Feb
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February 5, 2015 | Leave a Comment
Class 3: Income Inequality – Does it really hurt that much?
After finishing the readings, I find myself unable to generate much productive ideas from the information I gained from the readings. This is mostly due to my need of broader explorations into the issue of the effects of income inequality in today’s societies, the current conditions of the lives of people not belonging to the one percent, and Thomas Piketty’s proposal to counter income inequality. The question that needs to be considered is whether income inequality is really so undesirable, especially in today’s society that is so much different since the last so called “gilded age”, and whether Piketty’s proposal to combat this supposed evil really fail to be a “blueprint of action”.
While the authors of doesn’t seem to like Piketty’s plan of action against income inequality, they appreciate his work in presenting and comparing the issue of income inequality between the top one percent and the rest of the population over a long stretch of time and space. However, the way in which the authors present Piketty’s work lacks exploration into the effects of income inequality in our generation. The authors seems to only be interested in presenting a general agreement with Piketty’s opinion that income inequality is undesirable without giving details as to why that is so. Piketty’s work shows income inequality to be a problem due to the rate of return on capital is greater than the growth rate of economy, and claims that such phenomenon hurts the public as most of the wealth are collected by ones who inherited great wealth and thus earns great amount of money through capital investment, leaving others little to gain. That is as far as the authors of the readings take the readers in terms of presenting evidence of income inequality as undesirable. To me, there needs to be more clear examples of how the society is hurt by income inequality. From how I see it, income inequality isn’t always negative for people not belonging to the top one percent. Take the Chinese society for example, it also houses the similar problem of large gap between the earnings of the top one percent compared to the rest of the population and the inheritance of that wealth into future generations. Yet, that did not stop the greater parts of the population from improving their standards of living as millions are lifted out of poverty in the past years. Until the authors can provide more clarity on the negative aspects of income inequality, they will have a hard time convincing someone with my point of view.
On the other hand, I find Paul Krugman, author of The New York Review of Books, to share a somewhat pessimistic view of the public’s ability to react to income inequality with Piketty. According to Krugman and Piketty, the United States is going through the same path as France’s third republic. The wealthy are using their wealth to control public policies and discourses, and effectively blinding the public to the issue of income inequality. The authors attribute the public’s inactivity towards income inequality to this particular reason. I find that to be hard to believe, as the social conditions today differ dramatically from France’s third republic, which existed for a 70 year period between 1870 to 1940. In today’s world, citizens are easily exposed to a great amount of information, and is therefore more knowledgeable about all kinds of issue. It would only seem natural that the citizens are aware of income inequality. I believe that if people didn’t take action against income inequality, it is because they don’t deem it to be that damaging towards their lives and not because they don’t realize the presence of the issue.
A most interesting aspect of the readings is when the authors finally begin to come against Piketty. The criticism for Piketty’s proposal of a global progressive tax on the wealthy is most visible from reviews of his book by The Economist. While I agree with Economist’s criticism of Piketty’s progressive tax to be overly straight forward and could backfire by hurting the economy as a whole by impeding investments, I am also intrigued by the other solutions brought up by the articles. The article would have been much more interesting and convincing if only the authors can add descriptions of these method mentioned. Yet, now I am stranded with terms like “baby bonds” and “government top-ups of private savings accounts” that I have no knowledge about. If a more general audience is to agree with this article, the author really should try to clarify how his proposed methods is a better solution than progressive taxing.
After reading all of the reviews of the book from the reading, I have come to wonder about the accuracy of Piketty’s data. I am sure that Piketty has done lots of work to dig up income records that formed the basis for his work, but what about the incomes that failed to leave records? As people today commonly realize, there are a great number of illegal immigrants living among us. Now, I don’t deny the fact that they work hard to keep up their life here, but they do cause a certain degree of problem for this particular issue. Piketty takes a large amount of his data from tax records, but there are part of illegal immigrants who doesn’t pay income tax by receiving cash payments from their employers. This is not me believing in the myth that illegal immigrants don’t pay taxes, but a fact I have observed in some illegal immigrant workers today. Having that in mind, I can’t help but wonder how great is the amount of the undocumented data? To what degree is Picketty’s data accuracy affected by these missing records? Perhaps the number will not be that great , but it would definitely negatively impact the accuracy of Picketty’s claims.
While there might be problems with Picketty’s book, it is still a good read, as the authors of the readings suggested. To say the very least, it raised public awareness in the unsung issue of income inequality between average citizens and the top one percent. Though I, like the authors of the readings, believe the book has room for improvement, there is no denying the hard work Picketty much have done to create it. I just hope that the authors of the readings have taken more care in their details to assess the book through their writings.
