Capital in the 21st century, a book by the french economist and writer Thomas Piketty, published in France in 2013, the English version came up later in April 2014 by Arthur Goldhammer. Chosen as the Financial Times and McKinsey Business Book of the Year in 2014 and won the British Academy Medal in the same year.
Piketty, in this book, studies the dynamics of income and wealth distribution in the western countries since the 18th century.
The book demonstrates how inequalities in wealth distribution are a fundamental problem that hinders the stability of modern democratic societies . Relying on an important amount of statistics data, the French economist shows that capitalism is, by nature, a machine of manufacturing exponential wealth inequalities .
Piketty questioned the Kuznets relationship established in the 1950s which suggested that economic development is automatically accompanied by a decline in income inequalities. Kuznets curve hypothesis suggested that inequality rises when countries industrialize but tnen falls.
Piketty disagrees, benefiting from recently available researches , he was the first one to seriously challenge this theory, he claims that Kuznets’ data are misleading.
He put forward a theory called “central contradiction of capitalism”.
Considering r: is the annual return on capital, and g: is the economic growth, according to this theory: r is always greater than g (r>g), r is growing 4~5% a year while g is barely growing (~0.1% annually). And this shows how those who hold the capital keep getting richer and the inequalities keep growing.
Thomas Piketty also argues that the world is returning towards “patrimonial capitalism ” which also decreases the equality because the economy is dominated by inherited wealth: wealth is handed down from one generation to the next.
Piketty suggests to fix an annual global wealth tax up to 2% and a progressive income tax of 80%, according to him this would help to reduce inequalities. Otherwise he predicts a low economic growth and extreme inequalities in the future.
This book is still subject of a major debate between academics, widely criticized by those who support capitalism and think that it creates better opportunities for everyone and extensively appreciated by those who agree that we need to rethink this system because it hinders our development as societies. Whether we agree or disagree with him, Piketty deserves huge credit for kickstarting a debate about inequality and illuminating the distribution of income and wealth.
Oeconomia 