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.

Getting to Democracy

Martin Pengelly at The Guardian recently called attention to a Wall Street Journal editorial which states:

"Egyptians would be lucky if their new ruling generals turn out to be in the mold of Chile's Augusto Pinochet, who took power amid chaos but hired free-market reformers and midwifed a transition to democracy."

Pengelly asks if the WSJ can get away with such advocacy for brutal dictatorship.  Of course, they can.

Meanwhile, back in Chile the current front-runner in the 2013 presidential election race is Michelle Bachelet who was previously the country's president from 2006 to 2010.  Bachelet, her mother and her father were all imprisoned and tortured by the Pinochet regime along with thousands of other Chileans.

During the first Bachelet presidency, the country made great strides in economic equality, education and public health.  Bachelet, a medical doctor, speaks Spanish, English, Portuguese, German and French.  Prior to winning the presidency, she served as Chile's Defense Minister and Health Minister.  After leaving the presidency, Bachelet became the first executive director of the United Nations Entity for Gender Equality and the Empowerment of Women.

Bachelet's presidency of Chile overlapped the second term of George W. Bush who spoke English as if it were his second language, and who led his country into the worst economic crisis since the Great Depression.

Bush's successor, Obama, has managed to squander whatever good will he built up during the run-up to his election, and is quite likely now held in lower esteem throughout Latin America than was Bush.