Saturday, September 24, 2016

Equal is Unfair: The Commentary on the Egalitarianism of Thomas Piketty

Equal is Unfair
Don Watkins and Yaron Brook

In the last 60-years, the sword of egalitarianism has cut down the lives of millions in many third world countries, but the egalitarian idealists avoid falling on the sword of their own ideology as they operate out of the safe spaces in Western countries.

In my earlier article on Equal is Unfair, I look at the book mainly from the angle of its discussion on how the egalitarian insistence on equality led to Cambodia's Khmer Rouge nightmare in which one-fourth of the country’s population was slaughtered in just four-years.

But the focus of Equal is Unfair is not on the mass-murdering organizations such as Khmer Rouge. Written in a polemical style, the book offers detailed critique of the works of several influential egalitarians—one of them being the French intellectual Thomas Piketty. In this article, I focus exclusively on the book’s commentary on Piketty’s ideas.

In his bestselling work, Capital in the Twenty-First Century, Piketty has ignored the production problems and placed the distribution problems at the heart of economics. In the name of fighting inequality, he has proposed an annual global wealth tax of up to 10 percent, and a top marginal income tax rate as high as 80 percent.

Don Watkins and Yaron Brook point out that for many egalitarians even such a confiscatory tax regime does not go far enough. “There are critics of economic inequality who are largely indifferent to its impact on opportunity and want to level down society even if it means crippling economic progress.”

Piketty accepts that inequality is not necessarily a bad thing, and it can contribute to economic growth. But economic growth is not his concern, equality is. He wants to fight inequality through a confiscatory tax regime even though such taxation will wreck the economy. He has given lot of data to prove that inequality is rising.

Don Watkins and Yaron Brook point out that there are several flaws in Piketty’s data, and that despite high inequality majority of Americans are leading better and better lives. The real prices of the goods that we buy today are “far lower than they were in the 1970s, contributing to a dramatic rise in the average American’s standard of living.” Also we have access to facilities like Skype, FaceTime, Google Maps, Wikipedia, etc., which add immense value to our lives.

Piketty declaims that the salary of the top managers in companies is too high. But Don Watkins and Yaron Brook argue that it is for the owners to decide what the salaries should be. Even if it is true that the compensation of the top level management is too high then this problem could and eventually would be solved by the free market.

Egalitarians want to impose their own views of what constitutes fair pay. They think that they, and not the shareholders, should have the power to decide how a business handles it finances.

The key point that Piketty has made in Capital in the Twenty-First Century is that there are certain flaws in capitalism that cause wealth to accumulate in the hands of unproductive heirs rather than value-creating entrepreneurs.

Don Watkins and Yaron Brook argue that Piketty’s propositions on wealth inheritance are not based on laws of capitalism or economics—it is just pure speculation. They also point out that the egalitarians are invoking a collectivist framework when they suggest that wealth belongs to society and must be used for “social benefits.”

When the egalitarians like Piketty talk about a social system with equality, they do not mean equality of rights, they mean equality of results. They believe that individuals do not earn their success because success is dependent on luck. Piketty has said in his book that the government must seek to reduce inequalities as much as possible because success mainly comes from factors such as inheritance, cultural capital, etc.

Don Watkins and Yaron Brook look at the careers of few celebrated industrialists and present a full picture of the vision, work, and planning that is required for creating a fortune. They point out that “human capital is primarily intellectual, and it consists, not of creation ex nihilo, but of building on the achievements of others and taking them further.”

The egalitarians don't plan to uplift mankind, their agenda is to “destroy values as an end in itself.” Piketty acknowledges that the confiscatory wealth tax and inheritance tax will not help lift up those below the top. He accepts that the very high tax brackets will not yield much revenues to the government. “The point,” Piketty says, “is to put an end to such incomes and large estates.”

The aim of Piketty’s egalitarianism is to destroy the rich without any hope of helping the poor. This is nihilism of the worst kind and it will ultimately lead to the destruction of both, the so-called rich and the poor. Equal is Unfair is a good book to understand why we must not believe a single word that these egalitarian intellectuals say.


Book Review - Equal is Unfair by Don Watkins and Yaron Brook

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