Barron’s editorial page editor contrasts progress with progressivity

As the subheadline of Thomas Donlan‘s latest Barron’s editorial commentary explains, “Growing inequality is not as dangerous as doing something about it.”

On the day that Americans faced a deadline for filing their tax returns, a French economist came to Washington, preaching against the growing global inequality of wealth and income. He suggested that, to redress this intolerable grievance, the U.S. and all the nations of the world should levy a progressive income tax with a top rate of at least 80% and an annual wealth tax of 5% or more.

Thomas Piketty, author of the widely acclaimed new book, Capital in the Twenty-First Century, offered an exegesis of his historical research and his conclusions. …

… The prices of food and goods have been falling for more than a century, and citizens in every industrialized country live longer and better than their great-grandparents’ generation, but Piketty is magnetically attracted to facts about how much faster income and wealth were obtained at the top of society.

In 1910, Piketty reports, 90% of the wealth of the British and French empires was owned by 10% of the population. The wealth of the German, Austrian, Russian, Turkish, Chinese, and Japanese empires was distributed less widely. The Latin American republics and the minor countries of Europe and Asia shared the general lack of equality. The U.S. was just a little less unjust, a little bit behind the trend in other countries, but its destiny was the same.

A grotesque solution to the gross inequality of 1910 was on the horizon: World War I destroyed large stocks of wealth and killed millions of people who might have created more. It left most of the nations of Europe—and the members of their capitalist classes—deeply in debt. Some tried to pay what they owed; others wiped out capital with revolution and inflation. Neither strategy worked. Both helped bring on the Great Depression, which obliterated more wealth and deeply depressed returns on investment. Then, World War II vastly extended the destruction of capital beyond the battlefield, levelling factories and whole cities with aerial bombing.

Piketty is not the first to notice that in the period after World War II, inequality was at an all-time low in the developed world. But he goes further than most: In seeking the result so much, he admires the means. …

… A better reading of history, noting the practical failures that befell mass democratic movements in National Socialist Germany, Soviet Russia, pre-Deng China, postcolonial Africa, and other exemplars, produces another warning to the comfortably debt-ridden mixed economies of Europe and North America: If you fear a tyranny of wealth concentrated in a few hands, fear also the tyranny of majorities with no respect for property.

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