I apologize in advance, because I am going to talk about a book that I have not yet read. To be clear, I intend to read Thomas Piketty's "Capital in the Twenty-First Century." It is sitting on my (virtual) bedside with a big stack of other (digital) books that I intend to read. But it's far down in the queue, and I'm afraid that I can't wait to weigh in -- not on the book itself, but on its topic. How much does inequality actually matter?
According to many of the book's reviews, inequality is about the most important thing that is happening in the world, and thus, Piketty's book is one of the most important publishing events of this year, or any year. Our own Clive Crook rounds up some of the glowing reviews:
Martin Wolf of the Financial Times calls it "extraordinarily important." Paul Krugman, writing in the New York Review of Books, says it's "truly superb" and "awesome." Branko Milanovic, a noted authority on global income disparities, calls it "one of the watershed books in economic thinking." Even John Cassidy, in a relatively balanced appraisal for the New Yorker, says "Piketty has written a book that nobody interested in a defining issue of our era can afford to ignore."
For a somewhat more skeptical take on the book, I suggest you read Clive, and Tyler Cowen, and Scott Winship. What I want to quarrel with is not the book's methods or conclusion, but with the general idea that income inequality is the most important thing going on in the world. In terms of how it matters to lived human experience, I doubt it even makes the top 20.
I am not disputing that something unhappy is going on in the global economy. Nor am I disputing that this unhappiness is unequally distributed. But the proportion of this unhappiness due to income inequality is actually relatively small -- and moreover, concentrated not among the poor, but among the upper middle class, which competes with the very rich for status goods and elite opportunities.
If we look at the middle three quintiles, very few of their worst problems come from the gap between their income and the incomes of some random Facebook squillionaire. Here, in a nutshell, are their biggest problems:
- Finding a job that allows them to work at least 40 hours a week on a relatively consistent schedule and will not abruptly terminate them.
- Finding a partner who is also able to work at least 40 hours a week on a relatively consistent schedule and will not be abruptly terminated.
- Maintaining a satisfying relationship with that partner over a period of years.
- Having children who are able to enjoy more stuff and economic security than they have.
- Finding a community of friends, family and activities that will provide enjoyment and support over the decades.
This is where things are breaking down -- where things have actually, and fairly indisputably, gotten worse since the 1970s. Crime is better, lifespans are longer, our material conditions have greatly improved -- yes, even among the lower middle class. What hasn't improved is the sense that you can plan for a decent life filled with love and joy and friendship, then send your children on to a life at least as secure and well-provisioned as your own.
How much of that could be fixed by Piketty's proposal to tax away some huge fraction of national income from rich people? Some, to be sure. But writing checks to the bottom 70 percent would not fix the social breakdown among those without a college diploma -- the pattern of marital breakdown showed up early, and strong, among welfare mothers.
Writing checks to the bottom 70 percent would probably alleviate some of the worst stresses of being a single mother -- but even in Scandinavia, the children of single parents still don't do as well as children raised in intact households. Similarly, an unemployment check eases the financial stress of joblessness, but not the psychological pain of being out of work. To the extent that it helps people to stay on the dole and look for a perfect job that doesn't exist, it may make people less happy, not more so.
Writing checks to the bottom 70 percent will not prevent a factory from moving to China or find meaningful replacement work for the 50-year-old accountant who has been there for 20 years. It will not bring back the feeling that you can expect each year to be better than the last in tangible ways.
We hear a lot about minimum-wage workers and their problems, which are all too real. But the problem for minimum-wage workers is not that fast food and retail jobs don't pay well; they never paid well. The problem for these workers is that they can't get a regular schedule or full-time hours, because owners now use advanced software to minimize their labor costs at maximum inconvenience to low-wage workers. The problem is that owners can get away with this, demanding that workers make 60 hours available in order to pick up 25, because there are fewer and fewer better jobs that you can move on to with minimal education. And that in this dreadful job market, many of them are trying to support a few kids and maybe a laid-off sibling with what one person can make selling ultracheap food. This was never remotely feasible. But the breakdown of families and the low-skilled labor market mean that an increasing number of people are trying to pull off this impossible feat.
Writing a check will let a high-school dropout sit at home with her three children, but it will not make her employable at something better than McDonald's. It will not create a more hopeful future for those children.
The government can spend a lot more money on social programs, and that might or might not make people somewhat happier. But when you look at places where a large percentage of the people are completely dependent on government benefits, you don't really see a great explosion of human flourishing. Nor do I think we would see it if only the checks were larger. Checks do not fix the psychological pain of unemployment or the emotional deprivation of single parenthood. They do not increase social cohesion. They don't even necessarily cut down on crime; while you'd think there would be an obvious connection between economic conditions and crime, apparently there isn't.
Writing checks certainly won't offer a more hopeful future to the middle class. Middle-class parents aren't worried that their kids will starve or freeze to death. They're terrified that their children will not enjoy the security that their parents had. I'm not making light here: That's a real terror. You used to be able to feel that when you had gotten your kid through high school or college without a major substance-abuse problem, you'd done much of what was needed to launch a successful adult. Now that seems like barely a start.
But how much better would parents feel if a technocrat came along and said, "Your child will never have a real job that conveys status and belonging and some feeling of contributing to society. He will, however, have an annual check for $20,000 a year and government-sponsored health insurance"? Your kid would have to be a very deep screwup indeed for that to be much consolation. A check fixes deep deprivation that middle-class parents aren't really worried about. It doesn't do a thing to make sure that your kid has a respectable job and a solid community to raise her kids in.
We could, I suppose, take these huge taxes Piketty wants to levy and put them into government make-work programs from which you cannot be fired. But as Cowen points out, doing so might slow productivity growth still further. Or even take it backward. And how much satisfaction will people derive from going to the office to fill a job that isn't really needed? I'm sincerely asking; I have no idea. I would, however, want a pretty good answer before I'd start with the massive wealth taxes.
I suspect that Piketty's plan would actually work best for the pretty well off. It would knock the consumption of the ultrawealthy down to the consumption of a professional near the top of his field, who earns a large income but has comparatively little wealth. Because those people are being priced out of top schools and delightful real estate by people who can afford to have a nice apartment in five different world cities, they would strongly benefit from this plan.
But a recently-laid-off accountant in Duluth probably still wouldn't have the same shot at Harvard for the kids or a nice apartment on Riverside Avenue as a Columbia professor does. Nor would a food-service worker in East New York. I can imagine any number of policy changes that might help those people. But very few of them would start, much less end, with a check.
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