May 14 2014
Thomas Piketty’s Data-Driven Indictment of Capitalism Proves Inequality is Inevitable Without Agressive Taxation
A new analysis by the Wall Street Journal has revealed that CEOs of big banks, earn a median income annually of $57 million. Big banks like Goldman Sachs, Morgan Stanley, and J.P. Morgan Chase pay their executives ever-ridiculous salaries and stock options. But these salaries do not in fact depend upon CEO performance but rather depend upon the size of the bank itself. The compensation packages are conveniently voted on by committees that CEOs themselves appoint. And their pay it turns out, is set at levels that have little to do with how well the bank performs and far more correlated with the size of the “too-big-to-fail” banks.
Equally as absurd as the size of executive compensation is the role that inherited wealth or income from assets and capital plays in enriching the uber-rich. A new book that is being hailed as a game-changer to the way we view capitalism, called Capital in the Twenty First Century, takes into account this often ignored but central variable in economic models and theory. Thomas Piketty, a professor in the Paris School of Economics wrote the original book in French, and its English translation published by Harvard University Press, has been selling out so fast, it is barely able to stay in print.
Lauded most notably by Nobel Prize winning economist and New York Times columnist Paul Krugman, Capital in the Twenty First Century compiles nearly 2 centuries of data from tax returns and other sources to paint a picture of how the rate of return from capital investments tends to outpace wealth from earned income, thereby resulting in an inevitable pressure to recreate the Gilded Age. The only forces that counter the trend are wars, aggressive taxation, and other disruptions. According to Krugman, Piketty offers a “unified field theory of inequality.”
Doug Henwood, in his review of Piketty’s Capital in the Twenty First Century, sums it up like this: “Left to its own devices, wealth inevitably tends to concentrate in capitalist economies.”
GUEST: Doug Henwood is a political economist, author of “After the New Economy,” and editor of “Left Business Observer,” host of a Pacifica weekly program called Behind the News. His review of Piketty’s book is called Top of the World: An Ambitious Study documents the long-term reign of the 1 percent, and was published in Bookforum