capital in the twenty first century review

Twenty-five years ago, the Japanese stock market was more than two times today’s level. For example, the decrease in interest rates from 15 per cent in 1981 to zero has impoverished those previously wealthy on fixed incomes, and blessed those trafficking in financial instruments. The other major instability Piketty chooses to ignore is the riotous variability and volatility of returns on assets. In the last twenty years, the elite has become a very thin stratum of nouveaux riche – financial masters of the universe, technological entrepreneurs and corporate managers. Statistically, there will always be a “one per cent” – achieved through various combinations of starting position, luck, cunning, exploitation, manipulation, foresight and chutzpa – but there is much less permanence than his graphs suggest. Darcy, those English families with large estates that long ago became “land rich, cash poor” (Downton Abbey comes to mind) and survive by offering tour groups the opportunity to experience life in a “stately home.” An example that should give him pause would be to consider the successors to Mr. Piketty ignores the demonstrable instability of large accumulations of wealth and those who hold that wealth. Therefore the gap is normal and persistent. Piketty purports to explain the concept of “gap” by resorting to a weird, little, non-verifiable formula that assumes “patrimonial capital” to have permanence and then asserts that this capital grows more rapidly than the growth in the economy since returns on wealth are reliably stable. Literary historians Underwood, Long and So (Slate, Dec 2014) succinctly enunciate Picketty’s thesis: “Novels by Balzac and Jane Austen matter for Piketty because they dramatize the immobility of a 19th-century world where inequality guaranteed more inequality … since returns on capital were reliable, especially for large fortunes, the best way to get ahead was to start out ahead income from labor could never catch up.”įor Piketty, high degrees of inequality are the norm, born of the immobility he perceives in the nature of wealth and stability of the return on wealth. It was shorthand for the angst most observers feel in dealing with the vexed question of how to solve the problem of wealth and income gaps. Gidean Rose, editor of Foreign Affairs, introduced the six-article topic of inequality (Jan-Feb, 2016) with a reference to “The Age of Piketty.”

Despite his failings as a literary historian, economist, policy maker and author, Piketty cannot be ignored.

Capital in the twenty first century review