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July 29, 2014

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Author and economist might be a rock star, but his ideas hit a sour note

The academic and publishing worlds are abuzz, alight and atwitter over the surprising, sucker-punch success of “Capital in the Twenty-First Century,” the titanic tome written by French economist Thomas Piketty. His manifesto for the non-one percenters is a best-seller on Amazon, and it’s the talk of the town among smart people that actually, you know, read books.

And Piketty has become something of a rock star. He’s being profiled in magazines and on television, drawing Tiger Beat swoons and adulation from fans around the world. Besides, every time you see a picture of this guy on the Internet, he’s staring blankly into the distance, like he was lifted off a ’70s album cover from the Ramones.

Of that, let me say this: Enjoy it while it lasts, because it won’t.

By all accounts, the man has researched and written a brilliant and thoughtful recapitulation of the history of capitalism. His main thesis is our economic system breeds inequality just as naturally as stagnant water breeds mosquitos because growth in wealth compounds more rapidly than growth in production. Due to this phenomenon and several others, investors accumulate money much faster than workers do.

In other words: The rich get richer.

Of course it’s not this rather obvious revelation that has tugged people by the arm and gotten their attention; rather it’s the remedy. Piketty suggests that it takes only three things to cure such rampant and ramping inequality: taxing, taxing and taxing. Higher marginal rates. Taxes on wealth. Global taxes. The world economy, it would appear, is just a big jar of peanut butter, and capitalism is a spoon: It’s great for scooping, not so good for spreading. And Piketty is standing at the ready, Joey Ramone gaze and all, holding out a butter knife.

And this is why “Capital” won’t make it out of the decade — let alone the 21st century — alive, or even marginally relevant. All the great political and economics books in history created seismic tremors, their aftershocks felt to the edges of civilization for years to come. Plato’s “Republic,” “The Wealth of Nations,” “Das Kapital,” “Mein Kampf,” Mao’s “Little Red Book,” etc., endure — the varying value of their ideals notwithstanding — because they disrupted the trajectory of human existence. For better or worse, they changed the world.

The only thing Piketty’s book will change is maybe a dust jacket for the second edition. Do you really think our federal government will start confiscating personal wealth and give it to others? Do you really think we will revert to a 70 percent marginal tax rate? Do you really think rich people from rich countries are going to send their tax dollars (or tax euros or yen or whatever) to poor people in poor countries?

Then you’re really not thinking.

The fact is Piketty’s prescription will never be filled. It’s too idealistic, too utopian, too un-American. His recommendations are destined to be discussed, debated and dissected by chin-strokers and elbow-patch wearers at coffee houses and on college campuses, not actually implemented by real people in the real world.

Here’s what will happen instead: Piketty will continue to sell a bunch of books, continue to enjoy his celebrity status, and continue to draw accolades and attaboys from the Greek chorus of neo-Keynesians out there. Likewise, he will continue to endure scorn and derision from the Fox News crowd, which of course embraces contradictory beliefs like a hemophiliac embraces a porcupine.

All of this should last, eh, another 12-18 months until what was is de rigueur, as is always the case, eventually becomes passé. After that, no one is going to care or even remember.

And don’t hold your collectivist breaths for a sequel. This isn’t Harry Potter, or even Freakonomics or Sniglets. A magnum opus, by its nature, is all-encompassing. It’s an anthem. When the last word is written, there’s nothing left to say.

Far be it from me to cross swords with a man as learned as Piketty on the faults and the future of capitalism. But how about approaching the inequality problem from another angle? Why is levying the only way to leveling?

If Piketty proved one thing, it’s that over the course of time, savings and investment are essential components to wealth creation. Then why doesn’t he promote them? Look at the savings rate in the country. Wait, let me get you a magnifying glass so you can see it.

If people could live below their means, they could save and invest some of the remainder. This would steer at least a percentage of their incomes into the passing lane of the economy, even while most of it would remain locked in bumper-to-bumper traffic. Sure, the less you make the harder this is to do, but most everyone can forego some discretionary spending to better solidify their future.

You can start by saving the $25 for this book.

Roger Snow is a senior vice president with Bally Technologies.

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