Monday, June 2, 2014

Why Is Capital So Much Stronger Than Labor?

They have more money. gwc

Why Is Capital So Much Stronger Than Labor?:

by Jared Bernstein

Thomas Piketty’s analysis of inequality through the ages kicked off an important debate about the causes of and solutions to the problem of the increased concentration of wealth and income. Central to Piketty’s economic mechanics is his assumption that, barring some cataclysm, wealth will increasingly accumulate to those at the top of scale as long as its rate of return (the rate at which wealth holdings appreciate) exceeds the economy’s growth rate. From this diagnosis, his prescription is redistribution through the tax code. This certainly falls out of his model: once you accept the inevitability of narrowly held wealth accumulation, the only solution is to tax and redistribute.

Note, however, that this is not a onetime solution; it implies consistently ratcheting up the redistributive function to offset relentless accumulation. Moreover, in most political systems I can envision, there’s a fatal flaw here: the increasingly wealthy and powerful won’t stand for it, a criticism Piketty himself of course recognizes (he’s not naïve).

So how should we think about this problem? ...

Bernstein was previously the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. This post was originally published on his blog, On the Economy.'via Blog this'

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