Clos­ing the gap

China Daily (Canada) - - HONG KONG - By PETER LIANG

The book that tops the best­seller list in the United States is about eco­nomic in­equal­ity, a sub­ject that is as rel­e­vant there as it is in Hong Kong.

Thomas Piketty’s Cap­i­tal in the Twenty-First Cen­tury, which is sold out on Ama­zon, uses his­toric data to strip the dis­guise of un­fet­tered cap­i­tal­ism and ex­poses it as the main cul­prit re­spon­si­ble for the ris­ing in­come in­equal­ity that has be­come a thorny po­lit­i­cal and so­cial is­sue in the US.

In do­ing so, the book blows the lid off the myth of the trickle-down ef­fect of wealth that many ortho­dox cap­i­tal­ists, or, in the case of Hong Kong, pos­i­tive non-in­ter­ven­tion­ists, would want you to be­lieve.

French economist Piketty con­tends that wealth is not go­ing to trickle down with­out gov­ern­ment in­ter­ven­tion in the re­dis­tri­bu­tion process. He calls for leg­isla­tive mea­sures, in­clud­ing the im­po­si­tion of a global tax on cap­i­tal, to ad­dress the im­bal­ance in wealth dis­tri­bu­tion.

Un­sur­pris­ingly, his book has won ac­claim from lib­eral econ­o­mists, in­clud­ing No­bel lau­re­ate Paul Krug­man, who hailed Piketty’s work as “rev­o­lu­tion­ary”, and ex­plained that in­come dis­par­ity is all about “r” ver­sus “g” — the rate of re­turn on cap­i­tal ver­sus the rate of eco­nomic growth.

Cit­ing his­tor­i­cal records, Piketty ar­gues that the widen­ing gap be­tween “r” and “g” has re­sulted in a re­dis­tri­bu­tion of in­come away from la­bor and to­ward hold­ers of cap­i­tal.

Krug­man posits that a ris­ing share of cap­i­tal, in turn, di­rectly in­creases in­equal­ity, be­cause own­er­ship of cap­i­tal is al­ways much more un­equally dis­trib­uted than

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