French market monetarist Nicolas Goetzmann kindly allowed me to reprint his email:
Perhaps you remember this post:
Piketty published a book this month in France “capital in the XXI century” (900 pages on inequality).
If you go back to your post, Piketty delivers an answer to your question:
“The main fact is that GDP per capita growth has been almost exactly the same in all “rich” countries from 70-80’s”
“Contrary to one might think in the US or in the UK, the truth from the numbers is that growth has not been stronger from 70/80’s in the UK and in the US, than in Germany, France, Japan, Denmark or Sweden”
(sorry for my translation which must be french style..) this is page 825.
But off course, per capita growth has been stronger starting 1980 in the US, in fact 40% stronger, which gives us a 25% difference between US and France.
At the end, in a small note, Piketty said that this gap is due to the fact that US workers work more……which is the same answer he gave in the Bloomberg article you linked to…
Nothing more, but an abuse of the numbers….
I’ve made an article on this one, with the Prescott paper and the Alesina paper.
I think that Piketty missed something which might be important: Capital is mobile, workers are not, and at the end we have this: Gini is reducing on a worldwide basis since 2005.
A few comments:
1. When Piketty talks about growth being roughly the same in developed countries over very long periods, he obscures a lot of shorter term trends. Thus Europe grew faster than America up until about 1980, partly due to catch-up after WWII. After the supply-side reforms of Reagan and Thatcher, the US grew faster. Similar comparisons are possible with countries like Australia and Sweden. Highly prosperous after WWII, then slower growing than other developed countries, then renewed vigor after supply-side reforms.
2. It’s odd that Piketty explains away France’s lower income by pointing to lower hours worked, as that is precisely how taxes are supposed to reduce real output. And don’t say it’s a cultural difference, when the French had lower tax rates back in the 1960s they worked just as long as Americans. Culture is endogenous.
3. It’s true that supply-siders also focus on taxes on capital, but that is one area where US tax rates are fairly high by international standards. Thus the main difference between the US and Europe is hours worked, not capital.
4. I also like Goetzmann’s comment about global Gini coefficients. Liberals should care about global welfare. Are they closet nationalists?
PS. Nicolas also sent me the following:
“Global inequality seems to have declined from its highplateau of about 70 Gini points in 1990-2005 to about67-68 points today. This is still much higher than inequality in any single country, and much higher than globalinequality was 50 or 100 years ago. But the likely downwardkink in 2008″”it is probably too early to speak of a slide””is an extremely welcome sign. If sustained (and much willdepend on China’s future rate of growth), this would be thefirst decline in global inequality since the mid-19th centuryand the Industrial Revolution”