Capital in the Twenty-first Century by Thomas Piketty; Harvard Business Publishing; Price: Rs.1,495; Pages 577 THE OUTSTANDING characteristic of this extraordinary outcome of 15 years of intensive research and scholarship is that although ex facie Capital in the Twenty-First Century is an economics text which brings great clarity to the increasingly divisive and confusing issue of wealth creation and distribution between countries and within them, it is not at all the typical dry-as-dust economics treatise. Refreshingly, this investigation into the phenomenon of rising wealth and economic disparity in countries around the world, is as much a political and even literary history of Europe and America. In tracing the evolution of capital locked in agricultural estates in the 18th century to the predominance of industrial and financial capitalism in the 20th and 21st centuries, Thomas Piketty, a professor of the Paris School of Economics, examines the novels of Honoré de Balzac and Jane Austen while conterminously debating and distinguishing the theories and postulates of renowned economists such as Malthus, Ricardo, Karl Marx and Simon Kuznets. The starting point of this comprehensive tome is the commonplace observation that wealth and income chasms dividing the rich and poor are becoming wider in the modern globalised age. By researching British and French government tax records, Piketty establishes that wealth or capital-income ratios, which averaged 6:1 — i.e, the stock of wealth was six times GNP in Europe and the US for over two centuries — narrowed briefly during the years 1914-80 to 3-4:1 before reverting to the historical average during the past three decades. In the past 30 years, average rates of return on capital have been consistently higher — as they were in the pre-industrial revolution years — than national income growth rates, which means the income gap between owners of capital and those who live off their labour is becoming wider again. In effect Capital is a warning that the brief interregnum of the Cold War years which ended with the collapse of the Berlin Wall in 1989, during which the gap between the return on capital and return on labour narrowed, is over. Economics Nobel Prize winner Simon Kuznets (1901-1985), citing US data relating to 1913-48, had persuasively argued that wealth and income inequality follows a ‘bell curve’ rising initially in the early stages of industrialisation and then declining sharply as economies of scale, improved logistics and rising labour incomes begin to be shared. Especially in the 1980s during Ronald Reagan’s presidency in the US and the Thatcher years in the UK, Kuznets’ strident advocacy of economic growth based on the reasoning that a rising tide lifts all boats, became received wisdom. Reduced income taxes, abolition of estate duties and inheritance taxes, tacit acceptance of tax havens, are the consequence of the belief that releasing the animal spirits of risk-taking entrepreneurs would boost economic growth, the benefits of which would trickle down to the lowest deciles of the population. On the contrary, the outcome of this growth-at-all-costs philosophy has been relegation of wealth/income…
