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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For All the Tea in China

22 February, 1784: The first American trade ship to China weighs anchor in New York City. The history of trade between China and the West is fraught with conflict and cultural complications, as demonstrated by the audacious 19th-century attempt by the British to steal China’s tea crop and transplant it to its own plantations in India. The caper is recounted in Sarah Rose‘s FOR ALL THE TEA IN CHINA.

In the dramatic story of one of the greatest acts of corporate espionage ever committed, Sarah Rose recounts the fascinating, unlikely circumstances surrounding a turning point in economic history. By the middle of the nineteenth century, the British East India Company faced the loss of its monopoly on the fantastically lucrative tea trade with China, forcing it to make the drastic decision of sending Scottish botanist Robert Fortune to steal the crop from deep within China and bring it back to British plantations in India. Fortune’s danger-filled odyssey, magnificently recounted here, reads like adventure fiction, revealing a long-forgotten chapter of the past and the wondrous origins of a seemingly ordinary beverage.

22 February, 1784: The first American trade ship to China weighs anchor in New York City. The history of trade between China and the West is fraught with conflict and cultural complications, as demonstrated by the audacious 19th-century attempt by the British to steal China's tea crop and transplant it to its own plantations in India. The caper is recounted in Sarah Rose's FOR ALL THE TEA IN CHINA: http://bit.ly/Zn5SltIn the dramatic story of one of the greatest acts of corporate espionage ever committed, Sarah Rose recounts the fascinating, unlikely circumstances surrounding a turning point in economic history. By the middle of the nineteenth century, the British East India Company faced the loss of its monopoly on the fantastically lucrative tea trade with China, forcing it to make the drastic decision of sending Scottish botanist Robert Fortune to steal the crop from deep within China and bring it back to British plantations in India. Fortune's danger-filled odyssey, magnificently recounted here, reads like adventure fiction, revealing a long-forgotten chapter of the past and the wondrous origins of a seemingly ordinary beverage.

Conference: Global History of Agrarian Labor Regimes, 1750 to 2000 (Harvard University)

My interest in Agrarian Labor Regimes was first awaken in my research on Opium trade in India. Since then, more readings have made me realize the complex structures behind the history of agrarian labor in a global context.

If you are also interested in the topic, the *Weatherhead Initiative on Global History (WIGH)* at Harvard University is planning a conference for *April 2013* that is focusing on changing labor regimes within global agriculture.

As posted by Blog de la AMHE by Manuel Bautista, they are interested in exploring the diversity of labor regimes, the paths along which they changed, and—most especially—the connections between these changes in different parts of the world. We are interested in work that explores the connected histories of propertied farming, sharecropping, wage labor, slavery, *cultures obligatoires*, and other such forms of labor, and how they have been connected to the spatial and social spread of capitalism.We are seeking proposals from historians, political scientists, economists, sociologists, and anthropologists at all stages of their academic career, including graduate students. We encourage proposals from those in relevant career paths or institutions outside the university. We are particularly interested in forging a global discussion of these topics, and therefore welcome especially contributions from outside North America and Europe.

The conference will try to balance broad comparative papers and revealing case studies. The Weatherhead Initiative on Global History is a newly created center that responds to the growing interest at Harvard in the encompassing study of global history. The Initiative is committed to the systematic scrutiny of developments that have unfolded across national, regional, and continental boundaries as well as to analysis of the interconnections—cultural, economic, ecological and demographic—among world societies. For further information about WIGH as well as the conference, please consult our website at http://wigh.wcfia.harvard.edu.

Proposals should include an abstract of no more than two pages and a brief curriculum vita. Please email your submissions to Jessica Barnard ( jbarnard @ wcfia.harvard.edu ) before *November 30, 2012*. Travel expenses as well as accommodation will be covered.

Holger Droessler hdroessl @ fas.harvard.edu

Inequality in India

By 2011 the BRIC economies had some of the highest rates of income inequality adjusted to the Human Development Index among developing nations.  At the same time, the BRIC countries had consistently had the highest GNP growth versus the previous 10 years among developing nations.  How is it that there is not a parallel growth of the Human Development of its citizens?  The answer and one of the biggest challenges for the BRIC countries is the fact that a large amount of the GNP is distributed among small elites that control their market economies.

Economists and investors such as O’Neill, Krugman and others largely emphasize the expected growth of the BRIC economies as indicators of where to invest their money.  Unfortunately, they have not paid the same interest to what many other economists consider important: the human development of the people.  Fortunately, there are still some economists who since the decade of 1970 paid a lot of attention to the issues of freedom and equality.  Economists leaded by Milton Friedman, the Economics Nobel Prize of 1976, argued that economic policies should be focused in the freedom of its citizens as a primary value.  To them, stressing equality per se could lead to economic inefficiency as well as it would put in risk Freedom itself.  However, the same economist argued that it was necessary for developing economies that the government took a central role in poverty alleviation in order to keep the pace with the economic growth of its economies.  Unfortunately, this poverty alleviation is not being done in the BRIC countries and the economic difference between the poorest and the richest continues to grow. Since the 60s, a large group of economists emphasized the negative effects of not paying attention to a free and equal development in emerging markets; economists like Friedman and Hayek wrote a lot in this regard and even recently Elinor Ostrom’s ideas, who won the Nobel Prize in Economics in 2009, are still not listened by those who have forgotten the importance of good governance economic policies.

India is the country in which this income inequality versus human development is more pronounced.  Currently, India occupies the position #93 with an IHDI of 0.392 and the country has descended in the rank many positions since the last decade.  Inequality in the earnings among Indians has doubled over the last two decades, making it one of the worst performers among developing economies.  Why? This is again the result of the failed attempts by the Indian government to combat corruption, bad administration and under-payments and also of the unawareness of foreign investors.

The fact that foreign investors have no interest in securing the welfare of the Indian people is a problem.  To them, the investment opportunities of this specific BRIC country are of value until they find a better economy to move their money to.  However, the real stakeholders are not the foreign investors but the Indian Government and its groups of interest who should aim to secure the welfare of all of its citizens now that they have a chance.  While the growth of this economies will continue the effect it will have in such unequal societies will result in some of the worst rates of poverty and hunger ever seen in history. By 2025 India will be the most populous country in the world but also, it will have 268 million people (20.3%) living still with less than US$1.25 a day as reported by economists in the World Bank. The Indian government should go aligned with the current trade liberalization in order to support higher productivity in the private sector and to exploit its comparative advantage of having a labor-intensive industry to foster the production of goods and services.

Did Empire Matter? Indian Migration in Global Context 1834-1940

Bombay Fort
Image via Wikipedia

Prof. Adam McKeown from Columbia University did an online conference a couple weeks ago (November 08, 2011. University of Pittsburgh. World History Center.).  The title was “Did Empire Matter? Indian Migration in Global Context 1834-1940” as a continuation of the Global Migrations Discussion.  I have uploaded a summary of that lecture’s content and here’s the link to the pdf,

McKeown - Migrations

You can still watch the tape of the online conference in this link: LIVE Conference (taped)

Prof. Adam McKeown, is a leading figure in world-historical interpretation, has shown the value of migration studies in clarifying global patterns. He is author of studies including, Melancholy Order: Asian Migration and the Globalization of Borders /(2008), and he is writing a history of globalization since 1760. He co-directs the International and Global History graduate track at Columbia.

Where are the world’s biggest Chinese and Indian immigrant communities?

The Economist published a mind-blowing graphic depicting the migration of Chinese and Indian people around the world. The asses that “more Chinese people live outside mainland China than French people live in France, with some to be found in almost every country. Some 22m ethnic Indians are scattered across every continent.” More so, they emphasize that even though Diasporas have been a part of the world for millennia; their size and the ease of staying in touch with those at home are making them matter much more with the emergence of social network online technologies.

World's top 20 destinations for Chinese and Indian migrants

Now, this is once again part o the large “discourse of newness” that embeds great part of current mainstream history.  This is something that has been denied and discussed by Prof. Adam McKeown in the article “Article: Global Migration, 1846–1940” who claims after doing a extensive research of migration from China and India during the 19th Century that the amount of immigrants and the global effect it had is comparable (and at some points superior) to the more known Atlantic migration from Europe to America. I strongly suggest you checking the Article by Prof. McKeown an check also Dr. Dirk Hoerder great book titled: Cultures in Contact in case you are interested in this subject.

Joel Cohen: Top 10 key population trends on Earth with 7 billion

Joel Cohen is the author of the 1996’s bestseller on Population studies titled “How Many People Can the Earth Support?“. I remember some of its content and that it was one of the first book acquisitions I did from Barnes & Noble (from those times in which you actually went to the bookstore!).  Now, 15 years later we are confronted with his favorite topic: overpopulation and his fetish with calculations for possible saturation points.  Here’s what he thinks even though so many people has been born since he wrote his book doing numbers of saturation points of the world:

Humanity took until year 1800 to reach its first billion people. We added 1 billion people in just the past 12 years. October 31, 2011 marks a milestone in global population: 7 billion humans. That’s according to projections by the United Nations. EarthSky interviewed demographer Joel Cohen, professor of populations and head of the Laboratory of Populations at the Rockefeller University and Columbia University in New York. He explained the top 10 population trends in a world with 7 billion inhabitants.

1. One billion people are hungry, and 1 billion are obese. Cohen said this is the most important thing people should know about the population milestone of 7 billion. Too too many people on Earth today live without knowing where their next meal will come from.

A billion people are chronically hungry. That means they wake up every day hungry. They don’t get enough calories to get through the day and do a day’s work like you and me. And many of them have been hungry since they were born. And their brains aren’t fully nourished, fully developed. And they’re having a very hard time learning and coping with life’s problems.

At the other extreme there are about a billion people that are really, seriously obese. And that’s partly a matter of not getting a good food supply also — not a food supply that’s balanced for their needs. Roughly two or three billion people — we don’t know precisely — are malnourished as opposed to undernourished. That means they’re not getting the trace vitamins that they need to have a balanced diet.

For world's seven billion, one billion hungry, one billion obese. (UN)

In a world with 7 billion, 1 billion are hungry, 1 billion are obese. (UN)

2. Three billion people live on two dollars a day. Cohen said:

That is abject poverty. You try to live on two dollars a day for long and you’ll start losing weight pretty fast. So roughly half the world is in desperate poverty.

3. One billion people live in slums. Cohen said:

Right now, about half the world lives in cities — let’s say 3.5 billion, slightly more. And of those, a billion are living in slums without adequate sanitation, electricity, water, security, legal protection, transport, and inadequate housing conditions. When it rains, it leaks. Maybe a mud floor. So we, the world, have not provided home or food, have not reached minimum standards that we ought to be providing for people.

One billion people today live in slums. (UN)

One billion people today live in slums. Image Credit: United Nations

4. Over 200 million woman have unmet needs for contraception. He said:

That means that they don’t want to have an additional child, and yet they’re not able to use modern means of contraception. These problems are not only abroad. We have, I would say, a very serious population problem in the United States. According to the United States Centers for Disease Control, in 2001, approximately half of the pregnancies in the United States were unintended. That means that the woman, or the couple either did not want a pregnancy at that time or did not want a pregnancy at any time. And that is a very serious problem of human well-being related to the lack of control over people’s own reproduction.


5. Today, 1.5 billion people live in rich countries.
 Cohen explained:

That’s Europe, Western Europe mainly, the United States and Canada, the overseas English-speaking countries of Australia and New Zealand, Japan, and some of the Asian tigers.

6. Four billion people live in middle-income countries. Said Cohen:

These are the countries that have recently emerged from poverty with fast-growing economies. And I would put China, India, Brazil, many countries in Latin America in that realm of the middle-income. And that means on the order of Chile — let’s say 5,000 dollars a year income. That’s tremendous progress when you remember how recently China and India were really in desperate poverty. And many in those countries still are.

Four billion people live in middle-income countries like China. Image Credit: weirdchina

7. Economically at the bottom are 1.5 billion people. Cohen said:

Those people are living largely in sub-Saharan Africa, but in the new world also in Haiti, and in many of the provinces of South Asia in both Pakistan, Afghanistan, India, Bangladesh. There are hundreds of millions of people in dire poverty — the bottom billion as one Oxford economist calls them. So that gives you sort of a geographical picture of where these 7 billion people are.

Seniors now outnumber toddlers.

Seniors now outnumber toddlers.

8. Seniors now outnumber toddlers, and this trend will continue to increase. Cohen explained:

In the last decade, the world passed a very major milestone. And that is that for the first time in history, the number of people 60 years old or more exceeded the number of people 0-4 years old. Basically, for the first time, the grandparents outnumber the grandchildren. In the year 2000, there were about 10 percent of the world’s people were age 0-4, and about 10 percent were age 60+.

What we’re going into now is the era of aging. And by 2050, we anticipate that the number of people 60+ will be about 3.5 times the number of people age 0-4.

In the richer countries, like the United States and Europe, this process of aging is already pretty far advanced and will pose some serious questions and challenges for our retirement systems. In the poorer countries, which have a younger population because they’ve been growing faster — that means more children, so higher proportion of young people — aging will increase even faster than in the richer countries, which have already made a transition in part, the beginning of a transition to aging. So aging is one big thing that’s happened.

Two-thirds of people worldwide will live in cities by 2030, experts predict.

Two-thirds of people worldwide will live in cities by 2030, experts predict.

9. More than half of Earth’s inhabitants today live in cities, and two-thirds will live in cities by 2050. Cohen said:

In 2000, a little less than half of the world’s people lived in cities. Somewhere around 2007-2008, it became about 50-50. And by 2050, we expect about two-thirds of the world’s people to be living in cities. Now the increase in the number of city dwellers, between 2000 and 2050 is expected to be about three billion people, which was the total population of the Earth in 1960.

Virtually all of that additional three billion people will be added in the cities of the developing countries, not the rich countries. The rich cities will grow somewhat, but the really rapid growth will be in the poor or developing countries.

And if you do the arithmetic, 50 years between 2000 and 2050, roughly 50 weeks per year, 50 times 50 is 2500 weeks in that half century. And yet we’re going to add three billion people in the cities. Three billion is 3,000 million. It means that developing countries have to add urban infrastructure for a million people every five days from now to 2050. Now if that isn’t a building job, I don’t know what is. And hardly anybody is thinking about the design of the cities so that they can accommodate those additional three billion people in a constructive and useful way.

More than half of women today have fewer children needed to replace themselves. (UN)More than half of women today have fewer children than the number needed to replace themselves and their partner. Image Credit: United Nations

10. More than half of women today have fewer children than the number needed to replace themselves and their partner. Cohen said:

In 2003, for the first time in human history, more than half the women in the world lived in countries or provinces where the rate of reproduction was below the replacement level. That is, they were having fewer children than required to replace themselves in the next generation. This represents a tremendous change over the previous half century. The rate of growth of the world population fell by almost half, from 2.1 percent per year in 1950 to 1.1 percent per year in 2000. And we expect it to continue to decline if we continue to educate women, to provide modern contraception, and to improve the status of nutrition and education.

Bottom Line: Humanity took until year 1800 to reach its first billion people. We added 1 billion people in just the past 12 years. October 31, 2011 marks a milestone in global population: 7 billion humans. That’s according to projections by the United Nations. EarthSky interviewed demographer Joel Cohen, professor of populations and head of the Laboratory of Populations at the Rockefeller University and Columbia University in New York. He explained the top 10 population trends in a world with 7 billion inhabitants. Many continue to face issues of dire poverty. The population is aging. For the first time, more than half the world’s women live in countries or provinces where the rate of reproduction was below the replacement level.

professor of populations and head of the Laboratory of Populations at the Rockefeller University and Columbia University in New York.

via: Joel Cohen: Top 10 key population trends on Earth with 7 billion