Real Vs. Republican Populism: How to Win the War on Inequality

[DonViejo]

Michael Tomasky

If only Ted Cruz and Rand Paul would pick up Thomas Piketty’s book. Failing that, Hillary Clinton should heed his findings about wealth and inequality—and take on the crisis head on.

So Republicans are going populist, or at least two of them are, reports The Daily Beast’s Patricia Murphy. And perhaps it’s only in the sense that unlike Mitt Romney and many in the House GOP, they’re not speaking of working people with contempt. Well, it’s a start. But I wish they’d pick up copies of Thomas Piketty’s Capital in the Twenty-First Century. Oh, of course Ted Cruz and Rand Paul would find ways to pooh-pooh the book’s findings and conclusions, but it’s nice to think of them merely having to immerse themselves in empirical reality for a few hours instead of the magical economic fairy tales that undoubtedly constitute their usual diet.

If you’ve not heard of Piketty or Capital, it’s certainly the economic book of the year, and probably of the decade so far. (You can read Paul Krugman’s rave in The New York Review of Books here.) I admit I’ve only waded into it so far, but I went to see the author, a French economist, speak at the Economic Policy Institute in Washington to a room full of people who braved a hideous, monsoon-ish rain Tuesday morning. (The video of the event is here.) What Piketty has done, my economist friends tell me, is nothing short of revolutionary and deserves to change the way we think about wealth and inequality. Much more important, it also deserves to alter what we do about them.

Here’s the story in a ridiculously small nutshell. Thirty scholars collected data from 20 countries over about 100 years. Piketty pored over the data trying to pinpoint salient reasons for our insane levels pf income inequality, which is worse in the United States, where the richest 1 percent own nearly 40 percent of the wealth, than in most other advanced countries but hardly endemic to America.

The one key: In all times and places under study, the rate of return on capital increases at a faster rate than general economic growth. Growth averages 1, 1.5 percent. Rate of return averages 4 or 5 percent. So presto, the people with the capital—money and assets of all kinds, land and equipment and what have you—are getting richer a lot faster than the rest of us. And as Nobel Prize-winning economist Robert Solow, a panelist at the event, pointed out: “Note that this is not a market failure.” This disparity (r > g, in wonk-speak) is a feature, not a bug, as they say, and it’s just our fate, and on and on it shall go, as the rivers roll to the sea.

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http://www.thedailybeast.com/articles/2014/04/16/real-vs-republican-populism-how-to-win-the-war-on-inequality.html