Piketty: The #1 Amazon Bestseller Nobody Really Reads

By Shlomo Maital    

  Piketty

  Can you believe a 696-page boring economics book,  Capital in the 21st C., is the #1 Amazon best-seller, and one of Harvard University Press’s (Belknap) all-time best-sellers?  And can you also believe very few people have actually ploughed through this tome?  And that people constantly mispronounce the author’s name:   He is French, and his name is   toh-MA  pi-ke-TTY, rhymes with bring me TEA!

    Bloomberg Business Week has devoted an entire issue to Piketty, his arguments and his criticics, including Chris Giles (Financial Times) and two respected macro-economists, Per Krusell and Tony Smith.    (See: http://www.businessweek.com/articles/2014-05-29/pikettys-capital-economists-inequality-ideas-are-all-the-rage ).

   As a service to my readers, and to prevent a widespread narcolepsy epidemic (the malady that causes people to fall asleep in daytime),  here is a very short summary of the ongoing debate.

    What does Piketty claim?  Simply – that “Beta” (the ratio of capital to income, for nations) initially fell, but in recent decades has risen.  This is because the fraction of income saved (which is what leads to capital accumulation) exceeds the rate of growth of income or GDP.

    So what?  People who own capital can earn high return on their wealth, averaging 8 %; this doubles their wealth every 9 years.  People who spend their income (most of us working people) fall into debt and fail to accumulate wealth.

    So what?    People with great wealth gain control of the democratic system, to perpetuate their wealth through tax breaks. 

     The growing concentration of wealth in fewer and fewer hands cannot be corrected by the democratic system (the vast majority, who have no wealth), because the super-rich use their wealth to manipulate the democratic system. 

     That last paragaph is NOT in Piketty.  It comes from an article by John Cassidy,  “Is America an Oligarchy?”, The New Yorker, April 18.  He quotes two political scientists, Gilens and Page,  who claim that:  “Our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts”:   

Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association, and a widespread (if still contested) franchise. But  …in the United States, our findings indicate, the majority does not rule—at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover … even when fairly large majorities of Americans favor policy change, they generally do not get it.

On many issues, say the authors,  the rich exercise an effective veto. If they are against something, it is unlikely to happen.

     So here is where things stand.  Wealth grows faster than income.  Wealth concentrates in fewer and fewer hands.  Wealth corrupts democracy. 

     Marx predicted that the concentration of wealth would grow so intolerable, that the proletariat would revolt.   

      If the democratic system cannot repair itself – what other solution is there?

 

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