When Thomas Piketty published his book “Capitalism in the Twenty-First Century” five years ago, it was a sensation. He had analyzed historical concentrations of wealth. Why do the rich get richer? Because the rates of return on capital exceed the rates of economic growth, and the inevitable wealth inequality leads to destabilization. Tax cuts favoring the wealthy can only worsen the situation.
In the President’s State of the Union (SOTU) address, he cited his tax cuts and economic growth. But that rising tide as Professor Piketty showed has never lifted all boats. The percent owning as much as the bottom half in the US continues to decline as it does in the world. Hence Oxfam’s shocking statistic that the top 26 billionaires own as much as the world’s poorest 50 percent — that is 3.8 billion people.
President Trump has cut corporate taxes to the lowest in recent memory. Yes, there is a stock market boom favoring the rich and an injection into the economy boosting growth but what are the consequences? If the US is taxing companies at 10%, it obliges poorer countries like Brazil or India or South Africa to lower corporate taxes also to stay competitive. They are denied a more equitable tax policy even if they want one — some of course like India’s Modi government do not.
The result is increased inequality and poverty in the lesser developed countries. Such destabilization has consequences as even a cursory reading of history informs us. Professor Piketty’s simulations show that if the world follows the US inequality trajectory, the poorest half will have by the 2040s to 2050s the purchasing power of 300 euros per month; following the European trajectory increases it to 1100 euros.
If the tone of the president’s SOTU address was amicable and the content rosy, the ramifications are not — and have not been since Clinton’s neoliberalism left most without a voice. A country without beggars a few decades now swarms pitifully with the destitute and homeless. And so the country elects a billionaire and he behaves … well, like a billionaire. Another billionaire, the Starbucks guy is planning a run for president. Coffee at Starbucks is $5 while most of the world is living on less than that per day.
Nothing in the SOTU address on climate change. Like the poor, it does not exist for the president. You trip over the poor if you walk the streets and the evidence of climate change is equally obvious. Such facts remain impervious to this president who distrusts experts.
Meanwhile, Germany has issued a 336 page report produced by a 28-member coal commission on how to phase out coal-fired power stations and reduce CO2 emissions to achieve carbon neutrality by 2050. Does the US president have to live in la-la land?