Thomas Piketty Got This Right!

CapitalLast summer, Thomas Piketty published Capital in the Twenty-First Century (reviewed here), a best-seller that probably few people waded through. One of the things Piketty explores is how capital wealth accumulates far more rapidly than wealth from wages, and tends to be concentrated in an increasingly small percentage of the global population.

This week, we got a startling glimpse of this in a new Oxfam Study that predicts that by 2016 (that is next year, folks) one percent of the world’s population will control more of the world’s wealth than the remaining ninety-nine percent of the world’s population. A mere 80 of the world’s richest individuals control more wealth than the bottom 3.5 billion people in the world.

All but the most ardent capitalists will see these figures and conclude something is wrong. When over 1 billion people live on less that $1.25 a day while 80 people have billions, something is wrong. One of the things this study noted is that not all of this capital came from sheer entrepreneurship. Those invested in health care and pharmaceuticals saw their net worth jump by 47 percent due to lobby efforts for these industries.

By DFID - UK Department for International Development (https://www.flickr.com/photos/dfid/14590135480/) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

By DFID – UK Department for International Development (https://www.flickr.com/photos/dfid/14590135480/) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)%5D, via Wikimedia Commons

The immediate cry of many will be for more taxes on this incredible wealth. Bill Gates himself thinks that this wealth should be taxed unless the wealthy invested their fortunes in philanthropy, as Gates himself is doing. It seems that what may also be needed are greater protections against exorbitant profits subsidized by higher costs that the less fortunate must bear. I do not want to fault wealth gained by honest effort and entrepreneurship, but when wealth benefits from special privilege and is further enlarged by access to power, this seems to be a form of welfare for the rich. At very least, there might be additional taxes levied on lavish consumption.

But far better for the rich to do themselves what may be done less efficiently with taxes, through using the influence and entrepreneurial intelligence they have in philanthropic efforts. There is an old story of the rich man who died and someone asking how much he left behind, and the answer given was “all of it.” I’m reminded of the biblical parable (Luke 16:19-31) of the rich man and Lazarus. The rich man walks by Lazarus every day but doesn’t give him even table scraps. Lazarus dies and rests in the bosom of Abraham. The rich man burns in Hades. Even here, he assumes the privilege of demanding that Lazarus alleviate his thirst. Even here, he assumes he is entitled. And yet in the end he perishes and his name is not known while poor Lazarus at last finds comfort.

I’m not a part of that richest one percent. But I also think of that large group living on $1.25 a day. I don’t think twice about spending more than that on a cup of coffee. Yet like the Gates folks, I’ve discovered that some of the greatest joys of life come around giving–thoughtfully, as well as generously. John Wesley once said, “Earn all you can, save all you can, and give all you can.” Wesley even acknowledges that creating wealth and accumulating capital is not bad if the end for which this is done is generosity. It may be this last part that is the hardest, and yet which makes more sense, to gain joy in the giving while you are living? Or to let someone else, or the tax man dispose of what you’ve left behind?

Wouldn’t it be crazy if a whole generation joined Bill Gates and Warren Buffett and defied Thomas Piketty and the Oxfam folk as well as the folk crying for higher taxes, and invested their wealth with intelligence and generosity–to provide clean water, and economic development, and educational opportunity? What if we did this with our more modest means? This would not by a long shot solve all the world’s problems… but then neither will a bunch of taxes. And it sure could be a lot more fun…

The Month in Reviews: August 2014

During this month I traveled the spectrum of reading from the preaching of hell and damnation in pre-Civil War America to America’s gods. I read a fictional account exploring the dynamics of adultery and a couple of books on calling. I explored how capital is changing the economic landscape of the world, and what religious communities often think of when they use rhetoric about changing the world. I read about the Israeli-Palestinian conflict and the challenge of being both-and people in an either-or world. It felt like a bit of a “both-and” kind of month! So here’s the list:

1. Damned Nation: Hell in America from the Revolution to Reconstruction, Kathryn Gin Lum. The book explores the varying approaches to the subject of hell and judgment during this period as well as the appropriation of damnation language to the problem of slavery.

Damned Nationboth-andIsraeli-Palestinian

 

2. Both-And: Living the Christ-Centered Life in an Either-Or WorldRich Nathan with Insoo Kim. Pastors Nathan and Kim describe and narrate the vision of Vineyard Columbus to live as a both-and church that is both evangelical and charismatic, both united and racially diverse, both showing mercy and pursuing justice, and more.

3. The Israeli-Palestinian Conflict: Tough Questions, Direct AnswersDale Hanson Bourke. This book doesn’t take sides but seeks to provide background information about the conflict, the history, the context of daily life, and other players in the conflict. Well illustrated and concise.

4. Capital in the Twenty-First Century, Thomas Piketty. This lengthy best-seller explores the growth of capital in relation to income and the growing inequities of wealth and poverty that may result in the US and Europe and other parts of the world.

to change the worldshooting starCapital

5. To Change the WorldJames Davison Hunter. Many organizations and movements in Christian circles have used the language of changing the world but have not been cognizant to the deeper dynamics of culture change nor its double-edged character.

6. A Shooting Star, Wallace Stegner. This novel not only traces the unraveling of a marriage following an incident of adultery but raises questions about the illusions and follies of the American dream for both people and places.

7. Visions of Vocation, Steven Garber. The main thesis of this book is that to live as a called person is to be implicated in what one knows, to have a sense of responsibility that flows out of understanding the world and our place and work in it. Garber does a wonderful job of unpacking this idea through narratives of his work in helping many young leaders discern vocation.

Visions of VocationAmerican GodsCalled to be saints

8. American Gods, Neil Gaiman. Shadow, a released prisoner gets caught up in a war between the old and new gods with which Gaiman populates the American landscape, and discovers his own identity in the process.

9. Called to Be Saints: An Invitation to Christian MaturityGordon T. Smith. Smith articulates a vision of becoming a saint as union with Christ that results in holy character that is wise, works good, loves, and is joyful.

I thought there were some great books in this month’s collection, three of which I gave 5 star ratings and a few others were near misses.

What’s next? Well, I’m in the middle of a biography of Abraham Kuyper, theologian and prime minister of the Netherlands at the beginning of the 20th century, an autobiography of Chai Ling, one of the leaders of the Tiananmen Square Demonstrations in 1989, a collection of critical essays by George Steiner and a book on why study church history. After these, I will probably pick up a book on working class in Youngstown that I’ve been wanting to read for some time and an Ann Patchett novel.

Did you miss any of these reviews the first time? Follow the blog and never miss another review (you can even get it emailed to you!). I’d also love to hear what you’ve read in the last month!

Review: Capital in the Twenty-First Century

Capital in the Twenty-First Century
Capital in the Twenty-First Century by Thomas Piketty
My rating: 4 of 5 stars

I wonder how many people purchased this “bestseller” and laid it down after 50 or 100 pages. It is a daunting but doable challenge to work through the 577 pages of text as Thomas Piketty gives us a carefully crafted exposition of the nature of capital and why the growth of capital in relation to income is something that deserves the careful attention of our citizens as well as policy makers on a national and international level.

I actually found that Piketty took the arcane and often statistically laden subject of economics and has given us a tour de force explanation based on the compilation of two centuries of data from the major western countries, including data from 20 or more countries overall.

The major result of his study is to show that capital (which consists of most non-labor income sources of wealth such as real estate, stocks, bonds, bank deposits and the physical plant and machinery of companies, is growing at a far faster rate that income from labor, and that there is a concentration of capital wealth among the top ten percent (even more among the top one percent or .1 percent) of the population and that because of the disproportionate growth of capital over income from labor, this inequality of capital wealth will become even more concentrated in the twenty-first century.

Part One of the book explores the nature of income and capital growth, and how these are measured. Part Two draws on the massive data set Piketty and his associates have developed to trace the ratios of capital to income from the late eighteenth century (in the case of France) to the present. In general, with variations from country to country, he notes extremely high concentrations of wealth and a high capital to income ratio up to the first world war, a collapse of this wealth between the two wars (1915-1945), a golden era of greater equality from 1950 to 1980 (coinciding in the US with high progressive income taxes), and increasing capital to income ratios from 1980 to the present as well as growing disparities of wealth during this period.

Part Three explores the structures of inequality, looking at exorbitant growth in compensation of top executives in relation to other wage earners for no other apparent reason that the cutting of income taxes in the top brackets (no evidence being found for increased productivity of these executives) and the dynamics of capital accumulation and inheritance. All this is a complex argument that can be summed up with the idea of the rich getting richer, the middle class stagnating and the poor getting increasingly small pieces of the pie. What I wish were clearer is whether Piketty sees living standards for the poor and middle class declining as well as growing disparities, which does create a potentially volatile social situation. If everyone is doing better, by contrast, it would seem that they may not resent, or even be that conscious of increasing disparities in the wealth of the super-rich. In other words, do growing wealth disparities necessarily imply declining standards of living for the poor and middle class or simply less of a share of a growing wealth pot?

Piketty argues in Part Four that the needed remedy for the growth of capital is progressive taxes on incomes that allow the rich to acquire capital, and globally enforced taxes on capital to check the growth of capital. As I read this section, I thought it made mathematical sense and perhaps even sense as a social policy, but surveying the political realities of the current scene, particularly in the U.S. I thought, “ain’t gonna happen”. My hunch is that the only ways we might see these inequities decrease would be through cataclysmic events like the two world wars with an economic collapse in between. One could also hope for an “enlightened capitalism” where the richest people voluntarily deploy capital for the wider good, perhaps as the Gates Foundation and Warren Buffett have done.

I’m not convinced that the rich will accept either greater taxation or voluntary de-accumulation of capital, which then sets us on the course of some form of social cataclysm. It is the unspoken possibility of such occurrence that I think Piketty glimpses and seeks to avoid. But I think he assumes an enlightenment of the human heart that I find more dubious. Nevertheless, this is an important work for understanding the dynamics of capital accumulation and how it leads to inequalities that belie our democratic values. It raises the question of what kind of nation and world do we really want?

View all my reviews

And Then There is The Big Box Bookstore

I wrote yesterday about my visit to a wonderful little independent used and antiquarian bookstore. As it happens, I also had a chance to visit our nearby Barnes and Noble store, incentivized by a 20% coupon I’d received by email. Turns out I was able to score a copy of Capital by Thomas Piketty (my BIG summer reading project) at under $20 (retailed at $40) using my Barnes and Noble membership, the coupon, and the discounted price they were selling it at. Perhaps they knew that sooner or later potential readers would figure out this is a LONG book even if it is a best-seller.

Capital_in_the_Twenty-First_Century_(front_cover)

It is interesting to reflect on how my experience compared to my visit to the Indie bookstore. Both certainly offered the experience of browsing long aisles of books and discovering books of interest I was unaware of. Barnes and Noble occupies far more space of course, and one of the big differences is no floor to ceiling bookcases and much wider aisles. There was no Norman in the basement lovingly preparing books for the shelves because there was no basement.

Still, the booksellers were friendly and I was asked if I needed any help. So were the people at checkout, but with a big difference. It was all very inefficient, and impersonal. No one knew any names. The customers by and large didn’t know the booksellers or each other. I suppose there are times we want it that way. But the feeling was, as I reflect on it, that this was just a big box store for books and media–and pastries.

Our local Barnes and Noble.

Our local Barnes and Noble. Picture from B& N website: http://store-locator.barnesandnoble.com/store/1968

That was the other thing. At checkout, we were given a coupon for $10 off cheesecake from their cafe’. And we were really encouraged to go buy one. So we wandered over, only to find out that the starting price was $40. We didn’t need cheesecake that badly. But we were given plenty of reasons why we could need it. It was plain that they really wanted to sell us a cheesecake.

It was interesting that the greatest effort to engage me as a customer in a bookstore was to try to sell me a cheesecake. In the other store, what they cared about were what kind of books I was interested in. It is fascinating that there is something of a resurgence in the Indie stores, at least according to this Salon piece. What I wonder is whether this season of discontent with Amazon over its treatment of Hachette might be an opportunity for Barnes and Noble stores to take a look at the Indie stores and how they might operate more as a “third place” than as a big box store for books, media and pastries. I don’t say ditch the pastries– a cup of coffee and a scone are wonderful adjuncts to leafing through newly purchased books! But thinking about how to make this like the neighborhood bookshop might be worthwhile as well.

What strikes me is that the Barnes and Noble booksellers I’ve met also know and love books. And my observation is that most of what people are actually buying in the stores are books. In the small Indie store I wrote about yesterday, they help foster a community of booklovers. It occurs to me that there are many members of the same tribe frequenting Barnes and Noble–and working there. I can’t help wondering if working on that connection could make Barnes and Nobles a more enjoyable place for booksellers and customers alike. And I can’t help wondering if it would enhance sales. I could be totally out to lunch here. What I do know, and maybe this is a function of age, is that I am increasingly attracted to the places where that connection happens.

What do you think? What do you value most about going to a brick and mortar bookstore?