trail which has been blazed before them will somehow help them get through.
  • The second tribe adopts similar principles, but with more inclusive incentives. People still largely run in accordance with their capabilities, but the fast runners are encouraged to help those further out in the back through social and financial rewards. They will likely not get as far as the fast runners of the first tribe, but the group as a whole will be much more compact.
  • The third tribe adopts socialism. Those who run fast must pay a penalty in favor of those further behind (they are just lucky to have those genes after all). Now the fast runners have to think twice about how fast they should run, because the quicker they run the bigger the penalty. They may end up resenting the slow runners as a result, who may resent them in turn because they should be doing more to help them move along. That tribe will move forward at a more even pace, although clearly slower than the first two tribes and arguably less harmoniously. It's unlikely that anyone will try to go past point B.
  • Finally, the fourth tribe adopts communism, where everyone is running in accordance with the same beat. There is no broad inequality since most cover the same ground. However, the fast runners must either accept a much slower pace or, if they dissent, “take one for the team”. The slow ones are not necessarily better off either. If the leaders (the guys beating the drums) want to enhance their collective pace to match the other tribes they may not be able to make it after all.

This was a long way of saying that inequality arises in economic systems where individuals are largely given the freedom to act in accordance with their capabilities and desires. We can certainly force society to be more equal, but this will come at some cost to individual freedoms and opportunities in general.

The fact is that we are all born with different capabilities and attributes. So when someone starts complaining about inequality, we need to understand what they are talking about. Is it because some are more capable than others? Luckier? More cunning? Are they obligated to bring everybody along?

We can say it is unfair that some of us are world class football players, others Hall of Fame actors, and others top tier fund managers. We can complain that they make way too much money. But this is a consequence of the economic system we have adopted in the West. And we're not necessarily poorer because these folks are richer.

In other societies they may have not fared as well. The best baseball players in Cuba are clearly much worse off on a relative basis in comparison to their peers in the US (and many are just as good). And since there are no savings (i.e. capital) there aren’t any fund managers either.

So there, much less inequality, but would you want to live in Cuba?

Piketty’s Argument

Having seen that freer societies tend to have greater inequalities, let’s quickly review Piketty’s argument (especially if you also haven’t made it beyond page 12 of his book).

As a disclaimer, for sure a lot of work went into the book and far from us wanting to oversimplify or denigrate what appears to be an honest attempt to tackle a recurring concern of society (over thousands of years in fact). On the whole Piketty comes across as a decent and sincere fellow.

But being sincere does not mean he's right; anyone can be sincerely wrong. And because of the fame bestowed upon him, his ideas may get widely accepted without due scrutiny or, as we shall see, little basis on fact. Worse, they can serve as justification for some truly repressive and appalling economic policies, which should concern us all.

So here’s the main thrust of Capitalism’s 696 pages: examining over 200 years of return on capital data in twenty Western world countries, Piketty concluded that because such returns have historically exceeded the rate of economic growth the holders of capital will get rich faster than anybody else.

In other words, inequality does not stem from differences in individual ability and achievement as we have discussed above, but rather through the mere ownership of capital. The system is rigged. Moreover, because capital can be inherited, this inequality can persist over many generations.

Piketty claims that the inevitable outcome from capitalism is perpetual misery, social violence and wars.

Incidentally (or not), this is eerily similar to the argument that John Maynard Keynes put forward to advocate the euthanasia of the “rentiers” in the 1930s (a great example of a repressive economic theory that has been adopted by the world’s central bankers and is now causing misery to millions of people, particularly to our elderly). Plus ça change Monsieur Piketty.

We would also have liked to pinpoint the similarities with Karl Marx's thinking (although his bag was mostly the perpetual exploitation of labor by capital, or something like that) but we also never got past page 12 of his book. Apparently a lot of pages are needed to explain something that should have been obvious to us all.

In a June 2014 interview with the jovial Stephen Colbert, Piketty provided some context to his thinking. People like Colbert became rich because capitalism is unfair; and because he became rich Colbert is depriving others from the opportunity to also become rich. The rich are out to get us! Not to worry, the French economist has a solution: tax all earnings above US$500,000 at 80%.

We can start getting a sense as to why Facebook and Spanx were created and mass-adopted in the “unequal” US and not “egalitarian” France, Piketty’s home country. Let's look at some facts.

The Unequal Land of the Free

Without even getting into the time-tested damage an 80% tax rate does to an economy, the US – the habitual poster child for inequality – provides robust evidence that inequality is oftentimes ephemeral and generally misunderstood. This is where facts start getting in the way of Piketty's grand vision for society.

Thomas Sowell, the prominent American economist from the Chicago School, has extensively researched this topic. He found that 56% of US households will join the richest 10% at some point in their lives, usually when they are older. So much for the rich versus the poor; this is much more likely a debate with our own selves at different stages of our lives.

When looking into the composition of the much vilified 1%, the statistics are even more revealing: over the course of a decade, the great majority of Americans only stay at that level for one year, and less than 13% for two years. Basically these are temporary spikes in wealth from things like asset sales. It certainly doesn’t seem like the wealthiest 1% are out to screw everyone else.

We have also written about inequality in the past. The Pikettys of the world obsess about the dispersion of income levels, where we believe that a much better measure of general prosperity is the percentage of people earning above a minimal threshold that achieves the fulfilment of basic needs (and then some). Using this metric US prosperity peaked in 1999, but the subsequent decline is certainly not attributable to ownership of capital.

History shows us that prosperity is best achieved in societies with a strong rule of law, enforceable property rights, good education and... access to capital!!! Try starting a business with no money and see how far you get. To vilify capital and the people who own it is truly myopic, not to say misguided.

So what if dozens of new Mark Zuckerbergs and Sara Blakelys also emerge from that system and greatly distort the income statistics because of their phenomenal wealth? But according to Piketty, Zuckerberg’s “fair” compensation for co-founding Facebook, a social media vehicle used by over a billion people around the world, and Blakely for starting Spanx, which sells undergarments to millions of women, should be a little over US$500,000 per year. Does this sound fair to you?

For all its virtues, we are not saying that the US is a perfect country. Many millions of people are still struggling after the last recession, and for them the American Dream is proving to be ever more elusive. Our point is that whatever valid grievances we may have with inequality, the ownership of capital is not the culprit. And hurting the people most likely to create it is not a solution either.

The Poor vs Piketty

One of the most robust critiques we have seen of Piketty’s work comes from Hernando de Soto, the Peruvian economist. His critique is not based on models or theory but rather on hard facts accumulated by his research team in the very countries where Piketty’s perpetual scourges of inequality – misery, social violence and wars – are prevalent.

He used Egypt as an example, which in 2011 was undergoing a profound social change with the emergence of the Arab Spring movement. What better testing ground to assess people's grievances? His findings were the polar opposite of what Piketty contends: people in those countries “actually want more rather than less capital, and they want their capital to be real and not fictitious”.

In fact, de Soto even points out that the very first "martyrs" of this movement were mostly small entrepreneurs desperate because they did not have access to the capital to sustain their businesses.

Piketty did not have reliable data for developing countries, but rather than conducting his own on-the-ground research he merely extrapolated his findings to the whole globe using data from Western countries. And voilá!

How was Muhammad Yunus able to improve the livelihoods of thousands of families in his native Bangladesh? By providing microcredit to them; in other words, access to capital.

How did China become such an economic powerhouse? Certainly not by restricting its citizens' access to capital and taxing them at 80%. On the contrary, it sucked as much foreign capital and know-how as it possibly could. At the start of their great march towards prosperity in the 1980s, Deng Xiaoping (supposedly) proclaimed "to get rich is glorious". They were tired of Mao-Tse Tung wanting to make everyone equal.

Piketty clearly knows something people in emerging markets don't. Or maybe what he was really describing is capital in the nineteenth century, not the twenty-first.

Unintended but Predictable Consequences

We have rich people, poor people, right-wing economists, left-wing economists and even revolutionaries, all contesting Piketty’s argument. It seems we the People do have a point against him. But will it prevail?

We’re not optimistic on this one. It is far more likely that Piketty's ideas will gain traction rather than fade away. Why? Because it gives politicians and their Keynesian consorts yet another framework and justification as to why the state should be the key allocator of resources in society.

In other words, it’s another "soak the rich" argument, this time propagated by a soft-spoken best-selling author. And to think that the state will be any more benevolent and altruistic when it is done soaking them is another example of academic theory which is contradicted by the historical record. Power corrupts everything, especially a more aggressive and intrusive state. Perhaps unintended, but clearly a predictable consequence.

The state does play a very important role in society, but not how Piketty, Krugman and their pals envisage it. Unfortunately, it seems we may be saddled with yet another set of dubious economic ideologies governing our lives and our livelihoods.

If you are one of those fast runners, we can only wish you the best of luck in your journey across the forest

 

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Fri, 05/15/2015 - 15:05 | 6098272 TruxtonSpangler
TruxtonSpangler's picture

He surely knows where his bread gets buttered

Fri, 05/15/2015 - 15:07 | 6098281 CH1
CH1's picture

it gives politicians and their Keynesian consorts yet another framework and justification as to why the state should be the key allocator of resources in society.

It worked for Keynes!

Fri, 05/15/2015 - 15:16 | 6098320 Stuck on Zero
Stuck on Zero's picture

Where did the Author come up with this stupid statement:

Having seen that freer societies tend to have greater inequalities ...

 

 

Fri, 05/15/2015 - 15:20 | 6098329 GoldSilverDoc
GoldSilverDoc's picture

The biggest problem with this article is the assumption by the author that there is some entity called "The People".

That is the biggest Marxist red-flag ever, and all the maroons who use it to describe.... whatever it is they are trying and failing to describe, unwittingly play into the collectivists's hands.

There are PEOPLE, many of them.  Each one.... an individual.  There is no "The People" except in the minds of collectivist statists and the dimwits who believe in them. 

Fri, 05/15/2015 - 15:22 | 6098335 i_call_you_my_base
i_call_you_my_base's picture

It's occassionally appropriate, as in, "The People are coming for our heads!"

Fri, 05/15/2015 - 15:39 | 6098408 Doña K
Doña K's picture

The facts however, are that governments have always favored the elite who financed them to get the permits and the quasi-monopolies of their countries resources, export licences and the rest, including tax breaks and subsidies.

Nothing new here. They are now looking to legitimize the practice.  

Fri, 05/15/2015 - 15:49 | 6098461 GoldenGeezer
GoldenGeezer's picture

"My people" would agree. We are all individulists within a collective kinda sorta.

Fri, 05/15/2015 - 15:55 | 6098487 NotApplicable
NotApplicable's picture

I regret that I have only one upvote to give to this comment.

I'm ever saddened to see how collectivists always work to remove the actual humans when discussing humanity.

Sat, 05/16/2015 - 06:16 | 6099939 Why.Not.
Why.Not.'s picture

Those quotes around "The People" have meaning.

Fri, 05/15/2015 - 15:32 | 6098377 midtowng
midtowng's picture

The author made up his mind about the subject and then decided to research the article. This is a joke.

Fri, 05/15/2015 - 15:29 | 6098363 Stoploss
Stoploss's picture

He's the A Typical narcissistic liar. They're all the same, just different flavors...

Fri, 05/15/2015 - 15:07 | 6098282 carbonmutant
carbonmutant's picture

Politics is all about resource allocation...

Fri, 05/15/2015 - 15:08 | 6098284 CH1
CH1's picture

Politics is all about...

Selling the illusion that the slaves are in control.

Fri, 05/15/2015 - 15:11 | 6098300 Parsecs Taxi
Parsecs Taxi's picture

Inequality is necessary in a free world: how else would you know who the winners are?

Same with slaves: without them, how would you know who the masters are?

Fri, 05/15/2015 - 15:26 | 6098350 exi1ed0ne
exi1ed0ne's picture

I really don't care about inequality, as there will always be some around.  What matters to a society is MOBILITY, both up and down the social strata.  We have a durth of movement right now.  One decent indication of this is small businesses.  The birth/death rates for small businesses are seriously alarming to me, and put the nail in the coffin for any kind of future prosperity. 

Fri, 05/15/2015 - 15:47 | 6098450 Parsecs Taxi
Parsecs Taxi's picture

Actually, I think social mobility is one the primary underlying global-governance goals, although the vectors will look different depending on the viewers' perspectives.

Fri, 05/15/2015 - 20:55 | 6099321 Livermore Legend
Livermore Legend's picture

"Selling the Illusion"........

Indeed....

Fri, 05/15/2015 - 15:10 | 6098299 falconflight
falconflight's picture

They greediest in any western welfare state are the pets living on the plantation.  The poor are the new Proletariat, and if anyone deserved a savage war, it is the so called poor.  Fuck the bloodsuckers, the ObamaTicks.  

Fri, 05/15/2015 - 15:12 | 6098310 Parsecs Taxi
Parsecs Taxi's picture

Greedier than the owners of plantation Raytheon?

Fri, 05/15/2015 - 20:33 | 6099274 buyingsterling
buyingsterling's picture

They're just doing what they are taught to do by family and state. Told they're entitled to it. Sure, their conscience tells them that they could have studied in school and tried harder to stand on their own, but to suggest that is considered mean (and racist, even if you're just talking about society in general). That shows how far the body politic is from promoting any kind of personal responsibility.

The problem is exacerbated by genetics. The clearest causal/necessary factor for determining high earnings is intelligence. The poor are generally not as bright as the rest of society (mean again) and anything you do to help them will get less traction.

The solutions (har har) probably involve incentives for not procreating before a certain age (mean), removal of obstacles to a lower cost of living, denial of the vote to anyone not a net taxpayer for X years (who let Hitler in the room?), removing barriers to entry into business and trade, ending the drug war, corporate subsidies, and income tax, etc. In other words, the poor will always be with us.

I sympathize somewhat with your comment. Some poor are real victims of tragedy (mostly short term poor), but most long-term poor are dysfunctional (really mean). Because of these people, psychopaths have a reason to control the rest of us, and have a reason to expand the ranks of the 'poor' of all ages. About half of the budget consists of transfers from earners to consumers, and that doesn't include the 7 trillion/year in unfunded liabilities, which is mostly transfer payment related. So transfer payments are really 80+% of the real budget.

Fri, 05/15/2015 - 15:12 | 6098302 billwilson
billwilson's picture

Are they obligated to bring everybody along?

 

YES!!!!

 

The only reason they themselves exist, and they themselves are rich is because of what has come before them , and the society that has been created. So YES, they do have to contribute more than their perceived fair share.

Fri, 05/15/2015 - 15:18 | 6098323 Amy G. Dala
Amy G. Dala's picture

Yes, Bill, when their slogan is "we're going over that fucking hill and we're taking everybody with us!", it is their DUTY.

Fri, 05/15/2015 - 21:39 | 6099417 buyingsterling
buyingsterling's picture

Unless the system is RUN by someone, they have already contributed extra value; their wealth is a reflection of that.

If government intrusion into any of this goes beyond a few simple rules to insure fair competition, you have established a nexus of enormous power that will eventually fall into the hands of psychopaths.

Fri, 05/15/2015 - 15:12 | 6098309 i_call_you_my_base
i_call_you_my_base's picture

Rather than an estate tax, it would be better to destroy the money. It would be deflationary and would have the effect of strengthening the currency and everyone else's buying power.

Fri, 05/15/2015 - 15:14 | 6098316 Amy G. Dala
Amy G. Dala's picture

696 pages, but ebooks tracking shows almost all the highlighted passages in the first 100 pages.  I bet Krugman hasn't read the fucker.

Fri, 05/15/2015 - 15:16 | 6098321 i_call_you_my_base
i_call_you_my_base's picture

I am convinced that its best-seller designation is a lie. People have been caught buying massive amounts of books and placing them in storage to fake the status. My guess is the same was done with this book. No one reads shit like this.

Fri, 05/15/2015 - 15:58 | 6098500 NotApplicable
NotApplicable's picture

Why would they? There's certainly nothing new about any of his... umm.. I mean Keynes' ideas.

Fri, 05/15/2015 - 16:17 | 6098565 GoldenGeezer
GoldenGeezer's picture

You're probably right, but a "best seller" only has to be a best seller in its own genre and there are so many genres and sub-genres that it doesn't take as many sales to have a best seller as one might think. Especially in economics.

Sun, 05/17/2015 - 16:50 | 6103749 mkhs
mkhs's picture

So what you are saying is that three people bought an economics book, and two of them bought this trash because of the hype?

Ha ha ha....oh, damn.  I was laughing so hard I kruged myself.

Fri, 05/15/2015 - 15:18 | 6098326 PTR
PTR's picture

Ubuntu.

 

I say no more.

Fri, 05/15/2015 - 15:25 | 6098345 kchrisc
kchrisc's picture

I would rather watch Honey Boo Boo than read the tit for tats of two Zionist scribes.

Liberty is a demand. Tyranny is submission.

 

I do enjoy Rothbard and Mises. Two of Liberty's finest scribes.

Fri, 05/15/2015 - 15:30 | 6098364 Atomizer
Atomizer's picture
If Robin Hood Met Republicans http://m.youtube.com/watch?v=LEcDlD8Jz5k We can always sniff out a RINO. GOP has become a limp wristing set of faggots. This statement comes from a conservative. 
Fri, 05/15/2015 - 16:38 | 6098660 free shit plz
free shit plz's picture

go vote for the democrats then you muslim cunt

Fri, 05/15/2015 - 15:30 | 6098365 Atomizer
Atomizer's picture
If Robin Hood Met Republicans http://m.youtube.com/watch?v=LEcDlD8Jz5k We can always sniff out a RINO. GOP has become a limp wristing set of faggots. This statement comes from a conservative. 
Fri, 05/15/2015 - 15:32 | 6098370 londoncalling
londoncalling's picture

in the uk the level of inequality has never been higher apparently, rich are richer and pulling away from the poorer (funny, the exponential function sort of works like that!)

however

the poor have never had such comfortable lives either

so are you going to focus on the fact that everyone is better off than they were

or the fact that the gap is widening

i mean in some "fair" countries everyone is equally poor, that sounds great!

Fri, 05/15/2015 - 15:51 | 6098474 Atomizer
Atomizer's picture

Thatcher pointed it out. 

Fri, 05/15/2015 - 15:32 | 6098372 londoncalling
londoncalling's picture

in the uk the level of inequality has never been higher apparently, rich are richer and pulling away from the poorer (funny, the exponential function sort of works like that!)

however

the poor have never had such comfortable lives either

so are you going to focus on the fact that everyone is better off than they were

or the fact that the gap is widening

i mean in some "fair" countries everyone is equally poor, that sounds great!

Fri, 05/15/2015 - 15:32 | 6098375 ucde
ucde's picture

This article runs a thought experiment based on four imaginary 'tribes' and then concludes:

This was a long way of saying that inequality arises in economic systems where individuals are largely given the freedom to act in accordance with their capabilities and desires. We can certainly force society to be more equal, but this will come at some cost to individual freedoms and opportunities in general.

I don't follow. I believe that societies that care about each other tend to triumph over societies that don't care about each other. Social cohesion is a big factor. I'm not interested in this person's thought experiments with his imaginary tribes. That smells like old thinking.

Fri, 05/15/2015 - 16:12 | 6098557 BuddyEffed
BuddyEffed's picture

Theorizing straw men or straw tribes can be part of an effort to manipulate thought processes or opinions.

Fri, 05/15/2015 - 17:27 | 6098809 robobbob
robobbob's picture

voluntarily caring about each other is great human attribute

 

having it enforced at gun point, not so much

 

I'm sure the Chinese peasant farmers, and before them, Ukranian farmers, loved taking one for the team for such a noble goal as arbitrarily defined equality.

Fri, 05/15/2015 - 21:53 | 6099441 buyingsterling
buyingsterling's picture

A bill to help women WIDOWED by a dam failure (or similar event) was defeated in one of the early congresses. The constitution confers no power to buy votes. We can care about people with voluntary association. The alternative is what we have now.

Sat, 05/16/2015 - 07:05 | 6099970 Why.Not.
Why.Not.'s picture

Look at any "developing" east Asian culture. They all have a tradition of "looking after each other," but only at a family - and to some extent friends - level. Outside of that it's all graft and corruption, and the ones who are best at it become enormously wealthy while the multitudes are lucky to achieve a "comfortable" subsistence. You want a nation of caring poor people? Dream on.

Fri, 05/15/2015 - 15:34 | 6098383 Mike Honcho
Mike Honcho's picture

"And conservatives are terrified." - tough talk from Captain Turtleneck.  Noone buys their camps chant.  Only the wealthy because it favors them.  And those that don't get it don't realize the lesson is coming.

Fri, 05/15/2015 - 20:45 | 6099302 Livermore Legend
Livermore Legend's picture

".......those that don't get it don't realize the lesson is coming...."

Indeed.

Fri, 05/15/2015 - 15:35 | 6098389 gdiamond22
gdiamond22's picture

Do these Keynesian freaks not realize that THEIR policies of central planning, central banking, central everything is the CAUSE for such great inequality in our world? Capitalism died in 1913.

Fuck you Krugman, Piketty, Keynes and Marx - Fuck you all

Fri, 05/15/2015 - 16:37 | 6098656 juujuuuujj
juujuuuujj's picture

Wake up.

They're Libertarian when the time comes to lift restrictions on gambling and fraud, and they're Keynesian whe it comes to bail out the Oligarchy with public money. In the end, the only enemy is oligarchy.

Keynesians as well as Austrian/Libertarians and neocons were complicit in the rise of this oligarchy. They were complicit in the dismantlement of the Glass-Steagall act, the promotion of cheap credit and screwing of small business in favor of big corporations and banks. Every single economic school went along with it, so don't be fooled into the view that "only if everyone adopted Libby's ideology and eradicated Kenny's", things would get better. Both Libby and Kenny have been screwing you for decades, just like the Democrats and the Republicans. The true enemy has one name and you better remember it well. It's what America is now officially called, as a system. Oligarchy.

The US central bank (the Fed) is not accountable to the public. It's a privately-controlled cartel, which is part of the oligarchy. The government (the two parties) support the oligarchy, because they're paid by it. Economists from all stripes justify the oligarchy using Keynesian and Libertarian motives. Just as well, you can find honest, non-orthodox members of the same schools. Schiff, Piketty, Michael Hudson, Steve Keen, Jim Rickards, Jim Rogers and others have so far spoken inconvenient truth to the oligarchy, so I support them, regardless of their "what school they went to". It's oligarchy that needs to be dismantled. Witout an oligarchy, you can have a well-functioning economy of any type. From Scandinavia to Switzerland, Singapore and South Korea. 
Fri, 05/15/2015 - 18:28 | 6098988 unicorn
unicorn's picture

nice, juujuu, thx;)

this guy wirtes : Power corrupts everything, especially a more aggressive and intrusive state.

he forgets to add:
Power corrupts everything, especially  more aggressive and intrusive corporations.

cause:

the power these big corporations have now lets them suck the life out of the future of this planet. they have to be controlled, otherwise they ll just gonna take, what they can, everything without regard. its the nature of the game at the moment. but we cant go on like this.

i dont want communism, i dont want the chicago scool, i want something new, cause what we re living now is new. we need new laws, appropriate to whats goin on now.

 

all these hawks cant survive in a world full of hawks. this the writer hasnt understood. hes blind.

Fri, 05/15/2015 - 20:34 | 6099278 Simplifiedfrisbee
Simplifiedfrisbee's picture

I'm putting aside my faith and speeking without regard to my morality. With that said. This site has become a degenerate, dingy, dusty, word, disgusting pigsty. The words on the street is the original Tyler got booted from trading with the big boys in NY and London and since has been motivated to go against them. Well good effort Tyler. At first, it was awesome. Intelligent and vehement discussions. Real information and perspective. But this year ZH stock is at an all time low. Articles suck and the posters are mediocre. "You ain't bout that life" Tyler. To spread truth requires a ground level grass movement on all fronts. It surely will not happen posting articles from your enclave near the beach. Honestly, what the fuck happened to bank guy from Brussels? Fuck this place. I know economics and this place has become stagnant. No ideas, no progress, and no inspiration. Regional Indian is cool and so is Cognitive Dissonance but who the fuck are the rest of you? From the comments I read you are all a class of degenerate idiots who have no contribution other than to nag. Fuck y'all. Best regards.

Sat, 05/16/2015 - 00:54 | 6099774 buyingsterling
buyingsterling's picture

I have dispatched the waambulance.

Fri, 05/15/2015 - 23:53 | 6099674 RichardParker
RichardParker's picture

gdiamond22:

Their policies of central planning, central banking, central everything have nothing to do with mitigating inequality.

This is control. 

 

Fri, 05/15/2015 - 15:42 | 6098429 TMLutas
TMLutas's picture

Labor is a market. So are capital and capitalists. If we have too many workers and not enough capital, you would expect to see capitalist work compensated disproportionately and labor income being depressed. So if Piketty is right, the solution is to move people over from the labor side to the capital side until the compensation equalizes not drive capitalists out of that business and increase the imbalance. 

Fri, 05/15/2015 - 16:47 | 6098685 TeethVillage88s
TeethVillage88s's picture

I have no idea what you are getting at.

Yeah we have too much labor both skilled and unskilled.

Yeah we have too many Banks and Bank Executives Creating Money with which they reward themselves with outsized compensation, they invest in non-value added paper, they buy treasuries for collateral, and very little ends up as Capital Equipment or Capital Facilities in the USA... maybe if ends up as capital flight to Asia or Latin America.

Anyway we have a Socialist Nation already. Democracy at the Local and State Level. A military republic-corportocracy-Banking-Security State at the Federal Level. And very limited Free Markets due to excessive options, naked short selling, HFT, massive spoofing of the markets, and government sponsored 'Fixes'.

So to the Article, it is a catch-22, Pikety makes some points that will last, but we already have Corporate Socialism and Massive Welfare Systems... perhaps it doesn't make any difference if Pikety's work calls for more intervention in the markets since we are doing that.

What would matter is if Pikety's work stopped the Powerful Banks from doing whatever the hell they want, and took some of their money creating power away, and especially if TBTF were broken up in a way that said big corporations are too complicated and have too much impact on national security.

- Persistence of Large Organizations and Large Budgets is always Ripe for both Plunder and "Capture" by Evil Actors, the US Federal Government is full of Funds to loot, and it's Budget has been captured since Ronald Reagan.

Fri, 05/15/2015 - 15:49 | 6098457 MEFOBILLS
MEFOBILLS's picture

“Hudson begins, “According to every economics textbook and all the Nobel prizes for the last 40 years, this can’t be happening. According to the economics textbooks, the wealthy get rich by adding to production. You earn what you make and they’re wealth creators. But in fact what they’re producing isn’t wealth, it’s poverty. And they do this largely because—I think you can think of them as being creditors. They’re creditors to the bottom 99 percent that are debtors and renters. If you look at these wealthiest families, there are a number of common denominators: They didn’t earn their income, and yet economists only look at how people earn their income. President Obama last week said, “Well, if you have the desire to get rich and you work hard, you can do it.” But that’s not how these families got their wealth.”

Lawson adds, “Our figures show that the top group of people—the 80 people now—and of the billionaires… about a third now inherited their wealth. And that figure’s increasing all the time. And this is the point the French economist Piketty made in his famous book last year, that we’re rapidly returning to an era that we thought had been consigned to the history books, an era that we associate with The Great Gatsby or maybe Victorian times in Britain where wealth is inherited and all of the things that come with that. So it’s not just the capture of political power in this generation, it’s about using your money to shore up the future of your children and your children’s prospects. So it really is a kind of ossification of society, if you like, a stratification, which we think is deeply, deeply harmful, because it’s ultimately bad for the economy, it’s bad for meritocracy”

 

http://michael-hudson.com/?s=piketty

 

My comments:

Those who create our money, will end up directing society.  Bankers and “privateers” create the money to benefit themselves.  The state should create money as currency – a money type without debt association.

At least 60% of the money supply should be debt free currency, which then allows low cost transactions.  This money then becomes savings, and the people themselves now own a wealth and transaction means.  This type of money doesn’t disappear and it doesn’t form oligarchy.  A currency type of money can only be recalled with taxes, and to do that, government must wrangle with its people.  The relation of power changes to where government is subordinated. 

Ironically, sovereign money does not empower a state, nor does it empower a ruling class of money power elites, it empowers the people.

If new money is spent into households first, then that further empowers families, the cornerstone of human civilization.  The people can then work together to have political representation, a representation not perverted by money power means and influence.

www.sovereignmoney.eu

 

 

The wealthy are actually recipients of welfare.  The middle class is paying welfare to the rich, and in the process middle class are being eviscerated.  Private credit finance is strangling society.  Only some wealthy “earned’ their income; however vast majority are rentiers - who are engaging in theft.  Thievery is criminal behavior, and thieves should be jailed.  

Fri, 05/15/2015 - 17:03 | 6098737 TeethVillage88s
TeethVillage88s's picture

Interesting comments.

I wonder why the Gini Coefficient is not spoken of in the USA. I think it must be a sign that Fascists control the MSM, the Govt, the FED, and Wall Street.

The Gini coefficient measures the inequality among values of a frequency distribution (for example, levels of income). A Gini coefficient of zero expresses perfect equality, where all values are the same (for example, where everyone has the same income). A Gini coefficient of one (or 100%) expresses maximal inequality among values (for example, where only one person has all the income or consumption, and all others have none).[3][4]

Something has been happening for at least 30 years regarding this Gini Ratio.

Income Gini Ratio for Households by Race of Householder, All Races, 2013: 0.476 Ratio (Strong Steady Trend for 45 Years, first year = 1967-01-01), Annual, Not Seasonally Adjusted, GINIALLRH, Updated: 2014-09-30
http://research.stlouisfed.org/fred2/series/GINIALLRH

This one is different and I don't know which chart I would prefer except the one with lots of data.

GINI Index for the United States
2010: 41.12 Index (No longer propagated, has only 24 years of data), Annual, Not Seasonally Adjusted, SIPOVGINIUSA, Updated: 2015-04-21
http://research.stlouisfed.org/fred2/series/SIPOVGINIUSA

FRED also has some Gini Ratios for other Countries.

Fri, 05/15/2015 - 15:51 | 6098472 Prober
Prober's picture

another problem with a trivial solution:

recycle

ALL socialists

ALL proletariat who cannot fully support themseleves

Fri, 05/15/2015 - 16:03 | 6098503 juujuuuujj
juujuuuujj's picture

What a nonsense article. Saying that inequality has been growing is not Marxism, it's a fact. These anti-competitive oligarchs just hate it when people start to notice their swolen, blood-soaked leech bodies shining in the sun, and they'd do anything to hide it. So they try to shoot the messenger to divert attention from themselves.

Fri, 05/15/2015 - 16:00 | 6098506 Dasa Slooofoot
Dasa Slooofoot's picture

The author is a jackass who doesn't know that r > g. 

Fri, 05/15/2015 - 16:00 | 6098508 Panic Mode
Panic Mode's picture

Fucketty fuck

Fri, 05/15/2015 - 16:22 | 6098584 WTFUD
WTFUD's picture

There was something in the air that night
The stars were bright Fernando . . . . .

They were crying out for you and me
For Liberty, Fernando . . . . . . .

Fri, 05/15/2015 - 16:31 | 6098637 bankonzhongguo
bankonzhongguo's picture

This is the fundamental problem with economics and philosophy.

I just got through reading half this article. I zoned out. I'm reasonably smart and tolerant, but WFT.

I did not read this so-called Capitalism book and its 696 pages, nor any material critique - pro or con.

Why?

Because it does not matter what is going on in all those pages, nor even between the eternal fight between Keynes and Mises.

Take 100 people off the street, subway, heck even working inside the Fed. Take them from the halls of Congress or the closest 'hood.

Maybe 5% understand what you are talking about. 5% care. The rest are just trying to eek out a living or existence. Point A to point B.

That is the essence of economics and philosophy. Nobody else is so engaged that these theory real matter in the material world.

Are these mental exercises positive for the development of human culture? Sure.

Does war still exist? Yep.

Is anything really different in our lives since antiquity? Nope.

Its all a raging battle. A knife fight. Doesn't matter your faith, political stripes, education or your pocket book.  There is always someone or something nipping at your heels.

The Keynesian-proto communists are having a great century. But it will collapse into the hands of the Chinese (or Google and their Robot Army), who tried their Great Leap and host of other social engineering solutions and shake their heads at the West's implosion.

Read all this shit. Understand it. Teach it. Maybe you are even right.

And then some 15 year old kid with nothing to lose is going to walk up on you in an alley and stab you dead to rights for $20.

Economics used to be called political economy because it was merely a clever quantitative way to justify government theory and practice.

Most of these vaulted institutions are created to protect the rich and powerful, not level any playing field. Just ask anyone that lived in a fascist (communist) state. The same classism exists everywhere because it is human nature.

Maybe these guys are all correct, until they aren't and they run out of other people's money and tolerance.

 

Fri, 05/15/2015 - 16:51 | 6098692 TeethVillage88s
TeethVillage88s's picture

What Economics Class did you take. Econ 101: US has a Mixed Economy, Capitalism with Socialism.

The 4 Tribes you mention are too simplistic.

Europe, Scandinavia, UK, USA we are all Socialist.

Fri, 05/15/2015 - 18:38 | 6098867 falak pema
falak pema's picture

hahaha...so where does TRUE capitalism exist on earth????

Its lovely to define the words "socialism" and "capitalism" to mean something that only exists in people's minds not in FACT. 

Luddites and Libertarians live in never never land; and can defy gravity like the awesome greenback in the hands of the FED ! 

This post should be entitled : The Oligarchy vs the People, with Piketty defending the people's cause (the 99%).

Why the bamboozling turnaroud given that the Oligarchy controls the FED ? 

Head up ass logic as usual, blaming the usual suspects and never the factual ones. 

Fri, 05/15/2015 - 16:53 | 6098698 Quantum Nucleonics
Quantum Nucleonics's picture

Why are people still talking about this moron and his theories?  All of his arguments have been completely and totally debunked.

Fri, 05/15/2015 - 17:00 | 6098719 ghostofgo
ghostofgo's picture

"56% of US households will join the richest 10% at some point in their lives"

Possibly the single stupidest thing to ever appear on ZH.

It seems ZH is going to just go full retard shilling for inherited wealth in the months and years ahead. This sophmoric article has the absurd four tribes. But notice that inherited wealth is left out at that basic level.

NEW FLASH FOR TYLER: THE VAST MAJORITY OF WEALTH IN THE WORLD IS THE RESULT OF THEFT.

Go look at the George Carlin video that people love to post. And see what he says about all the best land being long gone.

ZH is some kind of far right limited hang out it seems. Nothing sends it into a tantrum more than attacks on inherited wealth.

What do you say Banzai?

Fri, 05/15/2015 - 17:03 | 6098736 orez65
orez65's picture

"... because capital can be inherited ..."

Pure bull sh.t!

Inherited capital typically gets squandered.

Look at the Kennedy clan.

Look at the Buffett children, do they look like entrepeneurs?

Fri, 05/15/2015 - 17:40 | 6098851 moneybots
moneybots's picture

  "...the French economist has a solution: tax all earnings above US$500,000 at 80%."

 

It didn't work in Piketty's home country, France.  Hollande had to abandon the 75% tax, when Gerarde Depardieu and others left France.  75% of zero is zero.

Fri, 05/15/2015 - 17:45 | 6098868 moneybots
moneybots's picture

"History shows us that prosperity is best achieved in societies with a strong rule of law..."

 

That would exclude the U.S.

Fri, 05/15/2015 - 17:57 | 6098877 moneybots
moneybots's picture

"To vilify capital and the people who own it is truly myopic, not to say misguided."

 

Capital is savings and the FED vilifies savers.

Fri, 05/15/2015 - 18:01 | 6098915 Trojan House
Trojan House's picture

You lost me at 'Piketty.'  Why can't anybody understand that he is just re-spouting Marx's views in a modern way.  And how well did Marxism/communism work out?  Millions dead and it eventually collapsed. 

Fri, 05/15/2015 - 18:54 | 6099064 moneybots
moneybots's picture

"You lost me at 'Piketty.'  Why can't anybody understand that he is just re-spouting Marx's views in a modern way."

 

The Commodities Futures Modernization Act.  The banking modernization act of 1999, commonly known as the dismantling of Glass Steagall.  What were those a spouting off of in a modern way?  The reckless roaring 20's bubble that lead into the New Deal.

World War Two came out of that, which killed some 60 million people.

Fri, 05/15/2015 - 19:04 | 6099093 moneybots
moneybots's picture

"And how well did Marxism/communism work out?  Millions dead and it eventually collapsed."

 

Everything that has a cycle, eventually collapses.  How did the Roman Empire work out?  How did the British Empire work out?  How has every economic boom worked out?  100% have ended in a bust.

 

Fri, 05/15/2015 - 18:39 | 6099035 moneybots
moneybots's picture

"The Poor vs Piketty"

 

Piketty would get nowhere, except for the rampant financial corruption in the (Name country here). 

Rigged Libor, rigged stock market, rigged housing bubble, etc. and add some infiitum for good measure.

10,000 appraisers petitiioned the U.S. government about appraisal fraud.  The government did nothing about it.  The FBI warned congress about major mortgage fraud and nothing was done about it.  

Why was Glass Steagall dismantled?  So the same thing that happened in the 1920's, could happen all over again.  So here we are, sitting in the 21st century version of the 1930's.

Piketty intends to take every advantage of that, just as FDR did.

"We have rich people, poor people, right-wing economists, left-wing economists and even revolutionaries, all contesting Piketty’s argument. It seems we the People do have a point against him. But will it prevail?

We’re not optimistic on this one. It is far more likely that Piketty's ideas will gain traction rather than fade away."

You shouldn't be optimistic.  Glass Steagall was dismantled.  The experts who spoke out against it were ignored.  It is therefore likely that Piketty's ideas will gain tractionWhat goes around, does come back around.

 


Fri, 05/15/2015 - 18:49 | 6099057 Porous Horace
Porous Horace's picture

"Where would you prefer to live: in a society with obvious economic and social inequalities but with an abundance of choices and opportunities, or in another with much greater equality and less choices?"

I would rather live in a country where people who write for a living know when to use the word "less" and when to use the word "fewer".

Fri, 05/15/2015 - 18:59 | 6099083 petkovplamen
petkovplamen's picture

you may be contesting him ALL you want, but you havent shown ANY evidence that refutes his arguments.

Fri, 05/15/2015 - 19:12 | 6099109 moneybots
moneybots's picture

"you may be contesting him ALL you want, but you havent shown ANY evidence that refutes his arguments."

 

The example of Piketty's home country, France, refutes his arguments.  Piketty wants an 80% top tax.  Hollande had to abandon a lower, 75% tax, due to its detrimental effect.

Fri, 05/15/2015 - 23:11 | 6099591 RichardParker
RichardParker's picture

You might want to take a look at youth unemployment in France for the past 20 years.

http://www.tradingeconomics.com/france/youth-unemployment-rate

 

 

Fri, 05/15/2015 - 19:31 | 6099095 RichardParker
RichardParker's picture

Funny how Picketty never bothers to mention the end of Bretton Woods in 1971 and the acceleration in inequality that has followed over the past 40 something years.

Fri, 05/15/2015 - 19:36 | 6099157 windcatcher
windcatcher's picture

Return to the American Free Enterprise System of capitalism that is FREE from corporate monopoly, nationalizing banking to free up access to capital and nationalizing the insurance racket to clean out the criminals would go a long way in reestablishing equality.

Return to a benevolent democratic government to restore our abandoned federal forest and lands and also provided development of science and our national transportation infrastructure would be a benefit to us all equally.

 

Fri, 05/15/2015 - 19:46 | 6099179 daenerys targaryen
daenerys targaryen's picture

I think this guy would be better off writing for a Murdoch publication

Fri, 05/15/2015 - 20:14 | 6099241 moneybots
moneybots's picture

"We can say it is unfair that some of us are world class football players, others Hall of Fame actors, and others top tier fund managers. We can complain that they make way too much money. But this is a consequence of the economic system we have adopted in the West. And we're not necessarily poorer because these folks are richer."

 

Just wow.

 

A record 93 million Americans are not working.  Are you listening?

I think it was in 1996 that World Series was cancelled.  Not because of a disaster like WW2, but because of a strike.  In 1986 i could name off every player on the Mets.  The other week i caught the last two innings of a Yankees/Mets game.  Couldn't tell you the name of one player on the team.

I am poorer for the fact that an A-rod gets a 250 million contract or whatever.  It cost me my interest in the game.

Several years ago, Barbara Streisand planned a singing engagement in Italy.  Apparently the ticket price was so expensive that the engagement was cancelled.  The people who would have liked to hear her sing, were poorer for not being able to do so.

A movie star gets 20 million for a movie and the production is filmed outside of Los Angeles to save money.  Local talent lose work.  Those people are poorer for it.

The problem is not people earning more than other people.  It is the absolute excess and absolute disperity.

Charlie Munger told the little people to suck it up and cope.  Rather easy for him to say.

Fri, 05/15/2015 - 21:33 | 6099403 Livermore Legend
Livermore Legend's picture

Inequality is Sine Qua Non to Ambition....

 

Fri, 05/15/2015 - 23:17 | 6099600 TheReplacement
TheReplacement's picture

It is funny.  The rule of law is thrown out so the .01% can accumulate wealth, power, and control.  As soon as these goals are completed (or nearly) they start trotting out the idea of rule of law and protection of property rights again - after they own and control everything.  How fortunate that they have morons like Piketty and the Kruginator to hoist upon their marxist petards.

Say it with me, horseshit.

The revolution must not spare any of them.  Not a single one.

Sat, 05/16/2015 - 04:04 | 6099880 Batman11
Batman11's picture

If you want an example of Piketty in action look at land ownership.

No one is making anymore ......

In the US, no current American owned any of it a few centuries ago, it has now concentrated in the hands of a few families.

Is this situation ever going to improve naturally?

Vast swathes of the UK are still owned by the old money Aristocracy in estates they have held for centuries.

Wealth accumulates to those that inherit land and capital.

It's the way it works and is probably why it is called Capitalism.

You don't need to earn it, inheriting it seems to be the true path to the top, the wealth accumulated over generations.

The UK rich list is topped by the Duke of Westminster that inherited the lot, inheritance not hard work is the key.

 

 

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