- Feb 11, 2010
The growth of inequality can sometimes feel as inexorable as the subterranean shifting of tectonic plates. It may be driven by powerful forces, but ultimately its a choice, not a fact of nature. What allows Gates to keep getting richer in spite of himself is a web of human-designed institutions and practices, from the tax system to patent law. So the question is not whether society can reduce inequality, but whether it wants to. If the answer to that is yes, the next question is how.
Thomas Piketty, a 42-year-old professor at the Paris School of Economics, has scored a surprise publishing hit, Capital in the Twenty-First Century, that proposes an unusual, possibly impractical, yet intriguing response to what he calls the central contradiction of capitalism: the tendency of wealth to grow faster than the gross domestic product, creating inequality that undermines democracy and social justice.
In a review last year, World Bank economist Branko Milanovic wrote that we are in the presence of one of the watershed books in economic thinking.
Most of the coverage of Pikettys book has focused on his diagnosis, but the most interesting part is the cure. He proposes a global tax on capitalby which he means real assets such as land, natural resources, houses, office buildings, factories, machines, software, and patents, as well as pieces of paper, such as stocks and bonds, that represent a financial interest in those assets. In his terminology, capital is essentially the same as wealth. So taxing capital is taking a chunk of rich peoples money. His tax would start small but rise to as high as 5 percent to 10 percent annually for fortunes in the billions. The proceeds in Pikettys view should not fund an expansion of government: The states great leap forward has already taken place: there will be no second leapnot like the first one, in any event, he writes.
I'm not sure I agree with the proposed cure, because, although I think the wealth is far too concentrated today, I would like to see a proposal that would encourage more investments of the job-creating type, and, I don't think this proposal would do that. But, I like the fact that at least this is being discussed openly now.