Marx is dead; long live Picketty

The Book entitled Capital in the Twenty First Century will undoubtedly become the seminal book on economics for the next half century.

Yes you read correctly. A best seller entitled Capital in the Twenty First Century by Thomas Picketty, a Frenchman has created a revival in Marxist thinking throughout the world.

How is it possible that a dense economic tome of 685 plus pages has already sold in excess of 200,000 copies on Amazon? Moreover it has attracted this much attention especially now that Marxist dogma & orthodoxy has been comprehensively discredited throughout the world as a failure.

Not only did it result in the non-fulfilment of its promises but enslaved the very people that its egalitarian polices were supposed to uplift through discouraging initiative and the work ethic. It was only when countries broke free from his dogma as in the case of Communist China was the human spirit set free to achieve great things so that penury was banished

When did I first hear about the name Picketty? By happenstance, I was on the Guardian newspaper website where a stunning journalist by the name of Lucia Pradella caught my attention. Perhaps it was the enigmatic smile or dark sunken eyes. Whatever it was, it forced me to read the article entitled “It’s madness to ‘privatise’ Marx – thanks to Piketty he’s back in vogue.” Austerity and the financial crisis mean economics is in the news, so why is a publisher taking Marx and Engels offline?

http://www.theguardian.com/commentisfree/2014/may/05/marx-piketty-austerity-global-financial-crisis

Based on her beauty I read the remainder of the article and for no other reason as I refuse to associate with any such socialist claptrap. The article bewailed the fact that a publisher was forced to charge for its work – how surprising – and hence was in a sense privatising the works on Marx. With Russia no longer bank rolling this project, the publisher Lawrence & Wishart was committing a heresy and charging a fee for their usage. WOW. That is a revolutionary concept that they now have to cover their costs.

After reading the article and shaking my head in disbelief that such an intelligent woman was not aware of economic reality, I forgot those sunken eyes and enigmatic grin.

It was not long before I read some disturbing news: Picketty’s economic tome was a best seller on Amazon. Was the world stark raving mad?

Two weeks later there was an article in that liberal weekly magazine Time and it too threw the spotlight on Picketty.

Finally I was forced to “endure the unendurable” to quote the late Emperor Hirohito when he spoke to his people after the dropping of the atomic bomb on Nagasaki and he called upon them to accept the realities of the situation.

I opened the Time magazine with trepidation not knowing what to expect. There staring in the distance was Thomas Picketty, not some fearsome ogre but rather a gentle soul in his forties.

What did he have to say that would buttress Marx’s claims in the eponymous Das Kapital.

What were different about Picketty were two things. Admittedly he had done his Masters in Inequality in socialist France but then he had taught at MIT for many years thereafter. Secondly instead of being polemical and an inarticulate political rant, his opus magnum was a digestion and summation of 15 years of rummaging through 300 years of archives to plot the taxes and the wealth of the citizens of numerous countries.

Based on that detailed research, this seminal work has clearly established that except for brief periods of time such as post WW2, the gap between the rich and poor widens until it becomes a chasm. It peaks when 1% of the people possess 99% of the wealth. It is at this point, Picketty contends, buttressed by a plenitude of graphs and facts that Revolutions spontaneously occur.

What was even more disheartening was that he has conclusively proved that there is no “trickle down” effect so beloved of the Milton Friedman or Chicago School of Economics but rather a trickle up.

So the veracity of the aphorism or cliché that the rich get richer and the poor get poorer has been proved to be true.

This wealth accumulative occurs not from some dastardly acts by nefarious capitalists’ intent on purloining the entire world’s wealth. Rather it is founded on the economic principle that the rate of return on capital exceeds the rate of growth of the economy in most years. Conflated with the compounding effect of the growth inexorably results in a widening wealth gap.

One can just take gross executive pay as one example. If the executives continue to enjoy pay rises based on their gross packages of 15 to 20% per annum while workers are implored but to expect no more than a 5% increment, on a purely mathematical basis shortly executive packages in South Africa will exceed R100m pa, then R500m ad infinitum.

Whatever Chris Griffiths, the CEO of Anglo America Platinum, may claim to the contrary regarding scarcity and market forces, social justice will not countenance such a disparity in earning. He might as well have been beseeching the miners Marie Antionettesque style to eat rice instead of pap.

Chris Griffiths, CEO of Anglo American Platinum

What is Picketty’s solution to this conundrum: progressive rates of tax on capital?

Howls of protest have already arisen from both Left and Right Wings of the political spectrum; from the left because it is not radical enough and from the right because it will destroy the essence of capitalism.

America is already confronting the first two revolts in this regard. After the average worker’s pay packet has stagnated in the USA for the past 3 decades, those of the high and mighty have reached stellar proportions with bonus alone amounting to USD100 i.e. R1000m!!

These are obscene levels. The first to make its mark was the Occupy Wall Street campaign. Asymmetrical pay levels unrelated to economic benefit based upon generating untrustworthy investment vehicles and bonuses that the average person could never spend over a lifetime have generated a simmering discontent.

Occupy Wall Street protests

Then it was the turn of San Francisco. With Google attracting a significant number of software engineers to its headquarters, its employees have skewed the property prices to such an extent that the local inhabitants are now harassing Google supplied bus transport. These are not some unwashed dope smoking drug addicts but rather average Joe people being evicted from their properties not by some legal action by the process of rental increments as property process escalate.

I too fear the catastrophic consequences of continued pay disparities. No longer can I, from a Social Justice perspective, support such pay levels.

But what I can predict as the Platinum Industry Strike has illustrated, is that workers will not countenance such gross disparities over the long term. Whether governments will legislate against such levels such as the EU is proposing or tackle it by means as an Transnational Capital Tax as proposed by Picketty, my Crystal Ball has not yet revealed.

I fundamental agree with Picketty’s exposition of the problem but I am wary of precipitous action. Stunning Lucia Pradella will forever be a chimera in my life not only because of the age differential but also for her inane conflation of a treatise on inequality with charging for copies of Marx’s works.

Like all politicians, she abuses scientific findings to support conclusions not underpinned or even intended by the initial work.

Perhaps what I am hoping for, are any measures to prevent further wage disparities is a tiny dose of meritocracy leavened with egalitarianism.

Finally at no point does Picketty make any political claims for this work. Indeed he studiously avoids any in case it unnecessarily contaminates the essence by the pollutants generated by course political discourse.

Nevertheless, for me, Picketty articulates, albeit sotto voce, the ideal of a nobler world.