113 thoughts on “Q&A: Thomas Piketty on the Wealth Divide”

  1. Very interesting article. I agree with the point that inequality is a positive thing up to a point. People need to have an incentive to work hard and come up with new ideas. But there is clearly a tipping point after you which it is no longer true.

    If I start working for a company on €20k and see that the boss is on €500k, that’s a great incentive to try to work your way up the ladder. Many multinational CEOs are pulling in 10 to 100 times that amount however. That is far past the useful point for incentivising junior staff.

    But how do you combat it? If you put a 75% marginal tax on high incomes like the French tried, business simply moves to another country. It is hard to see how policy makers in any single country can make a difference. Some sort of pan-national effort would be required and that seems almost impossible in practice.

  2. The US had a top marginal tax rate above 90% for the entire decade of the 1950s and into the early 60s. It was lowered to “only” 70% in 1964 or so.

    I doubt you’d really have to have a global agreement: it would be enough to get most of the English-speaking world on board for higher wealth taxes to get them implemented most places.

  3. @Ernie Ball,the book was just released here on the 10th,got a copy but haven’t started it yet just finishing the fifth edition on the origin off the species..
    Taxing labour/income is not really the issue it’s the taxation of capital specifically gains that must be addressed.All partners in private equity funds/hedge funds/investment banks keep the salary at a minimum often a token amount say 100,000.But structure their deal so that “income” or “salary” is subject to capital gains tax,via carried interests.

    “Not only did President Barack Obama eliminate the tax break on private equity and hedge fund profits in his latest budget request, but Dave Camp, the top Republican tax writer in the House, included the same idea in his own massive revamp of the US tax code.
    Meanwhile, the news that the nine founders of four large listed private equity firms took home $2.5bn between them last year as equity markets boomed has placed them again in the crosshairs of lawmakers.
    “There is a growing acknowledgment that carried interest is a loophole that gives tax breaks to a small group of people managing the assets of others,” Sandy Levin, a Michigan Democrat who has led the charge in Congress over the years, told the Financial Times. “Work must continue to effectively close it.”

    http://www.ft.com/intl/cms/s/0/6b9f8b52-a627-11e3-8a2a-00144feab7de.html?siteedition=uk#axzz2vlWapuGu

  4. The US did increase the tax on those profits from 15% to 20% recently, but still far short of the higher marginal income tax rate.

    As an aside, I saw some data recently which I though was interesting. Working off memory here, but the gist of it was that over the past 30 years the bottom 6 deciles and the top decile globally have seen strong increases in income levels. Countries like China, India, many parts of Africa have seen positive economic growth sufficient to drive billions out of absolute poverty. On the other hand, the wealthiest 10% has also gained, driven mostly by gains in the top 1%. It is the next three deciles, made up mostly of people on average incomes in the ‘West’ that have suffered most. They have to compete with cheap labour from China and also the themes being discussed here of a greater % of income being absorbed by corporate profits.

    So it not as simple as the rich have gotten rich at others’ expense. From a global perspective, most people have done well in recent decades. The main issue is among average to poor people in developed nations.

  5. @JG “All partners in private equity funds/hedge funds/investment banks keep the salary at a minimum often a token amount say 100,000.But structure their deal so that “income” or “salary” is subject to capital gains tax,via carried interests.”

    LLB structures are another issue. Started off with auditors in the UK who didn’t want any auditing cock ups to hit their profits – basically there are no consequences for failure.

    @ Carson

    “People need to have an incentive to work hard and come up with new ideas. But there is clearly a tipping point after you which it is no longer true.”

    And then it’s rent seeking. A lot of innovative financial ideas over the last 20 years turned out to be dud.

    It’s much harder to justify things like bonuses when there is very little growth or the models run out of road.

    http://www.ft.com/intl/cms/s/0/a3930c18-a934-11e3-9b71-00144feab7de.html

  6. Trends in recent decades are not going to be reversed anytime soon.

    Research by PEW found that 40% of Americans consider it common for a person in the United States to start poor, work hard, and become rich. But that rags-to-riches story is more prevalent in Hollywood than in reality. In fact, 43% of Americans raised at the bottom of the income ladder remain stuck there as adults, and 70% never even make it to the middle while only 4% move from rags to riches.

    Most Americans still make more money than their parents. However, the lack of rising house equity is hitting new business firm startups.

    Only 7% raised at the bottom get a college degree.

    In Sweden, Finland, Norway, Denmark and the United Kingdom, between 25% and 30% of people stay in the bottom quintile, compared to the 44% in the U.S.

    Poor whites support rich Republicans as they fear the rise of ethnic minority groups and oppose equal rights for gays.

    With the help of outside money, a district in Florida yesterday elected a Republican lobbyist to the House who wants to scrap Obamacare – healthcare accounts for more than 17% of GDP.

    Meanwhile in Democratic leaning Silicon Valley, inequality has grown as manufacturing has been outsourced while public services have been under stress for years.

    The rich Democrats like their Republican business counterparts want to have more money by gaming the corporate tax system and Asians are the preferred employees, not generally women, blacks or Latinos.

    I gave the example a few days ago that the majority of Apple’s employees in the US are poorly paid.

    Census data shows that there has been a significant drop in mixed income level suburbs since the 1970s.

    Carson is correct in saying that on a global scale life has improved in a big way for a huge number of people in recent decades.

    The global trading market has doubled to 3bn since the early 1990s and it’s unlikely that the prosperity enjoyed by those who were born after 1945 in the developed world will be available to the young.

    Apple iPhones can sell everywhere as can some car brands but emerging markets can produce many products for their own demand.

  7. “… U.S. inequality is now close to the levels of income concentration that prevailed in Europe around 1900-10. History suggests that this kind of inequality level is not only useless for growth, it can also lead to a capture of the political process by a tiny high-income and high-wealth elite. This directly threatens our democratic institutions and values.” Piketty

    +1

    The Financial System has captured the political decision making elite in the EZ (and the media) leading to the ongoing demolition of the EU’s ‘Solidarity Principle’ (the foundation stone of The European Project) and, in parallel, leading to a weakening of Democracy.

    Locally in Hibernia – look around.

  8. Sam Bowles also has a good book out on inequality for anyone interested, which is available as a pdf online(i wont link in case Im breaking any copyright laws, if someone tells me Im not/its okay then I can link)
    The book is based on a series of lectures he gave and is called the new economics of inequality and redistribution.

  9. This part resonated with me:

    U.S. inequality is now close to the levels of income concentration that prevailed in Europe around 1900-10. History suggests that this kind of inequality level is not only useless for growth, it can also lead to a capture of the political process by a tiny high-income and high-wealth elite. This directly threatens our democratic institutions and values.

    Can anybody think of a place other than the US that resembles that description? Hmmm.

    If you asked an average Independent reader (or irisheconomy.ie poster) which “tiny high-income and high-wealth elite” had “captured the political process” the answer would almost certainly be: “the public sector.” And that, my friends, is testimony to just how effective that “tiny high-income and high-wealth elite” have been in “capturing the political process.” That capture is the reason that the majority of the “adjustment” here in Ireland has been borne by the public sector while the “high-wealth elite” have been asked to sacrifice almost nothing.

  10. “History suggests that this kind of inequality level is not only useless for growth, it can also lead to a capture of the political process by a tiny high-income and high-wealth elite. This directly threatens our democratic institutions and values”.

    But that would never happen in Ireland.

  11. Actually, tull, I’m not. But, I would expect members of the rentier class like yourself to want to redirect the focus…

  12. And, yes, I’d consider a nominal drop in take-home pay of 25% a sacrifice. The real drop is no doubt closer to 35% with no end in sight. But using scare quotes around words like “sacrifice” in order to suggest that a sacrifice is not a sacrifice is but one of many rhetorical tricks used by members of the “high-wealth elite” like yourself in order to make sure that you are never asked to pay much of anything.

  13. @Cian and rf thanks for the links,DeLong reviewed it in Dec and provides a link to a Helsinki lecture,almost same presentation as in Cian’s link.

    http://delong.typepad.com/sdj/2013/12/tomas-piketty-capital-in-the-twenty-first-centuryinequality-and-capitalism-in-the-long-run-the-honest-broker.html

    @seafoid Isn’t there some ongoing litigation regarding Anglo’s auditors,with some raised eyebrows at the “decision” not to pursue the auditors of Nationwide?

  14. @ JG

    The big 4 have sailed on through the crisis leaving behind many banjaxed companies that had a perfect audit at the time. Who audited AIB ,BoI, RBS and Irish Life and Perm ?

    What is the point of auditing anyway ?

  15. @ernie the above reference was probably above your pay grade:)
    “Darwin first used Spencer’s new phrase “survival of the fittest” alongside “natural selection” in the fifth edition of On the Origin of Species, published in 1869,[2][3] intending it to mean “better designed for an immediate, local environment”.[4][5]”
    http://en.wikipedia.org/wiki/Survival_of_the_fittest

  16. @ JG

    Are they not self regulated? I dunno.
    But if you were a CEO what would say an audit brings to the business ?

  17. @seafoid over here we have this,eh I am a CEO unless oh no did I miss a memo/meeting,miles off tread as usual anyway looking forward reading the book few hours sitting waiting,lots travels ahead off me,will get stuck into it.
    Big day next week your fearless leader is in town,pounding the pavements holding a few meetings,haven’t checked this afternoon but this morning the irish 10 year hit an all time low,great timing for his lap of honor.Anyone got any decent questions,i like to be asked back,she who must to be obeyed used say second time we went anywhere was for me to apologize,Ernie just having a bit of fun.
    http://pcaobus.org/Inspections/Reports/Pages/default.aspx

  18. Barista may have a better ring to it than waitress and here is a piece by a former one.

    One of the highest pressure jobs I’ve had was working as a waiter. So I have a lot of respect for the trade.

    http://www.theawl.com/2014/03/the-service-economy-trap-inside-brooklyns-barista-class

    At one point in what felt like an endless job search, I walked into an editor’s office to find, to my absolute horror, that I’d served him coffee for years. Nervously I answered his barrage of questions about my background and qualifications. Right before the interview ended he made the connection (“I knew you looked familiar”) and complimented me on my superior espresso skills. I thanked him.

  19. Mr B,
    you are not above rent seeking yourself. What activity do you perform that adds to the stock of human or physical capital in this country.

  20. You seem to be a bit out of date, tull: none of those are university subjects.

    And now it’s your turn: what activity do you perform that adds to the stock of human or physical “capital” in this country?

  21. Or, to put the question in more meaningful terms: in what way does the way you spend your days lead to a fuller flowering of human potential, increased happiness or well-being for humanity or decreased suffering?

    Or is it, as I suspect, all about enriching tullmcadoo while, in ways typical of the high-wealth elite, deflecting attention and suspicion on to those who actually are doing something for humanity.

  22. Ernie,
    I do not claim to be deserving of any rent or much less claim to be doing something for humanity. I am a simple taxpayer who funds your salary.

    It is you who claim to be worthy of a “higher” salary from the tax payer for teaching Marx to the offspring of the elite of the even number metropolitican post codes. I am not sure if it is Karl or Groucho though.

  23. @tull

    “I do not claim to be deserving of any rent or much less claim to be doing something for humanity. I am a simple taxpayer who funds your salary.”

    Seanie Fitz couldn’t have said it better.

    But you don’t “fund my salary” in any meaningful sense. The state does. That would be the same state that makes it possible for you to skim off the surplus value created for you by others. Who was it who said that? Was it Karl Marx?

    Amyway, I think we can agree that the Gesammelte Werke of Groucho Marx are a worthy subject of study.

    I haven’t claimed to be worthy of a “higher” salary from my university (which, by the way, is supposed to be autonomous from the government). You’re once again twisting things around in the way that those who have “captured the political process” typically do. Rather, I made a different claim: that your class (the rentier) class) haven’t been asked to do anything for the nation in what we’ve been told is a time of national emergency. Instead, you’ve managed to shift almost the entire burden (again, through “capture of the political process”) to the public sector and, more importantly, to those who depend on them. So my salary is not the issue. Your income and the ideological reasons for its protection: those are the real issues.

    I ask again: what great service do you provide to humanity that justifies the exemption of your class from participation in the great national sacrifice in which “all must do their part”?

  24. I provide no service that makes me exempt. I am honoured to pay my taxes to the exchequer so that you continue to enjoy your elevated T&Cs for whatever service you provide.

    I would happily welcome an autonomous UCD funded by student fees for the courses they would choose. I suspect you might not like the outcome of that process though.

  25. @tull

    Your suspicions would be wrong… You really do have no clue what it is I teach. That suits me. But I note your assumption that the market (for subjects in university, for property, for whatever) is always right. That’s one you might want to have a rethink about.

    And “elevated” is another rhetorical flourish typical of your class. I’ll ignore it.

    Now on to the systemic question (and back to Piketty): Who pays? In Ireland you are “honoured to pay your taxes to the exchequer” precisely to the extent that your class have, as Piketty puts it, “captured the political process.” You are happy to pay those taxes provided they are not raised. And your class, through the captured media (owned almost entirely by super-rich moguls and with very little separation between ownership and the editorial team) make sure that they are not raised (and have not been raised) despite the facts that:

    1) taxation on wages and salaries are very low by OECD standards;
    2) Capital gains taxes are very low by OECD standards;
    3) wealth taxes in general are almost non-existent;
    4) the failure to make the rich pay for a crisis caused above all by their behaviour leads to the kind of undermining of democracy (not to mention sub-optimal growth) that Piketty warns of.

    So although you are “honoured” to pay taxes, I’m afraid your class hasn’t paid enough and that this is due entirely to the capture of the political process in Ireland by monied interests (like yours). Instead, you’ve shifted the burden for your mistakes to others who are less able to pay than you (collectively) are and accompanied this with a propaganda campaign of bullsh*t (that, I hate to say, you personally show signs of actually believing) about “elevated terms and conditions” and the “highly-paid” public sector, etc. Meanwhile, your sons and daughters are now being packed 30 to a tutorial in classes where there used to be 18. That’s where we are still able to have tutorials (you know: where actual learning goes on). But that’s OK as long as the really important things are preserved: the ability of our betters to buy 141 Land Rovers…

  26. 1) taxation on wages and salaries are very low by OECD standards;
    2) Capital gains taxes are very low by OECD standards;
    3) wealth taxes in general are almost non-existent;

    I agree with point 3 there. The closest thing we have is the new household charge which is not a particularly good measure of wealth and is only very marginally progressive. A proper wealth tax could and should be introduced in Ireland.

    I’m not sure I agree on points 1 and 2 though. The higher rate of marginal income tax is already high enough for my liking. I think it should cap out at 49% so as not to discourage work. Also haven’t capital taxes risen quite a lot in recent years? It’s gone from 20% to 33% I think and probably will get back up to 40% soon enough. DIRT is already there.

  27. @Carson

    Exhibit A

    Exhibit B

    Exhibit C

    (all of these are reproduced from Michael Taft’s “Notes on the Front” blog. His source is here.

    Exhibit C speaks volumes. If Piketty has forcefully reintroduced the questions “who gains?” and “who pays?” and suggests that how those are worked out in practice has little to do with real democracy and everything to do with its capture by the wealthy, Exhibit C (employer taxation) says just about everything you need to know about how the deck is stacked in Ireland.

  28. Ernie,
    run for election in the Locals on a campaign platform of increasing income taxes on all workers to the European average and see what ye get.

  29. That SF proposal looks like a good starting point. 1% might be a bit high to start off with, but I think it is better than the current household charge.

    Also increasing employers PRSI doesn’t seem unreasonable given the charts Ernie has shown there. The counter argument would be the effect on employment, but an increase to the German level over several years seems possible without doing too much damage on that front. Strange that Denmark is bottom of the list. I wouldn’t have expected that.

  30. Any political party that runs on a policy of increasing taxes to fund Ernies lavish T&Cs would face annihilation. I knote EBs biggest asset, the NPV of his DB pension is exempt from a wealth tax.

  31. @tull the ball tull,the ball.
    heres cantillon
    “The IMF proposed something similar late last year. It reckoned that for a sample of 15 euro area countries, a tax rate of about 10 per cent on households with positive net wealth would be required to reduce sovereign debt ratios to end-2007 levels. Sinn Féin could perhaps borrow some of the Bundesbank and IMF’s clothes for their wealth tax on the basis that if we had implemented a wealth tax back in 2007 then perhaps we might not need a residential property tax now.”
    http://www.irishtimes.com/business/economy/cantillon-sinn-f%C3%A9in-find-bond-with-bundesbank-1.1686818
    http://www.reuters.com/article/2014/01/27/us-eurozone-crisis-bundesbank-idUSBREA0Q0HV20140127

    oh BIG story WSJ this morning off topic but worth tracking down,google bypases the paywall.
    U.S. Investigators Suspect Missing Airplane Flew On for Hours
    Engine Data Suggest Malaysia Flight Was Airborne Long After Radar Disappearance

  32. “Any political party that runs on a policy of increasing taxes to fund Ernies lavish T&Cs would face annihilation.”

    Right, tull. Keep picking the most ideologically slanted way of putting it.

    What chances do you think a political party that proposed increasing employer taxes and wealth taxes to reduce class sizes at all levels back to what they were in 2008 would have? I’d say it’d be pretty good… But that’s what you’re afraid of, isn’t it.

    Be very afraid.

  33. “It is you who claim to be worthy of a “higher” salary from the tax payer for teaching Marx to the offspring of the elite of the even number metropolitican post codes. I am not sure if it is Karl or Groucho though.”

    jesus this is stupid, though kind of funny. Is this a real argument now? That we dont need an education system ?

  34. Ern,
    I am pretty cool that whatever happens will not involve rewarding rent seeking kulaks such as your good self .

  35. @tull

    Your confidence, once again, confirms Piketty’s thesis about the capture of the political process and nothing more. My sense is, the tide may well be turning…

    I’ll leave it to you to explain how working a job for a wage (as opposed to how you earn your money) amounts to “rent seeking.”

  36. @carson, tull, ernie

    Currently administration of funded Defined Benefit pension schemes assumes that once payments begin, the pension payments themselves, as defined become “property rights” and untouchable.

    Because of this, any insolvency risk is shifted on to scheme members not currently drawing a pension. Effectively their ‘property’ right is artificially diminished so as to make that of those receiving payments already as close to absolute as the scheme can.

    This is rather like the cover pool on a banks covered bonds being topped up and the position of unsecured creditors (eg depositors) being undermined. Its a swizz but most people don’t understand it.

    I wonder if defined benefit pensioners should have their cake and eat it. A property right must logically be an asset and presumably available for any wealth tax.

    Unfunded schemes – like ex-ministers’ ones – have also been regarded as a “property right” and therefore not on the table.

    “Transfers”, which are also unfunded, but seem similar in character, are not regarded as “property rights”.

    There have already been “levies” which have ‘wealth taxed’ funded pension schemes – but only hitting, in practice, those not already drawing from the fund.

    For every 100bn of unfunded pension liabilities a state has – and the accompanying 100bn ‘property’ or ‘wealth’ that the beneficiaries have – a tax of 1% gives 1bn euros. Of course, where the liabilities themselves are off balance sheet, the revenue is not obvious.

    How would a wealth tax deal with those citizens who have little or no pension lined up, but have some ‘wealth’ which they would presumably draw on in place of a “pension”. Would they just be suckers?

  37. Carson,

    the Scan countries have very low or non-existent PRSI. They have high taxes to finance welfare, health, etc. But low Social Insurance.

  38. @grumpy,oh they ringfenced their BTL bets/pensions,not suckers at all….

    ah now really and it used to be so much fun!

    “​The Bank of England is consulting on proposals to require all firms authorised by the Prudential Regulation Authority (PRA) to amend employment contracts to ensure bonus awards that have been vested can be clawed back from individuals where necessary. The Bank of England already has powers to require firms to stop payment of unvested bonuses, called malus; the proposals in today’s document would represent a further strengthening of the remuneration code. ”

    http://www.bankofengland.co.uk/publications/Pages/news/2014/053.aspx

    http://www.ft.com/intl/cms/s/0/5cec9496-aab0-11e3-9fd6-00144feab7de.html?siteedition=intl#axzz2vquTcB00

  39. No John, read again. Consider net wealth (not BTL call options) and without any significant pension provision.

  40. @grumpy for once not trying to be a d**k but you lost me a little,would ‘net wealth’ include say cash placed in trusts,college savings plans for the kids or just dead presidents in the bank?

  41. @JG

    Net wealth is what Buba were talking about, the exact definition not necessary for discussion in principle. Trusts not used as much as they used to be – partly because of lack of sufficient ‘wealth tax’ type incentives for all but the very wealthy to use such vehicles these days.

    For the argument you could nominally include interest in possession and beneficial owner trusts. For most people in Ireland with net wealth the trusts argument is fairly irrelevant. A ‘wealth tax’ will provide lots of business for advisers. There was a time when most Stockbroking firms got a lot of their business specifically in response to high tax rates, but that was a long time ago in the days when a stockbroker wasn’t a 20 something in a call centre.

    For the discussion in principle, add up assets and subtract liabilities.

    Those with public sector defined benefit pensions currently have very significant wealth hidden off-balance sheet.

  42. @ Grumpy

    “Currently administration of funded Defined Benefit pension schemes assumes that once payments begin, the pension payments themselves, as defined become “property rights” and untouchable.”

    Does it not depend on whether or not the trustees have bought an annuity ? I thought the Govt had a proposal to reduce the ongoing payment of pensions out of schemes where the scheme is seriously underfunded.

  43. @grumpy the corollary to that is the govt/state including same public sector wage salves has significant off balance sheet liabilities!

    One the problems over here using CGT-or capital gains tax as an example-is 1031 like kind exchanges,if the CGT rates are raised more investors will elect to do a ‘1031’ deferring paying CGT until the Republicans get back in and lower CGT-oh refi proceeds are tax free.So you park some the gain for short while,then refi the deal pulling out tax free the gain.

    These guys are losing talent daily here they cant pay them,its a death spiral.
    http://www.reuters.com/article/2014/03/11/us-banks-barclays-bonuses-idUSBREA2A1HZ20140311

  44. @grumpy…oh grumpy apols for that non sequitur im not touching that whole public sector thing,also truly haven’t a clue about irish pensions.

  45. @seafoid

    Yes, within duff DB there is movement on distribution. Afaik very limited situations, zero below 12k, <10 % up to 60k and 60k. Also there is the real world question of regulatory discount rates vs bonds…

  46. I’m all for a wealth tax, higher capital gains taxes and higher contributions from employers, higher property tax, reintroduction of 2nd home tax etc…. Anything that puts the focus back on labour and away from rent seekiing.

    Regarding DB pensions, the justification for those at the higher/obscene end seems to be ‘it’s a property right’ or ‘it’s a contractual obligation’. Well how about a new law from the law makers, a tax of 100% on amounts above 60k pa. Can’t see how Bertie would have any difficulty living of that, it’d still deliver alot of pints in Fagans.

    We could extend that to all institutions in receipt of state money. Claw back some of that 2 billion used by AIB to plug the hole in their pensions.

  47. I shall add to the Sinn Fein / Buba (the holy Bundesbank : – ) link John Gallaher provided, and mention that the German parties supporting a wealth tax even in Germany (SPD, Grüne, Linke) have a 5 seat majority in the Bundestag.

    The target would be that the wealth tax is as high as to bring down the public debt in all countries to the Buba described medicine level of 60% GDP

    Nothing wrong with that from a Ordnungspolitk point of view. We did this in Germany after WWII.

  48. @ Grumpy

    Thanks

    DB pensions contributions get tax relief so they are reasonably fair game, I would have thought.

  49. “The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing.”

    Jean Baptiste Colbert quotes (French Economist and Minister of Finance under King Louis XIV of France. 1619-1683).

    The idea of combating inequality did not, of course, come into the calculation at the time as the widespread use of indirect taxes on essentials such as salt testified. We all know where that ended.

    The point that Piketty seems to be making is that the very structure of modern economies has changed in such a way as to almost automatically benefit holders of capital over everyone else, if to varying degrees, and that this is a slow cyclical phenomenon which invariably ends badly.

  50. @ DOCM: Eh! ” … and that this is a slow cyclical phenomenon which invariably ends badly.”

    A cycle that ends … ??? Sorry about this. But, that means it ‘starts’ …
    “No worries”. Thanks for the chuckle.

    I think a few guys got their retaliation in first on this inequality business. Goes back quite a ways it does. History rhymes! You really do have to admire that guy who came up with the notion that ‘debt’ was the new wealth – for the other ranks, as they say.

  51. German sovereign debt post WW2 was between 300 and 400% of GDP depending on whether you included the stuff stolen from the occupied countries. By the early 1950s it was written down to 20%. The victorious powers of course did not default on their debts so they had to carry higher debt service costs and they also paid for Germany’s security during the Cold War.
    So Germany was rewarded for “going criminal” from 1933 to 1945. I believe that is your phrase.

  52. The fact that Francis didn’t even recognise the write-down of German debt after WWII, even after it was pointed out to him, speaks volumes about the sorts of narratives Germans are being fed. “We did it ourselves and so should you.” Please.

  53. @ BWS

    Brad de Long linked by John Gallaher above states the Piketty position in the following terms.

    “First, that inequality is driven by the dynamics of capital (and more broadly, wealth–wealth includes land and also rent-extraction position as well) accumulation–the capital-to-output ratio and the capital share of income–and by the dynamics of wealth distribution. A society with a high savings rate and a low growth rate will have a high wealth-to-income ratio and a high capital share in income. A society with multiplicative dynamics–in which the return on wealth are such that wealth makes more wealth rather than wealth getting taxed or stolen or bombed or consumed away–will be one with an unequal distribution of what wealth there is. A society with both of those things will be an unequal society.

    Second, from roughly 1930 to 1980, the North Atlantic had neither of these. Rapid productivity and technology population [progress?] from the Second Industrial Revolution coupled with the population explosion of the demographic transition era raised the denominator of the wealth-to-income ratio. Wars, progressive taxation to finance wars, the sticking of progressive taxation even after the wars were over, and a popular demand for social democracy and social insurance inhibited multiplicative dynamics by which more was given to those who had.

    Third, meritocracy? Make me laugh. In my view meritocracy does not produce inequality. Rather, true equality of opportunity produces relatively small income differentials because there is always somebody almost as good eager to bid for your high-paid job. Inequality emerges either (i) when this generation’s human capital is last generation’s wealth, or (ii) when other non-meritocratic factors are creating jobs that are the equivalent of covering yourself with glue, standing outside at a corner in Canary Wharf, and watching the money stick to you as it blows by.

    Fourth, now with the end of the demographic transition era and with the possible slowing of technological progress, we face a world with a much higher capital share of income than over 1930-1980. And multiplicative dynamics are back with a vengeance–largely, I think, because unequal wealth poisons politics and creates a powerful class interested in making sure that multiplicative wealth dynamics persist.”

    I think this summing-up is correct, including the value judgments by its author. The cyclical element is evident. Threshing around in the individual taxation undergrowth of particular economies in a globalised world leads nowhere unless there is acceptance of social democratic principles with regard to wealth distribution. A curiosity of the Irish situation is that these are accepted at a private level (hence the growth of the “Charitable Sector”) but not when mediated by government through taxation.

    The best revolutions are, of course, the quiet ones and that taking place with regard to establishing responsibility for control of the public purse in Ireland is a remarkable example. But the goose is going to be hit with a lot of plucking in the coming months (property tax, non-principal private residence tax, water charges, septic tank charges, health insurance etc.) and the current government can already hear the hissing.

  54. @ tull

    “The victorious powers of course did not default on their debts”

    Did the Brits not string out some of those war loans again and again before finally inflation destroyed whatever value was in them?

  55. @Seafoid/Grumpy

    re: Defined Pension beneficiaries:

    Double Insolvency: Both Employer and Pension scheme:
    Benefits up to 12,000 ‘guaranteed’. Above 12,000, members are ‘protected’ up to 50% of entitlement. [ I assume this means that a person entitled to 30,000 will be protected for 15,000, not 12,000 plus 50% of 20,000? ??? ]

    Single Insolvency:Either (one of ) employer or the Pension Scheme:
    Benefit up 12,000: 100% protected:
    12,000 to 60,000: 90% protected:
    > 60,000: 80% protected:

    The protection will be funded by a levy on all funded schemes, many with balances that would not provide pensions of even €500 per annum.

    By any standards, it is one of the most inequitable solutions that any reasonable minded person could come up with.

    It is indeed a funding variant comparable with that offered to unsecured bank bondholders, all all compliments of a Labour minister.
    http://www.irishtimes.com/business/personal-finance/pensioners-in-troubled-schemes-to-face-cuts-under-new-law-1.1599974

  56. tull,

    this was like attempt nr 45 from you to warm up the ancient past with false and misleanding statements.

    There is the London Debt Agreement 1953, which everybody signed. If somebody feels like Germany owes him anything, he is completely free to sue in whatever court he feels fit. And that is it.

    I, and Germany, are not getting drawn into anymore of this endless blackmail attempts.

    It is exactly people like you, who prevent any further, possible even reasonable steps for more federalization in Europe

  57. Seafoid,
    Yes they cut the coupon but financial repression and default are not quite the same.
    Francis,
    The 1953 agreement involved what exactly? Go on do tell.

  58. tull,

    you have to present and detail YOUR grievances to the court of your choosing.

    It is not my job to guess and fend off imaginary ideas of what you might have in mind.

    German interest rates are at a stellar 115 bp above lesser quality UK & US

  59. rf,

    who is “us” in your words? Ireland??

    and who manned the frontier ?

    Angela won Olympics in russian speaking, and we very much welcome all our russian speaking guests and customers, with 2 dozen city employees catering specifically to them over Xmas season, menues are printed in kyrillic here, and the memorial honoring the 5th russian guard division is kept in perfect condition before the war museum here in Dresden.

    Germany has no problem with Russia, and a direct gas pipeline, without any interference by other idiots.

  60. rf,

    and would you have any kind of argument / evidence or whatever else,

    how De Valera relates to Germany? Anything at all?

    the wiki/Éamon_de_Valera is not exactly flattering, to put it politely.

  61. text from Blind Biddy in Kharkov: some context on theE/W Ukrainian divide ….

    Saving Lenin in Illichivsk –

    ‘In western Ukraine, the majority of people speak Ukrainian. About half of the west of the country once belonged to the Habsburgs’ empire, and to this day Lviv has coffeehouses serving apple strudel with whipped cream that tastes just like it does in Vienna. The eastern and southern parts of the country, meanwhile, are home to cities such as Illichivsk, where people speak Russian and dream Russian, and the pelmeni with sour cream taste just like in Moscow. Here by Illichivsk’s Lenin statue, its defenders gather under a tent that bears a printed image of a hammer and sickle. […]

    Boris works as an engineer, lives in Illichivsk and is a member of Svoboda, a radical nationalist political party that has its power base in western Ukraine, and many enemies in the east of the country. Boris and his fellow Svoboda members venerate Stepan Bandera, a western Ukrainian soldier who collaborated with Nazi Germany; after World War II, Bandera and his comrades fought in Ukraine’s partisan army, murdering Soviet police officers and party functionaries into the 1950s. Many western Ukrainians consider Bandera a hero. For people like Fabrika, he’s a Nazi and a murderer.

    Svoboda is particularly hated these days, because it wants to ban Russian as an official language in Ukraine. The party also calls for a ban on immigration, and for “ethnic affiliation” to be noted in Ukrainians’ identity cards, to identify Ukrainians of Russian origin. Svoboda also maintains strong ties with Germany’s right-wing extremist National Democratic Party (NPD). Boris knows two words of German: “danke” (“thank you”) and “Rasse” (“race”).

    http://www.spiegel.de/international/europe/residents-in-provincial-southern-ukraine-defend-a-lenin-statue-a-958294.html

    Svoboda are in the ‘interim’ gov in Kiev.

  62. and following D O D’s text,

    why should I lift one finger, spend one cent, endanger one pomerian grenadier

    to support the ilk presently in power in Kiev?

    It is just the same with Iraq, libya, syria, etc.
    Why should I take sides with what looks like the a little less evil of the parties in places I dont care? For the profit of US oil companies and hedge Soros guys?

    The Coup was financed and organized by US Kerry and Nuland, now these folks can see what the UK & US “guarantees” are worth.

    After the hot heads cool off a little bit, they will probably come to Mutti in Berlin to sort out their self organized mess, and first demand and then beg for some money.

  63. fyi on INequality:

    Inequality Is The Number One Challenge Of The 21st Century
    12/03/2014 by Hannes Swoboda

    Socio-economic inequalities in Europe are greater today than in the 1980s. They have been further amplified by the destructive austerity policies imposed in response to the crisis: five years of economic, banking and unemployment crises, fuelled by irresponsible austerity policies, have led to the deterioration of living standards for millions of Europeans.

    The crisis in Europe has further increased inequalities and hit the most vulnerable hardest. Conservative governments across Europe continue to turn a blind eye to the growing divisions in society, despite the shocking realities. In Greece, infant mortality is up 43% because of dramatic cuts to healthcare services. In Spain, over 400,000 families have been evicted from their homes. Youth unemployment affects a quarter of young Europeans on average and in some countries, like Greece and Spain, half of young people are unable to find work.

    Read on: http://www.social-europe.eu/2014/03/inequality/

    @Prudent Hans

    Mother: What did you take her Hans?

    Prudent Hans: Nothing mother.

  64. francis – the secret meeting at Yalta where the Lemass plan (later renamed the Marshall plan for geopolitical reasons) was formulated.

  65. rf,

    I see , secret meetings with alleged participants making alleged decisions, somehow beneficial to my place, and I should be eternally thankful for it.

    How are your Bilderberger, truther and birther friends doing ?

  66. @francis,hi francis some interesting comparisons may explain the “Irish”
    “My earlier post making some parallels between attitudes to Greece and attitudes during the Irish potato famine of the 1840s was picked up by others in Ireland and Greece, and has drawn some interesting reactions.”
    http://mainlymacro.blogspot.com/

  67. And how did we get into this mode here, today?

    john gallaher pointed out some, at first maybe somewhat usual similiarities

    “Sinn Féin could perhaps borrow some of the Bundesbank and IMF’s clothes for their wealth tax”

    very relevant to the thread topic “wealth divide”.

    I do add the relevant information about party programs and majorities in Germany with respect to that.

    And then Tull goes off to his usual wild unspecific allegations, he can not provide references to, resulting de facto in thinly veiled racist hate mongering.

    And DOD can not resist his habitual urge for name calling, even on a rare point we are agreeing on, like a Pavlovs dog.

    Piketty’s book, anybody still interested ?

  68. Francis,
    You do not owe me anything. I am not going to any court to seek redress. I am merely pointing out that the much vaunted German track record for fiscal probity over the long term ranks pari passu with the long term track record for human rights and respect for the neighbours.

  69. Along the Jerusalem link comes that also:

    http://www.jpost.com/Diplomacy-and-Politics/Poll-Two-thirds-of-Israeli-Jews-dont-trust-Kerry-on-security-344976

    It is time for Obama to clean house, and to fire Kerry, Nuland, the CIA boss, the head of NSA, or, if not, for US Congress to impeach Obama

    Tull,

    is your last post (”financial probity”) not just another diversion from thread topic or what was said before, or where did I miss out on the connection?

    rf,

    I dont do podcasts, like for analphabets, but you can provide links to text, 98% civilized Europeans can read

  70. @francis

    I have no competence in German law but I am not aware of the default of debtor on an obligation to a creditor being a crime under English or Irish law. Try Tort.

    @rf

    Do you think you might be over-egging the Irish Republic’s contribution to the cold war and the last hot one, just ever so slightly?

  71. @francis being oppressed and blaming others is an Irish affliction,similarities to Vichy France cast a long shadow in Irl.SWL has been running a simply superb series of pieces on this,it’s been picked up by Ireland’s paper off record the Irish Times.Some great links in the articles.Despite non existent growth crippling dept there remains a belief in the growth fairy,but if as some like me believe it will all end in tears,the Germans will get blamed not the quisling government or citizens,the more things change…

    “Between 1846 and 1851 about a million died of starvation and epidemic disease in the Irish potato famine. The general consensus today is that although this famine began as an extraordinary natural catastrophe, its impact was made much worse by the actions (or lack of action) of the British government, headed by the Whig Lord John Russell. As Jim Donnelly describes here, there seem to be three ideologies that held the “British political élite and the middle classes in their grip, and largely determined the decisions not to adopt the possible relief measures.” These were “the economic doctrines of laissez-faire, the Protestant evangelical belief in divine Providence, and the deep-dyed ethnic prejudice against the Catholic Irish.” The system of agriculture in Ireland was perceived in Britain to be riddled with inefficiency and abuse. The British civil servant Charles Trevelyan, chiefly responsible for administering Irish relief policy, wrote that the famine was “the sharp but effectual remedy by which the cure is likely to be effected.”

    http://mainlymacro.blogspot.co.uk/2014/03/the-sharp-but-effectual-remedy.html

  72. grumpy ?

    where does your latest post relate to what in this thread, especially related to me or Germany ?

  73. Looks like my diversion tactics are not working,KOR just opened a tread on the 800 pound growth gorilla,oh well there’s always inflation eh hold on…
    francis isn’t there a law or rule that on most threads after a certain number of posts people like Ernie or DOD revert to the “war”,stay above the fray it’s pointless.

  74. john

    I think it is called wiki/Godwin%27s_law

    And I have something to say on this “always blame somebody else” , but not any more tonight.

    Mañana : – )

  75. @ DOCM: Thanks for that. An oasis of sense and civility in a desert of pap. And this is great:-

    ” … equivalent of covering yourself with glue, standing outside at a corner in Canary Wharf, and watching the money stick to you as it blows by.”

    I have this image of a canary (of the avian sort) – bollok naked, shivering with the cold (wind whips around there something awful) with a begging bowl in one claw and beeching passers-by for “Feathers`- a few feathers for the naked canary!”. The mind truely boggles.

    Thanks again for the chuckle.

  76. “and now another usual suspect, ernie, comes and tries to play the jew card.”

    It’s like being victimised by the Jews all over again, isn’t it?

  77. Ernie, and some others above. No disrespect lads – as they say in the gangster films, but could ye please, can it! Thanks.

    This thread is about ‘inequality’ – which is a quite elastic concept. It is something, that in some form or other, has existed for milennia. Our current manifestation`is pretty horrific – and it would seem, to be getting`worse’ and more intractable. Our economic and political context is that of a Consumer Economy. One may have a choice (thought this is arguable) to accreet or spend. The former is only available to a minority, the latter is the fate of the rest of us.

    There actually may be no ‘legal’ or political economic way back out of this developing inequality thing – absent heads in baskets. That’s what the historical evidence has shown. us. And History rhymes!

  78. @ Ernie

    I looked up your „overman“, and on wiki/Übermensch this sentence caught my eye:

    “The Übermensch is not driven into other worlds away from this one.”

    Havent read my Nietzsche in a long time. As a 15 year old I like ths a lot:

    Die Krähen schrei’n
    Und ziehen schwirren Flugs zur Stadt:
    Bald wird es schnei’n –
    Wohl dem, der jetzt noch – Heimat hat!

    As you can see from the links above, I think we got our arrangements with Israel, all our bases covered and working sufficiently.

    @ John

    There is actually not much of a point in making the Excel sheet available. The data can be easily downloaded from the links I provided, and if people can use e.g. Excel solver they can fit them easily by themselves, in 10 minutes time. And if they can not use it, the xls is of no help for them.

    I think I had asked this here before, who in this blog can do a non-linear fit with more than one variable, and did not get one positive answer.

    Anybody ?

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