FT’s review of Piketty’s Capital and Ideology shows that the market liberal worldview is based on a number of, if not outright false, at least highly questionable interpretations of contemporary history. I now comment some.
1/7. If the main driver of 20th century societal change was technological development and not ideology, why in the capitalist Nordic countries a majority of the people has supported the welfare state, while in the capitalist USA a majority has usually rejected it as socialism?
2/7. The point of comparing the situation today with the high-tax age of 1950-1979 is not to claim that we could reach higher economic growth with a more redistributive economic policy. The point is to suggest that we can have redistributive policy without impairing growth.
3/7. Evidence does not generally support the belief that taxing the rich a little bit more would seriously hamper innovation and entrepreneurship. In fact, innovation has already been hampered in the West, which shows as sluggish productivity growth and low investment rate.
4/7. Tax avoidance of course existed in the high-tax age, but the scale was different. There were strong legal restrictions on international capital movements, and one hence had to circumvent more regulation, whereas today one can more easily move one’s assets to Panama.
5/7. Voters ended the ’good times’ of Keynesian regulation not because the system was fundamentally flawed, but because economic elites began protesting more strongly against it and got support from economists advocating a more liberal regime.
6/7. United States had abandoned the Bretton Woods currency regime already BEFORE the 1970s economic crises truly began. Stagflation and other problems were then used to justify the change that had already begun. There was some ideology certainly at play here.
7/7 Similarly, Mitterrand did not abandon his socialist/Keynesian agenda because it was fundamentally flawed, but because France could not pursue it alone in a liberalized global economy, where finance markets would punish for ’wrong’ policy.
One more point on ethics: Even if a majority of today’s rich have earned and not inherited their wealth, we can still make the ethical judgement of it not being just that they can accumulate capital almost without limit and that their tax rate is lower than middle-income people's
