What Will It Take?

June 25, 2014

For some of us, it seems so abundantly clear that the high level of inequality in the US (and much of the world) is not what we want, and is not healthy for future generations.

But, there are many who are unconvinced. For some of them, they succeeded to the higher levels of income and wealth, whether through inheritance or their own talent (at least as they see it), and they don't see anything wrong with that--let others make their own way, if they have the determination--opportunity abounds in America. For some who haven't made it, there is the lure of making it, the belief that I too can be among those millionaires or billionaires, so let's not do anything to reduce incentives (e.g., raise taxes). For others of a libertarian bent, it's all about individual freedom and liberty, any any intrusion of the government into that right and privilege (including progressive taxation) is a form of taking away my liberty.  Some people believe that any diminution of incentives will seriously damage motivation, savings, investment, and/or economic growth.  There are some of the major arguments defending inequality.

The collective of resistance to doing anything is substantial. And, what with the rising power of wealth on politics and the sophistication of misleading advertising campaigns financed by conservative interests, the challenge to change is truly formidable.

Yet, studies show Americans are concerned and want something to be done about it.

If that's true, and in the meantime, nothing at all is happening, two questions must be answered:

1) How can the case best be made to persuade those in power and the public to aggressively pursue solutions? How can the wealthy be convinced?

2) And, what are the practical (considering politics) policy changes which can begin the process of at least slowing the continued increase in inequality, and, in time, arrest it and reverse it?

It seems there are two main elements which have the greatest potential, when considering possible overarching themes:  Clarification that changes will be gradual and will not take away any present wealth, just gradually reduce the amounts going to the higher levels of income and wealth in the future; and, demonstrating that such change can be in the best interest of the wealthy as well.

Some modest downward adjustment over time in inequality is in the best interest of the wealthy:

• Society becomes more enjoyable for everyone, not so divisive, fewer homeless, fewer on welfare, fewer protesting.
• While the results of actions to reduce inequality are disputed in regard to impact on growth, even conservative economists agree that if the actions are modest, the negative impact on growth is negligible.  A number of prominent economists argue that such actions will stimulate growth.
• You can choose a little more government now, or a lot more government later, when the underprivileged rise up.
• The potential of an eventual massive uprising, a revolution, chaos, redistribution, is averted.

What practical policy changes can be made? The operative word is "practical," and this makes the list short and limited. Political resistance and lack of international structures precludes a global wealth tax, as proposed by Thomas Piketty in his best seller Capitalism in the Twenty-First Century. Raising income taxes in the US can only be considered in narrow situations, and must be offset with spending cuts, due to our divided Congress. 

Important issues to focus on include measures to alleviate poverty, homelessness, affordable housing, improve health and education, and minimum wages in places where raising the minimum is justified (where the current minimum wage is well below the local median wage).  

At this time, given the gridlock in Washington, it may be more effective to work on these issues on a state and even on a county and city basis, as they come up. 

No action is simple and without it's political and financial costs. While it is regrettable that nothing major is feasible at this time, we must do whatever we can, until the pendulum swings to the left. It is very likely this will happen when things get sufficiently unpleasant, but we shouldn't complacently wait for that.

And, here is an unfortunate political reality: While many of us on the left do indeed sympathize with the pain that imposing costs on restauranteurs by raising the minimum wage and similarly on owners of apartments by rent controls--a hot issue in NYC today and always in San Francisco-- these kinds of impositions on the owner class may be one of the only ways to eventually convince the wealthy that something fairer and simpler could be done! There has to be motivation to move the pendulum to the left. It has a powerful constituency pushing it to the right.

Inherited Wealth--Is It a Problem?

June 21, 2014

Inherited Wealth--Is It a Problem?

Thomas Piketty's new book Capitalism in the Twenty-First Century argues that inherited wealth is a problem for our future.  A number of journalists and economists are taking exception with this, as well as other of his well documented and analyzed conclusions. The impact of wealth inheritance is one of the most significant of the concerns Piketty addresses. He recommends stronger progressive taxes on inherited wealth, but would be happier with an annual tax on all owned capital.

One of his critics is the very conservative economist Gregory Mankiw, Chairman of the Economics Department at Harvard. His disagreement on wealth inheritance is found in the New York Times of today: http://www.nytimes.com/2014/06/22/upshot/how-inherited-wealth-helps-the-economy.html?hpw&rref=business

Here is my understanding of Mankiw's arguments:

1. He reverts to the old argument that if we minimize tax on the wealthy, they will invest their tax savings (capital) in productive facilities, thus stimulating the economy and in the process, creating jobs for those who are not wealthy.  This is the conservative "trickle down" argument--the wealthy get richer and along the way, the rest of us get a little better off. Indeed, this has been a economic argument for sometime, and still has some adherents. It was promoted by Arthur Laffer with great aplomb during the Reagan era. However, this theory has lost a great deal of its support over time. For one thing, it fails to acknowledge that putting more money in the hands of the lesser privileged results in more consumption than putting more money in the hands of those who do not need more consumption (sometimes this is called the supply side vs. demand side argument). More consumption results in more investment and more jobs. For another, studies show that the choices of the wealthy do not now so clearly go to growth producing new companies and jobs. More often these days, the incremental savings of the wealthy seem to go into liquid investments.  It is not at all clear that an additional investment in the stock of a public company does anything for growing the economy or jobs.

2. He argues that increasing capital is subject to decreasing returns. This is true and Piketty devotes a great deal of study and attention to this issue in his book. Mankiw devotes one sentence to his statement of "fact," as if that closes the issue, implying that the diminishing returns will be falling dramatically, thus implying that the whole Piketty argument r > g is overblown, where r is the rate of return on capital and g the growth rate of the economy.  No one is arguing with the truism that when r exceeds g by 2 or 3 percent annually, wealth grows, rather rapidly. So, argument centers around whether r will decline. Piketty convincingly argues that diminution of returns is likely to be very slow to occur, decades away, if not centuries, before significant in the context of reducing the impact of wealth on inequality.

3. Then, Mankiw makes a final one sentence proclamation--that increased capital increases labor productivity, which inevitably increases labor's wages. This is an economic theory. But, if this is going to be true in the future, why hasn't the vastly increased capital across the last 30 years resulted in increased wages to labor? Why should that be different in the future, absent any policies whatsoever to gradually provide for slightly reducing inequality?

I am not an economist. I do not have a Ph. D. I did not graduate from Harvard, much less Chair the Economics department anywhere. I don't presume to say that I understand economics better than Gregory Mankiw.

But we can all understand issues when presented as Piketty explains. And, more indisputably, we can all see clearly what has happened to the US and the world since 1980.

Instead of defending the status quo, as inequality rises, why don't the critics explain just exactly why the world would not be better off with some gradual adjustment via taxes and other policies to make the world a little more egalitarian? No one is arguing for socialism, just a little more fairness.

What would be wrong with a progressive estate tax scheme, which might look something like this:
For inheritance over $1 billion, 95 percent tax (that leaves $50 million for heirs); over $500 million, 90 percent; over $100 million 80 percent, etc...under $5 million no tax. Or, smooth out these percentages to avoid unduly penalizing those who barely fall into the next highest tax category.  Or lower all the percentages by 10 percent, etc.

What would be so wrong with such a plan?  Or, better still, a progressive annual tax on all wealth (capital)--and here we could be talking about single digits in percentages.

Of course, additional policy would have to deal with gifts before death--to family (through complex tax avoidance trusts and partnerships) and to foundations. Foundational charity from the wealthy is wonderful, but it comes with two problems if it is to be considered the substitute for the withdrawal of government support to the underprivileged: The amount of philanthropy falls woefully short of what has been withdrawn by government; and, what is philanthropically given, in aggregate (with exceptions) goes first to universities, churches, etc., and a relatively small portion goes to needs of the poor. Incidentally, that which goes to universities is much more likely to go to Harvard or Stanford than to community colleges, as an example. So, that kind of philanthropy probably tends to widen the gap in opportunity between the privileged and the underprivileged.

It's hard to feel that most Piketty critics are objective. How much is professional jealousy, hoping for recognition by riding on the coattails of this amazing study, nitpicking or reminding of disputed theoretical arguments? And, of course, how much is simply the result of the prejudice of deeply committed neoliberal ideology?  How much of that is captive to the big money on the right, one way or the other?

San Francisco's Inequality

June 18, 2014

San Francisco's Inequality

The May 20 edition of Vanity Fair comments on the state of inequality in San Francisco, which is 2nd only to Atlanta in the height of its Gini coefficient at .523.  (http://www.vanityfair.com/online/daily/2014/05/san-francisco-income-inequality-developing-nations). If San Francisco were a country, it would rank with Rwanda in inequality at about the 20th most unequal country in the world.

Here in my favorite city, we have the abundance of wealth growth and what goes with it--a tech boom, which has produced a number of multi-millionaires and billionaires, and has created hundreds of thousands of jobs within an easy commute distance.  We have a growing number of upscale restaurants, merchants, and services catering to the growing number of wealthy. Preferring to live in the city, many of those working south of the city on the Peninsula, at one of the tech companies, have used their newfound wealth to bid up the price of homes in San Francisco. Why not, the city is more fun and the tech giants send busses to bring you and return you from pricey neighborhoods in San Francisco.

A Reuters article of June 9 reports that a UC Berkeley study finds that each tech job creates 5 other jobs in the Bay Area. Indeed, the unemployment rate in the City is down to 4.8 percent, far below the national average.

Yet, the poor segment of the population is being squeezed out of the city by rapidly rising apartment rents and very little new affordable housing being built. Mayor Ed Lee has just introduced legislation to target 30,000 new housing units to be built over the next six years, with half to be affordable--defined in this expensive city as for those whose incomes can be up to $146,000 for a family of four. If history is any guide, there will be very few that end up affordable to families whose incomes are $30,000, $50,000, or even $75,000. Officials offer an example of hope for townhomes to be built in Visitacion Valley, a rehabilitation area 30 minutes by car from toney neighborhoods, for $600,000 each. Most clerks, restaurant workers, and lower level support staff in government and industry cannot touch that price.  Rents for a studio with only 400 square feet are averaging $2,500 per month in Pacific Heights.

San Francisco's Human Services agency reports that as of 2012, 15 percent of San Franciscans live in poverty. That's up from 10.5 percent 5 years ago.

Something that can't be good is also happening to San Francisco's middle class, defined as those earning from 50 percent to 150 percent of San Francisco's median income of $72,500. This middle class has declined from 45 percent of San Francisco's population in 1990 to only 34 percent in 2012, according to the Brookings Institution.

Should we care about this? If we are among those who are at least reasonably secure financially, perhaps already own a home in the city, or have a job with a wage sufficient to live on, and upward potential possible, it's hard to be concerned about it. After all, career and the family take the bulk of one's energy and attention, and a little entertainment can take all the rest. That's been true of my past, as well.

Some say, let's just look at the good side of all this. Theoretically, we all have the opportunity in San Francisco and in the US to become multi-millionaires, so let's not disturb a system which offers its citizens that chance.

Others, like me, say the capitalistic system is a good system, far better than any socialist system, but not without its faults and its excesses, and we must rein in certain of those in order to preserve it. Otherwise, given time, we subject our city and our nation to increasing social instability, possibly even revolution, followed by a dramatic redistribution of all wealth.  It has happened before in nations around the world and given time and likely worsening of inequality without policies to address it, it can happen here.

There are other reasons. A little more equality (without destroying incentives) makes the world a more pleasant, more enjoyable, and safer place for all. Furthermore, it's just not fair--many of the wealthy inherited a good portion of that wealth, didn't earn it themselves.  Many benefitted from privilege of the wealth or social status of their families or connections with people of power. Many benefitted from their skin color or their gender. Some were just in the right place at the right time.  It's not all meritocratic!

Piketty's Wealth Tax

June 16, 2014

This will be one of a series of articles focused on the findings of Capitalism in the Twenty-First Century by Thomas Piketty. By all means, if you can read the book, or listen to it on Audible, do so. It's worth the investment. But since many will not be able to dedicate the time to it, I offer these observations, along with my own views, of course.

I'm starting in reverse, because many people may elect not to read the book because the policy recommendation is unrealistic. Please do read the book!

The Wealth Tax

Starting from the "policy prescriptions" part of the book, which is the final section of such scholarly works, let's understand his proposal and why he proposes it.  Let's begin with Piketty's acknowledgment: "A global tax on capital is a utopian idea. It is hard to imagine the nations of the world agreeing on any such thing anytime soon. To achieve this goal, they would have to establish a tax schedule applicable to all wealth around the world and then decide how to apportion the revenues....Admittedly, a global tax on capital would require a very high and no doubt unrealistic level of international cooperation."

His acknowledgment should dispense with the critics who have been proclaiming this prescription is impossible.  He says so himself. So, why has he bothered to develop an extensive argument for such a tax, if its unrealistic?  He explains: "...this ideal...can serve as a worthwhile reference point, a standard against which alternative proposals can be measured....[and] when looked at closely,...this solution turns out to be less dangerous than the alternatives." That is the opinion which he supports with some of the following arguments, highly abbreviated, my interpretation:

• First, it is helpful to stipulate just for this reading, that there is indeed a major problem in the trend of inequality in the world. If you can take that for granted for the moment, it will help. His first 514 pages offer the history, various explanations, and his prediction that it is highly likely the current trend will continue, if not addressed with policy. In other posts, I'll try to summarize some of the preparation leading to the prescription.
• It will also help to stipulate for now that the decline in inequality between 1945 and 1970 was not due to "natural" elements, but rather due to specific policy (e.g., tax) changes instituted in many nations in the aftermath of huge macro-economic events of the first half of the twentieth century--specifically the two World Wars and the Great Depression. Without these policy changes, inequality would not have declined, and the reversal of these policies (opposite policies) are driving the dramatic increase in inequality beginning about the time of Reagan in the US (1980). Without new policy changes, he argues, inequality is likely to continue to rise--perhaps to levels experienced in Europe in the 18th and 19th centuries.
• The primary policy he recommends is the wealth tax. This tax would require disclosure of all assets we each own--stocks, cash, property, businesses, art and jewelry (within practical limits, I will add). This could be a one time tax or an annual tax (more likely), and most likely would be highly progressive. There would need to be international agreements on where/how the revenues are split up and spent. He doesn't propose the wealth tax as a substitute for other taxes. Each major form of taxation has it's own specific purpose in his view. The reason a wealth tax is important (vs income tax) is that inequality due to wealth differences is far greater than inequality due to income differences. The taxing would in itself reduce inequality, and the use of proceeds could drive further future reduction in inequality.  Amounts taken would not be sufficient to reduce incentives for hard work and talent, at least not significantly.
• As to the size of the wealth tax, Piketty does not give specific recommendations, just hypothetical examples: One example is a tax of nothing on wealth below $1 million euros (about $1,350,000), 1 percent between 1 and 5 million, and 2 percent above 5 million, would result in an annual contribution of about 2 percent of Europe's GDP, which is a very significant number, if it were to be applied to critical elements of equalization for the underprivileged--like schools, job training, better health care, etc.  2 percent for the US would be about $300 Billion, a very substantial number.
• If one is not persuaded that high and rising inequality is a risk to the social stability and sustainability of  the capitalistic system (which he proposes to slightly constrain in one of its most egregious excesses by his proposal), one might be concerned about the level of national debt in the US and in many other countries. One might resonate with Piketty's explanation of how a wealth tax could be the most effective way to eliminate or significantly reduce record government debt levels. For example, simplistically, Piketty calculates that the public debt of most countries, averaging about one full year of national income in size, could be eliminated entirely by a flat one time 15 percent tax on all private wealth. Can you imagine a world without government debt, without that burden and risk on future generations, without the necessity to dedicate a significant percentage of taxes to interest and debt repayment? Of course, Piketty does not propose this--a more progressive schedule could be developed and 5 to 10 years could be used to accomplish it--or longer.
• Or, if eliminating debt does not attract one, what about the cost of repairing and preventing the damage from climate change, a cost which some estimate to be equal to 5 percent of global GDP per year, according to Piketty?
• Furthermore, the tax is not so new as some first think. There are wealth taxes currently in existence. Most prominent is property tax, but there are other forms in various nations.
• The information to effectively enable the collection of such a tax would come from government records (as with property taxes), and from banks and other financial institutions where traded assets are held. Taxes could be on gross value or net of debt. Some critics have focused on the question of valuation of certain types of capital--e.g., privately held companies, such as Koch Industries. Indeed, this is an example of a executional challenge, but not impossible. The world figured out how to value real property for taxation, at least well enough, and there were many who thought this an unsurmountable challenge at the time.
• Also, the informative value of a wealth tax, with all global financial institutions reporting, is high.  Some will argue this risks personal privacy, but our property ownership is already recorded by local governments and our financial assets are already recorded by the financial institutions which hold them. If there was a secure and accurate international governmental record of all assets owned by each of us, we would have a far better understanding of inequality in the world--and incidentally, also perhaps then able to document the fortunes of criminals and drug dealers, etc., whose assets are at least in part held by financial institutions which would be obligated to report in such a scheme.  Escaping taxes by placing assets in tax havens would be impossible.
• Piketty points out that while this proposal seems impossible, it may not be. After all, income taxes seemed impossible in the world until around 1910 and the following decade, when a number of developed nations struggled through the debate and complications and enacted such taxes. In fact, France imposed a 25 percent one time tax on capital (wealth) in 1945, to deal with war costs. It has been done elsewhere.

These are a few of the important observations of the final chapters of the book. Piketty's book examines alternatives to the wealth tax--inflation, central bank actions, and other policies which could be used to address the issues he is concerned with--but he finds none remotely as effective as the wealth tax.

I'm in favor. I would be willing to pay 15 percent of my modest wealth to fully eliminate public debt, and I would be willing to pay annual percentages of a progressive wealth tax to reduce inequality and allow investment in opportunity building for the underprivileged.

Finished Capitalism in the Twenty-First Century by Thomas Piketty!

June 14, 2014

Finished Capitalism in the Twenty-First Century by Thomas Piketty

I am pleased to report that today I finished the new Piketty Book. Along with it, I also finished re-reading Jane Austen's Pride and Prejudice and am now into Balzac's Pere Goriot, which books Piketty and many other scholars concerned with rising inequality recommend reading, since they paint the real and graphic dismal picture of extreme inequality and misery for the lower classes as existed in the 18th and 19th centuries in Europe--where we may well be headed in the twenty-first century.

Having read a number of reviews of the Piketty book, I am doubtful that many have yet finished reading the 577 pages (not counting the index, etc). I see much to suggest many relied on someone else, which often results in misstatement.  For example, there are hundreds of instances in this book where Piketty reminds his audience that his view is based on his own analysis of data (tons of it) and that he has been forced to make some assumptions where the data was insufficient, and that therefore, there can be others who would not agree with his assumptions or his conclusion. He regularly describes alternate scenarios around a number of interpretations, and explains carefully why he thinks his proposals are probably (but not certainly) the most dependable. So, when his results are described as just his view and possibly wrong, I have been hoping to see a recognition that he acknowledges that in his book, and an explanation of the support for an alternate view. I'm not seeing much of recognition, and even less of an alternate explanation with compelling defense.

A frequent example is that some critics have been so cavalier as to say the wealth tax prescription is impractical, politically infeasible in today's world, as if they were offering a profound criticism. But this is a clear indication they have not read the book, or simply do not choose to acknowledge that Piketty himself says this many times in the book. But he explains carefully why he feels strongly that it is nevertheless worth proposing and discussing--and in my opinion, it certainly is.

This is a fabulous book, full of well documented analysis, loaded with insights that explain our past, easy to read, and so broad as to look at the widest possible array of considerations, which other books on inequality (I have read quite a few) do not undertake to examine. I will be surprised if Piketty is not the recipient of the Nobel Prize for this work. I cannot recommend it too highly to all to read. If you have any concern for the economic and social stability and sustainability of the US and of the planet, you should read this book.

I will now set about to more slowly read it again, study, read more reviews, and try to understand better a few of the economic debates which surround its key principles.

Various elements of this book will be the subject of quite a few future posts on this nascent blog, as I seek to fully digest this commendable study.

My hat's off to Thomas Piketty and the group of scholars who assisted him!

The Redistribution We Have Already Had

May 25, 2014

The Redistribution We Are Now Experiencing

Most of my friends don't want to talk about re-distribution. If they're concerned with inequality (some are and some aren't), most want to talk about equality of opportunity. "Re-distribution" has taken on the connotation of taking money or property from wealthier people and giving it to poorer people, as if that happens right at this moment as a financial exchange--akin to stealing, violating property rights, etc.  Or, maybe akin to land reform, which has happened in many countries across time at points of maximum inequality--the land of the wealthy is expropriated, divided up, and given out to the poor, as in China in 1952.

But I don't know anyone who recommends anything remotely like that as the solution to today's inequality, so I can't help thinking that the pejorative connotation to the word "redistribution" is just a part of the conservative scheme and rhetoric--i.e., making "redistribution" seem so extreme, horrible, illegal, unfair, that it just can't be discussed.

I'm compelled to make a point which is not new, but has received less attention than it deserves: I'm fine on focusing on realizing more equality of opportunity, as this too has suffered significantly across the last 30 years, but I'm not willing to concede that there is no basis for a certain amount of redistribution, through progressive taxation, estate taxes, and the like.

Perhaps one of the best ways to re-format the discussion is to consider the redistribution that occurred from middle class and poor, upward, to the wealthy, across the last 30 years and is continuing. The facts are indisputable. See this chart from the new Piketty book:

The share of total national income taken by the top 10 percent has increased significantly from 30-35% in 1960 for all the above developed countries (for which there is adequate data), excepting Sweden, which has actually become more egalitarian, although Sweden is moving to rising inequality again now. All the others have seen the share taken by the wealthiest increase since 1960. The change is most dramatic for the US, where the share has risen to almost 50 percent of all national income going to the top 10 percent--taking us back and actually a bit beyond the excesses of the robber baron era!

If there is now no dispute that there has indeed been a redistribution upward during the last 30 years, and, of course, this has happened without the kind of dramatic expropriation which conservatives (and all of us) vehemently abhor, then (1) what were the influences or policies which caused this to happen, and (2) can't we use some of the same or similar to gradually abate the continued rise of inequality?

In other words, if we can now agree that we have indeed experienced a form of redistribution upward across the last 30 years, whether or not we can agree on whose "fault" that is or whether this is just a cycle, can we not now agree that we need a similar form of redistribution downward across the next 30--one which does not destroy incentives, but simply moderates and restrains such as to maintain a society in which fairness is felt to exist?  Can we not agree that fairness in correcting this redistribution should not be limited to focus on opportunity alone, no matter how important that is also?  

If we don't address the trend and reverse it to a degree, our children may indeed be part of the abhorrent form of redistribution sometime down the road. Millions of innocent people died in the chaos in China during the process, and many who did not deserve to have their entire life's work expropriated, lost all their belongings, and many their lives also. This is not a legacy we want to bequeath to our children and grandchildren.

Let's look at the factors which enabled this redistribution upward to occur. To be fair, these cannot all be fully ascribed to some kind of organized scheme by the wealthy to enhance their relative wealth at the expense of the underprivileged--but some can!

First, there was the period from 1940 to 1960 during which the US became more equal. Much of what happened was the result of the two world wars and the Great Depression. Policies enacted as a result of those monumental macro-economic events led us back to the more egalitarian US of the 60s, in which we returned to the kind of egalitarianism which was one of the hallmarks of the patriots who founded the US. Without the progressive taxation post-WWII, reaching up to a peak of 90 percent on marginal high incomes, and without the social programs of the New Deal, without the minimum wage laws of the middle of the century, and other such policies enacted, the return to a more equal society would not have happened.

If the two Wars and the Great Depression had not given the US a major shock, the period of greater equality would not have occurred. Left unrestrained, the wealthy of the robber baron era might well have advanced to even greater heights of super inequality than what exists today.  We might have experienced a revolution in the developed world, had we not these macro events and the policies which followed them. The correction came mainly as a result of those shocks and the policies installed in the aftermath.

But in the 80s, beginning with Reagan's neo-liberal policies, this set of equalizing policies was reversed. The ethic of the US changed from one more supportive of equality and helping the underprivileged to one of sponsoring individual freedom, entrepreneurism, reducing government, reducing taxes (especially on the wealthy who were argued to be the investors who drive economic growth), and removing protections for workers so as to create more "flexibility" for employers, such as to further stimulate economic growth.  The theme gradually changed to believing that growth will solve all problems of poverty and inequality--that there would be a trickle down of wealth as the wealthy invest their tax savings in job creating enterprises. This theory did not prove to be true--see the chart again--the trickle was clearly up, not down.

Some of the growth in wealth for the wealthy was the result of honest attempts to improve the economies of the world. Privatization is an example. Beginning slowly in the 1970s and picking up steam in the 80s and 90s, governments in the developed world led the way in privatizing large sectors of the economy which had been government owned. British Telecom is a classic example. Energy, transport, telecom, minerals, water, and finance were at the top of the list. In some cases the process of selling off these assets to private ownership was fair and transparent, and market prices were obtained. But even in these cases, only those with the ability to purchase shares were the wealthy. And, in many cases, Russia and China being examples, opportunity went first to those of high social status or political connection to government officials, and the price was not fair, nor was the process. It remains to be debated, case by case, whether the privatized entity served the public better than the when publicly owned. Many seem to have performed well, and others not so well in terms of the public interest (e.g., privatization of water in Bolivia). Often the motivation of the government was primarily to monetize the asset to solve budget problems, rather than for better service to the public.

Asset price recovery: Some was the result of the unusual appreciation of asset values across the period since 1960, which added to the fortunes of those who had asset ownership to begin with.

Some was due to inheritance, with estate taxes put back to relatively low levels.

Some was due, according to Piketty, to the arrival of the era of the "Supermanager" who gets paid $10 million to run a major company, and his direct reports (the "C class") get large percentages of such compensation. This phenomenon is found most strikingly in the US, and has confounded scholars who have sought to correlate such compensation to any reasonable measure of individual contribution or corporate performance, and have generally found that there is none--executives are rewarded by the Compensation Committees of their Boards, most often, for results which can be traced only to external events over which the executives had little control.

Joe Soss, Jacob S. Hacker, and Suzanne Mettler produced a collaborative study of the effect of a wide variety of policies on the rise of inequality in Remaking America: Democracy and Public Policy in an Age of Inequality.  Below are some of the relevant observations from this book:

The battle between supporters of an entrenched activist state of the 1950s and 1960s and the growing opposition of a rising force of conservatism seeking to roll back the welfare state and the role of government in general, was eventually won in large part by conservative forces, although certain of entrenched features of the welfare state survived to date--e.g., social security and medicare.

Conservative policy incubators were well funded and played a strong role in changing public opinion--such organizations as the Heritage Foundation, the Cato Institute, and the American Enterprise Institute. 

The movement away from pensions to individually managed 401K programs was sold as beneficial to the public (choice), but lost the advantages of pooling of risks, and many individuals lacked the investment knowledge of pension fund advisers. Tax benefits of such programs went largely to the wealthy, due to their higher marginal tax rates.

The main income maintenance program, Aid for Families With Dependent Children was replaced by Temporary Assistance for Needy Families, the latter being more work focused, thus less helpful to those who could not work. 

Less educated workers became less likely to have access to health insurance than they did a few decades back. The number without health insurance at all has increased. 

Unemployment benefits were reduced in many states, and legal protections for workers right gave way to more control by the corporation, and thus, less power and influence of labor unions.

The Soss et. al. authors show, as does the Piketty book, that the egalitarian US of the mid-twentieth century resulted largely from policies enacted--social and labor policies of the New Deal, the Fair Labor Standards Act of 1938 with its minimum wage guarantee, support provided GI's returning from WWII, and other such policies.

So, any arguments that reduction in inequality since 1940 was simply natural (as Simon Kuznets argued in the 1950s), are simply wrong. Policy changes moved the US back to a more egalitarian society. Likewise, policies changed in the reverse direction beginning with Reagan facilitated the resurgence of the natural forces of capitalism, which left entirely unrestrained, will inexorably toward a more and more unequal society. See Piketty and Soss for extensive support for this argument.

Conclusion: There has been a redistribution, no matter whether one likes it or not. It continues in an upward direction at this time. There needs to be some moderating redistribution in the reverse direction. This upward redistribution did not happen naturally.  It was not largely the result of competence and merit.  It was caused by policy changes. Policies in the reverse are needed to enable a modest correction in the other direction. Let's start talking about what those might be, and stop wasting time debating whether a redistribution from the underprivileged to the top 10 percent and especially the top 1 percent happened. It did, and dramatically so.

As Piketty so forcefully and compellingly argues in his new book, capitalism is a wonderful system, but it cannot be left unrestrained.