“The Piketty Panic”: Out Of Ideas, Conservatives Are Terrified
“Capital in the Twenty-First Century,” the new book by the French economist Thomas Piketty, is a bona fide phenomenon. Other books on economics have been best sellers, but Mr. Piketty’s contribution is serious, discourse-changing scholarship in a way most best sellers aren’t. And conservatives are terrified. Thus James Pethokoukis of the American Enterprise Institute warns in National Review that Mr. Piketty’s work must be refuted, because otherwise it “will spread among the clerisy and reshape the political economic landscape on which all future policy battles will be waged.”
Well, good luck with that. The really striking thing about the debate so far is that the right seems unable to mount any kind of substantive counterattack to Mr. Piketty’s thesis. Instead, the response has been all about name-calling — in particular, claims that Mr. Piketty is a Marxist, and so is anyone who considers inequality of income and wealth an important issue.
I’ll come back to the name-calling in a moment. First, let’s talk about why “Capital” is having such an impact.
Mr. Piketty is hardly the first economist to point out that we are experiencing a sharp rise in inequality, or even to emphasize the contrast between slow income growth for most of the population and soaring incomes at the top. It’s true that Mr. Piketty and his colleagues have added a great deal of historical depth to our knowledge, demonstrating that we really are living in a new Gilded Age. But we’ve known that for a while.
No, what’s really new about “Capital” is the way it demolishes that most cherished of conservative myths, the insistence that we’re living in a meritocracy in which great wealth is earned and deserved.
For the past couple of decades, the conservative response to attempts to make soaring incomes at the top into a political issue has involved two lines of defense: first, denial that the rich are actually doing as well and the rest as badly as they are, but when denial fails, claims that those soaring incomes at the top are a justified reward for services rendered. Don’t call them the 1 percent, or the wealthy; call them “job creators.”
But how do you make that defense if the rich derive much of their income not from the work they do but from the assets they own? And what if great wealth comes increasingly not from enterprise but from inheritance?
What Mr. Piketty shows is that these are not idle questions. Western societies before World War I were indeed dominated by an oligarchy of inherited wealth — and his book makes a compelling case that we’re well on our way back toward that state.
So what’s a conservative, fearing that this diagnosis might be used to justify higher taxes on the wealthy, to do? He could try to refute Mr. Piketty in a substantive way, but, so far, I’ve seen no sign of that happening. Instead, as I said, it has been all about name-calling.
I guess this shouldn’t be surprising. I’ve been involved in debates over inequality for more than two decades, and have yet to see conservative “experts” manage to dispute the numbers without tripping over their own intellectual shoelaces. Why, it’s almost as if the facts are fundamentally not on their side. At the same time, red-baiting anyone who questions any aspect of free-market dogma has been standard right-wing operating procedure ever since the likes of William F. Buckley tried to block the teaching of Keynesian economics, not by showing that it was wrong, but by denouncing it as “collectivist.”
Still, it has been amazing to watch conservatives, one after another, denounce Mr. Piketty as a Marxist. Even Mr. Pethokoukis, who is more sophisticated than the rest, calls “Capital” a work of “soft Marxism,” which only makes sense if the mere mention of unequal wealth makes you a Marxist. (And maybe that’s how they see it: recently former Senator Rick Santorum denounced the term “middle class” as “Marxism talk,” because, you see, we don’t have classes in America.)
And The Wall Street Journal’s review, predictably, goes the whole distance, somehow segueing from Mr. Piketty’s call for progressive taxation as a way to limit the concentration of wealth — a remedy as American as apple pie, once advocated not just by leading economists but by mainstream politicians, up to and including Teddy Roosevelt — to the evils of Stalinism. Is that really the best The Journal can do? The answer, apparently, is yes.
Now, the fact that apologists for America’s oligarchs are evidently at a loss for coherent arguments doesn’t mean that they are on the run politically. Money still talks — indeed, thanks in part to the Roberts court, it talks louder than ever. Still, ideas matter too, shaping both how we talk about society and, eventually, what we do. And the Piketty panic shows that the right has run out of ideas.
By: Paul Krugman, Op-Ed Columnist, The New York Times, April 24, 2014
“We Built This Country On Inequality”: The Wealth Gap Didn’t Spring Up From Policy Gone Awry, It Is The Policy
I admit to tuning out most conversations surrounding income and/or wealth inequality in the United States. It’s not because I don’t find these conversations important; they are vital. The problem is that I always hear the issue of inequality situated around what has happened in the last thirty or forty years, which ignores the fact this is a nation built on inequality. The wealth gap didn’t spring up from policy gone awry—it is the policy. This country was founded on the idea of concentrating wealth in the hands of a few white men. That that persists today isn’t a flaw in the design. Everything is working as the founders intended.
The source of that inequality has changed, as the past thirty/forty years have been dominated by the financial class and rampant executive corruption, but the American economy has always required inequality to function. Even times of great prosperity, where the wealth gap decreased, inequality was necessary. The post-WWII period is notable for the lowest levels of inequality in the modern era, but the drivers of that prosperity (the GI Bill, construction of the highway system, low-interest home loans) deliberately left black people out, and the moments of robust public investment that have benefited racial minorities and women have always been followed by a resurgence of concern over government spending and “state’s rights.”
Our job, then, if we’re serious about forming a society of true equality, is to interrogate and uproot the ideologies that created the original imbalance. In other words, we can’t deal with income/wealth inequality without also reckoning with white supremacy and patriarchy.
So far, we haven’t done a very good job of that. Bryce Covert writes eloquently about the gender gap, while Matt Bruenig writes about the failure to address economic disparity along racial lines. Over at Salon, he says:
Although the Civil Rights Act, the landmark legislation which just reached its 50th anniversary, made great strides in desegregating the economy, economic discrimination is still widespread, and anti-discrimination legislation alone can never rectify the economic damage inflicted upon blacks by slavery and our Jim Crow apartheid regime.
He’s right, though I’d quibble with some of the other points in this piece. Later on, he says, “Even if racism were wiped out tomorrow and equal treatment became the norm, it would never cease being the case that the average white person has more wealth than the average black person.” Except that is racism. The persistence of inequality along racial lines is racism. It may seem to be a minor point, but it’s important in constructing a truer definition of racism, in order that we know what we’re fighting against. It’s important to remember that slavery was chiefly an economic enterprise that created a racial caste system out of necessity. Karen and Barbara Fields chart this history in their book Racecraft.
The larger point still remains, as Bruenig concludes:
Thus, those actually serious about righting the wrongs of enslavement and Jim Crow apartheid must support more drastic leveling efforts. Beefed up anti-discrimination, which is both necessary and good, will not be enough. Ideally, we could work towards reparations in the form of redistributing wealth along racial lines. With that an unlikely possibility though, we can at least think about ways to redistribute wealth more generally from those with wealth to those without it, something that would have a similar, albeit more attenuated, effect as reparations given who the wealthy and non-wealthy happen to be.
I would more than welcome a renewed discussion about reparations. It is, however, as Bruenig notes, a long shot. But there are other avenues to explore that would have a similar impact to reparations, like a jobs guarantee and universal basic income. Perhaps this is an opportunity to revisit A. Philip Randolph’s “Freedom Budget for All Americans.” But any conversation about inequality absent one of white supremacy (and patriarchy) isn’t one worth engaging.
By: Mychal Denzel Smith, The Nation, April 18, 2014
“Liberty, Equality, Efficiency”: What’s Good For The “One-Percent” Isn’t Good For America
Most people, if pressed on the subject, would probably agree that extreme income inequality is a bad thing, although a fair number of conservatives believe that the whole subject of income distribution should be banned from public discourse. (Rick Santorum, the former senator and presidential candidate, wants to ban the term “middle class,” which he says is “class-envy, leftist language.” Who knew?) But what can be done about it?
The standard answer in American politics is, “Not much.” Almost 40 years ago Arthur Okun, chief economic adviser to President Lyndon Johnson, published a classic book titled “Equality and Efficiency: The Big Tradeoff,” arguing that redistributing income from the rich to the poor takes a toll on economic growth. Okun’s book set the terms for almost all the debate that followed: liberals might argue that the efficiency costs of redistribution were small, while conservatives argued that they were large, but everybody knew that doing anything to reduce inequality would have at least some negative impact on G.D.P.
But it appears that what everyone knew isn’t true. Taking action to reduce the extreme inequality of 21st-century America would probably increase, not reduce, economic growth.
Let’s start with the evidence.
It’s widely known that income inequality varies a great deal among advanced countries. In particular, disposable income in the United States and Britain is much more unequally distributed than it is in France, Germany or Scandinavia. It’s less well known that this difference is primarily the result of government policies. Data assembled by the Luxembourg Income Study (with which I will be associated starting this summer) show that primary income — income from wages, salaries, assets, and so on — is very unequally distributed in almost all countries. But taxes and transfers (aid in cash or kind) reduce this underlying inequality to varying degrees: some but not a lot in America, much more in many other countries.
So does reducing inequality through redistribution hurt economic growth? Not according to two landmark studies by economists at the International Monetary Fund, which is hardly a leftist organization. The first study looked at the historical relationship between inequality and growth, and found that nations with relatively low income inequality do better at achieving sustained economic growth as opposed to occasional “spurts.” The second, released last month, looked directly at the effect of income redistribution, and found that “redistribution appears generally benign in terms of its impact on growth.”
In short, Okun’s big trade-off doesn’t seem to be a trade-off at all. Nobody is proposing that we try to be Cuba, but moving American policies part of the way toward European norms would probably increase, not reduce, economic efficiency.
At this point someone is sure to say, “But doesn’t the crisis in Europe show the destructive effects of the welfare state?” No, it doesn’t. Europe is paying a heavy price for creating monetary union without political union. But within the euro area, countries doing a lot of redistribution have, if anything, weathered the crisis better than those that do less.
But how can the effects of redistribution on growth be benign? Doesn’t generous aid to the poor reduce their incentive to work? Don’t taxes on the rich reduce their incentive to get even richer? Yes and yes — but incentives aren’t the only things that matter. Resources matter too — and in a highly unequal society, many people don’t have them.
Think, in particular, about the ever-popular slogan that we should seek equality of opportunity, not equality of outcomes. That may sound good to people with no idea what life is like for tens of millions of Americans; but for those with any reality sense, it’s a cruel joke. Almost 40 percent of American children live in poverty or near-poverty. Do you really think they have the same access to education and jobs as the children of the affluent?
In fact, low-income children are much less likely to complete college than their affluent counterparts, with the gap widening rapidly. And this isn’t just bad for those unlucky enough to be born to the wrong parents; it represents a huge and growing waste of human potential — a waste that surely acts as a powerful if invisible drag on economic growth.
Now, I don’t want to claim that addressing income inequality would help everyone. The very affluent would lose more from higher taxes than they gained from better economic growth. But it’s pretty clear that taking on inequality would be good, not just for the poor, but for the middle class (sorry, Senator Santorum).
In short, what’s good for the 1 percent isn’t good for America. And we don’t have to keep living in a new Gilded Age if we don’t want to.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 9, 2014
“An Epidemic Of Plutocrat Self-Pity”: Filthy Rich But Secretly Terrified, Inside The 1 Percent’s Sore-Winner Backlash
What explains the toxic mélange of entitlement and shame that’s driving the raging 1 percent sore-winner backlash? From Tom Perkins comparing the ultra-rich to Jews during “Kristallnacht,” to tycoon and newspaper-destroyer Sam Zell insisting “the top 1 percent work harder,” to investment banker Wilbur Ross proclaiming that “the 1 percent is being picked on for political reasons,” there’s an epidemic of plutocrat self-pity afoot. Just last week ex-CEO of Morgan Stanley John Mack told the media to “stop beating up on” CEOs Jamie Dimon and Lloyd Blankfein after they got obscene raises from JPMorgan Chase and Goldman Sachs.
The sore winner backlash is odd timing. There’s no longer any real movement to hike taxes on their income or their wealth, both of which are at all-time highs. President Obama has said an increase in tax rates is “off the table.” There’s no more discussion of the “Buffett Rule,” named for the Berkshire-Hathaway oracle who famously suggested his secretary should no longer pay higher rates than her boss.
Almost nobody talks about ending the “carried interest” loophole that lets hedge fund managers pay a shamefully low rate on much of what should be considered income; instead there’s a “boom in trusts passing carried interest to heirs,” the Wall Street Journal reports. Yes, they’ve figured out a way to pass that unfair advantage onto their heirs through new estate-tax dodges. Sadly, Occupy Wall Street has fizzled, so they can even enjoy Zuccotti Park unaccosted.
So why all the whining now? I read Kevin Roose’s buzzy “I crashed a secret Wall Street society” piece Monday morning looking for insight. You should read it if you haven’t. It’s a fun hate-read. You’ll come away thinking, if you don’t already, that a lot of these people are monsters.
Apparently the secret fraternity Kappa Beta Phi gathers the titans of Wall Street at the St. Regis once a year for a gala that celebrates their wealth and power and mocks the rest of us. New inductees to the fraternity are charged with putting on a variety show to entertain the long-tenured. The evening features all the standard bad behavior common to male societies, from sports teams to military units to the boys of the Bohemian Grove. Cross dressing? Check.
After cocktail hour, the new inductees – all of whom were required to dress in leotards and gold-sequined skirts, with costume wigs – began their variety-show acts.
Misogyny and homophobia? Check.
The jokes ranged from unfunny and sexist (Q: “What’s the biggest difference between Hillary Clinton and a catfish?” A: “One has whiskers and stinks, and the other is a fish”) to unfunny and homophobic (Q: “What’s the biggest difference between Barney Frank and a Fenway Frank?” A: “Barney Frank comes in different-size buns”).
Mocking the loser-outsiders, who paradoxically make their great wealth possible? Check.
One of the last skits of the night was a self-congratulatory parody of ABBA’s “Dancing Queen,” called “Bailout King.”
When Roose was discovered, he was ejected from the ballroom, and the story wound up in his new book, “Young Money,” a portrait of eight entry-level Wall Street traders, which came out today. The Kappa Beta Phi story was excerpted in New York magazine.
What the excerpt captured was the insularity and paranoia of plutocrats who band together to protect themselves from mostly imagined social approbation and self-doubt. As Paul Krugman has argued, they aren’t like the titans of yore who made things; they “push money around and get rich by skimming some off the top as it sloshes by.” They’ve gotten insanely wealthy mainly by rigging the rules of the game to privilege the world of finance, and it’s no wonder they’re worried the rest of us will someday figure that out.
The good news from Roose’s work? Among younger Wall Streeters, there’s more doubt than you might expect. The percentage of Ivy Leaguers going into investment banking straight out of college is dropping. Before it faded, Occupy Wall Street had an impact on some of his young subjects, Roose reveals. The bad news is, the people who have doubts about the morality of their enterprise, and about their own privilege, tend to leave, so that those who remain are particularly entitled and/or deluded.
Still, that nagging doubt helps explain the backlash. They project in order to protect themselves. Their self-defense gets ever louder.
Last week Tom Perkins doubled down on his plutocrat paranoia at the Commonwealth Club, insisting the more money you have, the more votes you should get. He later “clarified” his remarks by saying he was only warning about the dangers of the 50 percent of the country that doesn’t pay taxes nonetheless having the right to vote. It was an uglier version of Mitt Romney’s 47 percent remark. Neither Romney nor Perkins nor their many defenders seem to realize that the people who pay no taxes are either retirees, or low-wage workers who are paid so little they’re not taxed.
These men who rigged the rules of the game to make themselves obscenely wealthy are trying to convince themselves, and us, that they’re entitled to those rewards. If only there were a genuine political movement triggering their paranoia. Instead, it’s preemptive, a product of their buried guilt and practiced entitlement.
By: Joan Walsh, Editor at Large, Salon, February 18, 2014
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