Wednesday, September 17, 2014

Piketty, T., & Goldhammer, A. (2014). Capital in the twenty-first century.

What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In this work, the author analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings transform debate and set the agenda for the next generation of thought about wealth and inequality. He shows that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. But we have not modified the deep structures of capital and inequality as much as we thought in the optimistic decades following World War II. The main driver of inequality–the tendency of returns on capital to exceed the rate of economic growth–today threatens to generate extreme inequalities that stir discontent and undermine democratic values if political action is not taken. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, the author says, and may do so again. This original work reorients our understanding of economic history and confronts us with sobering lessons for today.

Thomas Piketty Discusses, “Capital In The 21st Century” with Ryan Grim and Alexis Goldstein, Hufington post (45 minutes)

Capital in the Twenty-First Century [Video] London School of Economics (86 minutes)

To view slides+audio please see: https://www.youtube.com/watch?v=oXYIY…
To download slides please see: http://www.lse.ac.uk/newsAndMedia/vid…

Sir Tony Atkinson, Oxford and LSE “Inequality: What can be done?” (35 minutes)
Increasing inequality is a salient issue in public discourse, but debate often centres on the causes rather than any possible solutions. Introducing his new book, Inequality: what can be done? Professor Atkinson argues we can do much more about inequality than the skeptics might imagine.

Group A

Reich, R. B. (2013). Inequality for All: Aftershock: Movie Tie-In Edition. Random House Inc.

When the nation’s economy foundered in 2008, blame was directed almost universally at Wall Street bankers. But Robert B. Reich, one of our most experienced and trusted voices on public policy, suggests another reason for the meltdown. Our real problem, he argues, lies in the increasing concentration of income at the top, robbing the vast middle class of the purchasing power it needs to keep the economy going. This thoughtful and detailed account of the American economy—and how we can fix it—is a practical, humane, and much-needed blueprint for rebuilding our society.

The Politics and Economics of Inequality (54 minutes)

Group B

Stiglitz, J. (2013)The Price of Inequality: How Today’s Divided Society Endangers Our Future

This work examines how the wealthy classes have contributed to growing inequality in society and explains how the quest to increase wealth has hindered the country’s economic growth as well as its efforts to solve its most pressing economic problems. In it the author, a Nobel Prize-winning economist puts forth a forceful argument against America’s vicious circle of growing inequality. America currently has the most inequality, and the least equality of opportunity, among the advanced countries. While market forces play a role in this stark picture, politics has shaped those market forces. Here the author exposes the efforts of well-heeled interests to compound their wealth in ways that have stifled true, dynamic capitalism. Along the way he examines the effect of inequality on our economy, our democracy, and our system of justice. He explains how inequality affects and is affected by every aspect of national policy, and offers a vision for a more just and prosperous future, supported by a concrete program to achieve that vision.

Authors@Google: Joseph Stiglitz (60 Minutes)

10 thoughts on “Wednesday, September 17, 2014

  1. I agree with “Capital in the 21st Century” that wealth inequality is a feature of capitalism. I do not believe it can be avoided in any type of society because no matter what wealth is defined as, there will always be a way where someone has more than others. Regardless how the state and capitalism is changed, I don’t believe that the inequality will cease to exist. I think it is much more important to manage the inequality so that it isn’t detrimental to the people. This can be done through changing attitudes about other socioeconomic groups and through the creation of more programs and educational policies. By creating more programs and increasing education, those who have less will be given enough of an opportunity to be successful in their environment and the back up they need incase of failure. Trying to eliminate the gap will result in a bigger gap and wasted time and resources that should be used to compensate for the gap.

    I find that I really agree with “The Politics and Economy of Inequality”. I think it makes a lot of valid points about how inequality is needed and how it is not the real issue. I think wages are a big source of the issue, as stated in the video. A very clear argument is made about what causes inequality and what is the true root of the problem. I find that I really agree with it and that is follows what I have observed/heard about the past few decades. As seen in 2008, this system cannot be maintained. So what can be done about it? I think part of the issue is our current values. People really like their stuff and we live in a society that revolves around that. How can we change that? I think it will take technological innovation to make us value something else more and step away from physical products. Additionally I think many of the wage issues need to be solved by policy and the enforcement of that policy.

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  2. The Piketty and Stiglitz readings raise important points about inequality that ought to be addressed, but I don’t think I know enough about economics to be able to make any educated comments. Stiglitz argues that inequality is dangerous for the future and examines the forces driving it – mainly that the rich control politics and the economy in a way that benefits them but not the rest of society. The expression “the rich get richer and the poor get poorer” comes to mind, and it seems that both Piketty and Stiglitz are also arguing this. Obviously, inequality is a problem, and it seems to have been a problem for all of the history of capitalism – or rather, that inequality is an unavoidable byproduct of free market capitalism. It also seems obvious to me that the ones who control the market as well as politics and consequently legislation are the people who benefit from the system, so it all just ends up in a vicious cycle. Many of the “solutions” economists argue for are government interventions and/or increasing income tax for the rich, but if the government itself is flawed then I don’t see how this type of solution will help. Of course I don’t know what the answer to this problem is, or if there is one – is a perfect economic system even possible? – and unfortunately having read the readings hasn’t made me any more optimistic about the future. I feel conflicted, because I’m privileged enough to not have to worry about inequality issues, yet I feel like I should because I’m morally opposed to it. But I’m also morally opposed to poverty and world hunger and global warming; I think the (unfortunate) bottom line is I would be more invested in this issue once it actually begins to affect my lifestyle – and also that I just don’t have an interest in economics. However, I do appreciate being exposed to these topics, and I think it’s helpful in establishing a broader worldview.

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  3. This week’s readings were a combination of ideas I’ve been thinking about for awhile. Thomas Piketty’s findings reminded me a lot of Naomi Klein’s the Shock Doctrine. Which also had a critical view of modern day economists, their published findings, and their promoted policies that encourage the concentration of wealth in the Industrialized nations. I also found his observation that the US is both more egalitarian and more inequal interesting. I do think that the promise of equality when there are strong market forces preventing equality makes it far worst than the obviously inequal alternative.

    I watched Robert Reich’s documentary, Inequality For All, a few years ago at the San Francisco Film Festival. This documentary, along with one I watched this year, Ivory Tower, help to explain the cycle of concentration of wealth and the growing income divide in the US. Inequality For All explains the factors that lead to the housing crisis of 2008 while Ivory Tower seeks to explain how the growing cost of higher education is widening income inequality.

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  4. “I do think that the promise of equality when there are strong market forces preventing equality makes it far worst than the obviously inequal alternative.”

    Yeah. This was, in my mind, the most striking part of Stiglitz’s talk: the “land of opportunity” isn’t. So, right, we can hopefully correct it (in ways that he talks about: change corporate bankruptcy laws, student debt, international capital movement, etc) – or take Piketty’s ideas of a global progressive tax on net wealth. But it seems like it’d be really hard to do any of these without huge public support, because since Reagan (earlier?) there’s this popular story of “trickle down” economics, minimal taxation, avoiding government “interference”.

    Maybe we need different stories. I like the “land of opportunity” angle; play up how increasing inequality makes it more difficult to move up or down in the world. This has been handled clunkily by movies like Elysium; could be done better. But I think if we saw unbreakable class systems become a more common trope, the idea might start to become pervasive in the public consciousness.

    And beyond just the awareness that classes exist, we need to build awareness of what the wealthier classes are like. For this, I’m thinking we could use some kind of “day in the life” stories. For example, I have no idea what a lobbyist does, or how you hire one. I have no idea how you, you know, go out to eat or get around town if you’re in the .01%. I didn’t until recently have an idea of how you make money as the .01% – investing, apparently, but what does that even mean? I’d love more stories – documentaries or realistic fiction – that portray these folks to help the 99.99% understand who’s running away with all the money and how.

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  5. I really liked watching the Joseph Stiglitz Google talk in relation to Professor Kristin Hughes’ visit and class discussion last week. In his talk, Stiglitz argues that in order to reduce inequality, people have to place effort into a “common good” (e.g., schooling, technology). Professor Hughes’ work on the Octopus Garden and the Latham Street Commons represents one way to get the Pittsburgh community thinking of a common good in the Stiglitz sense (see: https://www.facebook.com/octopusgardenpittsburgh/timeline?ref=page_internal ).

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  6. Stiglitz and Picketty both offer interesting an interesting view point on the topic of inequality in the world and the United States. I found Picketty explanation for why there is wealth inequality very interesting. The reasoning being that the rate of return historically has been around 4-5% while the overall growth rate has been 1%. This means that those that have accumulated wealth have a higher rate of return than how the overall economy is doing. He suggests that we need a wealth tax and financial transparency to change the face of inequality in the world, while stating that we shouldn’t just wait for a birth boom or some unlikable event to happen for it to just change randomly.

    Stiiglitz concentrates more the American situation, where the wealth of the top 1% has double in the past 10 years. He states that in 2001 we actually had a large surplus but from 2001- to today we made several pivotal mistakes to get where we are now, with a large national debt. He explains that the reasons for the large debt are two expensive wars, a tax cut for the wealthy that we couldn’t afford, a drug company benefit and the recession. He says that we need to go through a reform to be able to improve our current situation and with that be able to decrease wealth inequality.

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  7. I think that the “Capital in the 21st Century” makes sense because it talks about how there will be inequality with the economy in the future. This makes sense because if you look at history there was always inequality with wealth and status and this will always continue. People will not have the same resources to wealth and there will always be levels of hierarchy. The state of inequality may become less due to the growth of the middle class and poorer people finding resources that will allow them to grow and develop. Therefore, I believe that the gap between the wealthy and poor will decrease. However, wealth inequality will always exist. There are always going to be wealthier people.
    In “The Politics and Economy of Inequality”, I agree that the widening inequality is generically a minor, “pedestrian issue”. The widening of the economy is due to people not being able to afford new things. He states that there is not enough purchasing power for the economy to sustain itself and the poor and middle class do not have enough money to buy what its needs today. He states that if you don’t have a growing middle class, the poor people cannot ascend in to it. If we want to help the poor and resolve issues of equality we need to analyze each class to understand where they can go. People born in to poverty are finding it harder for upward mobility because the ladder is increasing between them and the rich. Our politics and democracy are also a key factor in the widening inequality. In this way it is more important to understand the factors that cause the widening inequality and understanding what needs to be changed.

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  8. I think the central idea that the return on capital often exceeds the overall economic growth of the country is a new perspective on the age old question on why some people are poor and others are not. This perspective sheds even more light on why it is so difficult for minority groups to accumulate wealth. If old wealth grows faster than new wealth, then obviously the old wealth owned by largely white males will continue to be more valuable than the new wealth being owned by new groups. However, the question this brings up is what can we do to make this country an even playing field for all individuals involved. Do we eliminate inheritance? This seems a little unfair to the families that have worked hard to provide a better living for their children. Do we promote the progression of new groups i.e affirmative action? This also seems a little unfair but honestly might be the best solution. Maybe minority groups do need a boost to catch up to their white brethren that largely exploited the toils of their group to succeed. It might seem harsh but slavery was harsh. Once again though, it is unfair to blame the current generation for the mistakes of the past. But if the current generation can benefit from the success of the past generation then maybe they should also be punished for their past generations evil deeds. Just some food for thought.

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  9. In the “Capital in the 21st Century” the ideals of capitalism branch out into the ideals of inequality of wealth. The idea that “the rich gets richer and the poor gets poorer” is inevitable. With the society built as it is, there will always be someone who is richer than another person. I would love for the middle class to continue to expand, but I foreshadow the middle class will continue to maintain its level but rise higher and higher in education credentials. Those who can afford education are the ones who get a better career.

    In Inequality for All, Robert Reich states the inequality is difficult to talk about. However, this idea is well and on its way to spreading awareness. Unfortunately this topic when spoken about appears to define a “blame” position. Some inequality is necessary to provide incentive to the workers. The young want jobs and need the money. Medium wages has dropped. We need to look at the median of people. Wages aren’t going anywhere. Where is the money going? How could the company afford to have these justifications.

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  10. It’s interesting to see how Robert Reich focuses on purchasing power. I used to always think about the companies having teh power in terms of selling goods to particular classes of people, fragmenting their consumer base, but the idea of letting the consumers have the power, and more so the high income class people is a powerful one.

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