Piketty has produced a veiled attack against capitalism by attacking capitalists. How did Piketty do it?
Piketty believes that if the rate of return earned by capitalists exceeds the the rate of growth of an economy, we're in trouble. To quote Piketty, "the past devours the future."
Piketty writes his doomsday pronouncement as R > G.
Interestingly, we could examine the return to laborers relative to GDP. We could call the return to laborers L.
So, let's put Thomas Piketty's theory to the test.
Lest someone decry that I have cherry-picked the data, this is how far back the records go courtesy of your friendly neighborhood Bureau of Economic Analysis of the Department of Commerce.
Capitalists have been defined as farmers, proprietors, landlords and those receiving dividends. Mind you, capitalists were restricted to merely landlords and those receiving dividends, then the share of GDP to capitalists would be much smaller still.
Laborers are those receiving compensation as employees in the form of wages, salaries and supplements to wages and salaries.
First, someone should tell Piketty, that every year since 1929, the share of GDP going to laborers has exceeded the share going to capitalists.
Here is the year-over-year growth or decline in GDP, compensation to laborers and return to capitalists. Whenever the red line is above the blue line, the growth of compensation to laborers growing faster than the growth of the economy. Likewise, whenever the orange line is above the blue line, the return to capitalists is growing faster than the growth of the economy.
In 83 of 85 years, the sum of compensation to laborers consisted of 50% of GDP or greater.
For private sector labors, in 37 of 85 years since 1929, Lp > G. For capitalists, in 40 of 85 years since 1929, R > G.
Now let's have a look at capitalists if we break out "rentiers" and entrepreneurs. Rentiers are landlords and those getting paid dividends, or those living on income from investments. Entrepreneurs are those who own farms and businesses.
Again, as above, the red line is above the blue line, the growth of compensation to laborers growing faster than the growth of the economy. Whenever the the orange line is above the blue line, the return to capitalists is growing faster than the growth of the economy. the green line is about the blue line, the return to entrepreneurs is growing faster than the growth of the economy.
Likewise, whenever any of those lines fall below the blue line, the economy is growing faster than returns to the respective "classes."
After breaking out R into rentiers and entrepreneurs, both rentiers and entrepreneurs lose a year when returns to either exceeded growth in GDP. Said another way, only in 39 of 85 years did the rate of return to either rentiers or entrepreneurs exceed the growth rate of GDP.
From above, you can see that it is tough being entrepreneurs. As the economy goes, so goes it for laborers. Rentiers experience stretches of better growth and stretches of sub-par growth relative to GDP.
After breaking out capitalists into rentiers and entrepreneurs, the share of GDP going to laborers greatly exceeds the share going to rentiers and entrepreneurs.
To socialists and crypto-socialists alike, rentiers are hated worse entrepreneurs. Yet, as a "class," rentiers get the least share of GDP.
To socialists and crypto-socialists alike, rentiers are hated worse entrepreneurs. Yet, as a "class," rentiers get the least share of GDP.
The upshot of all the above is this. Piketty tells a false story from mythology.
THE TRUE PROBLEM
Ironically, Piketty argues to increase the problem, not fix it so the problem gets cured.So what is the true problem? IT'S ALWAYS CRONY POLITICS, CRONY GOVERNANCE AND CRONY REGULATORY CAPTURE and TRY CRONY POLITICS, CRONY GOVERNANCE AND CRONY REGULATORY CAPTURE BECAUSE THERE IS NO SUCH THING AS CRONY CAPITALISM.
Piketty wants to double down, creating even more crony politics, crony governance and crony regulatory capture. In short, Piketty wants to turn the world into the failure known as France!
Piketty wants to curtail capitalism, remove competition among capitalists in their fight to buy shares of profit from entrepreneurs. Piketty wants to make it easier for the biggest capitalists who would remain standing in Piketty's Dystopian future masquerading as Fairness-Rhetoric Utopia.
If Piketty were to get his way, the western world would move ever closer to a neo-fascist, neo-feudal system. Individualism and freedom would at long last get crushed by the power elite.
Academicians like Piketty are among the priesthood who conjure up mythology, mythology which justifies action against unorganized individuals by the power elite. So Piketty would become a winner in a neo-fascist, neo-feudal future.
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