Piketty is a new rockstar in the Keynesian and Marxist economic world. In the best-seller Capital in the Twenty-First Century, which is an onslaught of data, he comes across as an old-school economics professor. His seemingly 1960s influenced episteme finds a welcoming home in modern academia, while his centralized ideas of global economic management reveal him to be a ghost from the 20th century, an obsolete economist ignorant of 21st century economic tools.
The book demonstrates that wealth inequality is bigger than income inequality. This is common sense. Anyone who has spent a bit of time thinking about how the world works has seen that there are some very established interests who have been a sort of ruling class for a very, very long time. Piketty paints a picture, with statistics, that the elite hold the rest of the world in debt to itself. In other words, they are not productive, but earn via economic rent from debtors. In other words, they are not producing anything, not building any wealth. The ruling class is a class of debt collectors.
Whereas Piketty posits government as a tool towards global economic fairness, bitcoiners view peer-to-peer technologies as a tool towards the same. In the 21st century, government is not needed to regulate, because regulation can be managed by computers and open-source code. Here are some quotes from Piketty’s book, coupled with an analysis from the purview of a bitcoiner.
“Taxation is not a technical matter. It is preeminently a political and philosophical issue, perhaps the most important of all political issues. Without taxes, society has no common destiny, and collective action is impossible.” (p. 493)
This dark view of mankind is symptomatic of the scientific application of economics to human society. There is one problem – human society is not a solely mechanical process. It is susceptible to all the unexpected anarchy of organic systems found in nature, and somethings – if not many things – are simply out of the purview of an overly scientific economics, just as many things about the natural world are currently outside the purview of modern scientific fields.
The errors in thought are easily subverted. Let’s take for instance, the extremely cynical quote, “without taxes, society has no common destiny, and collective action is impossible.” This implies that mankind must be forced by a third-party, government, to be philanthropic.
Let’s put this view of individual action to bitcoiners. Bitcoiners had already grown their community to worldwide prominence before any tax authorities on the planet had meaningfully commented on it. Bitcoiners had gathered around the idea of bitcoin, had banded together to help each other via donations and other philanthropy, all the while creating a rather sophisticated online community capable of transacting most things for bitcoins. It has pushed the idea of finance and economics to new extremes, all without taxes. It wasn’t until 2013 when taxes truly started coming into the picture, long after bitcoin had established itself as a viable community. A simple Google search demonstrates the philanthropy bitcoiners have shown without taxes. Back to the quotes:
“[Piketty and co-authors’] findings have important implications for the desirable degree of fiscal progressivity. Indeed, they indicate that levying confiscatory rates on top incomes is not only possible but also the only way to stem the observed increase in very high salaries. According to our estimates, the optimal top tax rate in the developed countries is probably above 80 percent.” (p. 512)
The philosophy of bitcoin is not to “confiscate” anything, but rather to participate in something (bitcoin) and thus benefit for having brought individual uniqueness to the greater whole. Progressive in the bitcoin mind is not how much an individual can be taxed by a centripetal system, but rather how much a system can be turned towards centrifugal ends. In other words, how decentralized can mankind’s social arrangement become? Whenever you hear “peer-to-peer” anything, you’re hearing about the true, progressive cutting-edge, in the eyes of a bitcoiner.
Piketty highlights a problem many bitcoiners also see with the current financial system: an out of control and destructive financial and banking system. Piketty parrots that
“The primary purpose of the capital tax is not to finance the social state but to regulate capitalism. The goal is first to stop the indefinite increase in inequality of wealth, and second to impose effective regulation on the financial and banking system in order to avoid crises.”
What he fails to internalize is that, in the modern world, this method has resulted in the state and the top corporations working together. Governments have never been so sophisticated as they are today, but where is the regulation? I think everyone can agree, there is none.
Piketty, unlike bitcoiners, does not value privacy:
“An 0.1 percent tax on capital would be more in the nature of a compulsory reporting law than a true tax. Everyone would be required to report ownership of capital assets to the world’s financial authorities in order to be recognized as the legal owner…” (p. 519)
Bitcoin has been designed, in part, to protect financial privacy. People do not trust government agencies nor banks because government agencies have a proclivity towards prosecution and confiscation and most of the world’s biggest banks only exist today thanks to government subsidy and protection. It is this fact, coupled with National Security Agency revelations, that has led to bitcoin’s adoptions. Piketty’s philosophy, if implemented (that is, an inheritance and global wealth tax), would only bring more people into bitcoin. His view of offshore tax havens underscores this:
“No one has the right to set his own tax rates. It is not right for individuals to grow wealthy from free trade and economic integration only to rake off the profits at the expense of their neighbors. That is outright theft.” (p. 522)
Firstly, for Piketty to flat out claim that “no one has the right to set his own tax rates” pretty much shows him to be a sociopathic control freak. Hyperbole aside, if the above-mentioned offshore haven were merely seen as bitcoin, Piketty’s writings are essentially suggesting that bitcoiners owe non-bitcoiners some money, and by keeping the treasure trove of new wealth created by bitcoin, bitcoiners are stealing. Piketty comes up with theoretical examples fit for a Disney cartoon to prove his point:
“[I]f, tomorrow, someone were to find in her backyard a treasure greater than all of her country’s existing wealth combined, it is likely that a way would be found to amend the law to share that wealth in a reasonable manner (or so one hopes).” (p. 537)
Piketty reveals his Marxian dis-taste for usury:
“From the standpoint of the general interest, it is normally preferable to tax the wealthy rather than borrow from them.” (p. 540)
But if you ask bitcoiners about taxing or borrowing, it is likely they would prefer borrowing. Wherefore? Well, there is already a fledgling lending system evolving in the bitcoin ecosystem, and people within the community, in many cases, feel a desire to help each other out. Moreover, many people are excited about peer-to-peer lending, which could, given enough time to properly develop, re-invent the way the world sees lending. It could be the end of the taboo on money lending.
Unlike Piketty, the bitcoin community has a plan for its wealth, which it built by being innovative. Whereas Piketty supports a global tax on the wealthy, with no real plan for how to use that money other than to put it in the hands of the people [read: government], bitcoiners desire a world more decentralized than ever before, putting emphasis on the talents of individuals and what they can bring to a community. Bitcoiners pay a tax of their own time working for the community.
Robert P Murphy writes, “If you’re rich you’d better make friends with Piketty et al. real fast, and maybe they’ll let you keep some of your stuff.”
But if you have bitcoin, Piketty’s proposals won’t effect you. In this world of re-distribution, the only thing you can own is encrypted data.