French economist Thomas Piketty is raising a ruckus

[4est_4est_Gump]

... from the hosannas and harrumphs that have greeted the book — no, I haven’t read all 577 pages — certain conclusions can be drawn. There is general agreement that Piketty has compiled an impressive array of data on income inequality in multiple nations going back 200 years or more. There is agreement also that he thoughtfully states caveats and cautions about data interpretation. His thesis seems at least plausible at a time when the very top incomes have increased much more rapidly than those at the middle and bottom. Even some critics acknowledge that, as the Washington Post’s Robert Samuelson writes: “the present concentration of income and wealth feels excessive. It understandably stirs resentment.”

But is his picture of current trends complete? The Manhattan Institute’s Scott Winship points out that relying, as Piketty does, on tax returns for the U.S. statistics means omitting income from Social Security, food stamps, public housing, Medicare, and Medicaid. Tax returns count roommates and unmarried partners as separate units when they are part of a larger household. They don’t include employer-paid health insurance — an increasing share of employee compensation in recent decades. Including these factors, Winship notes, means that incomes below the top 10 percent have not stagnated but have risen significantly since the 1970s. Increasing inequality is compatible with increases in ordinary people’s incomes.

Economist Tyler Cowen takes issue with another of Piketty’s assumptions, that the rich can earn 4 to 5 percent on their wealth “automatically, with the mere passage of time, rather than as the result of strategic risk-taking.” The French economist, Cowen says, has “a notion of capital as a growing, homogeneous blob” when in fact “sudden reversals and retrenchments are inevitable.”

Piketty concedes this is true for people with ordinary incomes. He opposes personal investment accounts in Social Security because there is too much risk of making bad investments. His assumption that wealthy investors face no similar risks may have seemed plausible in the generation after World War II, when the Fortune 500 list of major companies remained remarkably stable. But it has made little sense in recent years, when General Motors has gone bankrupt and Google, founded in 1998, is one of the world’s most highly valued companies.

“There’s a persistent tension,” writes Bloomberg’s Clive Crook, “between the limits of the data [Piketty] presents and the grandiosity of the conclusions he draws.” Like global-warming alarmists, he extrapolates from abstract theory and a few years’ trendlines out a century forward — and presents the results as inevitable. He also presents them as justifying the confiscation, more or less, of wealth accumulated by private individuals and putting it in the hands of mandarins guided by their supposedly superior sensitivity to public welfare. There might be less inequality in such a world, but also less economic growth and a lower, though more equal, standard of living.

“In perhaps the most revealing line of the book,” Cowen writes, “the 42-year-old Piketty writes that since the age of 25, he has not left Paris, ‘except for brief trips.’” France, where a cozy elite runs government and large corporations, has a 75 percent top-income-tax rate and essentially zero economic growth. Is that the future American liberals want?

Michael Barone, NRO

 

[RobDownSouth]

Michael Barone, NRO

Barone doesn't need to actually read the book to draw conclusions.

He's smart like that, you know.

#DerpDerpDerp
#WingnutDefense
#UnfitToAdoptWhiteChildren

 

[KingOrfeo]

From James Howard Kunstler:

Clusterfuck Nation – Blog April 28, 2014

Piketty Dikitty Rikitty

The debate over Thomas Piketty’s new book Capital in the Twenty-First Century is as dumb as every other issue-set in the public arena these days — a product of failed mental models, historical blindness, hubris, and wishful thinking. Piketty’s central idea is that wealth will continue to accumulate and concentrate among individual rich families at ever-greater rates and therefore that nation-states should take a number of steps to prevent that from happening or at least attempt to correct it.

The first mistake of Piketty fans such as New York Times op-ed ass Paul Krugman is the assumption that the dynamic labeled “capitalism” is an ism, a belief system that you can subscribe to or drop out of, depending on your political correctitude. That’s just not true. So-called capitalism is more like gravity, a set of laws that apply to and describe the behavior of surplus wealth, in particular wealth generated by industrial societies, which is to say unprecedented massive wealth. The human race never saw anything quite like it before. It became both a moral embarrassment and a political inconvenience. So among the intellectual grandiosities of modern times is the idea that this massive wealth can be politically managed to produce an ideal equitable society — with no side effects.

Hence, the bold but hapless 20th century experiment with statist communism, which pretended to abolish wealth but succeeded mainly in converting wealth into industrial waste and pollution, while directing the remainder to a lawless gangster government elite that ruled an expendable mass peasantry with maximum cruelty and injustice.

In the other industrial nations, loosely called “the west,” the pretense to abolish wealth altogether never completely took, but a great deal of wealth was “socialized” for the purpose of delivering public goods. That seemed to work fairly well in post-war Europe and a bit less-well in the USA after the anomalous Eisenhower decade when industrial labor enjoyed a power moment of wage arbitrage. Now that system is unraveling, and for the reason that Piketty & Company largely miss: industrial economies are winding down with the decline of cheap fossil fuels.

Piketty and his fans assume that the industrial orgy will continue one way or another, in other words that some mysterious “they” will “come up with innovative new technologies” to obviate the need for fossil fuels and that the volume of wealth generated will more or less continue to increase. This notion is childish, idiotic, and wrong. Energy and technology are not substitutable with each other. If you run out of the former, you can’t replace it with the latter (and by “run out” I mean get it at a return of energy investment that makes sense). The techno-narcissist Jeremy Rifkins and Ray Kurzweils among us propound magical something-for-nothing workarounds for our predicament, but they are just blowing smoke up the collective fundament of a credulous ruling plutocracy. In fact, we’re faced with an unprecedented contraction of wealth, and a shocking loss of ability to produce new wealth. That‘s the real “game-changer,” not the delusions about shale oil and the robotic “industrial renaissance” and all the related fantasies circulating among a leadership that checked its brains at the Microsoft window.

Of course, even in a general contraction wealth will still exist, and Piketty is certainly right that it will tend to remain concentrated (where it isn’t washed away in the deluge of broken promises to pay this and that obligation). But he is quite incorrect that the general conditions we enjoy at this moment in history will continue a whole lot longer — for instance the organization of giant nation-states and their ability to control populations. I suppose it’s counter-intuitive in this moment of the “Deep State” with all its Orwellian overtones of electronic surveillance and omnipotence, but I’d take the less popular view that the Deep State will choke to death on the diminishing returns of technology and that nation-states in general will first degenerate into impotence and then break up into smaller units. What’s more, I’d propose that the whole world is apt to be going medieval, so to speak, as we contend with our energy predicament and its effects on wealth generation, banking, and all the other operations of modern capital. That is, they’ll become a lot less modern.

As all this occurs, some families and individuals will hang onto wealth, and that wealth is apt to increase, though not at the scales and volumes afforded by industrial activities. Political theorizing a la Marx or Thomas Piketty is not liable to deprive them of it, but other forces will. The most plausible framework for understanding that is the circulation of elites. This refers to the tendency in history for one ruling elite to be overturned and replaced by another group, often by violence, and then become the new ruling elite. It always happens one way or another, and even the case of the Bolsheviks in Russia during the industrial 20th century can be seen this way.

In any case, just because human affairs follow certain patterns these days, don’t assume that all these patterns will persist. I doubt that the Warren Buffets and Jamie Dimons of the world will see their wealth confiscated via some new policy of the Internal Revenue Service — e.g. the proposed “tax on wealth.” Rather, its more likely that they’ll be strung up on lampposts or dragged over three miles of pavement behind their own limousines. After all, the second leading delusion in our culture these days, after the wish for a something-for-nothing magic energy rescue remedy, is the idea that we can politically organize our way out of the epochal predicament of civilization that we face. Piketty just feeds that secondary delusion.

 

[4est_4est_Gump]

The problem with Piketty is an old one, one shared by even such a preeminent school of thought as the Chicago School and developed by the Socialists of the Chair in Germany from 1880 and onwards and that is a top-down understanding and view of economics, one that can be modeled mathematically (Historical School) as a set of inputs and outputs but one that can never get the future right for all of its advanced modeling because looking backwards, you can fiddle with the inputs to achieve an output of what actually happened in a chaotic system (hint: think glowball warning modeling or Zandi's housing mortgage derivative modeling). The problem is that economics is not a branch of the math department, but an adjunct of the Sociology Department and is actually the sum of the bottom-up inputs of individuals in the marketplace and how they act and behave in one market, time and place, cannot guarantee that in the future, their feelings and behaviors, the mob psychology, so-to-speak, will match that of those in the past and they will thwart most, if not all, top-down machinations and manipulations of money supply, including redistribution, with substitute goods, services and money-like objects...



"The more communal enterprise extends, the more attention is drawn to the bad business results of nationalized and municipalized undertakings. It is impossible to miss the cause of the difficulty: a child could see where something was lacking. So that it cannot be said that this problem has not been tackled. But the way in which it has been tackled has been deplorably inadequate. Its organic connection with the essential nature of socialist enterprise has been regarded as merely a question of better selection of persons. It has not been realized that even exceptionally gifted men of high character cannot solve the problems created by socialist control of industry."
Ludwig Heinrich Elder von Mises

No matter how much you love it, all you have to do is look to France to see how not to run an economy no matter how worldly and erudite you try to explain away the failure of Socialism and its Social Justice Economic underpinnings.

 

[RobDownSouth]

No matter how much you love it, all you have to do is look to France to see how not to run an economy no matter how worldly and erudite you try to explain away the failure of Socialism and its Social Justice Economic underpinnings.

Ja, ja, Capitalism Uber Alles, mein freund. Arbeit macht frei und all that good stuff.

 

[unregistered]

 

[4est_4est_Gump]

We can take an inward look as well. The biggest threat to world peace, American liberty and economic freedom, is the American Democrat Party.

Well, liberty, like Capitalism and free markets, is a wonderful thing in theory, but in practice it can never work without a lot of government regulation and oversight...



Any advocate of socialistic measures is looked upon as the friend of the Good, the Noble, and the Moral, as a disinterested pioneer of necessary reforms, in short, as a man who unselfishly serves his own people and all humanity, and above all as a zealous and courageous seeker after truth. But let anyone measure Socialism by the standards of scientific reasoning, and he at once becomes a champion of the evil principle, a mercenary serving the egotistical interests of a class, a menace to the welfare of the community, an ignoramus outside the pale. For the most curious thing about this way of thinking is that it regards the question of whether Socialism or Capitalism will better serve the public welfare, as settled in advance -- to the effect, naturally, that Socialism is considered good and Capitalism as evil -- whereas in fact of course only by a scientific inquiry could the matter be decided. The results of economic investigations are met, not with arguments, but with …"moral pathos" …and on which Socialists and (Statists) always fall back, because they find no answer to the criticism to which science subjects their doctrines.
Ludwig von Mises

 

[4est_4est_Gump]

Well, another Equal Pay Day has come and gone. This year it came on April 8th to represent how long into 2014 a woman would have to work to make what a man did in 2013. The highlight this year was when White House Press Secretary Jay Carney tried to explain away the pay gap between men and women in the White House by saying that when men and women hold similar positions, they are paid the same. And while the federally commissioned CONSAD report from a few years back found virtually the same thing nationwide, the Obama administration still pushed forward its executive order to end the gender wage gap.

This is nothing new of course. Equal Pay Day and other things of that sort have always required a large degree of cognitive dissonance. Back in 2012, the adult actress Sasha Grey made a PSA (a very explicit one at that) for the Belgium version of Equal Pay Day saying “porn is about the only way to make more than men.” In its analysis of the PSA Jezebel accuses the ad of sending “mixed messages.”[1] The first mixed message one might wonder about is why, if women are discriminated against, is such discrimination not relatively uniform? After all, not only do adult actresses make more than their male colleagues, but the same goes for models. Indeed, in 2013, the top ten male models made only about one tenth of what the top ten female models made. Why is this?

Furthermore, don’t left liberals basically believe, as Vladimir Lenin once said, that “the capitalist will sell you the rope with which we will hang them,” (i.e., capitalists care about nothing but money). If that’s true, it would make sense that female models and adult stars would make more given current market demands. However, since liberals tend to blame any gap in wages between two groups solely on discrimination, apparently capitalists don’t only care about money. They care about being sexists, too.

When we look in more detail at the facts, however, a more complex picture emerges. Women earn only 77 cents on the dollar compared to men, but employers apparently switch teams from time to time even when they are employing people who are expected to keep their clothes on. For example, as Warren Farrell notes, “When women and men work less than 40 hours a week, the women earn more than the men.”[2] According to the 2003 Census Bureau Current Population Survey, women earn 134 percent of what men do when both work between 25 and 34 hours a week and 107 percent of what men do when both work between 35 and 39 hours a week.

In addition, never-married men with no children between the ages of 40 and 64 have consistently earned less than never-married women with no children in the same age group. In 2001, such men earned $40,000 a year while such women earned $47,000 a year.[3] Why do employers discriminate so erratically?

And speaking of women, there are some strange discrepancies between groups of women most wouldn’t expect. Discussing the 1960s, economist Walter Williams noted,

One of the best-kept secrets of all times and virtually totally ignored in the literature on racial differences in earnings is that black/white female professional income ratios do not exhibit patterns even remotely similar to their male counterparts. ... [Black female college graduate] income was 102% of that of white female college graduates.[4]
I am not sure why employers would decide to be prejudiced against white women in this instance. And furthermore, when it comes to race, employers also have an odd preference for Asian Americans. The median per capita income for Asian-Americans in 2005 was $27,331 whereas it was only $26,496 for whites. Are white people being discriminated against ever so slightly here?

And the list goes on:

Jews make more money than other Americans
Residents in northern states make more money than residents of southern states
Tall men make more money than short men
Atheists make more money than Christians
Japanese-Americans make more money than Korean-Americans
African immigrants make more money than native born African-Americans
Lesbian women make more money than straight women
Gay men make just slightly more money than straight men
Older people make more money than younger people
Black-Americans make a little more money than Hispanic-Americans
Among Mexican-origin Hispanics, American-born make more money than foreign-born
People in urban areas make more money than people in rural areas
All of this must of course only be caused by discrimination, including the interesting (and encouraging) development that black incomes in Queens, New York surpassed whites in 2005, right?

Andrew Syrios

 

[4est_4est_Gump]

Abenomics said Japanese stimulus efforts would offset tax hikes. I disagreed. Although one month is not proof, Markit reports Japanese Output and New Orders Decline For First Time in 14 Months Following Tax Hike

Key points:

Output falls at fastest pace since December 2012
New orders also down; exports decline slightly
Rate of job creation accelerates to highest since February 2007

Summary: Japanese manufacturing firms saw a decline in output for the first time in 14 months in April. Alongside this fall in output was a deterioration in new orders which also decreased for the first time in 14 months. In both cases, firms linked the reductions to the rise in the sales tax.

The headline seasonally adjusted Markit/JMMA Purchasing Managers’ Index™ (PMI™ ) – a composite indicator designed to provide a single - figure snapshot of the performance of the manufacturing economy – posted at 49.4 in April, down from 53.9 in March. This was the first time in 14 months that the Japanese manufacturing sector saw a deterioration in business conditions. Output fell to the greatest extent seen since December 2012.

The main contributor according to anecdotal evidence was a decline in demand. Indeed, similar to output, new orders decreased, with evidence suggesting the increase in the sales tax was the main factor behind lower new orders, as clients had brought forward purchases in March to avoid paying additional costs the following month.

...

Abenomics in Review

One month does not present a complete picture. However, Abenomics has so far resulted in a declining Japanese balance of trade, inflation (foolishly wanted), little to no increase in exports, and soaring import costs (especially food and energy).

For those results, many leading world economists think prime minister Shinzo Abe is a hero. In contrast, I think he is a fool.

Mike "Mish" Shedlock

Read more at http://globaleconomicanalysis.blogspot.com/#VULUCfhbc4MSoAkR.99

 

[RobDownSouth]

One month does not present a complete picture

Mike "Mish" Shedlock

Read more at http://globaleconomicanalysis.blogspot.com/#VULUCfhbc4MSoAkR.99

The Chief has always considered "fallacy of the small data sample" as one of his favorite logical fallacies.
:nods:

You: "The jobless rate has improved steadily for 3 years!"
AJ: "but...but...it fell in February 2013! I win! I WIN!"

BTW, Japan has been trying to induce inflation to break out of a deflationary death spiral, but notice how Mish the Simpleton continues to cling to the discredited "ALL INFLATION BAD" talking point.

"And in the end, the derp you make, is equal to the derp you fake" - Ludwig Von Mises

 

[4est_4est_Gump]

...

There is no doubt that income inequality has increased in America. Even after adjusting for inflation, the income share of the top 1 percent of Americans rose by 201 percent from 1979 to 2010, compared to just 49 percent for the bottom 20 percent.

But just as Professor Krugman’s earnings are irrelevant to mine, the growing wealth of the super-rich tells us little about how the average American is really doing.

And it turns out we are doing pretty well.

First, we should recognize that, by and large, Americans at all income levels are better off than their parents were. A study by the Pew Charitable Trust and the Brookings Institution found that two-thirds of 40-year-old Americans are in households with larger incomes than their parents had at the same age, even taking into account the fact that the cost of living has risen.

In fact, the news is actually even better than that. The average household is smaller today than it was back then, meaning a household income has to cover fewer family members, leaving them better off than the bigger households of the past. A second Pew study found that when incomes are adjusted for household size, four out of five adults today are better off than their parents were at the same age.

Even the poor are doing comparatively well. As Robert Rector of the Heritage Foundation has pointed out, the poorest of Americans today enjoys luxuries that were beyond the reach of even the wealthy not so long ago. For example, 65 percent have a DVD player, 64 percent have cable or satellite television, and 31 percent have two or more cars.

Second, the American dream of moving up the income ladder actually remains alive and well. Krugman, Thomas Piketty, and others may believe that the meritocracy is dead, replaced by a new aristocracy, but the reality is that income mobility remains strong.

For example, a study by Treasury Department economists Gerald Auten and Geoffrey Gee found that more than half of taxpayers moved to a different income quintile between 1996 and 2005, roughly the same as in previous periods. True, there was slightly less mobility in the top and bottom quintiles, but even so, roughly half of those who began in the bottom quintile had moved up to a higher quintile by the end of the period.

Nor did the rich necessarily stay rich. Many of those in the top income quintile saw their incomes decline, and the top 1 percent were even more likely to drop to a lower income group. In fact, the most dramatic downward mobility was among the top 1 percent of taxpayers.

It may take some time to determine the impact of the recession and recovery on various income groups — the rich, who disproportionately hold investment wealth, both took the biggest initial hit and have recovered the most strongly — but the evidence suggests that historical levels of income mobility continue.

Likewise, despite the conventional wisdom, we can still hope that our children will do better than we.

A comprehensive study looking at children born between 1971 and 1983 found that intergenerational mobility has remained extremely stable, with roughly 8 to 9 percent of children born to parents in the bottom quintile of incomes actually reaching the top of the income distribution.

As Raj Chetty of Harvard puts it, “The rungs of the ladder have grown further apart (inequality has increased), but children’s chances of climbing from lower to higher rungs have not changed.”

So, while Krugman enters the realm of the 1 percent, I actually see that as a very positive sign that even those who condemn the affluent and actively attempt to tax them out of existence still have the opportunity to join them. If that’s not a sign of capitalism’s mobility, I don’t know what is.

Michael Tanner. NRO

 

[Adre]

So even with all the whining and complaining from the Wingnuts here about the general state of things, we are actually doing well according to this guy? Great!

 

[4est_4est_Gump]

Nice try.


It is the Left that is telling us how bad things are, which is funny because for years in the Doom and Gloom thread, every two months the Democrats were jumping up and down with some upturned stat claiming, "We've turned the corner! Obamanomics are working!" only for us to discover, just recently that they actually failed, especially for the Middle Class who were not lavished with more food stamps, relaxed welfare standards and increased disability claims acceptance.

Those of us that you consider to be on the right have been telling the Democrat supporters (and those wily centrists ) where the Obama Economy was headed.

With a full million less involved in the workforce, no we are not doing better, and the writer above does not say we are doing better, just that the inequality gap is being exaggerated to deflect away from the dismal economy with a misdirection, "Look, let me be perfectly clear, you are no better off now than when I was elected, but don't blame me, blame the wealthy."

 

[RobDownSouth]

Nice try.


It is the Left that is telling us how bad things are, which is funny because for years in the Doom and Gloom thread, every two months the Democrats were jumping up and down with some upturned stat claiming, "We've turned the corner! Obamanomics are working!" only for us to discover, just recently that they actually failed, especially for the Middle Class who were not lavished with more food stamps, relaxed welfare standards and increased disability claims acceptance.

Those of us that you consider to be on the right have been telling the Democrat supporters (and those wily centrists ) where the Obama Economy was headed.

With a full million less involved in the workforce, no we are not doing better, and the writer above does not say we are doing better, just that the inequality gap is being exaggerated to deflect away from the dismal economy to, "Look, let me be perfectly clear, you are no better off now than when I was elected, but don't blame me, blame the wealthy."

The difference between you and us libruls, besides the fact that we're smarter than you and our children are our own biological issue, is that we celebrated improvement over time.

You, on the other hand, celebrated the aberrations and outliers, anything that fit your preconceived bias.

 

[4est_4est_Gump]

Throb practices his keyboard Ju Jitsu...

http://4.bp.blogspot.com/-_1aaUBtLRW8/UhOeXqEJjiI/AAAAAAAAJLk/MK82Tx9NiqI/s200/writing_process.gif

 

[4est_4est_Gump]

As Raj Chetty of Harvard puts it, “The rungs of the ladder have grown further apart (inequality has increased), but children’s chances of climbing from lower to higher rungs have not changed.”

 

[RobDownSouth]

C'mon Chief, you used the same spew yesterday.

Now that you're unemployed and sponging off that gummint check like a good glibertarian, you have lots more time on your hand.

Let's see you channel that into some interesting snark.

 

[trysail]

It's standard fare— and the gullible, the credulous and the desperate almost always fall for it.

Professional meddlers, gossips and busybodies employ the age-old Machiavellian levers of envy and jealousy in their quest for power.

The urge to save humanity is almost always only a false-face for the urge to rule it.
​

-H. L. Mencken
​

​

 

[Adre]

The writer says: "And it turns out we are doing pretty well."

Which is a long way from where we were six years ago. But you feel free to spin things any way you like.

 

[KingOrfeo]

From AlterNet:

AlterNet / By Lynn Stuart Parramore

How Piketty's Bombshell Book Blows Up Libertarian Fantasies

Sorry, Ayn Rand. Your fiction has been exposed as, well, fiction.

April 27, 2014 |

Libertarians have always been flummoxed by inequality, tending either to deny that it’s a problem or pretend that the invisible hand of the market will wave a magic wand to cure it. Then everybody gets properly rewarded for what he or she does with brains and effort, and things are peachy keen.

Except that they aren’t, as exhaustively demonstrated by French economist Thomas Piketty, whose 700-page treatise on the long-term trends in inequality, Capital In the 21st Century, has blown up libertarian fantasies one by one.

To understand the libertarian view of inequality, let’s turn to Milton Friedman, one of America's most famous and influential makers of free market mythology. Friedman decreed that economic policy should focus on freedom, and not equality.

If we could do that, he promised, we’d not only get freedom and efficiency, but more equality as a natural byproduct. Libertarians who took the lessons from his books, like Capitalism and Freedom (1962) and Free to Choose (1980), bought into the notion that capitalism naturally led to less inequality.

Basically, the lessons boiled down to this: Some degree of inequality is both unavoidable and desirable in a free market, and income inequality in the U.S. isn’t very pronounced, anyway. Libertarians starting with these ideas tend to reject any government intervention meant to decrease inequality, claiming that such plans make people lazy and that they don’t work, anyway. Things like progressive income taxes, minimum wage laws and social safety nets make most libertarians very unhappy.

Uncle Milty put it like this:

“A society that puts equality—in the sense of equality of outcome—ahead of freedom will end up with neither equality nor freedom.… On the other hand, a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality.”

Well, that turns out to be spectacularly, jaw-droppingly, head-scratchingly wrong. The U.S. is now a stunningly unequal society, with wealth piling up at the top so fast that an entire movement, Occupy Wall Street, sprung up to decry it with the catchphrase “We are the 99%.”

How did libertarians get it all so backwards? Well, as Piketty points out, people like Milton Friedman were writing at a time when inequality was indeed less pronounced in the U.S. than it had been in previous eras. But they mistook this happy state of affairs as the magic of capitalism. Actually, it wasn’t the magic of capitalism that reduced inequality during a brief, halcyon period after the New Deal and WWII. It was the forces of various economic shocks plus policies our government put in place to respond to them that changed America from a top-heavy society in the Gilded Age to something more egalitarian in the post-war years.

As you’ll recall, if you watched the movie Titanic, the U.S. had a class of rentiers (rich people who live off property and investments) in the early part of the 20th century who hailed from places like Boston, New York and Philadelphia. They were just as nasty and rapacious as their European counterparts, only there weren’t quite so many of them and their wealth was not quite as concentrated (the Southern rentiers had been wiped out by the Civil War).

The fortunes of these rentiers were not shock-proof: If you remember Hockney, the baddie in James Cameron’s film, he survives the Titanic but not the Great Crash of ’29, when he loses his money and offs himself. The Great Depression got rid of some of the extreme wealth concentration in America, and later the wealthy got hit with substantial tax shocks imposed by the federal government in the 1930s and '40s. The American rentier class wasn’t really vaporized the way it was in Europe, where the effects of the two world wars were much more pronounced, but it took a hit. That opened up the playing field and gave people more of a chance to rise on the rungs of the economic ladder through talent and work.

After the Great Depression, inequality decreased in America, as New Deal investment and education programs, government intervention in wages, the rise of unions, and other factors worked to give many more people a chance for success. Inequality reached its lowest ebb between 1950 and 1980. If you were looking at the U.S. during that time, it seemed like a pretty egalitarian place to be (though blacks, Hispanics, and many women would disagree).

As Piketty notes, people like Milton Friedman, an academic economist, were doing rather well in the economy, likely sitting in the top 10 percent income level, and to them, the economy appeared to be doing just fine and rewarding talents and merits very nicely. But the Friedmans weren’t paying enough attention to how the folks on the rungs above them, particularly the one percent and even more so the .01 percent, were beginning to climb into the stratosphere. The people doing that climbing were mostly not academic economists, or lawyers, or doctors. They were managers of large firms who had begun to award themselves very prodigious salaries.

This phenomenon really got going after 1980, when wealth started flowing in vast quantities from the bottom 90 percent of the population to the top 10 percent. By 1987, Ayn Rand acolyte Alan Greenspan had taken over as head of the Federal Reserve, and free market fever was unleashed upon America. People in U.S. business schools started reading Ayn Rand's kooky novels as if they were serious economic treatises and hailing the free market as the only path to progress. John Galt, the hero of Atlas Shrugged(1957), captured the imaginations of young students like Paul Ryan, who worshipped Galt as a superman who could rise to the top through his vision, merit and heroic efforts. Galt became the prototype of the kind of “supermanager” these business schools were supposed to crank out.

Since the ‘80s, the top salaries and pay packages awarded to executives of the largest companies and financial firms in the U.S. have reached spectacular heights. This, coupled with low growth and stagnation of wages for the vast majority of workers, has meant growing inequality. As income from labor gets more and more unequal, income from capital starts to play a bigger role. By the time you get to the .01 percent, virtually all your income comes from capital—stuff like dividends and capital gains. That’s when wealth (what you have) starts to matter more than income (what you earn).

Wealth gathering at the top creates all sorts of problems. Some of these elites will hoard their wealth and fail to do anything productive with it. Others channel it into harmful activities like speculation, which can throw the economy out of whack. Some increase their wealth by preying on the less well-off. As inequality grows, regular people lose their purchasing power. They go into debt. The economy gets destabilized. (Piketty, and many other economists, count the increase in inequality as one of the reasons the economy blew up in 2007-'08.)

By the time you get to 2010, U.S. inequality, according to Piketty’s data, is quantitavely as extreme as in old Europe in the first decade of the 20th century. He predicts that inherited property is going to start to matter more and more in the U.S. as the supermanagers, the Jamie Dimons and so on, bequeath their gigantic hordes of money to their children.

The ironic twist is this: The reason a person like the fictional John Galt would be able to rise from humble beginnings in the 1950s is because the Gilded Age rentiers lost large chunks of their wealth through the shocks the Great Depression and the deliberate government policies that came in its wake, thus loosening their stranglehold on the economy and society. Galt is able to make his fortune precisely because he lives in a society that isn’t dominated by extreme concentrated wealth and dynasties. Yet the logical outcome of an economy in which there is no attempt made to limit the size of fortunes and promote greater equality is a place in which the most likely way John Galt can make a fortune is to marry an heiress. So it was in the Gilded Age. So it may be very soon in America.

Which brings us back to Friedman’s view that people naturally get what they deserve, that reward is based on talent. Well, clearly in the case of inherited property, reward is not based on talent, but membership in the Lucky Sperm Club (or marriage into it). That made Uncle Milty a little bit uncomfortable, but he just huffed that life is not fair, and we shouldn’t think it any more unjust that one person is born with mathematical genius as the other is born with a fortune. What’s the difference?

Actually, there is a very big difference. It is the particular rules governing society that determine who amasses a fortune and what part of that fortune is passed on to heirs. The wrong-headed policies promoted by libertarians and their ilk, who hate any form of tax on the rich, such as inheritance taxes, have ensured that big fortunes in America are getting bigger, and they will play a much more prominent role in the direction of our society and economy if we continue on the present path.

What we are headed for, after several decades of free market mania, is superinequality, possibly such as the world has never seen. In this world, more and more wealth will be gained off the backs of the 99 percent, and less and less will be earned through hard work.

Which essentially means freedom for the rich, and no one else.

 

[Que]

Freidman is, as usual, correct. You cannot HAVE equality, at any price...it does not exist, anywhere, nor can it.

Reducing freedom doesn't make anyone equal.

It doesn't even bend things in that direction. You could tomorrow confiscate everyone's wealth, then dole it back out equally. In a week the former rich will have made modest gains and the poor will be whining about it, and broke.

The conclusion is "jaw-droppingly" stupid.

Is the author under the impression that we have INCREASED our freedoms while this awful inequality increased?

We have done EXACTLY the opposite. Government regulations are designed to benefit who ever hires the lobbyist to draft the rules. That INCREASES inequality by raising the bar for entry to any field that is overseen by some government agency.

 

[trysail]

Pie-eyed, utopian useful idiots and economic illiterates want to believe Piketty's type of bilge.


Intelligent men know it's one more in a long string of nonsense designed to manipulate the gullible by provoking envy and jealousy.


Perform a needed service or introduce a useful product and the world will beat a path to your door.


​

 

[Sean Renaud]

Freidman is, as usual, correct. You cannot HAVE equality, at any price...it does not exist, anywhere, nor can it.

Reducing freedom doesn't make anyone equal.

It doesn't even bend things in that direction. You could tomorrow confiscate everyone's wealth, then dole it back out equally. In a week the former rich will have made modest gains and the poor will be whining about it, and broke.

The conclusion is "jaw-droppingly" stupid.

Is the author under the impression that we have INCREASED our freedoms while this awful inequality increased?

We have done EXACTLY the opposite. Government regulations are designed to benefit who ever hires the lobbyist to draft the rules. That INCREASES inequality by raising the bar for entry to any field that is overseen by some government agency.

Bullshit. If you did for whatever retarded reason confiscate everyone's wealth, there is no reason to believe the former rich would be back on top. Some of them would and there are a number of reasons for that but just no.

Whether or not we've increased or decreased of freedoms isn't really up to deabte. We've decreased them in a number of ways and need to in a number of ways. Such is life.

 

[jeninflorida]

omg, don't you people ever shut the fuck up?

Sean, you are a fucking idiot.

 

[RobDownSouth]

From AlterNet:

How did libertarians get it all so backwards? Well, as Piketty points out, people like Milton Friedman were writing at a time when inequality was indeed less pronounced in the U.S. than it had been in previous eras. But they mistook this happy state of affairs as the magic of capitalism. Actually, it wasn’t the magic of capitalism that reduced inequality during a brief, halcyon period after the New Deal and WWII. It was the forces of various economic shocks plus policies our government put in place to respond to them that changed America from a top-heavy society in the Gilded Age to something more egalitarian in the post-war years.

Chuckleheads like query and the Vettebigot regard Uncle Miltie as some sort of Oracle.

Friedman's mythical Capitalism Camelot hasn't aged well.

America had a brief "Golden Age" post-WW2 where Europe was rebuilding its manufacturing base and Asia hadn't developed yet, plus there was cheap oil to be had in the Middle East.

Those days are gone.