Dániel Vékony on Thomas Piketty’s book, Capital in the twenty-first century
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Thomas Piketty: Capital in the twenty-first centuryThomas Piketty’s grand analysis of trends concerning capital and economic growth is set to dominate discourse in macroeconomics in our contemporary post-crisis environment. The central idea of Piketty’s work is that increase of returns on capital is higher than economic growth, especially in times of sluggish economic expansion. Thus, he argues, we are heading back to the times of great inequalities of the late 19th and early 20th century. This could be described by a U-shaped arc of re-emerging income inequalities caused by the stagnating wages of the middle classes and spectacular rise of income on the side of the top 1 percent. According to Piketty this rising unfairness is a threat to democracy with the potential reappearance of patrimonial capitalism. Although Capital in the twenty-first centuryis regarded as a ground-breaking book, it is not without shortcomings. Lawrence H. Summers challenges some of Piketty’s arguments, such as the issue of inherited wealth. He rightly points out that looking at the Forbes 400 list between 1982 and 2012 the idea Piketty is proposing could not be fully supported. Thomas Frank points out that although Piketty (and his colleagues) carried out a massive research of empiric data, he ignores a number of factors that could contribute to rising inequalities, such as the weakening of labour unions. Nevertheless, Piketty’s work published after more than a decade of sound research of empirical data clearly sets the stage for a renewed debate on the growing wealth of the top 1 percent and its possible consequences.