January 09, 2015

“Regression to the mean”, if allowed by politicians and regulators, will take care of the plutocrats, in due time.

Sir, Paul Marshall in “Blame the rise of the plutocrats on politics not capitalism”, January 9, holds that we need Schumpeter much more than Marx.

As you could deduct from my letter “Long-term benefits of hard landing” and which you kindly published, before you decided to name me a persona non-grata at FT, I totally agree with him

I have never been too much concerned by the rise of plutocrats, since I have always figured that, mostly, it was the result of something good… and I have always counted on the “regression toward the mean” theory, aka “reversion to the mean”, or aka “reversion to mediocrity”, to take care of the problem of the same plutocrats reigning into eternity.

But for that “regression to the mean” to happen, anyone that has that in him to be a plutocrat needs to be able to become a plutocrat… and that requires not only fair access to education as Marshall rightly puts forward, but almost foremost fair access to bank credit. And credit-risk weighted capital requirements for banks which operate in favor of those who have made it; and against those risky who have yet not made it, and who probably most of them will fail while trying to make it; blocks that fair access to bank credit.

And then of course, for the “regression to the mean” to happen, losses need to flow freely, and not be contained by QE dams, which quite often help to make the plutocrats even more plutocrats.

PS. There are some other issues related to the rise of plutocrats that need to be more closely looked into. One is intellectual property right. Why should income from a shielded property right be taxed at the same rate than those profits coming from competing bare-naked in the market?