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Tuesday, June 3, 2014
Current Affairs ... Economics/Business ... Personal Reflections ...

I intended to write a long, profound essay on Thomas Piketty’s news-making book release “Capital in the 21st Century” . . . but then I realized that I may not have all that much to add to the discussion. And there has been plenty of discussion on this book over the past few weeks (Salon, The Economist, Financial Times, NY Times, Wall St Journal, Forbes, NY Review of Books, etc.). Most of it is worth reading, quite erudite and long-sighted.

In a nutshell, Piketty has written a long tome about the historical economic trends of industrialized civilization over the past 4 centuries or so, addressing the overall question as to whether capitalism and free markets have made things better for the common, average person. Well, most people would have to agree that on average (with plenty of exceptions to the rule), the economic growth that capitalism has fostered raised the living standards of a majority of people in the industrialized nations, over the long term. The question really is, just who is getting the bigger share of free-market capitalism’s benefits; is the generated wealth being widely distributed, or is it being concentrated in the hands of a rich few? Do the long-run trends favor income equality and widespread opportunity, or are they increasing concentration of wealth in a tiny majority, with more and more people shut out from a chance at the good life?

As you might guess, the historical evidence on that is mixed; but Piketty seems to feel (I haven’t read the book, I’m just going by what others are saying) that the overall trend emerging from the noise and from the unforeseeable historical perturbations (such as big wars) is that capitalism inherently tends to concentrate wealth. On the whole, it gives more and more economic return over time to providers of capital, and less and less return to providers of labor (most forms of labor, other than perhaps, entrepreneurial / managerial effort, along with highly specialized technical skills that happen to be relevant to an important technology for some limited period of time – e.g. smart phone software engineers).

In the long run, if this trend continues, we will have a fantastically productive economy with a small population of extremely wealthy capital owners and entrepreneurial risk-takers, along with a handful of technicians to assist them (the remnants of the middle class), with everyone else living more-or-less like peasants in the Middle Ages. (Or more realistically, like the “underclass” in today’s cities and rural regions).

The thing that really incites debate is Piketty’s recommendation that a world-wide wealth taxation system be established, a system that would not allow tycoons to shop around for a low-tax nation to move to after they’ve made it big. Obviously, Mr. Piketty feels that the rich increasingly owe something to growing ranks of economically disenfranchised people, but they will need to be forced to fork over the cash since they otherwise don’t need the services or extremely limited resources of such people. Again obviously, there is a wide range of opinion amongst the pundits about this prescription. About all I can add to the discussion, off the top of my head, is to ask: just how could the revenues of such a tax be used to make any real difference in the lives of the growing majority of economically irrelevant families?

If the trends of technology and capitalism are as strong as Piketty make them out to be, then it’s hard to see how such a tax will make much of a difference. Oh sure, it may help feed some starving people or provide some expensive health care services that the masses could not otherwise afford. And maybe that would ultimately be worthwhile to the rich, if it tamps down the temptation on the part of the proletariat to rebel against the machine by becoming domestic terrorist Luddites. (Also to prevent the rise of political rabble-rousers, assuming that the rich haven’t already bought off the political system with their wealth – they seem to be doing a pretty good job today in keeping our political system from going populist).

The other issue that I don’t feel Piketty dealt with sufficiently is the effect of technology. Over the decades and centuries, technology has sometimes made common, low-to-moderately skilled labor more valuable to the capital holders, and sometimes (as of late) has made it increasingly unneeded. Where is technology taking us today? Overall, does the internet and other communications technologies open up opportunities for the less well off, or close them? What technologies could make common human abilities relevant again to the entrepreneur, without pricing it down to Chinese or Indian sweat-shop / live-in-factory conditions? Anything?

Well . . . I’ll leave the Piketty topic right there, as I don’t have any good answers to these questions. Let me just make a little observation about something that recently struck me regarding the labor-providers in my own area of the economy (i.e., government service). As many right-wing politicians decry, a lot of government workers who were hired more than 10 years ago got a sweet deal, in terms of retirement benefits. These workers were making a bit less than what was available in the private sector at the time (the 1980s and 90s). But they hung in there, and now they want to cash-in on the relatively low hurdles that were set for them to gain valuable (and more costly than anticipated) retirement benefits.

Workers with 25 years of service can often retire at about half their maximum yearly salary, and receive lifetime health benefits to boot. Not a bad deal if you started with the government at around age 30, and now you are 55 and want to just kick around or work part-time (not for government, though, as the retirement plans bar that; although there are certain ways around that restriction, such as coming back as a part-time contractor – I have seen that happen). Conservative politicians such as NJ Governor Chris Christie are trying to rally the voters to welsh on the deal and take many of these benefits away from long-term government workers, and they have had some success. But still, a lot of those workers are able to “get out now, while the getting is good”.

This past week, I saw three middle-level government workers people in their 50s enjoy their last workday. But this is not terribly uncommon; most government people who reach the health benefits threshold head for the door right away. In a way this is sad, because their working life had become mostly about getting over the goal line, and not about finding happiness in what they do (or did). I can only think of maybe one or two people where I work who have more than enough time to retire at a comfortable level, but stay on apparently because they enjoy what they are doing. I don’t know just what it is that makes government work so spiritually toxic, why it turns so many talented people into “months left to go” countdown zombies. (And I must admit, I myself have a “countdown clock” in my head – this phenomenon is infectious).

There are a lot of good things about working for the government. One of them should be the opportunity to serve the public, to contribute to the good of the whole. Unfortunately, the top leaders of government are selected by the political process, and the corruptions that are increasingly infecting the modern political system find ways to seep into the daily mechanics of government work. Politics are all about struggle, and struggle can be wearying. Fairness and ethics take a back seat, and modern information technology and marketing psychologists have allowed politics to become increasingly vicious and untethered to the facts. Politics is now mostly about image and rhetorical technique, about holding power day-to-day, and is less and less focused on finding truth and seeking long-term public good. (Perhaps we need another Piketty to write a tome about that trend.)

I’d like to think that my own struggles with the mini-politics of daily life in a county agency have been worth it, that I have made some real contributions to the “common weal”, that I have given the public their money’s worth. But at the same time, I continue to count the months until I too can put it all aside. I wish they could find a way to keep us all inspired, to be constantly willing to go the extra mile, but . . . as the saying goes . . . politics are politics!!

(And if Piketty is right, retired government workers with relatively good benefits are going to among the last of the 20th Century middle class enjoying the American suburban good life. But then again, these workers were unwillingly subject to a lot of politics, and modern politics have become war, and war is hell; so maybe they should be treated, to some degree, like veterans. But then again, given the recent VA health care scandals, I’m not sure that that would be good either!)

◊   posted by Jim G @ 8:58 am      
 
 


  1. Jim, I cannot say anything about Piketty’s book as I have never heard of it before your post. (I guess it shows how unaware of what’s going on in NYC I am [or how unaware I am of what’s being published as the book publishers do not bring that set of books to my attention]; but there you have it. Then again, perhaps the Midwest has not yet taken note of Piketty and his book.)

    [Jim G note: Oh come on, Mary, you read Natl Catholic Reporter, don’t you? Check this note out about Piketty and a tweet from Pope Francis.]

    However, I’ve been thinking about Capitalism for a while now; so perhaps I could simply address the concept of Capitalism as it works in the United States. I might also make a few comments about the points you make about Piketty’s book and comment on them – as points you have made but not as something I’ve read myself.

    First of all (and here I am not sure whether I am disagreeing with you or disagreeing with what you say Piketty has said) it seems to me that there is some fundamental contradiction from the beginning of the comments about Piketty’s book to the point where the questions start. First there is the statement that “most people would have to agree that on average . . . the economic growth that capitalism has fostered raised the living standards of a majority of people in the industrialized nations”. Then there are the two questions that follow: Who is getting the bigger share of capitalism’s benefits? (Not the “minimum wage worker”, I say.) Are there increasing concentrations of wealth in a tiny majority? (Oh, definitely.) So it would seem to me that capitalism has *not* raised the living standards of the majority of people in industrialized nations. (But maybe there’s something here I don’t get.) I’d agree with Piketty that the “little guy” is the one who is getting the short end of the deal in Capitalism.

    Then too, I’ve found myself in a position I’d never really tho’t I’d be in, that of actually agreeing with the Pope, particularly as he has been critical of Capitalism. First, he basically said, “play nice” and “the guys with lots of money should share with those who don’t have much”. Francis has also recently added to that by emphasizing that “trickle down” does not work (don’t need to be an economist to find that doesn’t work) and also by pointing out that it’s money that is controlling politics now, rather than the electorate (as in lobbyists who contribute money to a politician’s campaign in exchange for a vote on something the lobbyists want; thus, while the electorate actually votes, the politician really *works* for the lobbyists).

    While the Pope has the poor people listening to him, the people with the money are not likely to listen to the Pope or even have a clue of what he says about Capitalism. Even the Capitalists who are willing to “share” find that most of those with “most of the money” do *not* want to share at all; Warren Buffett for one has said as much.

    As to some kind of “world-wide taxation”: Again, that concept appears to me to be about the same as the Pope saying, “play nice and share”. I doubt that will happen either.

    Lately, there’s been a move on to raise the minimum wage. Notice, that’s a kind of “taxation” on the rich who again probably have no clue of what the people who make minimum wage actually do. (For an example of this, see the program “Undercover Boss” where Donald Trump was almost forced into doing some of the work that minimum wage people do. He refused the “undercover” part of the whole thing; everyone *had* to know *he* was doing this demeaning labor. Then, when things got to be “do more work in less time” and “work harder”, he simply walked out and refused to participate. He had no interest whatsoever in understanding what the minimum wage worker in his hotel(s?) do for the little they are paid.

    Neither are the ones with the money likely to spend their time in a fast food line. The few times I’ve passed through a fast food line, I’ve been amazed at the amount of work the people who work for minimum wage do. For instance, I’ve noticed that *one* person will be doing several things at one time: 1) taking food orders (and keeping track of who gets what as a side issue to this job . . .[I wonder if this is actually a “2” in the numbering of the jobs one person does]), 2) taking the money from people for their order, 3) giving change, 4) placing the order for the people making whatever is purchased (well, perhaps that all is done in one fell swoop by computer. Nevertheless, all these things are part of getting the order correct. And here I would note, seldom does one get an incorrect order when going thru the line). Then at times this same person 5) asks people if they want any other additions to their order and, if so, there will be an extra charge. (At other times a different person will ask this question and take the money.)

    So this one person, paid a minimum wage is doing (depending on how one counts) four or five (perhaps six?) very important things. I’ve long tho’t that it’s outrageous to expect all these jobs of one person who is paid minimum wage. (And then I often still see Donald Trump walking out of the bathroom he was cleaning when the lady being paid minimum wage was asking him to actually scrub the sink. My tho’t would be that “The Donald” would perhaps have given the “minimum wage” lady a tip or bonus of some kind for what she was required to do, but, he said what he tho’t with his feet.) Pope Francis is right: Trickle down does not work.

    I am beginning to think that capitalism is a “step up” only for those people who would like to be paid a minimum wage at least, yet have no choice but be paid a few cents a day. So perhaps capitalism works only in such conditions.

    I certainly can see your point that working for the government is something that good people tend to do in order to help people in good ways. I’ve known one woman whose purpose in life was to “work for the poor” in just such a gov’t job. You and these other individuals are to be honored, I would say.

    Yet, somehow or other (as with other types of work people go into to help others, such as teaching, for instance) the good these individuals accomplish is not because of capitalism it’s despite capitalism.

    It would seem to me that what is needed are economists who start to look for another economic system besides capitalism (and communism and socialism); they need to find an economic system that does not put us, for all practical purposes, back in the Middle Ages. (For when one thinks of it, what basically is the difference between working for the king and working for a capitalist like, say, Donald Trump?) We need a new system, one that has an aim of spreading the wealth more evenly . . . and one that does not start out offering everything the poor can hope for (as does capitalism) but end with the 1% having all the money and the 99% working for minimum wage, or if not minimum wage, certainly a wage/salary that is nowhere near what the 1% has. MCS

    Comment by Mary S. — June 4, 2014 @ 1:58 pm

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