The fact that they are not is prima facie evidence that how hard we work has little to do with how wealthy we are.

The fact that the distribution of wealth is not a constant, but has been evolving over history to a more equitable one, also suggests the correlation between social virtue and financial wealth is, at best, somewhat exaggerated. If how much you own depends on how much good you provide to the society, and how hard you work to produce it, then the richest people in the country should be migrant farm laborers.

The insistence that the rich are so because they deserve to be immediately implies that those who are poor also deserve to be poor: that the poor are naturally stupid, lazy, and criminal while the rich are naturally clever, hard-working and virtuous.

This arbitrary division of society, and the use of property and wealth to identify and distinguish between the worthy and the unworthy
is fascism. It is not fascism based on aristocratic birth, or race, or nationalism, or religion, but on property and income.

No one is saying economic freedom demands that everyone have the same property and income, the same wealth. Economic freedom means everyone has the same opportunity. People should be rewarded in proportion to what they produce. They should not be rewarded for what they accumulated.

I will be the first to concede that these remarks are overly simplified, perhaps even somewhat exaggerated. But then again, so is the simplistic nonsense that “supply and demand” and the “invisible hand” will solve all our problems if we just leave the market to regulate itself. As Piketty remarks, in page 20 of his introduction,

What are the major conclusions to which these novel historical sources have led me? The first is that one should be very wary of any economic determinism in regard to inequalities of wealth and income. The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms. In particular, the reduction of inequality that took place in most developed countries between 1910 and 1950 was above all a consequence of war and of policies adopted to cope with the shocks of war. Similarly, the resurgence of inequality after 1980 is due largely to the political shifts of the past several decades, especially in regard to taxation and finance. The history of inequality is shaped by the way economic, social and political actors view what is just and what is not, as well as by the relative power of those actors and the collective choices that result. It is the joint product of all relevant actors combined.

The second conclusion, which is the heart of the book, is that the dynamics of wealth distribution reveal powerful mechanisms pushing alternatively toward convergence and divergence [concentration vs distribution of wealth]. Furthermore, there is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently.

Hmmm. I wonder what happened in 1980…

They’ll do anything they have to in order to discredit Piketty. Not necessarily because he puts the lie to all their entrepreneurial fantasies, but because he has the audacity to claim that they might be fantasies.

Its something that never really occurred to them, and that they have no answer for.

Yet The Economist called Piketty “the modern Marx”. I was so impressed by Piketty’s analytical data-based approach that I had mentally already added him to the pantheon of Smith, Marx, and Keynes.

Economics is still by nature a branch of sociology, and thus possessed of many cognitive limits. The one I find most worrisome is the faith that something fundamental in human nature will never change and if you build it, they will always come. Or if you make it, they will always buy it. But what if people become jaded with possessions for the pleasure of ownership? What if the winds of cultural fashion start blowing in a more spiritual direction?

What if technology diminishes the need for material possessions, at the same time it concentrates wealth at the top? Consider the smartphone: Buy one, and never again buy a camera, still or video, a telephone, a television, book, magazine and newspaper reader, or music player.

Technology advances and for less money you have all the functionality of stuff you had before, so you’re OK, as are the people who made your smartphone. But the people who made all those other things are now fearing for their own survival. (Disclosure: Got my first smartphone yesterday. Ironic, isn’t it?)

Piketty didn’t really address that angle of inequality growth, but it is a factor. It’s a specialized part of the broader trend of people working more productively yet the benefits flow mainly to the top. Intellectual capital owned by the wealthy generates tangible wealth for the wealthy.

Like all work in the social sciences, it is impossible to really evaluate objectively. We are all faced with the same data, and we all interpret it through the filter of our own experience and prejudices. I gave up a long time using adjectives like “right” or “wrong” to assign to history, politics, economics, even geography (a social science in which I have some modest formal training, and a long and tedious familiarity with its methodological feuds and philosophical controversies). All you can really hope for is insight, to see how another mind interprets reality, and to incorporate its insights, and perhaps its errors, into one’s own interpretation.

So far, I trust Picketty’s insight, although I must confess I base that trust on little evidence. Here’s one thing Picketty says (p. 31) that leads me to extend that trust.

“I belong to a generation that turned eighteen in 1989, which was not only the bicentennial of the French Revolution, but also the year when the Berlin Wall fell. I belong to a generation that came of age listening to news of the collapse of the Communist dictatorships and never felt the slightest affection or nostalgia for those regimes or for the Soviet Union. I was vaccinated for life against the conventional but lazy rhetoric of anticapitalism, some of which simply ignored the historic failure of Communism and much of which turned its back on the intellectual means necessary to push beyond it.”

And even though Picketty is a few years younger than I am, I have to admit those remarks pretty much sum up my own feelings. I am looking forward to examining his arguments in detail.

Been a hell of a year, ER. mcfly’s dreaming to hope for a politics-free 2016, and I doubt we’ll see politics get any more civilized. So let’s just resolve to march arm-in-arm into the New Year determined that nil conservatismus illegitimi carborundum!

Of course, our free enterprise apologists claim that they should never be controlled or regulated, but that’s because they are already doing exactly that, to their benefit and profit. That’s why they are called Conservatives, they wish to conserve things the way they are, only more so. Economics is a branch of politics, but it also seems to operate on its own internal dynamic, one which is neither from Adam Smith or Karl Marx. People don’t realize it, but Marx himself never criticized Smith, and quoted him extensively. And Smith, of course, has riddled his writings with cautions about the inherent larceny of Capitalists.

I’ve just started Piketty, here is from page 1 of his Introduction:

“Modern economic growth and the diffusion of knowledge have made it possible to avoid the Marxist apocalypse but have not modified the deep structures of capital and inequality–or in any case, not as much as one might have imagined in the optimistic decades following World War II. When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based. [emphasis my own]. There are nevertheless ways democracy can regain control over capitalism and ensure that the general interest takes precedence over private interests, while preserving economic openness and avoiding protectionist and nationalist reactions.”

This explains the instantaneous objection by Capital to even the suggestion of regulation or supervision by democratic institutions.

I myself must confess I reached similar conclusions some time ago. Remember this?

The Bell-Shaped Curve

It’s not just in our society and time, but in any civilization and age, being rich has always been considered an advantage over being poor. Wealth, whether you define it as having many possessions, the means of acquiring more possessions (money), or an income guaranteeing those conditions in the future, has always been considered a laudable goal. It is understood that wealth is neither a necessary nor sufficient condition to secure happiness, but it is also accepted that it helps to have the former to achieve the latter. Wealth is a great aid in realizing security, comfort, power, and even self-actualization; even if it is conceded that it isn’t the only way, it is also obvious that it helps.