Opinion

The Great Debate

from Edward Hadas:

The problem with the Piketty problem

If a man is suspected of murder, arson and speeding, any prosecutor who focuses only on the last charge risks ridicule. That imagined situation has some bearing on recent criticism of Thomas Piketty, the best-selling French anti-inequality economist. The accusations are largely restricted to ways in which he has exceeded the limits of his data.

The Financial Times, the most prominent critic, has identified possible compilation mistakes and biased adjustments in Piketty's statistics on the history of wealth distribution. This is potentially a bit sloppy, but beyond that it's hard to get too excited. Revising the questionable numbers would not change the basic conclusion that wealth has become more concentrated in most countries over the last three decades.

More importantly, though, all Piketty's wealth data suffers from a much more fundamental error: It cannot be telling us what he says it does. In his widely praised book, "Capital in the Twenty-First Century", he concludes that elites are becoming wealthier and more powerful at the expense of the rest of the population. However, wealth information alone, based on the market value of financial holdings and other real assets, can't validate that claim. Incomes and, importantly, social factors also need to be considered.

Piketty does look at income inequality, and fewer doubts have been expressed about that data. But the meaning is only slightly clearer. Yes, the top 1 percent and 0.1 percent have been pulling away from the masses, as measured in income declared on tax forms. However, that provides little insight into what is surely the central economic topic: the comparison of how well people can actually afford to live.

This yawning gap won't be filled by wealth or income data, even if it is perfect. Another much-cited case of doubtful data in economics also obscured a larger analytical problem. In 2011, Harvard professors Carmen Reinhart and Kenneth Rogoff wrote a book about fiscal deficits through history. Like Piketty, their measurements were questioned. Like Piketty, the more serious issue was elsewhere: the failure to explain why the average experience of high-deficit governments – mostly in wartime, under a gold standard or after a commodity price shock – was relevant to the merely recession-struck governments of recent years.

from Bethany McLean:

How corporate jets fly under shareholder radar

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Men’s apparel retailer Jos. A. Bank may be best known for its incessant advertisements of all the merchandise it has on sale. “Could they advertise more? Could they sell less?” quipped Jerry Seinfeld. “We’ll give you three suits for $8! Just take it! Get it out of here!”

So in a twisted kind of way, it’s perfect that the company and its chairman of the board, Robert Wildrick, have recently pulled off a different kind of super sale. In March, competitor Men’s Wearhouse agreed to buy Jos. A. Bank -- for $65 a share, about a 55 percent premium to its share price last fall. Wildrick served as the chief executive officer until 2008, and is often given credit for growing the business from a struggling retailer into a national brand. He now has a consulting agreement with the company that pays him $825,000 a year, and has earned over $200,000 a year in his role as chairman.

Seinfeld might be surprised to hear it, but there is a piece of merchandise that Jos. A. Bank doesn’t advertise. According to Federal Aviation Administration records, Jos. A. Bank leases a private plane, and not just any private plane -- a high-end Dassault Falcon 2000EX. A reader of Jos. A. Bank’s financial statements would almost certainly not be aware of the existence of the plane.

from Stories I’d like to see:

A follow-up on Dasani, fitting Credit Suisse punishments, when Hollywood meets Beijing

credit suisse

1. What happened to Dasani?

Remember Dasani Coates?

She’s the homeless Brooklyn girl whose plight the New York Times’ Andrea Elliott chronicled in a moving series of Times features last December. The last we heard about Dasani in the Times was this February 21 follow-up by Elliott and Rebecca R. Ruiz. They reported that New York City officials had decided to move 400 families, including Dasani’s, out of the squalid shelter where she had been living and into rent-supported apartments.

What’s happened since? One would think that with all the attention Dasani received -- much of it focused on how intelligent, articulate and determined she was in the face of unspeakable adversity -- that she might have been recruited by now into a prestige private school or otherwise showered with attention and even donations that would have dramatically improved her circumstances.

Is that true? What about her parents and siblings? And what about the trust fund established for the family following Elliott’s series?

Meet the Tea Party — European edition

schneider combo

Europe finally has its own Tea Party. Or something like it.

Last weekend, citizens of 21 nations elected members of a new European parliament. The result? An outpouring of rage.

Angry voters across the continent and Britain cast ballots for protest parties, mostly on the far right, which doubled their number of seats and now account for close to one third of the parliament. French Prime Minister Manuel Vallis called the vote “more than a news alert . . . it is a shock, an earthquake.”

palin -- leeWhat were the voters angry about? Well, everything. The parties that made big gains were anti-Europe, anti-common currency, anti-integration, anti-bureaucrat and anti-politician. They were also anti-immigrant. Angry voters were protesting immigration from within the Common Market (mostly by Eastern Europeans, who have the right to work in any European country) and from outside Europe (mostly by Muslims).

Russia’s Navy: More rust than ready

axe -- nuke sub

On May 8, the British Royal Navy destroyer HMS Dragon sailed from the naval base at Portsmouth on an urgent mission — to find and follow the Russian aircraft carrier Kuznetsov and six accompanying vessels steaming through the English Channel.

“A Russian task group of this size has not passed by our shores in some time,” said Rex Cox, Dragon’s captain.

True, the Russian navy has been more active in recent months. Moscow annexed Ukraine’s Crimean Peninsula with its strategic ports and asserted itself with troop, ship and warplane deployments along the frontier between Russia and the North Atlantic Treaty Organization.

To help injured veterans, bring in private sector help

VA BACKLOG

In all the brouhaha about the Veterans Administration — the alleged misconduct and malpractice in Arizona, and the ensuing calls for the head of Secretary Eric Shinseki — it is crucial that the issue not be treated solely as a referendum on Shinseki, and on the Obama administration generally.

The VA system is far too reluctant to ask for help from the private sector in caring for the hundreds of thousands suffering from the signature injuries of 21st century war: post-traumatic stress disorder (PTSD) and traumatic brain injury (TBI).

This is ironic, since it has been increasingly successful in getting veterans themselves to seek help with these challenges — which used to be so stigmatized that they often preferred to hide or ignore them.

Poland’s example may offer Ukraine a way out

FORMER POLISH PRESIDENT AND SOLIDARITY FOUNDING LEADER LECH WALESA SHOWS V-SIGN IN 1989.

Since the collapse of the Soviet Union in late 1991, Ukraine has tried — and repeatedly failed — to transform itself into a stable, prosperous democracy. The presidential elections on Sunday, May 25 offers another opportunity to make that happen, for Ukraine to come out from Russia’s shadow and the shadow of its own corrupt post-Soviet limping economy.

While understandably preoccupied with Russian President Vladimir Putin’s designs on the eastern part of their country, Ukraine’s new rulers should look to their western neighbor for lessons on how to succeed. On June 4, Poland will commemorate the 25th anniversary of its historic elections that swept out the Communist regime  and produced a government led by the opposition Solidarity movement. What happened next launched Poland on the path from poverty to prosperity, from dictatorship to democracy, and from the Warsaw Pact to full integration with the West, including the North Atlantic Treaty Organization and EU membership.

If all that seems like an impossible dream for Ukraine today, it’s worth remembering that after Solidarity came to power in 1989, economic prosperity and Western integration looked just as improbable.

Secrecy’s out, so here’s what Swiss banks can still offer

brady555

If Swiss banks were to cast off their usual discretion and make a marketing pitch these days, it might start off something like this:

Dear Potential Client,

While we would be delighted to open an account and manage your money for you, once you’ve complied with our anti-money laundering provisions, please be advised that we will no longer be able to help you avoid taxes back home, and in fact may soon start providing account details to your national tax authorities. Moreover, if you are American, please stay away. We’ve been so beaten up by the Justice Department that we’d rather not take your money at all.

That may not sound like a compelling proposition, but it hasn’t scared off everyone — so far. In fact, according to the latest monthly statistics published by the Swiss National Bank, foreigners have been depositing a growing volume of assets into Swiss banks. The 45 billion Swiss Francs ($50 billion) invested in Swiss savings and deposit accounts at the end of March represent an almost 30 percent increase from a year ago.

Europe is under siege from both the left and right

eu combo

Elections will begin on Thursday across the 28 European Union member states to elect national representatives to the European Parliament, which regulates trade, borders and some elements of foreign policy. Though this is a continent-wide election, voters historically use it to send a message to their own nation’s governing party. With the meteoric rise of anti-European populism on the political left and right, however, things promise to buck that trend this time.

This was not how things were supposed to be. Five years ago, at a meeting of the European Union’s heads of state and government in Lisbon, Portugal, European leaders signed a treaty that foresaw these elections as defining the political direction of the European Union. This week’s elections are supposed to mark a turning point, as competing progressive, liberal, green and conservative visions of Europe’s future vied for popular support.

Instead, Europe is in a mess — and the future of the European Union seems in doubt.

from Breakingviews:

Russia puts gas-hungry China in a bear hug

By Ethan Bilby
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Russia has signed a long-awaited gas pipeline deal with China, and it leaves the People’s Republic in a bear hug. Russia gets a new market outside the increasingly frosty European Union. Oil major PetroChina gets to balance out some losses from low regulated prices at home. But the optics of the deal shred Beijing’s pretensions to political neutrality.

Russia could use a friend. EU countries have been planning to diversify supply away from dependence on Russia, which provides a third of their energy needs – especially after a dispute in 2009 saw gas cut off. Annexing Ukraine’s southern Crimea region has raised the temperature further. New pipelines from places like Azerbaijan are designed to limit Moscow’s leverage.

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