[governance] NYT: Thomas Piketty and His Critics (long email)

[michael gurstein]

One has to ask how long “Internet Governance” aided and abetted by the
active and willing collaboration of “civil society” will be able to maintain
its isolation from the broader issues of social justice and economic
inequality; particularly since there is increasing evidence of the highly
significant contribution which the Internet and digitization processes are
playing in exacerbating and accelerating the processes that Piketty has so
devastatingly documented.

 

That NetMundial failed to even allow these issues to be raised, will I think
be seen as a highly significant historical failure.

 

M 

 

From: Ottawadissenters at yahoogroups.com
[mailto:Ottawadissenters at yahoogroups.com] 
Sent: Wednesday, May 14, 2014 6:55 PM
To: Ottawadissenters at yahoogroups.com; futurework at vancouvercommunity.net
Subject: [Ottawadissenters] Thomas Piketty and His Critics (long email)

 

  


Thomas Piketty and His Critics


*	by Thomas B. Edsall 
*	May 14, 2014 NY Times• 

Many on the left see the popularity of Thomas Piketty’s new book, “Capital
in the Twenty-First Century,” as a sign of hope, but both optimists and
pessimists share a belief more telling than Piketty’s success: the idea that
the traditional Democratic economic agenda is dead.

Piketty’s book reinforces the idea that the domestic policies liberals
advocate for are palliative, not curative — that, in essence, inequality is
here to stay.

The problem of deepening inequality is enormous, Piketty writes: “Growth can
of course be encouraged by investing in education, knowledge and
nonpolluting technologies. But none of these will raise the rate of growth
to 4 or 5 percent a year.”

Instead, he writes, “for countries at the world technological frontier” —
the United States, Northern Europe and parts of Asia — and “ultimately for
the planet as a whole – there is ample reason to believe that the growth
rate will not exceed 1-1.5 percent in the long run, no matter what economic
policies are adopted.”

Piketty’s analysis articulates what many people on the Democratic left feel
intuitively, that a domestic tax, spending and regulatory agenda is
ineffective in the face of the power of globalized capital to grind down
wages and benefits.

In Piketty’s view, the solution is a measure beyond the political reach of
any individual nation or international body, as they are now constituted: a
global wealth tax. Only such a tax “would contain the unlimited growth of
global inequality of wealth, which is currently increasing at a rate that
cannot be sustained in the long run and that ought to worry even the most
fervent champions of the self-regulated market.”

Piketty’s proposed global tax would set rates of 0.1 to 0.5 percent on
fortunes of less than 1 million euros ($1.37 million); 1 percent on assets
of 1 to 5 million euros ($1.37 million to $6.87 million); 2 percent on
holdings of 5 to 10 million euros ($6.87 million to $13.7 million); and a
sliding scale ultimately reaching 10 percent on fortunes of “several hundred
million or several billion euros.”

It  would be an understatement to say that a tax on wealth faces major
implementation problems. James Wetzler, the tax commissioner of New York
State during the administration of Mario Cuomo, wrote in an essay
<http://www.nationalreview.com/agenda/374380/thomas-pikettys-wealth-tax-prop
osal-has-huge-problems-james-wetzler>  that “absent aggressive policy
intervention, the Western world appears to be headed toward a plutocratic
dystopia characterized by wealth inequality approaching that of ancien
régime France.”

Wetzler added in an email that “to make the U.S. tax system more
progressive, we should focus on strengthening our existing income, estate
and gift taxes, not on a new starter like a wealth tax. A federal tax on
wealth would require a constitutional amendment, and we know a lot less
about its economic impact than we know about our existing taxes.”

Further complicating implementation of a wealth tax, according to Wetzler,
is that it “must address complexities associated with the fact that so much
wealth is owned by corporations and other legal entities with dispersed
ownership.”

And that’s only part of the problem. Who would run a super-national tax
collection agency? How would the taxes collected on assets owned by one
person but held in multiple countries be distributed? How would global
wealth tax supporters actually win the enactment of regulations that would
require transparency of ownership of real estate, of bank holdings and of
control of private corporations?

Is it fair to describe Piketty’s analysis (as opposed to the upbeat man) as
pessimistic? First, Piketty declares that traditional liberal remedies –
education spending, worker protections, more progressive taxation, family
stabilization assistance – may be helpful at the margins, but inequality
will worsen “no matter what economic policies are.” Second, Piketty does not
offer a weapon other than a massively redistributive and politically
unachievable tax with which to battle this intensifying inequality.

The unlikeliness of Piketty’s policy prescription becoming reality has not
placated the right. James Pethokoukis, the money and politics blogger for
the American Enterprise Institute, exemplifies the aversion to Piketty now
erupting among American conservatives. Pethokoukis warns
<http://www.nationalreview.com/article/374009/new-marxism-james-pethokoukis>
that Piketty’s “soft Marxism,” if unchallenged, “will spread among the
clerisy and reshape the political economic landscape on which all future
policy battles will be waged. We’ve seen this movie before.”

It’s not only the right that is disturbed; there is also opposition among a
number of progressive activists and liberal policy analysts who recognize
the dangers Piketty’s analysis poses to their agenda.

While Piketty notes that “there is widespread discontent with the extreme
inequality and lack of opportunity and security,” he simultaneously
reinforces the “passivity and resignation” that comes out of “the failure of
the state and of center-left parties to do much to change what’s happening,”
Robert Kuttner, the founder and editor of The American Prospect, told me in
an email. And so, Kuttner wrote, “working class people give up on it.”

Dean Baker, co-director of the Center for Economic and Policy Research, a
liberal economic think tank, took a harsher view of liberals’ attraction to
Piketty. In an email, Baker wrote that “a big part of the appeal is that it
allows people to say capitalism is awful but there is nothing that we can do
about it.” Baker, who has formulated a detailed domestic agenda
<http://www.cepr.net/documents/piketty-comment-2014-04.pdf>  to fight
inequality, worries “that many people will feel that they have done their
part after struggling through a lengthy book on economics, and now they can
go back to their vacation homes and say it’s all a shame.”

It may be that Piketty is right that traditional liberal policies are
largely ineffective. There are, however, grounds to challenge this
pessimism. Support for this challenge can be found not only on the left, but
also on the center-right.

Kenneth Rogoff, a Harvard economist, contends in a review
<http://www.project-syndicate.org/commentary/kenneth-rogoff-says-that-thomas
-piketty-is-right-about-rich-countries--but-wrong-about-the-world#kYyhjdex29
T8e54I.99>  of Piketty’s book that “the idea of a global wealth tax is
replete with credibility and enforcement problems, aside from being
politically implausible.”

Rogoff views evidence of growing inequality presented by Piketty and others
as “persuasive” and he proposes a number of alternative, smaller-scale
remedies to control disproportionate wealth accumulation. He suggests a
shift to a “relatively flat consumption tax, with a large deductible for
progressivity.” Consumption taxes apply to spending, as opposed to income
taxes that are levied on wages, benefits, profits from sales, dividends and
other gains. Why, Rogoff asks, should we “try to move to an improbable
global wealth tax when alternatives are available that are growth friendly,
raise significant revenue, and can be made progressive through a very high
exemption”?

Rogoff cites a series of suggestions
<http://www.project-syndicate.org/commentary/jeffrey-frankel-argues-that-att
acking-the-ultra-rich-is-an-inefficient-way-to-reduce-inequality>  developed
by Jeffrey Frankel, a professor at the Kennedy School at Harvard. These
include “the elimination of payroll taxes
<http://www.taxpolicycenter.org/taxtopics/Payroll-Taxes.cfm>  for low-income
workers, a cut in deductions for high-income workers, and higher inheritance
taxes.”

Despite the criticism of Piketty from right, left and center, he has, by
shifting the focus from income to wealth, successfully transformed the
debate over inequality.

His influence is reflected in two essays by Clive Crook, a financial
columnist at Bloomberg View. The first was an unrelentingly negative review
<http://www.bloombergview.com/articles/2014-04-20/the-most-important-book-ev
er-is-all-wrong>  of Piketty’s book, the headline of which gives you the
flavor of the rest: “The Most Important Book Ever Is All Wrong.”

“Every claim,” Crook argues, “is either unsupported or contradicted by
Piketty’s own data and analysis.”

On May 11, however, Crook did an about face and wrote a very different essay
<http://www.bloombergview.com/articles/2014-05-11/picketty-s-wealth-tax-isn-
t-a-joke> , “Piketty’s Wealth Tax Isn’t a Joke.”

“One idea that’s been roundly dismissed by fans and critics alike deserves
to be taken more seriously: the proposal for a global wealth tax,” Crook
writes, noting that “on equity and efficiency grounds, it makes sense to tax
wealth.”

Crook, too, sees insurmountable difficulties for any entity that might try
to collect an annual wealth tax and argues instead for “moderate but
effective taxation of capital income combined with moderate but effective
taxation of inheritance, so that unrealized gains are brought back into the
tax base, either during the course of an investor’s life or at death.”

In other words, centrists like Rogoff and Crook — in addition to liberals
determined to assault bastions of privilege — are beginning to take
proposals to restrain the growing concentration of wealth seriously.

Both the shift of attention to wealth and the seriousness with which a
proposal to constrain the accumulation of wealth is being taken represent a
major change in the contemporary debate over inequality. Few Americans
appear to begrudge the multimillion dollar annual compensation of
entrepreneurial executives like Steve Jobs or Bill Gates. But inherited and
unearned wealth does not command the same legitimacy.

In fact, the emergence of what Piketty calls “patrimonial capitalism” —
concentrated wealth and political power passed on from generation to
generation in a class-based social order — runs directly counter to the
longstanding American commitment to equality of opportunity. Piketty has
laid the intellectual groundwork for a challenge to a social and political
order based on socioeconomic ranking by wealth stratification.

Now we need effective politicians to articulate this challenge in ways that
resonate with a striving electorate determined to achieve a higher standard
of living through grit and hard work. Where is the level playing field?
Politicians who seek to gain traction on these issues face high hurdles, but
only those willing to risk confrontation can address the depth of public
discontent, anger and resentment.


Original URL:


http://www.nytimes.com/2014/05/14/opinion/edsall-thomas-piketty-and-his-crit
ics.html?emc=edit_ty_20140514
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tics.html?emc=edit_ty_20140514&nl=opinion&nlid=4223025&_r=0>
&nl=opinion&nlid=4223025&_r=0

 

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