Capital in the Twenty-First Century by Thomas Piketty
How can a very small percentage of the population stockpile capital ? Why does the distribution of wealth in the twenty-first century seem to be so much less equable than in the twentieth century? What are your chances of becoming wealthy? Is there some way to predict what economies for the remainder of the century will look like?
Piketty’s purpose in Capital in the Twenty-First Century is to answer these questions—to use mountains of data that have previously been unavailable or misinterpreted to show the reader how the world economic situation came to be. To arrive at his answers, he has studied records going all the way back to the French Revolution and the earliest recording of estate taxes. He describes and analyzes many political, social and economic philosophies. He looks at twenty countries and their histories of wealth as well as the wealth of their citizens.
Piketty isn’t a doomsayer, and he doesn’t insist that the course of the world can’t be changed. But he does use a great deal of evidence to argue that the increasing economic equity among citizens of western countries during the twentieth century was caused by the two global wars—that we shouldn’t see economic parity as a natural result of an ever more civilized society.
Capital more naturally accumulates for those that already have a tidy sum of it. For those who have more than a tidy sum, it accumulates exponentially. This isn’t because the rich are evilly plotting to suck the life out of the average Joe. But it isn’t because they are particularly worthy or smart either. It just is the nature of capital. This makes the divide between haves and have-nots wider and wider with time. As evidence, records of inheritances and capital gained from labor are reviewed. Today, when CEO’s can made many hundreds of times the salaries of the average worker at their corporations, their labor capital works as well as any other vast sum.
Piketty’s bottom line is that the return on capital exceeds the rate of economic growth—“r > g” (and that we are asking too much to have consistent economic growth rates much above 1%). This causes inequality and can very well lead to political unrest as democratic ideals and standards fall away. So, while all is not lost, it may be if we don’t do anything about it.
Capital in the Twenty-First Century is a clarion call to look at the accumulation of capital realistically and to work to alter economic trends before we lose the gains we have made in democratic (political) systems. His solutions would not be easy to effect, requiring as they would global cooperation.( Progressive taxes on wealth in select countries would mean that capital would move to others.) But as he presents it, the stakes are so high, the world must be willing to try.
High school housekeeping: This is a good choice for a high school economics student. It’s detailed and serious, but it’s a layman’s book, written so that the average person (with little to no background in economics) can understand it. I think it’s the sort of nonfiction that the framers of the Common Core standards would like to see in high school courses. As it utilizes so much historical data—and even looks at descriptions of capital and incomes from eighteenth and nineteenth century novels—a student can cull some interesting historical facts in her reading. Any reader will certainly understand the enormity of the problem of rising economic inequity.