In Capital in the Twenty-First Century, Thomas Piketty documents a vast increase in inequality in income, forecasts an ever worsening increase in wealth inequality, and offers a perfectly plausible proposal to deal with the social consequences of both. He says that we should impose a big increase in the top brackets of the income tax, a big increase in the top brackets of the estate tax, and a direct world-wide tax on capital.
Pundits of every stripe say the same thing: the proposal is utopian. It can’t happen. It will never happen. And since it can’t happen, it isn’t worth discussing any further, and let’s try my favorite proposal, which I have been pushing for years and is a staple of liberal or conservative politics, strengthening unions, improving education, increasing technology-driven growth, whatever. Their ideas have been around for decades and nothing has happened. Nothing happened for a very good reason: rich people don’t like those ideas any more than they like higher taxes, and Congress does what the rich want them to do. That’s the basis for the pundits’ claim that Piketty’s idea is utopian. Apparently the irony of their criticism is lost on them.
Piketty’s proposal is different: it strikes directly at the problem, the very problem that the pundits refuse to identify. The problem is that the filthy rich control too much money and too many people’s lives, and they are wrecking society with their ever increasing demands for higher returns on their staggering piles of money, and their control over the supposedly democratic societies to enforce their demands. Piketty’s proposal allows people to stack up the money, but then the societies that nurtured them bite into the stacks of money and make it impossible for them to strangle the people who made that accumulation possible.
Two of the big suggestions from the pundits are education and strengthening unions. How does a person from the lower class (using Piketty’s definition: lower class, the 50% of us who have only a tiny net worth, middle class, the 40% of us who have small net worth, and the upper class, the 10% who have all the money) get an education? The rich refuse to pay taxes to support public education, even at the grade school level, and somehow that stupidity trickles down to the very people who get hammered by it. No one votes for taxes to support schools. Instead, we get privatization to benefit the already rich, or just plain crappy schools. Lower class people have exactly one way out: debt. They get to pay for an education. The debt isn’t dischargeable in bankruptcy, so they carry that burden forever, and probably share it with their parents who can’t discharge it either. The same thing is true of most middle class people. Their schools are marginally better, but when the kids get to college, here comes the debt. Only the upper class has a shot at getting an education for their kids without burdening them with debt.
The fact is that even a good education doesn’t mean you get a job, especially a job that will pay the debt. The best jobs go to the upper class kids who have the social cachet and the friendship circles to get them into the corporate slots that are the ticket to success. If you come from the lower class, you can just bag the idea that you are getting into that management training program at Goldman Sachs or GE.
For those without college educations, union jobs offer a decent life. But look at what happened in Chattanooga when the workers at VW were given a chance to join a union with little formal resistance from the company. The union lost. The resistance to self-protection of the lower class is so strong that there is absolutely no reason to think strengthening union laws will make any significant difference in the next 20 years.
Piketty’s tax proposals cut through the garbage. They directly reduce the power of the filthy rich. They provide governments with the wealth they need to improve the lives of every one of us. They insure that the benefits of capitalism flow to all citizens, not just the members of the lucky sperm and egg club. They make room for new ideas, new forms of living and new and better ways to live with the changes that are coming. That isn’t true of any of the other proposals.
The people who call Piketty’s ideas utopian and impossible are making real change impossible.
Image by Giorgio Monteforti: Cutting the Gordian Knot, 1692-1700, by Augsburg Marx Weinold (active 1665-1700), silver repoussé, parcel guilt. At Warsaw National Museum, used under creative Commons license.