Category Archives: Society

Capital in the Twenty-First Century

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I was thrilled when I read on the UMass homepage that Thomas Piketty would be the Gamble Lecturer this afternoon. If you haven’t been living under a rock for the past few months, you’ve surely heard about his new book, Capital in the Twenty-First Century, published earlier this year in the United States to great acclaim and perhaps even greater controversy.  The lecture was scheduled to start at 5, so I left my office around 4:30 and walked over to the Student Union Ballroom, where the seats were filling fast.  There was standing room only by the time Provost Katherine Newman and Economics Department Chair Michael Ash introduced the program and the speaker.

Thomas Piketty (his name is pronounced Tome-AH PEEK-a-tee) is the author of ten books and numerous journal articles; a former professor at MIT (1993-1995), he is currently Professor of Economics at the École des hautes études en sciences sociales (EHESS) and professor at the Paris School of Economics.   His scholarly interests are focused on income inequality and wealth distribution; with collaborators Facundo Alvaredo, Anthony B. Atkinson, and Emmanuel Saez, he collects and publishes data for the World Top Incomes Database, which is currently available online to both academic researchers and the general public.

I have not read the book, nor do I have any kind of background in economics, so I don’t think I want to try reproducing his arguments in a thousand-word blog post (not to mention the fact that you can Google “Thomas Piketty Capital in the 21st Century” and get more than 200,000 hits).  The following summary is what I took away from the lecture — kind of like Josh and Chuck’s “fact of the podcast”  (meaning, “some interesting stuff you did not know about before but now you do”).

Piketty’s work is both historical and global in scope, which means that he did a lot of grunt work, poring over decades of tax returns from European countries, the USA, Japan, and other developed economies.  (He mentioned that during the period 1900-1920, many countries began collecting income taxes for the first time.)  Depicted graphically, the most interesting data form a U-shape.Saez-Piketty
I know I shouldn’t include the graph, but it has been reproduced many times, and you are hereby notified that it is protected intellectual property.  By the way, I obtained the image from the Washington Post, where Wonkblog presented it as the “graph of the year.”

So what does this mean?   The graph depicts the share of the national income which goes to the top 10% of the population, over time.  In the 1950s, only a third (30%) went to the top 10%, but in 2012, it was up to 50%.  Piketty asked, “Will this graph stabilize?  What are the forces behind this trend?”  The standard explanation is that there are patterns of supply and demand for skilled labor, and that there is now a premium paid for skilled workers.  However, this explanation does not address the increase at the very top, for the 1% (vs the 10%).

Piketty decided to focus on wealth, rather than income from labor (salaries).  This led him to examine the ratio of capital to income and calculate what those values were over time.  Prior to 1914, the watershed year when the western world convulsed into war, the ratio was quite high, around 600-700%.  The Great Depression and the two world wars brought this number down drastically, but then beginning in the 1950s, the ratio began rising steadily (which is not necessarily a bad thing).  When Piketty and his colleagues looked at private capital in developed countries, they discovered that in the top eight developed economies, aggregate private wealth has risen from about two to three times national income in 1970 to a range of four to seven times today.  Again, we don’t know when these trends will stabilize.

Piketty made three points about these data on wealth.  First, they indicate the return of patrimonial capitalism, which means a situation wherein a person’s current high net worth is basically inherited.  Second, with high r – g, that is, high net-of-tax rate of return minus economic growth rate, wealth inequality is likely to increase.  Third, inequality in America may not be true labor inequality, based on “meritocratic extremism,” meaning that really smart people are making a lot of money, but rather on wealth inequality, meaning that “the already rich are getting richer.”  There is still good news though.  At least in America, wealth concentration is high but it’s less extreme than it was in the past.  Consider this:  the middle 40% of the population now own 20-30% of the nation’s wealth.  The breakdown is roughly this:

% of Population % of Wealth
Top 10
 60-70
Middle 40
 20-30
Bottom 50
 < 5

But what forces determine the long-term trends in wealth concentration? Theoretically, r, which is is the rate-of-return on your investments (for example, you’d be fortunate to see your 401K grow as much as 10% a year), should keep pace with g, which is economic growth (the number you see on the news as “increase in GDP”). But this has not been happening, because average wealth is increasing much faster than average world income.  The actual numbers are something like a 6-7% increase for r and perhaps 2% for g.

Piketty probably counts himself among the social scientists who have as their motto, “Science serving society,” so he would naturally ask, “Is rising inequality a social problem? Should we do something about it? What should we do?” He pointed out that at one point, the US had an extremely progressive tax structure, with the highest rate at 90% (the thinking was that in America, we did not want to return to a plutocratic society such as was the norm in the Old World for generations). Perhaps the harshest criticism of Piketty’s work (aside from questions about the accuracy of his data and his data collection methodology) has been for its prescriptivist implications. However, I did not think Piketty was dogmatic in the slightest. Besides progressive taxation (or a steep inheritance tax, or both), he mentioned other possible solutions to rising wealth inequality. Industrialized societies could see a return to very high inflation, or there could be massive damage to our infrastructure, or there could be explosive population growth. On the brighter side, our countries could re-examine tax policies, invest in infrastructure, and call for more transparency with respect to ownership of capital.

After the lecture, I went up to the group of students and faculty clustered around Piketty in order to take a snapshot, but all you can really see in my photo are the upraised arms of other star-struck groupies taking photos, so I won’t post it here.

James Lawson on Nonviolence

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Over thirty years ago when I was a graduate student at Vanderbilt University, just saying the name “Jim Lawson” would evoke admiration and awe among students and faculty at the Divinity School.  Thus I was thrilled when I learned that the man himself would speak tonight in the lecture series on Nonviolent Direct Action and Civil Resistance sponsored by the Psychology Department.  The 2013-2014 distinguished lecture series was hosted by the department’s Psychology of Peace and Violence Program, which was established at UMass ten years ago in order to train doctoral students and facilitate research in the area of group psychology, particularly as it relates to cooperation and conflict resolution.

Born in Pennsylvania in 1928 and now officially retired from the ministry, the Reverend James Lawson is currently a visiting faculty member at the California State University, Northridge.  He has had a long and distinguished career as a pastor and civil rights activist, working in the Deep South in the sixties and with other marginalized groups in southern California beginning in the seventies and continuing through the nineties.  While still in college, Lawson joined the Fellowship of Reconciliation, America’s oldest pacifist organization, and because he remained true to his principles, he was imprisoned briefly for refusing to be drafted to fight in the Korean War.  During the mid-fifties, he worked and studied in India.  Like Dr M L King himself, Lawson was inspired by India’s Mahatma Gandhi and the nonviolence he championed.

Before the lecture began in the Goodell Building at 7:30, long-time Pioneer Valley activists in the peace movement were recognized (and Chancellor Subbaswamy himself was in the audience).  Reverend Lawson’s talk was titled “Where do we go from here: Chaos or Community.”  I tried to take notes; below is my idiosyncratic distillation of the wisdom he imparted in his lecture.

First, things in the US will get worse before they get better, because the propaganda forces such as Fox News, Heritage Foundation, Tea Party, and the Koch Brothers have gathered strength.  We have become ignorant of history, but the past is never dead; it lives on in us.

Second, we are currently living under the influence of four forces of history: sexism, racism, violence, and plantation capitalism.  These are structures of systematic oppression, in which hierarchies are imposed and individual persons do not matter.  These forces cause a spiritual disease, and to cure the malaise, we need a concerted effort on the part of people of good will.  We need to stop categorizing people, or society will continue to be permeated with violence.

Third, in the late twentieth century, we were moving forward on a path toward eradicating these debilitating forces, but progress has slowed.  We need to emerge from this impasse.

So where do we go from here?

When we look at our own history, we notice that the Civil Rights Movement emerged from the political arena.  Although it’s somewhat counter-intuitive, the leaders of the movement had a more practical understanding of what they were doing (they didn’t necessarily use the term “civil rights”).  The leaders were concerned with jobs, with dignity, with “how black people were treated.”  The movement had many different dimensions; for example, school desegregation and sports integration were also part of it, in addition to Voting Rights.  The Freedom Movement that Reverend Lawson became a part of was a “nonviolent struggle,” often just to survive daily life.  The Montgomery Bus Boycott resonated because it was concrete: people who had worked long hours were physically exhausted and just wanted to sit down as they rode the bus home from work.  Perhaps they were just so tired that all they could do was sit quietly, and it became nonviolent resistance by default.

Gandhi himself, engaged in conversations with suffragists and pacifists and labor leaders, gradually developed the philosophy of resistance founded on the concept of ahimsa.  The Sanskrit word means literally “not to cause harm” and is an important principle in Hinduism and Buddhism.  Gandhi made the principle active rather than passive, by proposing that there is power in compassion.  He proposed the term satyagraha, which he described as the pursuit of truth not by inflicting violence on one’s opponent but rather by turning him from error by patience and compassion.  Reverend Lawson urged us to reclaim power; love and compassion can overcome hate and hardness, he said.

Our country appears to have gone to chaos, not community, which means that we need to think again about what we take for granted; we need to create methods and tactics to awaken people to the realization that we can be a better nation.  Twenty-first century activism has to relearn nonviolent practice; we need to be re-awakened to its possibilities.  We cannot allow the forces of spiritual wickedness to prevail; we must dismantle the structures of sexism, racism, violence, and plantation capitalism.  As a democratic society, we need to practice civic engagement; we need to organize locally and take risks in the public arena.

When we think of the titanic figures of the twentieth century, ironically, both Albert Einstein and Mahatma Gandhi often come to mind.  Einstein, of course, developed the theory of general relativity, one consequence of which was the atom bomb, while Gandhi promoted nonviolence as a means of transforming society (by the way, the two men corresponded).  Because we have the power to destroy ourselves, we need the principles of love and compassion to neutralize this destructive force.

Reverend Lawson concluded with a ringing call to continue the nonviolent struggle:  “Justice will still prevail.”