Much has been said lately of Thomas Piketty's new book "Capital in the 21st Century." In reality he hasn't discovered anything new...he's only documented it. The economic danger of excessive inequality has been known for generations. What's significant is that "Capital" upends the prevailing narrative of the wealthy elites. We're supposed to believe that inequality isn't increasing, that if it is there are no negative effects, and to whatever extent there ARE negative effects more of the policies that increased inequality will magically fix the problem. It just makes no sense...but it's good Americans are finally paying attention to this critical issue that will affect the future in profound ways.
"The Founding Fathers feared that inequality and the conflict between capital and labor would undermine the nascent American government: John Adams, for example, wrote that “property monopolized or in the possession of a few is a curse to mankind.” And even Adam Smith — he of the “invisible hand” — worried of men who “monopolize economic power and undermine the government.” The solution proposed by America’s founders was widespread capital ownership. As Adams writes, “The only possible way then of preserving the balance of power on the side of equal liberty and public virtue, is to make the acquisition of land easy to every member of society.” Later, Abraham Lincoln said, “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” Lincoln and the Founders would have been disturbed to learn that one family, the Waltons, now owns more wealth than the bottom 48 million families in America combined; and that wealth inequality is again back to the levels last seen in the days of “The Great Gatsby.” (See chart below, from Saez and Zucman.)
Piketty supplies us with the basis for a new narrative. In this narrative, the postwar period — in which rapid growth produced broad-based, equally shared growth — is unique, not an inevitable product of capitalism. Piketty believes this postwar lull in violent inequality to be an inevitable coalescence of population and war. I believe it was brought about by a powerful labor movement and an epochal crisis of capitalism, coupled with wartime solidarity. Either way, such equality will not come again without action (and it’s unlikely we could grow our way to equality). Money will not remove itself from politics. Power cedes nothing without demand.
The owners of this country, those who profit off of lung cancer, environmental degradation and political capture, are very worried that we learn their tricks. They did not create wealth, they stole it, and continue to accumulate it. As Marx noted, the default position of capitalist societies is ever more inequality and accumulation. Although he is far from a Marxist, Piketty has reaffirmed this truth. The only question that remains is the question Nikolai Chernyshevsky asked in 1863, “What is to be done?”