Shocking as it may sound, that is what the Left’s new idol, French economist Thomas Piketty, proposes to alleviate the growing inequality in capitalist economies. As Cato Institute’s Michael Tanner argues, instead of attacking capital and capitalism, let’s make more capitalists. What we need to do is lift the bottom up rather than bring the top down. As Mr. Tanner points out here, our problem today is likely that there is too little capitalism, not too much.
For those who believe in the redistribution of wealth, the hero of the hour is Thomas Piketty, the French economist whose book Capital in the Twenty-First Century provides a serious critique of inequality in modern capitalist economies and warns that market economies “are potentially threatening to democratic societies and to the values of social justice on which they are based.” To remedy this, he argues for a globally imposed wealth tax and a U.S. tax rate of 80 percent on incomes over $500,000 per year.
The Left has been rapturous. In the last two months, Piketty’s book has been cited more than a half-dozen times by the New York Times, something that has happened with no other book in recent memory. Paul Krugman hails it as “the most important economics book of the year.” Martin Wolff, in the Financial Times, lauded it as “an extraordinarily important book.”
Capital in the Twenty-First Century is well researched and contains much useful information and some important insights. But it is not unflawed. Some of the problems are technical — Piketty tends to underestimate the elasticity of returns on capital — but more are deeply philosophical. Piketty takes the evilness of inequality as a given, ignoring the broader question of whether the same conditions that lead to growing wealth at the top of the pyramid also improve material well-being for those at the bottom. In other words, does it matter if some people become super-rich as long as we reduce poverty along the way? Which matters more, equality or prosperity?