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Piketty split - why soaking the rich won't help anyone

By Graham Young - posted Monday, 7 July 2014


It's not Joe Hockey's "leaners" Australians need to fear, it's the new breed of economic "levellers" who believe that to make an economy work better you just need to dial down levels of inequality.

Their worry, enumerated in Capital in the 21st Century by French economist Thomas Piketty, is that inequality is inexorably rising and inherited capital is about to eat our world.

Rather than equality of opportunity, they are fixated on equality of outcome, despite 20th Century experience in a string of communist countries showing this leads to an authoritarian state where fiscal, political and social powers are all used to brutalise the populace as the only way to keep it in a state of uniformity.

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Levellers seem to be everywhere in Australia, and across the political spectrum.

The Gonski recommendations were an exercise in improving education not through lifting standards, but by lifting school funding on an "equitable" basis.

The Queensland Government's "Queensland Plan" has as one of its goals "Increase the wealth of all Queenslanders while achieving Australia's narrowest gap between the wealthy and the poor."

If this is your mindset this year's BRW Rich 200 List, would be another proof that Australia's economic performance is about to tank because the rich appear to be getting richer.

In the 30 years since the first Rich List the minimum net worth required for inclusion has increased from $10M to $250M. That's a growth of 11.33% compound, outpacing the economy's nominal average growth in the same period of 6.88%.

There were no billionaires in the first list. Now, adjusting to 1984 dollars there are 10 1984 billionaires, and 39 in 2014 dollars.

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It would definitely seem that wealth is being concentrated, but the averages always hide the truth.

Piketty's primary concern is about "patrimonial" capital. He sees a world of declining growth where wealth is principally inherited and heirs are rentiers.

That's not the world of the BRW Rich List. Out of the 200 members, only 31 (16%) appear to have inherited their money, with most being self-made.

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An edited version of this article was published in the Australian Financial Review.



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About the Author

Graham Young is chief editor and the publisher of On Line Opinion. He is executive director of the Australian Institute for Progress, an Australian think tank based in Brisbane, and the publisher of On Line Opinion.

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