Max Benavidez re: Thomas Piketty: Capital in the 21st Century
Thomas Piketty says, “Historically, the main equalizing force — both between and within countries — has been the diffusion of knowledge and skills. However, this virtuous process cannot work properly without inclusive educational institutions and continuous investment in skills. This is a major challenge for all countries in the century underway…In the very long run, the most powerful force pushing in the direction of rising inequality is the tendency of the rate of return to capital r to exceed the rate of output growth g. That is, when r exceeds g, as it did in the 19th century and seems quite likely to do again in the 21st, initial wealth inequalities tend to amplify and to converge towards extreme levels. The top few percents of the wealth hierarchy tend to appropriate a very large share of national wealth, at the expense of the middle and lower classes. This is what happened in the past, and this could well happen again in the future.” Quoted here in the NYTimes: http://economix.blogs.nytimes.com/2014/03/11/qa-thomas-piketty-on-the-wealth-divide/
The question is, are the forces the rate of return to capital exceeding the rate of output growth unstoppable or immovable?
According to Piketty, “U.S. inequality is now close to the levels of income concentration that prevailed in Europe around 1900-10. History suggests that this kind of inequality level is not only useless for growth, it can also lead to a capture of the political process by a tiny high-income and high-wealth elite. This directly threatens our democratic institutions and values.”
Democracy is now at risk. The situation is begging for a solution. Stay tuned.
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