Piketty & the recent US Supreme Court decision April 3, 2014Posted by larry in economics, Justice, Philosophy.
“…[I]n the long run, the return on capital tends to be greater than the growth rate of the economies in which that capital is located.
What this means [concludes Campos] is that in a modern market economy the increasing concentration of wealth in the hands of the already-rich is as natural as water flowing downhill, and can only be ameliorated by powerful political intervention, in the form of wealth redistribution via taxes, and to a lesser extent laws that systematically protect labor from capital. (Piketty argues that, because of historical circumstances that are unlikely to be repeated, this sort of intervention happened in the Western world in general, and in America in particular, between the First World War and the early 1970s.)”
This is as pessimistic as it gets. What is not mentioned in most discussions of this outcome is the view put forward a few years ago by Republicans that corporations are individuals, that is, people. This is a logical howler of immense proportions, but in this context, such fine distinctions seem to be irrelevant. It is this view that partially underpins the Supreme Court decision that, just like people, corporations have free speech rights that need protection. This apparently includes the way that their CEOs and board members spend the corporation’s money.
Piketty’s data is extensive and runs for hundreds of years. It is a door-stopper of a book, around 600 pages of text and 100 pages of notes, not including the material Piketty has placed online. One could be forgiven for concluding that the greater the economic inequality, the greater the chance of political plutocracy and that this is the inevitable consequence of the political implementation of neoclassical economic principles. This relationship seems to me to inevitably entail that politics can not be divorced from economics, which is a central tenet of the neoclassical paradigm. It seems to follow, therefore, as the night the day, that since politics can never be value-free, the idea that economics can be, as claimed by the neoclassical econs, is a non-starter.
I would like to think that this constitutes another nail in the coffin of the neoclassical paradigm, but it doesn’t look like it. Despite the mounting evidence against it, the dominant economic paradigm rumbles on with hardly a hesitation along the way.
Also have a look at this and the links therein: http://www.slate.com/blogs/moneybox/2014/04/02/wealth_inequality_is_it_worse_than_we_thought.html. It is about new research by Saez and Zucman on US wealth disparity. As has been pointed out previously by researchers, it isn’t the 1% who are the biggest gainers from this financial crisis, it is the 0.1%, the 1/10th of 1%.