Piketty's Prognosis

Barry, My Liege :

As you know already, a new book by Thomas Piketty of the Paris School of Economics titled CAPITAL IN THE TWENTY-FIRST CENTURY was published in 2013 by Belknap Press of Harvard University Press.

In the book he documents the accumulation of capital into fewer and fewer hands along with an increase in wealth and income inequality from the middle of the 19th Century until 2010 in the United States, France, Britain and Germany.

One of his overarching themes is that there is nothing inherent in economics which will slow or reverse this movement toward extreme inequality in the foreseeable future.

In fact, our earlier expectation that rising economic growth would lift all boats and reduce inequality between classes was based on a study of the United States economy between 1914 and 1944. That study was fine as far as it went, but it turns out that the period in which inequality fell was a historical anomaly.

From this, I conclude that, unless we, My Liege, take decisive and drastic action, inequality will continue to rise until we have an economy ripe for revolution or depression.

Some of the actions we might take include a progressive tax on capital, confiscatory estate taxes and extremely high marginal tax rates.

Unless we voluntarily redistribute incomes and wealth, there is a high probability of a violent revolution to accomplish the same ends.

This space has made similar declarations previously ; I take no pleasure from this confirmation of earlier gloomy thoughts.

We are warned, My Liege.

Your faithful servant,