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Why Does Thomas Piketty Remain So Popular?

By: Priscila Guinovart - @PrisUY - Aug 15, 2016, 12:36 pm
Thomas Piketty
If Thomas Piketty was truly concerned about poverty, he would have written a book on how to increase wealth, the only tried-and-true solution. (Medias Presse)

EspañolEvery generation rallies around a singer, an actor, a writer, and – although less evidently – an economist.

Thomas Piketty is all the rage nowadays. Everyone has heard about him and everyone has an opinion on his theories, truly a feat in a profession where recognition is limited to academic circles.

Piketty is the economist of this generation, having dethroned Paul Krugman — or perhaps sharing the altar with him, given their political affinity.

The Frenchman’s book “Capital in the 21st Century,” which mimics Karl Marx’s magnum opus even on the cover, became a worldwide bestseller almost overnight — never mind that many of his  supporters have confessed to not being able to read it in its entirety.

Yes, Piketty is a tough read. He intertwines economic assumptions with convoluted, 18th-century French prose. As if that not were enough, it is huge: a 650-page volume.

Perhaps its biggest strength lies in that fact; people hardly ever admit to not understanding something, and in doubt, they applaud.

I wish that literary aspects were the only thing that’s wrong with Piketty’s book. But the French economist is the new standard-bearer of the old faulty reasoning that says the poor exist because there are rich people.

He’s become an inspiration to Bernie Sanders in the United States, Pablo Iglesias in Spain, Axel Kicillof in Argentina, and to all the economically resentful, revanchist, and anti-progress left.

Thomas Piketty is the left’s muse because he represents the very essence of their movement.

According to Piketty, capitalism produces inequality. But is inequality in itself a problem? To answer this question we need to distinguish inequality from poverty.

Inequality is a condition of human existence: there will always be someone who owns more than the rest. People eating caviar five times a day while others can only afford rice with vegetables is something that will not change.

The true problem then are those who have absolutely nothing to eat. We should focus on solving poverty, not inequality, which is a feature of human life. I don’t demand to earn the same as Mark Zuckerberg because, among other things, I would have never come up with Facebook and be able to profit from it as he has. We have different incomes because we don’t generate the same profits. And that’s fine.

But let’s get back to poverty and Piketty: is the world poorer because of capitalism? The answer is not only a resounding “no,” but also “quite the opposite.”

Over the past two centuries, as industries flourished thanks to evil capitalism, we’ve grown richer. This is specially true in recent decades: in 1990, according to U.N. data, 47 percent of the world was in poverty. By 2005, it had fallen to 27 percent. In 2015, the figure stands at 22 percent.

For the first time in human history, obesity is more prevalent than starvation, a clear indicator that the world, although not perfect, is a much better place than it was two centuries ago.

I invite readers to ask themselves whether they do not enjoy from a quality of life that was unthinkable to their grandparents.

But Thomas Piketty cares little about poverty and even less about wealth creation, the only tried-and-tried solution to fight the former. The Frenchman, obsessed with inequality, proposes the same magic recipe as all socialists before him: more taxes.

Piketty focuses on a very particular one that he called “global wealth tax.” The rich, he holds, must give up up to 80 percent of their income — or rent or assets, a vagueness that pokes a hole in his theory — in favor of the poor. He also asserts that a system of redistribution would be in charge of ensuring that the money or assets are put to a better use.

Across the world, and in Latin America in particular, this is nothing new; many governments have come up with that idea.

Among many, you have the Castros, Hugo Chávez, Nicolás Maduro, José “Pepe” Mujica, the Kirchners, Lula da Silva, and Dilma Rousseff. We have suffered when they tried to enact such policies. Unfortunately, we know all too well how the “systems of redistribution” work. Everyone, from “exploitative” business owners to “exploited” employees, ends up a loser.

Redistribution has never worked. It has only served to create and concentrate power, to corrupt officials, to weaken citizens and turn them into beggars. Redistribution is the basis of socialism and socialism has failed and will continue to fail.

If Piketty was truly concerned about poverty, he would have written a book on how to increase wealth.

So why is he so popular? First and foremost, popularity alone does not prove anything. Hitler was popular. Ernesto “Che” Guevara, the racist and homophobic murderer whose true history no one bothers to read, is still popular.

Thomas Piketty’s popularity is due to a simple fact: after all the failures and horrors of socialism, he is keeping the dream alive with a “new” theory.

Plain and simple, redistribution sounds and feels good. Repeating it works like a mantra to clean guilty consciences: “I feel deeply about poverty, but at least I believe in redistribution! I fight poverty by advocating for redistribution.”

Then I go back home and write “death to capitalism” screeds on social media — from my iPhone.

Priscila Guinovart Priscila Guinovart

Priscila Guinovart is an Uruguayan teacher and writer. She has written for outlets in Latin America, the U.S., and Europe. While in London, she wrote her book La cabeza de Dios. Follow her: @PrisUY.

How Paul Samuelson Misinformed Generations on Economic Principles

By: José Azel - Aug 15, 2016, 12:30 pm
Books

If you took a college introductory economics course in the past fifty years, chances are your textbook was one of the 19 editions of Economics by Paul Samuelson. Since its first edition in 1948, Samuelson’s Economics has sold over four million copies and has been translated into 41 languages. Paul Samuelson was the most influential academic economist of the second half of the 20th century and his textbook introduced generations of students to the ideas of British economist John Maynard Keynes. Keynes developed the idea that government intervention in economic matters is necessary to serve the public welfare. Samuelson’s Economics dominated college economic classrooms for two generations. His influence on our thinking regarding the role of government in economic affairs can not be underestimated, as he noted: “I don’t care who writes a nation’s laws…if I can write its economic textbooks.” So what did Professor Samuelson teach us? And what should we unlearn. // Samuelson was a believer in central economic planning. To be accurate, Dr. Samuelson’s views evolved over the years, an evolution that can be traced in the various editions of his textbook. But as late as the 1989, 13th edition (with coauthor William Nordhaus) he asserted: “The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.” Two years later, the Soviet economy collapsed. Conceptually blind, the brilliant Dr. Samuelson never saw it coming. Samuelson also espoused anti-saving views incorrectly believing that higher saving rates may cause money to “leak” out of the system and shrink the economy. This anti-saving bias view extended to his support for progressive taxation: “To the extent that dollars are taken from frugal wealthy people rather than from poor ready spenders, progressive taxes tend to keep purchasing power and jobs at a high level…” He aberrantly suggested that progressive taxation may actually incentivize people to work harder in order to get rich. Read More: Brazil’s Lula Caught in Eye of Corruption Storm Read More: Emails Link Brazilian Ex-President Lula to Petrobras Scandal In editions well into the 1970s, Samuelson held that deficit spending was not a significant problem. He offered a “we owe it to ourselves” argument claiming that the interest on an internal debt is paid by Americans to Americans with no direct loss of goods or services. As a believer in an activist government, Samuelson taught that a large government can provide “built in” stabilizers to the economy with policies such as unemployment and welfare compensation, farm aid and the like. His discussion of the role of government emphasized market failures with little reference to government failures. His enamorment with an activist government led him to claim that harmful government policies are probably rare. New schools of economic thought and empirical evidence have shown that much of what Dr. Samuelson taught us in Economics was flawed or just plain wrong. Our understanding of savings, central planning, government intervention, deficit spending, progressive taxation, market failures, welfare policies and much more has evolved or changed radically. To his credit, Dr. Samuelson was willing to update his textbook in keeping up with intellectual progress, and our understanding of economic affairs. In latter editions, he even suggested that he no longer agreed with some of his earlier analyses. In his words: “What was great in Edition 1 is old hat by Edition 3; and maybe has ceased to be true by Edition 14.” Unfortunately, most of us, and particularly our political class, who learned about economics with Samuelson’s textbooks, have not kept up with the advances in that dismal science. Consequently, most public policy today is formulated according to the unsound economic principles that we learned from Samuelson in our college years. The same is true of editorial and op-ed writers that argue, without intellectual discomfort, along the Keynesian motif espoused by the Samuelson textbook. They are unable to shed the false certainty of their youthful learning. This is the insidious Paul Samuelson effect; questionable public policy, based on disputed economic principles, but defended with conviction by two generations unwilling to unlearn the canards in their college introductory economics course.

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