Monday, June 2, 2014

Piketty and the Austerity of Imagination


Thomas Piketty’s recent book Capital in the Twenty First Century has gotten rave reviews and has been proclaimed by many liberal and progressive pundits and scholars as the best thing since Marx.  Piketty’s central claim is that the return on capital (investments, real estate, rents) will always exceed the return on labor unless some extraordinary shock occurs, like a world war or depression.   In laymen terms, this means that rich people who can inherit and invest their wealth will always make more than everyone else who has to earn their money through labor. The solution Piketty proposes to this inevitable growth in inequality is a global wealth tax, which he himself says is utopian and unlikely.

So why is this book so popular with liberals?  One possible reason is that it displays moral indignity in the face of wealth inequality, but it does not ask any of us to change or do anything.  It also gives the reader a strong sense of historical knowledge of the global economy, but this understanding is plagued by several glaring blind spots.  As Thomas Frank has pointed out, in a book on labor and capital that goes on for close to 700 pages, the role of unions is barely mentioned.  Moreover, the incredible destructive nature of the 2008 global financial meltdown is also ignored, and most of his statistics only focus on a small number of countries, and this is due to his reliance on a narrow set of tax data.  In short, Piketty is blinded by his own limited source of information and his own ideology.  Although he looks like a Occupy Wall Street proponent, he really is locked into a moderate austerity mindset.

Since he believes that the only thing that can cause income from labor to exceed wealth from investments and inheritance is a war or massive depression, he promotes the logic of austerity: we will never have strong economic growth, so all we can do is try to tax the wealthy and reduce social benefits like pensions.  If this austerity logic sounds familiar, it is what is driving the thinking of the White House and the State House.

What is missing from this austerity of imagination is any hope that we could expand economic growth by increasing the wages of working people.  While Piketty justifies the Federal Reserve lending trillions of dollars to banks and corporations to stabilize their books, he does not even ponder how some of this money could have been used to refinance mortgages or student debt.  Like Piketty, the Fed does not think that the government can do anything to spur economic growth and job creation, and so the only alternative is to feed money to the investment class who have decided that we no longer need consumers or workers since businesses and banks can make money by just buying back their own stocks from cheap government loans. 

What we need are policies that help to create better high paying jobs so we can increase consumer demand and create even more economic growth.  However, companies have found that they can increase their profits, stock valuation, and executive compensation by reducing labor costs, and this is done in part by hiring people part-time with low wages and no benefits.  Since most workers do not have any bargaining power and do not belong to unions, there is a global race to the bottom as everyone loses ground to inflation except for a small number of managers and investors.   

3 comments:

  1. A valuable comment, Bob. One might add that we have taken small, inadequate, but essential measures against income precarity by loosening the link between employment and income for the elderly and disabled and, modestly, through the EITC. We need to think about a future in which more and more people must find income security elsewhere than from paid labor at starvation wages. Mary Furner

    ReplyDelete
  2. Replica Louis Vuitton handbags are aswell actual accepted because, the appearance usually keeps alteration and gucci replica replica handbags and added items advice you to be kept clip with the latest fashion. In added words, artist handbags and purses become out of date soon. This is why, replica Louis Vuitton handbags, purses and wallets are added applicable than the aboriginal one. You can calmly buy several replica handbags and louis vuitton replica added items at the bulk of an aboriginal one. In added words, replica Louis Vuitton handbags accommodate you with the befalling to allow in awful avant-garde appearance of handbags and purses after spending a acceptable bulk of money.For accepting these replica items, there are a amount of chanel outlet online stores. These food not alone accommodate you with Louis Vuitton handbags, but aswell an array of replica Louis Vuitton handbags, Louis Vuitton Replica Purses, Louis Vuitton Replica Wallets and Louis Vuitton Replica Accoutrements at easy-on-the-pocket prices with adorable discounts. For accepting your adapted piece, all you accept to replica chanel do is just seek over the internet and baddest a store.Handbags are advised as an basal fshion accent that anniversary beautiful woman demands to possess, analogous accurately with her clothes. Meticulously congenital from brought in covering calm with abutting application to accomplishment and detailing, Louis vuitton Replica duke accoutrements accept developed to be the acerbity amidst account acquainted women that await on abreast affairs while not compromising acceptable feel.

    ReplyDelete
  3. Hi everyone i live in Texas USA I applied for a loan of $100,000 in march 2012 with diamond loan company and i was ask to pay $1000 for insurance which i did and they never transfer my loan and i was charge more and more fee which i got nothing in return i lost over $5000 to them because i was anxious of the loan i have to apply through another company and this second company did the worst to me,i was ask to pay only $100 for transfer fee which i later give them the total of $7000 and till date i never get mails from them.and this really make me frustrated Until 1st of July when a friend of my refer me to Fidelity Loan company at first i was scared but i later contact them and after three days they transfer to me $120,000.00usd on 3% interest please if any one is looking for a loan then fidelity (financialhome@outlook.com) loan company is the solution to your loan problem's.thank you again Mr Wang Yang C.E.O financialhome@outlook any one in need of loan can reach them now on this email financialhome@outlook.com

    ReplyDelete