I guess we can say that Thomas Piketty isn’t a Marxist then

One of the book’s main arguments is that wealth inequality is a function of the difference between the rate of return to capital (after taxes) and the economic growth rate. Inequality will increase the more that the capital return rate exceeds the economic growth rate, and it will decline when the relationship is flipped (the growth rate exceeds the capital return rate).

OK, take that as being true. He also then goes on to state that the return to capital is rising above the growth rate. Thus inequality is rising.

Which cannot be a Marxist interpretation for that does rather rely upon the idea that returns to capital will inevitably fall.

It’s also something of a crushing blow to the watermelons. For it means that as long as the return to capital is positive therefore we must have economic growth or the level of inequality will rise.

And finally it tells us something very interesting about the great reduction in inequality in the past century. It was nothing at all to do with unions, taxes, deliberate government intervention into distribution and so on. It was simply that economic growth was high.

Something for everyone there. Assuming that it is true of course.

5 comments on “I guess we can say that Thomas Piketty isn’t a Marxist then

  1. It’s that word ‘function’, isn’t it? Like ‘stakeholder’, it can loosely mean anything or nothing, according to taste.

    My desire for a cup of tea is a function of my having a pulse.

    Hopla!

  2. Upbringing in edgy Paris, parents 68’tards, Normal Sup then LSE. How could he not be a Marxist.
    Unless he is a left deviationist, thrice cursed worse than a dog etc (Get your rubber stamp from the N Korean news agency).
    Agree with FT, the graph is doing way too much work. ROC in 1000 AD, srsly?

  3. Oh really, I’m pretty sick of all this.

    There are sheep and there are wolves, just face it.

    And She might write for the Guardian proclaiming that the sheep should be more equal, but She’s an aristo who gets paid £2m a year by a hypocritical tax dodging organisation and She’s a wolf.

  4. There’s another link from the FT today which is interesting. (Unusual for the FT, I know.)
    Should interest rates on super safe assets be positive? Historically people have accepted negative rates, depreciation of the value of your house as you use it, charges for storing your gold at the bank, Swiss bank fees, etc.
    So what’s with bond yields and BoE lending rate? The govt could simply argue that you have parked surplus in a safe place and so you deserve to get slowly fleeced as inflation wears away the debt.
    So we are not condemning our children to penury after all.

  5. “It was nothing at all to do with unions, taxes, deliberate government intervention into distribution and so on.”

    Nope. Picketty says its the relationship between post-tax returns to capital and growth that determines inequality. Higher taxes on capital and greater levels of unionization (or high minimum wages) can lead to low post-tax returns to capital. So “unions and taxes” are compatible with Picketty’s explanation.

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