Worried about income and/or wealth inequality? Yeah, me neither. But some of your left-leaning neighbors are practically apoplectic about the world as interpreted by French economist Thomas Piketty (“Capital in the 21st Century”): Briefly, that in Western capitalistic economies, a comparative handful of folks are doing fabulously well while many millions of their countrymen endure lives of meager means.
About that. When Piketty’s peers go spelunking around the depths of his research, they frequently find the data don’t support his conclusions. For instance, The Tax Foundation, a right-of-center Washington think-tank, disputes Piketty’s assertion that inherited wealth is a significant contributor to the imbalance.
In his book ... Thomas Piketty portrays the rich as heirs with privileged access to high rates of return, stating “it is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor.” He points to the Forbes wealth rankings for support.
In fact, the Forbes 400 — an annual ranking of the richest Americans — indicates wealth is much more fleeting than Piketty suggests and is characterized more by entrepreneurship than by inheritance.
In his review for Baron’s, George Mason economics professor Donald J. Bordeaux notes errors both abundant and egregious, among them Piketty’s insistence on describing wealth and income as being “claimed” or “distributed” but “never produced or earned”; his failure to account for microeconomic behavior (daily financial decisions made by millions of individuals) as a shaper of the overall economy; and his absolute refusal to acknowledge the supply side effect: that is, what people can buy with their money.
[T]o the extent that inequalities are at all relevant, the only ones that really matter are inequalities in access to real goods and services for consumption. Bill Gates’ living quarters are larger and more elegant than mine and, I dare say, yours. But even the poorest people in market economies have seen their ability to consume skyrocket over time.
For all its flaws, “Capital etc.” became a surprise best-seller in America this spring, probably in no small measure because it confirms the just-now fashionable us-vs.-the-1-percent world view pushed by the Occupy movement, obsessed over by lefty economists such as New York Times columnist Paul Krugman, and flogged to excess by President Obama. It’s also hard to shake the notion that purchasers of “Capital etc.” and Hillary Clinton’s “Hard Choices” form a perfectly concentric Venn diagram.
Piketty’s effort, which carries on for nearly 700 pages and has surpassed “A Brief History of Time” as the most unread best-seller of all time, received a pithy retort from Charles Koch, the billionaire industrialist/philanthropist/libertarian in the opinion portion of USAToday.com Tuesday. The Right Stuff tips its cap to Power Line’s John Hinderaker for alerting it to the piece.
Lamenting the weak economic recovery and the lamentable parade of false starts that have contributed to stubbornly high underemployment, Koch calls for “a different approach, [one] focused less on politics and more on basic principles.” His broad, multi-point plan includes an end to “rampant cronyism”; curbing “punitive permitting” that delays some projects for years and kills others outright; eliminating “the artificial cost of hiring” brought about by government mandates (such as Obamacare); teaching not just job skills, but the ennobling virtue of work; and increasing the incentive to work by limiting, severely, programs that foster “dependency and hopelessness” among the able-bodied.
These are not simply philosophical disagreements. Some problems Koch cites come at an enormous expense. According to George Mason University’s Mercatus Center, for instance, energy spent by businesses on extracting government favors, “cost[s] us more than $11,000 per person in lost GDP every year, a $3.6 trillion economic hit.”
Moreover, “destructive regulations” dictating business investment and how employees work represent another $1.86 trillion in lost GDP, according to calculations by the right-leaning Competitive Enterprise Institute.
American liberals can caterwaul all they like about how well the 1 percent is doing, but the vast majority of their countrymen have far higher thresholds for envy. Give them a good shot at a job that pays well, rewards effort and skill, and offers the chance for advancement and they’re unlikely to lose much sleep over whether the boss has an elevator in his six-car garage. Koch’s recipe is far more likely than the redistributionists’ to create the sort of economic growth that produces those sorts of opportunities.
Writes Koch, whose expertise in creating value for customers and employees is well-documented, “When it comes to creating opportunities for all, we can do much better. It’s time to let people seek opportunities that best suit their talents, for businesses to forsake cronyism and for government to get out of the way.”