In April of 2014. Happened something unusual. Something that, according to many was to change the world. Appeared in the English edition of “Capital in the twenty-first century.” By French economist Thomas Piketty. What is so revolutionary is in it? New and it said groundbreaking explanation of growing in the last decades of social inequality.
– After Pikettym nothing will be the same – repeated journalists, economists, politicians. It also contracted the ordinary people. By January 2016. His book sold worldwide 2.2 million copies and been translated into 45 languages. At that time, Piketty of a totally unknown to the public academic economist was promoted to the rank of “economic rock stars.” It was his uncompromising genius who neoliberal econometric models perversely used to overthrow neoliberalism, giving rise to major changes in economic policy. “When you do a film about the collapse of Western capitalism, Piketty will play Colin Firth” – wrote the British newspaper “The Guardian”. Now it turns out that the star Piketty is probably a supernova: the sudden glow announces her death. His theory crack under the pressure, however.
Phase I. Discovery
Although the voices unfavorable Piketty’emu heard for over a year, only Carlos Goes, economist international Monetary Fund, can effectively wipe out the French star of the economic galaxy. In his latest work (published at least in draft) proves that the empirical data do not support the main theses of the Frenchman. Are these theses, he writes Goes – with hidden between the lines, but distinct sneer – “consistent” and “inspiring”, but … unfounded. And he adds: “Explanations of the problem of inequality should look elsewhere.”
The details of the criticism, however, Goes for a moment. First a brief resume “discover” the Frenchman. Piketty innovative approach to inequality is not relied on the finding that it is capitalism itself from the need to produce them (about this already wrote Marx), but to identify the mechanism that is responsible for this. Piketty does this using two indicators: the average rate of return on capital in the economy (ie, among others, deposits, shares and dividends), which in his model is the “r”, and the rate of growth of national income, the letter “g” . Between “r” and “g” according to the Frenchman the relation of major importance. Here’s return on capital (r) is greater than the average GDP growth (g). World GDP growth is falling, the gap is widening, and this is reflected in the increasing share capital (labor costs) in the general account of GDP. It was not always so. Growth in this gap phenomenon worsening of approx. 30-40 years, Piketty meticulously documented. And here comes the most important observation. Since the revenue from capital is not distributed in society as equally as income from work (if only because not all are productive capital), this along with the deepening gap between “r” and “g” rising social inequality. We live in an economy increasingly dominated by the wealthy rentiers.
Can we be surprised that such an approach to the problem easily picked up media? Social inequalities since the financial crisis is one of the main subjects of the economic debate, but a societal. Mathematical notation theorem Piketty “r & gt; g” became the economic equivalent of the equation “E = mc2″ in physics. The company is already stupidly did not know. Especially since reading Piketty admit the economic Nobel Prize winners such as Paul Krugman and Joseph Stiglitz and billionaire Bill Gates, and politicians all over the world like to use suggested by Frenchman solution to the diagnosed problem. For example … higher taxes.
Do you remember the recent attempt to introduce 75-percent. tax on millionaires in France (the idea functioned for a short time, but was withdrawn from it)? It is natural that it was taken.
Piketty was, after all his time adviser to the Socialists, who govern France.
But President Francois Hollande and so did not go as far as what is proposed in the Piketty ” capital … “. According to economist for the richest (those “with income above 500 thousand. Dollars. Or a million a year”) to introduce a tax of over 80 percent.
– You may not translate into a significant increase in budget revenues, but will reduce drastically remuneration of the highest paid people – says Piketty. Taxes of this kind have to break down the accumulated fortune and by redistributing again to create a space for social advancement and stop “endless spiral of inequality.”
Piketty does not advocate local solutions, and aware of is that high taxes make locally inefficient. What smarter and richer know how to avoid them. Hence his skepticism about the tendencies Hollande. Piketty will act globally and calls for the introduction of global wealth tax and the global harmonization of corporate tax. It sounds like a nightmare so. right-wing (ie free market) economists? Yes. Therefore, the growing popularity of the Frenchman made an uproar among them.
Phase II. Criticism
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