Hotshot French economist Thomas Piketty, of the Paris School of Economics, looked at the major democracies with North Atlantic coastlines over the past couple of centuries. He saw five striking facts: First, ownership of private wealth—with its power to command resources, dictate where and how people would work, and shape politics—was always highly concentrated. Second, 150 years—six generations—ago, the ratio of a country’s total private wealth to its total annual income was about six. Third, 50 years—two generations—ago, that capital-income ratio was about three. Fourth, over the past two generations that capital-income ratio has been rising rapidly. Fifth, the flow of income to the owner of the dollar capital did not rise when capital was relatively scarce, but plodded along at a typical net rate of profit of about 5% per year generation after generation. He wondered what these facts predicted for the shape of the major North Atlantic economies in the 21st century. And so he wrote a big book, Capital in the Twenty-First Century, that was published last year.
It has been a surprise bestseller. Thomas Piketty’s English-language translator, Art Goldhammer, reports that there are now 2.2 million copies in print and e-book form in 30 different languages scattered around the globe.
Piketty’s big surprise best-selling book has one central claim: Two generations ago the major North Atlantic economies were all four stable social democracies—relatively egalitarian places when viewed in historical perspective (for native-born white guys, at least), with political voice widely distributed throughout the population, the claims of wealth to drive political directions and shape economic structures not neutralized but kept within bounds. That was the North Atlantic economy that we lived in and had grown used to as recently as one generation ago. That, Piketty argues, was an unstable historical anomaly. It is now passing away.
Piketty believes that the rising inequality trends we have seen over the past generation and see now are simply returning us to what is the pattern of unequal income distribution and dominant plutocracy that is normal for an industrialized market economy in which productivity growth is not unusually fast. We had thought otherwise, and grown used to the social-democratic structure of two generations ago only because it came at the end of an era in which productivity growth had been unusually fast; the various political, depression, and revolutionary shocks to overturn established and inherited wealth had been atypically large.
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