To stop income inequality from growing, Japan should levy a heavier tax on big earners, said Thomas Piketty, a French economist known for his recent best-seller “Capital in the Twenty-First Century.”
The amount of national income held by a small number of wealthy people in Japan has climbed in the past few decades amid the prolonged economic slump, although not as sharply as in the United States, he said in a symposium in Tokyo on the widening income gap and Japan’s future.
“Inequality in Japan is in some ways closer to Europe than to the U.S.,” he said Thursday.
Touching on economic policy, Piketty said Japan is depending too much on “creative” monetary easing rather than raising wages, which he said is more important.
Under the “three arrows” of his “Abenomics” policy, Prime Minister Shinzo Abe urged the Bank of Japan to drastically ease monetary policy, which supercharged stock prices and weakened the yen, as part of his strategy to end Japan’s prolonged deflation. But letting goods prices climb in a wide range of industries without structural reforms and a commensurate hike in wages has raised fears that Abe’s plan will never help the general public.
The opposition parties in particular say economic indicators show that the gap between the economic well-being of salaried and temporary workers is only growing larger under Abenomics.
In his best-seller, which discusses the evolution of wealth concentration based on 15 years of research conducted by himself and by other scholars, Piketty warns that accumulated wealth grows more rapidly than output and wages do.
“The entrepreneur inevitably tends to become a rentier, more and more dominant over those who own nothing but their labor. Once constituted, capital reproduces itself faster than output increases,” he said.
In the study, he explains the trend by using the “r > g concept,” where “r” means the rate of return on capital and “g” means the rate of growth.
The book was first published in French in 2013. The English version, published in the following year, quickly became a best seller. But the ambitious economist’s study has also sparked debate and criticism among economists and policymakers in Europe and the United States. That is partly because he proposes that governments introduce a global tax on wealth to stem the endless spiral of soaring inequality.
“The distribution of wealth is one of today’s most widely discussed and controversial issues,” Piketty, who is often called “the modern Marx,” says in his book.
“Since the 1970s, income inequality has increased significantly in the rich countries, especially the United States, where the concentration of income in the first decade of the twenty-first century regained — indeed, slightly exceeded — the level attained in the second decade of the previous century,” he said. “The inequality r > g implies that wealth accumulated in the past grows more rapidly than output and wages.”
He was invited to Japan to commemorate the publication of the Japanese version of the book in December and is scheduled to stay in Japan until Sunday.
news source & image credits: japantimes.co.jp