I'm a philosopher and historian, not an economist, and I'm far from a Nobel Laureate, but I was surprised that Paul Krugman's column about French economist Thomas Piketty's influential new book described only the problem Piketty's thesis creates for conservatives: that the facts show American society is no meritocracy. It seems to me that Piketty also creates a problem, if a more subtle one, for those of us on the moderate left.
As Krugman explains in his op-ed and in a laudatory piece in the New York Review of Books, Piketty and his colleagues have drilled deep into tax records and other financial archives to support the view that capitalism tends to create inequality by driving up the values of investment among the already wealthy far more rapidly than it increases wealth accumulation across the board. This inherent quality of capitalism has been somewhat obscured in the 20th century because of the anomalous conditions created by World War I, the Great Depression, the New Deal and World War II, which destroyed a lot of wealth, particularly in Europe, and prompted higher taxes to cope with the wars, the economic collapses, and the rebuilding.
This rebuilding helped create the great American middle class, yet it has been in decline since the 1970s, surpassed most recently by its Canadian equivalent, and intergenerational economic mobility is now greater in much of Western Europe than in the United States. According to those most worried about inequality, including the president, the American Dream is on the ropes, and Piketty's book explains why. Without far higher taxes on inheritance and net worth, not merely income, this country seems on its way to an Argentinian-style oligarchy.
To be sure, conservative commentators have been first out of the box with accusations that Piketty is a quasi-Marxist who rationalizes a modern case for class warfare by means of confiscatory taxation. As Krugman points out, name-calling is no substitute for substantive argument.
But where does that leave the positive case for the moderate left? Since Teddy Roosevelt's trust-busting campaign against the "malefactors of great wealth," progressives have buried the hatchet with capitalism based on the conviction that its extreme tendencies could be regulated and that growth could lift all boats. But if economist Robert Gordon is correct even technological progress -- a lynchpin of post-World War II progressive faith -- makes little difference and might even exacerbate challenges that already face the lower-skilled labor market. For example, how many millions of truck and taxi drivers will be put out of work by driverless cars, a technology that is now essentially on the shelf? Even if the number is small what jobs will replace those lost?
At the very least, Piketty creates a problem for the left in framing its argument for more inclusive economic growth based on anything beyond higher taxes. Perhaps Americans are coming to appreciate the dire implications of rising inequality but are they prepared to support far higher taxes on the wealthy while they might still entertain fantasies of joining their ranks? Today many powerful opinion leaders lean libertarian, including Silicon Valley entrepreneurs of all ages, and as I write Rand Paul's stock is rising.
Just as one party has been pulled to the right, Piketty could help pull the other further left, fostering a dilemma that looks hard to avoid for moderate progressives.