Capital in the Twenty-First Century

Capital in the Twenty-First Century, is a book written by the French economist Thomas Piketty, and published 2014. He also reviews the pertinent aspect of the works done by previous authors on this subject (Karl Marx, Arthur Young, David Ricardo and Simon Kuznets) and details historical changes in the concentration of income and wealth. He takes a profound look at the evolution of inequality since the beginning of the industrial revolution.

In the 18th and 19th centuries western European society was highly unequal. Private wealth dwarfed national income and was concentrated in the hands of the rich families. This system persisted even as industrialization slowly contributed to rising wages for workers. Only the chaos of the first and second world wars and the Depression of 1929 disrupted this pattern. High taxes, inflation, bankruptcies, and the growth of sprawling welfare states caused wealth to shrink dramatically, and ushered in a period in which both income and wealth were distributed in relatively egalitarian fashion. But the shocks of the early 20th century have faded and wealth is now reasserting itself.

From this history, the author derives a theory of capital and inequality. As a general rule wealth grows faster than economic output, he explains, a concept he captures in the expression r > g (where r is the rate of return on capital, including profits, dividends, interests, rent and other income from capital expressed as a percentage of its total value, and g is the economic growth rate). Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it. But there are no natural forces pushing against the steady concentration of wealth. Only a burst of rapid growth (from technological progress or rising population) or government