Thomas Piketty: Neo-Marxist OR Neoliberal Capitalist?

"Production is carried on for profit, not for use. There is no provision that all those able and willing to work will always be in a position to find employment; an "army of unemployed" almost always exists. The worker is constantly in fear of losing his job. Since unemployed and poorly paid workers do not provide a profitable market, the production of consumers' goods is restricted, and great hardship is the consequence. Technological progress frequently results in more unemployment rather than in an easing of the burden of work for all. The profit motive, in conjunction with competition among capitalists, is responsible for an instability in the accumulation and utilization of capital which leads to increasingly severe depressions." - Albert Einstein, in 'Why Socialism'


The immense buzz and controversy surrounding Thomas Piketty and his 700-page work, 'Capital in the Twenty-First Century', continues in both the national media as well as amongst bloggers and in the 'water cooler' conversations of many educated citizens. Alas, many of the takes on it are off mark and show again why an exclusively American perspective can't be trusted - any more than it can in the venues of political assassinations, national security (see e.g. the horrid blather enunciated this a.m. by faux liberal Bill Scher of 'liberal oasis',  who actually stated Snowden "couldn't prove concrete abuse by the NSA" and that we mustn't be "dismissive of authoritarianism") or economics. Indeed, it is in economics that perhaps the biggest distortions of all reside because too many of our countrymen are either uneducated in that area, or brain washed by the Neolib media. (See, e.g.
http://brane-space.blogspot.com/2011/09/economic-lies-distortions-and.html )


To remind readers, Piketty's tome methodically researched hundreds of years of French tax records - which are amongst the most detailed in the world - given the French bureaucracy was intent on meticulously documenting who was wealthy and how much they'd amassed since the French revolution. Clearly, the purpose was not to have a replay of that horrific historical spasm. Thus the French government is committed to ensuring the nation doesn't re-commence a benighted economic trajectory such as exhibited by 18th century France - which saw most of the one percent's heads lopped off in the guillotine.

With the assistance of Berkeley scholar Emmanuel Saez, Piketty's monograph also integrated 15 years of similar tax records from 30 other nations, including the U.S. In concert, the records disclosed the rich inevitably make out like bandits, even after major financial downturns. This is possible because the rate of return to wealth (r) inevitably exceeds the rate of growth (g) of the revived economy. Hence, the share of national income that labor receives as compensation is invariably lower than the share accruing to rentiers and speculators via investments, speculation. Because capital -rentier income is less equally distributed than work income (most Americans don't own stock shares), the wealthy prosper while the rest suck salt.

Worse, the phenomenon of inheritance - with little redistributed via estate taxes- ensures the wealthy keep their ill gotten gains.The U.S. itself didn't always have inherited wealth play such an immense role in inequality.  That didn't really take off until the Reagan Years and conservative think tanks changed the language - using the term "DEATH TAXES" instead of Estate Taxes. Too many dumbos spotted the word "death" - got stupid, and backed off proper taxation.

Piketty's data show that indeed, inherited wealth metastasized inequality because the scions of the wealthy can then park their capital in rentier venues: dividends, profits, capital gains, interest and so on- and just let it grow while they sit on their asses. As a result, the gaping inheritance disparity actually grows more gaping each year after the inheritances have been received. Combined with the tax disparity (job income taxed far more than investment income) the rich get richer every year.

Supporting Piketty's work, a 2011 study by Edward Wolff and Maury Gittleman found that the wealthiest 1 percent of families had inherited an average of $2.7 million from their parents. This is 447 times more money than the least wealthy group of people — those with wealth less than $25K — had inherited. In between the wealthiest and least wealthy groups, inheritance levels ran in exactly the direction you would expect: the wealthier a group of people, the more they had inherited. From this the more inequality could be forecast over time.

Despite all this, the reactionary Right media has classified Piketty as a  latter day "Marxist" (see, e.g. 'Inequality and the Fate Of Capitalism' in The National Review, by Scott Winship).   Winship writes, for example:


"One of Piketty's charts projects that after capital taxation, r will rise and exceed g, as it has for most of modern history, inspiring Piketty's fear of exploding wealth concentration. However, a less -celebrated figure projects that the pre-tax r will be lower  in the future than it is today. Piketty's post -tax projection leads to exploding wealth only because he has assumed that taxes on capital will disappear in the 21st century. Take away that assumption and economic growth rates will still exceed the after-tax return to wealth through mid-century."

Actually, Piketty doesn't assume taxes on capital will "disappear" only that they will continue to be ever lower in relation to taxes on labor - an idiotic inversion which feeds the inequality beast. Indeed, without any ability to foresee the overthrow of the Neoliberal capitalist system - including its political edifice - Piketty is quite justified is making his assumption. The earlier book, The Judas Economy - The Triumph of Capital and the Betrayal of Work (1997)  by William Wolman and Anne Colamosca, shows indeed that the Neoliberal state has consolidated since its writing. With no counter political force strong enough to displace it on the horizon, why not make such a projection  - given that even the large communist states (China, Russia) have gone the way of market capitalism?

The claim that removing the Piketty assumption shows "economic growth rates will exceed the after tax return to wealth by mid-century"  is also misplaced. Indeed, we've already passed Peak Oil (in 2005) so that the costs of every facet of the economy - driven by spiking commodities' costs, especially oil but also collateral costs therefrom -will drive us to a "losing wicket" in terms of economic growth. See also: www.dieoff.org

Thus, economic growth  by mid -century will be far into negative territory, probably minus ten percent a year or more, and this is likely a conservative estimate. It cannot be otherwise, given the extent to which high quality oil has supported the unusual  economic growth and no more high quality oil remains. See again the link above, in particular the sections to do with economics and energy!

Neo-Marxist Piketty? Really?


Let's get another perspective here, from a Frenchman (Pascal Emmanuel Gobry) who recently wrote an article on Piketty in the WSJ.  Gobry writes that Piketty's book never caused a similar sensation in France as it did in the U.S. and:

 

"The reason for this disparate reception is simple enough: What drives discussion and sales is controversy, and the idea that capitalism produces ever-increasing inequality and fundamentally corrodes the social order is controversial in the U.S. In France, it is the opposite of controversial—it is Gospel. Truly, no one is a prophet in his own land.

There is probably another reason why Mr. Piketty isn't as influential in France as he could be: He is a serious thinker."

Gobry goes on to elaborate further:


"In France, many famous economists sell books and appear on TV talk shows. What most of them have in common is the lack of a degree in economics or of any peer-reviewed publications in economics. I myself am no economist—but I have been introduced as one on a French news program. Mr. Piketty is an outstanding academic economist, which, in France, hurts his credibility as an economist.

It is an amusing reminder of the differences between France and the U.S. that, while Mr. Piketty's views put him well to the left on the American political spectrum, in France, he has sometimes sounded like a conservative. He opposed the last Socialist government's signature policy, the globally infamous 35-hour workweek, and he called for cutting payroll taxes. At bottom, Mr. Piketty remains that most familiar of characters in the policy debate: a neoliberal economist who sees many virtues in market forces but favors government redistribution to smooth out some of the market's excesses."

A Neoliberal economist? Whoa! Of course, this information dispatched many right wingers into a state of frothing hysteria, dismissing him then as a "Marxist useless imbecile masquerading as a conservative" -  as on hotair.com.  But anyone who's followed my blog posts on economics would see that any guy that opposes a 35 hour work week and calls for cutting payroll taxes - has to be a Neoliberal. The last is especially indicative, since it guts the very social contract that supports social insurance payments  and places the latter in the hands of political poltroons.

Recall here Henry Giroux's description of Neoliberalism's mandate:

As an ideology, it casts all dimensions of life in terms of market rationality, construes profit-making as the arbiter and essence of democracy, consuming as the only operable form of citizenship, and upholds the irrational belief that the market can both solve all problems and serve as a model for structuring all social relations. As a mode of governance, it produces identities, subjects, and ways of life driven by a survival-of-the fittest ethic, grounded in the idea of the free, possessive individual, and committed to the right of ruling groups and institutions to exercise power removed from matters of ethics and social costs...."

Well, refusing a 35-hour week (which would necessitate higher wages to compensate for shorter hours) and cutting payroll taxes - which foot the bill for social insurance - definitely plays into this.  Gobry again:

"Mr. Piketty is, in short, that increasingly rare thing: a pure product of the French meritocracy, the working-class child who went to public school, worked his way to an elite school and ended up in prestigious government service (he co-founded and led the government-run Paris School of Economics). This is the model that built France's postwar revival but now stands broken."

Hmmm......sounds markedly like the (Milton) Friedman school of economics .....that now also stands broken here in the U.S.

 

Gobry's final point is perhaps the most germane:

 

 

"Mr. Piketty is right about some things and wrong about others, but his worldview is hardly radical. It could even be embraced by someone on the right who is troubled by inequality and worries that enormous differences in wealth, if left unchecked, could undermine the social order.

 

Indeed, for all the huffing and puffing about Mr. Piketty's supposedly revolutionary ideas, that conservative insight might be his most lasting contribution to the American debate."

Something to think about!

See also:
http://www.smirkingchimp.com/thread/richard-eskow/56198/the-real-piketty-scandal-is-right-wing-deception

Somebody Is Lying Here - About Poverty and the Middle Class

Scene in Barbados - May, 1972, left: my aunt and cousin visit near a school where I taught in Peace Corps. Right: homes in the neighborhood I used to live. That was my encounter with poverty  - but chosen deliberately. 

It is a sad reflection that in a nation where competing interests are often engaged in memetic warfare, as well as PR battles, it is hard to tell the good guys from the bad. Well, check that....for those of us who've done independent research and are capable of critical thinking, it's not so hard. The recent Dept. of Energy report claiming there's no evidence that fracking contaminates water is a case in point. Look at who is doing the report, look at the extent of the government being co-opted by corporate-private agents, and the conclusion that this DOE malarkey is real emerges as bare bollocks (see also my skewering of it here: http://brane-space.blogspot.com/2013/07/the-doe-fracking-is-safe-for-water.html  )

Now it seems another battle over economic claims has emerged, from differing sources. At stake is the narrative for the next two elections, and whether the liberal side can even invoke the plundering of the middle class by the wealthiest, and the further degradation of the poor. If one side's researchers are correct, a particular duo from the (once liberal) Brooking Institution, then it's game over - basically for any Dem or near--liberal (not Neoliberal) running for office.

I became aware of this on reading the local rag's editorial ('Data Explodes Obama's Myth of a Disappearing Middle Class'), today and its  referencing a paper entitled:  "The exaggerated death of the middle class."   The authors,  Ron Haskins and Scott Winship, claimed that when the numbers are crunched with all of the relevant data included:

"the incomes of the bottom fifth of households actually increased by 26 percent, rather than declining by 33 percent. Those of the middle fifth increased by 37 percent, rather than by only 2 percent. There is no disappearing middle class in these data; nor can household income, even at the bottom, be characterized as stagnant, let alone declining. Even after 2000, estimates from the Congressional Budget Office (CBO) show the bottom 60 percent of households got 10 percent richer by 2009, the most recent year available."

Hmmmmm......did these bozos run this claim past those now raiding dumpsters and lined up at food kitchens because their food stamps and unemployment benefits have been cut? Have they asked the kids in those families, the kids crying themselves to sleep each night because their stomachs won't stop growling, keeping them awake?  Have they asked all those downsized before they were eligible for their pensions and now having to live on a meager Social Security benefit because they had to take it at age 62? Have they asked all those who are living in states where NO part of Obama care will be available to them, so that they will be ineligible for even the most basic care....given their pre-existing conditions, and other issues? Have they asked all those (such as featured on the PBS documentary 'Two American Families') who had their health benefits cut or removed entirely?

Now, counter this "finding" with the one reported in yesterday's Denver Post ('4 in 5 Adults Confront Poverty in Their Lifetime', p. 14A) and it's quite obvious both claims can't be true. You simply cannot have - by all the principles of logic - 4 in 5 adults of all classes facing poverty at some point, and also no stagnant wages or growing at the rate that Haskins and Winship claim.

According to the Post article:

"Although ethnic and racial minorities are more likely to live in poverty, race disparities in the poverty rate have narrowed substantially since the 1970s, census data show.

Economic insecurity among whites also is more pervasive than is shown in government data, engulfing more than 76% of white adults by the time they turn 60, according to a new economic gauge to be published next year in the Oxford University Press."

The Post article notes that "measured across all races" the risk of economic insecurity rises to 79% or nearly 4 in 5. Pardon me, but this indicates a nation of rising inequality and the degradation of most citizens in terms of their economic welfare. According to William Julius Wilson who specializes in race and poverty at Harvard University, quoted in the piece:

"It's time that America comes to understand that many of the nation's biggest disparities, from life expectancy to poverty are increasingly due to economic class position."

This is something that authors like Michael Parenti ('The Dirty Truth') have tried to educate us about for over 20 years. Parenti, for example, dug up arcane records - not easily available and not in the census - that disclosed that 96% of all wealth accruing to the silver spoons arrives via inheritance. That means these entitled spoiled types get a leg up on everyone else before the race even starts. Did the Brooking Bozos factor any of that into their computations?

The study reported by the Post (and to be published by Oxford Univ. Press) also notes that more than 19 million whites currently fall below the poverty line, which is still defined as $23,012 /yr. for a family of four. Of course, this is more than forty years old, takes no account of inflation, so that if the real poverty line was assigned, we'd likely see over 50 million fitting the category as opposed to only 19 million. Did the Brookings Bozos take that into account? Somehow, I doubt it!

The article goes on to note that while the census figures (and other gov't data) do give a snapshot of poverty, they don't capture the makeup of those who cycle in and out of poverty at different points I their lives - these might be the working poor (earning $7.25 at Mickey D's - not enough to live in a homeless shelter far less one's own apt.) or those white collared types downsized because of their age, and also cut off at the knees before they could collect pensions or health benefits.

If one only takes gov't census or other data into account he will find 12.6% of adults between 25 and 60 lived in poverty. But, when differential time data are integrated into the picture, taking into account intervals of being down and out, the figures increase to 4 in 10 (40%) and that is for living in poverty at least a year in their lives. The risks are particularly great for those between 35 and 55. For example, those between 35 and 45 had a 17 percent probability of encountering poverty in their lives.

The Oxford-published study predicts that by 2030, based on the current trend of widening income inequality, close to 85% of all working age adults in the U.S. will experience bouts of poverty.

According to Mark Rank, a professor at Washington University in St. Louis, who calculated the numbers:

"Poverty is no longer an issue of us versus them, it's an issue of 'us'. Only when poverty is thought of as a mainstream event, rather than a fringe experience that just affects blacks and Hispanics, can we really begin to build broader support for programs that lift people in need."

Sadly, the new Haskins and Winship study would have us continue to regard poverty and middle class decline as only a fringe experience, thereby taking social insurance program revisions off the table. Were the authors aware of this? Maybe, maybe not. But they certainly didn't seem to be aware that their methods of measuring income left them open to charges of statistical hijinks and manipulation much like the recent DOE study of the effects of fracking on water - which selectively excluded those depths of the Marcellus Shale wherein frack poisons would most likely be found.

We need to be aware that merely becomes some study arrives out of some institution with a name that echoes some gravitas, it still may not be worth donkey lickspittle.

As for me, have I ever encountered poverty? Yes, for four years - but that was deliberately chosen when I signed up for Peace Corps, to be paid $125 a month. And yes, I'd do it again, just to see how the other half of the planet lives!