CAPITAL – Thomas Picketty

“It seems safe to say that Capital in the Twenty-First Century, the magnum opus of the French economist Thomas Piketty, will be the most important economics book of the year―and maybe of the decade. 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 KrugmanNew York Times

– To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of  historical research and collaboration with the other social sciences.
– In other words, the lead that Europe and America achieved during the Industrial Revolution allowed these two regions to claim a share of global output that was two to three times greater than their share of the world’s population simply because their output per capita was two to three times greater than the global average
– Take the bicycle. In France in the 1880s, the cheapest model listed in catalogs and sales brochures cost the equivalent of six months of the average worker’s wage. And this  was a relatively rudimentary bicycle, “which had wheels covered with just a strip of solid rubber and only one brake that pressed directly against the front rim.” Technological progress made it possible to reduce the price to one month’s wages by 1910. Progress continued, and by the 1960s one could buy a quality bicycle (with “detachable wheel, two brakes, chain and mud guards, saddle bags, lights, and reflector”) for less than a week’s average wage. All in all, and leaving aside the prodigious improvement in the quality and safety of the product, purchasing power in terms of bicycles rose by a factor of 40 between 1890 and 1970. One could easily multiply examples by comparing the price history of electric light bulbs, household appliances, table
-Taxation is not a technical matter. It is preeminently a political and philosophical issue, perhaps the most important of all political issues. Without taxes, society has no common destiny, and collective action is impossible. This has always been true. At the heart of every major political upheaval lies a fiscal revolution. The Ancien Régime was swept away when the revolutionary assemblies voted to abolish the fiscal privileges of the nobility and clergy and establish a modern system of universal taxation. The American Revolution was born when subjects of the British colonies decided to take their destiny in hand and set their own taxes. (“No taxation without representation”). Two centuries later the context is different, but the heart of the issue remains the same. How can sovereign citizens democratically decide how much of their resources they wish to devote to common goals such as education, health, retirement, inequality reduction, employment, sustainable development, and so on?
– “The rise in the top 1 percent highest incomes since the 1970s is largely due to the rise in the top 1 percent highest wages”
–  Productivity growth in the service sector has been less rapid
–  Once a fortune is established, the capital grows according to a dynamic of its own, and it can continue to grow at a rapid pace for decades simply because of its size.
“The problem is simply that the entrepreneurial argument cannot justify all inequalities of wealth, no matter how extreme.”
– “Entrepreneurs thus tend to turn into rentiers” say that though this may be the case they created something initially ? and if the government contributes to this as we state then less rent will be used up down the track. CRUCIALLY instead of an unfair progressive annual tax on the largest fortunes worldwide its fairer that government has a share of those fortunes only by right of its contribution to their development, via a live to innovate programs.
– “To be sure, one could tax capital income heavily enough to reduce the private return on capital to less than the growth rate. But if one did that indiscriminately
and heavy-handedly, one would risk killing the motor of accumulation and thus further reducing the growth rate. Entrepreneurs would then no longer have the
time to turn into rentiers, since there would be no more entrepreneurs”
– “Housing is the favorite investment of the middle class and moderately well-to-do, but true wealth always consists primarily of financial and business assets.”
– All of my conclusions are by nature tenuous and deserve to be questioned and debated. It is not the purpose of social science research to produce mathematical
certainties that can substitute for open, democratic debate in which all shades of opinion are represented.

 

 

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