Dean Baker has written a very interesting review of Thomas Piketty’s new book, Capital in the Twenty-First Century. I mean “interesting” in a neutral way: it is notable to see Baker so optimistic. It is probably due to his iconoclastic tendencies. He just has to take a contrary position. And based upon the review, he was forced to be at least somewhat optimistic, because Piketty’s book sounds like a real downer!
Of course, that doesn’t mean he is wrong. His thesis is that based upon the historical trends, income inequality will get ever worse. Piketty’s work with Emmanuel Saez on the income distribution of the very richest people are key to this. Baker has nothing but praise for this work. His problem is with Piketty’s proposed solutions such as a wealth tax. Baker thinks these are very unlikely to happen, although Piketty is in agreement on that. Baker, however, sees politically viable solutions as he documented in his last solo book, The End of Loser Liberalism: Making Markets Progressive. These involve things like limiting intellectual property rights and taxing financial transactions.
All of these ideas are really good, and The End of Loser Liberalism is free for your phone, so you really should go and read it. I’m entirely in agreement with Baker that these are incredibly good ideas. Where I differ from him is in that I don’t see limiting patent protections as distinctly more possible than a wealth tax. For example, Baker wrote:
It sounds nice: divide and conquer. But I don’t see this past time when some segment of capitalists sided with progressives. I think the times that he is talking about owed a huge debt to strong unions. There is nothing like that on which to build. What’s more, there seems to be more solidarity among the rich than there ever has been. And there is less among the poor. “Divide and conquer” is working, just not against the rich.
The big problem that I see is that we simply don’t live in a democracy. A financial transaction tax is very popular with actual voters. But it isn’t on offer from any major politician. That’s because before any people get to vote, the rich get to vote on who the people get to vote for. No politician with Bake ideas, much less Piketty ideas, will ever get the money to be a viable candidate. And given that I think that, I guess I’m even more pessimistic than Piketty.
Update (13 March 2014 2:05 pm)
Eduardo Porter wrote a great sorta review over at The New York Times, A Relentless Widening of Disparity in Wealth. In it he sums up something that Piketty said, “The holders of wealth, hardly a powerless bunch, will oppose any such move, even if that’s what is needed to preserve capitalism against the populist impulses of those left behind.” This is an argument I’ve been making a long time: the rich are shortsighted and so greedy they will never give up a little to keep their wealth safe. Look at what’s happened with their spokesmen: the Republican Party. At a time when the rich are doing better than ever, the demands are more extreme than ever. It’s like they want a revolution.
Update (13 March 2014 2:32 pm)
Eduardo Porter also has an interview at The New York Times that is really worth reading, Q&A: Thomas Piketty on the Wealth Divide.