Money, money, money 042514

A literary surprise this season is Thomas Piketty's, 700 page tome "Capital in the Twenty-First Century" originally published in French.  For xenophobic Americans to rush out and spend "good" U.S. dollars for anything French, except maybe an over-priced bottle of wine, is truly amazing.

I've not read Piketty's work and probably never will, not because of its French origins but because it's a scholarly study of centuries' of economic data.  Piketty isn't targeting America in his study but rather the principle capitalism and its impact on inequalities of its outcomes.

Karl Marx condemned capitalism over a century and half ago in a philosophical argument that labor is exploited by the wealthy.  Capitalist countries immediately condemned Marx's arguments and even the so-called communist countries never truly embraced Marxism.

By the turn of the 19th century labor began struggling to capture a small share of capitalism.  Henry Ford broke from his contemporaries by paying his workers enough so they could afford to drive his automobiles.  Ford may have been a capitalist anomaly because his contemporaries hired private armies and pressured legislatures to keep labor poor and subservient.  Events however overtook global capitalism in the form of world wars and depressions.  For a while in 20th century it appeared that wealth would indeed trickle down as labor could now drive cars to pickup their unemployment checks.

In the 21st century labor is again under attack by wealthy capitalist and wealthier legislators, forcing an even larger wedge between big bucks and a few pennies.   Piketty's work quantifies the role of capital and income inequality.  True workers make more money but they can't afford to live on one paycheck.  The immediate surge of growth after World War Two appears to also be an anomaly (a shortage of labor and greater demands from the near universal destruction.)

Changing the focus of inequity, Piketty looks at the rate of capital return and economic growth.  In it simplest form Piketty proves that the rich get richer while the poor gets poorer.  The wealthy can use their money and power to churn economies, skimming the cream and ignoring reinvestment for real economic production.  This is not only an American phenomenon; globalism has embraced wealth and power as billionaires have now emerged even in former communist countries.  The 19th century robber barons are back and much more sophisticated.

Barons now understand how to sell, "What is good for the baron is good for the serf."  The deceived serfs then vote even more power to the barons by electing them to legislatures empowered to write serfdom oppression laws.
  
According to Piketty, "When the rate of return on capital exceeds the rate of growth of output and income, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based."

Piketty might make a few bucks from his book but he must understand it and invest for capital growth and not squander his workman's wages on more paper and pencils for his next book.