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May 14, 2014

I am now reading Thomas Piketty’s book, Capital in the Twenty-First Century, and it is a real eye-opener. I drove twenty miles to buy his book, only to discover that my favorite bookstore had closed, apparently a victim of Amazon’s technology and marketing expertise (a lesson in economics itself), so I drove an additional twenty miles to my favorite bookstore’s main outlet, and was pleased to see that it was still in operation (perhaps waiting not for Godoy, but Amazon). The book was prominently displayed on the best-seller table, as well it should be, since, unlike other tracts on economics, it is based on much more extensive historical and comparative data subject to retrieval than were available to previous researchers. (Adam Smith, David Ricardo and Karl Marx had no computers, spreadsheets etc.)
Piketty took fifteen years to gather the numbers and write the book. Such massive research spanning some three centuries and more than twenty countries along with “a new theoretical framework that affords a deeper understanding of the underlying mechanisms” is not something one can do overnight. (This quote and all other quotes in this Part II are from his book, Capital in the Twenty-First Century.) No one past or present has undertaken such a gigantic project, and I think few have the energy and perseverance to confront the issue he treats and devote fifteen years to its proposed solution.
What is the issue to which this brilliant economist gave a large chunk of his life? It is income inequality, which just so happens to be the most burning issue on our political/economic plate today. Piketty’s effort may well have changed how professional economists (and amateurs like me) seek out optimal taxation of capital and income for social good rather than fantastic capital accumulation for the few. As my followers well know, I have long been arguing that the post-WW II sharing of new wealth provided by our economy was hijacked circa 1974 by the rich and investment class and that family median wages have been stagnant or declining (with bumps from interim bubbles here and there) ever since. I have accordingly been beating the drums for policy changes (legislation, executive order or whatever) which would increase minimum wage levels, encourage workers to unionize etc.
I am shocked to learn that my prescription to regain fairness and equilibrium between runaway capital accumulation and decent wage scales may not be the way to go. Piketty writes that income inequality is historically STRUCTURAL IN DESIGN and that the political environment for its practice is immaterial! It is hard for me to believe that, for instance, a tea party or libertarian government would treat the wage equality issue substantially the same as a liberal Democratic government would, and fortunately, I don’t think that is what Piketty is saying. Rather I think he is saying that, HISTORICALLY, it has not made a difference. I think, if I may correct any misunderstanding in this connection, that HISTORICALLY, we have never had such a hatred of labor as we have now within the libertarian and tea party elements of the Republican Party. Republicans once were progressive around the turn of the 20th Century and Democrats were then guardians of right wing views. 180 degrees later, the parties traded philosophies.
Piketty’s view on how we got to where we are cannot be challenged given his massive and unassailable research, i.e., that wage inequality is an inevitable outcome of capitalism itself, a system which also provides for increasing accumulation of assets by the one percent, and one in which such wealth may have to be taxed in order to afford fairness in inter-class sharing. More Piketty in Part III – ! GERALD E


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