Tag Archives: Thomas Piketty

Taming our free-market beasts one election at a time

Ever since the financial meltdown of 2008, economic thinkers have wondered whether the free market thirsty for oil and nostalgic for the good, old, bad, old days of easy profit could ever learn from the errors of its rapacious ways.

After all, in the shadow of that calamity, the rich did, indeed, get richer, the poor did, indeed, get poorer, and the middle class became almost mythological throughout much of North America.

Even more maddening, perhaps, is the certainty that many of the very institutions that played key roles in engineering (or, at least, ushering) the near-collapse of the global economy have been bolstered, rehabilitated and otherwise rewarded with public money – money that is now no longer available to pay for the necessities of civilized life, such as rational, affordable health care and higher education.

All of which is reason enough for public intellectuals, such as French economist Thomas Piketty, to conclude that capitalism is, at its core, breathtakingly Nietzschean. In  the introduction to his best-selling book, Capital in the Twenty-First Century, the professor at the Paris School of Economics, states that “Modern economic growth and the diffusion of knowledge have made it possible to avoid the Marxist apocalypse but have not modified the deep structures of capital and inequality – or in any case not as much as one might have imagined in the optimistic decades following World War II.”

Why? Mr. Piketty explains: “When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.”

Still, he’s not entirely without hope. “There are nevertheless ways democracy can regain control over capitalism and ensure that the general interest takes precedence over private interests, while preserving economic openness and avoiding protectionist and nationalist reactions,” he writes.

The rest of his tome is essentially a 577-page set-up for a series of recommendations for savagely curtailing the savagery of capitalism, itself.

But, at least one Nobel Prize-winning economist thinks that while his colleague “is right about the severity of the problem, he is not completely right about its cause – and how  to fix it.”

In an article that appears in this month’s Harper’s magazine, Joseph Stiglitz, chief economist of the Roosevelt Institute, argues, in effect, that the fault is not so much in the social and political systems and institutions we erect but in ourselves for failing to keep them healthy and honest.

“There is no such thing as a ‘purely’ capitalist system,” he writes. “We have always had a mixed economy, relying on the government for investment in education, technology, and infrastructure.” Indeed, he pointedly adds, “the most innovative and successful industries in the U.S. economy (tech and biotech) rest on foundations provided by government research.”

His bottom line is that “a well-functioning economy requires a balance between the public and private sectors, with essential public investments and an adequately funded system of social protection.”

Of course, that notion has been out of style for nearly 35 years. Both Reagan and Thatcher revolutions, which marked the ascendence of neo-conservative cultural warriors and their fellow travellers on Wall Street, made puppy chow out of the once cherished and credible proposition that good governments play a legitimate role in curbing the excesses that turbulent competition is bound to produce.

Still, had such creatures (good governments) existed prior to the financial crisis, there’s every reason to believe that the awe-inspiring income inequalities, joblessness, consumer debt, and fiscal malaise entrenched in public institutions of every variety would not so bedevil us today.

It is even conceivable that elected officials would ply their trade with a certain decorum and circumspection, knowing that the voters they woo do not, in fact, find all politicians utterly loathsome.

As New Brunswick heads ever closer to an election that many pundits have predicted will be conspicuous for its failure to inspire much confidence in any political party, we mustn’t forget that democratic governments are the only protections we have against the predations of the marketplace.

When we don’t respect our public institutions and refuse to care for them, they will weaken, dissolve and vanish.

Then, dear citizen, enjoy facing the free market in all its rapacious glory.

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When our knowledge is unequal to our opinion



Whenever a columnist, book reviewer or any other species of gum-flapper, who’s paid to pontificate windily about the world’s state of affairs, writes something like, “I don’t know much about this subject, but that’s never stopped me before,” I usually take that as a helpful invitation to stop reading.

Occasionally, though, curiosity gets the better of me. 

So it was the other morning when I stumbled across a line in Margaret Wente’s latest attempt to speak for the common man from her lofty perch, at the Globe and Mail,  as one of Canada’s best-known columnists.

In her diatribe against “liberal policy elites” who are snapping up copies of French economist Thomas Piketty’s new book about the growing divide between those who have and those who have not in western societies, Mrs. Wente declared, “I’m not qualified to analyze Mr. Piketty’s work (Capital in the Twenty-First Century), which even critics have described as ‘brilliant’. My question is why now?”

Her answer was transparently deflective: “The progressive elites have been completely captured by the declinist narrative. . .There’s just one problem with this. Although highly educated social progressives are alarmed by the scenario, hardly anybody else is.”

She then “proves” her point by quoting surveys that show that regular folk – you know, “real” people – couldn’t give a toss about so-called income inequality. In fact, what Joe and Jane Public care most about is government incompetence and waste.

Now, there’s a straw man if ever one came tumbling out of the opinion pages of Canada’s national newspaper. 

Ms. Wente may not like “policy elites”. She may have reasons to distrust them. But that doesn’t mean they’re wrong about the deleterious socio-economic effects of the ever-widening gulf between the rich and rest. 

Equally, the apparent sanguinity of the general public doesn’t automatically denote that the average man and woman on the street is right. In fact, it doesn’t even go to the root of the problem.

Has it occurred to Ms. Wente that one reason why middle earners are more ticked off with governments than rich people is that they recognize how tax policies,  which were supposed to protect the common interest, have effectively accelerated the concentration of wealth among the one per cent?   

Besides, asking someone directly whether he’s worried about income and wealth inequities is like asking a farmer whether he’s concerned about crop failure. Sure, in a general sort of way. But it’s not real until it happens, up close and personal. And in this regard, data trumps anecdote every time. 

Earlier this year, a formerly confidential government report (made public through an Access to Information request by Canadian Press) declared that “the Canadian dream is a myth more than a reality.”

In fact, its findings pointed to “a middle class that isn’t growing in the marketplace, is increasingly indebted though it has a relatively modest standard of living, and is less likely to move to higher income (i.e., the middle class is no springboard to higher incomes).”

Other findings included:

“Over 1993-2007, there has been a slight hollowing out of the middle class, and the face of the middle class has changed considerably. Couples without young children and unattached individuals now account for most middle-class families.”

Meanwhile, “although middle-income families experienced a good progression in after-tax income, the same cannot be said of their earnings. In particular, the wages of middle-income workers have stagnate. . .Although the middle class holds a relatively fair share of the ‘wealth pie’, higher-income families have far greater nest eggs. Furthermore, wealth is not equally divided among middle-income families, with those headed by younger individuals being at a disadvantage.”

Compared with other western nations, Canada actually fares pretty well. But for how long? 

The economics of rampant income inequality is not an issue of pocketbook envy. Disparities in the currency that makes everyone’s world go round generate disparities in every avenue of life, from education to health care and, eventually, to the consumer sectors that sustain all goods and service-producing industries.

Although I am one of those gum-flappers who gets paid to pontificate windily, this time you can trust me.

I actually do know a little something about these things.


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