Piketty's inherited-wealth dystopia: private capital millionaires multiply

Thomas Piketty's much-discussed economics bestseller Capital in the Twenty First Century prophesies a future where inherited wealth dominates the world, because the rate of return on capital outstrips the rate of growth in the economy, meaning the money your ancestors earned will always outstrip what you could earn. A new Boston Consulting Group report confirms Piketty's hypothesis, concluding that the share of wealth due to capital increased by 14% last year

-- 31% in Asia-Pacific, mostly due to gains in the stock markets. Millionaire households all over the world are also up.

According to the report, private wealth in:

* North America rose by 15.6% to $50.3tn

* Western Europe, which includes UK, Germany and France, rose by 5.2% to $37.9tn

* Eastern Europe, which includes Russia, Poland and Czech Republic, jumped by 17.2% to $2.7tn

* Latin America rose by 11.1% to $3.9tn

* Middle East region increased by 11.6% to reach $5.2tn

Global private wealth hits $152tn

(Image: Bull Market, Nathaniel Zumbach, CC-BY)

Notable Replies

  1. Sim0n says:

  2. Piketty's book simply points out what has been obvious for decades now - that wealth is moving more and more rapidly to the wealthy. The solution is also just as obvious - tax wealth (capital gains) as common labor is taxed. The old line that capital investment promotes growth is now as obviously bull (ha ha) as reducing taxes increases revenue. But we live in a world where that sort of BS is sacrosanct. A world where wealth has bought those with a voice and with power. We're farked.

    Consider that the so holy "jobs creators" have mainly created jobs in the most powerful communist country in the world. Jobs in America have gone to shit. Yet "jobs creators" is still considered a valid incontrovertible point pushed by the working whores of the wealthy.

  3. "Job creators" in the U.S. are, in most cases, small entrepreneurial companies. Ma-and-pa stores, etc. This group stands to benefit from the ACA because now they can attract better employees: historically, working in a smaller company meant foregoing health insurance benefits, so there was a more limited pool of willing applicants.

    The faux "job creators" are in fact job eliminators. Yes, there are the newly created jobs in other countries with fewer human rights to sidestep, but the sum total of jobs has gone down over time for most of the industrial leaders.

    The former create jobs, consumers, and value. The latter create a platinum level of multimillionaires rising above a mountain of disposed brass cogs. The former used to grow along a continuum, with some ultimately reaching the status of the latter. A careful pruning of regulations to allow virtually unrestricted growth in what was already full grown, coupled with a convenient barrier of regulations to keep out any new saplings, has severed that continuum and resulted in the dystopia Piketty is describing.

    Tearing down the fence keeping real job creators out, and re-installing the regulations that would have kept the fastest-growing weeds in check are important components in fixing this problem. Taxes alone won't do it.

  4. No, it's like taking 40 years of increasing average global temperature and saying "See? global warming."

    No, because that was a transient blip in the 40 year trend I just mentioned.

  5. ...and make sure that taxation is progressive—in terms of income per person—or flat in terms of economic activity by all entities throughout the retail, wholesale, and financial sectors of the economy.

    But redistribution is not the only component of the solution. Much of the reason for the r > g phenomenon is that excesses by market elites (market power, information asymmetry, oligopoly, monopoly) are supposed to be curbed by churn and "creative destruction", but aren't. Libertarians like to point the finger at democracy and governments as the enabler of this corruption, but that's like blaming the dam for the water that comes over the spillway. What's actually happened is that market elites are given a pass on their unethical behavior. Even though their exploitation of people fills the market with distortions, the wealthy have been able to brand their criminality as virtue, and being victimized as a vice.

    As an example of how things could be better, if consumer products and services were longer-lasting, more modular and more easily upgraded, and the profit margins of their business was held down by more competition and market churn, r would lose ground to g. It might not be enough to reverse the inequality, but targeting the exploitation of market power by elites is at least as important as redistribution.

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