Posts Tagged ‘economic growth’

Piketty Poo

May 20, 2014

                  For to everyone who has, will more be given, and he will have an abundance. But from the one who has not, even what he has will be taken away. — Matthew 25:29

Piketty

Piketty

French economist Thomas Piketty’s Capital in the 21st Century is the latest book sensation. Confession: I haven’t actually read it. But I’ve read plenty about it (both pro and con) — hardly avoidable lately. “Progressives” are gaga over it*, a confirmation bias feeding frenzy. People love having their pre-existing beliefs flattered. Piketty strokes the left’s inequality obsession: he predicts the gap worsening, saying returns on capital tend to outpace economic growth, so wealth tends to concentrate; and to combat this he proposes a worldwide wealth tax and punitively high (80%) income tax rates for the rich.

images-1Piketty’s predictions of slow growth and consequently increasing inequality have been challenged for faulty economic assumptions and analysis. The Left imagines a coming dystopia where a corporate 1% hogs all the wealth and the 99% have nothing. The absurdity is: who would buy all the products and services that make the 1% rich?

Meantime, Piketty’s fans also strangely overlook a glaring political correctness no-no. The book is Western-centric, focusing on the “First World” and pretty much ignoring the rest. But this is no mere cosmetic flaw — it goes to the heart of Piketty’s presentation. Wealth and equality are global matters, and if you only look at part of the globe, you can’t get it right. The big story is that while inequality may indeed be rising in Pikettyland, it’s not rising, in fact it’s falling, globally.

That’s unarguable fact, because for some time, Western economic growth rates have been materially exceeded in the poorer countries, notably India and especially China (together comprising over a third of world population). That means the global gap between rich and poor must be narrowing (even if within countries it’s not).

Moreover (fatal to Piketty), trends in rich nations and poor ones are not unrelated. As we know well in America, a big reason for rising inequality is the disappearance of high-paying factory jobs that used to raise up the less affluent. images-2Many of those jobs have gone to poorer countries — raising up their lower classes. In other words, global inequality is shrinking because wealth is shifting from richer countries to poorer ones; though it’s flowing from the less wealthy people in the rich countries which thus become more internally unequal. So the U.S. lower and middle classes are being hurt more by poor foreigners than rich Americans.

Piketty calls rising inequality “terrifying.” It would be, if the poor were getting poorer; yet they’re not. While the rich are getting richer, so are the world’s poor, albeit not as fast, but with hundreds of millions rising out of poverty in recent decades. Even in advanced countries, the poor are not falling, what with all the social safety nets. (Entitlements to Social Security, Medicare, and other government benefits are a form of wealth Piketty seems to ignore.) And poverty ain’t what it used to be: the living standard of Americans now classed as “poor” would have been considered solidly middle class a few decades ago (and would be considered rich in much of the world today).

But inequality is really the wrong concern, because the problem of the poor is not that others are rich. The problem of the poor is instead their poverty, which cutting down the rich won’t solve. images-2The left’s big error is thinking the rich “extract” their wealth from the rest; that there’s a lump of wealth to be divided up. Not so; wealth is created by productive effort. Steve Jobs got rich because people gladly paid more for his products than they cost to make. That added value made everyone richer. Had Jobs and his products never existed, his wealth would not have been spread among everyone else; it would not have existed either!

True, if you simply grab money from the rich and hand it to the poor, they’d be less poor and unequal — for the moment. But it won’t solve why they’re poor in the first place. What’s needed is not redistribution of wealth, but of the ability to earn wealth. That would be good for everyone, and without taking anything away from anyone; but it’s a much tougher problem. (Piketty does acknowledge that expanding education must be part of the answer.)

UnknownYet the left’s inequality obsession is not truly a social conscience thing. It’s not so much compassion for the poor as envy and hatred for the rich. It’s wealth and the power it brings that they find so intolerable (because they lack it), and are so rabid to tear down. Thus their swoon for Piketty’s global wealth tax proposal (how innovative). How to use the tax revenues, to raise incomes at the bottom, is barely a concern; it’s mainly to make the rich less rich.** And of course Piketty and his fans ignore how their vendetta against the rich, if enacted, would gum up the economic growth machine. Now that would really be terrifying — for rich and poor alike.

But in a commentary on Piketty, in Salon, Jesse Myerson says the solution to inequality is really simple. Instead of letting the returns on capital assets flow to their owners, we can just have the returns flow “democratically” to, well, everybody! imagesAs Red Green would say, “It’s just that easy!” Why didn’t Piketty think of that?

If you don’t find Myerson enlightening, you might try more of Robinson: here, and here.

* Visiting SF’s famed City Lights bookstore last week, the guy ahead of me was buying their last copy.

**This was demonstrated by the string of hostile comments to a version of this review on Amazon. It was all “the rich this” and “the rich that” and why they should be made less rich, with nary a word about making anyone less poor. Will there be similar comments here?

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Bill McKibben, Climate Change, and Who’s the Real Enemy?

June 1, 2013

images-3Bill McKibben (leading climate change activist) now decrees that a cause needs an enemy to mobilize against. Apparently climate Unknownchange deniers are not a big enough enemy, so McKibben solemnly proposes that the oil and fossil fuel industries be declared the enemy, to moralistically crusade against. He says searching and drilling for oil is wrong and should stop.

Unknown-1This might make more sense if that pied piper and his followers stopped using it. Stopped driving cars, riding buses or trains or planes; stopped heating or air-conditioning their homes; or using any electricity, which is mostly generated with fossil fuels like oil or coal (so even electric cars still actually use those fuels). McKibben talks as though oil drilling is solely for (horrors!) profit; as if our using oil were irrelevant; as if we’d quit if the evil oil companies just bowed in contrition and stopped foisting it on us.

Unknown-2If only we could wave a magic wand and convert to all-renewable fuel use, with economic efficiency. Of course that’s the rub. We could displace all fossil fuels tomorrow — but at horrendous cost.

Pish tosh, McKibbenites might say, planetary health trumps money concerns. However, money buys food and other conveniences of life, and in a world where too many people still endure poverty and hunger, they’re the ones who’d suffer the most. McKibben and friends may shed Unknown-3crocodile tears about the plight of the world’s poor (“victims of capitalism” they imagine), but when it comes to their climate obsession, the world’s poor are thrown under the bus.

In fact, McKibben has actually said economic growth is a bad thing; and even technological progress we’ve had enough of, it should all be stopped. A breathtaking idea when in the past few decades economic growth, accelerated by technological advancement (and our use of energy), has lifted billions from poverty.

imagesPish tosh comes the retort; the problem is too many rich. Just redistribute their wealth to the poor; problem solved. But we live in the real world, and if this “solution” were actually implemented (not bloody likely), then afterwards why bother making efforts and investments to produce wealth? We’d have equality all right – equal poverty. At least it would remove that splinter (rich people to envy) from the left eye.

But back to the original point of declaring war on oil companies. We have enough demonization of “enemies” in our political discourse. Should we make “enemies” of those who produce commodities we all use and need, in fact a vital underpinning for our whole living standard? As if we could or should give up modernity itself. Some like McKibben romanticize an agrarian past; but that pesky point of poverty again poops on their party. Before modernity, the vast majority lived in wretched squalor. We’re not going back there.

images-1The  fixation on curbing atmospheric carbon to combat global warming goes hand in hand with the McKibbenites’ bizarre vendetta against, once more, economic growth and the whole industrial economy. Despairing of actually slaying that dragon, they hope at least to put it on a starvation diet (for some human beings, alas, that would be literal), by cutting its energy supply. This (a) won’t happen and (b) would be bad for human progress if it did, but also (c) won’t solve the climate problem. If tomorrow we slashed carbon emissions to zero, scientists’ climate models show temperatures still rising, and rising only slightly less than if we do nothing. Yes, we should nevertheless try to limit carbon as much as possible, but to combat climate change a more rational strategy would shift the focus to preparedness, mitigation and adaptation, and exploration of geo-engineering (like adding particulates to the upper atmosphere) to recool the planet. All this will cost money, so anything impeding economic growth (like capping emissions regardless of the economics) would be self-defeating.

These realities McKibbenites don’t want to hear, because they detract from their anti-industrial, anti-technology, anti-growth, anti-progress, and ultimately anti-human crusade.

images-2Finally, climate change is not our biggest challenge. People’s future lives will be impacted far more by those age-old but prosaic nemeses of poverty, disease, and ignorance. Our chief weapons against them are economic and technological progress – fueled by energy use. This is humanity’s main battle. Which side is McKibben on?

POSTSCRIPT: Just after posting this I got the latest Economist, focusing on world poverty reduction. Great strides are chronicled. “Most of the credit,” The Economist says, “must go to capitalism and free trade, for they enable economies to grow – and it was growth, principally, that has eased destitution.”