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June 2, 2014

Editor’s letter: Words of wisdom on a Highgate tomb

The remains of the man behind The Communist Manifesto and Das Kapital are buried in London’s Highgate cemetery. German philosopher Karl Marx died in 1883, but what about his contribution to economics. Is his intellectual legacy dead too?

Judging by the outcome of the Soviet Union, an ill-fated experiment based on Marx’s ideas, the answer seems pretty obvious: Communism doesn’t seem to work. But at a time of austerity measures and in the aftermath of the global financial crisis, many would argue that the path capitalism has taken since the fall of the Berlin Wall doesn’t always seem the most righteous.

Interestingly enough Russia, a former communist economy, tops The Economist’s crony-capitalism index. And both critics of socialism and the anti-capitalists would blame each other’s credo for creating such a degraded form of free market economy or crony-capitalism.

The consequences of the global financial crisis, particularly the rescue of failed banks with taxpayer’s money, seem a breeding ground for disenchantment with the current economic model.

Against this backdrop of an apparent crisis of capitalism, the French economist Thomas Piketty’s book Capital in the Twenty-First Century has become an international best-seller despite being a 700-page data-driven treatise.

Piketty’s tome focuses on the study of inequality and wealth distribution. One of the questions he tackles is whether capitalism inexorably leads to the accumulation of wealth in fewer hands, as Karl Marx argued. But don’t expect Piketty to be an advocate of the "inequality zeitgeists", whose support is behind the author’s success according to Financial Times.

Instead, he writes: "I was vaccinated for life against the conventional but lazy rhetoric of anti-capitalism, some of which simply ignored the historic failure of Communism." Piketty declares he’s more interested in contributing to the debate about what would be the most appropriate institutions and policies to achieve a just social order.

One of those policies is a global tax on capital, a "useful utopia" as he calls it, which would constitute a tool for the redistribution of wealth. Coincidentally that’s a core issue for the accountancy profession, which more than once has found itself on the horns of a dilemma: is it ethical helping my clients to avoid paying taxes that could be used for the common good?

In one of his weekly briefings in May Deloitte UK chief economist Ian Stewart wrote that the idea of a global wealth tax seems far-fetched, a statement with which Piketty would agree. Nonetheless, the book, says Stewart, will prove influential and likely to "bolster support for more redistributive policies, from a higher minimum wage to taxes on property".

Capital in the Twenty-First Century will remain in the limelight for a while, being equally praised and criticised. And a review by the Financial Times is now suggesting that Picketty’s data and sources don’t support the findings of his book. But as is inscribed in Marx’s tombstone: "Philosophers have only interpreted the world in various ways. The point however is to change it." And we can all agree on that.

Carlos Martin Tornerocarlos.tornero@uk.timetric.com

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