Tuesday, May 27, 2014
Piketty is just another leftist crook
By Pejman Yousefzadeh
I have bought Thomas Piketty’s book Capital in the Twenty-First Century, and while I have posted many an item that takes issue with the books claims and conclusions concerning wealth inequality, I do plan on reading Piketty; his book has made quite the intellectual and cultural impact, and although I know what his basic arguments are, I want to be sure that I read the whole of the book to be fully aware of his claims.
But even before reading the book, one can conclude certain things about Piketty, as my previous blog posts indicate. And today, we learn that we may well be able to conclude one more thing still about Piketty, his research, and his arguments: They may be completely wrong. And yes, those words were worth emphasizing.
The Financial Times has engaged in exhaustive research regarding Piketty’s book, and it has found serious errors. Let us give the microphone to Chris Giles and Ferdinando Giugliano:
Thomas Piketty is in no doubt that data underpin the conclusions of his best selling economics book, “Capital in the Twenty-First Century” .
He writes, in the introduction: “Compared with previous works, one reason why this book stands out is that I have made an effort to collect as complete and consistent a set of historical sources as possible in order to study the dynamics of income and wealth distribution over the long run”.
While the conclusions of his work, including his call for an international wealth tax, have stirred controversy among academics, commentators and policy makers, even his critics have generally praised the ambition and quality of the data presented in the text.
Reviewing the book this month, Lord Mervyn King, former governor of the Bank of England, said, “the principal weakness of the book is that the carefully assembled data do not live up to Piketty’s rhetoric about the nature of capitalism”.
The sense of diligence in Professor Piketty’s compilation of trends in wealth is bolstered by an online technical annex and spreadsheets containing the data, with sources.
An investigation by the Financial Times, however, has revealed many unexplained data entries and errors in the figures underlying some of the book’s key charts.
These are sufficiently serious to undermine Prof Piketty’s claim that the share of wealth owned by the richest in society has been rising and “the reason why wealth today is not as unequally distributed as in the past is simply that not enough time has passed since 1945”.
After referring back to the original data sources, the investigation found numerous mistakes in Prof Piketty’s work: simple fat-finger errors of transcription; suboptimal averaging techniques; multiple unexplained adjustments to the numbers; data entries with no sourcing, unexplained use of different time periods and inconsistent uses of source data.
Together, the flawed data produce long historical trends on wealth inequality that appear more comprehensive than the source data allows, providing spurious support to Prof Piketty’s conclusion that the “central contradiction of capitalism” is the inexorable concentration of wealth among the richest individuals.
Once the data are cleaned and simplified the European results do not show any tendency towards rising wealth inequality after 1970.
The US source data are also too inconsistent to draw a single long series. But when the individual sources are graphed, none of them supports the view that the wealth share of the top 1 per cent has increased in the past few decades. There is some evidence of a rise in the top 10 per cent wealth share since 1970.
Prof Piketty, 43, provides detailed sourcing for his estimates of wealth inequality in Europe and the US over the past 200 years. In his spreadsheets, however, there are transcription errors from the original sources and incorrect formulas. It also appears that some of the data are cherry-picked or constructed without an original source.
For example, once the FT cleaned up and simplified the data, the European numbers do not show any tendency towards rising wealth inequality after 1970. An independent specialist in measuring inequality shared the FT’s concerns.
And still more:
Two of Capital in the 21st Century’s central findings – that wealth inequality has begun to rise over the past 30 years and that the US obviously has a more unequal distribution of wealth than Europe – no longer seem to hold.
Without these results, it would be impossible to claim, as Piketty does in his conclusion, that “the central contradiction of capitalism” is the tendency for wealth to become more concentrated in the hands of the already rich and
“the reason why wealth today is not as unequally distributed as in the past is simply that not enough time has passed since 1945”.
This long post will outline the classes of data problems I have found in Chapter 10 of Piketty’s book, which deals with the inequality of capital ownership. I will then show why these problems matter for each one of the four countries prof Piketty studies – France, Sweden, UK and the US.
Finally, I will put all the revised data together to show that, based on the sources Piketty cites, the conclusions that (a) wealth inequality rose after 1980 and (b) wealth inequality in the US is larger than in Europe no longer seem to hold.
Read the whole thing. Read this, this, and oh, yes, this as well, and note that the last link makes the following entirely accurate statement about what the gravamen of the Financial Times’s charges against Piketty is:
Giles says there are clear examples of some “fat finger” mistranscriptions and compares the situation to omissions found in Reinhart’s and Rogoff’s data on debt levels and growth.
But while the two Harvard professors’ errors seemed to have been unintended, Giles levels a more serious critique: that Piketty actively manipulated his data.
His most damning claim: Piketty altered U.K. data to show that wealth distribution there is worse off than it appears to be.
Piketty says the share of income going to the top 10% never fell lower than 60%, and since the end of the 1970s has returned to 70%, a level not seen in 70 years.
But the data Piketty himself cites shows the top 10% share of wealth is no greater than 50%, and may be as low as 42%.
Giles writes: “This appears to be the result of swapping between data sources, not following the source notes, misinterpreting the more recent data and exaggerating increases in wealth inequality.“
Below is the chart. The right-most portion of Piketty’s blue trend line showing the share of wealth owned by the top 10% of Britons ends up well above what’s suggested by the data, in red, that Piketty himself cites.
Meanwhile, just one official data point for the top 1% share of wealth aligns with Piketty’s blue line. But Giles said the source of that data said it was not suitable for the kind of calculation Piketty is trying to make.
“Prof. Piketty ends his series taking at face value the level of the HMRC data, despite HMRC saying clearly the data is not suited for that purpose, nor is it consistent with the old Inland Revenue Series which Prof. Piketty uses for earlier years. This latter point is also clearly stated in the notes to the source data.”
The charges are devastating, and there is plenty to back them up. And again, let’s be abundantly clear: The Financial Times is accusing Thomas Piketty of dishonesty, of making up his arguments, of actively trying to mislead readers and actively trying to mischaracterize inequality trends. This mischaracterization leads to policy prescriptions on Piketty’s part that are both entirely unrealistic in their design and implementation, and, more importantly, are wholly unsupported by the actual data on inequality. The main thrust of Thomas Piketty’s book is entirely undermined, and his arguments and conclusions are annihilated. It is hard to imagine a more comprehensive refutation.
Having established that Piketty’s conclusions are shredded and unbelievable, it is important now to note two things. The first is that the Financial Times–and Chris Giles and Ferdinando Giugliano in particular–deserve kudos for the scholarship and for shining a light on Piketty’s mistakes and dishonesty. For those who are wondering how journalism ought to be done, look no further than the example set down by Giles, Giugliano and the Financial Times in general. They have truly done excellent work. Would that more media outlets followed the example that Giles, Giugliano and the Financial Times have set.
The second thing we ought to note is that neither Giles, nor Giugliano, nor the Financial Times would have discovered that Piketty’s books is fundamentally flawed if they listened to Paul Krugman, who famously said on his blog that “if you think you’ve found an obvious hole, empirical or logical, in Piketty, you’re very probably wrong. He’s done his homework!” Yes, that was a real statement by Paul Krugman, and yes, it ought to haunt him for the rest of his life–and beyond. We now know that it is more accurate to say that Piketty fudged his homework.
I doubt that Krugman knew that Piketty’s conclusions were pretty much made up out of thin air–if he did, there is truly something rotten in the state of economics–but the point is that Krugman tried his damnedest to ensure that no one would take a critical eye to Piketty’s data and conclusions. It’s a good thing that the good people at the Financial Times were more intellectually honest and rigorous than Krugman would have wanted them to be, but it should scare us more than a little bit that a leading economist who won a Nobel Prize and who has a big megaphone provided to him by the New York Times was trying as hard as humanly possible to prevent good journalists and scholars from poking at Piketty’s data and arguments to see whether or not they passed the laugh test.
And of course, as of this writing, and with this scandal having fully erupted into public view, Krugman has nothing whatsoever to say about the debunking of Thomas Piketty–though of course, he has time to post a music video. Because, you know, priorities. As for Krugman’s Mini-Me, as of this writing, nothing on Brad DeLong’s eponymous blog (though again, music video!), and one thing on an alternative blog pointing to a graph prepared by Matthew Yglesias (of all people) that tries to pretend that there is nothing to see here, and that we should all just move along.
Sorry, but that dog won’t hunt. In light of the allegations against him, Thomas Piketty has a lot of explaining to do, and given the nature of the allegations and the detail which backs them up, it is hard to see how any amount of explaining will persuade anyone who isn’t already a hack that Piketty is in fact in the right.
Castro the commie hypocrite who lives like a billionaire: He's posed as a man of the people. But a new book reveals Cuba's leader has led a life of pampered hedonism and a fortune as big as the Queen's
A short boat trip from the coastal city of Cienfuegos, halfway along Cuba’s southern coast, is a secluded tropical island called Caya Piedra.
Surrounded by warm turquoise waters, with a picture-postcard quota of coconut trees, white sand beaches and unspoiled coral reefs, this two-mile-long Caribbean paradise is the private domain of a single, very wealthy man.
Locals call him El Comandante — The Commander — and he likes to dock at Caya Piedra aboard his luxury yacht, the Aquarama II, fitted out with cream-coloured leather and rare Angolan wood.
Invariably attended by an army of personal servants, who are kept on call 24/7 to serve chilled white wine and exotic shellfish, he and his friends while away the days by reading, scuba diving, and attempting to catch fish.
Celebrity guests who have enjoyed the lavish hospitality there include Gabriel Garcia Marquez, the Colombian novelist who died last month, and the late French underwater explorer, Jacques Cousteau.
Like everyone who visited, they were struck by the island’s stunning beauty and laid-back charms.
If a single cloud ever did mar the horizon, it was that, every so often, their multi-millionaire host would have to take a break from enjoying the high life in order to carry out the important business of running a country.
For the owner of Caya Piedra is none other than Fidel Alejandro Castro, the Left-wing dictator who seized power over Cuba in a communist coup 55 years ago.
Now 87, this self-styled ‘People’s Revolutionary’ — who handed power to his brother, Raul, in 2008 — on paper makes a strange laird for this prime piece of real estate.
He has, after all, spent decades cultivating his public image as an unassuming, hard-working man of the people.
Indeed, the Communist Party of Cuba styles Senor Castro as a cigar-chomping but otherwise modest military servant, devoted to advancing the public good in a country where the majority of the 11 million residents live in abject poverty.
Propaganda is often far removed from reality, though. And as his yacht, private island and domestic staff demonstrate, this lifelong critic of the supposed excesses of capitalism does not always practise what he preaches.
In fact, Castro’s lifestyle turns out to be jaw-droppingly decadent — a revelation set out in eye-popping detail by his former bodyguard Juan Reinaldo Sanchez.
In a new, 338-page memoir, titled The Hidden Life Of Fidel Castro (published in France by Michel Lafon and co-authored by Axel Gyldén), Sanchez, an employee of 20 years’ standing, lifts the lid on the luxurious excesses enjoyed by the autocrat and his inner circle.
The book portrays a man obsessed with power and money, who styled himself as a hero of the working classes while living the opulent existence of a medieval potentate.
Unlike a gilded royal, however, the Cuban leader — whose British apologists have, by the by, included Ken Livingstone, Arthur Scargill and the late Tony Benn — managed to keep his life of luxury a closely guarded secret.
For that, like any good dictator, he can thank the agents of a security state every bit as oppressive as that forged by dictatorial chums in Zimbabwe, China and the old Soviet Union.
Sanchez was one of Castro’s security guards from 1977 to 1994, accompanying him on overseas trips to meet everybody from popes to U.S. presidents, and witnessing first hand his boss’s ability to exploit Cuba as a personal fiefdom.
Recalling, for example, a typical day spent spear fishing off Cayo Piedra, he says: ‘I can’t describe it any other way than comparing it with the royal hunts of Louis XV in the forests around Versailles.’
After Castro rose at midday, kneeling flunkeys would dress him in scuba-diving gear, before accompanying him to a gleaming motor boat.
There, manservants would be on hand to attend to his every whim, whether it was to pour his preferred iced whisky (12-year-old Chivas Regal), or prepare his favourite snack, a whole toasted langoustine.
Other colleagues would have risen at dawn to scour the waters surrounding the island for the best possible fishing spot.
As their master fished, security guards (including Sanchez) stood by with Kalashnikovs and harpoon guns to ward off over-inquisitive sharks and barracudas.
Decades of Stalinist industrialisation combined with mass tourism have left much of Cuba heavily polluted, but Cayo Piedra, south of the Bay of Pigs, where the CIA sponsored a failed invasion of the island in 1961, is described by Sanchez as a ‘Garden of Eden’.
The vast majority of Cubans have no idea of the existence of the private island, let alone that Castro owns it. Given the absence of a free Press in the country, they are unlikely ever to find out about it. Neither are they likely to be aware of the existence of other crown jewels in their former leader’s property portfolio, which, according to Sanchez, extends to 20 homes.
His palatial residences on the mainland include a Havana estate complete with rooftop bowling alley and indoor basketball court, and a coastal villa next to a private marina with pool, Jacuzzi and sauna.
Castro loved sport. His guards were required to make up ‘red and blue’ teams on the basketball court, writes Sanchez, adding: ‘Of course, everybody played for Fidel — there was no question of him losing a match. I remember one day, he gave me a black look because instead of passing to him, I shot to score a basket.’
To get to the most sinister of all Castro’s properties, you must drive west out of Havana to a former fishing village called Jaimanitas.
Here lies the so-called Unit 160, a fortress-like building in a complex known locally as Punto Cero, which is described as a classic dictator’s bunker.
As well as being an arms stash for Castro’s personal guard, it was the nerve centre for a range of covert activities, from torture to surveillance. Yet the property also had a facility dedicated to producing high-quality ice cream and sorbets for Castro, a ‘foodie’ who could not bear the totalitarian junk food still churned out for his proletariat.
After having been the subject, over the years, of more than 600 CIA assassination plots, Castro was obsessed with the fear of being poisoned, so made sure all of his food and drink was locally sourced.
His caution extended to having a personal cow, which supplied all the milk he drank.
Every drop of water he drank came from garden wells, while vegetables had to be organic. Free range chickens raced around Castro’s estates, while rich overseas friends regularly sent other food luxuries. Saddam Hussein, for example, would send cases of fig jam, while shipments of red wine arrived from Algeria.
The boot of Castro’s armoured Mercedes-Benz limousine always contained emergency supplies of these high-end foodstuffs, along with a small stash of weapons, to add to the Kalashnikov kept at Castro’s feet when he travelled, and by his bed when he slept.
Every single one of Castro’s fleet of personal Mercedes cars was stripped down and then rebuilt on arrival from Germany, to make sure it did not contain microphones or bombs.
Castro had five sons with his second wife, Dalia, but regularly met up with mistresses in a property close to Unit 160, which was dedicated to infidelity. In his younger days, he is believed to have had hundreds of secret lovers, and produced a total of at least nine children — facts which the state-run Cuban media are still not allowed to mention.
His lovers allegedly ranged from Italian actress Gina Lollobrigida to an unnamed, under-age nightclub dancer, who later revealed he had smoked throughout intercourse.
As he aged, Castro apparently became a regular user of Viagra.
When not satisfying his raging libido, Castro’s favourite pastimes, says Sanchez, included watching a five-hour long Russian version of Tolstoy’s War And Peace over and over again in a private cinema.
He even had an ‘official’ projectionist appointed by the Interior Ministry, to go with all his other staff, including three chauffeurs, personal medics, a butler and a photographer.
Two members of his team of bodyguards were specially selected because they had the same blood group as Castro, and so would be able to donate in an emergency.
A professional lookalike — Silvino Alvarez — wore a false beard when he stood in for Castro, attending engagements when the dictator fell ill, couldn’t be bothered to go himself, or was afraid of an assassination attempt.
Describing Castro as a ‘master of disinformation’, Sanchez says the hard-headed autocrat’s claim to be an enemy of Western values was a charade.
While claiming to be a ‘modest’ state functionary on a parsimonious salary, Castro was in fact worth at least £100 million — excluding his property assets. But he became enraged if that wealth was ever reported.
When, in 2005 and 2006, Forbes named Castro as one of the world’s richest heads of state — on a par with the Queen of England and Prince Albert of Monaco — he accused the magazine of ‘infamy’ in a public tirade that raged against the alleged greed of countries such as Britain and the U.S.
As Cuba’s Chief of State, Head of Government, Prime Minister, First Secretary of the Cuban Communist Party and Commander-in-Chief of the armed forces, he wanted to be known as the ‘Maximum Leader’, not a lazy, avaricious despot.
Sanchez, who is now 65, spent 17 years working for Castro before getting bored with the job and asking to be allowed to resign. Castro responded by accusing him of disloyalty and jailing him for two years between 1994 and 1996.
Today, Sanchez recalls how he once viewed the indisputably charismatic Castro as ‘a god’, admitting: ‘I would have died for him.’
But now he says the man he’d been brought up to admire became Cuba’s ‘master in the manner of a 19th-century landowner’.
‘For him, wealth was above all an instrument of power, of political survival, of personal protection,’ he now believes.
‘Fidel Castro also let it be known that the revolution gave him no rest, no time for pleasure and that he ignored, indeed despised, the bourgeois concept of holidays. He lies.’
Following a decade of keeping his head down, Sanchez fled to the U.S. as an exile in 2008, where he now does occasional work as a security adviser in Fort Lauderdale, Florida.
Castro, meanwhile, handed over power to his brother, Raul, the same year, guaranteeing that in the absence of any legal opposition party in Cuba, the Castro dynasty will continue to flourish.
The original and most famous Castro is now a shadowy recluse who has all but disappeared from public view.
He continues to enjoy the best food and medical care, but otherwise leads a relatively uneventful life, his joie de vivre curtailed by ill-health and age. And still his people regard him as the good communist he always insisted he was.
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Posted by JR at 12:36 AM