New paper: 'Piketty in the Netherlands - The first reception'

The two papers brought together here are revised versions of:

  • Paul de Beer, Wat kunnen sociaaldemocraten van Piketty leren?
  • Wiemer Salverda, Ongelijkheid in Nederland
    S&D Volume 71 Number 3 June 2014 — pages 31-38 and 49-60 respectively.

Click here for the paper

What can we learn from Piketty?

Paul de Beer

Piketty’s book tells a compelling and ‘grand’ story. The practical lesson is to aim for a more balanced distribution of wealth without impeding growth: more home ownership without debt, less tax deductions for pension premiums paid by higher earners, more profit sharing for employees.

Capital in the Twenty-First Century by French economist Thomas Piketty has created a shockwave among economists. A few have already welcomed the book as the most important economic work since Marx’s Das Kapital. It is not just the title that has prompted this response, it is also the breadth and depth of Piketty’s analysis. In an age in which ‘big stories’ are supposed to have been dispensed with because today’s world is too complex to be expressed solely in simple formulas, this is exactly what Piketty has done.
The essence of his book can be summarised in three elementary formulas: α = r x β, β = s/g and r > g. The latter inequality in particular has captured the imagination of the economist community in the past year, as if it were the formula for the holy grail. The Huffington Post even compared it with Einstein’s E = mc2. The formula has already appeared on hipsters’ T-shirts!
Reducing the analysis of modern capitalism to three simple formulas that can be explained fairly easily to non-economists would seem to be an impossible task. Many economists who sang the praises over Piketty’s book seem to be desperately wondering why they had not hit upon the idea themselves, as it is not as if the formulas contain anything that is really new.

Wealth/income inequality – the significance of Piketty’s views for the Netherlands

Wiemer Salverda

It is not possible yet to draw a comprehensive comparison of wealth inequality in the Netherlands with the results for other countries found in Piketty’s Capital in the Twenty-first Century survey, if only because consistent Dutch figures on wealth go back no further than the 1990s. By contrast, it is possible to study the ratio between national wealth and income in much the same way as Piketty has done, but from the mid-1990s on only. The results show that from an international perspective the wealth/income ratio in the Netherlands is considerable, and has been growing. Further research is required, first, to improve this comparison and extend it to earlier years and even centuries as in Piketty, and, second, to link that to the distribution of wealth over individuals and households.

The discussion on Capital in the Twenty-First Century by Thomas Piketty raises three important questions about the significance of his research for the Netherlands:
What is the wealth-income ratio like; is it increasing here too?
How concentrated among individuals or households is the possession of wealth, and is this concentration increasing or decreasing?
How important is income from wealth in the distribution of incomes?
For each of these questions, it is also relevant to know its development and level relative to other countries.
I will attempt in this contribution to find a first answer to these questions, using Dutch income and wealth statistics, international macro-economic statistics (national accounts) and of course the top-income shares, which laid the foundation for Piketty’s theory about the role of wealth, economic growth and inequality.
One hundred years ago, top incomes in the Netherlands accounted for an extremely high proportion of overall income, possibly due to colonialism, opportunistic profiteering from the First World War, or perhaps because that is simply how things were. In 1916, 53% of all income in the Netherlands, as in Sweden, went to the Top-10% and 29% to the Top-1%. That was considerably more than in Germany, the United Kingdom, or the United States at the time. As was the case elsewhere, the top shares showed a marked decline in the Netherlands, especially after 1945, until reaching their lowest points of 27.5% and 6.1% respectively in 1975. After that, the top-income shares diverged considerably from one country to another, as we shall shortly see. Because minor differences in definitions can have significant effects when it comes to income and wealth – the devil really is in the detail here – I will try to be as accurate as I can in what I have to say.

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