Monday, May 19, 2014

The Blindness of Thomas Picketty

I haven't read Thomas Piketty’s book on Capital in the 21st Century, but going by numerous and lengthy reviews, the French academic deserves the Blind Economist of the Year Award.

At a time when the connective and analytical technologies of the Information Age have opened up the possibility of a truly egalitarian use of capital, he argues the opposite: that capitalism is bound to create increasing inequality.

The reason for this massive misreading is obvious: he looks not at the reality of the world but at the distorting mirrors of statistical analysis that cannot capture new and emerging phenomena.

If we look at the real world it is clear that a quiet revolution is taking place against a system that has, throughout its history, allowed the corporate elite to apportion a lion’s share of wealth to itself.

It is a revolution that promises to reverse that process and equalize societies more comprehensively than any with flags and incendiary slogans. Consider the following:

1. The Internet and Worldwide Web allow small and medium sized enterprises to find and cater to niche markets. In effect, that destroys the mass market, which is no more than a conglomeration of niches homogenized by advertising.

2. Without a mass market, giant corporations have no reason to exist. Their decision-making hierarchies make them corporate dinosaurs, incapable of competing with smaller companies capable of adjusting far more swiftly to changes in consumer demand.

3. Without giant corporations to finance, the great bourses of the world will also become dinosaurs, especially as they face competition from crowd-funding. That fund-raising model is already revolutionizing indie film production in the United States – Spike Lee movies are now entirely financed that way – and will undoubtedly spread to all other economic sectors under a new American law that allows crowd-funding for profit. That law, which is sure to be replicated around the world, allows very tiny enterprises to raise funds publicly, in effect, creating innumerable little stock markets, tapping into minuscule pools of capital.

4. An added kick to the old gargantuan world of industrial production comes from the combination of off-grid renewable energy and 3D printing. It makes possible high quality manufacturing in areas without the heavy and expensive infrastructure that has always before been necessary for industry.

What all this means is that the global corporate elite created by the mercantile and industrial eras will have millions of new competitors capable of eating its lunch.

The days of corporate biggies strong-arming governments and riding roughshod over social and environmental concerns are over. Not because of any Good Corporate Citizen Code of Conduct, but because the biggies and their weird values will no longer exist.

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