By J.D. Alt
How would Thomas Piketty propose to save the city of Norfolk, Virginia? He teaches us, ad-nauseum, that what the U.S. collective state has to spend on such things as sea walls, flood gates, elevating infrastructure and roadways, buying-out property owners so they can relocate to higher ground, etc., etc., is limited to the number of tax dollars that can be collected from U.S. citizens—as if the collective state itself were like a club, and if the clubhouse needs repairing, the club members must first pay a special assessment of dues—or, alternatively, the club can borrow dollars from the supply of Capital owned by the wealthiest 1% of its membership, or (as a creative alternative) the rebuilding effort could be structured in such a way that the newly elevated Norfolk would pay rent to the one percent in perpetuity for the privilege of living above sea-level.
For Mr. Piketty, the calculation is: what is the availability of “Capital”? His entire book is an exercise in quantifying and compartmentalizing in various ways the distribution of “Wealth” throughout the world—and projecting how its historical 5% growth rate might be distributed in the future. Presumably, he would use these calculations to arrive at some number of Dollars that theoretically could be made available to the effort of saving Norfolk.
This perspective—and the fact that Piketty’s book so relentlessly reinforces it— is a tragedy for Norfolk. First, whatever amount of “Capital” he might calculate is available would likely fall short of the rebuilding budget. The task that modern civilization has before it over the next many decades has, it is rapidly becoming apparent, extraordinary dimensions. Second, it is virtually impossible to imagine the U.S. political system taxing the 1%—or borrowing from them—even that shortfall amount. So Norfolk is sunk. Or soon will be, possibly in my lifetime, certainly in the lifetime of my children.
The tragedy isn’t that Norfolk is sunk. It’s that it could be saved if we, as a collective nation (forget the rest of the world—they can follow in our footsteps) would only embrace a slightly shifted understanding of money than the one Piketty is stuck on. This shift in perspective doesn’t refute any of his remarkable data compilations and analysis—it simply steps slightly to one side and realizes that Piketty’s calculations are, in fact, a mirror image of reality: the “wealth” he measures and spells out in graph after graph is NOT a measure of what is available to pay citizens to do the work necessary to build and sustain their social civilization; it is, instead, a measure of the real goods and services the citizens have already created using the real resources (materials, labor and technology) that have been available to them. This is not a small distinction. The fact that the process of creating wealth manages somehow to distribute it inequitably, as Piketty admirably demonstrates, is an issue of huge social difficulty. Believing that existing wealth defines and “finances” what we can accomplish as a collective nation going forward, however, makes solutions not just difficult but impossible.
This shift in perspective—this realization of what we can actually do as a cohesive society—is not an ideological (progressive versus conservative) shift. It can provide huge benefits to Democrats, Republicans, or Libertarians alike. Furthermore, it is easily visible to any observer willing to acknowledge a few simple (and obvious) facts:
First, “money” is not a natural resource that humans dig out of the ground, or catch in the sea, or cultivate with water and sunshine. Money is a social invention created in people’s minds (using paper or metal or digital symbols to keep track of.) The purpose of the money-invention is to facilitate the trading of “debts” amongst individuals in a very large, collective society. The debts are for goods and services individual members of the society provide to each other. It should be obvious to anyone’s common sense that these goods and services are NOT limited by the number of paper, metal, or digital symbols that keep track of the debts, but are instead limited ONLY by the actual goods and services individuals are willing and capable of providing each other. The paper, metal, or digital symbols (the “money things”) are created, as needed, to accommodate the actual goods and services that are exchanged.
Second, people cannot individually create their own paper, metal, or digital symbols (“money”) because it would be impossible to know the value of one person’s money compared to another’s with respect to the quantity of various goods and services the money symbols can be exchanged for. The money invention can only work if the social group collectively agrees to a common unit of currency, and assigns the task of creating or “issuing” that currency (producing the paper, metal or digital symbols) to a Central Authority.
Third, while money could simply be created “by law”—with the central authority threatening to put citizens in jail if they refuse to provide goods and services in exchange for the authority’s money-symbols— it is less effort and more effective to use a more dynamic method: Federal Taxes. Instead of requiring citizens to provide goods and services in exchange for the money, the central authority levies a tax on the citizens which can only be paid with the money the authority issues. Having given each citizen a debt which can only be paid with the authority’s money—taxes due—the collective state sets in motion the dynamic whereby it is now able to issue paper, metal or digital symbols (money) and the citizens are willing to provide real goods and services in exchange for those symbols.
It should now be apparent that we do indeed , collectively as a nation, have the monetary means to save the city of Norfolk if we choose to—and this monetary means is not dependent on any calculation by Mr. Piketty about the amount of “Capital” or “Wealth” that exists today (no matter how that wealth might be distributed.) What it does depend on, however, is the answer to two questions:
(1) Are the real resources—labor, materials, and technology—required to substantially rebuild Norfolk actually available to be employed?
(2) Assuming the real resources are available, is employing them to rebuild Norfolk to a higher elevation actually the best use of those real resources?
The incredible incompetence of our political dialog as a collective society is exemplified by the fact that neither of these questions is even being asked. But that, of course, is largely because we insist on holding on to a view of money that is exactly analogous to standing in a tub of concrete. The inevitable result of this view is that we’ll sink right alongside Norfolk.