Capital in the Twenty-First Century

There is a new book out, this one by a Professor Thomas Piketty of the University of Paris. Others more equipped than I am have written excellent reviews. See, for instance, Martin Wolf of the Financial Times at http://on.ft.com/1hIeobd. What emerges from the book is clear evidence that the rich are getting richer and that the process is accelerating. Wealth brings power and enables CEO’s to demand outrageous salaries that add to the pile. The wealthy are unable to spend their wealth and so it accumulates even further. The growing importance of robots doing the jobs that humans used to perform is tilting the balance even further in favor of a small group of very, very rich people. We are returning to the world of feudal kingdoms when the lord of the manor owned most all of it. Wolf suggests that this might not matter economically. After all, he says, the poor in developed countries enjoy lifestyles that the rich of a century ago would envy. On the other hand, he and others do worry that it does matter politically as wealth gives the rich an inordinate share of the vote.

Was Marx right?

Thomas Piketty in Capital shows that the rate of return on capital tends to exceed the rate of growth with the inevitable result that inequality is going to increase, possibly sharply. This tends to confirm Marx’s fears about capitalism. This inequality can be curbed by political means but the political will to do anything about it seems to be lacking, particularly as elites appear to control the levers of political power. I am rather intrigued by the role of the church in all this. Their focus on sexual issues to the exclusion of economic issues has led many to vote for a party that does not act in their economic interest. Others, such as Thomas Frank, have long since noticed this.