Piketty’s “Capital,” and the Rest of the World

Video: Thomas Piketty Discusses, “Capital In The 21st Century” with Ryan Grim and Alexis Goldstein

The book by the French economist Thomas Piketty’s Capital in the Twenty-First Century has already become part of everyday discussions and is being referenced among academics. The research by Piketty has come in the perfect time and there are plenty of reasons why. Piketty’s book discussion brings some light to the study of income quintiles and deciles into a new debate of the “the skyrocketing incomes of the 1% — and the mind-boggling gains of the 0.1% and 0.01%  — by gathering and publishing income tax data that nobody had bothered with before. Piketty was behind similar projects in France, Britain, Japan, and other countries.” (via Justin Fox at the Harvard Business Review)

I finished reading the book this weekend and it was eye-opening. The book presents great challenges to the study of capital and inequalities in the developed economies as well as in the rest of the world. The book also opens the doors for a wider discussion on the effects European Capital has had in the global economy. Further, the book invites globalists to challenge our understanding of European-centric terms that over longer periods of time become, perhaps, insufficient to comprehend global economic processes over the passing of centuries and how these processes have changed and transformed themselves by a complex evolution and redefinition.

It can’t be denied that capital during all of the 19th Century and in the beginning of the 20th Century was centered in the main European metropolises and extracted most of the goods from the periphery. Few Capital remained in colonies and protectorates. Wealth belonged to the Empires and Poverty remained in colonial territories. Even the poorest of the European was considered Rich by comparison to the inhabitants of Colonies.

Today, European Empires are gone for a while, U.S. Capital increased and gained from the fall of the European Empires and new economies started developing in former Colonies. Giant Economies like China and Russia woke up after decades of isolation from global trade and today reconfigured our understanding of Capital. Piketty’s book somehow fails to explore this Global political changes and its economic effects.

Piketty’s central argument has a gigantic weakness since it is tied to nation-states and cannot be compared or understood in reference to Global Capital flows in today’s multinational economy. Very few references are made to the role played by Multinational Companies and foreign national investments and savings by State Companies in the world.  And less is mentioned of global inequalities and the North-South divide that has been increased by the investments done by Developed and Developing Economies in the rest of the world.  Piketty argues that Capital has tended over time to grow faster than the overall economy (he focuses on European and US economies); and that income from capital is invariably much less evenly distributed than labor income (again he focuses on European and US economies). Thus failing to acknowledge how Labor income stopped been localized during the 20th Century and it involved multiple polities far away from the metropolis.  Piketty argues that together (Capital growth and its uneven distribution) amount to a powerful force for increasing inequality.

Piketty doesn’t take things as far as Marx and this is a pitty. Marx’s methodology involved the State but it also referenced to its effects both and from the peripheries through the pass of longer periods of time. This is one of the most important contributions of Marx: his global understand of the economy.

Piketty shows how over the two-plus centuries for which good records exist, the only major decline in capital’s economic share and in economic inequality was the result of World Wars I and II, which destroyed lots of capital and brought much higher taxes in the U.S. and Europe. However, he again fails to acknowledge how Capital grew in the Global South after these wars as a result of increased inequalities in the Colonies and Agriculture-centered States in South America and Asia. During the wars Capital destruction was followed by a spectacular run of economic growth that involved the entire globe and not only Europe and the U.S.  The Cold War is a good reference for finding how Capital flows went from Europe to Asia, America and Africa.  As well, the run of economic growth started involving non-State actors in which Capital continue increasing at a higher and faster rate than the one he references and studies. Failing to study this shows in Piketty’s book that after decades of peace, slowing growth, and declining tax rates, capital and inequality are on the rise all over the developed world only, and it’s not clear what if anything will alter that trajectory in the decades to come.  However, the declining tax rates, capital and inequality are on the rise at a faster pace in the developing economies and in the “puppet states” (Nigeria, Chile, the Middle East countries) which have emerged around them as sources of petrol, minerals and rare earths.

Piketty’s main worry as points out Justin Fox is that “growing wealth in Europe will bring a return to 19th century circumstances in which most affluent people get that way through inheritance.” Plus, “U.S. median income will continue lossing ground relative to other nations in the following years”. But this are not the only worries that we should identify.  The BRICS countries are probably a good source of comparison to see how the growing wealth of the 20th Century remains on the hands of the few rich and is currently been passed through inheritance. Further, developing economies in South America and Africa are an extreme case of the last.

Piketty’s solution to Europe’s and U.S. problems is that a progressive global wealth tax be established. But this tax will fail to be the best response to the current dynamics of inequality if Capital continues flowing outside of Europe into multinational capital investments overseas and into State companies overseas. 

I enjoyed this political economy analysis and will continue learning a lot from it. Piketty’s solution is a challenge for the study of global political economy and the reconfiguration of the global economy in the 21st Century. Perhaps if a new book is published studying the shareholders who own the most stock in almost every Fortune 500 company and the Capital of any major global company instead of only the economies of France, Germany or the United States more accurate insights will be found.

 

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Global Education trends

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In the last few years I have found myself immersed traveling around different cultures.  A trend I have observed is that the more educated people has been, the more they are healthy and the more they are cooperative towards the rest.  Following Malow’s hierarchy of needs one can easily understand why is it that education is so important to help establishing a better society.  My favourite philosophers agree that in order for a human to act rationally he/she needs to know clearly which is his/her code of values and their aim in life.

Today’s reality whoever is discouraging to many in regard to the Global Educational trends.  The divergence between the Global North and South in terms of educational development is increasing:

globalliteracychallenges_0

Why is it that development has continued growing uneven in these regions is the field of study of global studies and it requires a long discussion.  One thing is certain: in order for ignorance to be cured there is only one medicine: cheap or free good access to all knowledge.  For this reason I support strongly projects like Google Books and many others in local areas.  I contribute to this global project by donating printed books and providing access to an online ebook collection of Humanities. Now, how are you contributing to this project?

February 26: The day the Communist Manifesto was published

These are some of the most used words in The Communist Manifesto
“WordCloud” of some of the most used terms in The Communist Manifesto

26 February, 1848: Karl Marx and Friedrich Engels publish the COMMUNIST MANIFESTO, a political theory that has become one of the modern world’s most influential documents and a source of inspiration for most of our political leaders.

The Communist Manifesto changed the face of the twentieth century beyond recognition, inspiring millions to revolution became an ideological source for millions of deaths (at least 94 million people according to Werth et al. Margolin‘s The Black Book of Communism).  This book has become the basis of political systems that dominate countless lives and continues to ignite violent debate about class and mixed systems of economic and political government today.

If you have never read this book (as most of its advocates have surely not done so) I encourage you to read it and study it attentively.

communist manifesto karl marx book cover

In countries where modern civilisation has become fully developed, a new class of petty bourgeois has been formed, fluctuating between proletariat and bourgeoisie, and ever renewing itself as a supplementary part of bourgeois society. The individual members of this class, however, are being constantly hurled down into the proletariat by the action of competition, and, as modern industry develops, they even see the moment approaching when they will completely disappear as an independent section of modern society, to be replaced …” Manifesto

Table of Online Contents for the Communist Manifesto:

Preamble
I:   Bourgeois and Proletarians
II: Proletarians and Communists
III: Socialist and Communist Literature
IV: Position of the Communists in Relation to the Various Existing Opposition Parties

Other Free Versions for Download: AudioWordepubprcPDF, Kindle.

Book Review: Free Will

Free Will

Harris explores the notion that free will is an illusion in this nimble book (which, at 83 pages, can be read in one sitting or a couple of Metro rides), amiably and conversationally jumping from point to point. The book’s length is one of its charms: He never belabors any one topic or idea, sticking around exactly as long as he needs to in order to lay out his argument (and tackle the rebuttals that it will inevitably provoke) and not a page longer. Go to article

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2012, Early Summer Reading List #Books

I am reading all day long specialized non-fiction books and journal essays.  That is how life is like when you want to be an Academic in a world in which competition is getting harder and harder.  However, I also find some time to read good non-fiction from other specialties or great fiction and poetry that allows me to romanticize.

Choosing good non-fiction is very hard for me since the offers are so many and the time to read is so reduced. Plus, the new offers in the market are huge and I learned when working as Collection Developer for my college library that even reviewing the best book review magazines takes a lot of time.

I found this list of the 2012 Pulitzer Prize winners that will surely help me choose the best non-fiction to read this summer when traveling for holidays.  I hope you will also find this list helpful!  Also, I add some other fiction books from my ongoing list of “pending to read” that may be also helpful for you!

PULITZER WINNERS 2012

MORE FICTION Recommendations

If you have some recommendations please share them with me! I’d love to have them in my reading list! 😀

April 23, 2012. World Book and Copyright Day

Today I am joining the celebration of the World Book and Copyright Day (also known as International Day of the Book or World Book Days) a yearly event on 23 April, organized by UNESCO to promote readingpublishing and copyright. The Day was first celebrated in 1995 and in 2012 the UK World Book day was celebrated on March 1, 2012.[1]

As part of my celebration I am sharing with you some quotes from one of my favorite books.  This year I have chosen the book “The Law” written by Frederic Bastiat.  The book was first published as a pamphlet in June, 1850  and later became widely read in Europe and the world.

Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.” ― Frédéric Bastiat, The Law

In The Law, Bastiat states that “each of us has a natural right — from God — to defend his person, his liberty, and his property”. The State is a “substitution of a common force for individual forces” to defend this right. The law becomes perverted when it punishes one’s right to self-defense in favor of another’s acquired right to plunder.

Bastiat defines two forms of plunder: “stupid greed and false philanthropy”. Stupid greed is “protective tariffs, subsidies, guaranteed profits” and false philanthropy is “guaranteed jobs, relief and welfare schemes, public education, progressive taxation, free credit, and public works”. Monopolies and Socialism are legalized plunder which Bastiat emphasizes is legal but not legitimate.

If you are interested in reading more about this ideas here are the links to the book,

The Law (English Edition) via Amazon.com

La Ley (Spanish Edition) via Amazon.com

La Loi (annoté) (French Edition) via Amazon