6. Addicional. On Piketty copia

Texto completo

(1)

On Piketty and his model

(2)

PIKETTY’S WORK

Study of the historical evolution of the distribution of income

and wealth from the 18

th

century in over 20 countries.

Research spanning 15 years, with a team of over 30

investigators.

The book is divided into four parts: Income and Capital; The

Dynamics of the Capital/Income Ratio; The Structure of

Inequality; and Regulating Capital in the 21

st

Century.

All the graphs in the work can be found on the following site:

http://piketty.pse.ens.fr/capital21c

(3)

BASIC PILLARS

1. The importance of a patrimonial society in Europe

and Japan. The capital/income ratios return to high

levels in countries with weak growth.

2. The concentration of wealth: based on (r) as the

rate of return on capital; (g) the growth rate, the

difference between (r) and (g) is increasing in the 21

st

century, and returning to 19

th

-century levels.

3. Inequality in America, stimulated by huge wage

(4)

The notion of capital

1. Link of capital K to return B, which goes to

the capitalists.

2. Capital stock includes all forms of assets:

dwellings, lands, machinery, financial capital,

people (in times of slavery).

3. The income from capital includes,

dividends, rent, interests.

(5)

BASIC RELATIONSHIPS

α=

SHARE OF CAPITAL INCOME IN NATIONAL INCOME

r=

RETURN ON CAPITAL

β=

(6)

Basic relationships I

1. Share of income in the national income,

expressed as: α

α= B/Y

(7)

Basic relationships II

2. Rate of return r, or profit on capital:

(8)

Basic relationships III

3. Product capital or income capital ratio,

which he calls β:

β= K/Y

(9)

First fundamental law of capitalism

THE SHARE OF INCOME DEPENDS ON THE

PRODUCT β BY r:

(10)

Second fundamental law of capitalism

THE RELATIONSHIP K/Y IS EQUAL TO THE

SAVINGS RATE DIVIDED BY THE GROWTH

RATE:

β= s/g

(11)

Explanation

A country that saves a lot and grows slowly

accumulates an enormous stock of capital

relative to its income.

If K/Y increases, it means that the owners control

(12)

1

IMPORTANCE OF THE PATRIMONIAL SOCIETY.

RETURN ON CAPITAL GREATER THAN ECONOMIC GROWTH…

The return on capital (r), in percentage terms, is higher

than the percentage of economic growth (g).

This

has

economic

consequences

of

social

transcendence: the gap between rich and poor has

widened.

Capitalists obtain an increasingly large part of the

wealth to be distributed and bequeath it to their

successors: the latter are born rich, and must make the

capital continue growing above the returns for other

individuals.

(13)

r

> g

(14)

RETURN (r) AND ECONOMIC

GROWTH (g), 1700-2100

(15)

…WHICH CAUSES SOCIAL

CONTRADICTIONS

The increase in inequality produced by the

imbalance between (r) and (g) translates into the

core problem of capitalism: instability is

generated.

The mass of poor workers may rebel against the

rich minority, by democratic or revolutionary

means, which could put an end to the system.

(16)

THE IMPORTANCE OF THE

PATRIMONIAL SOCIETY

PATRIMONY: all that is owned or can be sold on the market (without

debts)= k.

Actually, in Europe and Japan a rise was recorded in the ratio B= k/Y, over the

last few decades: 200-300% in 1950-1960; 500-600% in 2000-2010.

On average patrimony represented 2 or 3 years of income in around

1950-1960; and 5-6 years in 2000-2010.

If, for example, we suppose that B= 600% and Y= € 30,000 per capita, then k=

€ 180,000per capita.

THIS LEVEL APPROACHES B=600-700% OF THE SOCIETIES OF THE 18

th

AND

19

th

CENTURIES.

(17)

THE FALL OF CAPITAL

The fall of capital throughout the 20

th

century was due to

the Great Depression and the world wars. From the 1950s

on, and above all from the 1990s, the ratio between capital

and the GNP grows again in the eight richest countries.

Conclusion 1: capitalists obtain a return (r) that is greater

than the growth rate of the economy.

This makes their wealth larger and so they transfer it to

their successors in inheritances.

The natural tendency is for the ration between capital and

growth to increase. The only exception occurred in the first

half of the 20

th

century.

(18)

INCOME INEQUALITY IN THE UNITED

STATES, 1910-2010…

(19)
(20)

DIRECT TAXATION EXPLAINS

SOCIAL DIFFERENCES…

(21)
(22)

2

THE CONCENTRATION OF WEALTH

The concentration of capital was extremely high in the 18

th

and 19

th

centuries, up until

World War One :

Around 90% of total capital total controlled by the richest 10%;

Around 60% of total capital total controlled by the richest 1%.

CLASSIC PATRIMONIAL SOCIETY: a minority lives from its wealth and the rest of the

population works.

Today, the concentration of capital is more intense, but less extreme than a century

ago:

Around 60-70% of total capital total controlled by the richest 10%;

Around 20-30% of total capital total controlled by the richest 1%.

Around 40% control 20-30% of total capital.

RISE OF A PATRIMONIAL MIDDLE CLASS.

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3

INEQUALITY IN AMERICA

There is not the same structure as in Europe. A more egalitarian

model in certain aspects; and inegalitarian in others.

The capital accumulated in the past counts for quite a lot less

than in Europe. Constant demographic growth reduces the level

of inherited wealth and the concentration of. In the 19

th

century, part of the society were clearly slavers.

Northern states: more egalitarian in Europe. Southern states:

more inegalitarian.

The distribution of income is more unequal than in Europe in

the 20

th

century. Currently, it is more unequal than in the Belle

(24)

THE COMPOSITION OF CAPITAL,

EUROPE-AMERICA

(25)

PIKETTY’S GENERAL CONCLUSIONS

(1)

1. The history of the distribution of wealth is political, chaotic and unpredictable.

2. EQUILIBRIUM STATE. Whilst, for Karl Marx, when growth is zero (g=0), the

contribution of capital increases (B=s/g) and the return rate is zero (r=0), we are

faced with the possibility of wars and revolutions, Piketty’s vision is “less

apocalyptic” (sic). Weak growth leads to an equilibrium state in B.

3. This equilibrium state may however lead to an extreme concentration of capital,

due to the fact that the result of r-g will be very high.

4. This has no relation whatsoever to “imperfections of the market”. On the

contrary, for the capital market the situation is perfect, because the r-g result

increases.

5. Ideal solution: progressive tax on capital on a global level, on the basis of

automatic exchange of banking information.

(26)

PIKETTY’S GENERAL CONCLUSIONS (2)

6. The acceleration of the distancing process of the 1% from the whole of

society over recent decades is confirmed.

7. Natural evolution of the system towards inequality with no regulation

mechanism.

8. If we do not combat this inequality, we may reach a situation of

self-destruction of the system, which includes, in turn, the self-destruction of

democracy.

COMMENTS:

a) The accumulation of wealth by a minority is due to: 1. Breakaway change with the arrival of ICT; 2. Creation of global communication, without frontiers; 3. Need for constant innovations with ICT. This has promoted a technological leap of the first order, which has enriched many in a short time and brought about cultural, economic and social changes in millions of people. All progress sustained by technological advances grow significantly and at the same time face new competitors. b) Conclusion 8 refers to Karl Marx’s theory, in his prediction that inequality and class struggle would bring about the collapse

of capitalism, an unbridled capitalism that spreads inequality which destroys the system itself .

c) Conclusion 5 does not manage to explain how to bring about this huge fiscal correction. We can infer that the non-assumption of the tax by THE WHOLE WORLD would make for capital movements stimulated by the countries that wish to recruit them, with the promise of never imposing the tax.

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