Capital in the Twenty-First Century by Thomas Piketty - Summary, Key Ideas and Facts

by I.K. Mullins

Summary of Thomas Piketty's book. Thomas Piketty is well known as a researcher of income concentration. He uses fiscal sources in order to document the changes in the share of the top income groups in France and other countries. The importance of the research conducted by Piketty and his colleagues has also been supported by the strengthened interest in inequality and by the recognition of the fact that in the United States the median incomes have been stagnant for almost 40 years, whereas the top 1 percent of the population, or even more narrowly the top 0.1 percent, have drastically increased their share in total income. Piketty's book explains issues of income concentration more openly than ever. Moreover, in his book, Piketty provides an analysis of capitalism and a general theory of capitalism. In his book, Piketty has provided a new and astonishingly rich framework that does not treat the recent increase in inequality as an isolated phenomenon, but identifies the rising inequality as essential part of the nature of modern capitalism. CHECK OUT MORE BOOKS PUBLISHED BY BRIEF, CONCISE AND TO THE POINT PUBLISHING: THINK LIKE A FREAK: THE AUTHORS OF FREAKONOMICS OFFER TO RETRAIN YOUR BRAIN BY STEVEN D. LEVITT AND STEPHEN J. DUBNER - SUMMARY, KEY IDEAS AND FACTS ONE NATION: WHAT WE CAN ALL DO TO SAVE AMERICA'S FUTURE BY BEN CARSON, CANDY CARSON - SUMMARY, KEY IDEAS AND FACTS

Genres: Economics

112 pages, Paperback

First published June 25, 2014

Reviews

[Helen · Rating 2 out of 5]

This is ostensibly a "Cliffs Notes" style "crib" book, a condensation of the famous tome by Piketty, perhaps seen as useful for readers who do not wish to wade through a 900 or so page economics volume but still wish to familiarize themselves with the main points of Piketty's book. The book under discussion does convey a brief outline of the concepts in Piketty's work, but the book appears to have been written by a non-English speaker, because it's rife with un-idiomatic and incorrect usages - forcing the reader to figure out what the author is trying to convey. Obviously, the book could use an editor, who actually does speak English, who could have smoothed out the opaque portions of the text.

Anyway, despite its shortcomings, it's still an interesting book. The copy I read had somewhat of a running commentary/marginalia inscribed by a prior reader - rather glum comments in which the reader admitted he or she is poor and so forth.

Piketty says capitalism must be reformed, otherwise the current yawning global gap between the haves and have notes is bound to lead to severe social unrest. His "prescription" consists of a global wealth tax, in addition to progressive income tax, as well as inheritance taxes on the rich, so that the rich will be unable to move their assets around from tax haven to tax haven, and they are finally made to pay their fair share of taxes. Piketty says that if measures are not taken, the world will see a situation much worse than that which preceded WWI - income and wealth inequality will be on a scale difficult to imagine. As more and more people begin to realize that the cards are stacked against them, that the system is rigged in such a way as to keep the vast majority of the population on a sort of treadmill, while the rich self-perpetuate and gradually move into a non-working lifestyle enabled by living off the interest on their financial and property assets (rents) - the truth gradually sinking in will lead to social problems. Actually, it was similar social problems at the turn of the 19th century, problems which had begun to build up in the prior 200 years, that led to the wave of revolutions in Europe and Asia, and the hastily implemented social reforms (social safety net programs first implemented under Bismarck in Germany, later emulated by many other countries, so as to head off revolution, by giving the masses various socialist programs while retaining capitalism). The implicit message is that the people can only take so much, that in order to head off the volatile/revolutionary situation that culminated in the unprecedented destruction of wealth and property (as well as loss of human life) in the 20th Century, a thorough reform of capitalism must take place, with verifiable international agreements that would force the rich to pay tax.

The rapid economic growth after WWII was a rarity or anomaly, because of the widespread/unprecedented destruction of wealth/property in WWII. Inherited wealth was less important in the post-war years, as tax rates soared to 90% on the rich, given that governments needed to urgently raise money to rebuild infrastructure. In the 21st century, "patrimonial capitalism" that is inherited wealth, dominates the economy and eventually the power of this ever-increasing wealth creates an oligarchy. Today, the richest 85 individuals in the world (such as Buffett, Gates, and Carlos Slim) own more wealth than the approximately 3.5 billion people who make up the poorest half of the Earth's population. Unfortunately, the majority of people will be poorer in the future, and crisis will emerge. Piketty says there is a criminal conspiracy between Boards of Directors of corporations and the managers they hire, to award extremely lucrative pay and stock compensation to managers - which, due to the low tax rate, the managers mostly get to keep, although the managers aren't producing anything of value that would even remotely such excessive compensation. It is a criminal conspiracy on the part of the Board and those they hire to manage corporations, which extracts a maximum amount of value from the business - the Boards and those they hire to manage the businesses, know that they will each award each other lucrative pay deals when they are in turn on a Board deciding on a compensation package for a former Board member who is now hired as a manager.

Piketty recommends an annual global wealth tax combined with a progressive income tax reaching as high as 80%, to reduce inequality and prevent concentration of enormous wealth in the hands of a tiny minority. He says that democratic order cannot function unless capitalism is reformed. Today, it is very difficult to undertake such reforms because the financially powerful also buy politicians; note the efforts of the Koch brothers in influencing politics throughout the US, and ensuring favorable legislation. Big business is behind Trump's candidacy, no doubt, given that Trump is advocating a huge corporate tax cut, as well as eliminating entirely the inheritance tax. Obviously, Trump's vision is the opposite of Piketty's recommendations - it seems Trump's recommendations will only increase income inequality and further solidify the oligarchy. No wonder Trump is a fan of Putin's - since Putin was the Russian official who ensured the continuation of the oligarchic structure Yeltsin implemented when Russian state assets were privatized upon the collapse of the USSR former system of state ownership (communism). The oligarchy in Russia is exactly analogous to the burgeoning oligarchy in the West - although the popular myth is promulgated that we have a meritocracy and social mobility is possible. Even education doesn't help in a rigged system - but most people don't realize this and gamely undertake years of education, even acquiring student loan debt, thinking it will all pay off someday. Meanwhile, with inherited wealth, and with the ways the wealthy have of dodging taxation on their wealth and income, there is a minority of the population who will never have to work, but will live a most luxurious and exclusive lifestyle. In a slow growth rate economy, inherited wealth and the oligarchy hold the high cards - and the majority becomes more and more impoverished. We see this happening everywhere, and it explains the rise of demagogues like Trump, as people desperately search for answers. It turns out that a Trump would actually exacerbate an already bad economic situation - leading to more income inequality and strengthening of the oligarchy. If the rich were taxed on a global basis, such that they could not shift their assets to tax havens to avoid taxation - both their income and wealth - fairly, then there would be less inequality and the tax revenue could go toward health, education, welfare, and unemployment. These efforts are as we know, anathema to the mostly conservative rich - who use code words like "small government" to disguise their true message, that is, they would rather return to 19th century, pre income tax conditions, when there was rampant poverty, inferior health care and education,and no social safety net (that is, no unemployment, social security, or welfare). The rich simply do not care for the poor - they would rather see them all die, perhaps. The paradox is that we are living in a democracy, so that presumably, the majority - which is not rich - could enact laws to tax the rich fairly. But this doesn't happen because the rich have bought politicians, who keep tax rates low for corporations and the rich. The low tax rates for the rich and corporations mean that the poor and the middle class are burdened with taxes unequally - they are paying a proportionally higher burden of taxes than the rich. You would think in the Western democracies, the majority (moderate income) population would enact legislation to lessen income inequality - but powerful lobbyists paid for by the rich, see to it that this doesn't happen. Of course the ultimate "puppet" of the rich is Trump, who has promised to slash taxes for the rich, in order to foster "growth" - "growth" of his bank account, and that of his wealthy friends, of course.. Unfortunately, politicians today are servants of the 1%, since it's the 1% who donate to their campaign war chests. Because the wealthy will do anything to protect their wealth and their status, society will move toward the social stratification and level of income inequality that existed prior to the first WW. If there is no reform of capitalism, eventually the stage will be set for social upheaval.

Piketty makes the following recommendations to remedy the dire economic situation:
1. Impose tax on income, including trusts, companies, etc.
2. Set a fixed tax rate on total wealth.
3. Apply a progressive tax on total wealth.

He says the best way to decrease the public debt is to tax the wealthy, that is, impose a progressive tax on capital. Also, it can be decreased by increasing inflation from 2 to 5% he says, as the value of the debt decreases with increasing inflation. However, because inflation can get out of control and eat poor peoples' savings at the same time, a tax on capital is the best option to decrease the public debt.

Piketty says democracy must rule capitalism, and for this reason, both democracy and capitalism must reinvent themselves.

I can't say I recommend this book exactly since it is poorly or sloppily written; however, it does seem to convey the gist of Piketty's ideas, so I suppose it does accomplish what it set out to do - summarize and give the key ideas and facts of Piketty's book on "Capital."

[Carolyn Hand]

Skimmed it.
Rich get richer, poor get poorer.
End of story.

[Nickolas · Rating 3 out of 5]

Trouble with translation to English, quite a lot of the syntax is as if it was directly translated from the French, sentence structure and all. Interesting enough, and if you read over sections enough you get the gist of what the main concepts probably are.

Makes me want to read, or at least peruse, the full text.