Capital in the Twenty-First Century () is a book written by French economist Thomas Piketty. It focuses on wealth and income inequality in Europe and the United States since the 18th century. It was first published in French (as Le Capital au XXIe siècle) in August 2013; an English translation by Arthur Goldhammer followed in April 2014."Piketty's Capital: An Economist's Inequality Ideas Are All the Rage" by Megan McArdle, Bloomberg Businessweek, May 29, 2014
The book's central thesis is that when the rate of return on capital (r) is greater than the rate of economic growth (g) over the long term, the result is concentration of wealth, and this unequal distribution of wealth causes social and economic instability. Piketty proposes a global system of progressive wealth taxes to help reduce inequality and avoid the vast majority of wealth coming under the control of a tiny minority.
At the end of 2014, Piketty released a paper where he stated that he does not consider the relationship between the rate of return on capital and the rate of economic growth as the only or primary tool for considering changes in income and wealth inequality. He also noted that is not a useful tool for the discussion of rising inequality of labor income.
On May 18, 2014, the English edition reached number one on The New York Times Best Seller list for best selling hardcover nonfiction and became the greatest sales success ever of academic publisher Harvard University Press.Marc Tracy (24 April 2014). Piketty's 'Capital': A Hit That Was, Wasn't, Then Was Again: How the French tome has rocked the tiny Harvard University Press. The New Republic. Retrieved 27 April 2014. As of January 2015, the book had sold 1.5 million copies in French, English, German, Chinese, and Spanish. The book is a worldwide success, with over 2.5 million copies sold by the end of 2017.Le Monde supp. économie et entreprise, 15th December 2017, p. 2
The book was adapted into a feature documentary film, directed by New Zealand filmmaker Justin Pemberton, and released in 2020.
Publication and initial reception When first published in French in August 2013, Laurent Mauduit characterized it as "a political and theoretical bulldozer".Laurent Mauduit, "Piketty ausculte le capitalisme, ses contradictions et ses violentes inégalités", Mediapart, 3 September 2013: Thomas B. Edsall, "Capitalism vs.Democracy". The New York Times, 28 January 2014. As news spread of its thesis in the English-speaking world, Paul Krugman hailed it as a landmark,Paul Krugman. "America's Taxation Tradition", in The New York Times, 27 March 2014 . while former senior World Bank economist Branko Milanović considers it "one of the watershed books in economic thinking".John Cassidy, "Forces of Divergence: Is surging inequality endemic to capitalism?", in The New Yorker, 31 March 2014 In response to widespread curiosity abroad aroused by reviews of the original French edition published by Seuil in September 2013, it was translated rapidly into English and its publication date was pushed forward to March 2014 by Belknap. It proved an overnight sensation"Thomas Piketty's blockbuster book is a great piece of scholarship, but a poor guide to policy", Economist 3 May 2014. and ousted Michael Lewis's financial exposé, Flash Boys: Cracking the Money Code, from the top of the US best-seller list.John Lanchester "Flash Boys" in London Review of Books Vol. 36 No. 11, 5 June 2014 pp. 7–9 Within a year of its publication, Stephanie Kelton spoke of a "Piketty phenomenon",Heidi Moore, "Why is Thomas Piketty's 700-page book a bestseller?", The Guardian 21 September 2014 and in Germany three books had been published specifically dealing with Piketty's critique.Heinz-J. Bontrup, Pikettys Krisen-Analyse. Warum die Reichen immer reicher und die Armen immer ärmer werden, pad-verlag. Bergkamen 2014, .Albert F. Reiterer, Der Piketty-Hype – "The great U-Turn". Piketty's Kapital und die neoliberale Vermögenskonzentration, pad-Verlag, Bergkamen 2014, .Stephan Kaufmann, Ingo Stützle, Kapitalismus: Die ersten 200 Jahre. Thomas Pikettys "Das Kapital im 21. Jahrhundert": Einführung, Debatte, Kritik , Bertz + Fischer Verlag, Berlin 2014, .
Contents The central thesis of the book is that inequality is not an accident, but rather a feature of capitalism and can only be reversed through state interventionism. The book thus argues that, unless capitalism is reformed, the very democratic order will be threatened.
Piketty bases his argument on a formula that relates the rate of return on capital (r) to economic growth (g), where r includes profits, dividends, interest, rents, and other income from capital and g is measured as growth of society's income or output. He argues that when the rate of growth is low, then wealth tends to accumulate more quickly from r than from labor and tends to accumulate more among the top 10% and 1%, increasing inequality. Thus, the fundamental force for divergence and greater wealth inequality can be summed up in the inequality . He analyzes inheritance from the perspective of the same formula.
The book argues that there was a trend towards higher inequality that was reversed between 1930 and 1975 due to unique circumstances: the two world wars, the Great Depression, and a debt-fueled recession destroyed much wealth, particularly that owned by the elite. These events prompted governments to undertake steps towards redistributing income, especially in the post–World War II period. The fast, worldwide economic growth of that time began to reduce the importance of inherited wealth in the global economy.
The book argues that the world today is returning towards "patrimonial capitalism", in which much of the economy is dominated by inherited wealth: the power of this economic class is increasing, threatening to create an oligarchy. Piketty cites novels by Honoré de Balzac, Jane Austen, and Henry James to describe the rigid class structure based on accumulated capital that existed in England and France in the early 1800s.
Piketty proposes that a progressive annual global wealth tax of up to 2%, combined with a progressive income tax reaching as high as 80%, would reduce inequality, although he says that such a tax "would be politically impossible".
Without tax adjustment, Piketty predicts a world of low economic growth and extreme inequality. His data show that over long periods of time, the average return on investment outpaces productivity-based income by a wide margin. He dismisses the idea that bursts of productivity resulting from technological advances can be relied on to return sustained economic growth; we should not expect "a more just and rational order" to arise based on "caprices of technology", and return on investment can increase when technology can be substituted for people.
Reception The book's exceptional success was widely attributed to "being about the right subject at the right time", as The Economist put it. Piketty himself recognized there is a common sense that "inequality and wealth in the United States have been widening." The Occupy movement's "We are the 99%" slogan made talk of inequality "the zeitgeist of our age – an age of seemingly permanent crisis and austerity," as Adam Booth put it.
British author Paul Mason dismissed charges of "soft Marxism" as "completely misplaced", noting that Marx described social relations trying to unveil capitalism's inner tendencies, where Piketty solely relies on social categories and historical data. Piketty rather "placed an unexploded bomb within mainstream, classical economics," he concludes.
Other scholars have built upon Piketty's work, such as historian Walter Scheidel, who concurs with Piketty in his own study of inequality (The Great Leveler, 2017) that the gap will continue to widen as the decades pass but contends that Piketty's solutions are untenable.
Praise
Paul Krugman called the book a "magnificent, sweeping meditation on inequality"Paul Krugman (May 8, 2014). "Why We're in a New Gilded Age". The New York Review of Books. Retrieved April 14, 2014. and "the most important economics book of the yearand maybe of the decade." He distinguishes the book from other bestsellers on economics as it constitutes "serious, discourse-changing scholarship".Paul Krugman (April 24, 2014). "The Piketty Panic". The New York Times. Retrieved April 26, 2014. Krugman also wrote:
At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn't just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame. ... Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we'll never talk about wealth and inequality the same way we used to.
Steven Pearlstein called it a "triumph of economic history over the theoretical, mathematical modeling that has come to dominate the economics profession in recent years", but also added: "Piketty's analysis of the past is more impressive than his predictions for the future are convincing."
Branko Milanović, a former senior economist at the World Bank, called the book "one of the watershed books in economic thinking."John Cassidy (March 31, 2014). "Forces of Divergence: Is Surging Inequality Endemic to Capitalism?" The New Yorker. Retrieved April 13, 2014.Branko Milanovic (October 2013). The return of "patrimonial capitalism": review of Thomas Piketty's "Capital in the 21st century", Munich Personal RePEc Archive. Retrieved April 20, 2014.
British historian Andrew Hussey called the book "epic" and "groundbreaking" and argues that it proves "scientifically" that the Occupy movement was correct in its assertion that "capitalism isn't working".Andrew Hussey (April 12, 2014). Occupy was right: capitalism has failed the world. The Guardian. Retrieved April 21, 2014.
According to Robert Solow, Piketty has made a "new and powerful contribution to an old topic: as long as the rate of return exceeds the rate of growth, the income and wealth of the rich will grow faster than the typical income from work".Robert M. Solow. Thomas Piketty Is Right. The New Republic.
French historian and political scientist Emmanuel Todd called Capital in the Twenty-First Century a "masterpiece" and "a seminal book on the economic and social evolution of the planet".Emmanuel Todd (September 14, 2013). Piketty décrypte le come-back des héritiers . Marianne.
The book has been described as "a political and theoretical bulldozer" in the French press.Thomas B. Edsall (January 28, 2014). Capitalism vs. Democracy. The New York Times. Retrieved April 15, 2014.
The Economist wrote: "A modern surge in inequality has new economists wondering, as Marx and Ricardo did, which forces may be stopping the fruits of capitalism from being more widely distributed. Capital in the Twenty-First Century ... is an authoritative guide to the question."All Men Are Created Unequal, The Economist, Print Edition, January 4, 2014.
Will Hutton wrote: "Like Friedman, Piketty is a man for the times. For 1970s anxieties about inflation substitute today's concerns about the emergence of the plutocratic rich and their impact on economy and society. ... the current level of rising wealth inequality, set to grow still further, now imperils the very future of capitalism. He has proved it."Will Hutton (April 12, 2014). Capitalism simply isn't working and here are the reasons why. The Guardian. Retrieved April 22, 2014.