Paul Krugman has an interesting OP/ED on Thomas Piketty’s book Capital in the Twenty-First Century.
Picketty makes the assertion that capital demands rates of return greater than that of the underlying economy, and that, over the long run capital will extract more and more of the overall economy, to the detriment to wages and labor.
As Krugman notes, this work has the apologists for the rent seekers apoplectic:
“Capital in the Twenty-First Century,” the new book by the French economist Thomas Piketty, is a bona fide phenomenon. Other books on economics have been best sellers, but Mr. Piketty’s contribution is serious, discourse-changing scholarship in a way most best sellers aren’t. And conservatives are terrified. Thus James Pethokoukis of the American Enterprise Institute warns in National Review that Mr. Piketty’s work must be refuted, because otherwise it “will spread among the clerisy and reshape the political economic landscape on which all future policy battles will be waged.”
Well, good luck with that. The really striking thing about the debate so far is that the right seems unable to mount any kind of substantive counterattack to Mr. Piketty’s thesis. Instead, the response has been all about name-calling — in particular, claims that Mr. Piketty is a Marxist, and so is anyone who considers inequality of income and wealth an important issue.
I’ll come back to the name-calling in a moment. First, let’s talk about why “Capital” is having such an impact.
Mr. Piketty is hardly the first economist to point out that we are experiencing a sharp rise in inequality, or even to emphasize the contrast between slow income growth for most of the population and soaring incomes at the top. It’s true that Mr. Piketty and his colleagues have added a great deal of historical depth to our knowledge, demonstrating that we really are living in a new Gilded Age. But we’ve known that for a while.
No, what’s really new about “Capital” is the way it demolishes that most cherished of conservative myths, the insistence that we’re living in a meritocracy in which great wealth is earned and deserved.
For the past couple of decades, the conservative response to attempts to make soaring incomes at the top into a political issue has involved two lines of defense: first, denial that the rich are actually doing as well and the rest as badly as they are, but when denial fails, claims that those soaring incomes at the top are a justified reward for services rendered. Don’t call them the 1 percent, or the wealthy; call them “job creators.”
Needless to say, the defenders of oligarchy are unamused by this.
The book, which, if reports are true, uses rather traditional economic tools, makes a compelling argument that excessive wealth is not synonymous with virtue.
I’m putting Capital in the Twenty-First Century on my summer reading list.