Economist uses huge data trove to show that capitalism inevitably fails

[Ichingcarpenter]

Suddenly, there is a new economist making waves – and he is not on the right. At the conference of the Institute of New Economic Thinking in Toronto last week, Thomas Piketty's book Capital in the Twenty-First Century got at least one mention at every session I attended. You have to go back to the 1970s and Milton Friedman for a single economist to have had such an impact.

Like Friedman, Piketty is a man for the times. For 1970s anxieties about inflation substitute today's concerns about the emergence of the plutocratic rich and their impact on economy and society. Piketty is in no doubt, as he indicates in an interview in today's Observer New Review, that the current level of rising wealth inequality, set to grow still further, now imperils the very future of capitalism. He has proved it.

It is a startling thesis and one extraordinarily unwelcome to those who think capitalism and inequality need each other. Capitalism requires inequality of wealth, runs this right-of-centre argument, to stimulate risk-taking and effort; governments trying to stem it with taxes on wealth, capital, inheritance and property kill the goose that lays the golden egg. Thus Messrs Cameron and Osborne faithfully champion lower inheritance taxes, refuse to reshape the council tax and boast about the business-friendly low capital gains and corporation tax regime.

Piketty deploys 200 years of data to prove them wrong. Capital, he argues, is blind. Once its returns – investing in anything from buy-to-let property to a new car factory – exceed the real growth of wages and output, as historically they always have done (excepting a few periods such as 1910 to 1950), then inevitably the stock of capital will rise disproportionately faster within the overall pattern of output. Wealth inequality rises exponentially..........



http://www.theguardian.com/commentisfree/2014/apr/12/capitalism-isnt-working-thomas-piketty

[rhett o rick]

1. I am surprised that something like this hasnt come out sooner. It seems obvious

that unregulated capitalism will self destruct. What happens after we get to the point of one bank, one grocery supplier, one water supplier, one media company, etc. The goal of capitalism is to gain wealth. It should be obvious that society cant let that get to the point that people die. But we are already there.

[swilton]

2. Highly critical of the Kuznets Curve

I recall Richard Wolff mentioning this economist in one of his lectures - especially how this economist is one of the first to attack the Kuznets curve -which (in my own words) is the notion that as countries embrace capitalism, they become more democratic. Wikkepedia's summary of Pickety's concept is as follows:


"A critic of the Kuznets curve[edit]

The analyses of Piketty can be seen as a critical continuation of the pioneering work of Simon Kuznets in the 1950s.[10] According to Kuznets, the evolution of earnings inequalities was to be shaped, in the long run, as a bell curve (Kuznets curve), growing at the beginning of the industrial revolution, to decrease later, due particularly to the reallocation of labor force from low productivity sectors like agriculture to higher productivity sectors such as industry.

According to Piketty, the tendency observed by Kuznets in the early 1950s is not necessarily a product of deep economical forces (e.g. sectoral spillover, the effects of technological progress). Instead, estates, rather than wage inequalities, decreased, and they did for reasons which are not specifically economical (among which the creation of income tax plays a major role), contingent or reversible. Consequently,[clarification needed] nothing guarantees that this decrease will continue. In fact, inequalities have grown sharply in the USA over the last 30 years, returning to their 1930s level."

[Mustellus]

3. Monopoly games end....

... just at that point. When one player gets all the money and property. They don't have guillotines and firing squads in Monopoly.....