The Other Third Way part II

In the book Capital in the 21st Century, French author Thomas Piketty does a thorough analysis on the history of income and wealth distribution. One highlight from the data is that in most industrialized nations, about a third of all income is income from capital, as opposed to income from labor. In other words, doctors, cleaners, managers, technicians, teachers, and all other workers in the economy account for only two-thirds of income earned. The remaining third is the interest earned on land and property.

Pketty brought up a good point when he said it’s not the existence of inequality that’s a problem, it’s whether or not the society feels that that inequality is justified. Most cultures are somewhat intolerant of inequality of income from capital, and that is exactly the inequality that’s predicted to grow in the 21st century. In the United States, which is highly meritocratic, inequality of income from labor is highly tolerated. The US has what’s known as “super managers,” who earn ten to one hundred times the average income. We feel that hard work deserves extreme compensation in the US.

As mentioned in the previous post, this is where proprietism and ESOPs could shine in American culture. They would continue to reward hard workers, yet distribute the ownership of property more evenly. Piketty’s analysis is not apocalyptic, but he does imply the warning that there is no societal benefit to the continual accumulation of vast amounts of capital held by noncontributing people. Famous political philosopher John Rawls agreed on this point; he believed redistribution of income via democratic socialism was not the answer, but a repositioning of wealth could be.