Thursday, April 24, 2014

when r > g

If you are seeking amusement, take a look at the critical responses in the Wall Street Journal's editorial pages to the publication of Thomas Piketty's Capital in the Twenty-First Century.  As might be expected, the WSJ commentators are not economists but rather business-schooled money managers.  Their arguments either ignore the inequality issues raised by Piketty or claim that obscene levels of compensation for CEOs have no significantly deleterious effect.  Much of the verbiage is devoted to an attempt to portray the French economist as a doctrinaire anti-capitalist Marxist.

What the WSJ folks do not do is to look at the central claim made in Piketty's work:

"Piketty uses a simple formula to illuminate the dynamics at work. Inequality tends to rise, he argues, when the average rate of return on capital exceeds the economy’s growth rate (or, as he puts it, when r > g)...

...Per capita growth for developed economies, Piketty believes, has settled at approximately its maximum sustainable rate, around 1 percent annually. That was enough to make people in the nineteenth century feel they were caught in perpetual revolution, but judged by the best of the twentieth century, or China and India today, it seems positively anemic. With growth reduced, escalating income inequality is all but inevitable without aggressive policy intervention."

Those are the words of Timothy Shenk in an extraordinarily articulate article in The Nation, in which the writer presents an analysis of Piketty's work in the proper historical context, which is totally lacking in the WSJ critiques.

Wednesday, April 16, 2014

Mother Jones vs Mother Martinez

There is a  long article penned by Andy Kroll on the Mother Jones site about New Mexico Governor, Susana Martinez.  The piece has been linked to from Alternet and Huffpost and will get a lot of national attention.  The article makes use of a lot of intercepted conversations and emails from inside the Martinez machine, and it is likely to make the Martinez camp very nervous.  It will be interesting to watch how they combat the allegations of the article without calling more attention to the source.

It seems to me that Kroll has made an error in trying to characterize Martinez as the next Sarah Palin.  The Gov may be sketchy on policy detail, but she clearly is not an air head.  She and her handlers have been very adept at managing her media image.  Martinez has a bigger war chest already than all of her potential Democratic Party gubernatorial rivals together.  She has not hesitated to do effective hatchet jobs on rivals in her own party, but she has also not done anything that seriously harms her with the Tea Party wing of her party.  At the same time, Martinez has put considerable effort into ingratiating herself with the Republican mainstream, and she has been embraced by both the big names and the big funders.

Martinez currently has New Mexico approval ratings in the 50-60 per cent range.  It is hard to see how she might be bested in the upcoming Governor's race in the absence of some major scandal revelations.  While it may be hard to imagine anyone would take her seriously as a presidential candidate, when you look at the electoral history of the last couple decades, it is clear that there is a very low bar for aspirants to the second place on the ticket.