The new bestseller written by the young French economist Thomas Piketty has raised a storm in the economic world. The writer has headlined his book as the Capital obviously appealing and reconsidering the classic ideas of Marx. In fact, the book provides the outlook on the global economy and explains the reasons for poverty and global inequality. The presented paper aims to analyze the key ideas of the author on the wealth concentration and its outcomes in the modern world.
In the book, the author provides many historical, statistical and scientific data. In fact, it is overwhelmed with the cases and examples that make the book look rather trustworthy. However, there are few contested ideas that would be examined more in details further. At first, it should be stressed that the author focuses on the detailed describing of the history of wealth concentration in the world over the past years. In particular, he examines the period stretching from the Industrial revolution having started in XIX century. He asserts that in the XVIII and XIX centuries the world’s wealth was unequally distributed among the population. The big money and businesses, so to say, were concentrated in the hands of the few rich families that were situated on the top of the social structure. All of it lasted until the two World Wars. These catastrophic events have changed the political landscape and economic patterns as well. Picketty states that after that the high taxes, inflation, frequent bankruptcies as well as the growth of the nation-states have disrupted the patterns and led to the more equal distribution of the wealth all over the globe.
Yet, the shocks of the XX centuries are far from now and the world’s population has again started to compete over the volume of wealth concentrated in one’s hands. Reflecting on all of this, Picketty suggests his own theory on the wealth concentration in the modern world. He claims, that in general, the wealth is accumulated faster than the economy grows. In case other factors remain equal, the faster economic growths will deteriorate the significance of the wealth in the society. And vice versa, the slower growth will contribute to the raise of the importance of the wealth globally. Considering the fact that the demographic growth that is nowadays experienced in the world slows down the economic growth, Picketty expects that the wealth will gain its positions back. He claims that there are no natural powers that might affect this tendency. Only the economic growth driven by the technological progress can make a difference in this regard. Otherwise, he states the government should intervene and equal the positions of everyone.
In overall, Picketty concludes by the recommendation given to the governments to introduce the global tax on wealth to prevent inequalities and to ensure the political and economic stability.
There are three ideas of the book that everyone can agree on. First, the high level of the inequality all over the world is indeed a problem and a challenge that is to be somehow addressed by the international community since the world is becoming more and more globalized the challenges are to be met together. The governments today mess up with the democratic and economic initiatives; the democracies ate tailored to serve the powerful interests etc. All of this needs to be slowed down. Secondly, the capitalism will not lead to the equality and would not guarantee it. Thus, the governments, indeed, have to intervene somehow in this process. And, thirdly, the governments are, in fact in position to change the snowballing tendencies associating the capitalistic movements and streams that negatively affect the entire society.
It should be stressed, however, that the conclusions Picketty makes are not correct in most part. Indeed, today we have the opportunity to experience the enormous wealth and extreme poverty at the same time due to the communication channels. Yet, it should be stressed that today the middle class has started to grow slowly in such countries, as Mexico, China, Brazil, Colombia and in the future it would significantly change the political and economic landscape of the world.
As to the global inequality and poverty, it should be stressed that this issue needs to be addressed with one notion: the capitalism has indeed left place for the inequality in its theory, while Picketty claims that it should be eradicated. The question in this regard is to determine what level of inequality might be dangerous and what level is actually acceptable.
Despite the commonly shared ideas, the book of Picketty contains few historical flaws as well as the issues that could be contentious in regard to the wealth concentration and accumulation and its future tendencies. First of all, Picketty stresses that the rapid economic growth will ensure the equal distribution of the wealth in the world. The idea behind this assumption is that the return on the capital is greater than the return on the labor an, therefore, in the future, if nothing changes, the gap between the people who posses wealth and those who rely on labor only will widen. The rest of the researchers and scientists are less confident on this assumption as they consider that the relation between the economic growth and wealth is not that direct.
It seems that while analyzing the wealth and the trends of its concentration, Picketty has not taken into consideration the powerful forces that greatly affect the accumulation of the wealth by the future generations. Of course, one might presume that the rich families will get richer while simply sitting on their wealth and getting the rentier income, as Picketty calls it, yet it seems that the American society itself does not shows the trends of it. A glance at the list of the 400 most successful companies ranked by the Forbes simply undermines this argument. The majority of the businessmen listed there have started their ventures years ago and succeeded in it. However, None of them inherited the wealth from their ancestors and made a fortune on it. As Picketty correctly claims the high taxes and inflation have eaten it all up. And the new businessmen of the American economy are mostly self-made men, so to say.
In addition to that claim, one should stress that the wealth itself is not a goal nowadays. More and more people are willing to develop their personalities and skills. Many people are abandoning their promising wellbeing jobs and step outside their comfort zones to challenge themselves. The majority of them has suddenly realized that everything that is equally distributed among all is time and that they are to decide how to spend it. The money could not be taken into the grave and they do not usually warm one up during the winters. The wealth accumulation is the goal of yesterday generations and this global pattern of behavior will definitely affect the wealth distribution in the future. In fact, Picketty does not dwell on this argument. He does not consider the cultural implications and the civilization processes. Just as many scholars he is lured by the idea of the same globalized world. Yet, there are the corners and even the great civilizations that might significantly affect the world map.
Other factors that Picketty has not mentioned in his book refers to the distribution of the wealth that is currently accumulsted in the few hands of the rich families. Indeed, all of them are protected against life discrepancies and enjoy large opportunities. However, they actually are generating profits from the ideas of their diseased relatives. They produce nothing new. They frequently rely ton the CEO or executive directors in making decisions regarding their estate. The most frequent action of them is to invest in the development of the ideas of the others. And in this regard it should be stressed that these ideas are not always successful. In fact, the real life proves otherwise. The American history shows that Henry Ford has created an industry having launched the production of the first automobiles. By the end of the century there were 20 automobile companies and only 20 survived till now. It means that the money invested in these non-successful companies have gone with the wind and in such a way they distributed among the different social classes. In any case, they are not currently accumulated in one’s hands only. And Picketty, in fact, keeps silent on those issues. Moreover, he focuses simply on the formula he has invented and seems to be blind in regard to other factors that affect the variables that he has outlined.
While reflecting on the wealth concentration, Picketty claims that rich families can benefit from the ties they have already made; from the respected education they can earn and from other benefits that the poor families do not have access to. Yet, there are many outside forces that impact the wealth concentration and sometimes even contribute to its decay. For example, Picketty pays little attention to the consumption scale when, in fact, it shows the way people distribute the limited resources they have. It provides also deeper understanding of how people live and what are the values that they are driven by. The statistics on the income generated does not provide that kind of view for the people and, therefore, the consumption rates should be reexamined. They will indicate the tendencies in regard to the social classes and discover the future that awaits the humanity. As it is known, the future is created by the deeds made today, not tomorrow.
Picketty suggests the governmental intervention and the introduction of the tax on wealth as the panacea against global inequality and poverty. He suggests that it would help to reduce the gap between the most powerful and rich people and those miserable located on the other hand of the line. Of course, the claim is right to certain extent. The governments should stop levy taxes on labor. Currently, the tax on labor in the USA is ranked among the highest in the world. However, it would be irrelevant in the nearest future as soon as the robots and other technology will replace the manual work. However, the tax on the capital is also not a way out for the issue of inequality. The reasons behind it are not justifying enough. Why should some people be deprived of their legally earned profit for the benefit of others? In this regard the tax, levied on the consumption might be more reasonable. Those, who are careless about their future, should pay more. The same rule might also apply to the introduction of the tax on estate.
The bias of Picketty turns to be glaring at times. He condemns the free market for the various economic disruptions that are caused by the initiatives launched by the government to control the various economic processes. His default offer provides for the increased governmental control exercised against the wealthy private interests.
In conclusion, it should be stated that the Capital, written by Picketty, is the modern attempt to explain the reasons underlying the global inequality and poverty in the world. The work is huge and is based on the historical and statistical data. It examines the wealth concentration from different perspectives, criticizes it and offers recommendations and solutions. Of course, the author has not considered many issues. Yet, it should be recognized that it is hard to capture the full picture and dwell on all processes that somehow affect the world and the inequality in it.