Feb
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Mr. Piketty – Post #3 – Josh Hirth
February 4, 2015 | Leave a Comment
In response to Mr. Piketty’s theories I am inclined to just respond by saying, as I have done in a previous blog post, that income inequality is an unintended consequence of capitalism. From a research perspective I completely understand the logic that guides his theories. How can we live in a society where a fraction of a fraction of a percent controls the majority of a country, or even the worlds, wealth? And if his statistics are accurate, this trend seems to be worsening at a very detrimental rate.
However, if this data is brought down to an individual level to lets say a future (far more successful and affluent) Josh Hirth, his ideas seem far less reasonable. This fictitious, Josh Hirth, grew up in a fairly modest home in the suburbs, went to city college on a scholarship, and worked extraordinarily hard so that he can move up his socioeconomic position. Josh was lucky enough to get a job at Goldman Sachs upon graduation and after 15 years there he left to start his own hedge fund, and is now one of the wealthiest Wall Street tycoons. So much so, that his family has formed a dynasty of sorts with his children and grandchildren all following in his footsteps. Would it really be reasonable to go to this self made Josh Hirth and say as pointed out by R.A and following Mr. Piketty’s recommendations that “governments step in now, by adopting a global tax on wealth” thereby reducing Josh Hirth’s wealth substantially. Is that really a free market capital economy?
The thing that impresses me most about Mr. Piketty’s work is overwhelming competency in statistical analysis. Specifically his comparison of pre war European wealth with modern day wealth. According to Paul Krugman, “In France, Piketty shows, the inherited share of total wealth dropped sharply during the era of wars and postwar fast growth; circa 1970 it was less than 50 percent. But it’s now back up to 70 percent, and rising.” This represents a problem because of the threat of renewed elite families, whose political power may allow them to control governmental decisions and by doing that destroy the democratic freedoms we rely on.
In response to this statement in the article entitled A Modern Marx “In doing so, he [ Mr. Piketty] shows that the period from about 1914 to the 1970s was an historical outlier in which both income inequality and the stock of wealth (relative to annual national income) fell dramatically. Since the 1970s both wealth and income gaps have been rising back towards their pre-20th-century norms.” I am inclined to argue that absurd wealth is expanding to pre-20th century numbers, for completely different reasons. And that today we live in a completely different society, with freedoms our predecessors could have only dreamt of, and with access to education and financial mobility that brings thousands of immigrants to both Europe and America on an annual basis. Wealth today, for the most part, is driven by the advancement of technology and those that are smart enough to capitalize on it, not a corrupt Bourgeoisie.
After looking at the charts that John Cassidy put together it is pretty much undeniable that the state of income inequality is at the levels of pre-war Europe and America. The U-shape curve shown on the graphs are truly problematic, because it shows how we are going in the wrong direction in terms of income inequality. However, is the redistribution of wealth really the answer? While Piketty work seems to be truly revolutionary, only time will tell if his conclusions drawn are the best solutions to this growing problem.
