The Idiocy of the Elitist Class

The Trump administration is achieving tremendous success. Why can’t the global elitist class surrender?

In the Revolution, by Steve Hilton, Fox News

This is a broad overview of a deeper problem confronting the issue of income and wealth inequality. For those interested in a seminal treatise of the subject, “Capital in the Twenty-First Century,” by Thomas Piketty.

Piketty, arguably the world’s leading expert on income and wealth inequality, does more than document the growing concentration of income in the hands of a small economic elite. He also makes a powerful case that we’re on the way back to ‘patrimonial capitalism,’ in which the commanding heights of the economy are dominated not just by wealth, but also by inherited wealth, in which birth matters more than effort and talent. (Paul Krugman New York Times 2014-03-23) – Amazon Editorial Review

Amazon Top Customer Review

January 18, 2015

Format: Hardcover|Verified Purchase

Thomas Piketty’s “Capital in the Twenty-First Century” is a sprawling examination of the developed world’s capital/income ratio and wealth and income concentrations over three centuries. The essence of Piketty’s argument is that under normal conditions (that is to say, slow growth and no radical destruction of capital), the rate of return on capital exceeds the rate of growth, which causes large fortunes to grow faster than the labor income of the middle class or poor. Everyone agrees that the “patrimonial middle class” (the ownership by people in the 10-50 percent share of the economy of a quarter to a third of a developed country’s wealth) is a recent phenomenon, but there are disagreements on how it came to be. Piketty’s thesis is that the World Wars and the Great Depression reduced the rate of return on capital (and, he does not emphasize, increased spending by the government) to the point that the growth in national income could overtake the rate of return on capital and spread the wealth to a larger proportion of the rich world’s population than had ever before been possible.

Piketty’s insistence on linking economics to other disciplines, in particular literature and history, is one of the nobler aspects of this magisterial book. Evidence for the stagnation and extreme inequality of society just two hundred years ago is provided by Piketty’s two favorite authors, Honore de Balzac and Jane Austen, whose protagonists naturally assumed that a “decent” life was only possible on at least 50 times the average income. Piketty notes (unfortunately in passing) that the increase in purchasing power is the reason it is possible for someone with an average or slightly above average income to 1) invest in things like his book, and 2) take the time to appreciate it. Rising levels of education and technology are the primary reason for this increase in purchasing power, but both education and technology, he implies, may be nearing their limits, or at least cannot be expected to increase as rapidly as they did in the twentieth century. For certain, the human population (especially in developed countries) will not increase as fast, which will tend to increase the importance of inherited wealth.

Piketty spends roughly the first four-fifths of the book providing data and the theoretical background of the problem, and the last fifth proposing solutions. At the national level, he believes a more sharply progressive income tax is in order, but would also like to see a global, or at least pan-European, tax authority to impose a progressive tax on wealth itself, a tax that for the largest fortunes would be between 2 and 10 percent. As long as countries are competing against each other to provide lower taxes and therefore higher post-tax rates of return on capital, the common people of all countries will lose. The alternative of reducing the rate of return on capital through war would appear not to be viable in the nuclear era and the inflation associated with war at any rate does not reduce the rate of return on capital unless it dwells in unproductive asset categories like bank accounts.

Some of the projections in this book (such as $200 a barrel oil by 2020) are wildly off the mark, but most of them appear to be on it. The alternative of not acting to restrain the economic forces building up higher levels of inequality could lead to the top one thousandth of the world’s population owning 60 percent of all assets by the middle of this century. Piketty doubts that a machinery of repression sufficiently robust to prevent revolution in such circumstances exists anywhere but this level of inequality could in the end be just the challenge the NSA is looking for. A revolution in some developed countries but not others would set up another world war, which would make the question of income and wealth distribution among humans academic, as they could no longer live on Earth. Piketty therefore sees the peaceful reinforcement (through progressive taxation of both income and wealth) of the “social (welfare) state” as the only solution.

Purchase Capital in the Twenty-First Century at Amazon.




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