Bank regulators, Basel Committee, Financial Stability Board, listen to Violet Crawley “Don’t be defeatist, it’s so middle class.”

Sir, Lawrence Summers writes “Sooner or later inequality will have to be addressed. Much better that it be done by letting free markets operate and then working to improve results. Policies that aim instead to thwart market forces rarely work, and usually fall victim to the law of unintended consequences”, “America risks becoming a Downton Abbey” February 17.

He is right. One reason for growing inequality is that notwithstanding banks already lend less, at higher interest rates and in tougher terms, to those perceived as risky, regulators decided to intervene by requiring banks to also hold much more capital when lending to “risky” medium and small businesses, entrepreneurs and start-ups, than when lending to an “infallible sovereign”, or to the AAAristocracy.

And regulators did that because they were too scared of risk as such and because they never got down to understand: first, that for the banking system, what is truly dangerous is what is perceived as absolutely safe and can therefore generate too big exposures; and second, for the real economy, what is most dangerous long terms is not taking the necessary risks.

And so, if I was to bring Downton Abbey into this issue, that would be by quoting Violet Crawley with her straight to the point “Don’t be defeatist, it’s so middle class.”

Professor Thomas Piketty: “Don't be so defeatist, it is so middle class.”

Sir, Robin Harding holds that “Inheritance should not be an alternative to hard work” January 6.

The setting is: “The lower the rate of growth, the smaller the percentage of society’s wealth created by those who are alive today, and thus, by definition, the larger the percentage that is passed on from previous generations… higher inheritances certainly exacerbate inequality.”

And that is derived from Thomas Piketty’s “eagerly awaited” “Capital in the Twenty First Century”. The book includes: “if the after tax return on capital is higher than the rate of growth in the economy, then all the heir and heiress need to do is save enough of the income from their inheritance… and their share of society’s wealth will rise”… ergo we must redistribute, and so we need “wealth taxes on a global scale”.

I do not agree with its general premise. An after tax rate of return on capital which is higher than the rate of growth in the economy, is something not really sustainable… unless other factors are in play. And, in this respect, I would just ask Mr. Piketty about what he believes would have happened to after tax returns on capital, without Tarps, QEs and all Fiscal Stimulus since 2007?

And also, what a horrendous vision it implies! That we should now only adapt to a shrinking economy, and give up all illusions about making it stronger and better, and just concern ourselves with that the last tree on our Easter Island we cut down is equitably shared? I can hear Downton Abbey’s Violet Crawley admonishing “Don't be so defeatist, it is so middle class.”

But of course I agree with Robin Harding in that developed (and developing) societies should “opt for the free-flowing meritocracy of the last century, not a return to the dynastic wealth of the one that preceded it.

But that, as I see it, has less to do with inheritance taxes and, at least currently, much more to do with bank regulations. You see the Basel regulators, with their risk-weighted capital requirements, do not want banks to take the risks which come with any “free-flowing meritocracy”, and instead to concentrate their exposures to the illusions of safeness of the “dynastic wealth”.

And by the way, anyone who thinks that the presence of after tax returns on capital higher than the rate of growth in the economy, would be sufficient to keep the value of an individual inheritance… has little knowledge about real life and about capitalism. Oh no! To waste an inheritance is very easy, but to keep the real value of an inheritance is, and should always be, hard work, no matter what the average interest rates are.

I wish more would concentrate more on the causes of inequality, than on the resulting inequalities. If not, and if we tax more all of the wealthy, all we will get is few oligarchs getting even more wealthy, not because of capitalism but because of crony capitalism.