As I write this, Thomas Piketty’s book “Capital in the Twenty-First Century” is #1 on Amazon. It’s been deemed an “important book” by a bunch of smart people. Why not? It validates many of the preconceived notions progressives have about capitalism: Inequality is growing. Mobility is shrinking. Meritocracy is dead. We all live in a sprawling zero-sum fallacy. And so on.
The book, as you probably know, has also sparked nonstop conversation in political and media circles. Though it’s best to let economists debunk Piketty’s methodology and data, it is worth pointing out that liberal pundits and writers have not only enthusiastically and unconditionally embraced a book on economics, or even a run-of-the-mill leftist polemic, but a hard-left manifesto.
Now, I realize we’re all supposed to accept the fact that conservatives are alone in embracing fringe economic ideas. But how does a book that evokes Marx and talks about tweaking the Soviet experiment find so much love from people who consider themselves rational, evidence-driven moderates?
Put it this way: It’s unlikely that Democrats would have praised a book like this 20 years ago – or even 10. Nowadays, Jack Lew – better known as the Treasury Secretary of the United States of America - takes time to chit chat with the author.
Piketty, a professor at the Paris School of Economics, argues that capitalism allocates resources efficiently but unfairly apportions income. And the excessive accumulation of wealth by the one percent – nay, the .01 percent — is not only corrupt, but an inequality that makes democracy unsustainable. And it’s going to get worse. So only a massive transfer of wealth could make our nation whole again.
Here is his thesis, boiled down:
When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.
I’d ask if there are any historical examples that prove that skewed wealth in a generally prosperous nation is more damaging to its democratic institutions than the reallocation of wealth by a coercive state. But then I realize, as with any Marxist revival, the answer is: This time we’re gonna do it right!
Judging from the political rhetoric of the day, liberals already believe that higher taxes on the wealthy can create more opportunity for the poor and middle class. While some of us would argue that the nexus between high taxes and economic growth is tenuous, debating whether the top marginal tax rate should be 25 or 33 or 35 percent is well within the boundaries of a centrist debate. But that’s not Piketty’s position.
Here’s how Daniel Shuchman put it in a recent Wall Street Journal review:
Mr. Piketty urges an 80% tax rate on incomes starting at “$500,000 or $1 million.” This is not to raise money for education or to increase unemployment benefits. Quite the contrary, he does not expect such a tax to bring in much revenue, because its purpose is simply “to put an end to such incomes.”
Imagine there’s no rich people. You can say he’s a dreamer, but he’s not the only one.
Piketty also advocates for a 60-percent tax rate on those making $200,000 and an additional worldwide tax on wealth. Do his fans want to eliminate high-wage earners to create a fairer society? Is $1 million too low? How about anyone making $5 million a year? Or $10 million? Does that sound crazy? Well, here’s piece from a well-read pundit advocating for “confiscatory taxation.” We’ll work our way to Piketty’s position.
Fact is, the tax hikes offered by even the most progressive elected Democrats wouldn’t alter the dynamics of “fairness” in a society with a $16 trillion GDP. To put it into perspective, ending Bush-era cuts may net the treasury $80 billion yearly. If Piketty’s clairvoyance is to be trusted, and I’m assured it can — we will need to transfer trillions of dollars from one class to another just save our society from disaster. And none of this, according to the author, will destroy economic growth.
Like many progressives, Piketty doesn’t really believe most people deserve their wealth anyway, so confiscating it presents no real moral dilemma. He also argues that we can measure a person’s productivity and the value of a worker (namely, low-skilled laborers), while at the same time he argues that other groups of workers (namely, the kind of people he doesn’t admire) are bequeathed undeserved “arbitrary” salaries. What tangible benefit does a stockbroker or a Kulak or an explanatory journalist offer society, after all?
Sounds familiar. What is to be done? Do we cap salaries and slot everyone into their proper place, like unions? How do we measure the productivity of a CEO or a bestselling author? Who decides what measurements we should use to determine the relative worth of even less tangible work? A government official? A council of the people? Maybe a quorum of trusted economists?
The thing is, some of us still believe that capitalism fosters meritocratic values. Or I should say, we believe that free markets are the best game in town. Not that long ago, this was a nearly universal position. A lot of people used to believe that even the disruptions of capitalism — the “caprices of technology” as Piketty dismisses them— that rattle “social order” also happen to generate mobility, dynamism and growth. Today this probably qualifies as Ayn Rand-style extremism.
Then again, I haven’t read Ayn Rand since college (or maybe it was high school) but if I still believed she was the most prophetic writer of her generation, I might feel compelled to defend her ideas. But Piketty’s utopian notions and authoritarian inclinations — ones that I’m pretty sure most Americans (and probably most Democrats) would still find off-putting — do not seem to rattle the left-wing press one bit. While Piketty’s economic data might be worth studying and debating, his political ideas are unworthy of discussion.
Despite the extremism of his positions, Piketty has already become a folk hero to inequality alarmists everywhere. So if his popularity tells us anything, it’s that many liberal “thought leaders” have taken a far more radical position on economic policy than we’re giving them credit for.
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