The New York Times’ Paul Krugman recently reviewed Thomas Piketty’s Capital in the 21st Century, which argues that we’re on the road back to “patrimonial capitalism,” dominated by inherited wealth. Krugman’s column today, Wealth Over Work:
It seems safe to say that “Capital in the Twenty-First Century,” the magnum opus of the French economist Thomas Piketty, will be the most important economics book of the year — and maybe of the decade. Mr. Piketty, arguably the world’s leading expert on income and wealth inequality, does more than document the growing concentration of income in the hands of a small economic elite. He also makes a powerful case that we’re on the way back to “patrimonial capitalism,” in which the commanding heights of the economy are dominated not just by wealth, but also by inherited wealth, in which birth matters more than effort and talent.
To be sure, Mr. Piketty concedes that we aren’t there yet. So far, the rise of America’s 1 percent has mainly been driven by executive salaries and bonuses rather than income from investments, let alone inherited wealth. But six of the 10 wealthiest Americans are already heirs rather than self-made entrepreneurs, and the children of today’s economic elite start from a position of immense privilege. As Mr. Piketty notes, “the risk of a drift toward oligarchy is real and gives little reason for optimism.”
Indeed. And if you want to feel even less optimistic, consider what many U.S. politicians are up to. America’s nascent oligarchy may not yet be fully formed — but one of our two main political parties already seems committed to defending the oligarchy’s interests.
Despite the frantic efforts of some Republicans to pretend otherwise, most people realize that today’s G.O.P. favors the interests of the rich over those of ordinary families. I suspect, however, that fewer people realize the extent to which the party favors returns on wealth over wages and salaries. And the dominance of income from capital, which can be inherited, over wages — the dominance of wealth over work — is what patrimonial capitalism is all about.
To see what I’m talking about, start with actual policies and policy proposals. It’s generally understood that George W. Bush did all he could to cut taxes on the very affluent, that the middle-class cuts he included were essentially political loss leaders. It’s less well understood that the biggest breaks went not to people paid high salaries but to coupon-clippers and heirs to large estates. True, the top tax bracket on earned income fell from 39.6 to 35 percent. But the top rate on dividends fell from 39.6 percent (because they were taxed as ordinary income) to 15 percent — and the estate tax was completely eliminated.
Some of these cuts were reversed under President Obama, but the point is that the great tax-cut push of the Bush years was mainly about reducing taxes on unearned income. And when Republicans retook one house of Congress, they promptly came up with a plan — Representative Paul Ryan’s “road map” — calling for the elimination of taxes on interest, dividends, capital gains and estates. Under this plan, someone living solely off inherited wealth would have owed no federal taxes at all.
This tilt of policy toward the interests of wealth has been mirrored by a tilt in rhetoric; Republicans often seem so intent on exalting “job creators” that they forget to mention American workers.
* * *
In fact, not only don’t most Americans own businesses, but business income, and income from capital in general, is increasingly concentrated in the hands of a few people. In 1979 the top 1 percent of households accounted for 17 percent of business income; by 2007 the same group was getting 43 percent of business income, and 75 percent of capital gains. Yet this small elite gets all of the G.O.P.’s love, and most of its policy attention.
Why is this happening? Well, bear in mind that both Koch brothers are numbered among the 10 wealthiest Americans, and so are four Walmart heirs. Great wealth buys great political influence — and not just through campaign contributions. Many conservatives live inside an intellectual bubble of think tanks and captive media that is ultimately financed by a handful of megadonors. Not surprisingly, those inside the bubble tend to assume, instinctively, that what is good for oligarchs is good for America.
As I’ve already suggested, the results can sometimes seem comical. The important point to remember, however, is that the people inside the bubble have a lot of power, which they wield on behalf of their patrons. And the drift toward oligarchy continues.
The Teabaggers in their colonial constumes who oppose taxes and regulations on the banksters of Wall Street and corporations, and who support the Plutocrats of the “Kochtopus” would be anathema to the Founding Fathers and the principles on which this country was founded. Stephen Budiansky’s Liberal Curmudgeon explained in 2010:
If there was one thing the Revolutionary generation agreed on — and those guys who dress up like them at Tea Party conventions most definitely do not — it was the incompatibility of democracy and inherited wealth.
With Thomas Jefferson taking the lead in the Virginia legislature in 1777, every Revolutionary state government abolished the laws of primogeniture and entail that had served to perpetuate the concentration of inherited property. Jefferson cited Adam Smith, the hero of free market capitalists everywhere, as the source of his conviction that (as Smith wrote, and Jefferson closely echoed in his own words), “A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural.” Smith said: “There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death.”
The states left no doubt that in taking this step they were giving expression to a basic and widely shared philosophical belief that equality of citizenship was impossible in a nation where inequality of wealth remained the rule. North Carolina’s 1784 statute explained that by keeping large estates together for succeeding generations, the old system had served “only to raise the wealth and importance of particular families and individuals, giving them an unequal and undue influence in a republic” and promoting “contention and injustice.” Abolishing aristocratic forms of inheritance would by contrast “tend to promote that equality of property which is of the spirit and principle of a genuine republic.”
Others wanted to go much further; Thomas Paine, like Smith and Jefferson, made much of the idea that landed property itself was an affront to the natural right of each generation to the usufruct of the earth, and proposed a “ground rent” — in fact an inheritance tax — on property at the time it is conveyed at death, with the money so collected to be distributed to all citizens at age 21, “as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property.”
Even stalwart members of the latter-day Republican Party, the representatives of business and inherited wealth, often emphatically embraced these tenets of economic equality in a democracy. I’ve mentioned Herbert Hoover’s disdain for the “idle rich” and his strong support for breaking up large fortunes. Theodore Roosevelt, who was the first president to propose a steeply graduated tax on inheritances, was another: he declared that the transmission of large wealth to young men “does not do them any real service and is of great and genuine detriment to the community at large.”
As I’ve said many times, this is not your father’s GOP. These are radical extremists who prefer a serfdom under a Corporatocracy of Plutocrats than a democratic Republic of, by and for the people.
Hi Donna,
Do you have a study that says that conservatives work less than liberals?
The last contention like this was charitable giving.
Thuckmeister, since you were awake at 3:30 am, you certainly have had time to ponder the question I’ve been asking you:
Is it fraudulent (or, if you prefer, dishonest), using a pseudonym, to refer to yourself in the third person, giving the false impression that you are not the person to whom you’re referring?
I don’t have a study about that but I do observe a lot of conservative pundits and operatives, whose main occupations appear to be sitting in a comfortable chair and yapping (into a phone, on TV or radio, and of course on the internet at all hours of the day) and who do love to go on and on about how poor people would benefit from some hard labor.
As for charitable contributions, conservatives should subtract that which they lavish upon their fancy megachurches and then we’ll do a fair comparison.
“As for charitable contributions, conservatives should subtract that which they lavish upon their fancy megachurches and then we’ll do a fair comparison.”
Donna, it still wouldn’t be a fair comparison. You’d also have to subtract out the gazillions they give to right-wing think tanks, constituted as “charities,” that concoct their talking points.
Right wingers do have an impressive work ethic. For other people, that is.
Your point on people selecting leisure to improve the quality of their life would be entirely valid if government policies were neutral on that decision. But, that’s the whole point of this debate. Piketty is trying to put forth a falsehood, that taxation does not affect labor supply.
We now know that taxation has huge effects on labor supply and thus job creation and economic growth. And, not just taxation, regulation and welfare policies.
Higher tax levels cause people to join the workforce later, leave it earlier, exert less effort, develop their human capital at a slower pace and rejoin the workforce at a slower pace. It causes second wage earners in a household to be less likely to join the workforce and when they do, to have lower incomes relative to the first wage earner.
All the things you see in France relative to the USA from 1980 forward.
You’re still evading my question from a prior comment:
Is it fraudulent (or, if you prefer, dishonest), using a pseudonym, to refer to yourself in the third person, giving the false impression that you are not the person to whom you’re referring?
For a guy who worships work so much, Thucydides sure has a lot of leisure time to spend on the internet. Why doesn’t he follow that hard work ethic he wants to impose on others and get a job?
No, reduction in work hours aren’t an improvement in the quality of life. You have to understand the dynamic of what is happening. Spending more time unemployed places you at all kinds of risks. Just look at the article on this blog for the long term unemployed.
At peak, in 2001, we had 7 million jobs open. We now only have 4 million open. The number of open jobs and the speed at which they are filled define your economic health. Any reduction in openings or fill velocity reduces the number of hours the average adult works.
We are suffering from both right now.
Quality of life is also reflected in population growth. People flock to countries that can improve their quality of life. USA population growth killed France’s.
First, you’re still evading my question from a prior comment:
Is it fraudulent, using a pseudonym, to refer to yourself in the third person, giving the false impression that you are not the person to whom you’re referring?
Second, saying, without qualification, “no, reduction in work hours aren’t an improvement in the quality of life” is idiotic. Leisure time is subject to the rules of marginal utility just like anything else. Take a single mother of young children, for example. For her, reduced work hours are huge in terms of quality of life. For a 50 something blue collar worker who’s starting to feel the aches and pains of old age, reduced work hours also would be huge. You’re really kind of an idiot. You can’t answer a straightforward question that I’ve now asked three times (see above), and your analytical skills are abysmal. You’ll basically believe anything the right wing hacks tell you to believe. You’d do well to remember the old quote (from Voltaire I believe): “Those who can make you believe absurdities can make you commit atrocities.”
The results for France were even worse. The average annual work hours for France collapsed from 1800 hours per year in 1980 to less than 1500. So, their growth in job creation wasn’t really 25%, it was about 10 percent.
So, workers saw a huge improvement in their quality of life through the reduction in work hours, and you see that as a negative? Are you insane?
And you didn’t address the question from my previous comment:
Is it fraudulent, using a pseudonym, to refer to yourself in the third person, giving the false impression that you are not the person to whom you’re referring?
Jealousy is a fundamental human emotion designed to improve survival of small tribes where one persons gain is another’s loss.
Marx took this to another whole level in falsely implying that the principle applies to whole civilizations. “History is the struggle between the oppressed and the oppressors”.
In fact the rich in America have become rich by elevating the poor not opressing them. Everyone really hates Walmart because they enabled the poor to enjoy the lifestyle of the rich.
A lot of people living high on the hog by oppressing the poor were wiped out by Sam Walton and Cornelius Vanderbilt. A lot of crocodile tears have been shed for businesses wiped out by Walmart low prices.
Piketty can’t reconcile those two numbers and he knows it. Piketty engages in a slight of hand, instead of correlating growth against taxation, he correlates growth against gdp per capita and calls gdp per capita growth.
Obviously in creating over 20 million more jobs proportionately than France did, the US did a whole lot more to improve the gdp of the world and to improve the lot of the poor than France .
But, Piketty’s analysis covers that up.
I have his book and the inaccuracies start piling up starting from the first pages. “When the rate of return on capital exceeds the rate of growth of output as it did in the 19th century…” This is a false statement for the USA. From 1860 to 1900, our economy grew at an average rate of 10%, the gilded ears, when the burden of government was less than 5%. We exploded to the world’s largest economy more than doubling any European country.
Maybe in Europe, not in the United States.
But Piketty makes it perfectly clear that he’s referring to growth per capita, so it’s absurd on your part to have called him a fraud in your earlier comment. Fraud invovles an element of deception. You may not agree with Piketty, but there was no deception on his part.
So, while we’re on the subject of deception and fraud, is it fraudulent to make comments under a pseudonym in order to deceive people as to what the real you really believes?
Is it fraudulent, using that pseudonym, to refer to yourself in the third person, giving the false impression that you are not the person to whom you’re referring?
Picketty isn’t an economist, he is a fraud. His statement that all rich countries grew about the same is clearly not true.
Since the Reagan tax cuts starting in 1980, USA employment grew from 90 million to 138, over 50 percent.
Employment in Piketty’s France grew from 21.4 million to 25.6 million, less than 25%.
Sorry, Thuckface, you can’t call Piketty a fraud until you’ve read his book. I’m only two chapters into the book, and I can tell you that his statement about growth in rich countries can be reconciled with the figures for employment that you throw out.
You’re the fraud. You speak from total ignorance.
And, again, you’re a coward. Piketty puts his own name behind his words. You cravenly hide behind a pseudonym. What are you afraid of?