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Sunday, December 23, 2018


All right.  What is to be done, in light of the analysis I cobbled together from Piketty and others?

The central message of Piketty et al. is that capitalism is essentially a system for pumping profit, a.k.a. surplus value, out of the efforts of laborers and into the pockets of capitalists.  Piketty’s summary expression of this truth is the simple inequality r>g.  Taking into account everything, including depreciation, the rate of profit is greater than the rate of growth, resulting in ever greater inequality.

What can be done about this?  There are really only two answers.  Either get a new system, one in which capital is not privately owned, or else generate sufficient political support for an array of pre-tax and post-tax transfers from capitalists to laborers that will ameliorate the steepness of the inequality pyramid.  In short, socialism or the New Deal [speaking now of America.]

Maybe it is just that I am four days away from my eighty-fifth birthday, and hence do not put much faith in full-scale revolutionary change, but socialism does not seem to me to be just over the horizon.  Which leaves substantial pre- and post-tax transfers.

Now mind you, there already are in the advanced capitalist countries substantial transfers, a fact that Piketty, Saez, and Zucman document for the United States.  But the proportional magnitude of those transfers has dramatically declined, and they are now constructed so as to benefit primarily the middle 50-90% and the elderly among the Bottom Half [Medicare and Social Security.]

A dramatic revision and ramping up of such transfer programs would be an unambiguously good thing, in my opinion.  But it would simply slow, not reverse, the increasing inequality.  What is more, as Piketty made clear in his book, with the passage of time, a larger and larger share of the accumulated wealth is inherited rather than “earned” [if you will forgive the term].  In short, we are well on the way to full-scale patrimonial capitalism.  [Think of the piles of wealth that will be inherited by the young Bezos’s, Zuckerbergs, and Gates’s, and the piles already inherited by the Waltons.]

I am one hundred percent in favor of increased transfers.  Every dime that the minimum wage is raised puts $200 a year in the pockets of the poor.  A guaranteed national minimum income would also be an enormous advance toward social survival, if not social justice.  These are things worth fighting for.

But they do not change the underlying reality.  They soften it, but they do no change it.

I do not see collective ownership of the means of production growing within the womb of capitalism, not even in China, which pays lip service to Marx and not much else.

As I prepare myself for turning eighty-five [why does this seem so much more consequential than turning eighty-four?], this is the best I can offer.

Thin gruel at Yuletide, for sure.


s. wallerstein said...

I agree with your prognosis that collective ownership of the means of production does not seem to be coming.

One step, which does not do away with capitalism completely, but would give us lots of cash to ramp up transfer programs is semi-confiscatory inheritance taxes. Professor Leiter suggests limiting inheritances to 5 million dollars per heir (the definition of "heir" would have to be tightened to avoid loopholes of course). That seems like a lot of money to me, but that would allow people like Buzos to leave a nice fortune to his children and grandchildren and give us a lot of money for transfer programs.

s. wallerstein said...

It's Bezos, not Buzos. Sorry, Jeff.

Robert Paul Wolff said...

Why not make the limit on inheritance be an amount equal to the median household income for a century. That seems reasonable, and would be not much more than Leiter's proposal.

s. wallerstein said...

Sure, that would incentivate the wealthy to want to increase the median household income, which is progressive.

It's important to define who constitutes an "heir" tightly: I'd say children, grandchildren, spouse (including civil unions). If you want to leave your money to your dog, that amount has to be subtracted from the limit for children, grandchildren and spouse.

Jerome Doolittle said...

Hey, 85’s not so bad. I’ve been there since July. Listen to Glen Miller. Watch old movies. Call up old friends you haven’t seen in years. Re-read old books, even your own (I picked up one of my mysteries last month and found I had forgotten whodunit). Live in the past; there’s more of it. Enjoy.

Robert Paul Wolff said...

That is the best advice I have had in decades! Many thanks.

LeanMcHungry said...

The economist Mark Blyth proposes a novel solution to the problem of inequality, which is generated by the rate of return on assets being higher than the rate of growth in wages.
Why can't we have r for everyone? Blyth offers a way this could be done.
His response begins at 1:05:25

Anonymous said...

Wishing you a happy 85th. Many happy returns.

Jerry Brown said...

"I am one hundred percent in favor of increased transfers. Every dime that the minimum wage is raised puts $200 a year in the pockets of the poor."

Part of our problem when discussing 'What is to be done' is that we make our argument so much harder to accept if we assume that we need to take away income or wealth from the rich and 'transfer' it to the poorer in order for our government to do anything to benefit 'the poorer', or whatever you want to call most of the population. We handicap our argument and it's just not true most of the time. And a policy to raise the minimum wage should not really ever be considered as any kind of 'transfer program' to begin with. Not any more so than when the price of oil or any other commodity increases.

And as far as we want to discus transfers, Dean Baker has a good discussion in "Rigged:
How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer". The title summarizes it pretty well, but you can read the blurbs about it and read the book for free here if you like.

There's the real transfer payment changes. To the wealthy mostly. From the rest.

Jerry Fresia said...

All good and interesting. I especially like "the limit on inheritance be an amount equal to the median household income for a century." When stated that way, the political support might be easier to get.

Two concerns:

1. One is alienation. So is the best we can do is to engineer "highly paid slaves?" Maybe, as part of a reform
package, some creative decision making (at the point of production) could be worked in.

2. And simply on a theoretical level (unfortunately) - in a new system where capital is not privately owned, will this be because property rights just whither away or will private ownership (involving the exploitation of workers) be outlawed? Or will there be some version of a mixed economy?

David Palmeter said...

Another approach-which Piketty might mention in his book; I'm not sure--is not to tax the estate itself but to tax the beneficiaries according to their income and wealth. In that situation, if one child is a successful, highly-paid investment banker and the other a public school teacher, the former will pay a higher tax than the latter on an otherwise equal inheritance.