Piketty was wrong...the evidence
Economic inequality, a hotly debated topic in academic and political circles, is today seeing a renewal in its approach and analysis. At the heart of this debate is the work of Thomas Piketty, whose theories on the growth of inequality have aroused both admiration and controversy. However, a recent joint study by U.S. Treasury economist Auten and Congressional economist Splinter recently discredited the scientific underpinnings of Piketty's seminal work, Capital in the 21st Century.
Contrary to Piketty's assertion that wealth inequalities are ineluctably increasing under capitalism, the report, which uses more detailed tax series, stresses that inequalities are not simply the product of market mechanisms, but also the result of economic policies and regulatory structures. We are reminded here of economist Joseph Stiglitz's remark: "Inequalities are not inevitable, they are the choice of economic policy."
Philosophically, the report recommends considering inequalities from a variety of angles. For example, it considers income and wealth inequalities, but also inequalities in access to opportunities, a dimension often neglected. This holistic approach makes it possible to understand inequalities not only in terms of resource distribution, but also in terms of access to levers of power and decision-making.
A major criticism of the report concerns Piketty's methodology. His work is criticized for a certain rigidity in the interpretation of historical, fiscal and economic data. Piketty used mainly tax returns to conclude that the rich's share of total income had been rising steadily. Auten and Splinter, on the other hand, take into account tax changes, the weight of pension funds (a wealth effect for American households) and divorce, to establish a more rigorous vision of what needs to be compared. In this respect, the share of the 1% in after-tax national income is no higher today than it was in the 1960s in the USA, when Piketty claimed to have found an explosion in inequality.
This report calls for a renewed debate on inequality. The point is not to deny the existence or importance of inequalities in the United States, but to understand them in a broader, more dynamic context. In the 1960s, high income tax rates led to avoidance strategies, such as low boss salaries. This did not mean that the real gap with the average worker was any smaller than it is today... The explosion of financial markets since then has not only benefited the wealthiest, but all Americans via pension funds.
In our view, this moment of anagnorisis on Piketty's work opens the way - at last! - to a more nuanced and comprehensive understanding of the dynamics of inequality. It remains for political decision-makers, economists and social actors to engage in in-depth reflection on these issues, beyond the Marxist oukases that Piketty's books have so far elicited....