Thursday, October 23, 2014
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Democracy in the Twenty-First Century

NEW YORK – The reception in the United States, and in other advanced economies, of Thomas Piketty’s recent book Capital in the Twenty-First Century attests to growing concern about rising inequality. His book lends further weight to the already overwhelming body of evidence concerning the soaring share of income and wealth at the very top.

Piketty’s book, moreover, provides a different perspective on the 30 or so years that followed the Great Depression and World War II, viewing this period as a historical anomaly, perhaps caused by the unusual social cohesion that cataclysmic events can stimulate. In that era of rapid economic growth, prosperity was widely shared, with all groups advancing, but with those at the bottom seeing larger percentage gains.

Piketty also sheds new light on the “reforms” sold by Ronald Reagan and Margaret Thatcher in the 1980s as growth enhancers from which all would benefit. Their reforms were followed by slower growth and heightened global instability, and what growth did occur benefited mostly those at the top.

But Piketty’s work raises fundamental issues concerning both economic theory and the future of capitalism. He documents large increases in the wealth/output ratio. In standard theory, such increases would be associated with a fall in the return to capital and an increase in wages. But today the return to capital does not seem to have diminished, though wages have. (In the US, for example, average wages have stagnated over the past four decades.)

The most obvious explanation is that the increase in measured wealth does not correspond to an increase in productive capital – and the data seem consistent with this interpretation. Much of the increase in wealth stemmed from an increase in the value of real estate. Before the 2008 financial crisis, a real-estate bubble was evident in many countries; even now, there may not have been a full “correction.” The rise in value also can represent competition among the rich for “positional” goods – a house on the beach or an apartment on New York City’s Fifth Avenue.

Sometimes an increase in measured financial wealth corresponds to little more than a shift from “unmeasured” wealth to measured wealth – shifts that can actually reflect deterioration in overall economic performance. If monopoly power increases, or firms (like banks) develop better methods of exploiting ordinary consumers, it will show up as higher profits and, when capitalized, as an increase in financial wealth.

But when this happens, of course, societal wellbeing and economic efficiency fall, even as officially measured wealth rises. We simply do not take into account the corresponding diminution of the value of human capital – the wealth of workers.

Moreover, if banks succeed in using their political influence to socialize losses and retain more and more of their ill-gotten gains, the measured wealth in the financial sector increases. We do not measure the corresponding diminution of taxpayers’ wealth. Likewise, if corporations convince the government to overpay for their products (as the major drug companies have succeeded in doing), or are given access to public resources at below-market prices (as mining companies have succeeded in doing), reported financial wealth increases, though the wealth of ordinary citizens does not.

What we have been observing – wage stagnation and rising inequality, even as wealth increases – does not reflect the workings of a normal market economy, but of what I call “ersatz capitalism.” The problem may not be with how markets should or do work, but with our political system, which has failed to ensure that markets are competitive, and has designed rules that sustain distorted markets in which corporations and the rich can (and unfortunately do) exploit everyone else.

Markets, of course, do not exist in a vacuum. There have to be rules of the game, and these are established through political processes. High levels of economic inequality in countries like the US and, increasingly, those that have followed its economic model, lead to political inequality. In such a system, opportunities for economic advancement become unequal as well, reinforcing low levels of social mobility.

Thus, Piketty’s forecast of still higher levels of inequality does not reflect the inexorable laws of economics. Simple changes – including higher capital-gains and inheritance taxes, greater spending to broaden access to education, rigorous enforcement of anti-trust laws, corporate-governance reforms that circumscribe executive pay, and financial regulations that rein in banks’ ability to exploit the rest of society – would reduce inequality and increase equality of opportunity markedly.

If we get the rules of the game right, we might even be able to restore the rapid and shared economic growth that characterized the middle-class societies of the mid-twentieth century. The main question confronting us today is not really about capital in the twenty-first century. It is about democracy in the twenty-first century.

Read more from "Piketty's Charge"

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  1. CommentedEnrique Woll Battistini

    Right on: Democracy has no future in societies that are fractured by social or economic inequality; rapid economic growth would be perverse, and fatal now, without even more rapidly increasing sharing between the haves and have nots. Therefore, These proposals might make some sense as far as developing new financial system alternatives, including full scale tax reform and steering of investments for development in the right direction for global economic and planetary health:

    G8: The XXI Century Tax Reform:
    http://www.citizengo.org/es/signit/7489/view

    G8: "A Partnership for Development with the United States of America":
    http://www.citizengo.org/es/signit/7867/view

  2. CommentedEugene Devany

    Mr. Stiglitz has a good grasp of the economic problems but lacks any new solutions. The simple changes suggested do not change the dynamics and restore the balance, "including higher capital-gains and inheritance taxes, greater spending to broaden access to education, rigorous enforcement of anti-trust laws, corporate-governance reforms that circumscribe executive pay, and ..."
    Piketty’s version of a wealth tax is extreme because it is global (said to be needed to prevent wealth from leaving the country) and has a progressive rate structure (for no necessary reason). His design may reflect problems with the implementation of a "soak the rich" style wealth tax in France.
    A global wealth tax is not needed because the U.S. has maintained a worldwide tax jurisdiction and already requires that overseas assets be reported to the Treasury under penalty of a felony. Consider the same rates for rich and poor – 8% on income, no payroll taxes and 2% on net wealth (excluding $15,000 cash and $500,000 in retirement savings). Even C corporations could be taxed at a flat 8% with a 4% VAT - (considered the fairest way to apportion taxes among businesses worldwide).
    For individuals who want to avoid a 2% net wealth tax, there would be nothing wrong with an optional flat 26% income tax rate (and capital taxes on gains, gifts and estate taxes later). An optional net wealth tax paired with very low income tax rates is, at least, politically cognizable. According to Bill Gates (speaking at AEI on March 13, 2014) the elimination of payroll taxes is also the best way to encourage full employment.

  3. CommentedEd de Bruin

    Dear Sirs,

    The title suggests a discussion about democracy. The text however is about wealth distribution. I understand the wishful thought of democracy leading to wealth, then fair distribution. An academic once challenged me with the idea that peace and law, not democracy, drive wealth. Distribution of wealth takes place in many ways. What is the main driver behind that wealth? In my view it usually is the maintenance of current wealth. Only powers, be it democractic or not, can maintain existing societies. These powers will have to disturb the inevitable flow of changes in their preferred direction. Think of innovation, natural effects and demography. Unfortunately for these powers, such disturbances can only be temporary. Think of the rising sea water levels that threaten life in most metropoles. In other words, powers can buy time to bend the future in their society's direction. If powers bend wrong, the effect can be worse. A weak dike in the wrong place first feels good, but it will eventually break.

    Democracy can become a power of wealth creation and distribution only if it reckongnizes the inevitability of natural forces and innovation before it turns to bending human bevaior such that most of us are one day better off. Then life for most will be better, and that's best for all.

  4. CommentedProcyon Mukherjee

    Piketty's Magnum Opus has a passing reference of "Slave capital" in Chapter-4. My interpretation is that the modern form of capital accumulation is through "slave capital" where wages are artificially depressed, while surplus is generated that moves to benefit a minority who are equity holders of such slave capital.

  5. CommentedElizabeth Pula

    Excellent article.
    Measured increasing composite wealth dynamics vs. real increasing individual cost factors of the the majority of citizens is exemplifying what trend?
    Just as an indicator of trends occurring,although a bit off subject, with commentary from way-out in left field: I've noticed in a number of real estate markets that Berkshire Hathaway has gobbled up Prudential's real estate holdings. Didn't Prudential contribute quite a bit to the initial 1990's initial banking scandals, and endless churning of secondary thru adinfinitum backup questionable individual and group note-holders? And what ever happened to AIG, seems like those good ole boys are looking pretty rosy cheeked again. Ok, so MERS exposures supposedly has gotten rid of a bunch of the bad boys. So, now BH is carefully prodding markets, and pricing is gradually getting pushed by planned pricing dynamics, only accessible to BH(???), to escalate BH's holdings to profit from the initial rape way back in those durn days of Prudential etal. Seems to me just the names of the corporate entities have changed.
    The game since the 80's is definitely to push yahoos into a manipulated market failure, and swoop back down and profit from the spoils. That type of repetition is not a free-market economy. It's just the result of certain individuals and corporate entities having early and immediate access to economic trend data, especially individual yahoo financial data by demographic parameters, and then utilizing that data efficiently. Yahoos of the probably 90-or- so- percent constituency across the world have to keep their eyes, ears open, watch their backs and keep their mouths shut. Emotional demonstrations won't accomplish much other than creating more debris to muck through on a daily basis, and probably only for some yahoos. The real folks that count don't even have to look at the mess, let alone clean it up.
    Effective policies need to change to affect the majority of citizens to have a balanced reasonable day-to-day living wage. There are quite a few citizens functioning one way or another outside of legal societal institutions. If that type of alternative continues to be the only alternative for the majority to survive, then there will be more fracturing of economies, affecting societies. It may not be all that bad. There may not be escalation of just a caving-in of communities. (Which we are all watching in the Israeli-Palestinian scenario.) The caving-in of communities in the US have allowed certain areas of rebirth, and economic opportunities for some of the younger citizens, at least in the US. Europeans don't have anywhere else to go, and the US sure ain't got gold paved streets anymore. You have to be able to afford Dubai now. And who goes, or should I write, who flees into Dubai?
    With the escalating shaky ground for the 90% of yahoos communities, are there just going to be small gated pockets accessible only through guarded and walled toll-ways while a majority of beggars attack the passing caravans? This little verbal picture doesn't sound much different than the present larger scenario of the larger conflict that is still so prevalent in the Mideast. Is there really any real conflict in the Mid-East that anyone really needs to concern themselves?
    Here's a link to a neat little article. Can you relate to it? http://www.businessinsider.com/mind-blowing-facts-about-dubai-2014-7?op=1
    Save up for your next trip to Dubai, and who cares about any yahoos anywhere, just ignore the riff-raff. Just shoo them away, they're non consequential ants that just deserve to get stepped on.

    To wrap up this little digression, money is a sign of good-will and trust. Certain principles have to be publicly evident to the many in the society. Presently, just how much goodwill does a dollar represent anymore? I'd say it's pretty eroded on all levels, especially outside of the US.
    Really, how many American and any others can afford Dubai? If you are an ant from the Phillipines, or a "XXX" ant, sure you can labor there and maybe beat the heat for a short time. Ants from the US just aren't in that market, they're still tied up on one level or another in the good Ole USA.
    (Oh, and I just had to mention that the little scapegoat scenario affecting that Republican governor and spouse in Virginia was just a penny tossed outside of the proverbial political ring. Doesn't count for much other than another little tidbit of media digression to pacify the mass viewing audience, and keep the focus from the real issues. What effective policy programs have survived? Just certain targeted political cronyism payoffs? How affordable is the ACA if you are attempting survival at $7.50 per hour, or even up to $15.00 per hour, and if you are very lucky even able to be scheduled to work 40 hours per week?)
    If you are making $350,000 a week like some of the little media tv stars, then you fit in with the only economy that counts, and you might even get invited to Dubai for an up and coming party (especially, of you put out for whoever really counts in the plays for the greater good.) If you are scraping by at $7.50 an hour, then you know that you are really just an ant, and are lucky you're not already squashed, and not even buried, and not even remembered yesterday.
    What's in store for the future for the next round of 18 year-olds entering high school in September 2014? I wonder if Piketty's book and a few other books are on the must read list this year.

  6. CommentedBarry McHugh

    Pardon the move into multidisiplinary territory:
    *There appears to be strong parallels between the wealth divide we see now and the Russian and French Revolution ones. *This time there are no appeals to Nationhood and such but a myopic approach to geopolitics that says the wealthy (nation) can invade 'to address terrorism' but not you (poor nation) becasue somehow you don't have the right sense of justice-democracy-god. *Where's the tipping point for the non-well to do in rich nations where it no longer serves their interests to support their wealthy few in perpetrating this myopia. Historians, please advise.

  7. CommentedJack Schmidt

    Prof. Stiglitz is right about inequality of wealth vs. inequality of opportunity, but I think some of his prescriptions miss the mark. When an entity is making "too much" money we should ask why competition -- opportunity -- hasn't neutralized the advantage. For example, why are CEOs and board members chosen from such a tiny pool? Why aren't openings publicized? Because it's a closed, oligarchic system, and more progressive taxes won't change that.

      CommentedDouglas Costello

      Chosen from such a tiny pool

      Simply put they can and do. The pool will only widen when it is seen that overall performance has fallen off and heads are required.

      Of interest and related to your question is the emerging recognition that focus on short term profits ie; the next quarter has resulted in a stunting of growth potentil as corporations lik their future opportunities to satisfy demand for dividends NOW.

      This view I think has been around for at least 30 years and is only now beginning to gain momentum which points to the prospect of a tiny gene pool for CEO's and directors continuing for some significant time into the future.

      It I believe raises the interesting issue of the two classes of investor/shareholder. The long term investor buying and holding versus effectively the day trader seeking to profit from daily and intra daily market gyrations that have more to do with schooling fish behaviour and the flight response. It is the later investor group that drives CEO and Director behaviours as CEO and senior management performance bonuses are tied to how this later group drives the share price so they focus on activities that generate good news headlines today and forget about medium or long term issues. The conclusion is that eventually your small gene pool kills the enterprise but they escape free of blame because of the brilliant and believable story they concoct with the complicit aid of the media.

  8. CommentedChris Mante

    Feudalism, or the non-human animal (and plant!) equivalent, is the biological norm. Barring ultimately futile intervention, alpha males get disproportionately wealthy/"enjoy" excess breeding opportunities. The rest of us...not so much. (Ladies lie back, close your eyes and think of the Empire. Not saying I approve--I don't--but as old Uncle Walt was wont to say: "That's the way it is.") That we lived--I'm 71--in an now-ending historical economic anomaly was nothing but lucky circumstance, at least for North American, English-speaking people of European cultural ancestry. (Yep, I'm one of THEM.)

    Johnny Mercer lyric from "Saratoga" gets it right, I think:
    The strong take the money from the weak
    And the smart take the money from the strong
    You can say what you want to but it's dog eat dog
    And there is no right or wrong
    It's the law of the jungle and the sea
    Every pond has its biggest little frog
    It's a race for survival, it's a fight to the death
    And for all your flighty high and mighty fancy talk
    It's dog eat dog eat dog.

      CommentedCarolina Fraile

      Dear Chris Mante:
      I should believe that we are human beings. That is, we are not completely determined by our biology, but can shape our minds and our spirits in order to achieve justice for all of us. I also think that empathy and the longing for dignity is an essential quality fot being considered, properly, humans. So, those dubious comparations between we and the natural world reminds me certain ideologies that jusfied all sort of domination, injustice and, at the end, crimes against the persons who were seen as "inferior", "weak" or simply "subhuman"
      I'm not saying, of course, that you stand for such ideas. I just wanted to remark that the cynical and fatalistic view of the words "That's the way it is", deny all possibility of change, whereas History has shown us that change, in the long run, is really posible if we conceive it as possible. Justice begins in our minds, and if we exile it from them, evil and the suffering it causes through impunity will have their way with most of us.

  9. CommentedRobert REYNOLDS

    In response to correspondent John A Werneken's claim that, "There is NO concern with inequality." please let me assure him that there IS plenty of concern about the level of inequality, and the fact that the level is growing both in his country America and also in my country Australia, not to mention in many other nations.

    John seems to be living in a dreamworld where the free-market has nothing to do with inequality and its associated increase in crime and disillusionment in society. For John to attribute "lack of opportunity or lack of growth or both" to "democratic public intervention to create monopolies such as public education" is simply breathtaking.

    The views of John and his free-marketeers have been prominent for some 30 years or so since they gained traction because of the influence of people such as Margaret Thatcher and Ronald Reagan.

    Perhaps we should give John and his like-minded free marketeers a little more of what they seek, as by doing so I feel that we will be hastening a backlash against the insidious and nefarious consequences of neo-liberal, laissez-faire economics.

  10. CommentedJoshua Ioji Konov

    Lets see inequality and the ways market works from the prospective of the "unfair" competition in a "shady" business environment ell accumulating in the trickle-down Capitalism of the last 20th Century, however for the last 10-15 years this system of economics underperform: straightforward consequential to the ongoing Globalization and rising Productivity, furthermore, if under these new conditions the role of the large Transnationals that employ less than 1% of the global labor-force but gross more than 30% may well be considered consequential to the unfair advantages of the ruling capitalism whereas the small and medium businesses that employ the rest compete in such environment. Thus, if the business as usual with more governmental involvement could be considered as the solution such is hardly reasonable, furthermore, fixing the market unfairness is must, conditions for long term market equilibrium and economic growth.

  11. CommentedNathan Weatherdon

    Money matters. When the interests of the bottom 40% are not reflected in national legislatures, you can only expect class divisions to shine. That may not be highly conducive to long term stability. Solutions are fairly easy, and wil not destroy everything.

    A minimum wage which is high enough to pay rent, food, bills (including a car in less expensive rural areas, for those in rich countries), and enough leftover to maybe save for education or take the occasional holiday. Rich people will say that's stupid. But they consider it from the perspective of million dollars homes which cost 200% of minimum wage to rent on an annual basis, and from the perspective of holidays which they take which would eat up an entire year of income in the minimum wage. A few hundred dollars for flights or trains to visit family or friends, and a few hundred more to spend some money when you get there is along the lines of what I mean. The ability to enroll in 2, 3 or god knows even 4 courses per year at a local college or university would not be so terrible, even if 3/4 would opt to spend the money living life (so other avenues such as grants and loans are offered).

    Cash transfers to parents of poor children can also be prioritized, along with spending on community programs at local levels or through schooling so that they can afford to play soccer with the kids whose cleats cost half the annual per child clothing budget of many families.

    If this cannot be achieved by political means, than resentment, etc., linked to inequality could be troublesome. I graduated from high school in Ontario in the late 1990s. I argue in favour of the benefits I enjoyed, and which have been systematically pulled apart in many respects since then.

  12. CommentedPaulo Sérgio

    What do all the premier (leading lights) out-there democracies have in common right now? All dysfunctional, with varying degree of arguing Senators as Rome burns.

    Sadly inaction points to vested interests on all sides of the political system. The system - democracy - has shown itself quite capable of corruption for many years. And just because the leading democracies have lower corruption than the leading socialist states, doesn't give democracies space to gloat over communism. Democracy is in deep crisis while its fiercest proponents are having proxy arguments over who gets the most fat. Can the system still auto-correct?

    The insanity that is the current United States Congress as well as the Nkandla issue in South Africa, and to some comparable degree, the corruption charges laid against two recent consecutive former French presidents, probably best highlight this unnerving aspect of democracy.

  13. CommentedAlessandro Daliana

    In my view, this is all easily resolved by extending the concept of property to online user content. This would make everyone's posts, tweets, profiles, likes, pins,...proprietary assets that information technology companies could use only if they paid for it. Today, there are too many corporations making huge amounts of money from the unpaid labor of millions, if not billions of users. This act alone would level out the playing field significantly.

    The only legislation needed involves a change in privacy laws as the basic laws of property seem - to a novice like me - to be sufficient. Europe's privacy laws are already stricter than the US's and with a recent ruling against Google requiring the company to delete user information it seems like they are leading the way. Much still needs to be done.

  14. CommentedGerald Silverberg

    Stiglitz is quite right that "The most obvious explanation is that the increase in measured wealth does not correspond to an increase in productive capital." See my discussion and data at
    http://silverberg-on-meltdown-economics.blogspot.co.at/2014/06/nitpicking-piketty-productively-part-i.html.
    Because of this disparity, Piketty's use of the Harrod-Domar steady-state relationship for wealth is flawed. The explanation of the increase in the wealth ratio, as Stiglitz rightly points out, must be sought in valuations of nonaccumulable assets deriving from political/market power and inequality itself, not the inexorable laws of economic growth under free competition.

  15. CommentedJohn A Werneken

    Baloney. There is NO concern with inequality. There is universal concern with either lack of opportunity or lack of growth or both.

    These in turn are caused by democratic public intervention to create monopolies such as public education that impede opportunity and a host of backwards policy where there should be no policy at all, from most regulation through worthless money to use of both taxation and spending to distribute political spoils.

  16. CommentedAndrew Zimin

    "Simple changes – including higher capital-gains and inheritance taxes, greater spending to broaden access to education, rigorous enforcement of anti-trust laws, corporate-governance reforms that circumscribe executive pay, and financial regulations that rein in banks’ ability to exploit the rest of society..."
    Read more at http://www.project-syndicate.org/commentary/joseph-e--stiglitz-blames-rising-inequality-on-an-ersatz-form-of-capitalism-that-benefits-only-the-rich#q3e4RDY7675Q0Gjo.99

    it's like flogging a dead horse.

  17. CommentedAndrew Zimin

    "Простые изменения - в том числе высокую прибыль от капитала и налоги на наследство, увеличение в расходах для того, чтобы расширить доступ к образованию, неуклонное применение антимонопольных законов, реформы корпоративного управления, которые очерчивают зарплату заведующих и иных лиц высшего менеджмента, и финансовые правила, которые обуздают способность банков эксплуатировать остальное общество..."
    Read more at http://www.project-syndicate.org/commentary/joseph-e--stiglitz-blames-rising-inequality-on-an-ersatz-form-of-capitalism-that-benefits-only-the-rich/russian#0ozjgRw5VzRdOMSZ.99

    Всё это -- мёртвому припарки.

  18. CommentedZsolt Hermann

    It is good that we are gradually opening up these questions.
    But in order to find solutions we need to isolate the root cause of the problem.

    In retrospect it seems humanity has tried all the possible social structures, governance systems possible, and since the fall of the Soviet Union it seemed the world was "saved" by the most ideal system of all, liberal democracy.

    Still today we are in a global crisis affecting every level of human activity and we have many proof that liberal democracy, even in the most advanced Western nations is neither liberal nor democratic.

    Finally we could realize that the problem is not with what system, structure we use, but the problem is who is using the system.
    in short it is not what we build, but who is building and using.

    All our past, present problems originate from our inherently self-centered, egoistic human nature, and if we want to build a different future it is not the world, its structure, its systems we need to change, but we have to change ourselves.

    And changing ourselves, changing human nature, or more precisely rising above it is only possible with a completely new, "circular", integral education method.

  19. CommentedKen Presting

    It's important to recognize that democracy itself is at stake given the present level of inequality. Prof. Stiglitz touches on the competition for "positional goods" among the ultra-rich, but let me point out that the capacity to influence elections is exactly one of those goods which depends entirely on position. In most businesses it's a sign of great success to have a 49% market share. But of course, in an election that is the definition of losing.

    So what we face now is both the corporations collecting enough capital to influence the elections, and once the legislators are seated, they are beset by lobbyists as well. Or even more efficiently - bypassed altogether by groups like ALEC. And of course this process is abetted in every possible way by the current Supreme Court.

    Our time is fundamentally different from the Gilded Age, with its conspicuous consumption. The "domestic princes" of our time are fighting each other for their very existence. Stiglitz is right to point out how important are government subsidies for e.g. mining and medicine. The fossil fuel industry can see itself going the way of Big Tobacco, and they are not going gently.

  20. CommentedCurtis Carpenter

    The main question, it seems to me, is in the relationship BETWEEN capital and democracy. Focusing exclusively on only one of these two interacting systems will, I think, be ineffective if not dangerously counter-productive.

    Capitalism and democracy as they manifest themselves today have BOTH become corrosive of public trust -- and that trust is ironically essential to them both.

  21. CommentedJohn James

    The analysis, commentary and exchanges on this topic is elemental. The fundamental economic waves that are washing over humanity raise issues of human organization that concern us all. I would like to posit a longer term perspective. Democracy, in general, is appropriate for small scale societies with limited outside interaction. Over the past 400+ years there has been an inexorable growth in both scale and promiscuity of human interaction. This growth has led to a continuous consolidation of power, first at the government (development of nation-state) level and concomitantly at the enterprise level(corporation). The logical nexus is the reversal of the short term growth of a democratic structure (a mechanism which allowed for rapid non - class related intellectual achievement/"bourgeoise") and a regression to the mean of an aristocratic/quasi - feudal global social structure. The economic and financial results we are witnessing (because of the acceleration in technology, especially data collection, storage and fissemination) merely reflect the derivative results of that activity. As significant as the great economic minds, both past and present, I find myself increasingly marveling at the prescience of Orwell and Huxley. I can't see a reversal in this trend as long as the concept of commoditization drives economic activity. By definition it requires large scale, centrally organized, economic units. That structure is anathema to democracy. If we review the major events of the last 400 years and apply the sophisticated mathematical modeling we have available, I believe a more coherent understanding of this fundamental issue of human society can be more coherently assessed.

  22. CommentedJerry hough

    This is absolutely right. The United States has become extremely undemocratic. The problem is not elections or campaign contributions, but the electoral choice. The so-called left-wing party is now really to the right of the presidential Republicans. Because there is no economic choice as is Britain, voters have to choose on meaningless social issues like gay marriage and gun control, which are not even federal issues.

    The "left-wing" party is the party of Citigroup literally. Larry Summers is very close to Hayek as he was in Russia. Hillary Clinton was a Goldwater activist and retains those views. The extreme left-wing of the party is Elizabeth Warren. who was a Republican under Eisenhower, Nixon, and Reagan, and became a Democrat when Bill Clinton moved far to the right and made social issues salient.

    The problem is exacerbated by the shift in pension policy. Marx's owners of the means of production are mutual fund owners in their 401ks. The market has really tripled since 2009 while wages are up .5 of 1%. The market depends on profits, QEs, and low wages. Every government employee has an interest in that. The bourgeoisie really have taken over the government in a way that Marx could never imagine.

    Fortunately we have a 30 year cycle. 1900, 1930, 1960, and 1990 (the anarchist revolution carried out by the Goldwaterites and New Left youth of the 1960s. This too will pass. The Republicans have already nominated Christie and he is moving the party back to Nixon. He will win easily. Paul Ryan, who will run the House for him, ha a poverty program that Robert Reich has highly praised. The Democrats will have to move left by 2024 and this will define the next 30-year cycle.

    But it is frightfully difficult. The undemocratic primaries are controlled by the top 20% with meaningful 400ks. The supply-demand relation in labor will have to be changed by a drastic change in immigration and outsourcing to end an infinite supply of labor. There is a part of me that thinks it is going to take the rise of a KKK on immigrants, a spread of the highly sucessful Brat anti-Semitism against Cantor, and/or a market crash as in Japan to get the top 20% out of stocks.

    But Marx's predictions were negated by his Revolution of 1849 which scared people into democracy. Stiglitz is right. That redemocratization must feature 2020-2050

  23. CommentedEnrique Fleischmann

    Piketty´s analysis falls into the trap of being too " Economic" and less " Political Economy" or historical . This is a fault that even "liberal" economists fall into it since they try to appear as "scientific" or a temporal as possible .

    However , in the case of income distribution it is almost impossible ,to ignore history . For example , where is the correlation between the establishment of the welfare state in Europe and the popularity ( or even the mere existence) of the Soviet model in Europe ? And the collapse of the Soviet Union and the unleash of the globalization ( which brought about further increase in inequality)? Since the "economic" analysis is apparently detached from history and politics, the pint raised by Prof. Stiglitz is more than a mere critic, it sounds as a methodological alternative where economic analysis is closely attached to politics and history.

    Last point : I am afraid that within a globalized economy the focus on NATIONAL INEQUALITY should be replaced with a focus and analysis of INTERNATIONAL perspective ( i.e the distribution of wealth and income among the whole human race). It is a bit more complicated, but more correct given the actual economic structure.

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