Krugman: Worried About Oligarchy? You Ain't Seen Nothing Yet

In an interview with journalist Bill Moyers set to air Friday, Nobel laureate and New York Times columnist Paul Krugman celebrates both the insights and warnings of French economist Thomas Piketty whose new ground-breaking book, Capital in the Twenty-First Century, argues that modern capitalism has put the world "on the road not just to a highly unequal society, but to a society of an oligarchy--a society of inherited wealth."

The conclusions that Piketty puts forth in the book, Krugman tells Moyers, are revelatory because they show that even people who are now employing the rhetoric of the "1% versus the 99%" do not fully appreciate the disaster that global wealth inequality is causing.

"We are becoming very much the kind of society we imagine we're nothing like."

Says Krugman:

Actually, a lot of what we know about inequality actually comes from [Piketty], because he's been an invisible presence behind a lot. So when you talk about the 1 percent, you're actually to a larger extent reflecting his prior work. But what he's really done now is he said, "Even those of you who talk about the 1 percent, you don't really get what's going on. You're living in the past. You're living in the '80s. You think that Gordon Gekko is the future."
And Gordon Gekko is a bad guy, he's a predator. But he's a self-made predator. And right now, what we're really talking about is we're talking about Gordon Gekko's son or daughter. We're talking about inherited wealth playing an ever-growing role. So he's telling us that we are on the road not just to a highly unequal society, but to a society of an oligarchy. A society of inherited wealth, "patrimonial capitalism." And he does it with an enormous amount of documentation and it's a revelation. I mean, even for someone like me, it's a revelation.

A key component of this ongoing disaster of capitalism is what happens when great wealth--and Piketty puts focus on inherited wealth--grows at rates faster than the overall economy. The mathematical formulation of that idea--which looks like this: r > g--is now gaining popular currency.

"It's a real 'eureka' book," says Krugman. "You suddenly say, 'Oh, this is not--the world is not the way I saw it.' The world in fact has moved on a long way in the last 25 years and not in a direction you're going to like because we are seeing not only great disparities in income and wealth, but we're seeing them get entrenched. We're seeing them become inequalities that will be transferred across generations. We are becoming very much the kind of society we imagine we're nothing like."

The prediction embedded in Piketty's book is that even as inequality has been on a steady rise for the last several decades, the truth is: we ain't seen nothing yet.

As we go forward, according to Krugman, Piketty's thesis says that even though inequality is already a huge problem, it's going to get even worse. "Unless something gets better," he explains, "we're going to look back nostalgically on the early 21st century when you could still at least have the pretense that the wealthy actually earned their wealth. And, you know, by the year 2030, it'll all be inherited."

Writing about his new book at The Nation on Friday, the Economic Policy Institute's Jeff Faux says that though Piketty "is certainly not the first economist to criticize inherited wealth" his "credentials and exhaustive attention to statistical detail make him harder for the pundits and policy elites that protect the plutocracy to dismiss."

Faux concludes that Piketty has re-discovered, and re-stated for a modern audience, is what Marx himself and others long ago realized--that capitalism "is not only unfair, it is relentlessly and dynamically unfair."

As a point of order, however, it seems noteworthy that Piketty is quite prepared to go even further. In an interview last week in Europe, Piketty didn't stop at saying capitalism was unfair, but stated: "I have proved that under the present circumstances capitalism simply cannot work."

And as Krugman explains to Moyers, the implications of a world dominated by the super-wealthy for regular working people is profound. "When you have a few people who are so wealthy that they can effectively buy the political system, the political system is going to tend to serve their interests," he said.

______________________________________________