Globalization

The EU Commission’s investigation After a three-year investigation, on the 30th of August 2016 the European Commission has concluded that Ireland should recover up to €13bn (£11bn) from Apple. The…

Commercial property sector in UK after the Brexit referendum The UK’s choice to leave the EU triggered great instability on the financial markets resulting in currency value shocks and asset…

The agreement On the 5th of July, just a few days after the UK expressed its intention to regain trade negotiation autonomy with the Brexit referendum, the EU has found…

Thomas Piketty’s book “Capital in the 21st century” was dubbed as “blockbuster”. But for a group of French intellectuals under the lead of IREF, a free market institute in Paris, it was important to demonstrate that the French economist’s “Capital” did not deserve its commercial success. “Anti-Piketty” is a collection of essays by renowned international economists and historians, critical of Thomas Piketty’s volume.

How do you make a credible list of countries whose tax policies you don’t agree with? Do you ask only half of your members, let them decide their own criteria, and have it approved by a few interest groups? If you are the EU, then yes.

Transatlantic Trade and Investment negotiations are resuming. Popular support varies across Europe, we identify four distinct groups. Removing trade protectionism will generally benefit ordinary people. However, some protectionism may increase, especially in investment chapters. If governments rather give in to corporations than risk being sued by them frivolously, corporatism will strengthen, not weaken.

Only two countries remain opposed to QE, although even they realise that measures about to be implemented are QE in all aspects but the name. Meanwhile, ground is being prepared for ECB to shift blame if “unconventional stimulus” ends up not working.

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Russian sanctions work. Or so we are led to believe. However, it would be a mistake to underestimate the preparedness of EU banks (and bankers) to sidestep official sanctions and participate on the market. After all, Russia’s collateral may be sounder than that of EU governments…

Scotland’s coming referendum is offering the country “independence”. Politicians cannot agree about what exactly it would mean, especially what currency the new state would have. Now an economics Nobelist has added his voice to the debate. At face value the question of adopting another country’s currency is very simple, but closer scrutiny reveals deep fiscal connotations which complicate things. IREF disentangles the debate.

Two years ago, prof. Vani K. Borooah published a working paper for the IREF with the warning title “When the Lights Go Out“. We are pleased to announce that the working paper has been since extended into a fully fledged book, now published by Palgrage Macmillan.

In his new Capital in the 21st century, as forbidding as his previous work on High Wages in France in the 20th century, Thomas Piketty presents a mass of data on asset growth in several European countries and the United States. This information improves the knowledge of our society’s relationship to capital and the divide between the richest and the poorest. Except that the author abuses these data, following 19th century scientific materialism.

Like Marxist authors, he endeavours to transform his discourse into a scientific demonstration. He wants not only to convince, but to hit home his own truth, supposedly grounded in the mathematical formula that he presents. Granted, he states that “we should be wary of any economic determinism in this matter” (p. 47), but he uses econometrics to announce the expected wealth distribution in the 21st century, as if there were little or no risk of making mistakes.

And his claim is that the divide between rich and poor will inevitably widen, although he admits that the opposite took place during the 20th century. He extrapolates trends, as did Malthus in the 18th century or the Rome Club in the 1970s to predict that the world would die of starvation. He questions Kuznets’s inequality bell curve, sketching trends that ignore human action. He notes that “Marx totally ignored the possibility of technical progress and continuous productivity growth” (p. 28) in his theory of infinite capital accumulation killing off capitalism, but on the other hand he reproduces a theory of constant wealth growth.

Abstract:

– Thomas Piketty presents statistical graphs in the manner of Malthus in the 19th century or the Rome Club in the 1970s

– Piketty’s theory of boundless wealth accumulation does not withstand factual analysis

– There is first confusion between capital (productive, financial and real estate) and negotiable assets

– Thomas Piketty claims that for the past 20 centuries, the asset rate of return is 4 percentage points above the rate of economic growth

– But how could he possibly obtain such data for the past 2,000 years? This is absolutely impossible

– Further, and contrary to what he claims, the average asset rate of return of households cannot be higher than the rate of economic growth

– If Piketty’s calculations were accurate, then the wealthiest 1 per cent would own all available assets by 2016!

– Piketty’s calculations are wrong because he ignores reality: the economy is not a zero sum game, capital is saved, reinvested or even wasted; social mobility is extremely important and inequalities are not set in stone