Thomas Piketty’s new expose of the excesses of modern capitalism Capital in the Twenty-First Century has provoked a ferocious amount of criticism from the right wing, but the controversy has at least served to create a serious public conversation on the topic of inequality in America and across the globe.
In response to all the brouhaha, Tim Fernholz of Quartz complied a list of solutions to America’s growing inequality problem aside from Piketty’s suggestion of a wealth tax. A few of these suggestions are discussed below in the context of important steps that could be taken to create a freer and fairer country.
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More open borders
Fernholz’s first suggestion is to significantly liberalize immigration policies. He argues that greater migration would have a positive impact global inequality by giving incomes to migrants from poor countries, while “lowering capital’s share of income in wealthy countries.”
Piketty: Reform patent law
Reform of intellectual property law would be another major step forward in redressing economic inequality. Piketty argues that an entire class of the wealthy (rentiers) has arisen largely based on economic gain from patents they had nothing to do with, and that this is basically parasitism that contributes nothing to society. Fernholz’ suggestion of “getting rid” of certain classes of patents might be a bit radical, but by any reasonable standard there is ample room for reform in many areas of patentlaw, including software and pharmaceuticals/biotechnology.
Break up monopolies
Another more obvious way to create greater equality in society is to get serious about passing and enforcing anti-trust legislation. Fernholz cites Dean Baker’s indictment of the telecom sector, but points to breaking up monopolies as in general a good thing. “Anti-trust rules, aggressively enforced, could improve life for customers, and by forcing companies to compete rather than just sit on their monopolistic laurels, would also lower profit margins for shareholders—tough luck, but good for equality.”
Tax reform aside from higher income taxes on the wealthy is another possible avenue to address inequality. Fernholz highlights the importance of eliminating tax havens and tax loopholes for the rich, as well as floating the interesting idea of reforming property tax so that owners only pay tax on the amount of the property they actually own. Under this sustem, if you’ve just been paying for a couple of years on a 30-year mortgage (and assuming a 20% down payment), then you would only owe property tax on around 21-22% of the value of the property.
Fernholz also points to zoning reform as another way to fight inequality. He argues thoughtful reform of zoning and building codes could dramatically improve the lives of the urban poor. “This cost is…the product of zoning decisions, building codes and nostalgia that prevent the optimal utilization of space. Changing building codes to allow more development of affordable housing, taller buildings and fewer subsidies for cars would help alleviate inequality.”