The Piketty divide: Part 1


Thomas Piketty’s Capital in the twenty-first century has taken America by storm. It rose to the top of Amazon’s best-selling list. It brings a scholarly perspective to the issue of rising inequality and of wealth being concentrated in the hands of the few. It has been compared to Marx’s Das Kapital and it has been suggested that it may be as influential. It has also been compared to Milton Friedman and Anna Schwartz’s A Monetary History of the United States in 1963 for the reason that, like that work, it is based on extensive financial data that gives credence to its conclusions — although coming from the opposite side of the political spectrum.

Piketty’s work, of course, is not universally acclaimed. There is a very clear divide between the Right and Left, between progressives and the more radical Left, and between the Anglosphere and the non-Anglo-speaking world.

Piketty, now a professor at the Paris School of Economics, went to MIT in America in 1993 when he was 22 and completed a doctorate on the theory behind tax policies. He returned to France after five years and has remained there since. In 2003 with Emmanuel Saez, another Frenchman, but at Berkley in California, he wrote a paper on inequality in the US between 1913 and 1998. Saez also worked with Piketty on the data for Capital in the twenty-first century.

In France, while the book was recognised as significant, it was not the runaway best seller that it became in America — it was 192nd on the French book publishers’ rankings. One reason is that inequality has long been central to political debate in France, with even the right-leaning Gaullists like Chirac supporting the need to mend the fractures in society. France already has an annual wealth tax on assets. So in that sense, the theme of Piketty’s work was not as novel in France as it appeared in America, dominated as it has been since the 1980s by economic thinking that does not believe that inequality is a problem.

The French Left was critical, considering Piketty did not go far enough: that he failed to discuss cultural and social domination, or violence against and exploitation of the lower classes, or alienation at work, or the role of class struggle.

Why all the fuss?

Piketty has a basic equation developed from tax data across a number of countries going back over two hundred years:

r > g

That is, the rate of return on capital (r) is greater than the rate of growth of income (g). Throughout the nineteenth century and up to World War I, that greater rate of return led to high levels of inequality, with wealth concentrated at the top. In periods of high inequality, the rich can hold capital up to seven times the value of total national annual income (the capital/income ratio).

The rate of growth is influenced by population growth and productivity. Piketty’s data suggest that over the long run, income grows at 1‒1.5% while return on investment grows at 4‒5%. A period of declining inequality, between 1919 and the 1970s, occurred when the rate of growth exceeded the rate of return, fed by population growth, technological progress and government intervention.

As population growth slows (as it is already doing), Piketty suggests that the rate of growth will also slow and we will return to a situation similar to that before WWI. Various economists have already pointed to the slow down in economic growth since 1970, despite technical innovations like the spread of computers and the internet. An article in The Economist showed that annualised growth in the US averaged1.9% between 1947 and 1969, but only 0.8% between 1970 and 2012, creating a 35% gap in growth between where it actually is and where it would have been if the higher level of growth had continued.

One reviewer interpreted Piketty’s approach this way:

If you get slow growth alongside better financial returns, then inherited wealth will, on average, “dominate wealth amassed from a lifetime’s labour by a wide margin” says Piketty. Wealth will concentrate to levels incompatible with democracy, let alone social justice. Capitalism, in short, automatically creates levels of inequality that are unsustainable.

For Piketty, the facts derived from his data indicate that this is the nature of capitalism. The period from WWI to the 1970s was an anomaly and Piketty makes the case that capital in its natural state does not tend to spread out or trickle down but to concentrate in the hands of a few.

The problem is that as wealth becomes concentrated in the hands of the rentiers it can lead to ‘patrimonial capitalism’ (where the economic elite mostly obtain their wealth through inheritance). Some have suggested an inconsistency to the extent that Piketty supports entrepreneurs but is concerned that when they are successful they then become rentiers, and their wealth is passed to the next generation who need undertake little productive activity to maintain that wealth. Piketty argues that if this is left unchecked, wealth continues to accumulate in the hands of the few leading to greater levels of inequality.

Piketty acknowledges that the current situation in the US is different. There, the current increase in inequality has come from the rise of what he calls ‘supersalaries’. Unlike other countries, in the US, 60% of the income of the top 1% comes from ‘labour income’ (the salary packages of the CEOs of large corporations); only in the top 0.1% does income from capital predominate. Although, clearly, within a decade or two this wealth may well turn to inherited wealth based on the accumulated capital.

In an interview where it was put to Piketty that Americans have earned their wealth rather than inherited it, he replied:

This is what the winners of the game like to claim. But for the losers this can be the worst of all worlds: they have a diminishing share of income and wealth, and at the same time they are depicted as undeserving.

A key aspect of Piketty’s work, however, is that it presents a challenge to current mainstream economic thinking.

To understand why the mainstream finds this proposition so annoying, you have to understand that “distribution” — the polite name for inequality — was thought to be a closed subject. Simon Kuznets, the Belarussian émigré who became a major figure in American economics, used the [then] available data to show that, while societies become more unequal in the first stages of industrialisation, inequality subsides as they achieve maturity. This “Kuznets Curve” had been accepted by most parts of the economics profession until Piketty and his collaborators produced the evidence that it is false.

Piketty himself said regarding his approach:

I am trying to put the distributional question and the study of long-run trends back at the heart of economic analysis. In that sense, I am pursuing a tradition which was pioneered by the economists of the 19th century, including David Ricardo and Karl Marx.

So he is also attempting to return economics to the political economics of the best nineteenth century economic thinkers and also return to data as the basis of findings, rather than abstract theories and mathematical formulae.

The Left is not entirely happy with Piketty’s analysis, for example:

… Piketty’s almost exclusive metrics are inequality of income and wealth. They are important to be sure. Let us remember, though, that despite less inequality, most of the period 1913-1950 was hellish for the masses in the capitalist world. They died by the millions in the first world war, made little economic progress in the 1920s, suffered the hunger of the Great Depression in the 1930s, and died by millions more in the second world war. On the other hand, while inequality was high in the late nineteenth century and up to 1913, the working class did make advances, by militant struggle largely under the socialist banner, in obtaining fruits of industrial progress.

John Kenneth Galbraith, a progressive economist, while accepting the value of Piketty’s work has some criticisms.

Firstly, he rejects that the tax records on which Piketty relies are the only way to gather long term records — Piketty’s most complete records are French estate tax records dating back to shortly after the French revolution in 1789. Galbraith has used US payroll records back to 1920 to come to similar conclusions about growing inequality in America.

Galbraith also has difficulties with Piketty’s use of the term ‘capital’. He suggests that Piketty conflates physical capital equipment with all forms of money-valued wealth, including land and housing, whether that wealth is in productive use or not. Piketty’s measure of capital, therefore, is not physical but financial: ‘The problem is that while physical and price changes are obviously different, Piketty treats them as if they were aspects of the same thing.’ Galbraith suggests that (apart from World War II when the UK and Europe did suffer significant physical destruction) it was changes in the market value of wealth that reduced inequality between 1914 and 1950. He writes: ‘A simple mind might say that it’s market value rather than physical quantity that is changing and that market value is driven by financialization and exaggerated by bubbles, rising where they are permitted and falling when they pop.’

Galbraith also wrote:

The evolution of inequality is not a natural process. The massive equalization in the United States between 1941 and 1945 was due to mobilization conducted under strict price controls alongside confiscatory top tax rates. The purpose was to double output without creating wartime millionaires. Conversely the purpose of supply-side economics after 1980 was (mainly) to enrich the rich. In both cases, policy largely achieved the effect intended.

That gives rise to another issue embedded in Piketty’s work: the role of policy and politics.

As John Cassidy wrote in The New Yorker in reviewing Piketty’s work:

The Great Depression wiped out a lot of dynastic wealth, and it also led to a policy revolution. During the nineteen-thirties and forties, Piketty reminds us, Roosevelt raised the top rate of income tax to more than ninety per cent and the tax on large estates to more than seventy per cent. The federal government set minimum wages in many industries, and it encouraged the growth of trade unions. In the decades after the war, it spent heavily on infrastructure, such as interstate highways, which boosted GDP growth. … Inequality started to rise again only when Margaret Thatcher and Ronald Reagan led a conservative counter-revolution that slashed tax rates on the rich, decimated unions, and sought to restrain the growth of government expenditures. Politics and income distribution are two sides of the same coin. [emphasis added]

Piketty himself acknowledges this:

A quick glance at the curves describing income and wealth inequality or the capital/income ratio is enough to show that politics is ubiquitous and that economic and political changes are inextricably intertwined and must be studied together.

US inequality is now close to the levels of income concentration that prevailed in Europe around 1900-10. History suggests that this kind of inequality is not only useless for growth, it can also lead to a capture of the political process by a tiny high-income and high-wealth elite. This directly threatens our democratic institutions and values. [emphasis added]

The point that the progressives and Piketty make is that government policy plays a major role in economics generally, and in controlling inequality in particular. If government does not fulfil that role, then, as Piketty suggests, it leaves the way open for the economic elite to also capture the political process.

The major criticism of Piketty is for his policy conclusions: he recommends higher marginal tax rates for high incomes and a global wealth tax, although conceding that his recommendations may be utopian. His more vocal critics have picked this up and derided his policy proposals. Even supporters have suggested alternative approaches: Galbraith suggests that a large rise in the minimum wage in America would have the effect of reducing the amount available for the accumulation of wealth at the top levels; others have suggested more government regulation can have the same effect.

What do you think, so far?

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TPS Team

29/06/2014Today Ken Wolff analyses various attitudes to Thomas Piketty’s best-selling book, [i]Capital in the twenty-first century[/i]. Have a read, maybe a bit of a cogitate, and let us know what you think.

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29/06/2014Ken I'm so glad that you have chosen to review Thomas Piketty's book. It arrives on the politico-economic scene just as we prepare for the inevitable rise in inequality in this country that will arise from the Abbott/Hockey budget should it be implemented in full with all of the consequences its punitive elements will bring about. Hopefully progressive forces will kill off some of the worst features. What I find most distressing is the fact that many conservatives regard inequality as the 'natural order', indeed an necessary part of capitalist society. While even the most extreme of progressives would not expect all to have the wealth and income of the top one percent, reasonable people could not accept the extreme differences of income and wealth inequality that lead to discord and public revolt. The contemporary question is how close to this are we travelling, and how much closer we would be as a society should the Abbott government have its way? Those who accept gross inequality as 'natural', those who see no harm in penalizing those on lower incomes while those on higher suffer little penalty, those who believe in the spurious analogy that 'all boats rise with the tide', those who believe in the discredited theory of 'trickle down' economics, those who believe that increasing the basic wage and the wages of workers leads to loss of jobs, those who cling to these outdated and comprehensively disproved notions, which Piketty rebuts so well, simply ignore or discount the extensive factual data upon which Piketty has built his thesis so as to continue with their self-interested positions. Once more we see self-interest trump the common good. It is noteworthy that Piketty's critics focus not on his impressive data set, or even his conclusions, but on his suggested solutions. Their purpose is to discredit the man rather than his data or his theories. Thank you for tackling Piketty's book; we look forward to part 2.

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29/06/2014TT in response to your last offering on the previous piece, thank you for your comment. We ought not be too concerned about attacking the Abbott government. The adage applies: why bother attacking your adversaries when they are doing such a good job discrediting themselves, day after day. The public dislikes them; Abbott's unpopularity continues, and their incompetence is manifest for all to see. Let them self-destruct!

Ken

29/06/2014Ad I think you will like Part 2. It is less about Piketty and more about the reaction, including from the Right, and a few questions about how the progressive sideof politics should react. Unfortunately, this was not written as a two part piece. It just became too long. It did mean that I couldn't leave the reader with a 'cliff-hanger', so to speak, to lead into Part 2. This part was basically the introduction with just a brief glimpse of what Piketty was saying and some of the reactions. A key point in this part, is that Piketty has thrown economic thinking on its head by producing the data that backs a more progressive view, including the need for government intervention - anathema to the right of politics and the free-market and supply-side economists. As suggested in my last piece on 'experts', there will be political argument about what should be done but, I think Piketty's data proves beyond doubt that inequality is increasing in a way that is socially unsustainable. Even big business is beginning to see this. Inequality was a significant issues at the World Economic Forum in January. They know that social unrest is not good for business, and that high levels of inequality lead to social unrest. Abbott is on a loser whichever way you look at it. The data is against him. Big business will turn against him at the first sign of unrest. In fact, rather ironically, it will be the progressive forces in parliament that will help vote down some of the worst aspects of the budget that may save him in the short term.

Woodypear

30/06/2014Could someone explain to me where Wilkinson's "The Spirit Level" fits into this area of study? I would have thought his work, coming out prior to Picketty, and the more broader inputs used in his findings would have put him ahead of Picketty?

Casablanca

30/06/2014Woodypear I don't think that it is a case of one necessarily being ahead of the other based on publishing dates. Both tomes are valuable contributions to the issue of inequality which is on the increase despite the heady expectations that society would become more equal as a result of advances in medicine, education, technology and of more equitable economic and industrial policies. Richard Wilkinson and his co-author, Kate Pickett are epidemiologists and Piketty is an economist and tax policy specialist. So the short answer is that in their respective tomes they approach the subject of inequality from a different academic perspective. As Ken Wolff notes in para 5 [i]'The French Left was critical, considering Piketty did not go far enough: that he failed to discuss cultural and social domination, or violence against and exploitation of the lower classes, or alienation at work, or the role of class struggle'.[/i] Wilkinson and Pickett focus more on these social, physical and psychological effects of social differentiation. They analyze the impact of economic policies that are regressive and enshrine inter-generational inequality. Why one is a best seller and the other is not is one of those questions that any publisher would love to be able to answer. Timing, of course, can be everything. One was written pre-GFC and the other post-GFC when politicians, academics and many ordinary citizens were pondering the devastation of economies, societies and nations. Pondering also why so many of the large multi-national companies and the plutocrats emerged largely unscathed from the GFC while further down the chain there were bankruptcies and personal financial ruin.

Ken

30/06/2014Woodypear Good question. I hadn't previously heard of Wilkinson's work (also intriguing that his female colleague on the work was named Pikett)and had to do some googling. I watched a video of him explaining the work and read a few other pieces about it. From what I found, I think the big difference is that Wilkinson and Pikett aren't econmists. The work is more sociological although related to the economic issue of inequality. I also read a few articles that were quite critical of their methodology. I think the key difference is that Piketty has thrown the issue right into the middle of the economic debate (not a sociological debate) and backed it up with extensive economic data. As I point out in the piece this is a major shift for current economic thinking and is probably why Piketty has become so important.

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30/06/2014Woodypear, Casablanca, Ken Thank you for drawing my attention to [i]The Spirit Level: Why More Equal Societies Almost Always Do Better[/i] by Richard G. Wilkinson and Kate E. Pickett, (2009, Allen Lane) about which I was not aware. It seems to make a worthwhile contribution to the literature on inequality. There were several reviews that I found, almost all were favourable. Here is a sample: “[i]A groundbreaking work on the root cause of our ills, which is changing the way politicians think. Why do we mistrust people more in the UK than in Japan? Why do Americans have higher rates of teenage pregnancy than the French? What makes the Swedish thinner than the Greeks? The answer: inequality. This groundbreaking book, based on years of research, provides hard evidence to show how almost everything – from life expectancy to depression levels, violence to illiteracy – is affected not by how wealthy a society is, but how equal it is. Urgent, provocative and genuinely uplifting, The Spirit Level has been heralded as providing a new way of thinking about ourselves and our communities, and could change the way you see the world.[/i]” Another review read: “[i]Richard G. Wilkinson in The Spirit Level: Why More Equal Societies Almost Always Do Better takes data from the United Nation's World Health Organization and shows the ways in which countries that have higher levels of income inequality fare worse, overall, as a nation, in terms of various measures of psychological and social well-being. He also essentially demonstrates that of the advanced industrialized countries only two are faring well in terms of dealing with the income inequality problem, and those two countries are Sweden and Japan. Each country has discovered different ways in which to deal with the income inequality problem. Sweden's solution is to have high tax rates, which reduce the overall inequality that results from the pay differential different people receive from the work that they do. Japan's solution is to have low tax rates, but to put a cap on the pay differential that is allowed across the various kinds of work. In broad strokes, Wilkinson suggests that those are two ways to deal with the income inequality problem. Because Sweden and Japan have these systems, they both do exceptionally well across several measures of well-being. Health, education, life expectancy, and overall rates of happiness are better in these countries than in the countries that have higher rates of income inequality. For the curious reader, I'd recommend looking at his graphs. It's pretty surprising.[/i]” A third and much more extensive review begins: “[i]I reread the book during the last days and this is what I've come up with as a review. If you want it in one line, take the review of The Economist, a notoriously right-wing newspaper, saying that: "The evidence is hard to dispute". From The Economist, this means a lot! In “The Spirit Level“, Richard Wilkinson and Kate Pickett discuss the new evidence that strongly points at inequality as determining factor for most of the social and health problems present in contemporary societies.”[/i] This review concluded: “[i]In a nutshell, this book tells the story of two scientists. They observed the data, drew conclusions, tested them, drew new conclusions, sought after ways that explained their conclusions, and – after years of research – have found the solution to most problems in our societies: more equality. This might be an intuitive truth, but I am sure that millions of people will reject it even after they have seen the hard evidence.”[/i] The full review is here: http://www.goodreads.com/review/show/91818896?book_show_action=true&page=1 [b]And all the while, our new government, with almost every move it makes, propels our society, one that prides itself on its egalitarian nature, towards more and more inequality.[/b]

Casablanca

30/06/2014[b]PERSONAL ACCESS TO A VERY PRIVATE PM[/b] Mary Delahunty June 30, 2014 For three years and three days she was pummelled with a nasty political trifecta, which compounded her leadership flaws and masked her leadership achievements. Gillard, as the first woman to win the office, drew a deep seam of personal viciousness not seen before in Australian public life. A messy campaign in 2010 yielded a minority government and the swirling negotiations infused the 43rd parliament. From the moment the ink was dry on her commission from the governor-general, she had to battle two political opponents. Tony Abbott, who from the outside lanced her leadership with the brand of ‘liar’, and Kevin Rudd, whose quest for revenge poisoned her from within her own party. http://thehoopla.com.au/julia-gillard-defying-gravity/

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30/06/2014Folks If any of you are interested in the grotesque scandal that is steadily enveloping the power industry, you may be interested in Jess Hill’s comprehensive article in [i]The Monthly[/i], aptly titled [i][b]Power corrupts[/i][/b]. You will scarcely be able to believe what you read. http://www.themonthly.com.au/issue/2014/july/1404136800/jess-hill/power-corrupts

Casablanca

1/07/2014[b]Taxes, fees, laws: Here's what's changing on July 1[/b] Michael Koziol. June 26, 2014 Change is afoot as the clock ticks over to July 1 and the new financial year begins. There are bargains to be snapped up, goals to be set, plans to be enacted. While for some people the world will go on as normal, for the rest, this guide will help you keep abreast of the changes. http://www.canberratimes.com.au/federal-politics/political-news/taxes-fees-laws-heres-whats-changing-on-july-1-20140629-zsm66.html

2353`

1/07/2014Ad, The 'gold plating' of the electricity grid in the eastern states of Australia has been talked about for a while but hasn't really gelled with the public yet. In a similar way, the full story of the HSU saga is yet to be widely understood. Unfortunately [i]The Monthly[/i] or [i]Independent Australia[/i] don't have a wide readership and the real issue is that while people are doing some really good and worthwhile service to the community bringing issues such as the two I have mentioned to the forefront of the fifth estate - hwo do we get the message to the mainstream? [i]The Monthly[/i] has set up [i]The Saturday Paper[/i] which is a start - but the comparison between the number of copies on display versus the copies of the local(ish) LimitedNews publications was telling in the newsagent located in the large Regional Shopping Centre I was in last Saturday. In someways, it is like the TV Series - [i]The X Files[/i] - The truth is out there. How do we get the Australian public to look?

Casablanca

1/07/20142353 Enter Ross Gittins with this article on privatisation. [b]Privatisation debate fails public good[/b] Ross Gittins. June 30, 2014 The trouble with the latest round of state government privatisations is that those who oppose them do so for the wrong reasons, but their promoters are also pushing them through for the wrong reasons.... The truth is far more complicated than that. Whether publicly or privately owned, the monopoly business that doesn't seek to overcharge its customers has yet to be discovered by archaeologists. Monopolies that don't seek to maximise profits usually succumb to overstaffing and overpaying workers and managers. Why wouldn't they? The public sector unions understand this full well, which is their real reason for opposing privatisation so vehemently. http://www.canberratimes.com.au/business/privatisation-debate-fails-public-good-20140629-3b21k.html

Ken

1/07/20142353 'The truth is out there'. Sounds like the title for another post from you.

Ad astra

1/07/20142353 I agree with Ken. As you say, the truth about the genesis of the increase in electricity prices has been revealed to just a few, to wit those who read 'The Monthly' and the like. TPS is another conduit that reaches a modest audience. If you were able to write something along the lines of 'Power corrupts' for TPS, that would spread the electricity price scandal to another group.

Casablanca

1/07/2014[b]Invest in people, infrastructure and technology for future prosperity [/b](Video 15.14 + Transcript) Steve Cannane. 30/06/2014 Nobel prize winning economist Joseph Stiglitz says if Australia wants to prosper in the coming years the Abbott government should be spending more, not less. http://www.abc.net.au/lateline/content/2014/s4036416.htm

Curi-Oz

1/07/2014Not sure where this fits in the current conversation, but I think the idea of "open source everything" may be relevant to the work that Picketty et al, are doing. http://tinyurl.com/l5zkdpc Now off to read more, and pick up my copy of "Capital in the 21C" from the library

42 long

1/07/2014I think the abbott has more personal aims than the welfare of Australia. The misinformation about the costs of electricity are exposed. There can only be more realisation of the deception(s) as time goes on. I liar has t have a good memory. The internet has an excellent memory.

Casablanca

1/07/20142353, Now Tristan Edis has something to say on privatisation [b]Ceding the meter to a powerful Big Three[/b] Tristan Edis 1 July, 2014 A combination of Rod Sims, head of the ACCC, economist Ross Garnaut and, now, the father of competition policy reforms that led to the creation of the National Electricity Market, Fred Hilmer, have all highlighted concerns with how state governments are proceeding with privatisation of government assets. http://www.businessspectator.com.au/article/2014/7/1/policy-politics/ceding-meter-powerful-big-three

TalkTurkey

2/07/2014Greetings Swordsfolks First: "How To Pronounce *Thomas Piketty*" http://nymag.com/daily/intelligencer/2014/04/how-do-you-pronounce-thomas-pikettys-name.html (Albert Camus after all [i]en francais [/i]is Ahl-BEAR Cum-MOO!) They never have learnt to talk proper, les Grenouilles! (Actually j'adore the sound of French - that's what French is actually good for - sounding good! But English-speakers born and raised can thank our lucky stars, it's a huge advantage. Best at explaining, shameless in acquisitiveness from other languages, with new turds and worms constantly coming to the surface, and puns and Spoonerisms, like that grotty one just there, forever lurking, ready to leaven the lump of Life. We seem to derive most of our daily merriment by plays on words. [i]Yes Minister [/i]was entirely a matter of verbal wit. No smut, no slapstick, just worms and turds. Ken, [i]Merci bien a cause de ton effort[/i], which I read with all the economic insight I have acquired in my lengthy life, (that is, very little!) Still what you have said resonates in the double-bass section of my intuition, or putting it another way, sounds right to me. I'm sure that what you've said here largely obviates my need to read M Piketty's 'tome' which I never would anyway: I'm not that sort of reader at all. [i]Ad astra[/i], by contrast ... [i]Mon Dieu!*[/i] Er, [i]Mon Chien![/i] You read so MUCH! You, Lyn, Casablanca, Ken, Gypsy, so many others so well-read, makes me feel intellectually tiny. But I can always reassure myself of the validity of my own thoughts and attitudes by measuring them against those expressed here - most particularly by Ad of course, as we all do too I am sure. All these years later, I've never felt at odds with Ad at all - making me content within myself that I am anyway not seriously irrational, bit barmy maybe yes but in good sane company anyway. And that's a big part of why I so treasure this site and the Comrades here. I draw assurance and resolve from all here. And Ken, Whither Now, and Where It All Stops, aye, there's the rub. Will the People turn to the ultimate non-violent sanction against tyranny the General Strike? Will we turn on the hyper-rich like Rindlard and pop them like blood-filled ticks? Or just die quietly out of the way, and turn the planet over entirely to the deserving classes? Because, Luna or Satyr, something must and will most certainly have to give. It says so in the Bible! * Er, I mean,[i]Mon Chien![/i] No that doesn't work either, see you can't PUN much en francais!

Casablanca

2/07/2014Our mendacious PM is at it again: [b]Abbott slams green power industry[/b] Phillip Coorey and Jacob Greber. 2 July, 2014 Tony Abbott has sparked a war with the renewable energy sector by claiming their product was driving up power prices “very significantly” and fostering Australia’s reputation as “the unaffordable energy capital of the world”. The companies struck back at the Prime Minister, accusing him of grossly exaggerating the impact of renewable energy... Abbott said “The RET is very significantly driving up power prices. This posed a threat to domestic budgets and industry competitiveness, especially energy-intensive industries. We should be the affordable energy capital of the world, not the unaffordable energy capital of the world and that’s why the carbon tax must go and that’s why we’re reviewing the RET.” http://www.afr.com/p/national/abbott_slams_green_power_industry_nvaXoRjQCIZARcNBoBxKfO

Michael

2/07/2014Who said this? ''The road to productivity is not paved by goading your workforce and treating working people with a lack of respect and decency,'' he said. Visit here http://www.smh.com.au/national/military-scientists-and-engineers-appeal-to-tony-abbott-to-stop-the-spending-cuts-20140701-zssey.html?skin=text-only to find the whole story, where you will find an individual unlikely to be anything but a small 'c' conservative with the "national interest" at the centre of his thinking the person who said the words above. Words that well serve as an epitaph for a ditched Abbott gumnint sooner than later.

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2/07/2014TT i always enjoy your writings - so stylish and erudite. Now I shall pronounce Thomas Piketty's name: "Tome-AH PEEK-et-ee" We are returning to the south coast now, so will be 'off the air' most of the day.

DMW

2/07/2014Hi Ad, the Jess Hill article linked to is interesting reading that is a synopsis of her very good Radio National [i]Background Briefing [/i] programme from late April (and apparently just repeated) http://www.abc.net.au/radionational/programs/backgroundbriefing/2014-04-27/5406022 There is some good extra reading and spellbinding tale to listen to in the podcast of the programme. When you finally arrive back in paradise at your coastal retreat light the fire sit back and enjoy listening (and leave the mowing chore for another day :) )

DMW

2/07/2014Hi Ken, thanks for your informative musings on the great divide that is 'systemic inequality' and the effects it has on our world. Inequality is, like a diamond, is a many faceted thing, all the more highlighted for me as I am tapping this out listening to retiring Disability Discrimination Commissioner, Graham Innes' Press Club Address. The more I read and listen to discussions on the topic the more more I come around to a view that inequality is 'all in the mind'. Much of the problem begins with the attitudes and thinking that people have in them. In this country our almost universal love of sport encourages a winner take all attitude to many aspects of life and can instil a view that reinforces inequality, yet, as Andrew Leigh points out in Battlers and Billionaires, http://www.blackincbooks.com/books/battlers-and-billionaires there is a paradox when comparing the 'free market' in buying players in the English Premier League to how the AFL has 'levelled the playing field' with its' salary cap system. The challenges in addressing inequality are many and, much to the chagrin of many, it will take government intervention and in some cases a bigger and more empowered union movement to actually achieve real change and this highlights another of the many paradoxes that bedevil the area. When asked many Australians say that government is 'too big' and should be reduced in size and that we pay too much tax. Many of those same people then tell the pollsters that there needs to be more money spent on defence, roads, health, education and whatever other hobby horse that is uppermost in the mind at that time. There are many other paradoxes and disconnects that make coming to real solutions a very difficult challenge. Here I come back to it being 'all in the mind' and suggest that to make headway we, as individuals and collectively, need to clarify some of our beliefs and attitudes and and remove or minimise the paradoxes. A tough ask.

DMW

2/07/2014PS I can't recall if I posted a link to a podcast of the recent ACT Fabians event [b]'Why Equality Matters: Getting Outcomes in Today's Society' [/b] with the excellent panel of Humphrey McQueen, Paula Matthewson and Andrew Leigh MP. You can listen to a quite long but mostly entertaining and informative discussion by following the link on this page: http://www.fabian.org.au/1103.asp There is a 'fifteen minute question' toward the end that bored me to tears :( On that page you will also find links to podcasts of previous events that include a wide variety of topics discussed by a number of interesting people.

DMW

2/07/2014Not quite on topic but certainly related. A guest post today on John Menadue's Blog [b]Bruce Duncan. The Coalition: how to lose friends and alienate people[/b] http://johnmenadue.com/blog/?p=1920 had me nodding in agreement. Among the many gems in the post this raised more than just a wry giggle: [i]Mr Hockey’s budget has created a toxic reaction for its astonishing unfairness to the most vulnerable groups, ... Election promises were broken like plates at a Greek wedding. Even many Liberal supporters were dismayed at the brazen effrontery of this. If you haven't come across John Menadue's blog [b]Pearls and Irritations [/b][i] The Pearl is the Irritation of the Oyster [/i] I highly commend it.

Ken

2/07/2014DMW You raise some interesting points. I think the use of the salary cap in our sports may be an Australian thing because we still have something of our egalitarian beliefs left. The AFL also uses the 'draft' where sides who finished lower on the ladder the previous season have the first picks. It is obviously a restraint of trade on the individuals but no-one has challenged it because it helps make the competition fairer (and more even over time). The key one is the attitude that wants smaller government but more spending. I think part of the problem here is that people don't trust government to spend on the things they want money spent on. When government has announced "levies" for specific purposes, such as the gun buy back or the Queensland floods and more recently the NDIS, there tends to be little opposition. My view is that people are wiling to give more to government if they know what it is beig used for. What people object to is the money going into consolidated revenue and you still end up with decisions like the recent budget cutting welfare and government support -- why would you want to pay taxes if that still happens?? So I can see why there is an apparent paradox in the views. Lastly, as I said in the previous piece about 'experts', there will be a lot of debate about what should be done about inequality, even if there is a agreement that it is a problem. Unfortunately, we won't get agreement from this government (that is discussed in Part 2 of this piece, so you will have to come back for that. :-)

2353

2/07/2014Casablanca, Ken & AA, No I haven't been ignoring you all - I've been travelling for work. It seems I have a challenge - to put 1500 or so words to either of the suggested titles. I'll start doing some research! TT - If you ask a native French speaker about the American (or even French Canadian) accent when trying to pronounce a French word, they will tell you it will never be done correctly - 'it sounds horrible'!

Ad astra

2/07/2014DMW Thank you for your comments and links, which I enjoyed reading. I shall play the audios tomorrow. Abbott and Hockey ignore what the experts say and press on regardless with their neoliberal economic rationalist ideology that looks after their coal mining mates. Their behaviour is grotesque, yet they are unapologetic.

DMW

3/07/2014Hi All, with all the mentions of experts my cynical side can't resist reminding that expert can be defined as: [b]ex [/b] [i]is an unknown quantity[/i] and a [b]spert [/b] [i]is a drip under pressure[/i]. The second part certainly describes some of the conservative experts that are being trotted out lately. The New York Times has been running a series on its' Opinionator Blog titled [b]The Great Divide[/b] The last of the ten articles is [b]Inequality Is Not Inevitable[/b] by Joseph E Stiglitz who has been popping up on some of our tv screens as he tours Australia. It is a good and thought provoking read. You can get to all ten articles (which I am still wading through) at this location http://opinionator.blogs.nytimes.com/category/the-great-divide/ The Stiglitz article is at the top of the page with the first of the series at bottom. Some may have heard or read of the quote from Warren Buffet, who is one of the worlds' more well off people, that goes something along the lines of [i]There is definitely a class war and my class is winning[/i] Buffet has also made comments on the unfairness of the tax system whereby he pays less tax than his secretary. I was reminded of that as I read the following article by another very well off American who you may never of heard of, Nick Hanauer, who, among other fruitful ventures, provided seed capital for Amazon who I am sure most of us have heard of. In the current issue of [b]Politico Magazine [/b] Nick has written [i]The Pitchforks Are Coming… For Us Plutocrats [/i] a no holds barred warning to his fellow rich folks unless they change, and soon, there will be BIG problems for the 1%. Heady stuff that I really enjoyed. You will find it at http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014_full.html#.U7QXNJSSzHQ

Michael

3/07/2014The Thug, The Thief, and The Liar. Let's look at how Abbott and his mob work in just the last week. Thug Morrison seems ready to apply/has actually initiated the refoulement of Tamil refugees 'home' to possible torture and other ill-treatment. Illegal, and likely to lead to Australia being brought before international tribunals for acts directly leading to the death and physical abuse of individuals this country is obligated to protect. Thief Cormann secretly restores financial advice regulations that allow banks to steal their clients' money through depradation of fees and bonuses. Thousands of Australians skimmed by other Australians working for Australian companies who are supposed to owe their Australian clients responsible and non-exploitative treatment. Liar Abbott... well, any time he opens his mouth, but most likely recently refusing to come clean on means testing of the childcare rebate... by asserting there would be no means testing of the childcare rebate, which in Abbott-speak means, expect that there will be means testing of the childcare rebate, you just didn't hear him correctly. Meanwhile, slightly lower under the radar, Brandis, Dutton, Joyce, Truss et al et al et al tinker and smash their way through the dismantling of government for the people.

Casablanca

3/07/2014DMW Janet beat you to it with the link to that excellent article by Nick Hanauer (See June 28. 2014 09:19 AM - in comments on 'Who's Right?') http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014_full.html#.U7S5CLGIiSp Thanks for the links to The Great Divide. Most of the articles resonate with what is happening here in Australia. http://opinionator.blogs.nytimes.com/category/the-great-divide/

Casablanca

3/07/2014 [b]Here's the agenda for this week's 'Senator Kindy'[/b] Harrison Polites 1 July, 2014 Australia’s new senators are about to take their seats, but not before they go through ‘Senator Kindy’. That’s the name being given to a two-day training course that is set to prepare our 12 new senators for life in parliament. It’s taking place later this week. Today marks the first day that the new Senators are able to move into Parliament House. So, what’s on the agenda for Senator Kindy? Well, thanks to the Liberal Democrats' David Leyonhjelm (who coincidentally used to write for us), we’ve acquired a copy of the agenda for the two-day orientation program. We’ve included it below with some explainers to help with the political jargon. http://www.businessspectator.com.au/article/2014/7/1/politics/heres-agenda-weeks-senator-kindy?utm_source=exact&utm_medium=email&utm_content=809426&utm_campaign=kgb&modapt=

2353`

3/07/2014DMW - to demonstrate your point "Tony Abbotts Changes To Universities and Health a Crime Absurd-says Nobel Prize Winning Economist Joseph Stiglitz" http://www.brisbanetimes.com.au/federal-politics/political-news/tony-abbotts-changes-to-universities-and-health-a-crime-absurd-says-nobel-prize-winning-economist-joseph-stiglitz-20140702-3b8ue.html

DMW

3/07/2014Hi Casa, Smart girl that Janet - and I hear she keeps excellent company with the likes of your good self and, well, I am often slow on many things :) I have to admit I was slightly out to lunch from Thursday thru to Monday and missed a fair bit. When I get time I am going to invent a little app so that if anyone posts a link that someone else has already posted it blows a raspberry or gives a big gong ... ... maybe I won't cos I would get too many raspberries :)

Bacchus

3/07/2014DMW, With links like that one, I'd rather see it appear 20 times than not at all ;-)

Casablanca

3/07/2014DMW An app would be good! Bacchus Agree and I had meant to re-post it here after the current article was bedded down.

DMW

3/07/2014Hi Bacchus, did I tell you about the great article on ... I get what you mean and raise a glass in thanks for your comment (a fine port at the moment)

Michael

4/07/2014http://www.smartcompany.com.au/growth/economy/42676-abbott-flags-significant-new-policy-with-private-businesses-at-the-heart.html Abbott said. “We are not a mean or petty people and we will not be a mediocre nation.” Jacqui Lambie got it just right - Abbott IS a political psychopath.

Michael

4/07/2014Coconut Warren Mundine displays yet again just how deeply he has sold out his Aboriginal heritage in sucking up to Abbott and his gumnint of unredacted troglodytes: Abbott: “Our country is unimaginable without foreign investment. “I guess our country owes its existence to a form of foreign investment by the British government in the then unsettled or, um, scarcely settled, Great South Land,” he said. The head of the Prime Minister’s indigenous council, Warren Mundine, who was in the audience, said: “I did raise my eyebrows, and we could all do with a bit more education on this but, I know his heart is in the right place." http://www.theaustralian.com.au/national-affairs/policy/australia-unsettled-before-british-arrived-tony-abbott/story-fn9hm1pm-1226977438408 Australia was "unsettled"???!!! The return of 'terra nullius', which translates as, "Aborigines, sure, but there were no PEOPLE in Australia before white settlement." Mundine "knows" Abbott's heart is in the right place. I'm sure Mundine knows where his own tongue is, too.

Casablanca

4/07/2014 [b]Abbott government needs to acquire an empathy gene[/b] Michelle Grattan, "What is offensive about this government is not that it is pursuing tough policies, but that is it trashing accountability in the most cavalier manner and lacks empathy with so many people, from incarcerated asylum seekers to financially stretched Mr and Mrs Suburbia." http://theconversation.cmail1.com/t/r-l-mljlydy-trhltityg-i/

Ken

4/07/2014Michael Too true. I also picked up that reference by Abbott. The man who said he wanted to be the [u]Prime Minister[/u]for Aborginal affairs and can still come out with statements like that. He just doesn't learn. He manages to convince us day by day that he is even more stupid than we thought.

DMW

4/07/2014Thanks Michael, for such a short article there was an overload of puke making Loved this bit: [i]The Prime Minister pointed to key reforms being pursued by the government including the [b]National Broadband Network[/b], the proposed free trade agreement with China, a white paper on tax reform and a [b]Productivity Commission report on how workplace changes might improve productivity[/b].[/i] Hay-soos bleedin Car-ryst 'his' NBN is better described as DEform, and a FTA with china which if previous FTA's are any guide will sell us up and down the Yangtze River. How a white paper is actually a reform in itself tortures any logic that I have ever known and well, what can one say about a PC report into Productivity, one can only hope that they listen to the likes of Stiglitz and Hanauer but I ain't holding my breath on that one

Ken

4/07/2014DMW Yes, on past performance the PC will come down on the side of 'greater flexibility' in workplace arrangements, meaning lower wages or at least a watering down of conditions which effectively results in lower take home pay. Have any of that mob (including bosses, CEOs and the LNP) ever considered that productivity can be increased by encouraging and supporting workers. They seem to adopt that view in respect of themselves: CEOs are encouraged by being offered huge bonuses if they succeed (and even when they don't). I know there are many overseas companies that have brought workers into the structure of the company but it seems as rare as hen's teeth here in Australia. The usual one rule for them and another rule for us, really gets up my nose. I can sort-of half-forgive a right wing b*** if he applies his bastardry consistently, but they never do.

Bacchus

4/07/2014Ken, This seems like a pretty good analysis of Australia's productivity - from the McKell Institute: http://mckellinstitute.org.au/wp-content/uploads/2012/11/McKell_Productivity_Report_A4.pdf "[quote]they find that many recommendations suggested to improve productivity, such as the further deregulation of labour and capital markets, are recommended in the absence of evidence that they will actually increase output. Instead, they seem to be solutions in search of a problem. The low road of cost-cutting, lay-offs and cuts to working conditions will not deliver sustained productivity growth. Rising unemployment through mass lay-offs and the creation of a working poor in Australia through the erosion of workplace protections are very real risks if we take the productivity low road.[/quote]" In short, exactly the opposite of where Abbott, Hockey & Co. are taking us...

Bacchus

4/07/2014DMW, "A fine port ..." Something I haven't indulged in for a very long time - perhaps I should while we still have these cooler nights. :-)

2353

4/07/2014Abbott says that Australia was 'unsettled' before 1788. Just wrong -> http://www.buzzfeed.com/jennaguillaume/this-is-how-unsettled-australia-was-before-the-british

Ken

4/07/2014Bacchus Thanks for that link. I have saved it to read in full at my leisure. It is giving me ideas for another piece but I don't have a full article in my thougths yet. The quotes you provide make the point. We have so many pushing for the low wages, low cost approach, and too few are suggesting encouraging workers and growth. As the bloke linked with Amazon said: if you pay workers more, they consume more, and that leads to growth and more profits for business. Why can't the idiots see that -- because they are idiots!

jaycee

4/07/2014Was out all day, just got back to read of Abbott’s latest gormlessity…; “Australia unsettled before…”…..how does one respond to such witless commentary?….even in silence, the agony of his blind stupidity is heartbreaking!

Casablanca

4/07/2014[b]New senate reality now showing in a parliament near you[/b] Judith Ireland July 4, 2014 If you were casting a reality TV series, you would be hard pressed to improve upon the group that has assembled in Canberra this week...Usually in reality programs, the voting occurs throughout the series, with the audience forcing those they don’t dig off the show. With the Senate, the voting has already happened and the cast is here to stay for six years....So like it or not, the government will need something more than bravado and crossed fingers to get the upper house show rating in its favour. http://www.canberratimes.com.au/federal-politics/political-opinion/new-senate-reality-now-showing-in-a-parliament-near-you-20140704-zsvwc.html#ixzz36VDXmrAu

2353

5/07/2014From Facebook (sorry) but relevant to the discussion here. https://www.facebook.com/OccupyWallSt/photos/a.187967227937716.47329.184749301592842/713855365348897/?type=1

jaycee

5/07/2014Upon reflection on Abbott’s ” unsettled before…” comment…I have to concede that as a politician, Tony has settled quite comfortably, without any serious media examination, into the space of his own mind….it is a vast space, inhabited only by echos…echos bouncing back from a by-gone era…..there is a bit of Jesus there, along with idle bits and pieces of intrusive pornography..mostly of the S&M. kind…and a lot of parental words of worship..and LOADS of British imperial history….it’s the last that he draws his singular philosophy from..and it is that that makes his comments so wincingly “Colonel Blimpish”…..I suspect that when his allocated time as PM. is over, he will, like that “Prince Leonard” chappie in WA. attempt to secede his house and grounds from the commonwealth…..; “Prince Tony and Lady Margie “….

Janet (j4gypsy)

5/07/2014A wave, and I don't know if this is a link to something that has been posted before - but it's critical analysis on 'risk managing' climate change strategies: [i]Sir Jack Pratt @Jackthelad1947 Ian Dunlop (Former chair, Australian Coal Association) warns billions will die & gets no #MSM coverage?? #Auspol WTF? http://www.breakthrough2014.org/#!ian/c2048[/i] Do listen. Also note that there are 'Bust the Budget' marches in most capital cities tomorrow, Sunday. Feet-on-the-ground protest is growing and growing.

42long

5/07/2014Mundine will find out that the abbott only USES people, and the Liberals in power have never worked to improve the lot of our first people. All real progress was under Labor and it won't change with this bloke.

Ken

5/07/201442long Glad you've got things working. Yes, there won't be much joy for Aboriginal and Torres Strait Islander people under this government. Unfortunately, there wasn't much under the Ruddand Gillard Labor governments either. Rudd made the apology, a meaningful symbolic gesture but that was all it was. I was still working in the area at the time and very little changed after the fall of Howard -- most of the policies from the Howard years continued, occasionally with a little tinkering at the edges but no meaningful changes or advances. Hopefully the next Labor government will do better.

TalkTurkey

6/07/2014smh.com.au ‏@smh · 26m How Scott Morrison made two boats carrying Tamil asylum seekers "disappear". http://ow.ly/yNWY2 What has my country come to? We are now in the position of the pre-WWII German people who saw the Gypsies being rounded up and enslaved - or liquidated - and did nothing to stop it. Though many must have wanted to, no-one had the power to stand in Hitler's way. Comrades this is a real war with an egomaniac at its head. It threatens our society & lifestyle, our economy, and our place in world standing. It can only be stopped by standing in Abborrrtt's way. There's MARCHES all over Australia today, (Bust The Budget is its theme) - Be there if you can. 

Ken

6/07/2014Stumbled across this quite by accident. Written back in 1999, it is a fascinating insight on neo-liberalism (or economic rationalism, as we call it)and what it means for society and democracy. First a quote and the link is below. [quote]On the other hand, to be effective, democracy requires that people feel a connection to their fellow citizens, and that this connection manifests itself though a variety of nonmarket organizations and institutions. A vibrant political culture needs community groups, libraries, public schools, neighborhood organizations, cooperatives, public meeting places, voluntary associations, and trade unions to provide ways for citizens to meet, communicate, and interact with their fellow citizens. Neoliberal democracy, with its notion of the market uber alles, takes dead aim at this sector. Instead of citizens, it produces consumers. Instead of communities, it produces shopping malls. The net result is an atomized society of disengaged individuals who feel demoralized and socially powerless.[/quote] http://www.chomsky.info/onchomsky/19990401.htm

Casablanca

6/07/2014[b]This Is How "Unsettled" Australia Was Before The British Arrived In 1788[/b] Apparently, Tony Abbott needs to brush up on his history. http://www.buzzfeed.com/jennaguillaume/this-is-how-unsettled-australia-was-before-the-british

42long

6/07/2014He is certainly NOT the suppository of all knowledge. In fact he appears ignorant on many important matters. Not Prime Minister material. A pox on the Party that foisted this fraud upon us.
What does two plus 1 equal?