Confronting inequality: review article on Thomas Piketty on ‘Capital in the 2st Century’

Abstract

This review article on Thomas Piketty’s ‘Capital in the twenty-first century’ opens with a discussion of the trends in income and wealth inequality reported by Piketty and his co-workers. The significance of the rising trends of inequality after 1980 in contrast to the pre-1980 trends is elaborated. It is noted that rising inequality has been accompanied by slower growth. Piketty identifies the relationship between the rate of return on wealth and the rate of growth as a major issue. It is argued here that an excess of savings out of return on wealth over the rate of output growth is unsustainable. It may lead, following Piketty, to rising wealth inequality, but we argue the difference would be deflationary and cause high levels of unemployment. While Piketty favours high income and wealth taxation to address that difference (from which we do not differ), there are additional ways such as enhanced worker power, corporation tax on a coordinated basis to reduce tax competition.