Life's two certainties may be death and taxes, but French economist Thomas Piketty seems to have found a third: the rich will keep getting richer.
The rapidly rising wealth and income gap seen in the United States and around the world in recent decades is no fluke, but the natural state of affairs, according to Piketty's best-selling new book, "Capital in the 21st Century." Weighing in at nearly 700 pages, the book crunches 300 years' worth of income and wealth data to come to its unnerving conclusion.
In an interview with HuffPost Live, Piketty said the future of economic inequality will probably look a lot more like the 18th and 19th centuries than the 20th century, when the gap was mostly stable or shrinking. The central problem, according to his research, is that returns on capital -- think wealth like real estate and stocks -- typically grows much faster than the broader economy. That means the already wealthy usually accumulate more wealth more quickly than the average worker, whose wages are more directly tied to the real economy.
"This is the central reason why we had so much wealth concentration in the past," he said. "In the 20th century we forgot about this because there were several very unusual events that made this different. But in the future, there are reasons to believe we might return to this inequality."
The 'unusual events' he refers to include two world wars, during which widespread devastation and soaring public debt hurt rates of return and destroyed wealth in Europe and the U.S. In the decades after the wars, the economy grew unusually quickly, rebounding from the conflicts and sped along by the post-war baby boom.
Piketty's prescription for controlling future inequality is a global tax on capital, which would hit the super rich the hardest. For better or worse, such a tax seems politically impossible, at least for now. So inequality could rise unchecked for decades to come, if Piketty is right.
Original Article
Source: huffingtonpost.com/
Author: The Huffington Post | by Ibrahim Balkhy
The rapidly rising wealth and income gap seen in the United States and around the world in recent decades is no fluke, but the natural state of affairs, according to Piketty's best-selling new book, "Capital in the 21st Century." Weighing in at nearly 700 pages, the book crunches 300 years' worth of income and wealth data to come to its unnerving conclusion.
In an interview with HuffPost Live, Piketty said the future of economic inequality will probably look a lot more like the 18th and 19th centuries than the 20th century, when the gap was mostly stable or shrinking. The central problem, according to his research, is that returns on capital -- think wealth like real estate and stocks -- typically grows much faster than the broader economy. That means the already wealthy usually accumulate more wealth more quickly than the average worker, whose wages are more directly tied to the real economy.
"This is the central reason why we had so much wealth concentration in the past," he said. "In the 20th century we forgot about this because there were several very unusual events that made this different. But in the future, there are reasons to believe we might return to this inequality."
The 'unusual events' he refers to include two world wars, during which widespread devastation and soaring public debt hurt rates of return and destroyed wealth in Europe and the U.S. In the decades after the wars, the economy grew unusually quickly, rebounding from the conflicts and sped along by the post-war baby boom.
Piketty's prescription for controlling future inequality is a global tax on capital, which would hit the super rich the hardest. For better or worse, such a tax seems politically impossible, at least for now. So inequality could rise unchecked for decades to come, if Piketty is right.
Original Article
Source: huffingtonpost.com/
Author: The Huffington Post | by Ibrahim Balkhy
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