domingo, 24 de agosto de 2014

About Piketty’s Book on Capital - The Answer of a convinced Liberal

Considering the world-wide impact of the book 'Capital in the 21st Century', by French economist Thomas Piketty, and its meaning for social priorities and goals, I am pleased to send you my attached evaluation of this book. I hope this will inspire your reflections about the moments we are going through. Kind regards,
Ronaldo Campos Carneiro – June 2014
Brasília - DF - Brasil

About Piketty’s Book on Capital -
The Answer of a convinced Liberal

After fifteen years of research (1998-2013) aimed at understanding the historical dynamics of income and wealth in around 20 countries, mainly in the last 200 years, analysing remarkable facts about humanity such as the industrial revolution, world conflicts and economic crises, using and harmonizing data broadly accepted by credible institutions like the World Bank, the UN and the IMF, this French Professor at the Paris School of Economics, Thomas Piketty, aged 43, came to the conclusion that:
Capitalism,  or what is left of it, just as it is now put in practice or crony capitalism  is heavily concentrating income and wealth, in a process where the rich get richer and the poor get poorer. Estimates for the XXI century are alarming and define human coexistence as unfeasible under the rules prevailing nowadays.
The current market competition is like an athletic race in which some are well fed and have access to health assistance and education,  whereas crowds of excluded are left far behind:   the minimally decent atitude is to place them on the same  starting line or to equal their opportunities at the beginning of the race.
“The 85 richest people in the world, who could fit into a single London double-decker, control as much wealth as the poorest half of the global population– that is 3.5 billion people”.
“Strong inequality is corrosive of growth; it is corrosive for society. I believe that economists and politicians ignored inequality for too long.” (Christine Lagarde, Executive Director of the International Monetary Fund)
I personally think that these conclusions are irrefutable. No scholar will, after Piketty’s research, ignore the enormous social exclusion generated by capitalism, or the urgent need of actions to revert this dramatic situation. Inequality is complicating the market economy. One must never forget that the economy depends on supply and demand – it is useless to have supply facing a reduction in demand, or vice-versa. No one, but a liberal dreamer, can imagine that the economy will operate with supply only! Economics is a science where agents are regulated by the inexorable law of supply and demand. Politics is an art where the human will prevails. This is the reason why they cannot blend: economics and politics have diferent natures.
My complete agreement with Piketty’s conclusions also take me to a complete disagreement with his recommendations of a progressive tax and a global tax on wealth. This would be a shortcut to hell: it would mean more government, bureaucracy, war, corruption or, in the economic view, it would transfer assets from the domain of supply and demand to the changing human will of bureaucrats and politicians – an antechamber to hell. Nothing is more predatory than the action of governments in the economy – indebtedness is what governments know how to do, and they do it unreservedly.
“Deficits mean future tax increases, nothing less. The increase of deficits must be seen as a tax on future generations, and the politicians who create deficits should be judged as tax generators”. (Ron Paul, former US Senator – Republican).
Our generation has been the victim of decisions from past generations, that increased indebtedness, just like future generations will have to pay for the inconsequence of our own generation, that expanded those debts even further. The European discussion about austerity or Keynesian stimuli mean to penalize our generation or our descendants. The problem is that policy makers search immediate applause, transfering the solution of structural problems to the future. These are inconsequent acts, showing no concern with future generations.

“Do not forget that I have found out that more than ninety percent of all the national deficits, from 1921 to 1939, were caused by the payment of past, present and future wars” (Franklin D. Roosevelt)
“People do not make war. It is the governments that make it” (Ronald Reagan)
I would go back to the time of the American Revolution – “You will never strengthen the weak by weakening the strong” – and to the moments when the French Revolution was promising “liberty, fraternity and equality”.
Inequality of opportunities in human coexistence has been generating the most terrible process of domination and human bondage: the dictatorship of bureaucracy. The enormous amount of financial resources under the power of the State, to be allocated by acts of human will, stimulates an unbridled race of unscrupulous politicians in search of power at any cost; “They do not disdain, in certain cases, to associate with cheating, fraud and corruption”, to use the words of Vilfredo Pareto.
It would be very efficient and useful if economic policymakers became convinced that applying more measures under the same keynesian references they would come to the same results.  We must migrate to another reference frame if we wish to improve our development process.  
Economic rulers must be aware of the fact that: “If they do only what they have always done, they will end up having what they always had”. Piketty’s proposition, however, is for more of the same, and it would certainly lead to poor results.
The relation between income and wealth is like a river flowing to a dam, where income is the variable of flow or the fluidity of the river, and wealth is the variable of stock or the accumulation in the dam. They both have the same nature, because wealth is no more than accumulated labour, and only labour can generate wealth. Piketty proved that there are some who harvest without planting, or who generate wealth with the labour of others; when the rate of return on capital is higher than the rate of economic progress, it results in predatory accumulation. This is the patrimonialist economy, that produces income from inherited family properties or from political connections: to be a friend of the king produces more than merit or competence. It would be risible, were it not tragic, to imagine that the control of financial flows (currency, exchange and credit)  can generate development, as suggested by Keynes. Only productive labour can generate capital.
“Labor exists before, and is independent from capital. Capital is just the fruit of labor and it would never exist without the previous existence of labor. Labor is superior to capital, and deserves much more consideration.”
This truth expressed by Abraham Lincoln must be recognized by all the zombies who are wandering, lost and disconnected from the basic concepts of economics.
One must not criticize without a corresponding proposition. The solution is not among the tools of economic theory, but in the scope of politics, by means of a broad, full and true agreement around a new Social Pact, in which nutrition, health and education will become a responsibility of the private productive process, after the corresponding reduction of taxes by the government, who will also reduce its interference in the economy.  Instead of transferring resources from the rich to the poor, this pact will equal opportunities concerning nutrition, health care and education.  I do not mean philanthropy, but a new concept of human labor as a process of transformation of human energy in physical or intelectual energy. This would replace the changing logic of ideas –ideology- by the invariable logic of life – biology. Of course, entrepreneurs will not act out of philanthropy: full productive labor will be the broker of this agreement of wills.   
This idea is perfectly simple: Piketty proved that after centuries of distributive measures in all countries, in which resources were transferred from the rich to the poor, the result was more social exclusion.
To prohibit wealth with a ceiling on income, as Piketty proposes, means to weaken the strong to strengthen the weak. Better would be, instead of a ceiling on income, to establish a groundfloor, so as to permit wealth and prohibit poverty, in an open system that would open the pressure cooker after the progressive dissipation of pressure.
Let us equal, for all, the access to nutrition, health care and education, and liberate all the tools and values of the market economy.
It was these values that made the West prosperous since the XIX Century and their efficiency has been confirmed.
Instead of terming this my proposition utopic, theoretical or unfeasible, one must keep in mind that the complete liberation of prices and wages will lead us to full productive labour, that is: salaries will be ascending – there will be no need to establish a minimum wage – imagine the Industrial Revolution, at the beginning of the XIX Century.
“Governamental institutions:
a) protect the powerful and interest groups;
b) generate hostility, corruption and hopelessness;
c) hinder prosperity; and
d) repress free expression and the opportunities of individuals”. (IMB -  Mises Institute).
I offer, below, some challenges in the scope of this proposition, for the reader to ponder:
1) the agricultural sector and the reversion of migration to the cities;
2) health care, education and the power in the hands of the private sector; profit linked to people health.
3) the financial sector and its incapability in the purchase and sale of papers having monetary expression.; Christine Lagarde: “crisis has prompted a major course correction—with the understanding that the true role of the financial sector is to serve, not to rule, the economy.
As Winston Churchill once remarked, “I would rather see finance less proud and industry more content”.

4) the political area and the prevention of speculation when resources are reduced.
Finally: In a Soccer World Cup or in the Olympic Games, just imagine how the competition would happen if political or bureaucratic influences were present in the choice of teams or in the rules of the games! 
“In Hell, the hottest places are reserved for those who chose neutrality in times of crisis’. (Dante Alighieri (1265-1321)
Lets learn with the best lessons of Von Mises:
·   If history could teach us anything, it would be that private property is inextricably linked with civilization.
·   Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.
·   Governments become liberal only when forced to by the citizens.
·   Both force and money are impotent against ideas.

THE GREAT DIVIDE 2014, JUN 27 6:16 PM 793

“We need not just a new war on poverty but a war to protect the middle class. Solutions to these problems do not have to be newfangled. Far from it. Making markets act like markets would be a good place to start. We must end the rent-seeking society we have gravitated toward, in which the wealthy obtain profits by manipulating the system.
The problem of inequality is not so much a matter of technical economics. It’s really a problem of practical politics. Ensuring that those at the top pay their fair share of taxes — ending the special privileges of speculators, corporations and the rich — is both pragmatic and fair. We are not embracing a politics of envy if we reverse a politics of greed. Inequality is not just about the top marginal tax rate but also about our children’s access to food and the right to justice for all. If we spent more on education, health and infrastructure, we would strengthen our economy, now and in the future. Just because you’ve heard it before doesn’t mean we shouldn’t try it again.
Widening and deepening inequality is not driven by immutable economic laws, but by laws we have written ourselves”.

Conference on Inclusive Capitalism

By Christine Lagarde
Managing Director, International Monetary Fund
London, May 27, 2014

“A greater concentration of wealth could—if unchecked—even undermine the principles of meritocracy and democracy. It could undermine the principle of equal rights proclaimed in the 1948 Universal Declaration of Human Rights.
Pope Francis recently put this in stark terms when he called increasing inequality “the root of social evil”.
It is therefore not surprising that IMF research—which looked at 173 countries over the last 50 years—found that more unequal countries tend to have lower and less durable economic growth”.

Best wishes,
Ronaldo Campos Carneiro – June 2014
To understand Piketty’s book: - Paris School of Economics
Skidelsky’s blog –
“Too Much”: Special Thomas Piketty issue (26 May – Sam Pizzigati
John Weeks – “Why is ‘Capital in the 21st Century’ (C21C) Such a Success”? 30 May 2014
Debate Piketty and Senator Elizabeth Warren
I also suggest reading the texts on this subject by:
David Harvey (“Afterthoughts on Piketty’s Capital”), plus Paul Krugman, Dani Rodrick, Joseph Stiglitz, Lawrence Summers, Robert Solow, James Galbraith.
​From: Thomas Piketty
Date: 2014-06-13 3:37 GMT-03:00
Subject: RE : Piketty’s Capital - The Answer of a convinced Liberal
To: Ronaldo campos carneiro

Thanks Ronaldo, I appreciate it. Best, Thomas
Thomas Piketty
Ecole d'Economie de Paris/Paris School of Economics
Page personnelle :

From: Thomas Piketty 
Date: 2014-07-02 7:38 GMT-03:00
Subject: RE: Piketty’s "Capital" - The answer of a convinced liberal
To: Ronaldo Carneiro

Thanks Ronaldo, this is a very interesting reaction! Best, Thomas

Thomas Piketty
Ecole d'Economie de Paris/Paris School of Economics
Page personnelle :
From: Hector Julio Melchiori - june,13,2014
Creo que la diferencias comienzan en los tres primeros años de vida al no tener nivelado el alimento, ya que el intelecto se relaciona con la primera capacidad de ingesta, luego ya es tarde.
From: Pedro Schwartz june,13,2014
Dear Mr. Carneiro:
I find what you say complicated and will think on it. However, I think Piketty is wrong in his forecast of the future of capitalism.
Dhian Chand june.14,2014
2006-7 DG - 3080 District
Shimla Him. Pr. India

Dear PDG Ronaldo Carneiro,
Thank you for sending me your evaluation of Piketty's Capital - the answer of a convinced liberal. You have motivate me to buy and read his book "Capital in the 21st Century". You have rightly concluded in the last four points, the people responsible to create balance in the social economic status in the society. However, the question remained unanswered that politicians and bureaucrats have no limit for their greed for money and power which ultimately encourage corruption in the country and war between neighbouring countries. If we are able to influence these two category of our society the balance in distribution of economic growth will be maintained and there will be no poor in the modern world which due to technology evolution has become one a global village.
Dhian Chand
From: Anthony de Jasay 14/6/14
Dear Mr. Carneiro,

I have had your letter of 13 June read to me (as you may know I have lost my eyesight long ago). I agree with most of it , but as you must know very well it is not by condemning politics and politicians for being toxic and nasty that thay will become any less harmful. They are a probably inevitable product of one man, one vote.
Yous sincerely,

Anthony de Jasay
From: Stephen Raudenbush - 13/6/14
Dear Ronald

Thanks for sending this. I have admired your work and made very good use of your book with James Heckman on inequality.

I do have a few questions

* Why are key elements of Sen's "human development index" so much better in the European social democracies than in the US?
* Why have the countries that employed a Keynesian stimulus done so much better during the recession than countries that used the recession to reduce government spending?

I believe you have offered a false choice between heavy government involvement and light government involvement. All sides are competing to use the government to support their own special interest. If the government does not intervene to insure child care, education, health, housing, minimum wage, unemployment insurance, and social security for the elderly, and protect the environment, the result will not be a utopian laissez faire society. Instead, government resources will be directed entirely to prop up agri-business, build roads to support real estate developers, save failing banks, generate unneeded contracts for lobbyists, etc. In sum, we will have neither social democracy nor laissez faire but rather socialism for the rich, which is pretty much what the US has now.

Why did you not comment on our extraordinarily corrupt political system in which running for low level offices now requires millions of dollars? Where huge firms literally dictate legislation to the office holders they have bankrolled?

I would propose a government role that does the good things I mentioned above while aggressively intervening against oligopoly and favoritism to insure competition in the market place. The government can be a friend of the free market and a friend of meritocracy while insuring basic necessities, particularly for the children and the elderly, and supporting human capital development.


Steve Raudenbush
From: William Anderson - 13/6/14

If these points are true, then are you saying that the vast amount of people are materially poorer than they were, say, in 1980? That they have fewer goods and services available to them now than they had then?
It seems to me that the theories depend upon (1) homogeneous capital (capital as a lump of stuff that is useful primarily for how much is spent in creating and accumulating it), and (2) underconsumption. We have been getting underconsumption theories at least since “Fable of the Bees.”
Now, we do have a lot of what is called crony capitalism today, in which owners of capital, through political alliances, are able to force resources into a direction that would not be profitable (or would be less profitable) without the government intervention. However, from what I can tell, Piketty is not so worried about this development. Piketty would prefer lots of people to be poor to make Bill Gates and a few other people pay more taxes.

If Piketty’s thesis is true, then the vast majority of people today are poorer than were the people of the early 1800s, when the development of large-scale capital really took off in Great Britain and in Europe. Are you prepared to say that? Think of the logic of his thesis; are you prepared to claim that a larger percentage of people are poor today (and living in worse conditions) than were people of the early 1800s?
Then, to follow Piketty’s logic, the bifurcated returns to capital (versus ordinary income growth) would have to be consistent from the very start. Thus, you are having to claim that the poor today are poorer than the vast majority of people in the early 19th Century. Can you empirically justify that statement?

From: - 13/6/14
Dear Mr. Carneiro:
Thank you for your review of Piketty.
Attached, please find a copy of my review of him, which I’ve just posted to my blog.
George Reisman
june, 16, 2014
Dear fellow Rotarian Ronaldo Carneiro,
thank you very much. your thoughts on the book of Piketty are very interesting, especially in this period we are going through.
I will continue to reflect on this, and I will send it to my daughter who is studying Economics.
Many greetings.
Salvatore Sarpietro
2007-08 DG – 2110 District

Benegas-Lynch, Jr., Alberto
National Academy of Sciences, Argentina – june,20,2014

Dear Ronaldo Carneiro, thak you for sending your papers that I will read with great interest. In the meanwhile, I copy one of my weakly columns on the subject. Cordially, Alberto Benegas Lynch, Jr
From: Jeff Deist - june,20,2014
Excellent, thank you. Jeff
​From: Floy Lilley
Date: 2014-06-20 17:29 GMT-03:00
Subject: Re: About Piketty
s Book on Capital - The answer of a convinced liberal
To: Ronaldo Carneiro

Hello Mr. Carneiro,

Your enthusiasm for this project is palpable. That's a fine way to feel about whatever you do.

You embrace Piketty's work in ways that I do not. I do not find that he proves his thesis.

Thank you for having thought of me.


Floy Lilley
​From: Rev. Robert A. Sirico
Date: 2014-06-21 13:30 GMT-03:00
Subject: RE: About Piketty’s Book on Capital - The Answer of a convinced Liberal
To: Ronaldo campos carneiro

Dear Ronaldo:
Your email arrive just as I had begun reading Pikettey’s book Capital, so I shall now do so with your critique in mind.
Many thanks,
Fr. Robert A. Sirico,
The Acton Institute
​From: Gary North
Date: 2014-06-23 9:02 GMT-03:00
Subject: RE: About Piketty’s Book on Capital - The Answer of a convinced Liberal
To: Ronaldo campos carneiro

Don't start with Pikkety. Start woth Pareto: 1897
From: Jaana Woiceshyn 
Date: 2014-07-11 1:29 GMT-03:00
Subject: RE: Why competition is good and regulation bad
To: Ronaldo campos carneiro

Thank you, Ronaldo.—My silence does not imply anything but me being swamped and not being able to find the time to correspond—sorry. I hope my life will get less busy soon. But in general, I disagree with Piketty’s thesis. Inequality is a non-issue! Regards, Jaana
From: Noam Chomsky 
Date: 2014-07-11 1:56 GMT-03:00
Subject: Piketty’s "Capital" - The answer of a convinced liberal
To: Ronaldo Carneiro

Thanks for sending.  Hope to get to it soon.

From: Info 
Date: 2014-07-18 5:41 GMT-03:00
Subject: RE: Inequalities
To: Ronaldo campos carneiro


Thank you so much for your email below.

Unfortunately, Profile books do not accept unsolicited material. However, we do recommend the following websites as industry standard for gaining a reputable agent as well as other tips for publishing. Please do not pay an agent either – this is usually not a good sign.  

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Kind regards,


Olu Ubadike
Office Manager

Profile Books
3A Exmouth House
Pine Street
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Date: 2014-08-01 4:07 GMT-03:00
Subject: RE: Inequalities
To: Ronaldo campos carneiro

Thank you for sharing, Ronaldo. It will be very interesing to read your remarks on Piketty‘s book. Let‘s keep in touch.

Best wishes. Ieva

Christopher escreveu: "Thanx for the article. Thoughts. 1. Agree that capitalism is well on the way to eating itself 2. Agree that war is a major problem. Nation states have abrogated the right to billions of unprofitable dollars. 3. Agree that answer is probably not a 'ceiling' but a 'floor' - in other words, the tax system. If the 'haves' agree to pay generously, then the problems you point out with health, education, etc. will disappear. The problem occurs when the 'haves' think they own their money and try to hold it all. Conclusion: a neat summary of the problem ;-) Christopher"