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Piketty Dishes Up Class Envy, Disguised as Economics

By: Javier Garay - @Crittiko - Jul 25, 2014, 12:27 pm

EspañolA few days ago, Colombian news outlets began circulating the story of young people from high-income families who want to play football but are intimidated by their low-income competitors. Although this development may seem anecdotal, the story’s popularity is in fact a reflection of the negative view that has extended over the creation of wealth, and particularly over those who are wealthy.

This view not only seeks action against “the rich,” it is based on an interpretation of what they are. Many in society hold a flawed, binary conception of wealth: “the rich” are bad, while “the poor” are good.

Unfortunately, this view is widely accepted, and it circulates as a rationalization for envy. The most recent example of this phenomenon is the popular book written by Thomas Piketty, Capital in the Twenty-First Century (2013).

In this book, the French economist uses more than 600 pages, with considerable empirical evidence, to express one single idea: those who are wealthy must be penalized. As a consequence, most of the book’s reviews have focused on inequality and its impact on the world.

El economista francés Thomas Piketty en Cambridge, Massachusetts
The French economist Thomas Piketty in Cambridge, Massachusetts. (Wikimedia)

For Piketty, though, inequality appears to be something negative on face, just because.

On the one hand, he recognizes that it is not an intrinsic economic problem, as poverty is. Nor does it have undesirable effects with regards to generating poverty, except for a strange and almost desperate relationship made by the author between inequality and the current financial recession.

On the other hand, throughout the book, the author affirms that inequality may cause social dysfunction, due to the dissatisfaction of most people. Who are these people? He does not specify precisely, but he makes two references to the Occupy Wall Street movement.

What will be the result of this dissatisfaction? He does not make specific forecasts either. However, the author’s fears — to which he dedicated an entire book and in-depth research — suggest the worst phenomena: war and violent revolution.

One could analyze such outcomes in depth, but the point is that his book is a verbose example of the rationalization of envy. To the author, the problem is not poverty but the existence of wealth. Piketty, with sophisticated statistics and purported economic wisdom, unsuccessfully tries to hide his discomfort when it comes to the existence of rich people.

His explanation for the alleged, inevitable increase in inequality stems from two sources: (1) capital acquired, across generations, through inheritance, and (2) the disproportionate growth for manager salaries. This is where his attempt to make the subjective look objective comes undone, and his discomfort is visible.

He affirms, for example, that executive salaries — which, to him, are inflated — are unjustified, because their marginal productivity cannot be measured. Ludwig von Mises addressed this issue in Human Action a long time ago, but that is not convenient. Piketty also views inheritance as unjustified, because the heirs did not work for the wealth, and supposedly all fortunes have a theft component — a baseless fallacy, since all gifts work in that manner.

What is the result of the rationalization? Piketty’s recommendation is that the inherited capital needs to be taxed for increased redistribution, the welfare state, and to pay public debt. To Piketty, property rights, besides being inconvenient, are a minor obstacle: if the states are in debt while there exists considerable private capital, this must be confiscated to pay the debts. In other words, the rich people of the world must bear the brunt when state officials are not acting responsibly.

With regards to high salaries, Piketty’s “solution” is, literally, a final solution: these need to be extinguished through taxes. The goal is not to increase tax collection per se, but to penalize the existence of high salaries, which the author considers unjustifiable.

With academics providing fodder for envy, it is not a surprise to see class-warfare stories arise, such as the news story I mentioned. In present-day society, under the cover of the permeable concept of “social justice,” a self-sacrifice morality has become mandatory, which would outrage Ayn Rand. Not only has “helping” become centralized, it has ceased to be voluntary. Correspondingly, antisocial morality, such as envy, has become justified.

Hurting the rich may be politically correct, but it is a mistake. Thomas Piketty, in his endeavor to justify a banal sentiment, as his own envy is, forgets to mention the existence of another possible revolution, as popularized in Atlas Shrugged. Ideally, we would not need such a strike of producers against takers, but everything indicates that it is the outcome people are pursuing.

Translated by Mariana Nava.

Javier Garay Javier Garay

Javier Garay is a professor at the Externado University of Colombia. He has written two books on international issues, such as development, after his doctoral dissertation focused on the same topic. Follow him on Twitter @crittiko and through his personal blog, Crittiko.