Globalization

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

European nations’ fiscal authorities must be doing an excellent job if people are willing to pay hundreds of thousands of euros for the privilege to pay taxes to them… Or is there something else behind the new market for EU citizenship?

In which country would you live best? In France, amid interventionist politicians and cocooned by a Big Government? Not at all… The last OECD data about the well-being in the…

Globalization is often associated with delocalization and unfair competition with emergent countries that are flooding us with cheap goods and services regardless of good environmental practices or social benefits these populations should enjoy, like in rich countries. Beyond this spurious assessment hinge the even more fallacious concept of reciprocity that justifies a new form of protectionism and trade tariffs. The last blow to international trade stems from Brussels and its decision to tax imports of Chinese solar panels – from 37% to 68% – even though this could beget a trade war.

The IREF’s aim is to defend and promote economic freedom and fiscal competition. Our aim goes against the OECD’s last study that was commissioned by the G20 and called “Addressing Base Erosion and Profit Shifting”. It will be presented on February 15th at the G20 Summit in Moscow. The OECD claims that “global solutions are needed to ensure that tax systems do not unduly favour multinational enterprises, leaving citizens and small businesses with bigger tax bills.”

By Jacob Arfwedson

For global capitalism to reach optimal eclosion, there are several basic conditions:

– the right to be wrong, i.e. the right to fail which is inherent in and necessary to any entrepreneurial activity.

In an interview with the Guardian, Madam Lagarde says it is time for Greece to pay back and insists on the fairness of it – “Greeks have to pay taxes now and assume their past mistakes,” she says, adding that “As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time”. If her mathematics is somehow correct, she obviously doesn’t think about those who did not participate in the government’s wasting of money and find themselves today on the same boat with all the others.

In March 2010, when the Greek debt crisis was heating up, then-ECB president Jean Claude Trichet declared to the EU parliament that the “monetary Union in Europe is far more than a monetary arrangement. It is a union of shared destiny”. Less than two months later the ECB reversed its refusal to monetize debt and openly started buying government bonds in violation of its own charta. Germany also gave up its reservations about bailing out other countries. A first aid deal for Greece was signed and, because that didn’t help for long, a Euro rescue package to the tune of € 750 billion was put in place.

France is famous for its wine, cheese and…unions. It is well established now that any reform considered by any government, left or right, has to be approved by unions (or, at least, not strongly opposed) in order to have a chance to be passed. Strange situation in a country where less than 8% of all employees have a union membership card–the lowest rate in the EU. Despite the poor legitimacy that such a low membership rate implies, unions are getting important grants and allowances from the state as well as from businesses.

A widespread understanding of the 2007-2008 crisis places the origins of the crisis in a capture of global economy by the finance industry. The “occupy Wall Street” group would surely agree, as well as most of those who get their economics from the general media. And President Sarkozy in his recent Toulon’s speech did confirm the thesis. If this understanding is correct then it is natural to call for further regulation of the finance industry. But not everyone agrees, and some economists favor another understanding.