On Sunday I saw a student production of Vaclav Havel's adaptation of The Beggar's Opera at the University of Washington.  And guess what one of the whores was reading?  Thomas Piketty's Capital in the Twenty-First Century, of course. An honest working girl, she wasn't too impressed with the inequality thing.

Here's what she was complaining about. It's right on page one of the Introduction.

When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.

Inequality? Hey, a girl's got to get a return on her capital assets while she's still got them.

Speaking as a middling sort of capitalist, with my own particular assets, I have to say I agree with her. And anyway, where do I find this mythical beast called “rate of return?”

In the first place, your average mom-and-pop capitalist is getting zero rate of return on their bank savings account, courtesy of lefty-liberals in the Federal Reserve System. For the rest of us there is no “rate of return;” there are only agonizing choices. In Obama's America you can put your money in a municipal bond, but what good will that be when the government employee pension crisis hits? You can put money in so-called momentum stocks like Amazon and Facebook, but who knows how long the market-momentum gods will smile on them? You can put money in dividend stocks like utilities and consumer goods, but who knows when liberals will kick them in the teeth for burning coal or causing cancer?

Thomas Piketty wants us to think that the rate of return on capital is something that the wealthy manage to impose upon the rest of us, a consequence of their economic power.  But the truth is that every capitalist, from the mom-and-pop saver to the most corrupt crony capitalist, is placing a bet on the future. 

Before we euthanize working girls and middling capitalists, lefties, let's deal with the government-bailed-out banksters and crony capitalists.

Is capital's share of national income going up? Maybe that's because of the crony capitalists' political connections. Or maybe it's because capitalists really add value to the economy.

That's a thought: capitalists actually contributing to our income and wealth!

But which is right? Are the capitalists powerful oppressors that need to be curbed or ingenious creators amazing new products and services? 

It all comes down to faith.

Like Marx, Piketty seems to believe that the modern achievement is a accumulation of things like capital. Completely wrong, writes Deirdre McCloskey, who has a different faith.

We say that the modern world got rich by (at a minimum) 1500% percent compared with 1800 not, as the sadly mistaken Accumulators say, because of capital accumulation, or exploitation of the third world, or the expansion of foreign trade. The world got rich by inventing cheap steel, electric lights, marine insurance, reinforced concrete, coffee shops, saw mills, newspapers, automatic looms, cheap paper, modern universities, the transistor, cheap porcelain, corporations, rolling mills, liberation for women, railways.

In the Preface (pdf) to the third volume of her “Bourgeois Era” books due out in 2015, McCloskey expands on this.

The point is to revalue the middle class, the middling sort, the entrepreneur and the merchant... The bourgeoisie, though despised after 1848 by the artists and intellectuals, led the Great Enrichment, improving the lives of poor and rich together with such ideas as the electric motor or the land-grant university. The technical and institutional ideas were made possible by a new liberty and dignity for commoners, among them the middling sort.

George Gilder writes something similar in Knowledge and Power, as I note in “A Critique of Social Mechanics.” Modern business “is based on surprise, a surprising new idea or a surprising new product that emerges from the background of noise” and changes the world.

But what about Piketty's argument that a “high rate of return on capital” generates “arbitrary and unsustainable inequalities?” Well, I'm still reading the book, and blogging about it. So stay tuned for more at americanmanifesto.org.

But here's a thought.  If Deirdre McCloskey is right and the modern world has really got rich by 1500% compared with 1800, how arbitrary and unsustainable can this inequality be?  If the poor get Obamaphones this year, it'll be Obama smartphones next year.

Marx was wrong when he prophesied that capitalism would immiserate the workers. Lincoln Steffens was wrong when he said he'd seen the future in the Soviet Union and it worked.  Liberals were wrong when they said the War on Poverty would end poverty in America.  Now we have Thomas Picketty with a new lefty plan to tax the rich. You feelin' lucky, Tom?

Christopher Chantrill @chrischantrill runs the go-to site on US government finances, usgovernmentspending.com. Also see his American Manifesto and get his Road to the Middle Class.