Thomas Piketty’s book Capital in the 21st Century has placed a proverbial line in the sand for all those concerned with inequality of wealth distribution.
Piketty is an economic historian. In his book he documents the fact that owners of capital assets – including stocks, bonds, and real estate – have historically realized a financial return higher than wage growth.
His research demonstrates that a so-called self-regulating market-based system has a built in bias favoring those with capital assets over those living on wages alone. His conclusion is that without fundamental system change, or politically prescribed adjustments, the distribution of wealth will tend inevitably to concentrate in fewer and fewer hands with all the social and economic problems that such disparity suggests.
Occupy’s ‘One Percent’ is playing with a deck stacked in its favor.
Though this bias of the economic system is recognized intuitively, the myth of a level playing field has persisted, largely based on the exception to the rule following World War II. Pent up demand for new goods meant an unusual period of wage growth that was almost equal to the income from rents, dividends, and interest. Economists basing theories on data from the post war period argued that all have an equal chance to improve their financial position through steady hard work. We live, the myth insisted, in a political democracy and an economic democracy.
Piketty’s research has put that myth to rest and at the same time has set a challenge for those wishing to shape a new economy built on principles of fairness and sustainability.
The strength of Capital in the 21st Century is its analysis of the root causes of inequity in wealth distribution. Piketty also imagines possible mechanisms for adjustment, his preferred being a global progressive tax on capital assets. Theoretically this would work, though It would rely on transparency regarding reporting of assets and the cooperation of all nation states – so hard to achieve.
Peter Barnes proposes a more pragmatic approach as a starting point. In his new book, With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don’t Pay Enough, he suggests a tax on our commonly held assets such as atmosphere. Those using up that commons, environmental polluters for instance, would pay a tax into a fund for equal distribution to all citizens of a region.
His latest book is an evolution of Barnes’s thinking, starting in the 1970’s with Who Owns the Land. An author and entrepreneur, Barnes co-founded Working Assets (now Credo) and has written extensively on capitalism and the commons.
Barnes names Thomas Paine, as one of the influences on his thinking. In the 1797 pamphlet, Agrarian Justice, Paine proposes a “ground rent” on land, paid into a fund from which cash payments would be made to citizens when they reached twenty-one. Paine does not oppose private property, but he makes the following distinction:
Peter Barnes will discuss inequality of wealth distribution and ways to address it in a Schumacher Lecture titled “Economics for the Anthropocene.” Sunday, July 27th, 7:30PM at the American Institute for Economic Research, 250 Division Street, Great Barrington, Massachusetts. Seating is limited so pre-registration is required. Cost is $5 or 5 BerkShares. BerkShares Preferred.
The Lecture will be available online later this summer.
In the concluding section of his book, Thomas Piketty puts his hopes not in adoption of a single program, but rather in the combined actions of an informed citizenry, if we are to narrow the widening gap between rich and poor: