Tag: thomas piketty
Thomas Piketty: Germany’s Position On Greek Debt A ‘Huge Joke’

Thomas Piketty: Germany’s Position On Greek Debt A ‘Huge Joke’

Thomas Piketty is calling out Germany. The French economist who rose to prominence with the publication of his 2013 treatise on income inequality, Capital in the Twenty-First Century, gave a candid interview to German newspaper Die Zeit, in which he described Germany’s hard line on Greece’s debt as hypocritical and a “huge joke.”

In a 61-to-39 public vote Sunday, Greeks rejected a bailout proposal from European Union leaders that would have kept the country afloat but increased austerity measures, which have already taken a severe toll on the economy since they were imposed in 2010.

The critically indebted country is currently in a standoff with the other 18 eurozone nations, among which Germany is the most prosperous and populous, and has been in a position of de facto leadership in Brussels’ debt negotiations with Athens. At stake is Greece’s continued membership in the European Union, which German chancellor Angela Merkel has said she wants to preserve, but “not at any price.”

That Germany is in a position to dictate terms at all, Piketty claims, is owed largely to the rest of Europe forgiving that country’s own debts after World War II.

“When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke!” Piketty said in the interview, first published in German and translated into English by Medium’Gavin Schalliol (who took down the post due to copyright concerns). “Germany is the country that has never repaid its debts. It has no standing to lecture other nations.”

Piketty further accused Germany of “profiting from Greece as it extends loans at comparatively high interest rates.” Among eurozone nations, Germany is Greece’s largest creditor. According to the AP and Open Europe, the eurozone holds 60 percent of Greece’s total debt, the International Monetary Fund holds 10 percent, and the European Central Bank 6 percent

Piketty continued:

[A]fter the war ended in 1945, Germany’s debt amounted to over 200 percent of its GDP. Ten years later, little of that remained: Public debt was less than 20 percent of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece.

“Those who want to chase Greece out of the eurozone today,” he warned, “will end up on the trash heap of history.”

You can read excerpts from the interview in English here and the original on Die Zeit

ViaQuartzandMedium

File photo: Thomas Piketty in October 2014 (blu-news.org via Flickr)

Good News For Progressive Economics: Big Thinkers Like Piketty Are Back In Vogue

Good News For Progressive Economics: Big Thinkers Like Piketty Are Back In Vogue

Thomas Piketty’s success is no fluke; he and other progressive thinkers have redefined the public debate around inequality.

Inequality suddenly is the topic of the moment. Last weekend the French economist Thomas Piketty – whose recently published Capital in the Twenty-First Century is now #1 on the Amazon bestseller list, shocking for a 690-page macroeconomic tome – was not only the subject of dueling Paul Krugman/David Brooks op-ed columns in The New York Times. Piketty was also top of the fold in the Times’ Sunday Styles section (headline: “Hey, Big Thinker”), which made note of his “boyishly handsome” looks. Clearly, something is up.

At Boston Review, Roosevelt Institute Fellow Mike Konczal provides an excellent overview of the response to Piketty from both left and right. (You can also listen to him discuss it with WNYC’s Brian Lehrer.) Much of the commentary seems to have gone, in only two or three weeks, from economic and policy questions (about his core formula, r>g, or about whether his recommendation of a global tax on capital is actually realistic) to observations that he is a “sign of his times.” In my view, this observation is absolutely right. Piketty’s argument about increasing returns to capital, relatively weak returns to labor, sluggish growth, and the overall rise of both income inequality and wealth inequality, is in fact perfectly in tune with our political and economic concerns today.

However, I would go much further than to say that Piketty is merely a sign of his times. I would say that he and other economists have actually defined these times — or at least helped create today’s environment. Piketty and his colleague Emmanuel Saez have been developing their top incomes database for the last 15 years, and publishing results along the way. Since 2003, Piketty’s data, based on an exhaustive review of tax records, has been setting the agenda and driving a tremendous amount of research. I first encountered the data in Winner-Take-All Politicsalso a bestseller, by political scientists Jacob Hacker and Paul Pierson.

Moreover, a number of those involved credit Piketty’s data with sparking the 2011 rise of Occupy Wall Street and the 99 percent framing, which remains a central part of our national conversation. (Credit, according to many others, also goes to Roosevelt Institute’s Chief Economist Joe Stiglitz and his widely read April 2011 Vanity Fair piece, “Of the 1%, By the 1%, For the 1%.” )

My point is this: Big Thinkers, whether Thomas Piketty or Joe Stiglitz or others, are not just reflections of the times. They are creating today’s debate. Ideas really matter.

In congressional testimony on inequality Stiglitz gave three weeks ago, he noticed a real change in attitude among senators, who are open to everything from a carbon tax to changes in corporate taxation, carried income, and the like.

We are at a unique moment, thanks to Piketty, Stiglitz, the Occupy Wall Street organizers, and many others. Think tanks like Roosevelt Institute’s Four Freedoms Center have a window within which these ideas and arguments can make a very big difference – in the media, in Congress, and, I hope, in cities and towns nationwide. We are pushing hard here to create to a new normal in our understanding of the political economy. Our argument: you can increase economic growth and decrease inequality simultaneously.

But forces are also arraying against us. The conservatives have yet to fully organize their arguments against Piketty, but already the American Enterprise Institute is arguing that he is promoting the end of capitalism. (He isn’t.) Moreover, I am hearing from Washington sources that over the next year, and especially leading into the midterms, destroying any burgeoning inequality agenda is a central goal of the right wing.

If we want a new normal in our understanding of inequality, we need to be ready to go on the offensive – strategically and systematically. We have solutions. Recent evidence shows they can work. Now: can we put muscle behind the ideas?

Felicia Wong is President and CEO of the Roosevelt Institute. Follow her on Twitter at @FeliciaWongRI.

Cross-posted from the Roosevelt Institute’s Next New Deal blog.

The Roosevelt Institute is a non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.

Photo: Sue Gardner via Wikimedia Commons

Now We Know: Economic Inequality Is A Malady — Not A Cure

Now We Know: Economic Inequality Is A Malady — Not A Cure

It has been a long, long time since Americans accepted the advice of a French intellectual about anything important, let alone the future of democracy and the economy. But the furor over Thomas Piketty’s stunning bestseller, Capital in the 21st Century – and especially the outraged reaction from the Republican right – suggests that this fresh import from la belle France has struck an exposed nerve.

What Monsieur Piketty proves, with his massive data set and complex analytical tools, is something that many of us – including Pope Francis — have understood both intuitively and intellectually: namely that human society, both here and globally, has long been grossly inequitable and is steadily becoming more so, to our moral detriment.

What Piketty strongly suggests is that the structures of capitalism not only regenerate worsening inequality, but now drive us toward a system of economic peonage and political autocracy.

The underlying equation he derives is simple enough: r > g, meaning the return on capital (property, stock, and other forms of ownership) is consistently higher than economic growth. How much higher? Since the early 1800s, financiers and landowners have enjoyed returns of roughly five percent annually, while economic growth benefiting everyone has lagged, averaging closer to 1 or 2 percent. This formula has held fairly steady across time and space. While other respectable economists may dispute his methodology and even his conclusions, they cannot dismiss his conclusions.

As a work of history and social science, Capital in the 21st Century outlines a fundamental issue while providing little in policy terms. Piketty mildly suggests that nations might someday cooperate in a progressive and global taxation of capital gains, with shared proceeds. There isn’t much reason to hope for any such happy solution. But then it isn’t up to Piketty to solve the problem.

He has already done America and the world a profound service by demolishing the enormous shibboleth that has long stood as an obstacle to almost every attempt at economic reform, from raising the minimum wage to restoring progressive taxation: Only if we coddle the very wealthy – and protect them from taxation and regulation — can we hope to restore growth, employment, and prosperity. Only if we meekly accept the revolting displays of power and consumption by the very fortunate few can we expect them to bestow any blessing, however small, on the toiling many.

If you read Piketty – whose translation into English by Arthur Goldhammer makes macro-economics a literary pleasure – you will quickly realize that we’ve been told a big lie about this most basic social bargain. The stratospheric accumulation of rewards accruing to the top 0.01 percent of owners, at the expense of society and everyone else, is not only unnecessary to promote growth; in fact, that unfair dispensation retards growth.

Rather than argue honestly with Piketty’s findings, right-wing responses have varied from old-fashioned redbaiting, although he is plainly no communist, to juvenile misrepresentation of a book that at least one critic admits she didn’t bother to read! The boneheaded Tea Party reaction is to accuse him of demanding that sanitation workers earn the same salary as surgeons – although he explicitly agrees that a degree of inequality is important to encourage innovation, enterprise, and industry.

“I have no interest in denouncing inequality or capitalism per se,” he notes early in the book. But then the wing-nuts and trolls attacking him have no interest in debate, let alone knowledge. They hate social science just as much as they hate plain old science.

For the rest of us, Piketty’s opus poses an epochal challenge. Confronted with the truth about exacerbating inequality and the costs imposed on democratic society, what are we going to do about it? History provides a few clues if not a blueprint. The highest level of economic equality and social strength in the West arrived during the postwar era – back when unions were strong, taxes restrained the rich, minimum wages were higher, and redistribution was not a dirty word.

It will be the task of the next generation to restore decency and democracy – and save the planet — against the ferocious political resistance of the super-rich. They can now begin by discarding the ideological illusions that Piketty has so neatly dispatched.

Photo: Sue Gardner via Wikimedia Commons