- Will Hutton writes about Thomas Piketty's rebuttal to the false claim that inequality has to be encouraged in the name of development - and the reality that we have a public policy choice whether to privilege returns on capital or broad-based growth:
It is a startling thesis and one extraordinarily unwelcome to those who think capitalism and inequality need each other. Capitalism requires inequality of wealth, runs this right-of-centre argument, to stimulate risk-taking and effort; governments trying to stem it with taxes on wealth, capital, inheritance and property kill the goose that lays the golden egg. Thus Messrs Cameron and Osborne faithfully champion lower inheritance taxes, refuse to reshape the council tax and boast about the business-friendly low capital gains and corporation tax regime.- And Paul Krugman takes a look at the gross amount of wealth - by Gabriel Zucman's estimate up to 8% of all the wealth on the planet - which has been funneled to tax havens in order to be isolated from any contribution to the social good.
Piketty deploys 200 years of data to prove them wrong. Capital, he argues, is blind. Once its returns – investing in anything from buy-to-let property to a new car factory – exceed the real growth of wages and output, as historically they always have done (excepting a few periods such as 1910 to 1950), then inevitably the stock of capital will rise disproportionately faster within the overall pattern of output. Wealth inequality rises exponentially.
The process is made worse by inheritance and, in the US and UK, by the rise of extravagantly paid "super managers". High executive pay has nothing to do with real merit, writes Piketty – it is much lower, for example, in mainland Europe and Japan. Rather, it has become an Anglo-Saxon social norm permitted by the ideology of "meritocratic extremism", in essence, self-serving greed to keep up with the other rich. This is an important element in Piketty's thinking: rising inequality of wealth is not immutable. Societies can indulge it or they can challenge it.
The lesson of the past is that societies try to protect themselves: they close their borders or have revolutions – or end up going to war. Piketty fears a repeat. His critics argue that with higher living standards resentment of the ultra-rich may no longer be as great – and his data is under intense scrutiny for mistakes. So far it has all held up.
Nor does it seem likely that human beings' inherent sense of justice has been suspended. Of course the reaction plays out differently in different eras: I suspect some of the energy behind Scottish nationalism is the desire to build a country where toxic wealth inequalities are less indulged than in England.
The solutions – a top income tax rate of up to 80%, effective inheritance tax, proper property taxes and, because the issue is global, a global wealth tax – are currently inconceivable.
But as Piketty says, the task of economists is to make them more conceivable. Capital certainly does that.
- Of course, any public response to the continued distortion of political systems in favour of the wealth will require a massive amount of citizen activism. And Alexandra Bradbury and Jane Slaughter discuss how to build an enduring movement.
- Meanwhile, Kitimat's plebiscite rejecting the Northern Gateway pipeline should serve as an important demonstration that even the best-funded corporate propaganda campaign won't necessarily win out against a strong community.
- But it's a much more difficult task to achieve a change in general policies. And there's plenty of reason to focus on the Cons' continued refusal to regulate the oil industry which now represents Canada's largest source of CO2 pollution - particularly as the rest of the world starts to notice that renewable alternatives are well within reach.
- Finally, Marianne Lenabat wonders how Canada has been turned into one of the most reactionary actors on the global scene in recent years even when public opinion is still generally favourable toward social democracy.