Monday, December 28, 2015

Economic Inequality and a Booming Economy

As in my last post, I made the following comments on, in the back and forth of readers' discussions of Piketty's Capital in the Twenty-First Century.

A Piketty supporter asks: "Tell me the time in the [sic] history when the inequality was high but the economy was booming."

Answer: Broadly speaking, throughout the English-speaking world from about 1775 to the present day; the rest of the western world from about 1800 to the present day; Japan from about 1960 to the present day; South Korea from about 1970 to the present day; and China from about 1980 to the present day.

In these years, waves of continuous economic progress began in the areas named, that on the one side created multi-millionaires and billionaires, and on the other side provided growing masses of wage earners with the ability to afford, first, such things as cotton underwear, shoes, new clothes, improving diets, and then railroad and steamship travel, and then electricity, radios, vacuum cleaners, air conditioners, refrigerators, washer/dryers, flush toilets, automobiles, motion pictures, television sets, computers, cell phones, tablets, and, of course, antibiotics and all kinds of other pharmaceuticals as well as all kinds of surgical procedures.

The introduction of the innovations resulted in high profits for the businessmen who introduced them. The profits were heavily saved and reinvested, and served in the expanded and improved production of the very kinds of goods whose production provided the profits. The inequality was/is in the height of the profits and in the consequent wealth invested in producing the goods that the masses buy. That same wealth is the base of the demand for the labor that the masses sell.

This is an answer spanning centuries and many millions of square miles. For elaboration, read my book Capitalism: A Treatise on Economics. For a brief introduction, read my Kindle essay "
How the 1 Percent Provides the Standard of Living of the 99 Percent."