Thread by @KristinLangen

"Capital is back because low growth is back" @PikettyLeMonde said, stating that decreasing growth leads to increasing #inequality. If that would be true, we have a social-ecological dilemma #degrowth. I wrote my BA about it and got the #GSÖBW price for it yesterday. Thread. 1/14

Yesterday was #GlobalClimateStrike. Many studies show: The #ClimateCrisis can only be solved if economic growth rates in the North decrease rapidly. @timparrique, @g_kallis, @jasonhickel. If decreasing growth necessarily leads to increasing inequality, we have a problem. 2/14

True,since the 1980s economic growth has decreased in Germany, while income and wealth inequality have increased @CharlyBartels @MiriamRehm. But is it a correlation or causality? I argue, political decisions led to increasing inequality, not declining growth. Four arguments: 3/14

(1) @PikettyLeMonde explains his thesis with the two “laws of #capitalism. According to the equations, declining growth rates lead to a situation where people mainly earn money through #capital income, not wage #labor. 4/14

If capital would be distributed equally, it would have no effect on #inequality if the importance of capital income compared to wages increases. A #WealthTax, inheritance tax for example go in that direction. That’s why #redistribution must be part of #degrowth policies. 5/14

(2) #inequality is driven by a return on capital, r, higher than the growth rate, g. Piketty famous formula to explain inequality is: r>g. That the income generated by capital is higher than the growth rates is, according to @PikettyLeMonde, “a historical fact”. 6/14

However, advocates of the so-called “golden rule” assume that the economy is heading towards a situation of r = g. If g = 0 = r, capital income does not increase in a #SteadyStateEconomy. Current negative interest rates already go in that direction. 7/14

(3) @PikettyLeMonde assumes that it is possible to replace labor by capital (f.e.machines) to a ratio greater than one (elasticity of substitution). This leads to a situation where income generated through capital increases more than wages. A highly controversial assumption. 8/14

@ProfTimJackson and Victor show: if we assume that labor cannot be replaced easily by capital, the importance of capital decreases. Thus they demand policies that support labor intensive work and a strategy that targets full #employment and #degrowth at the same time. 9/14

(4) Empirically we can see that in #Germany inequality rises since the 1970s, but sharply since the mid-1990s / early 2000s. In my BA, I argue that the rise in income and wealth inequality cannot be explained by declining growth rates alone. #Economics is a #socialscience 10/14

Germany’s focus on #exports to boost growth went hand in hand with a decrease in #union power, rise in flexibility of the job market, atypical labor relations. @luciobaccaro @chiarabenax show: While between 1991 and 2007 labor productivity increased, real wages decreased. 11/14

When Piketty explains that r > g leads to rising inequality, he assumes that an increase in growth leads to rising income. However, the German export-oriented growth model has #decoupled productivity and wages. The adherence to this idea of #growth enforced #inequality. 12/14

Inequality is a result of political decisions,not of economic laws. Not decreasing growth led to inequality, but a focus on growth that prevented distribution, policies that support labor intensive work, high wages and union power. #Degrowth without #inequality is possible. 13/14

I wrote my BA thesis in 2018 at the @leuphana in economics and sociology @AufAnfang. I was a lot supported by @FelixKersting, @sh_schneider, @moritzzeidler and @PluralEcon. Thanks to the GSÖBW for acknowledging my work with the #GSÖBW price 2021. 14/14