The New Marxism: A prominent liberal economist contends capitalism will inevitably increase inequality

‘Karl Marx wasn’t wrong, just early. Pretty much. Sorry, capitalism. #inequalityforevah”. When trying to condense a sweeping, 700-page analysis of the past, present, and possible future of capitalism into an 85-character tweet, you’re bound to miss a few things. But the above Twitter-fication of economist Thomas Piketty’s much-awaited Capital in the Twenty-First Century captures the gist of the author’s argument.

Piketty thinks the German progenitor of Communism basically got it right. It’s only that his essential insight — private capital accumulation inevitably leads to the concentration of wealth into ever-fewer hands — took a hiatus during the middle part of the last century thanks to depression and war hurting the fortunes of the well-to-do. But now Marxism’s fundamental truth is reasserting itself with a vengeance, a reality borne out in both Piketty’s own meticulously gathered data and in business pages replete with stories of skyrocketing wealth for the 0.001 percent and decades of flat wages for everyone else.

And it’s only going to get worse, Piketty concludes. Sure, the productive and innovative capacity of market capitalism will generate enough income growth for the masses to prevent revolution. He concedes Marx got that bit of apocalypticism wrong. But an “endless inegalitarian spiral” will create such wealth bifurcation that “the meritocratic values on which democratic societies are based” will be undermined. The political process will be hopelessly captured by a tiny elite of rent seekers and trust-fund kids. America (and then the other advanced economies) will become what Occupy Wall Street types and Elizabeth Warren think it already is.

Piketty, a left-wing Frenchman who teaches at the Paris School of Economics, is hardly the only economist arguing inequality is headed inexorably higher. Tyler Cowen, a center-right economist and New York Times columnist, contends accelerating technological change will create an America where nearly all of us have stagnant incomes and serve as valets and massage therapists to the STEM-savvy and wealthy geek-ocracy.

Piketty is making a different and broader argument, one that intentionally rises to the level of grand theory: Embedded within the very fabric of capitalism is a powerful force pushing in the direction of rising inequality. The income generated from owning capital (everything from real estate to financial assets to intellectual property) tends to exceed the rate of economic growth. And when wealth grows faster than output — as it did in the 19th century when Marx was writing and as Piketty forecasts it will again in the 21st — inequality moves toward extreme levels since income from capital is outpacing wages from labor. When capital income gets reinvested, inherited wealth also grows faster than the economy. Even worse, from Piketty’s perspective: Not only will capital owners take more and more of national income, but more and more of labor income will go to a small group of “supermanagers” who rig the executive pay system in their favor.

“Will the world of 2050 or 2100,” Piketty asks, “be owned by traders, top managers, and the superrich, or will it belong to the oil producing countries or the Bank of China?”


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commented 2014-03-25 09:21:09 -0400 · Flag
Beau wrote:

I reject these Limousine Collectivists and Academia-Financed technocrats and researchers. A “Global Wealth Tax” is as Orwellian as it sounds…and it would mark the end of Liberty. True Capitalism can win the day…Crony Capitalism must die. Who will make the intellectual case for economic freedom today? I start with going back to Smith and Schumpert and Hayek … and listening to Mark Levin. A lesson in Liberty every day …