Friday, May 16, 2014

Piketty's Critics Within The Democratic Policy Elite

Kathleen Geier is pleased that Piketty's book has raised the level of debate about rising inequality.  She dismisses many of the conservative criticisms of the book which reject the idea that rising inequality is problem.  She turns her attention to critiques made by Larry Summers, and Jason Furman who are part of the neo-liberal elite that influence economic policies in Democratic Administrations.  They agree that inequality is a problem but, according to Geier, they do not support the kind of policies advocated by Piketty.  She devotes most of her criticism to Jason Furman who is an economic adviser to President Obama.

Piketty's thesis is based upon the gap between the return on capital and the rate of growth.  The level of inequality is determined by the size of the gap.  Furman and Summers both question whether the return on capital can remain high as capital accumulates.  Eventually, the return on capital might fall because there is more capital available than profitable investments.  Piketty's thesis would also be undermined if the rate of growth would increase beyond the rate the currently prevails.  Summers and Furman both support democratic policies that would stimulate economic growth. Furman, argues the the Obama Administration's proposed trade treaty's will stimulate economic growth. Moreover, they both support democratic policies that would expand educational opportunities for the poor, and they democratic proposals to raise the minimum wage .  These are all good things but they fall short of what is needed to reduce inequality according to Geier.  Summers, on the other hand does support a more progressive tax policy, and he supports efforts to eliminate tax havens that are used by the wealthy to avoid taxation.  These kinds of reforms may be more easily realized than a tax on wealth according to Summers.

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