Capital in the 21st Century - Professor Thomas Piketty

“Capital in the 21st Century”, Professor Thomas Piketty proposes a radical way to curb wealth inequality by suggesting progressive taxation on wealthy of up to 80 %. His study, which states that the rate of return of capital is higher than economic growth and that this further leads to wealth accumulation by the people with access to capital leading to wealth and in come inequality. Making an argument by collecting historical data of wealth in Europe and united states for almost past thee centuries, showing r>g in his book he further suggests if this stands true over time this will lead to further higher levels of inequality in the world. On the contrary, economists like Greg Mankiw question his data set used is his research by saying factors such as wealth decaying, spending, charity and wealth being divided down in generations through time

(Mankiw, 2014) says r>g is not a problem but a problem would be if rg is to come down significantly.

Looking at the world economy and how the wealth is distributed is very interesting, yes, there is inequality of wealth when you see it with the premise of who takes the bigger piece of the cake, the wealthiest one percent of the world according to (Oxfam) controls forty eight percent  of world’s wealth and by 2016 they will control more than fifty percent of the worlds wealth. (Oxfam) also states that in past four years there has been an increase of about $600bn for world top 80 billionaires wealth, while for the fifty percent of the poorest have lost $750bn in past four years. Looking at the economy of United states (Norton & Ariely) reveal that eighty percent of Americans only own the seven percent of the nations wealth while rest lies with the top twenty percent ,a staggering ninety three percent. (Forbes) Majority of the billionaires though in the world currently are categorized as self made, very few make it to the list with family inheritance dislodging the point piketty makes in his book. (Gates)  says old money  in United states does not exist anymore. So it is out of question that people with inherited wealth are becoming an oligarchy. If we look into history most of the rulers or people in power centres have been from the top ten percent.

The number speak for themselves, showing growing inequality globally, while these trends are very likely to continue the question arises of how to deal with these higher levels of inequality. In his book (Piketty) suggested global taxation on the wealthiest as high to eighty percent on their income is the way forward to curb the inequality, while a lot don’t agree with him for instance like Bill Gates, (Gates) “Rather than move to a progressive tax on capital, as Piketty would like, I think we’d be best off with a progressive tax on consumption”. This raises a whole new debate of ideologies of how to control the disparities between the rich and poor. (Oxfam) reported that the poorest in the world are becoming poorer and riches of the world are becoming richer. that brings in other factors such as economic, social and political factors of countries into play. (Acemoglu & Robinson) in their book “why nations fail” gives an example of the city of Nogales, Northern side of it lies the American city of Nogales, Arizona; south of it lies the Mexican city of Nogales, Sonora. Though these two cities share same geographical terrain but differ from each other in great ways socially, economically and politically, as in the northern side people got access to better infra structure, governance and more opportunities prospered unlike their fellows in the south. Similarly, I think is the case with people who create wealth they get get a better environment in which they can work to create wealth.