The architecture of this bank on Rainier Avenue is defined a modernist.
  • CM
  • The architecture of this bank on Rainier Avenue is defined modernist.

The response the richest man on earth (currently Bill Gates) provides to the solution proposed by the most famous economist on earth (currently Thomas Piketty) to address the ever-growing and global problem of wealth inequality (a progressive transnational tax system—transnational because the "myth of national sovereignty helps big corporations screw us over") is don't tax rich people like me: a philanthropist (generous) and an entrepreneur (productive). Tax instead rich people who are not like him, who spend their wealth on what the late Nigerian singer/musician Fela Kuti once called "expensive shit."

What is the problem with this way of thinking? For one, it assumes that rich people are either productive, generous, or just about that bling. But a large number (indeed if not most) of the rich of our day are missed by Bill Gates's categories. They are not contributing to the real economy, or are not socially sensitive, or do not live lavish styles. Who is missing? To begin with, Bill Gates wants the public to see him as an entrepreneur and philanthropist (both are socially useful), but he is also a rentier, a person who simply lives on "income from property or investments." The rentier is the person missing from Gates's categories.

But how exactly is the entrepreneur different from the rentier? One can argue that, after all, rentiers do make investments with their surplus capital, and this helps those who have good ideas but no capital to speak of transform their dreams into enterprises in the real economy. The rentier is, at the end of the day, useful. But as Doug Henwood pointed in his 1997 masterpiece Wall Street and Martin Wolf in his new book The Shifts and the Shocks, investor capital often never leaves the financial sector. Henwood makes the point that the money circulating in Wall Street rarely enters the books and budgets of new businesses; Wolf points out that the "loans on the balance sheets of banks are overwhelmingly not to businesses," but to property owners and other financial institutions. (In the UK, for example, less than 9 percent of "outstanding lending" went to non-financial businesses.)

Banks and most investors are about those rents. And what Piketty argues in Capital in the 21st Century is that, though many of the rich in the US make much of their money from wages and bonuses (CEO pay), as economic growth (g) slows, which it will (this decline relates to secular stagnation), the return on invested capital (r) will become more and more important than wages. In sum, if you do not heavily tax rentiers, the past will devour the future.