Fwd: qotd: Thomas Piketty - "CAPITAL in the Twenty-First Century"

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Subject: qotd: Thomas Piketty - "CAPITAL in the Twenty-First Century"
Date: Mon, 7 Apr 2014 09:33:51 -0700
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>



Harvard University Press
CAPITAL in the Twenty-First Century
By Thomas Piketty

The overall conclusion of this study is that a market economy based on
private property, if left to itself, contains powerful forces of
convergence, associated in particular with the diffusion of knowledge
and skills; but it also contains powerful forces of divergence, which
are potentially threatening to democratic societies and to the values of
social justice on which they are based.

The principle destabilizing force has to do with the fact that the
private rate of return on capital, r, can be significantly higher for
long periods of time than the rate of growth of income and output, g.

The inequality r>g implies that wealth accumulated in the past grows
more rapidly than output and wages. This inequality expresses a
fundamental legal contradiction. The entrepreneur inevitably tends to
become a rentier, more and more dominant over those who own nothing but
their labor. Once constituted, capital reproduces itself faster than
output increases. The past devours the future.

The consequences for the long-term dynamics of the wealth distribution
are potentially terrifying, especially when one adds that the return on
capital varies directly with the size of the initial stake and that the
divergence in the wealth distribution is occurring on a global scale.

The problem is enormous, and there is no simple solution.

Many people worry that moving toward greater cooperation and political
integration within, say, the European Union only undermines existing
achievements (starting with the social states that the various countries
of Europe constructed in response to the shocks of the twentieth
century) without constructing anything new other than a vast market
predicated on ever purer and more perfect competition. Yet pure and
perfect competition cannot alter the inequality r>g, which is not the
consequence of any market "imperfection." On the contrary. Although the
risk is real, I do not see any genuine alternative: if we are to regain
control of capitalism, we must bet everything on democracy.

http://www.hup.harvard.edu/catalog.php?isbn=9780674430006


Comment by Don McCanne

Although the English translation of Thomas Piketty's "CAPITAL in the
Twenty-First Century" was published only this month, it has already
become a classic in the economics literature. This book is not about
health care, but it provides us with an excellent background for
understanding why we need to reform our current health care financing
system. It is a must read, not just for those advocating for health care
reform, but for everyone.

Our health care system is designed to support rentiers. Current trends
in income and in wealth accumulation indicate that a disproportionate
share of global income will continue to shift more and more to the
control of the rentiers. We are already seeing a relative decline in
financing of health care for wage earners, manifested by higher cost
sharing and by more limited access through narrower, lower-cost provider
networks.

Piketty shows us how the concentration of capital at the top drives an
ever greater percentage of income upwards, with the rentiers having to
do nothing further to accomplish that feat. He explains how the solution
is progressive income taxes and progressive wealth taxes.

Expanding progressive financing through single payer would provide a
step forward in implementing solutions to the iniquities of concentrated
wealth. And it would be a significant move since health care constitutes
such a large part of our GDP.

Without intervention, there is the risk of major social disruption. If
we wish to avoid this, people are going to have to rediscover democracy.
As Thomas Piketty says, "if we are to regain control of capitalism, we
must bet everything on democracy."