If blood isn't flowing in the streets until 2030, I really need to watch my diet and get exercise.
Why, I think, inequality of capital ownership (and therefore income from capital) is always greater than inequality of labor income: capital is counted as net of debts, but labor income is always gross, even though food, housing, etc. offset that just as much as debt is to wealth. Obviously that's hard to measure, because it's so hard to specify "minimum" living expenses. But considering the number of people living paycheck to paycheck, if we could specify it, I bet we'd find inequality to be in the same ballpark.
I thought the way 19th century Englishmen got rich in India was, more often than not, by being corrupt mandarins (or the EIC, which amounts to much the same thing).
Oh, right, I'm supposed to be reading Piketty. The only Balzac I've read is the first half or so of Cousin Bette. It was just after I graduated from college and I kept finding petty reasons not to like it so I never finished it. I think I may have started it again and decided it wasn't so bad and I should read it.
I'll do Chapter 9, which will be motivation to catch up.
Connections helped a lot to get a profitable post with the East India Co. & sometimes you needed them to keep the money. Raffles, e.g., was born into minimal & failing gentry, lived v well abroad, but was criticized regularly for being not really a gentleman & died in enormous debt because the Co retroactively revoked income & charged him costs after he retired. Had he had connections, the last less likely.
All kinds of things happened, but I think the nabobs were mostly sons & cousins of inherited money.
I got almost caught up with you guys on a long plane trip the night before last--I'm almost through chapter 7. But I'm nowhere near caught up on the reading group discussion threads!
The nabobs were generally the sons of inherited money, but not necessarily of the super-rich (though the super-rich would often get their third or fourth sons a job with the HEIC. If you were lucky you could parlay a modest fortune into an immense one. E.g. Clive, whose father had an inherited estate but intermittently had to work to make ends meet (that is, to maintain the standards expected of a gentleman, not to put food on the table.) He died insanely rich.
I found this chapter easier going than the previous two, probably because it was less theoretical. I found his arguments against the "single number" measures that we're usually presented with by journalistic economic correspondents the most important and enlightening aspect of it. Never speak to me of Gini coefficients again.
I'm surprised LB didn't know of the OECD. It's the nearest thing in real life to the Central Committee of the bourgeoisie.
7. There is a great deal to be said, for being dead.
This seems like a ridiculous thing to ask, given the length of the book, but I wanted some more explanation of how he supported some of the things he was asserting. The projections of what inequality was going to be like in the US in 2030? Is it a straightline projection of trends from the 1970s through today, or something more complicated? Also, did he have any basis for guessing what the blood-in-the-streets level of inequality was, other than that there's got to be something?
As a matter of fact there was blood in the streets, at least locally, pretty often in the middle ages and early modern periods; it just didn't achieve much* except to provoke brutal repressions. Revolutions are not guaranteed to win. What if the pattern of the 21st century is uprisings every generation that are brutally put down?
* The Wars of the Three Kingdoms (what you learned at dame school as the English Civil Wars) were the exceptions that proved the rule, as the insurgents were led by factions of the elite. And even that didn't always help, cf. the Fronde.
4: I'm halfway through nine. You'll like it. It's where the villain of the piece is introduced. Summarizing Chapter 8 was a pretty thankless task (but thanks, LB!). There's lots more car chases and explosions in Chapter 9.
10: At this point in my reading, I think a lot of critics are missing the boat when the say Piketty "predicts" this or that. I read him to be saying that there's no natural tendency toward equality, and that actual results are going to be contingent on events. The value of saying "if trends continue, here's where we end up," isn't in the prediction - it's in identifying the trend.
You guys are doing great! Keep up the good work. Water station up ahead.
2: Yes, but this asymmetry is because in most cases only negligible or negative capital-based income can be drawn from holding debt equal to assets. You may be drawing against future income but you aren't really experiencing the wonders of compound interest until you have some net savings.
13: Which only the weak will use.
The whole idea of middle class wealth being a 20th century is a huge one to grapple with, and I have two contradictory intuitions about it.
The first is that it's historically right, or at least the amount of savings is enough that the income from it is never significant, certainly compared to the amount of wealth in the economy as a whole, but even at an individual scale. You might save up a few years income into savings but it doesn't produce rent.
The second is that historically people owned things but it wasn't constitutable as capital because it wasn't conceived of as a financial instrument. It wasn't an obligation and it wasn't fungible. Eg I read an old Economist article where the journalist asked a farmer somewhere in sub-Saharan Africa how much he would sell his house, a servicable one room shack, for. The farmer of course looked at him like he'd been in the sun too long and said "you don't sell houses, you'd just build another house". Similarly De Soto's point about peasants not having title on land their family has worked for generations, etc. In feudal times the peasant's right to their plot of what is technically their lord's land is not tradable, so hard to value. It's not capital unless it's an instrument of some legal force, or convertible into the same.
This seems a bit perverse though. You live in it, it keeps the rain off, but because you can't sell it, it's not capital?
Also, it's exactly the peasant farmer ownership / mutual dependence on the land and tools that make it a mainstay of the feudal agricultural state ... this is James C Scott's point.
Still reading, but I'm part way through chapter 6, so I may not have much to add to the chapter 7 discussion until later.
Still reading, but I'm part way through chapter 6, so I may not have much to add to the chapter 7 discussion until later.
Still reading, but I'm part way through chapter 6, so I may not have much to add to the chapter 7 discussion until later.
But I can make up for lack of quality with volume, aided by a slow browser response.
You live in it, it keeps the rain off, but because you can't sell it, it's not capital?
No. You don't/can't make money out of it. Whether that is because of the traditional approach to these things, as with your African farmer, or because you have no title which permits you to (let's please not have a digression about copyhold). There would be a few people before the 20th century who owned premises such as inns, smithys and so on which may well have been inherited and which they could make money on at a pinch by mortgaging them, but they would be a tiny number and not worth counting. The 20th century "property owning democracy", where half the population owns the houses they live in and can leave the value of those houses to their children is quite different.
Come to think, isn't the presence of a capital-owning middle class a difference between US and Europe in the 19th century? US small farmers in the 19th C would have been mostly owners, not tenants. Land wouldn't have been worth much, given that there was a lot of supply, but there's a difference worth exploring there.
Yes, but this asymmetry is because in most cases only negligible or negative capital-based income can be drawn from holding debt equal to assets. You may be drawing against future income but you aren't really experiencing the wonders of compound interest until you have some net savings.
Sure, that's why I said inequality of capital ownership is going to closely track inequality of capital income. My general point was that effective surplus (to switch terms) is likely to be similarly unequal whether you look at monetary streams from capital or labor, and that's disguised by the way we measure labor income.
Agreeing with Conflated that The valuation of non-cash parts of the economies in the nineteenth century is a big hole in this book. In particular, an unknown part the apparent increase in wealth in the nineteenth century was caused by adding stuff to the definition of capital. You have more capital, but not any more of anything useful, when you receive a transferable deed to your home. This kind of reclassification affected the lower classes more than the upper classes (who already had wealth in the form of capital), so this sort of useless acquisition of capital makes the century appear to feature less inequality than actually existed.
22: If by "farmers" you mean people who farm, in the U.S. many of them would have been slaves in the first half of the century, and sharecroppers in the second half. Out West, most farmers were in the category of hired hands, who were effectively tenants. As Piketty would put it, remember the low income ranchers in Brokeback Mountain, who did not own the sheep they managed. Also most of the extras on Bonanza and similar TV series.
Sure, but weren't there a lot of small owner/farmers in free states? Not saying it was everyone -- after all, the 'middle class' is the sixth through the ninth deciles, not the first through the fifth, but more than I think of in Europe.
22. That's an interesting point. What was the value of land in the west though? And would the prevailing attitude have been more like conflated's African farmer? To a European, 40 acres (a square plot a quarter of a mile on each side) and a mule sounds insane: the English equivalent is three acres and a cow.
I wasn't even thinking of the Homestead Act West -- more the northeast, mid-Atlantic, and midwestern states. There's a Lincoln speech about how the natural lifecycle is for a man to work for wages when he's young and then own a farm when he's older, if I recall correctly, I think the same one where he says that labor is the natural superior of capital. I'll try to find it.
Pick two: free soil, free labor, free men.
Here it is, from December 3, 1861:
Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights. Nor is it denied that there is, and probably always will be, a relation between labor and capital producing mutual benefits. The error is in assuming that the whole labor of community exists within that relation. A few men own capital, and that few avoid labor themselves, and with their capital hire or buy another few to labor for them. A large majority belong to neither class--neither work for others nor have others working for them. In most of the Southern States a majority of the whole people of all colors are neither slaves nor masters, while in the Northern a large majority are neither hirers nor hired. Men, with their families--wives, sons, and daughters--work for themselves on their farms, in their houses, and in their shops, taking the whole product to themselves, and asking no favors of capital on the one hand nor of hired laborers or slaves on the other. It is not forgotten that a considerable number of persons mingle their own labor with capital; that is, they labor with their own hands and also buy or hire others to labor for them; but this is only a mixed and not a distinct class. No principle stated is disturbed by the existence of this mixed class.
Again, as has already been said, there is not of necessity any such thing as the free hired laborer being fixed to that condition for life. Many independent men everywhere in these States a few years back in their lives were hired laborers. The prudent, penniless beginner in the world labors for wages awhile, saves a surplus with which to buy tools or land for himself, then labors on his own account another while, and at length hires another new beginner to help him. This is the just and generous and prosperous system which opens the way to all, gives hope to all, and consequent energy and progress and improvement of condition to all. No men living are more worthy to be trusted than those who toil up from poverty; none less inclined to take or touch aught which they have not honestly earned. Let them beware of surrendering a political power which they already possess, and which if surrendered will surely be used to close the door of advancement against such as they and to fix new disabilities and burdens upon them till all of liberty shall be lost.
The boldfaced text is what I was thinking of.
Now I'm thinking I don't remember that book correctly.
Interesting statistics here. It looks like in 1880, about 25% of farmers were tenants, rising to 35% in 1910, and there was indeed a significant age inequality, with a majority of farmers under 35 being tenants versus a small minority of farmers 55 and up. Tenancy rates especially high in the South and low in the West. It doesn't have overall statistics for inheritance, but cites a small study in Kansas showing only 6% of farms inherited, 14% homesteaded, and the rest purchased.
This is basically the subject of the Turner frontier thesis and debates surrounding it. I might have something to say about it 10 years ago but I've forgotten a lot of history.
29: great speech, but obviously aspirational. Sure, some people followed the pattern, but most didn't.
31: Fascinating. It looks like there's a division of farmers between tenants and owners, leaving out the large group of "hired hands" from teh statistics.
As far as ownership of farmland as a gateway to the Middle Class, recall that the longer trend in earlier periods is a massive decline in the value of agricultural land over the course of centuries. The old money is moving to the cities where capital investments are more profitable, and the dumb money is buying them out in the hinterlands.
Good point - most of the statistics I've been finding use farms, not people, as the unit, so the tenant farmers could be relatively privileged themselves.
so the tenant farmers could be relatively privileged themselves.
I would expect them to be, in a sense (excluding sharecroppers). But not owners of wealth as P. defines it.
Here we go, PDF page 19, table 8: in 1870, 3.1m farm owners, tenants, managers, and foremen, versus 3.7m laborers (gainfully employed, excluding unpaid family workers). In 1930, 6m owners and tenants, 4.4m laborers.
great speech, but obviously aspirational. Sure, some people followed the pattern, but most didn't.
Still, there was a middle-class farm ownership pattern to aspire to, at least, which I think there was much less so in Europe. I'm working entirely off novels, but I'd expect even a quite prosperous farmer in mid-19th century Britain to be paying rent to a large landowner.
So putting together my two sources, 3.1 * 75% / (3.1 + 3.7) = 34%, so that's about how much of the farming population owned a farm in the late 19th century (not considering the effect of mortages or other debt).
37.2. Most, certainly, but I think there was still a residual yeoman class, and by the 1880s a fair chunk of the traditional minor gentry were living at a middle class level because great depression.
39 cont'd. Those who hadn't sold up and gone into trade, which meant the really stubborn bastards.
Well Piketty titled his book Capitalism In The Twentieth Century not Owning Stuff: The First 5000 years. So it's fair enough he is mapping the evolution of capital. The wealth/capital distinction just seems far stronger than I expected once you get away from contract.
Because a plot of land does throw off cash flow, if you work it - it has yield. So do tools, and they are significant investments for a farmer. This is true even if you don't have freehold, because the fat guy in the nearby castle has it. I thought this was quite distinct from being a slave or serf, at least across parts of Western Europe, though I can't point to a reference offhand. The farmers investment in crops in the ground and the houses and plant next to them is how they were so taxable by the local lord - it's basically how feudalism worked, economically. At least on some views.
Now if that wouldn't show up on a graph, because cropping lease rights and a shovel doesn't add up to much vs a castle and a royal pension, well, fair enough. Or is it that that sort of property is not capital in P's sense?
I'm working entirely off novels, but I'd expect even a quite prosperous farmer in mid-19th century Britain to be paying rent to a large landowner.
The case in Middlemarch, for instance; Fred Vincy works his whole life to own the herds and movables, but I don't think he ever gets the land. (Aha: "Fred never became rich--his hopefulness had not led him to expect that; but he gradually saved enough to become owner of the stock and furniture at Stone Court, and the work which Mr. Garth put into his hands carried him in plenty through those "bad times" which are always present with farmers. " And the Garths aren't even summarized, though apparently Caleb has management authority.
Trollope has more landowning yeomen, but the inheriting class near them are waiting for bad years to buy the land.
A few classes lower down, Lark Rise to Candleford says that most of the people who farm directly have lost control over their land and useful environment and are much worse off -- the land got turned into capital assets and ownership went elsewhere. You might previously not have been able to sell your cottage, but it also couldn't be sold out from under you. (But 41.1)
||
Ugh. I'm on hold with Wells Fargo, and among their recorded advertisements is one suggesting people take out a loan to buy a washer and dryer.
|>
Lessig and Abramoff on Reddit AMA now. Lessig's MAYDAY PAC is IMO a good cause.
Apparently Alan Greenspan's latest book ends with seven straight chapters about near future capitalists living a Randian fantasy land where robots do all the physical work, but almost all the reviewers are too polite to mention it. Or Stephen Holmes is just very sensitive to it.
http://www.lrb.co.uk/v36/n10/stephen-holmes/how-the-world-works
Middle-class jobs seem likely to go the same way: 'The declining cost amortised over a two or three-year period of robot "labour" had become highly competitive in terms of hourly cost with what had heretofore (1950s, for example) been middle-income jobs.' In numerous passages devoted to the impending robotisation of the economy, Greenspan is not simply providing a detached view of the evisceration of the middle classes whose demand for goods and services once powered the American economy. He isn't merely forecasting. He is putting forward a utopian image of a market economy in which many of today's workers will be classified as 'scrappage'. His complacent glee at the thought of profitable investments that can simultaneously increase unemployment is hard to contain: 'I am astounded at how close we are to being able to vocally direct our cars while sitting back and enjoying the ride.'The inveterate forecaster anticipates a world where the master class escapes the burden of inequality only in the sense that employees have become largely expendable. Even though he pours scorn on crony capitalism for privileging 'a favoured few', he looks forward to a form of capitalism where 'an ever smaller share of our workforce staff our ever more sophisticated high-tech equipment and software.' He even imagines that Darwinian competition will bring market society to 'the point when all we have left is a small handful of especially talented people who can create and operate the newer technologies'. The identity of the 'we' in this phrase is worth pondering. The deregulation campaign of which he was such a prominent cheerleader may have been only a precursor to something much more ambitious, a worldwide movement for the liberation of the rich. In Greenspan that movement has found the voice it deserves.
Or are economists just constantly thinking about how cool robots are? Eg FT Alphaville
http://ftalphaville.ft.com/2012/12/10/1303512/the-robot-economy-and-the-new-rentier-class/
http://simplystatistics.org/2014/06/30/piketty-in-r-markdown-we-need-some-help-from-the-crowd/