Piketty’s Capital in the 21st Century

Summers are meant for reading longish, thick works of non-fiction – correct? Alright, I know I’m so wrong with that take, but if you are an unabashed non-fiction junkie like me, you know there’s simply not enough time for experimenting with mediocre fiction. I remember reading Buckley’s Thank You For Smoking when it came out in the ’90s; a truly hilarious and well-written read that lasted . . . five days. I have read other good fiction since then, but – I got to speak the truth – I’m in the game for the longer haul. Reading great narrative history (Lansing’s Endurance and Branch’s Parting the Waters, as examples) and good social commentary is what we n-f zealots do all year long. Ain’t it a blast! Here’s the latest review of a non-fiction must read (or, at least, of which one must read a few good reviews).

Thomas Piketty is a French economist; his 2013 book Capital in the 21st Century (English translation, Belknap Press, 2014) is a best-seller in the States and Europe. He teaches graduate level economics in France, specializing in economic inequality. He taught for a short while at MIT in the early 1990s and then returned to Paris to continue his teaching career. I knew enough about Capital before reading it to understand that Piketty and I speak similarly of capitalism’s susceptibility to political intrigue and its (potential) consequent propensity to siphon wealth upward, favoring the wealthy classes. For awhile I was thinking that my book, Just a Little Bit More, could be billed as the local, indie, American (and shorter) version of Capital. But then I read Dr. Piketty’s tome – so much for the local indie angle. Just a Little Bit More covers a lot of territory, but it doesn’t do r > g, or other economic equations. Capital, for the most part, is economics through and through.

Piketty states early on that “the history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms.”* According to Piketty’s work with extensive data, the rate on the return of capital (r) typically exceeds the growth rate of the economy (g), thus r > g. Historically, the interest garnered by accumulated wealth outpaces the gains of economic growth by about 5% to 1.5%. Are you still with me?

Things are the way they are – the rich getting richer in the US, especially in the last thirty-five years – not because it’s naturally intended by capitalism, but because it’s been manufactured. Piketty’s r > g has been buttressed by policy. Income and capital gains tax cuts for the wealthiest among us, along with reduced rates for inheritance taxes, have all contributed to the widening gap between America’s richest and poorest. The United States was founded to be an egalitarian country where primogeniture was not practiced as it was in Europe. Primogeniture – family inheritance passed onto the first born male – enabled Europe’s staid aristocracy to maintain its power and place. The two great democratic revolutions (American and French) wanted to give meritocracy a chance; you move yourself upward economically not by inheritance or family connection, but by hard work, ability, and effort. The good ol’ American Dream: one has to work to attain it.

There’s been a slight uproar this past week (third week of July, 2014) as it’s been revealed that the late actor Philip Seymour Hoffman didn’t want his children to be “trust fund kids.” His estate, valued at $35 million, will go (after a significant tax bit since he was not married) to his partner, the surviving parent of their young three children. As if a cruel fate (I jest), their children will need to forge their way forward more reliant upon their relationship with their mother than with a choice inheritance. The new American Dream: just give it to me. Hoffman was apparently adamant of his conviction; his accountant was not able to convince him otherwise.  The following Piketty comment supports Hoffman’s suspicion of oversized inheritance: “Every generation must in some sense construct itself.”~

Piketty, benefitting from the vantage point of an outsider, recognizes an important attribute of American taxation and its history that many Americans overlook: progressive taxation serves the purpose of reducing inequality. And a society that is more so (than less) economically egalitarian has fewer social problems. (If you missed Wilkinson and Pickett’s The Spirit Level: Why Greater Equality Makes Societies Stronger, put it on your reading list now – Bloomsbury, 2009.) Piketty reminds his readers that the great country that led the way in democracy and egalitarianism – America – was also one of the last Western nations to abolish slavery. US society maintains a certain schizophrenic attitude about equality and inequality – we tolerate and accept both simultaneously. “This complex and contradictory relation to inequality largely persists in the United States to this day: on the one hand this is a country of egalitarian promise, a land of opportunity for millions of immigrants of modest background; on the other hand it is a land of extremely brutal inequality, especially in relation to race, whose effects are still quite visible.”**

Inequalities based on individual talent and effort, Piketty asserts, are quite acceptable in democratic societies. But when the deck is stacked, so to speak, democracy is threatened. Whereas today in the Scandinavian countries, along with France, Germany, England, and Italy, the richest 10 percent own between 50 and 60 percent of national wealth – in the United States, the richest 10 percent claim 72 percent of America’s wealth, with the bottom half (the majority of these being women) holding just 2 percent. These figures for the European nations and the United States are similar to what they were at the end of the Gilded Age, shortly before the intervention of World War I.~~ Piketty also argues that the Great Depression was a similar type of intervention to counter the rising inequality of the Roaring ’20s. What is to intervene now and combat, as it were, this current era’s rising tide of inequality? The 2007-08 recession hurt most everyone’s bottom line, but the inequality gap is unaffected; it’s as wide now as it was before the recession.

Boldly, Piketty calls for an international tax on accumulated wealth. Obviously, as Piketty himself concedes, such a measure is highly unlikely to be implemented any time soon. Nonetheless, let’s have a conversation about it. There has been plenty of conversation about the “size of government” and the need to reign in the excessive growth of the public sector. (I agree; please read chapter 6, “Excess,” in Just a Little Bit More.) Inefficiency, redundancy, and waste – none of these are helping the cause of societal common good. But let us also converse and discuss – with some depth of argument – the plight of citizens living in and among social and economic inequality. Piketty says that inequality in America could reach record levels by 2030 if contributing factors (which include the meteoric rise of top salaries) continue unabated. “The egalitarian pioneer ideal has faded into oblivion, and the New World may be on the verge of becoming the Old World Europe of the 21st century’s globalized economy.”*** A highly inegalitarian society requires more attention (social programs) in order to maintain social and political order. A more balanced and egalitarian society requires less public attention to mend its ills and deficiencies. This angle of the debate on social inequality and social programs needs greater voice. Piketty reminds: “The primary purpose of the capital tax is not to finance the social state but to regulate capitalism.”~~~ In other words, to keep capitalism in check.

As a person of faith and a public religious leader, I understand Piketty’s warning about the perils of continued and increasing economic inequality as crucial and urgent. What kind of society do we want to live in and consequently pass on to those who follow us? One where the uncritical pursuit of more and more is encouraged as a way forward regardless of the increasing gap between the richest and poorest? Revolutions – many violent – have risen from such chasms. I will continue to work that we (and those who come after us) might live in a society where the value of egalitarianism is upheld for its own good and for the beneficial consequences it brings.

 

Just a Little Bit More: The Culture of Excess and the Fate of the Common Good (2014) is available at the Blue Ocotillo Publishing website.

 

* Location 454 (Ebook markings – the first one I’ve read!)

~ Location 1493

** Location 2770

~~ Locations 4409, 4429, 4509 – Piketty claims that the 72 percent figure most likely is underestimated – meaning it should be higher.

*** Locations 4556, 9009

~~~ Location 9073

 

Interested in more summer reading? I also recommend Lawrence Summers’s “The Inequality Puzzle: Piketty Book Review,” available online and in the Spring 2014 edition of Democracy: A Journal of Ideas. A rec and a pun together – how good is that!

Golfers – A Question of Form

Nearly flawless as a golf announcer, Jim Nantz and his dulcet tone define Masters’ broadcasts for this generation. Nearly flawless . . . his man-crush on former college roomie Fred Couples is a concern, especially as it approaches white-hot intensity every April once Magnolia Lane opens to the patrons. “Back in ’89 when Freddie had that closing 67, we all remember how . . .” No, Jimmy, nobody but you, Freddie, and his caddie remember. But since Freddie is so cool (and good), Mr. Smooth gets a pass on the man-crush. I do have one issue to raise, however, with no forthcoming pass for the Well-Pitched-One. It’s his word choice when he refers, over and again, to his current and distinguished CBS booth partner as Sir Nick Faldo. Really, “Sir”?

faldo-nantz

Nothing against the six-time major champion and World Golf Hall of Famer, or his fellow Brits. Faldo, as far as this American can tell, deserves the honor of knighthood (received in 2009) as much as any other subject of the British empire. His contributions to the sport and representation of his country merit prominent recognition. I understand that Nantz’s gesture of using his partner’s royally endowed title is done out of respect. And respect, of course, is in the golf etiquette rota.

Let me raise, however, a slight protest – American style. Respect can still be had without stealing a smidge of the Queen’s English. Sir does have proper and common usage in American English when relationships are hierarchical – US military, younger-elder – or when commercial service is rendered. But it is never used as a title, only as a generic address. Sir as title is the propriety of our English cousin-society where the monarchy, booted out of our society in 1776, yet survives.

Jim Nantz is a class act, no question. I don’t mind an initial and respectful acknowledgement of Sir Nick Faldo – one time is sufficient – at the beginning of the broadcast. But, when used over and again . . . does our boy Nantz fancy himself an aristocrat? Hanging out at Augusta National all these years, perhaps so. I don’t hear David Feherty, or any other commentator, calling their CBS colleague Sir Nick on the air. Feherty, a native of Northern Ireland, became a U.S. citizen in 2010. He understands his adopted country’s history, in this particular area, perhaps a bit better than the lead announcer.

 

Want to read on? The front side was pretty easy . . . back side tougher!

Here’s a word (I’m surprised to find out) with which many Americans are unfamiliar: egalitarianism. Along with the ever-popular liberty, egalitarianism is a founding principle of American society. Egalitarianism is shown forth by Thomas Jefferson’s statement in the Declaration of Independence “All men (sic) are created equal.” Egalitarianism does not refer to equal distribution of goods, per se; it refers to equal status and worth, socially and politically, accorded to all. Favoritism via gender, race, family name, or inherited wealth be damned! America is the land where oversized concentrations of power – whether it be a king, an overzealous military general, or a business titan – are kept in check. That is egalitarianism, and it’s American as apple pie.

The last thirty-five years have seen a steep rise in social and income inequality in the United States. In my book, Just a Little Bit More: The Culture of Excess and the Fate of the Common Good, I refer to the current time period as one of three recent short eras of excess. (The other two are the Gilded Age of late 19th century and the Roaring ’20s.) Like a pendulum that swings back and forth, American society has oscillated between eras of excess and relative equality. Said so well by Gilded Age critic Henry Demarest Lloyd: “Liberty produces wealth, and wealth destroys liberty.” Egalitarianism and liberty have worked together in this society to balance out the other’s excesses. Too much liberty exacerbates inequalities. Too much egalitarianism stifles creativity and growth. Eras of excess are a throwback, essentially, to the days and societies of an earlier Europe that many of our ancestors, with no chance to improve their economic or social status, left behind.

American society, where previously only white property owners had the vote, has struggled with what egalitarianism and liberty have meant for all of its inhabitants: indigenous, slaves, women, children, immigrants, and minorities. Today the struggle continues for what these two foundational principles mean for gays. Egalitarianism and liberty together are the proper form in our society. Relative balance, as evidenced in Nick Faldo’s swing when in his prime, holds it all together.

 

Just a Little Bit More: The Culture of Excess and the Fate of the Common Good is available at the Blue Ocotillo Publishing website. Thanks for joining me for this outing!

 

 

 

 

What Happened to Egalitarianism? Part 1

Market values-infused religion exalts individualism over and against societal common good. Its defenders claim, rather, that individual pursuits comprise the best method of achieving common good (albeit as a secondary by-product of market activity). While there is some legitimacy to this claim, when pushed to the extreme, it becomes an ideology that creates detrimental social effects. Egalitarianism – all humans accorded equal worth and social status – is thoroughly eroded by the ideology of market values. We live in a day and age where the value of egalitarianism, a grand construct of American society, appears to be increasingly forgotten.

The following is an excerpt from the book Just a Little Bit More: The Culture of Excess and the Fate of the Common Good, to be published in May 2014.

Egalitarianism – where economic and political opportunity are accessible to all – is a grand human-societal achievement. In the last five thousand years of civilization, purposeful egalitarianism is the best hedge against the natural human tendency toward uncivil hierarchy that has produced slavery, monarchies, and plutocracies. Egalitarianism is not a naturally occurring reality. It needs advocates; we need to struggle for it and continually lift it up lest it disappear in our midst. Egalitarianism is what helped end slavery and welcome American minorities and women to voting booths; egalitarianism generates social progress. We are constantly challenged by the first of Thomas Jefferson’s self-evident truths in the preamble of the Constitution: “All men are created equal.” We haven’t fully reached our destiny; as a matter of fact, the farther we travel the more we see what is in need of amendment. The current struggle for egalitarianism has a formidable foe in the cohabitation, since the time of Rockefeller and the Gilded Age, of business and government. The struggle has seen advances for egalitarianism after extreme social crises, such as the age of Rockefeller and his cohorts and the combined traumas of the Depression and World War II. The battle is on for egalitarianism to advance once again after the 2007-08 economic swoon.

Just a Little Bit More: The Culture of Excess and the Fate of the Common Good, Blue Ocotillo Publishing. All rights reserved.

Click here to read What Happened to Egalitarianism? Part 2.

What Happened to Egalitarianism? Part 2

We’re all familiar with the concept survival of the fittest. Have you ever heard of reverse dominance hierarchy? In his research on the origins of egalitarianism, evolutionary anthropologist Christopher Boehm coined the phrase and describes it: the weaker members in a community unite to thwart alpha-types from dominating.* Boehm witnessed it in primates, and concludes that egalitarian practice is not natural, but a learned behavior. Understood as such, egalitarianism has deep roots – a survival not necessarily of the fittest but of the united.

Nature displays hierarchies (ant colonies, for example); hierarchical organizations are not only natural and good, they accomplish manifold tasks. Hierarchy, however, can breed dominance. Egalitarianism – a group or community engaged in the struggle for self-determination and equal opportunity within a larger community or with a competing community – confronts subordinating dominance. Justly engaged, egalitarianism can permeate not only politics and social policy, but market economy as well.

Western philosophers and social commentators, going back to David Hume and Jean-Jacques Rousseau, assent that extreme inequalities can only have a destructive effect on society. Social dissention and fragmentation are the inevitable manifestations in a society that tolerates great disparities between its richest and poorest. The American Civil War was, in essence, a battle between egalitarianism and hierarchical domination. The (relatively) new nation was not to be like their European counterpart nations with their monarchies, aristocracies, serfdom, and church authority. American society has fought to put egalitarianism into practice – all the while struggling with what it has meant and means for its indigenous, ethnic minority, female, minor (children), foreign working, disabled, and gay populations.

Some libertarian voices, advocating personal liberty first and foremost, deride egalitarianism as a “revolt against nature” (Murray Rothbard). Might does not always make right – even though the laissez-faire market system has lifted millions from poverty and made others extremely rich, it doesn’t mean the market system can operate with impunity as concerns social outcomes. Egalitarianism is vigorous social progress; we’ve worked hard at it for generations and now is not the time to succumb to such an ardent antagonist. The just reversal of domination is a learned social skill naturally liberating.

*Christopher Boehm, Hierarchy in the Forest: The Evolution of Egalitarian Behavior, Harvard University Press (1999).

Click here to read What Happened to Egalitarianism? Part 1.

Common Good – Present yet Elusive

The following is adapted from the book, Just a Little Bit More: The Culture of Excess and the Fate of the Common Good, to be published in May 2014.

Ever think about how things could be worse? Without going into extensive details – yes, things could be much, much worse . . .

Consider Russia’s twenty-five year run with capitalism. Author Chrystia Freeland tells us (in her book Plutocrats) that contemporary Russia has more economic disparity than it did during the time of the czars.* Crony capitalism, created by the fire sale of state-owned entities in the early 1990s and dominated by Russia’s oligarch class, is described by the word prykhvatizatsiya – translated as “grabification.” Moscow has more billionaires than millionaires, with its ratio of billionaires to GDP (gross domestic product) the most unbalanced in the world – by far. Russia lacks not only a millionaire class, but also a sufficiently sized middle class. Capitalism’s uneven debut in Russia, characterized by excessive wealth garnered not by industry but by political connection, can largely be blamed on its lack of social capital.

Social capital, the potential or actual resources related to social networks and structures leading to cooperation and mutual benefits between actors, is essential for the existence of a well-ordered capitalism. Common good is always a communal or shared actuality – whether defined sociologically, politically, religiously, or ethically. Common good owes its very existence to social capital. The United States has a long history of egalitarianism (although mitigated by slavery, racism, sexism, and other deficiencies), which has fueled and enabled its healthy social capital. Russia’s history is decidedly different. Russia is not principally made up of bad actors; as a society it has few egalitarian traditions and a fragile concept of the common good.

Civil society, as we know it, would not exist if people always engaged in opportunistic behavior. The egalitarian values of American society are some of the strongest in the history of the world, yet the current competition with the market values-infused religion of self-interest increasingly hastens the depletion of America’s precious social capital. Common good has been and is a present reality in American society, but we run the risk of making it an elusive reality.

Economists have told us for a long time that there is no free lunch; getting something for nothing is a pipe dream. Common good does not magically result from individuals simply seeking our their own best interests. The maintenance and creation of common good requires purposeful attention and effort. Are we still willing to make modest sacrifices for common good or have we arrived (as has Russia) to a place where individuals and small groups selfishly protect their own benefits?

*Chrystia Freeland, Plutocrats: The Rise of the New Global Super-Rich and The Fall of Everyone Else, Penguin (2013).