French economist Thomas Piketty got a warm welcome in San Francisco last night [Tues/22] when nearly 200 people turned out to hear him discuss what is fast-becoming the defining book of this new Gilded Era of escalating disparities in wealth: Capital in the 21st Century.
“The book has been so popular that Harvard University Press has run out,” The Green Arcade owner Patrick Marks said in introducing Piketty at an event held across Market Street from the bookstore, in the McRoskey Mattress Company, in order to accommodate the large crowd.
Indeed, Capital has recently been lauded by a string of influential publications, ranging from The Nation through The New York Times to the Wall Street Journal, all acknowledging this as perhaps the most exhaustive study on wealth data ever collected — and a clear-eyed warning that capitalism isn’t the self-correcting system that its biggest boosters claim it is.
Piketty’s work shows how when the return on capital is greater than the annual growth rate of the overall economy, which is usually the case (except when interrupted temporarily by the major wars of the 20th Century, or the 90 percent tax rate on the highest US incomes after World War II), that dynamic consolidates wealth in ever-fewer hands, which is bad for the health of the economic system.
The only real cure, Piketty concludes, is a progressive global tax on wealth. Yet Piketty tries to avoid being too prescriptive, choosing to let his research speak for itself. “All I’m trying to do is present this book so everyone can make up his own mind,” Piketty told the gathering. In fact, he thinks the cure he outlines at the end of his book is less important than what comes before it: “You can disagree with everything in Part IV and still find interest in Parts I, II, and III.”
Piketty is critical of his economics profession for focusing too much on abstract theories and mathematical modeling while avoiding the real world calculations of how wealth is distributed and its implications, which he says should be the central question for economists.
He says wealth is more important than income to gauging how we live, which is why he has culled and analyzed most available gauges of global wealth distribution going back to the French Revolution of 1789. “The book is trying to shift the discussion from the study of income to the study of wealth,” he said.
That analyis is particularly illuminating for the United States, which is now experiencing one of the most rapid and extreme consolidations of wealth in history. “It is clear the rise of inequality in the US has been much more spectacular than in Europe,” he said.
Yet Piketty can’t bring himself to criticize capitalism itself, even as his work makes clear this inherent flaw in the system. Indeed, he writes critically of the “lazy rhetoric of anticapitalism” and declares in the book’s introduction, “I have no interest in denouncing inequality or capitalism per se.”
I asked Piketty about that point and about why he’s unwilling to support calls for a more fundamental transformation of the global economic system. He repeated points made in his book about coming of age during the fall of communism in 1989, feeling no sympathy for autocratic leftist regimes, and accepting private property as a basis for the economic system.
I pressed him with follow-up questions about how global warming and other externalities of capitalism seem to be call for new economic models, but he resisted going anywhere that might be seen as ideological. That didn’t play well with the San Francisco audience — indeed, about a dozen people came up to me afterward to compliment my line of questioning — but it has probably helped innoculate Piketty against criticisms that might undermine the impact of his work.
In fact, Capital in the 21st Century seems to destroy many of the faith-based economic fallacies that drive much of the political discourse in the US, from our persistent belief in trickle-down economics to the obsession with our national debt, which conservatives use to promote austerity measures that punish the poor.
Such austerity agendas don’t make sense to Piketty, who says they won’t work now any better than the did in 19th Century Great Britain, which funded its wars with public debt rather than higher taxes, thus devoting too much of the national income to paying interest to the wealthy bond holders.
“A progressive tax on public wealth is a better way to reduce public debt at a faster pace,” Piketty said in the same matter-of-fact style that he uses to apply data-driven analysis to controversial political realms. “I believe in progressive taxation of wealth, but that requires coordination among countries.”
Similarly, Piketty says he is not daunted by the political difficulties in implementing a global tax on wealth, which seems all but impossible to most political observers.
“I’m not terribly impress by people who say this can’t happen,” Piketty said of his proposed global tax on wealth, noting how the conventional thinking used to be that a progressive income tax, like the one adopted in the US in 1913, could never happen. “I am not as pessimistic as a lot of people seem to believe.”
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