Henderson on Piketty, Part 5
By David Henderson
For Piketty and, presumably, Solow to calmly countenance the possibility of stagnating real wages just to keep capital’s share from increasing, they would have to see some large problems with increasing inequality. Solow does not point out any such problems, which makes sense because his review is short. But Piketty, in over 600 pages, does not make a clear statement about why increasing inequality is a problem in a society where almost everyone’s lot in life is getting better and better.
So let’s fill in the gaps. How big a problem is wealth inequality? In my opinion, if people came by their money without cheating others and without getting special government favors, then there is no problem with those people becoming very wealthy. What really matters is inequality in consumption and, here, the differences between poorer Americans and wealthier Americans are probably as low as they have ever been. Most lower-income people have color televisions, cell phones, refrigerators, comfortable clothing, and three square meals a day. That was not true 60 years ago. Or take a longer view: In the mid-19th century, the poorest people in American were probably slaves. That was, of course, awful. The largely rich people who “owned” them could treat them very badly if they wanted to. And even if they did not want to, let me repeat that these poor people were slaves.
Or consider finer differences between the middle class and the wealthiest. You would have to look carefully–at least, I would–to see the difference in the quality of clothing that billionaires and those with a net worth of “only” $100,000 wear. Both can travel by jet, but the wealthier person can get there more quickly and easily on his private jet. The rest of us have to share space. The private jet is certainly nicer, but is that really a major social problem?
This is from “The Unintended Case for More Capitalism,” my review of Capital in the Twenty-First Century by Thomas Piketty.