NYTimes | Thomas Piketty’s new book, “Capital in the Twenty-First Century,” described
by one French newspaper as a “a political and theoretical bulldozer,”
defies left and right orthodoxy by arguing that worsening inequality is
an inevitable outcome of free market capitalism.
Piketty, a professor at the Paris School of Economics,
does not stop there. He contends that capitalism’s inherent dynamic
propels powerful forces that threaten democratic societies.
Capitalism,
according to Piketty, confronts both modern and modernizing countries
with a dilemma: entrepreneurs become increasingly dominant over those
who own only their own labor. In Piketty’s view, while emerging
economies can defeat this logic in the near term, in the long run, “when pay setters set their own pay, there’s no limit,” unless “confiscatory tax rates” are imposed.
Piketty’s
book — published four months ago in France and due out in English this
March — suggests that traditional liberal government policies on
spending, taxation and regulation will fail to diminish inequality.
Piketty has also delivered and posted a series of lectures in French and English outlining his argument.
Conservative
readers will find that Piketty’s book disputes the view that the free
market, liberated from the distorting effects of government
intervention, “distributes,” as Milton Friedman famously put it,
“the fruits of economic progress among all people. That’s the secret of
the enormous improvements in the conditions of the working person over
the past two centuries.”
Piketty proposes
instead that the rise in inequality reflects markets working precisely
as they should: “This has nothing to do with a market imperfection: the
more perfect the capital market, the higher” the rate of return on
capital is in comparison to the rate of growth of the economy. The
higher this ratio is, the greater inequality is.
In a 20-page review
for the June issue of the Journal of Economic Literature that has
already caused a stir, Branko Milanovic, an economist in the World
Bank’s research department, declared:
“I
am hesitant to call Thomas Piketty’s new book Capital in the 21st
Century one of the best books in economics written in the past several
decades. Not that I do not believe it is, but I am careful because of
the inflation of positive book reviews and because contemporaries are
often poor judges of what may ultimately prove to be influential. With
these two caveats, let me state that we are in the presence of one of
the watershed books in economic thinking.”
