Monday, April 28, 2014

Thomas Piketty's Solution

Published in March 10, 2014, Thomas Piketty's Book, "Capital in the Twenty-First Century" is making a sensational impact among intellectuals that many believe will certainly have strong influence in the direction of global economic debate and political actions. 

The first review I encountered was Andrew Hussey's article published last April 16. I immediately shared the link on my Facebook page, but I did not read it thoroughly until today. Paul C. How of Colorful Rag commented on my page:
"People should be more careful in the usage of a term. Without differentiating voluntary exchanges from the acquisition of goods per se, one can be led to support policies which themselves maintain the status quo."
"I can literally bet that Piketty's big book does not once show a causal relation between higher productivity and lower real wages."

Andrew Hussey's article is long. Through it, I found John Cassidy's article. I will read this one later. 

Andrew Hussey has a high regard for Thomas Piketty. He quoted Jacob Hacker's assessment of Piketty as someone who is

". . . . about to emerge as the most important thinker of his generation – as the Yale academic Jacob Hacker put it, a free thinker and a democrat who is no less than 'an Alexis de Tocqueville for the 21st century.' "

Hussey shares Piketty's belief that ascribing to capitalism the improvement of people's standard of living is a myth. Piketty claims to prove "that under the present circumstances capitalism simply cannot work," it cannot "solve the problem of inequality, " and  "that financial inequality in the 21st century is on the rise, and accelerating at a very dangerous pace" since 2008. His solution "is a progressive tax, a global tax, based on the taxation of private property." He believes, "This is the only civilised solution."

After reading Hussey's article, I checked the book on Amazon. As of today, it has 243 customer reviews. The most helpful favorable review claims to be written by a former libertarian who is now "elightened" by Piketty's book. Another reviewer defends Piketty against those who will simply dismiss the book as "socialist," and argues to the contrary and that Piketty's "conclusions are backed by more hard data than any other economist has so far amassed, and they deserve to be taken very seriously."

The article that triggers me to return to Hussey's review is co-authored by Hunter Lewis and Peter G. Klein of Ludwig von Mises Institute. Lewis compared Piketty's book to John Maynard Keynes' "General Theory of Employment, Interest, and Money" published in 1936. Lewis claims that "Piketty's book serves the same purpose in 2014, and serves the same short-sighted, destructive policies" as Keynes' book in 1936. For Lewis, the reason why the book is favorably received is because not only that Piketty advocates progressive tax on wealth, but he supports the "narrative that government is the cure for inequality when in reality government has been the principal cause of growing inequality." This means that Piketty's book provides the intellectual justification for the government to expand its size and its power, and this is exactly the essence of statism. If this is not socialism, then what is it?