What Mr Piketty conveys most powerfully, in my opinion, is the fact that economics was once centrally concerned with the question of distribution. It was impossible to ignore in the 19th century! Not least because economists of a market-oriented disposition and those more sympathetic to Marx both wondered whether capitalism was capable of generating a sustainable distribution of the gains from growth. We are all used to sneering at communism because of its manifest failure to deliver the sustained rates of growth managed by market economies. But Marx’s original critique of capitalism was not that it made for lousy growth rates. It was that a rising concentration of wealth couldn’t be sustained politically.
It’s true that it would be a mistake to get excessively hung up on any particular summary statistic of inequality. But the broad facts that stagnating living standards in rich countries are coinciding with a falling share of national income going to the bottom 80 percent or so of the population aren’t in serious dispute and they’re not “compensated for” in any policy-relevant sense by the success of Chinese development policy.
Drum’s suspects that taxes are going to rise on the rich:
My view is that the second half of the 21st century—assuming we manage not to blow each other up or fry the planet to a cinder—is likely to be an era of fantastically high growth thanks to robotics and artificial intelligence. That also produces problems related to the distribution of income, but they’re rather different from Piketty’s.
But in one sense it doesn’t matter. Piketty’s solution to the problem of this mismatch between growth and capital returns—which he considers an inevitable consequence of capitalism—is redistribution and plenty of it: “The only way to halt this process, he argues, is to impose a global progressive tax on wealth….an annual graduated tax on stocks and bonds, property and other assets that are customarily not taxed until they are sold.” That’s probably the eventual answer to the robotics revolution too. So regardless of which fork we take in the future, higher taxes on the rich seem pretty likely.
Millman wonders how such a tax work since “the incentives for a given state to cheat are simply too large – any state that had a lower tax on wealth than the cartel would attract enormous inflows of capital.”