My book is trying to puts facts and to put
history and to put data in one of the most controversial issues in history, which is
the issue of inequality and unequal income and wealth and you know this is an issue about
which people have been fighting for centuries in particular during the twentieth century
with the very violent fight between capitalism and communism, et cetera. Instead of looking at only
one country, I look at over twenty countries in the world, and I look at wealth and not
only at income so I can look, you know, I study the distribution of who owns what and
not only who earns what. Societies of the past were really based on wealth in the sense that inequality was primarily inequality between those who own wealth and those who only own
their labor. One of the economic law to the extent that there are laws in economics is,
indeed, R bigger than G. So the rate of return to capital tends to be bigger than the growth
rate. It means that whatever wealth was accumulated in the past is now being recapitalized faster
than the growth rate of the economy, which is also the growth rate of labor income. And
therefore basically you better start with some initial wealth. You know, if you just
try to enter the game only with your labor income, well this has to be a very high labor
income. Now, there is another type of society and another type of model of inequality that
has been emerging particularly in the United States over the past few decades where you
have a huge rise of the top labor income and in particular the top compensation that managers
in large corporations are getting. Now of course the problem is that if you are neither
a top manager nor a top inheritor then you lose on both grounds. So the good news is
that about the future is that when we read the past in this way we can see that, you
know, there are several possible futures. You know, it’s not as if inequality has
to rise indefinitely or inequality will reduce naturally. You know, there’s nothing natural
in the history of income and wealth distribution and there’s nothing natural in the history
of economic facts more generally. I think we need to reopen, you know, the black box
of inequality in our industrial societies and to look you know in a very crude way at
what the market economy is able to do and what the market economy is not able to do.
So the market economy is great at producing new wealth, but sometimes it can be quite
bad at generating distribution of wealth that is equitable in the long run. So you know
its great to have entrepreneurs, it’s great to have new wealth being formed, but this
has to be compatible with the size of the world economy. If the top of the distribution
is rising three or four times faster than the world economy, if you have that during
the next fifty years basically all the wealth will belong to a very small international
elite and basically there will be no wealth middle class anymore, and there will be a
level of inequality which is simply not compatible with our democratic and meritocratic values.

Author Since: Mar 11, 2019

  1. I am glad someone is looking at "inequality" other than Joseph Stiglitz. Today's wealthy can ignore this issue only at the risk (or, Opportunity?) of inviting another Bolshevik Revolution!

    Good luck to those who believe that their wealth was built on their own talents. To them I will suggest, do spend some of your leisure time to read Michael Lewis' "Moneyball."

  2. @Lance- Thank you for being a sounding board for the issue. Your stance rings hollow. The ideas you have adopted are a hedge for "The Prisoner's Dilemma." There are global equilibria that are more beneficial to you and your progeny. 

  3. the problem here is that definition of capital has changed over time. In ante bellum us, capital included property in the form of slaves. Fifty years ago the assets on the balance sheets of most major corporations in advanced economies were mainly machines, buildings and inventories. Today around 80 per  cent is in the form of non-tangibles and intangibles. in service firms, most assets are things economists 50 years ago wouldn't have considered to be things. The fastest growing element of corporate balance sheets are intangibles. The  biggest change in capital therefore is not its growth, but  how it is defined. this is socially determined, like slavery. It has nothing to do with economic theory.

  4. Interesting: WHY is it even POSSIBLE that r > g?  This implies that trading of capital (cap gains) is a far easier (!) and rather more sustainable means of generating wealth than earning a salary!  It (trading capital/ modern finance) is like maxwell's demon, sitting in a box isn't it, that a financiere can magically separate the faster gaining securities from the laggards!

    But that (r > g) has NO theoretical basis in econ 101 itself! Econ 101 teaches duffers such as myself that a person buying and flipping a house, say, for profit (hopefully) DOES NOT GENERATE one iota of GNP/GDP! Likewise trading capital (financial securities) DOES NOT GENERATE one iota of GNP/GDP!

    Yet the entire industries of Wall St,/City of London etc are HUGE parts of their respective countries ECONOMIES (measured as contributors to GDP/GNP)! All from underlying activities that are NOT ACCRUING TO GNP!


    And, why should trading capital (wall street style) be EASY?

    I read the useless financial press regularly etc. but I get NO TRADING INSIGHT WHATSOEVER to help me gain from trading securities. U could watch that useless CNVC channel all day and still not get appreciable actionable gain.

    Because, the monied, by sheer mass of their wealth are "RIGHT" no matter (mostly) what TRADE they do! If you pour enough money and network enough of the savvy similarly wealthy into a given trade in a capital security, why it is SELF REINFORCING BRILLIANCE! "They are always right". Then the lower rungs of trend followers, momentum traders start to follow. The media sycophants echo in on it and then it's written record.

    Till fashion changes. And who is the firs ARBITER to drop a hot capital security? The same 1%.

  5. Of course what he's saying is essentially true, but it's amazing that such a self-evident phenomenon – the concentration of wealth among the super-rich – is in any way newsworthy, let alone the basis for an acclaimed book. It's obvious that the trend that Piketty describes, combined with the dumbing down of the education system and the wider culture, have ensured that what ought to be a fairly transparent – and politically reversible – development is an occult process in need of explanation by a high-powered academic in the first instance to his fellow academics and other pundits. On a somewhat trivial note, it's bizarre that such a highly educated man – and an alumnus of the LSE, moreover – should sound like Inspector Clouseau.

  6. From my point of view the crucial question is the rate of return on human 90% and physical 10% capital. He did not analyze moral, intellectual, and social capital. Without it we are not capable to understand economic problem.

  7. While I don't agree with all what he said, I appreciate that a French guy like me, makes efforts to speak English. However, I think he should improve his accent 🙂 Joke put aside, I know people who had basically nothing to start and who are now managing big companies which make much money and have big success. It is not easy, but not impossible. I don't believe in fatality. Instead of closing doors, we should open new ones, especially in France.

  8. Democracy in the workplace.

    Abolish all positions on the boards of directors. Let workers vote on what they want to spend surpluses on.

  9. I propose a Gausian distribution of wealth to be the accepted standard of wealth distribution.

    Put on the Y-axis the number of people, Wealth on the X-axis and draw the Gausian curve.
    Then, change the economic and political laws in such way as to maintain such distribution.

  10. The FT has been exposing the bad data used by Piketty to sell his 80% tax that will surely destroy the economy and result in major war. Piketty is the new Marx and he has been hurled to super rock-star status by the left media hell bent on trying to just grab other people’s money with a pen and laws rather than a gun.The socialists just cannot stop their envy of other people’s money and they feel that they have a right to just take what other people earn. Their greed cannot be justified with real data so they fake everything to pretend to be morally justified.

  11. France exports trash. Piketty is following this ancient tradition with his book. Stay in France where the economy always has been people because of people like you. Don't spread this nonsense to countries with a healthy economy, please. 

  12. Found FRI 26 APR 2019
    From the Introduction to
    Capital in the Twenty-First Century
    By Thomas Piketty

    “Social distinctions can be based only on common utility.”
    —Declaration of the Rights of Man and the Citizen,
    Article 1, 1789

    The distribution of wealth is one of today’s most widely discussed and controversial issues.

    But what do we really know about its evolution over the long term?

    Do the dynamics of private capital accumulation inevitably lead to the concentration of wealth in ever fewer hands, as Karl Marx believed in the nineteenth century?

    Or do the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater harmony among the classes, as Simon Kuznets thought in the twentieth century?

    What do we really know about how wealth and income have evolved since the eighteenth century, and what lessons can we derive from that knowledge for the century now under way?

    These are the questions I attempt to answer in this book. Let me say at once that the answers contained herein are imperfect and incomplete. But they are based on much more extensive historical and comparative data than were available to previous researchers, data covering three centuries and more than twenty countries, as well as on a new theoretical framework that affords a deeper understanding of the underlying mechanisms.

    Modern economic growth and the diffusion of knowledge have made it possible to avoid the Marxist apocalypse but have not modified the deep structures of capital and inequality — or in any case not as much as one might have imagined in the optimistic decades following World War II.

    When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.

    There are nevertheless ways democracy can regain control over capitalism and ensure that the general interest takes precedence over private interests, while preserving economic openness and avoiding protectionist and nationalist reactions.

    The policy recommendations I propose later in the book tend in this direction. They are based on lessons derived from historical experience, of which what follows is essentially a narrative.
    . . .

  13. 00:01 – My book is trying to puts facts and to put history and to put data in one of the most controversial issues in history, which is the issue of inequality and unequal income and wealth.

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