Wednesday, July 23, 2014

Capital in the 21st Century

In a similar vein to my last post, here is another set of thoughts on a book composed of criticism and advice for our political and economic systems. This time Capital in the 21st Century by Thomas Piketty.

I have many worries about the future of the world, the two greatest being environmental destruction and wealth inequality. Capital in the 21st Century takes an extremely detailed look at the second of these. If you care about inequality, or the world's political and economic organization, I highly recommend reading this book. It is worth the time investment, which is certainly significant given its size. The only popular economic books I have read in the last few years that perhaps match its its significance would be Debt and The Second Machine Age.

Being on Amazon and the New York Times best-sellers lists, there has already been a lot of talk about the book, and much more exhaustive reviews than what I am putting together now. Cory Doctorow in particular has a good review of the book.

Piketty looks at the distribution of wealth in Europe and America over the last 300 years, and has documented an extraordinary amount of detail. Progressives and activists such as Occupy have been railing against wealth inequality for years, if you go back to Marx, more than a century, but Piketty paints a clear picture of the details of the economic distribution in a way that has not been before. This book is more a book on economic history than economic theory. It breaks down in great detail, not just the distribution of wealth in Europe and America since the Industrial Revolution, but such details as the share of income generated through labor vs capital at various wealth levels of society, the proportion of wealth transferred through inheritance, and more.

What this historical research shows is that the 20th Century, primarily the period between the start of World War I and the 1970s, was an outlier in terms of its level of equality. Piketty attributes this to three main factors: 1) the massive destruction of capital caused by the First and Second World Wars, 2) significant economic growth, primarily caused by population growth, and 3) progressive taxation and social welfare policy that gained prominence in this time period. Since the 1970s, due to rollback of these social policies, and the thankful recovery from the world wars, inequality has steadily risen, approaching levels not seen since the Gilded Age. As population growth rates continue to hopefully decline, and barring any horrible wars, without further governmental policy inequality looks set to rise throughout the 21st century.

Though a lesser part of the book than the historical analysis, there is some economic theory that is used to make these predictions. And there are certainly economists out there that will argue the theory. Regardless, the fact that we have already slipped back in many ways to a level of economic inequality that existed before the First World War is deeply frightening to me. The current political debate is still set by an economic reality that has been disappearing for the last forty years and is increasingly unrealistic. The economic realities of the 19th Century that were assumed by popular culture of the time, that Piketty shows through works such as those from Austen and Balzac, are horribly distasteful to a modern citizen. That is the world that we are on the verge of living in if trends from the last forty years continue. We are approaching the level of economic inequality that caused Marx to produce his works. It is not the society I want to live in. Piketty has potential solutions of course, such as a return to the top income tax levels of the 1950s, and a progressive global tax on capital. I would certainly support these solutions in theory, but more importantly, I want popular opinion to realize how far we have swung back to the extreme inequalities of the Gilded Age.

Friday, July 4, 2014

Republic Lost and the Mayday PAC

Happy 4th of July everyone. In the midst of fitfully trying to convince myself to write again, I came across a draft of my thoughts on Republic, Lost, which I had originally tried to get out back in October of 2012. With the July 4th deadline for the current Mayday PAC fundraising goal today I figured now was a good time to get this out the door.

I would like to recommended Republic, Lost, by Lawrence Lessig, to anyone with an interest in American politics, or who lives and votes in America. I have been a fan of the works of Lawrence Lessig for years. He first came to my attention with his work on the disastrous effects of modern intellectual property law, and this is the first work I have read of his that branches out to a broader view of the American political process.

Republic, Lost goes into painful detail how corrupt American politics have become over the last forty years. This book is frightful in its details, explaining how the process of deciding elections, how the practice of governing, and the end result of law and policy have all been horribly warped by money. The book traces a majority of the issues I care about back to this cause. Yes, it is a political policy book designed for the mass market, of course it is going to explain that it knows the primary cause of and cure for the nation's ills, but I found myself convinced of the importance of the issue.

Over the last several decades the amount and importance of campaign fund-raising has increased tremendously. Campaign processes have grown increasingly sophisticated in ways that sink money into advertising, research, etc. Campaign finance restrictions have been rolled back. The ethical norms of what is expected of our elected officials has changed and lobbyists have become a normal, accepted part of our political system while politicians spend more and more of their time fund-raising. Politicians work hand in hand with lobbyists in creating the laws. Congressmen spend less time debating the bills that they are supposed to be writing, farming that duty out to lobbyists. The laws grow more complex as lobbyists seek benefits for their industries, and politicians seek to expand regulation so that they have more influence to bargain with lobbyists in exchange for campaign donations.

Lessig goes on to detail how this corrupted process created the disastrous financial regulatory framework that lead to the Great Recession, how it prevented more thorough healthcare reform such as a single payer system, how it contributes to growing wealth inequality, how it has created an overly complex set of tax law, and many other unfortunate examples. There are many dreams of idealists on both the right and left that have been thwarted by the current corruption of the American political system.

In order to fix this issue Lessig as recommended many solutions since Republic, Lost was published in 2011. A constitutional amendment to repeal Citizens United, or publicly financed elections, or other forms of electoral reform would be wonderful, but are unlikely given the current state of political polarization and with moneyed interests opposed. Right now, the most important plan that I would like to encourage support for is the Mayday PAC, which with some degree of irony, is raising money to support candidates pledged to get money out of American politics. I am more optimistic about the Mayday plan than any previous attempt to address this issue I have seen before, simply in terms of the amount of public awareness it is generating. I would like to encourage you all to consider supporting it.