Capital in the Twenty-First Century

by Thomas Piketty

When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based. There

Once both population and output begin to grow steadily, land tends to become increasingly scarce relative to other goods. The law of supply and demand then implies that the price of land will rise continuously, as will the rents paid to landlords. The landlords will therefore claim a growing share of national income, as the share available to the rest of the population decreases,

With industrial revolution new valuable things came which caused the decline in land price

In any case, capital prospered in the 1840s and industrial profits grew, while labor incomes stagnated. This was obvious to everyone, even though in those days aggregate national statistics did not yet exist. It was in this context that the first communist and socialist movements developed. The central argument was simple: What was the good of industrial development, what was the good of all the technological innovations, toil, and population movements if, after half a century of industrial growth, the condition of the masses was still just as miserable as before, and all lawmakers could do was prohibit factory labor by children under the age of eight?

he devoted little thought to the question of how a society in which private capital had been totally abolished would be organized politically and economically

Kuznets himself was well aware that the compression of high US incomes between 1913 and 1948 was largely accidental. It stemmed in large part from multiple shocks triggered by the Great Depression and World War II and had little to do with any natural or automatic process.

The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms.

The history of inequality is shaped by the way economic, social, and political actors view what is just and what is not, as well as by the relative power of those actors and the collective choices that result. It is the joint product of all relevant actors combined.

dynamics of wealth distribution reveal powerful mechanisms pushing alternately toward convergence and divergence.

If, moreover, the rate of return on capital remains significantly above the growth rate for an extended period of time (which is more likely when the growth rate is low, though not automatic), then the risk of divergence in the distribution of wealth is very high.

“first globalization” of finance and trade (1870–1914), a period that is in many ways similar to the “second globalization,” which has been under way since the 1970s.