Monday, April 21, 2014

Marx Rises Again

You are going to be hearing a lot about a new Thomas Picketty book: Capital in the Twenty-First Century. It is the rage. Mostly because
mainstream economists and others have failed to understand the lessons taught to us by Ludwig von Mises in his books, Socialism and -Planning for Freedom. Indeed, they are likely unfamiliar even with the important Mises article, Economic Calculation in the Socialist Commonwealth.

Krugman has already been on the PBS show Moyers and Company, singing high praises for the book.

In a recent New York Review of Books essay on the book, Krugman wrote:
Capital in the Twenty-First Century is, as I hope I’ve made clear, an awesome work. At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame.
Note, this "unified theory of inequality" is not a discussion of crony capitalists who plot in cahoots with government to make markets less free, it is hate against all capital.

Krugman also writes in the review:
 Even if the surge in US inequality to date has been driven mainly by wage income, capital has nonetheless been significant too. And in any case, the story looking forward is likely to be quite different. The current generation of the very rich in America may consist largely of executives rather than rentiers, people who live off accumulated capital, but these executives have heirs. And America two decades from now could be a rentier-dominated society even more unequal than Belle Époque Europe...
Piketty ends Capital in the Twenty-First Century with a call to arms — a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.
Here's Ross Douhat on the book, at NYT in an article titled Marx Rises Again:
IN the season of resurrection, it’s fitting that he’s with us once again — bearded, prophetic, moralistic, promising to exalt the humble and cast down the mighty from their thrones.

Yes, that’s right: Karl Marx is back from the dead.

Not on a Soviet-style scale, mercifully, and not with the kind of near-scriptural authority that many Marxists once invested in him. But Marxist ideas are having an intellectual moment, and attention must be paid.

Thomas Piketty’s best-selling new book, “Capital in the Twenty-First Century,” argues income inequality is going to worsen.Taking On Adam Smith (and Karl Marx)APRIL 19, 2014
As Timothy Shenk writes in a searching essay for The Nation, there are two pillars to the current Marxist revival. One is the clutch of young intellectuals Shenk dubs the “Millennial Marxists,” whose experience of the financial crisis inspired a new look at Old Karl’s critique of capitalism. The M.M.’s have Occupy Wall Street as a failed-but-interesting political example; they have new-ish journals (Jacobin, The New Inquiry, n + 1) where they can experiment and argue; they are beginning to produce books, two of which Shenk reviews and praises.

What they lack, however, is a synthesis, a story, of the kind that Marx himself offered. This is where the other pillar rises — Thomas Piketty’s “Capital in the Twenty-First Century,” a sweeping interpretation of modern economic trends recently translated from the French, and the one book this year that everyone in my profession will be required to pretend to have diligently read.

Piketty himself is a social democrat who abjures the Marxist label. But as his title suggests, he is out to rehabilitate and recast one of Marx’s key ideas: that so-called “free markets,” by their nature, tend to enrich the owners of capital at the expense of people who own less of it.

This idea seemed to be disproved in the 20th century, by the emergence of a prosperous, non-revolutionary working class. But Piketty argues that those developments were transitory, made possible mostly by the massive destruction of inherited capital during the long era of world war.

Absent another such disruption, he expects a world in which the returns to capital permanently outstrip  —  as they have recently  —  the returns to labor, and inequality rises far beyond even today’s levels.
It is pretty basic, but obviously the principles about capital and entrepreneurship, that Mises taught us, have not been learned by many. This is what needs to be understood:
 It is untrue that some are poor because others are rich. If an order of society in which incomes were equal replaced the capitalist order, everyone would become poorer.--Socialism (p.34)
The riches of successful entrepreneurs is not the cause of anybodys poverty; it is the consequence of the fact that the consumers are better supplied than they would have been in the absence of the entrepreneurs effort---Planning for Freedom: Let the Market System Work (p.135)