This is Part IV of “Piketty’s Potlatch”. See the Introduction
All this talk of β vs. r and even ɑ vs. the return on labor could well be moot. If The People own a big chunk of the means of production, we could have an egalitarian society even with a high ɑ. This would be a society with slack, where we get to enjoy modern technology and not have to work so hard. I find it appealing.
So how do we have a well-capitalized society without domination by the One Percent? We can start with The People’s agent: the government. How about paying off that 15 trillion dollars of outstanding national debt?1 I have been shouting for years that deficit spending is a subsidy for the super rich. Piketty to his credit acknowledges this. In Chapter Three he points out that in the bad old days of parasitic aristocrats and groveling servants that interest on government bonds was a major income component for the non-productive upper caste.
And if pay down the debt vs. launching stimulus projects or entitlement programs when we soak the rich, we leave the private stockpile of capital intact. Even if 100% of the extra taxes come out of markets vs. mansions, all the money that goes into canceling government bonds goes back into the financial markets. Furthermore, we don’t have to go back to the brutally high tax rates of the 1950s – capital in the hands of wealthy angel investors is still critically important – we need simply treat long term capital gains as ordinary income to more than double the taxes paid by the one percent of the One Percent.
I’d like to see more people power in the form of power to people as individuals. We could put more of the capital stock in the hands of ordinary people by doing the Pinochet thing – replace Pay-As-You-Go Social Security with a forced savings plan. But there are problems with the arrangement. To be safe, the government will end up regulating where the forced savings will go. If everyone puts their savings into index funds or similar conservative investments, this locks up capital in the hands of today’s blue chip corporations – hardly a progressive result. So I prefer something less drastic: replace the current maze of tax deferred retirement savings options with a generous caveman-compatible IRA plan. If Joe Six Pack and his friends own the means of production, then a high β, or even a high ɑ society is no problem.
Now, to get back to reading Capital in the 21st Century to see if Thomas Piketty comes to similar conclusions, or does he indeed call for a potlatch…
1 While the total national debt is around $17.6 trillion, the Federal Reserve owns $2.3 trillion of it, and since the federal government owns the Federal Reserve, the true outstanding debt is more like $15.3 trillion. Some of that $15.3 trillion is internal debt, but I’ll count that as we will need to pay the Social Security trust fund as the Baby Boomers retire, whereas paying off the Fed might cause unpleasant deflation.