Capitalism and inequality

I’ve been reading a lot about Thomas Piketty’s Wealth in the 21st Century, but I most say, I found this NYT profile of Piketty and his work the most readable and interesting look at the man and his work.  I won’t be reading this tome myself, but I’m certainly a fan of Piketty’s perspective:

Inequality by itself is acceptable, he says, to the extent it spurs individual initiative and wealth-generation that, with the aid of progressive taxation and other measures, helps makes everyone in society better off. “I have no problem with inequality as long as it is in the common interest,” he said.

But like the Columbia University economist Joseph E. Stiglitz, he argues that extreme inequality “threatens our democratic institutions.” Democracy is not just one citizen, one vote, but a promise of equal opportunity.

“It’s very difficult to make a democratic system work when you have such extreme inequality” in income, he said, “and such extreme inequality in terms of political influence and the production of knowledge and information. One of the big lessons of the 20th century is that we don’t need 19th-century inequality to grow.” But that’s just where the capitalist world is heading again, he concludes.

Yep.  Capitalism, free markets, etc., truly are great when properly regulated.  Left to their own devices, the outcome is super sub-optimal for most members of society.   The idea that we should just stand back and unleash capitalism with barely any constraint has clearly been shown to be folly by history.  Now, it’s not easy to figure out exactly just how much and where capitalism needs to be held back, but it is clear that it does and that simply cutting taxes for rich people is not the recipe for a healthy, growing economy nor a healthy democracy.

About Steve Greene
Professor of Political Science at NC State

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