Worldview: Thomas Piketty -"Capital in the 21st Century"
“You shall not move your neighbor’s landmark, which the men of old have set, in the inheritance that you will hold in the land that the Lord your God is giving you to possess.”
Deuteronomy 19:14
The Center for Garden State Families would like to continue our series on worldview. This article delves into the dangerous rise of neo-Marxist economics. Thomas Piketty is a French economist who wrote the book “Capital in the 21st Century,” published by Harvard. Mr. Piketty is a Professor of Economics at the School for Advanced Studies in the Social Sciences (EHESS), Associate Chair at the Paris School of Economics, and Centennial Professor of Economics in the International Inequalities Institute at the London School of Economics. John Maynard Keynes and Karl Marx have influenced his work. His mentor was Anthony Atkinson, who Mr. Piketty called “the godfather of historical studies of income and wealth.” This dynamic duo of all things inequality put together a database on top incomes.
Mr. Piketty’s book “Capital in the 21st Century” is a modern-day roadmap for the aspiring Marxists amongst us who scream from the rooftops about rising inequality as the result of rampant capitalism run amok.
This book influences economics, government, and universities in America and is the new coffee table book of the left. What is even more impressive is how Mr. Piketty focuses on three nations’ rising income inequality: the United States, the United Kingdom, and Canada. Mr. Piketty’s 685-page book is simply a rehashing of Karl Marx’s book called “Capital.” Mr. Piketty advocates an 80% tax on those earning over $500,000 per year and an additional wealth tax. What is even more disturbing is how Mr. Piketty has in his mind a capitalistic apocalypse whereby a contingent of elites will purchase everything and everybody, including the governments around the world.
Therefore, he is advocating a complete overthrow of capitalism. In the National Review, James Pethokoukis said Mr. Piketty’s “economic agenda is successfully pushed by Washington Democrats and by the mainstream media.” Also, he writes, “The soft Marxism in Capital in the 21st Century, if unchallenged, will spread among the clerisy and reshape the political-economic landscape on which all future policy battles will be waged. Who will make the intellectual case for economic freedom today.”
In addition, the Wall Street Journal’s Daniel Shuchman calls Mr. Piketty’s book “less a work of economic analysis than a bizarre ideological creed.” Further, Mr. Shuchman writes that “Mr. Piketty assumes that the economy is a static and zero-sum; if the income of one population group increases, another must necessarily have been impoverished. He views equality of outcome as the ultimate end and solely for its own sake.”
Now we turn to a quote from Thomas Piketty’s book “Capital in the 21st Century,” where he writes the following: “To be sure, there exists in principle a quite simple economic mechanism that should restore equilibrium to the process: the mechanism of supply and demand.
If the supply of any good is insufficient and its price is too high, then demand for that good should decrease, which should lead to a decline in its price. In other words, if real estate and oil prices rise, then people should move to the country or take to traveling about by bicycle (or both). Never mind that such adjustments might be unpleasant or complicated; they might also take decades, during which landlords and oil well owners might well accumulate claims on the rest of the population so extensive that they could easily come to own everything that can be owned, including rural real estate and bicycles, once and for all.
”The lack of economic rigor, especially as it pertains to all the rural real estate and bicycles being owned once and for all, is quite stunning. In the stroke of a pen, Mr. Piketty moves from the free market principle of supply and demand, which then morphs into no one owning a bicycle over a period of time. What Mr. Piketty seems to ignore is that this ownership of everything, including an unlimited wealth concentration, is impossible in a free market economy.
Mr. Piketty, in his book, seems to ignore the role of entrepreneurialism, the laws of competitive advantage, and the division of labor. Also discounted is the consumer’s part, leading to the invisible hand of commerce and the principle of supply and demand. The market will make the necessary adjustments, and by doing so, the ownership of bicycles and land will be preserved for the population. In Mr. Piketty’s mind, the only solution to the problem he sees with capitalism run amok is destroying wealth through onerous taxation on a global scale. Also, Mr. Piketty is opposed to inheritances and retirement funds because those assets are not shared with the collective.
In Mr. Piketty, we see an idyllic egalitarian seeking to be the philosopher king taking from the rich and giving to the poor in a global redistribution of wealth scheme. Perhaps this is why his book is the roadmap for Marxist operatives. The 19th Century British economist David Ricardo coined a phrase called Rent-Seeking. In public-choice theory and economics, rent-seeking means seeking to increase one’s share of existing wealth without creating new wealth. Rent-seeking results in reduced economic efficiency through misallocation of resources, reduced wealth-creation, lost government revenue, heightened income inequality, and potential national decline. Rent-seeking is an attempt to obtain economic rent (i.e., the portion of income paid to a factor of production more than what is needed to keep it employed in its current use) by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth.
Rent-seeking implies the extraction of uncompensated value from others without making any contribution to productivity. Rent-seeking is distinguished in theory from profit-seeking, in which entities seek to extract value by engaging in mutually beneficial transactions. Profit-seeking, in this sense, is the creation of wealth. At the same time, rent-seeking is “profiteering” by using social institutions, such as the power of the state, to redistribute wealth among different groups without creating new wealth.
Rent-seeking is nothing new and has existed since time began. It transfers wealth from one person to another and uses big government and all the associated corruption to achieve its goal. The very idea of rent-seeking is handing over the reins of wealth redistribution to a few, which leads to the very worsening of income inequality. The solution is the problem that leads to a downward spiral of economic devastation.
We would now like to turn our attention toward The Heidelberg Catechism, adopted in 1563 by a synod in Heidelberg. We find a question as it pertains to the violation of the eighth commandment from the Bible. In question 110 of the Heidelberg Catechism, it asks what does God forbid in the eighth commandment. The answer is as follows: “Not only such theft and robbery as are punished by the magistrate; but God views as theft all wicked tricks and devices, whereby we seek to draw to ourselves our neighbor’s goods, whether by force or with show of right, such as unjust weights, measures, wares, coins, usury, or any means forbidden of God; so moreover all covetousness, and all useless waste of His gifts.”
Redistribution of wealth is the epitome of covetousness by those who promote rent-seeking, all under the guise of income inequality. Income inequality is simply another wicked trick and device of Communism, which has been tried 42 times in the last 100 years. It has failed in unimaginable ways, leading to the loss of lives resulting from disease, starvation, and violence. The only remedy for income inequality is for the free markets to operate in their purest form, and by doing so, all of society is elevated. The ownership of private property, which facilitates wealth creation free from government intervention, leads to productivity and, more importantly, job creation. Although capitalism has its flaws, we must remember that those flaws come from man’s fallen sin nature. When man calibrates his mind to God’s Word and submits himself to the authority of God, our economic system flourishes, letting us learn the value of stewardship and the great opportunity God gives us to demonstrate generosity and giving. It is the changed heart of man that gradually and over time diminishes income inequality, not a rent-seeking state filled with corruption and self-serving covetousness.