Thomas Piketty On the Democratic Primary

In an article in The Guardian, Thomas Piketty says that Bernie Sanders represents a real hope for the adoption of the tax policies Piketty lays out in Capital in the Twenty-First Century. Piketty calls for higher and steeply progressive income taxes and a high estate tax, which he thinks will lead to a reduction in income and wealth inequality, and to a better democracy, one less favorable to the interests of the rich and more open to the needs of society as a whole. He calls for a return to the ideals of the Democratic Party, ideals forged in response to an earlier awful financial debacle, and says that even if Sanders doesn’t win the nomination, he has opened the door for someone else to bring these ideas to fruition.

Piketty reminds us of the history of the Democratic Party starting with Franklin Roosevelt. He points out that FDR did not want to follow in the path of European nations, but instead forged a uniquely US path forward, including heavy regulation of the financial sector, a reasonably strong safety net, and a highly progressive system of taxation, including both a high marginal tax rate on outlandish income and a steep and a heavy estate tax that broke up fortunes quickly. After the financial problems of the 1970s, the disastrous loss of the War in Viet Nam, and due in part to the desires of the very rich, the nation turned its back on those ideals, and Ronald Reagan and his band of wreckers led the nation backwards towards a “mythical capitalism said to have existed in the past.” The Democrats did not resist these changes, but made peace with them.

Piketty says that the important thing Sanders wants to do is to restore the taxation system to previous levels, and to return to the uniquely US version of social democracy.

Sanders makes clear he wants to restore progressive taxation and a higher minimum wage ($15 an hour). To this he adds free healthcare and higher education in a country where inequality in access to education has reached unprecedented heights, highlighting a gulf standing between the lives of most Americans, and the soothing meritocratic speeches pronounced by the winners of the system.

Savor that last part, the part about the “gulf standing between the lives of most Americans and the soothing meritocratic speeches pronounced by the winners of the system.” The Clintons stand on the far side of that gulf with their huge fortune, their enormous foundation, and the hedge fund set up for their son-in-law whose meritocratic standing is open to serious question.

The last few weeks have sharpened our understanding of the differences between Sanders supporters and supporters of Hillary Clinton. Clinton is part of the neoliberal consensus described in Piketty’s article, which has governed the elite hive mind for decades. Sanders represents a break with that ideology. He is in the tradition of Franklin D. Roosevelt, the New Deal President, who established the US welfare state that was torn down by the neoliberals. Piketty too represents a break with the neoliberal consensus.

It is instructive to see where this divide lies. Take, for example, Paul Krugman. He is 62 years old, compared with Piketty, who is 44. Krugman is certainly liberal, but he has made it clear that he favors the incremental approach of Hillary Clinton. Krugman was trained in the mathematical school of economics, and even today insists that the use of mathematical models based on past history should be the central method of the discipline. Piketty was trained in the US, and is really good with those math techniques. However, he doesn’t accept the standard approach to the area, which he claims is closer to an ideology than a science. Instead, he adopts the methods of the social sciences. His book is a triumph of dogged efforts to read and understand 200 years of wealth and income inequality in Europe and the US.

Over the past several weeks Krugman has praised Clinton’s stand on Obamacare and financial regulation, and has derided Sander’s policies on both issues. He claims that Sanders cannot implement his plans and that they are somehow flawed. His comment sections are full of shocked people. Some call names, but many have more substantive issues: Krugman supported single payer in the past, and called for stronger financial regulation. Now he claims neither is possible.

What Krugman means is that the Republicans will never allow any tax increases. It’s that simple. He asserts that the ideas of Piketty and Sanders are never going to be possible because taxes cannot be raised. He accepts as a fact that there is no practical way to undo wealth and income inequality, that these are the immutable facts of our new normal. That is the dividing line between the neoliberal and the progressive wings of the Democratic party. One side says we need higher taxes and a larger social commons, areas of life not dominated by the rich people sucking up as much profit as possible. The other says we have to settle for whatever the rich will give us.

Krugman and most of the Democratic establishment is on one side of that line. And it isn’t an age thing. There are plenty of young wonks on the move who work inside the neoliberal consensus. Piketty and Sanders are on the other. And this isn’t an age thing either. There are plenty of people in all age groups, from Millenials to white-haired Boomers, who agree with Sanders.

This is the fight in the Democratic Party. Either you believe that we can change our government and our economy to work for all the people and not just the few, or you believe that we are doomed to remain under the thumb those who rule us from the far side of the money gulf with their laughable claim that they are the meritocracy and not a plutocracy.

Notre Dame undergrad (math); JD, Indiana University at Bloomington; 1st Lieutenant, US Army.; private practice in corporate and securities law; Assistant AG in Tennessee for consumer protection and securities; Blue Sky Securities Commissioner, Tennessee; private practice, bankruptcy and corporate law.

I have had a lifelong interest in economics. For most of my career, that interest was practical, focused on the problems in front of me. Lately I have been more interested in economics as a theory, especially its impact on the lives of people like those I met in my bankruptcy practice, and on the politics of money in the US. I also enjoy reading philosophers, starting in college and steadily expanding my reading ever since. I wrote at FireDogLake for a number of years.

Generally, I think the problem facing the US is the dominance of neoliberal discourse. I think it clouds the vision, and limits the kinds of problems that can be identified and solved. For example, the existence and danger of climate change can easily be identified in a scientific discussion. However, the problem does not fit the neoliberal discourse because science insists that the pursuit of individual and corporate self-interest will lead to devastation. In neoliberal discourse, the pursuit of self-interest always leads to Eden.

The neoliberal project has two prongs. One is the police function of crushing dissent and alternative views. The police function is provided by government agencies and private and institutional actors. The counterpart is the economic system , which is operated by government and by private and institutional actors. Some of these actors operate in both spheres. I focus on the second prong.

24 replies
  1. Bay State Librul says:

    In my opinion, it’s not a “either/or”, “black/white” situation.

    Political change does come slowly.

    No mention of the risk to a Sanders candidacy

    I’ll take Clinton.

    • emptywheel says:

      What’s the risk? That if Trump gets chosen he’ll be able to match his populism? Because if it’s Hillary Trump you can be sure he will talk endlessly about her Goldman speeches and the fact that he’s proposing more for working people than she is.

      • Bay State Librul says:

        I think Bernie is unelectable. Remember Dukakis?

        Hill would have a better chance against Trump. Trump wants to repeal Obamacare and
        it will never happen (in my view).

        • lefty665 says:

          You can think anything you please, but Sanders polls better against Trump than Hillary does. I also remember Gore and Kerry, other recent incrementalist candidates of Same.
          .
          Much to my surprise Kerry has turned into a decent Sec State. It’s the simple things, he has not been an accessory to the sodomization by bayonet and murder of a foreign head of state. Not a high standard, but then neither is Hillary.

          • Bay State Librul says:

            Look I like Bernie.

            If you believe Sanders can win the general election, you have taken way too many subway rides.

            • lefty665 says:

              What it looks like, and what is consistent with the numbers is that Hillary is very unlikely to win a general election.
              .
              More than half the country is pretty sure she’s a liar and have a very negative opinion of her. That’s not just Repubs, Indys are profoundly in the not Hillary column too. With those two groups of voters unwilling to vote for you there aren’t enough Dems to turn out to win. It’s pretty simple, if you want Trump or Cruz as President, nominate Hillary.
              .
              I like Bernie too. He would not have been my first choice as nominee, although he is a real New Deal Librul. But given the Dem nominee choice between him and Hillary (or Joe) it’s no contest. He at least has a chance to win. Like I said before, he has consistently outpolled Hillary against the likely Repubs.
              .
              Same has run its course, this is a Change election. Obama had the mandate for Change and he strangled it in its crib. This time it’s stronger, the economy has sucked for 90% of the country since the late ’70’s and real unemployment is still around 20%. If we don’t get Change this time, next time it’ll be the villagers out with bonfires and pitchforks.

              • Bay State Librul says:

                My sense is that Obama and Kareem Abdul-Jabbar are right. Trump will never become
                President because he is a “sound bite” that works well in a primary, but not in a general election.

                At your peril, you underestimate the Clintons.

                • lefty665 says:

                  Neither have particularly good prognostication averages. To play off BAD @11, people with money are not good judges of the amount of distress and anger in the nation today. Neither of those guys has missed a meal in a long time. One squandered his mandate for Change with a veto proof majority and the other shoots hoops. A sound bite beats no bite if you’re hungry.
                  .
                  I have never underestimated the Clinton’s vindictiveness, propensity for self serving or willingness to say anything to cozen a vote. I didn’t underestimate Hillary’s aspirations or achievements in ’08 either. Nor have I shared Hillary’s underestimation of the FBIs interest in her email and foundation conflicts of interest, or the influence of the hundreds of millions they have raked in from Wall St and fat cats around the world.
                  .
                  One thing Sanders is right about is that our political system is corrupted by money. Hillary is the poster child. Trump will eat her for breakfast. You saw what he did to Duhbya the other night. Give him a little truth to run with and he’s a hard hitter.

        • Bill Michtom says:

          Remember Dukakis? Clearly, you don’t. He was a conservative Dem who had the balance-the-budget delusion. Also, there was the Willie Horton ad and Dukakis’ non-existent personality. None of these issues are a problem for Bernie.

          Also, WTF does “you have taken way too many subway rides” mean. Clearly, whatever it means, you haven’t taken enough.

          • lefty665 says:

            TKU Bill.
            .
            I infer the “Librul” part is a disguise for right wing, DLC, corporate Demism of the Dukaka and Hillary brand. I’ll leave out the Dick Morris sexual fetishism, it’s titillating but doesn’t add much to the description:)

  2. bevin says:

    An excellent post, full of things to think about. Clinton represents the very worst of everything that the US Establishment has become: greed, callous contempt for suffering, a vast social divide which simply cannot be sustained, incredible arrogance in foreign policy and a refusal to face reality.

    The choice is not between change and stasis but reform or revolution; a taste of the sort of chaos and constant fear of violent death that has been visited upon, most recently, Syria where, according to the Russian Ambassador to London, the US was perfectly reconciled to an Islamic State conquest of Damascus last September. In other words a bloodbath on a scale unprecedented even in the worst nightmares of Genghis’s campaigns.

    It is not insignificant that Clinton represents a risk of nuclear war of precisely the kind that her candidate Goldwater was accused of representing in 1964: the policies that she pursued at the State Department were incredibly risky and have led to appalling suffering in Honduras, Haiti, Libya and Syria, amongst others.

  3. tony in san diego says:

    It is not insignificant that Clinton represents a risk of nuclear war of precisely the kind that her candidate Goldwater was accused of representing in 1964: the policies that she pursued at the State Department were incredibly risky and have led to appalling suffering in Honduras, Haiti, Libya and Syria, amongst others.

    Major nuclear powers.

  4. Alan says:

    Krugman was trained in the mathematical school of economics, and even today insists that the use of mathematical models based on past history should be the central method of the discipline. Piketty was trained in the US, and is really good with those math techniques. However, he doesn’t accept the standard approach to the area, which he claims is closer to an ideology than a science. Instead, he adopts the methods of the social sciences. His book is a triumph of dogged efforts to read and understand 200 years of wealth and income inequality in Europe and the US

    .
    .
    Let’s not get carried away. He doesn’t really adopt the methods of the social sciences. Like Krugman, Piketty is a fairly standard issue neoclassical economist with all the baggage that involves. For analysis see Chris Gregory, a prominent economic anthropologist, on Piketty’s social science: The Three Faces of Thomas Piketty.

    • Ed Walker says:

      Piketty’s book spawned a group of economists and others trying to show that his work was in the mainstream of conventional economics. I’ve read a bunch of it, and I disagree. Here’s a bit of my thinking. When Simon Kuznets, a traditional economist of the mid-20th Century, located some data covering 35 years of income distribution, he fitted a curve to the data and announced the Kuznets theory, essentially that in an advanced capitalist society, growth would increase income for everyone. That was the state of conventional economics until the 1980s, by which time it had become a fixed standard of political conventional wisdom, and a guidepost for economic policy. It was also dead wrong, as Piketty shows. In the same way, we got the Phillips Curve and a host of other totally wrong ideas.
      ,
      Piketty did much better. He gathered data for centuries and from different countries. Then he used modern math techniques to visualize the data in many different ways. Then, instead of coming up with a fitted curve, he looks at the institutions of the different societies and used those differences to work out which elements actually affected the growth of income and wealth inequality.
      .
      When I write about Krugman’s reliance on models, I mean that he finds models the same way Kuznets did. He uses a large number of ideas and tools that were developed to turn economic ideas into mathematical formulas, rather than analyze the social institutions to figure out why we got the outcomes we did. A large part of that effort uses the completely abstract and usually wrong ideas of neoclassical economics. Using those tools, Krugman said that NAFTA would not be a problem for the US. https://www.foreignaffairs.com/articles/mexico/1993-12-01/uncomfortable-truth-about-nafta-its-foreign-policy-stupid He wildly underestimated the damage NAFTA and all its related treaties would do to the US worker. Krugman now takes exactly the same position on TPP. Once again, he ignores the impact of these kinds of treaties on social institutions, and thus on the balance of power between labor and capital.
      .
      Models, especially those allegedly derived from data, excuse people from thinking about social issues. Piketty avoids that trap, and in that way he is completely outside the mainstream.

      • lefty665 says:

        Thanks for bringing us back on point. I’ve had a hard time making myself use the neolib label, it seems to disparage liberals, but suppose it’s the appropriate term. If you go back to 2007-2008 Krugman was in the tank for Hillary that cycle too, but maybe it’s just birds of a neolib feather.
        .
        Where can Sanders get on taxes? Reagan dropped the top personal income tax rate from 70%, it seems unlikely we will approach those numbers again.
        .
        Even with lower marginal rates, the last couple of Bill’s budgets were substantially in surplus. Treasury had to run open market operations using shorter term instruments because the long term notes were being redeemed. We’re approaching the late teens time the forecasts had for the national debt to be paid off.
        .
        Was that all a Greenspan bubble that never would have worked out? Are we just living in the shadow of Duhbya’s tax cuts for every situation that the neolibs have not been willing to recant even when they had veto proof majorities?
        .
        Your last paragraph nails it:
        “This is the fight in the Democratic Party. Either you believe that we can change our government and our economy to work for all the people and not just the few, or you believe that we are doomed to remain under the thumb those who rule us from the far side of the money gulf with their laughable claim that they are the meritocracy and not a plutocracy.”
        .
        The nation thought it was electing Change in ’08, with a president who campaigned on it, and provided him with a veto proof majority to enact it. He sold out and the country has tried another way in most subsequent elections for Congress and in the states. That has worked even worse.
        .
        We’ve got another chance this time, but it’s as if the Dem establishment is lined up behind Hoover instead of Roosevelt. That gets us back to right wing, DLC, Dick Morris toe sucking neo libs. Sigh.

      • Alan says:

        I have no idea what other members of his own discipline have written about him. He may appear radical to members of his own discipline – that wouldn’t be hard. I’m coming from a background in anthropology and I assure you that Piketty looks very much like a conventional neoclassical economist to anthropologists. I think Gregory has the right take: masses of data which is good but if you want to understand it better look outside the discipline of economics.

  5. Romancing the Loan says:

    Another Thomas (Frank, from What’s the Matter With Kansas) with another article in the Guardian on the same subject, also worth reading: http://www.theguardian.com/global/2016/feb/16/the-issue-is-not-hillary-clintons-wall-st-links-but-her-partys-core-dogmas

    The bluff that if you don’t let the Dems rip you off, Republicans will literally end the world was called in 2000. It won’t work again.

    I keep telling my Bay State Liberal friends that it works both ways – nominate Hillary and you’re basically assured at least four years of Trump or Cruz.

  6. orionATL says:

    ” Piketty was trained in the US, and is really good with those math techniques. However, he doesn’t accept the standard approach to the area, which he claims is closer to an ideology than a science. Instead, he adopts the methods of the social sciences…. ”

    good. the social sciences are where economics needs to go to continue progressing toward understanding those aspects of human behavior.

    personally, i wouldn’t put much credence in academics labelling the scientists doing the research with contemporary political terms. over time we’ll get to see which of their ideas works in terms of providing more complete explanations foe economic phenomena. that’s a better test than labeling.

  7. Bitter Angry Drunk says:

    Funny how everyone who says Sanders’s proposals can’t be enacted is making a really good living.

  8. earlofhuntingdon says:

    A more steeply progressive income tax rate and a higher estate tax rate would indeed encourage and help pay for a better democracy. Presumably, that’s why the elites have undone prior higher rates for both taxes and will fight tooth and claw to avoid fixes of the type Piketty recommends.
    Republicans pejoratively labeled the estate tax a “death tax” in hopes that it will convince hoi polloi that they, too, will be taxed on death, along with the Rockefellers, Bushes and Mellons. In reality, estate tax applies only to estates valued at almost $5.5 million, fewer than 0.2% of all estates. Even that small pool is constantly being emptied via aggressive estate and tax planning maneuvers.

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