This is one of a series of posts that will ask what the most pertinent question raised by a prominent influencer of political economy might have been, and what the relevance of that question might be today. There is a list of all posts in the series at the end of each entry. The origin of this series is noted here.
After the first two posts in this series, the topics have been chosen by me, and this is one of those. This series has been produced using what I describe as directed AI searches to establish positions with which I agree, followed by final editing before publication.
This post refers to Thomas Piketty, the French economist whose most notable book is Capital in the Twenty-First Century. In this, Piketty studied wealth and income inequality in Europe and the United States since the 18th century. The book was first published in French (as Le Capital au XXIe siècle) in August 2013. An English translation followed in April 2014.
Why is Thomas Piketty in this series? Firstly, because he tackles a key issue in our time: inequality. Second, because he showed (at length) that this was not inevitable, or a passing phenomenon, but was instead an obvious political construct that did, as a result, require political correction if the problems it gave rise to are to be addressed, which he argued they must be. Third, because he demonstrates the use of tax as a policy instrument, which matters to me. And, fourth, the discussion of Piketty follows logically from the discussion of John Rawls, who was the subject of the immediately preceding essay in this series.
Thomas Piketty's Capital in the Twenty-First Century (2013) was a bomb dropped into the polite world of economics. It did not rely on theory. It relied on data — two centuries of it, painstakingly compiled from tax records, national accounts, and inheritance registers. What Piketty showed was that inequality is not an accident of policy or a passing phase of development. It is a structural feature of capitalism itself.
His central equation, that r > g, captured that truth in a simple inequality. His argument is that when the rate of return on capital (r) exceeds the rate of economic growth (g), wealth accumulates faster than incomes rise. Those who already own assets grow richer, while those who rely on wages fall behind. Over time, inequality does, then, become self-perpetuating.
This was not a Marxist argument about exploitation. It was a statistical description of what capitalism does when left to its own devices. Piketty's conclusion was unambiguous: without deliberate political intervention through progressive taxation, redistribution, and public investment, inequality will spiral until it undermines democracy itself.
Hence the Piketty Question: if we now know that capitalism naturally produces inequality faster than growth can correct it, why do we still design policies that entrench it?
The empirical revolution
Before Piketty, inequality was treated as a moral or political question, not an empirical one. Economists assured us that as countries grew richer, inequality would first rise and then fall, as the Kuznets curve suggested. Piketty demolished that myth.
His historical data showed that the post-war reduction in inequality was exceptional, not normal. It had occurred only under the extraordinary conditions of World War II, the reconstruction that followed, an era of high inflation, and deliberate redistribution policies. As he showed, since the 1980s, as those policies have been reversed, inequality has returned to nineteenth-century levels.
The lesson is clear: left to its own devices, capitalism does not deliver equality. It delivers concentration.
The politics of the return
Piketty's suggestion is that capital begets capital, wealth generates income, and income buys influence. Those with wealth accumulate not only assets but also power over politics, the media, and public discourse.
His research showed that wealth concentration is not just an economic process but a political one. The wealthy use their power to reduce taxes, weaken regulation, suppress unions, and shape ideology. They fund think tanks and media outlets that promote the very policies that entrench their dominance.
In other words, inequality is not only the outcome of markets; it is the design of politics.
The myth of merit
One of Piketty's most devastating insights was to show how inequality hides behind moral language. Today's elite like to claim that their wealth reflects talent and hard work. But the data say otherwise. Inherited wealth is once again the dominant factor determining life chances. “Meritocracy” has become a self-serving fiction, masking the return of patrimonial capitalism.
When wealth reproduces itself through inheritance rather than innovation, societies ossify. Social mobility collapses. Democracy becomes plutocracy.
The international dimension
Piketty's work also reveals the global dimension of inequality. The same forces that concentrate wealth within nations also concentrate it between them. Capital now flows freely across borders, while labour is constrained. The result is a global system in which wealth accumulates in the financial centres of the rich world — and in the secrecy jurisdictions that serve them — while the developing world is drained of resources and talent.
This is not merely the outcome of market forces. It is the architecture of global capitalism — designed, maintained, and defended by those who benefit most from it.
Why policy fails
If Piketty has made the mechanics of inequality so visible, why do governments not act? The answer lies in capture. Politics is increasingly financed by the wealthy. Parties compete for donors, not for voters. The revolving door between finance and government ensures that reform never threatens the system's foundations.
Even centre-left governments, fearful of market reaction, have accepted the limits set by capital. The result is a politics that talks of fairness while quietly perpetuating inequality.
Piketty's unfinished agenda
Piketty's own solutions were moderate but radical in implication. They include:
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Progressive taxation of income, wealth, and inheritance, including on a global scale.
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Public registers of ownership to expose hidden wealth and tax evasion.
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Democratic control of capital through co-determination and public investment.
These are not utopian ideas. They are the minimum conditions for democracy to coexist with capitalism. Yet even these proposals are resisted, because they confront the core truth of Piketty's finding: inequality is not a flaw to be fixed, it is the system working as designed.
What answering Piketty requires
Answering the Piketty Question means more than tweaking tax rates. It means acknowledging that inequality is not accidental but structural and therefore requires structural counter-power. That means:
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Delivering tax justice by creating enhanced global coordination to achieve better taxation of wealth and income and gains derived from it, the closure of secrecy jurisdictions, and an end to the race to the bottom in the taxation of capital.
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Assisting public investment by using greater fiscal capacity to help build collective wealth in housing, education, health, and green infrastructure.
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Increasing the democratic and accountable ownership of wealth by expanding cooperative, municipal, and public forms of enterprise to both share and reinvest the returns to capital.
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Creating political reform to break the link between money and politics so that democracy can act on the evidence Piketty has laid bare.
Inference
The Piketty Question confronts us with an uncomfortable truth. Capitalism is not drifting toward inequality by accident; it is propelled there by its own dynamics. Unless we intervene, the concentration of wealth will continue until democracy becomes a façade (if that has not already happened in some places).
Piketty's data gave empirical shape to what earlier critics like Marx and Galbraith understood intuitively: that unchecked accumulation is incompatible with a just or sustainable society. The question is no longer whether inequality will rise. It will. The question is whether democracy has the courage to stop it.
If we know that capitalism concentrates wealth faster than growth can distribute it, the only real ignorance left is political.
Previous posts in this series
- The economic questions
- Economic questions: The Henry Ford Question
- Economic questions: The Mark Carney Question
- Economics questions: The Keynes question
- Economics questions: The Karl Marx question
- Economics questions: the Milton Friedman question
- Economic questions: The Hayek question
- Economic questions: The James Buchanan question
- Economic questions: The J K Galbraith question
- Economic questions: the Hyman Minsky question
- Economic questions: the Joseph Schumpeter question
- Economic questions: The E F Schumacher question
- Economics questions: the John Rawls question
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Certainly a must read for anyone whether interested lay person., economics student, teacher and the ivory towers of the LSE and other leading academic institutions. Quite a difficult read with unfamiliar terminology but well worth the effort and patience needed to get your head round. A complement to the work of Gary Stevenson and Zac Polanski and others wishing to work for a more equitable society.
Piketty’s more recent (2021) ‘Brief History of Equality’ summarises many aspects of ‘Capital’ in I think a more readable way.
Readers here will also like its explicit statement that: “the only true limit to monetary policy is inflation”.
An interesting aspect of Piketty’s personal development in between the two books is that he started out as quite a-political – very data-driven, as Richard says – but is now a committed socialist. An example of someone moving gradually leftwards as they come to understand how the world really works – simply because reason and evidence take you that way.
Thomas Piketty’s Capital in the Twenty-First Century saved me from ignorance and opened my eyes. It should be used in education as essential reading. Many of the misunderstandings of the population are due to a lack of education and proper understanding. I know it is cliché, but do you have a list of essential reading to educate people on how the world really works (Money for nothing and my tweets for free would also be on my list).
I don’t…
Nominations are open
Polanyi, The Great Transformation. If the lengthy volume is daunting, then at least read the Introduction by Gareth Dale (2024). Polanyi precedes Piketty in identifying the dynamics of unregulated capitalism, and the power politics that seek to control it.
The Deficit Myth, by Stephanie Kelton.
My vote – Killing the Host – Michael Hudson
Would be an interesting person for you to interview or have a discussion as per Steve Kean.
Late Soviet Britain by Abby Innes. Shortish, destroys neo-liberalism and wrt the UK privatisation. It makes the case for the gov ownership of sectors delivering monopoly services.
After the Great Complacense (various) excellent description of the 2008 crash, what happened in broad terms and why & what needed to be done – and why it wasn’t.
The New Industrial State – JK Galbraith – I do wish I could write like Mr Galbraith.
Thanks
Agree those two and for a less heavy but valuable read, ’23 things they don’t tell you about capitalism by Ha-Joon Chang’
and Ann Pettifor who foresaw the 2008 crisis and has a book on the Green New Deal.
23 Things They Don’t Tell You About Capitalism, by Ha-Joon Chang. Very accessible, easy to understand.
It’s worth reading this one also by Piketty: “Capital and Ideology”, in which he shows that other ways of dealing with the inevitable effects of capitalism have been/are possible. And can be implemented very quickly if the will is there. Sweden for example transformed itself from one of the most unequal societies to one of the most equal almost overnight.
He even includes a schema for taxation – proportional so can be applied in any economy.
As it is going, capitalism will destroy itself. Some might rejoice at that but the problem is it would drag most of us down with it for a considerable period of suffering.
Change isn’t just morally desirable. IMHO it is necessary for the rest of us. I won’t be here in 20 years but my children and grandchildren will. There is not a great deal I can do except continue to support the few causes I do. But I had a Guardian pick yesterday. Enough small actions can make a difference.
I wrestled with that book two summers ago; thank heavens for the graphs. It is brilliant, he’s collected and analysed the data, invincible. I’m glad you’ve got to Piketty in your excellent ‘ Question’ essays. Another economist who names the elephant of unregulated capitalism’s self-destructive path.
The mathematics of compound interest makes this happen. If you have spare money (ie you are wealthy), even sticking it in a low interest account, over time, will cause it to grow beyond avarice.
Capital in the 21st Century was my first venture into economics – long before I discovered FTF. A brilliant data-driven book, drawing on those boring but vital piles of French statistical data compiled over years of bureacracy.
He also demolishes several Thatcherite myths about free trade and open markets, looking at Korea and Japanese economies along the way.
I found it tough going but very well worth the effort.
I wonder if Rachel Reeves or Darren Jones have read it? Is it on the Oxford PPE reading list?
Good questions
I recall reading that Ed Milliband was reading it during the period he was leader of the Labour party. Maybe he could lend RR and DJ his copy?
Raises some interesting issues about interest rates, in particular when the rate is over the rate of inflation.
I go to the question you pose at the end of this excellent post ( I have read Piketty’s ‘Capital’ and noted what you noted – it was a very fact based, matter of fact based challenge towards the status quo).
The reason why we tolerate this, is because we allow the rich to become part of our rule, our democracy and enable them to inculcate the very top of democracy based on the belief that they merit it for some reason.
Why? Because wealth is seen as power. Not the law. Not armies. Not borders. But wealth – the acquisition of. And the ability to buy anything – man, property, the law, politics and beast. Wealth is seen as clever, deserving.
In effect – we worship it. Many of us want to be wealthy apparently, so as it is a goal for many, the morality of it (enabled by the Hobbesian abuse of language) is unquestioned; the fact that it could be selfish, destructive, thieving and dishonest is swept under the rug all of the time.
It is society’s flaw I’m afraid to confuse wealth with that which is for the common good. We’ve been living with this flaw for a long time and by all accounts continue to do so.
“This was not a Marxist argument about exploitation. It was a statistical description of what capitalism does when left to its own devices.”
But it does look very like an empirical verification of Marx’s model of how capitalism embodies the seeds of its own destruction through its internal contradictions. The inevitable rise in concentration of wealth and the increasing inequality produces inevitable crises – of which war is one.
If Marx was right – what is wrong with that? In no other discipline does finding somone is right make you an outcast in this way.
Nothing wrong with showing Marx was right – just the opposite. Maybe I wasn’t clear.
🙂
I think people tolerate such gross inequality because they believe the myth that poverty is the just dessert of laziness and wealth the result of talent and hard work. Piketty shows convincingly that this is manifestly untrue, but he uses a massive unwieldy tome to do it. How to get his ideas into the mainstream is the challenge. Blogs like this obviously help, but I suspect the followers of this blog are more curious, open to new ideas and instinctively left leaning than the general population. Maybe the younger generation are flocking to such parties as the Greens, because they are experiencing what Piketty describes in real life- working very hard and getting nowhere. If something is not done to help them then we could well see the kind of upheaval we saw in the early twentieth century. I hope it can be avoided. We shouldn’t have to wait until the aftermath of a war or revolution for radical change to happen.
Without change inequality will continue to increase. But this is not sustainable in a modern economy.
A century ago Henry Ford realised that this was true. He paid his workers a high wage precisely because he needed a market for his cars. If his workers could not afford his cars then he couldn’t sell them.
In a modern society there are large capital costs for many factories. Semiconductors are the archetypal example. Semiconductor “Fabs” cost billions to build. They are only economic if they have a large market. Ordinary people have to be able to afford smart phones and other tech, otherwise even the very rich cannot have them because the Fabs would not be viable.
If inequality continues to increase then only the very wealthy will be able to afford many products. But they do not provide a big enough market for many products. So those products will eventually disappear.
So increasing inequality is not sustainable. Eventually it leads to a breakdown of the economy. From there we get a breakdown in society. It’s not a question of whether inequality will decrease it’s how it will decrease. Peacefully I hope.
Hi Richard
Will you consider putting this series into a book?
All of the questions, summaries and inferences have been very readable and probably by design I’m finding many of them apposite.
Maybe…
We’ll see how it develops as yet
I very much enjoyed this section, and have decided at 79 I am NOT too old to learn economics. So I have listed all the books mentioned by members and have bought two books by Picketty on ebook (I might need to look up some terms or reference the glossary here.
By the way the first article, on Farage, the link doesn’t work. It just says ” nothing here yet”.
We got our wires mixed on Farage: Thomas and I thought we were doing different videos and decided to take the video down because YouTube can punish you if you don’t.