Tuesday, June 10, 2014

Why Has Thomas Piketty Hit Such a Nerve?

Thomas Piketty has attained a public figure status in the United States dwarfing his celebrity in his native France, and it isn't just because of the now-tired debate about the "one percent" and the "ninety-nine percent." Yes, there is wealth concentration in the United States. It is unprecedented in the United States, but not Old Europe. Piketty makes much of the Belle Epoque, the Gilded Age, a bright period of optimism and joie de vivre, but also extreme French aristocracy and wealth concentration. But in modern America, optimism is still slumping, and the wealth gap is increasing. Piketty proposes a progressive wealth tax; ideally, a global one. That proposal itself could be the focal point of the controversy surrounding his book. I don't think it's the only one.

It isn't just wealth concentration that haunts Americans. Wealth concentration just focuses a unease about the extent to which we control our futures and that of our children. We have handed over much of our lives to singular entities, private or not, consciously or not, voluntarily or not, and it is never clear if we are better off for it. Whether it be due to economies of scale, or some other reason that things are concentrating in the hands of a few, our diminishing lack of choice is disquieting. So much of our day-to-day experiences as Americans are impacted by extremely concentrated industries. The Hachette Book Group has gotten into a dispute with Amazon, through which about 44% of all books sales are made, in which Amazon is reportedly delaying shipments of Hachette books as retaliation for its refusal to agree to ebook rates. This is putatively for our own benefit as bookbuyers, but as a publisher or a writer, are we better off with one widespread, brutally efficient distributor? What are our choices of cable providers? And how do you feel when you get off of a flight on the one of now-three major airlines that you are forced to patronize? [nb: you can always file air travel complaints with the FAA consumer complaint site, which I did after an American Airlines gate agent in Miami slammed a boarding door in my panting, sweating face, sneering "sorry, flight's closed."] [nb2: airlines, it has to be said, are not making money hand-over-fist like the other concentrated industries]. Yesterday, the President announced an executive order that will cap student loan repayments at ten percent of income. That, too, seems aimed at an American malaise about access to success. It gets couched by the President as making sure everyone gets a "fair shot" at success, but what he really means is that success and material wealth should not be concentrated. Piketty himself focuses much of his reform proposals around access to higher education.

This brings me to my earlier post about climate change being a national security threat. Piketty is finds it "terrifying" that the wealth gap could increase back up to Belle Epoque levels. Why? Well, what happens when there are vast wealth inequalities, and a decreasingly small fraction of people that own an increasingly large part of the pie? Can you imagine what it feels like to be one of the 0.1%? Vast inequalities of wealth, concentrated in a vanishingly small few, creates a comparative advantage for violence on the part of the dispossessed. It could be that even expensive, sophisticated security systems, while offering an absolute advantage in violence, suffer a comparative disadvantage when faced with swarms of angry crowds with little opportunity cost of violence. That is the kind of calculus confronting oppressive governments when facing frustrated and hungry mobs with little to lose from violence. This may sound fantastic in modern America, but it is not solely a dystopian, futuristic Hollywood sci-fi risk, as evidenced from the many modern-day political upheavals. Moreover, the problem with this risk is that it is a potential spiral. Once a police state -- private or public -- is erected, it becomes difficult to reverse. Marx warned that class struggles would come; Durkheim warned that they may result in violent upheaval.

 Maybe this backdrop of potential violence is why Piketty has hit such a nerve.

http://lawprofessors.typepad.com/law_econ/2014/06/why-has-thomas-piketty-hit-such-a-nerve.html

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