After E=mc2 What's Next?

Sorry, we meant  to say r > g which means something almost as big as Einstein’s nuclear equation. The French economist, Thomas Piketty, has startled the world of economists and political leaders with an equation of seismic consequence. It expresses a new dynamic to inequality born of data showing that the return to capital (shareholders) is greater than economic growth such as standards of living and jobs. He says it is possible that during the twenty-first century the fault lines may grow from bad to worse.  

     Some sample facts drawn from current data in the U. S. include:

• Economist Paul Krugman reports a single Hedge Fund manager makes more than all kindergarten teachers  in the U. S. combined.
• The top 1 percent--own 75 percent of the Capital  and 50 percent of all income.
• The richest top 25 hedge fund managers have received more income than all the chief executives of the Standard and Poor’s 500 companies combined. 

    To catch you up In case you’ve been doing something else with your life the past month, you may have missed Piketty interviews on virtually all cable news channels and in hundreds of print media reports.  Over the past 15 years, he  and his colleagues have put together the most comprehensive data set on inequality ever assembled ;  a study of income and wealth in six countries over a two hundred year period —aided by the age of computer calculating power. 

    Using real estate tax and personal income tax records from England, Germany, France, Spain, Italy and the U. S. the data shows that over the last two hundred years the average rate of return on capital has been 4-5 percent annually while the growth of productivity, jobs and standards of living, averages only 1.0 to 1.5 percent. 

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     The Piketty study, Capital in the Twenty-first Century, refutes the long-standing belief that while capitalism follows an uneven, often un-fair growth pattern, it eventually raises all ships.

He gives us a picture of this rapids growth among the very rich in this chart.

The unfolding picture is potentially catastrophic and the illustrative figures go on and on but the question is what next?  Answers include a sharp increase in taxes on the super-rich, massive public investment and local community control and ownership of the economy.  The one exception in the 200 years of data developed by Piketty is the period of WWI and II when there was massive investment by governments in troops and weapons manufacture. That is what ended the depression of 1931-41.

So, the consensus is growing that dramatic new policy initiatives are now required to meet the rise of Oligarchy in the U. S.   It will be one of the tasks of faith communities to remind their people that economic policy-making is a moral task, as Jesus and the prophets made clear when they pointed to the power of wealth or the power of Rome in ancient times.  More on this next time.