How the post-supply side world turns

Wealth tax redux | Financial Times

Hello Swampians — Ed and I are shifting spots this week as he covers the latest Democratic debate. What a week it has been in wealth distribution. First, the debate over the crisis in affordable housing was reignited, as the White House proposed to scale back the government’s role in mortgage underwriting, a move criticised by many Democrats, including Alexandria Ocasio-Cortez and the other members of the Progressive ‘Squad’, who called for a raft of new protections for tenants, including the reining in of corporate landlords and support for co-operative ownership (FYI: you’ll be reading a big FT Weekend feature from me on this topic soon, as I recently travelled to Portland, Oregon, for some on the ground reporting on the tension investor and resident owned manufactured housing).Also, California passed a law forcing companies in the gig economy, such as Uber, Lyft and others, to treat the hundreds of thousands of contractors who work for them as proper employees, giving them rights and benefits like overtime pay and minimum wage. That could cost companies in the gig economy as much as 30 per cent extra in costs. No surprise that Uber has already announced it will fight the law.Meanwhile, a top Senate Democrat, Ron Wyden, put forward a plan to fund Social Security with a capital gains tax. And to top it off, Thomas Piketty has published a new manifesto and follow up to his Capital in the 21st century, entitled Capital and Ideology. Piketty’s first book laid out the case for inequality rising. This one — also a doorstopper at 1200 pages — is a manual on how to combat it, including proposals such as a wealth tax and giving every French citizen $132,000 on their 25th birthday (I’m curious to read how he came up with that number). I bet Bernie Sanders and Elizabeth Warren, who is, by the way, steadily rising up the polls, already have their copies.They say paradigm shifts happen slowly, then all at once. That’s what we’re seeing now in terms of wealth distribution. In August, I wrote a column predicting that we were leaving the 1980s, supply side driven age of wealth creation and moving into an age of wealth distribution, a cycle that has been repeated many, many times in history. It was not only by far the most popular column I’ve ever written at the FT, it was by far the best read one that week.The shift is happening faster than I would have imagined. And I’m both fascinated, and to be honest, somewhat anxious (as a property owning, college paying, middle aged bourgeoise) to see where it will all end up.Here are some of my predictions on the topic this week. I expect to return to this theme again and again in the coming few months and, probably, years:Housing will now take centre stage, along with student debt, healthcare and entitlements, as a key election debate. Private equity will be under pressure to get out of the sector. There will be big lobbying battles between real estate titans, sharing economy players, individual homeowners and renters about the laws within a new housing landscape.Longer term, Boomers and Millennials will fight more vigorously for their share of a shrinking national pie. This will play out big time in politics. One thing that could save us from this long term intergeneration strife — shared housing. I’m betting that many families will end up together in multigenerational dwellings, as in ages past.Universities will square off to become “the new Chicago,” meaning a hub for policy ideas that will fuel a generation of progressive politicians. I’m betting Berkeley, NYU and Yale will be players there.Recommended readingFashion is my not so secret guilty pleasure; I love reading Vogue and trolling Net-a-Porter. I also loved his fun New Yorker piece about what the clothes on the terrific HBO series Succession tell us about the emotional life of the rich and powerful.I’m going to be ordering Nicholas Lemann’s new book Transaction Man, about the shift towards shareholder capitalism in the 50s and 60s, pronto. I wrote about Michael Jenson, who came up with the “theory of the firm,” in my own first book, Makers and Takers, and am interested to read this detailed take.In the FT, don’t miss John Gapper’s very perceptive take on what Epstein tells us about how corrupted university and academic financing has become. On a separate but related note — look for a bunch of second tier colleges to start going bankrupt as Trump’s push back against immigrant students, particularly the Chinese, hits their bottom lines.Your feedbackWe’d love to hear from you. You can email the team on swampnotes@ft.com, contact Ed on edward.luce@ft.com and Rana on rana.foroohar@ft.com, and follow them on Twitter at @RanaForoohar and @EdwardGLuce


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