Monday, 30 June 2014

Pernickety about Piketty

In preparation for this weekend's stag do in Brussels, I've been reading Thomas Piketty's Capital in the 21st Century. I don't want to find myself blind-drunk in a nightclub chatting to some Eurocrat and be unable to remember whether return on capital (r) is greater than economic growth (g) or the other way round. How embarrassing would that be?

So that I don't get confused, I have invented the handy mnemonic "rum is better than gin". I imagine this will soon be adopted by economics teachers the world over. 

Piketty's main argument is that the rich get richer because having money earns you more money than merely working. This has been the case throughout the history of modern capitalism except for a brief blip during the Twentieth Century when the wealthy nations felt guilty about all the suffering they had caused during the two World Wars and briefly introduced some laws that redistributed wealth. Since the 1970s things have been returning to the status quo - money goes to money and screw the poor.

This is all explained in the introduction and then he presents several hundred pages of evidence. This is remarkable because it is something that no economist has ever thought to do before (even all the raw data is available online). Smith, Marx and Keynes all wrote enormous tracts on political economy with no evidence whatsoever. (And don't get me started on the Marginalists and their neoliberal apologist successors). Some of the evidence has been disputed by the Financial Times, but nothing which affects the central premise.

Spoiler Alert! The following paragraph contains an equitable solution for the future of humanity: 

Piketty concludes that the only way to change things is to tax the wealthy. Actually take their money and spend it on things that benefit everybody.

And that is the message I will be taking to Brussels... on a stag do... during the World Cup... I'm sure everybody will be hanging on my every word.



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