A few days after print publication, Knight's syndicated newspaper column, which moves twice a week, will be posted. The most recent will appear at the top.

Sunday, June 15, 2014

Capital run amok creates inequality, hurts meritocracy

Bill Knight column for Thurs., Fri., or Sat., June 12, 13 or 14

When similar thoughts emerge from various sources, everyday people can start to understand and act.

And when an idea is seemingly controversial – that unregulated capitalism today is causing such damage that it justifies wealth redistribution, even skeptics may consider the idea.

The notion isn’t coming from the Usual Suspects, such as AFL-CIO President Richard Trumka or Nobel Prize-winning progressive economist Paul Krugman or liberal populist Senator Elizabeth Warren (D-Mass.).

No, seeing the danger and a way to reduce its harm echoes in comments from the iconic 18th century pioneer of capitalism, Adam Smith, contemporary French economist Thomas Piketty and Pope Francis.

Of course, the 1-percenters and their chums on Fox and talk radio will dismiss the Holy Father and Piketty as Communists or Marxists, but Smith?

It’ll be difficult to ignore such a ground-breaking advocate for free enterprise.

In the last month or so, Pope Francis went on Twitter to note, “Inequality is the root of social evil,” and spoke to United Nations Secretary-General Ban Ki-moon and other agency leaders. The Pope said that the modern economic system is a failure that must be addressed, and he asked the U.N. to address “structural causes of poverty and hunger, attain more substantial results in protecting the environment, ensure dignified and productive labor for all, and provide appropriate protection for the family.”

The pontiff also said what’s needed is the “legitimate redistribution of economic benefits by the State.”

In 1759, Smith – “the father of modern economics” – warned of capitalism’s “success” hurting society by breeding envy and contempt by its victims: “The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.”

And current economist Thomas Piketty in his new book “Capital in the Twenty-First Century” suggests using taxation on the super-rich to deal with capitalism’s inevitable increase of economic inequality.

The main reason for rising income disparity is capitalism’s predictable outcome, Piketty says: rates of return on investment becoming greater than economic growth.

Comparing today to the 1800s “Gilded Age,” Piketty explains, “When the rate of return on capital exceeds the rate of growth of output and income, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.”

In other words, capitalism’s “successes” inescapably lead to what Smith saw: pandemic greed by the wealthy and powerful at the expense of everyone else, who can be dazzled by the rich and scapegoat the poor.

Also, Piketty writes, an oligarchy passing wealth to their heirs will create a concentration of capital that’s “potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies.”

Elsewhere, Kate Pickett and Richard Wilkinson in their 2009 book “The Spirit Level: Why More Equal Societies Almost Always Do Better” showed that citizens in more equal societies live longer, healthier and happier lives than those in more unequal societies.

The epidemiologists wrote, “If you want to know why one country does better or worse than another, the first thing to look at is the extent of inequality.”

Even American economist Nouriel Roubini, who predicted the 2008 financial meltdown that started the Great Recession, has said, “At some point, capitalism can destroy itself. You cannot keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand. That’s what has happened. We thought that markets worked. They’re not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else’s income and consumption. That’s why it’s a self-destructive process.”

Listening to various voices from today and centuries ago can lead the grassroots to conclude that a reasonable response should be economic, political and even spiritual.

As Pope Francis wrote, “Today we have to say ‘thou shalt not’ to an economy of exclusion and inequality. Such an economy kills.” Because of such a system, “masses of people find themselves excluded and marginalized.

“I beg the Lord to grant us more politicians who are genuinely disturbed by the state of society, the people, the lives of the poor,” he added.


[PICTURED: Ingram Pinn illustration of, left to right, Adam Smith, Karl Marx, Joseph Schumpeter and John Maynard Keynes, from]

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