A short review of Capital in the Twenty-First Century

Capital in the Twenty-First Century by Thomas Piketty is a critique of capitalism in its present form and a warning; we could be headed toward an insurmountable divergence in wealth distribution if adjustments aren’t made soon.

Some would accuse Piketty of being a Communist or an enemy of capitalism. He is neither. Piketty is an advocate for a particular kind of capitalism, one that is restrained with progressive taxation and regulation and balanced with social programs.

Piketty spends a lot of time on the economic history of Western Europe and the United States, and long sections of his book are focused on the extreme wealth disparity of the early 19^th century. A minority of the population lived in a grand style due almost exclusively to inherited wealth while everyone else worked hard for a living from an early age until death. These lucky few did nothing to earn their station in life. Everything they had was merely given to them. But Piketty points out that redistributing their wealth wouldn’t have helped the poor a great deal, and, at the time, this elite served a social function. Everything had to be made by hand, food could not be preserved and travel involved horses and carriages. To live elegantly and with style took a lot of money. These people were living for the society as a whole. And although these people were not necessarily more intelligent or discerning than their poorer neighbors, they had the means and opportunity to appreciate art, music and literature. Some patronized artists, scholars and scientists. This class was instrumental in preserving and passing on culture from one generation to the next. However, society no longer needs a wealthy elite for this purpose.

Piketty also spends a good deal of time delving into the historic events of the first half of the 20^th century. Two world wars and the Great Depression devalued and destroyed capital. And for thirty years following World War II, conditions were optimal for the expansion of the middle class. This expansion coincided with the Cold War, so there was an incentive to believe the happy developments of this period were the natural and inevitable results of capitalism. Piketty does not believe this. He insists that generally wealth has a tendency to trickle up, not down…unless something stops it.

Piketty’s most radical proposal is a global tax on wealth that would require banks everywhere to share information about their clients’ transactions with appropriate government departments so that it would be difficult to hide assets. But he admits it would be nearly impossible to make this happen anytime soon.

In the meantime, Piketty advises a return to more progressive taxation. He believes capital and inheritance should also be taxed, not just income from labor. Furthermore, Piketty advocates an increase in the minimum wage and a significant investment in education and training.