Capital Punishment 1 Why a Global Tax on Wealth Won’T End Inequality Tyler Cowen
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Special Collection BEST OF PRINT 1. Capital Punishment 1 Why a Global Tax on Wealth Won’t End Inequality Tyler Cowen 2. The Return of Geopolitics 12 The Revenge of the Revisionist Powers Walter Russell Mead 3. The Illusion of Geopolitics 24 The Enduring Power of the Liberal Order G. John Ikenberry 4. Show Them the Money 37 Why Giving Cash Helps Alleviate Poverty Christopher Blattman and Paul Niehaus 5. New World Order 48 Labor, Capital, and Ideas in the Power Law Economy Erik Brynjolfsson, Andrew McAfee, and Michael Spence 6. America in Decay 59 The Sources of Political Dysfunction Francis Fukuyama 7. Pitchfork Politics 91 The Populist Threat to Liberal Democracy Yascha Mounk 8. Why the Ukraine Crisis Is the West’s Fault 106 The Liberal Delusions That Provoked Putin John J. Mearsheimer 9. The Unraveling 120 How to Respond to a Disordered World By Richard N. Haass 10. China’s Imperial President 132 Xi Jinping Tightens His Grip Elizabeth C. Economy BEST OF WEB 11. Bitcoin Goes Boom 145 Will the World’s Favorite Cryptocurrency Explode or Implode? Yuri Takhteyev and Mariana Mota Prado 12. Erdogan Loses It 155 How the Islamists Forfeited Turkey Halil Karaveli 13. Putin’s Brain 160 Alexander Dugin and the Philosophy Behind Putin’s Invasion of Crimea Anton Barbashin and Hannah Thoburn ii foreign affairs 14. Foreign Policy à la Modi 170 India’s Next Worldview Manjari Chatterjee Miller 15. The Price of Poverty 179 Psychology and the Cycle of Need Johannes Haushofer 16. Meet Pakistan’s Lady Cadets 188 The Trials and Triumphs of Women in Pakistan’s Military Academy Aeyliya Husain 17. Notes From the Underground 194 The Long History of Tunnel Warfare Arthur Herman 18. Golden Rule 206 Why Beijing Is Buying Alan Greenspan 19. The Poor and the Sick 210 What Cholera and Ebola Have in Common Fran Quigley 20. 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MARPLES $45.00 · paper · 978-3-8382-0684-4 $54.00 · paper · 978-3-8382-0674-5 $36.99 · ebook · 978-3-8382-6674-9 CUP.COLUMBIA.EDU · CUPBLOG.ORG Foreign Affairs Special Collection: Best of 2014 Editor Gideon Rose Introduces the Collection We’ve published a ton of great content in 2014, and we’ve picked out ten of our favorite articles from the print edition and ten from the web to show you just what we’ve been up to over the last year. We hope you enjoy the collection and come back for more in 2015. ON INEQUALITY: ON PAKISTAN’S FEMALE SOLDIERS: In “Capital Punishment,” Tyler Cohen ex- In “Meet Pakistan’s Lady Cadets,” Aeyliya plains why French economist Thomas Husain offers an eye-opening account of a Piketty’s book on economic inequality is small group of women making their way brilliant but fundamentally flawed. through the Pakistan Military Academy. ON UKRAINE: ON TUNNELS: “Why the Ukraine Crisis Is the West’s Fault,” Hamas is only the latest in a long line of John Mearsheimer’s blockbuster article on groups to use tunnels to wage war. In Washington and its European allies’ respon- “Notes from the Underground,” Arthur sibility for the Ukraine crisis, will make you Herman writes that there’s no way to know rethink your opinion of recent Russian how long drones and the like will last. But behavior. as long as there is warfare, tunnels will almost certainly be part of the fight Visit ForeignAffairs.com for more on these topics—and all our other great content. Capital Punishment Why a Global Tax on Wealth Won’t End Inequality Tyler Cowen FROM OUR MAY/JUNE 2014 ISSUE A model gets a 24- carat gold leaf facial at the Beautyworld Japan 2007 trade fair in Tokyo, May 7, 2007. (Toru Hanai / Courtesy Reuters) Capital in the Twenty- firstCentury . BY THOMAS PIKETTY. TRANSLATED BY ARTHUR GOLDHAMMER. Belknap Press, 2014, 696 pp. $39.95. Every now and then, the field of economics produces an important book; this is one of them. Thomas Piketty’s tome will put capitalist wealth back at the center of public debate, resurrect interest in the subject of wealth distribution, and revolutionize how people view the history of income inequality. On top of that, although the book’s prose (translated from the original French) might not 1 Tyler Cowen qualify as scintillating, any educated person will be able to under- stand it— which sets the book apart from the vast majority of works by high- level economic theorists. Piketty is best known for his collaborations during the past de- cade with his fellow French economist Emmanuel Saez, in which they used historical census data and archival tax records to demon- strate that present levels of income inequality in the United States resemble those of the era before World War II. Their revelations concerning the wealth concentrated among the richest one percent of Americans— and, perhaps even more striking, among the richest 0.1 percent— have provided statistical and intellectual ammunition to the left in recent years, especially during the debates sparked by the 2011 Occupy Wall Street protests and the 2012 U.S. presiden- tial election. In this book, Piketty keeps his focus on inequality but attempts something grander than a mere diagnosis of capitalism’s ill effects. The book presents a general theory of capitalism intended to an- swer a basic but profoundly important question. As Piketty puts it: “Do the dynamics of private capital accumulation inevitably lead to the concentration of wealth in ever fewer hands, as Karl Marx believed in the nineteenth century? Or do the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater har- mony among the classes, as Simon Kuznets thought in the twenti- eth century?” Although he stops short of embracing Marx’s baleful vision, Piketty ultimately lands on the pessimistic end of the spectrum. He believes that in capitalist systems, powerful forces can push at various times toward either equality or inequality and that, there- fore, “one should be wary of any economic determinism.” But in the end, he concludes that, contrary to the arguments of Kuznets and other mainstream thinkers, “there is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevail- ing permanently.” To forestall such an outcome, Piketty proposes, among other things, a far- fetched plan for the global taxation of 2 foreign affairs Capital Punishment wealth— a call to radically redistribute the fruits of capitalism to ensure the system’s survival. This is an unsatisfying conclusion to a groundbreaking work of analysis that is frequently brilliant— but flawed, as well. THE RICH ARE DIFFERENT Piketty derives much of his analysis from a close examination of an important but generally overlooked driver of economic inequality: in contemporary market economies, the rate of return on invest- ment frequently outstrips the overall growth rate, an imbalance that Piketty renders as r > g. Thanks to the effect of compounding, if that discrepancy persists over time, the wealth held by capitalists increases far more rapidly than other kinds of earnings, eventually outstripping them by a wide margin. To measure this effect, Pik- etty focuses on the annual capital-to - income ratio, which expresses the size of a country’s total stock of wealth relative to the income generated by its economy in a single year. Capital wealth is gener- ally much larger than yearly national income— in the case of to- day’s developed economies, about five to six times as large. Piketty expertly narrates the story of how that gap has played a major role in economic history since the dawn of the modern era. The peace and relative stability enjoyed by western Europe during the second half of the nineteenth century allowed for enormous capital accumulation. Unprecedented concentrations of wealth arose, boosting inequality. But two world wars and the Great De- pression destroyed capital and interrupted that trend.