Edsall on Piketty: Inequality to Grow Ever Larger

Apropos Obama's State of the Union address last night where he vowed to tackle rising inequality, today the indispensable Thomas Edsall writes about Thomas Piketty's new book, Capital in the Twenty-First Century. Piketty, a professor at the Paris School of Economics, and his colleague from U.C. Berkeley, Emmanuel Saez, have been pumping out topnotch research the last several years that takes head on the idea that neoliberalism -- the central tenet of which is minimal market regulation -- produces abundant growth and shared prosperity. In a nutshell, Piketty and Saez have consistently argued that since the dawn of the neoliberal age in the 1970s the economy has worsened for working people.

In today's post, "Capitalism vs. Democracy," Edsall positions Piketty's new book as one that might well have historic impact. Capital in the Twenty-First Century argues that the high-growth, 60-year period beginning with World War I and ending in 1973 was an anomaly. The normal state of capitalism is one which produces ever greater inequality. Unless we address the problem through a global progressive wealth tax, increasing inequality is inevitable. Here is how Edsall summarizes it:

“If the rate of return on capital remains permanently above the rate of growth of the economy – this is Piketty’s key inequality relationship,” Milanovic writes in his review, this “generates a changing functional distribution of income in favor of capital and, if capital incomes are more concentrated than incomes from labor (a rather uncontroversial fact), personal income distribution will also get more unequal—which indeed is what we have witnessed in the past 30 years.” 

Piketty has produced the chart . . . to illustrate his larger point. 

The only way to halt this process, he argues, is to impose a global progressive tax on wealth – global in order to prevent (among other things) the transfer of assets to countries without such levies. A global tax, in this scheme, would restrict the concentration of wealth and limit the income flowing to capital.

Since a global wealth tax is an unlikely prospect in the current political environment (absent a revolutionary mass movement), we are likely headed for some sort of rupture or system failure. Yesterday I argued that this is already on view in Egypt, Thailand and Ukraine. Democracy is being scrapped and will continue to be scrapped in favor of either a formally representative but hallowed out government entirely captured by capital and saturated with surveillance (like in the West) or an overtly old-fashioned authoritarianism, also saturated with surveillance, and also ruling at the behest of neoliberal market fundamentalism (currently on display in Cairo). This is what is in store for us: rising inequality, receding democracy. Hopefully, people will come together and fight back.

But the super-rich will not yield a single dollar without a vicious struggle -- a fight they will pay a pittance to the growing global army of unemployed to wage for them. The future is shaping up to be very brutal.