THIS CHAPTER is organized in two parts: the first discusses the goals of economic policy, contrasting what I call ‘Economic Performance 1 (EPl)’ and ‘Economic Performance 2 (EP2)’. The second part addresses what one might call the Piketty boom, about the mechanisms which produce increasing inequality, and suggests that Piketty's emphasis on wealth distribution and its increasing concentration distracts attention from the more important and ineluctable question of income distribution, increasingly skewed by technological change, the transformation of skill-acquiring mechanisms needed to cope with that change, and the (normal curve) distribution of learning ability which constrains that skill-acquiring process.

ECONOMIC PERFORMANCE: EPl AND EP2

‘Performance’ is a strange word,’ or ‘paafuwamansu’ which is the form in which I encounter it most these days in the writings of Japanese who are obsessed with it. Past performance is the rating given to horses before a race, and indeed many economists use the word ‘economic performance’ to mean the ability of countries to score high in the growth-rate stakes, and to acquire foreign exchange reserves by exporting more than it imports. By that criterion German economic performance is outstanding. So much so that Brussels has condemned it for beggaring its neighbours by running a 6 per cent current account surplus.

A synonym for economic performance in this sense is competitiveness.

Let us call that EPl. I prefer as a policy objective what I shall call EP2, namely achieving enough of a growth rate such that, with a decent distribution of income and low unemployment, most of the population can look forward to the future as likely to be better than the past.

ECONOMIC CONDITIONS OF BOTH EPl AND EP2

Before getting on to my main theme of the social conditions for EP2, a word about the economic conditions for both EPl and EP2, one of which I now believe to be having control over the currency your economy uses. I write that in shame as one who was always critical of the way Britain dragged its feet and refused to commit to entering the eurozone. I now repent. Giving a group of highly disparate economies a single currency has now been shown to be the disaster that some predicted.