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Tuesday, March 14, 2017

Public Capital, Private Capital

Thomas Piketty:

Public capital, private capital: The present economic debate is over-determined by two realities which, moreover, are connected as we sometimes tend to forget. On one hand we have the steady rise in public debt and, on the other, the prosperity of privately owned wealth. The figures for the level of public debt are well known; almost everywhere the level approaches or exceeds 100% of national income ... as compared with barely 30% in the 1970s. ...
During the post-war boom (the Trente Glorieuses) public assets were very considerable (approximately 100-150% of national income, as a result of a very large public sector, a consequence of post-war nationalisations), and significantly higher than public debt...
The most recent data available for 2015-2016 shows that net public capital has become negative in the United States, Japan and the United Kingdom. In all these countries, the sale of the total public assets would not be sufficient to repay the debt. In France and in Germany net public capital is only just positive.
But this does not mean that rich countries have become poor: it is their governments which have become poor, which is very different. ... The fact remains that private capital grew much faster than the decline in public capital, and that rich countries themselves hold even a little more...
Why be so pessimistic in the face of such prosperity? Simply because the ideological and political balance of power is such that public authorities are not able to make the main beneficiaries of globalisation contribute their fair share. The perception of this impossibility of a fair tax sustains the flight towards the debt. ...
Historically, major changes in the structure of property ownership often come together with profound political changes. We see this with the French Revolution, the American Civil War, the Euro-World Wars in the 20th century and the Libération in France. The nationalist forces at work today could lead to a return to national currencies and inflation, which would promote a chaotic redistribution of resources, at the expense of severe social stress and an ethnicisation of political conflicts. In the face of this fatal risk to which the present status quo could lead, there is only one solution. We must chart a democratic pathway out of the impasse and organise the necessary redistribution of resources within the framework of the rule of law.

    Posted by on Tuesday, March 14, 2017 at 11:20 AM in Economics, Taxes | Permalink  Comments (20)


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