Wednesday, May 07, 2014
Margaret Wente's "Takedown" of Thomas Piketty
Marget Wente’s purported “takedown” of Thomas Piketty’s Capital in the Twentieth Century ( "Who Cares About Inequality? Wonks") Globe and Mail, May 3, p. F2), while anti-intellectual in tone, reminds me of the philosophical arguments made against idealist theories of equality decades ago. Friedrich Hayek railed against what he called the “mirage” of social justice, since "the results of the individual's efforts are necessarily unpredictable, and the question as to whether the resulting distribution of incomes is just has no meaning" (The Constitution of Liberty, ch.6). Likewise, Robert Nozick pointed out that any attempt to build a just society around a preferred distribution would be intolerable, because “liberty upsets patterns”.
Like Wente, both Hayek and Nozick thought that inequality was a problem only in some people’s heads. Get rid of the egalitarians and their misplaced notions, and you get rid of the problem. But their arguments don’t address a more recent line of thinking about inequality, which gives it a different ontological status from simply being an expression of envy or of subjective notions about "justice". Fred Hirsch's Social Limits to Growth (1977) analyzed society's declining ability to simply buy social peace and legitimacy through growth in terms of the growing importance of inherently scarce positional goods. Richard Wilkinson and Pickett’s The Spirit Level (2009) was written by two social epidemiologists who found stronger correlations between the degree of inequality and various social ills than existed between those ills and any other social determinant. Their conclusion: "societies with more equal distribution of incomes have better health, fewer social problems such as violence, drug abuse, teenage births, mental illness, obesity, and others, and are more cohesive than ones in which the gap between the rich and poor is greater."
Robert Frank (The Darwin Economy: Liberty, Competition, and the Common Good , 2011) has found that it is indeed getting harder and harder to join the middle class. His views are supported by the researches and arguments of prominent economists like Tony Atkinson, Joseph Stiglitz, Robert Reich and Paul Krugman. Now, Thomas Piketty has tied a lot of this together and looked at several national economies over centuries and has demonstrated convincingly that there is an inherent tendency within capitalism for the return from wealth to grow faster than the return from work. This "rich-get-richer" dynamic is the norm in capitalism. America in the 18th and 19th centuries (which because of the abundance of land and higher productivity had much lower capital/income ratios) and in the early-mid 20th century (because of Depression and war) was an aberration; it is now reaching capital/income ratios more like those that have been found historically in Europe. Piketty expects global capital/income ratios to reach about 6.5 in this century --barring another cataclysm. That is why he argues for a global wealth tax as the best long-run solution, even if that is not practicable in the short term.
Even in societies where basic living standards and a full panoply of civil and political rights have been achieved, much depends upon the assumptions of upward mobility and equal opportunity. This is why Piketty threatens to turn conservative views upside down, because he shows once again that the problem may not be the virus of class consciousness or socialist attitudes coming from Europe, but the actual economic dynamic underpinning them. If that is true, then the baneful consequences of inequality will be felt here as well, whether we like to think about them or not.