- 1. Overview
- 2. Etymology
- 3. Cultural Impact
Right. Let’s dissect this tome, shall we? It’s a rather… ambitious undertaking, this “Capital in the Twenty-First Century.” Piketty, the man himself, seems to believe he’s unearthed some fundamental truth about wealth and its distribution. Frankly, the universe has bigger problems, but I suppose someone has to document the slow, inevitable slide into plutocracy.
Capital in the Twenty-First Century
This weighty volume, penned by the French economist Thomas Piketty , purports to dissect the anatomy of wealth and income inequality . It’s a sprawling examination, stretching its gaze across Europe and the United States from the rather distant past of the 18th century right up to the present. The original French edition, “Le Capital au XXI e siècle,” graced the world in August 2013. For those who prefer their economic treatises translated, Arthur Goldhammer provided the English version in April 2014. A substantial undertaking, to be sure, bound in hardcover and weighing in at a formidable 696 pages. Its ISBN is 978-0674430006, should you feel compelled to acquire it.
The core argument, the one that’s set academic circles ablaze and probably caused a few well-heeled individuals to sweat, is deceptively simple: when the rate of return on capital (that’s ‘r’ for those who like their letters) consistently outpaces the rate of economic growth (that’s ‘g’), the inevitable consequence is a concentration of wealth. This, Piketty insists, isn’t just an unfortunate byproduct; it’s a recipe for social and economic instability. His proposed remedy? A global system of progressive wealth taxes . A noble, if rather optimistic, suggestion for curbing the tendency of the vast majority of fortunes to end up clutched in the hands of a minuscule few.
However, even the author himself seems to have had second thoughts, or at least a moment of clarity, at the close of 2014. In a subsequent paper, he acknowledged that the r > g dynamic, while influential, isn’t the sole, or even primary, driver of inequality. He also pointed out its rather limited utility when discussing the soaring disparities in labor income. An important distinction, though perhaps not as catchy as the original thesis.
The book’s reception was, shall we say, robust. By May 18, 2014, the English edition had clawed its way to the number one spot on The New York Times Best Seller list for hardcover nonfiction. It also managed to become the undisputed sales champion for Harvard University Press , a feat that speaks volumes about the zeitgeist, or perhaps just the collective anxiety. By January 2015, it had already shifted 1.5 million copies across various languages. By the end of 2017, the tally had surpassed 2.5 million. Clearly, people are interested in the slow unraveling of the economic fabric.
The narrative didn’t stop with the printed page. In 2020, New Zealand filmmaker Justin Pemberton adapted the book into a feature documentary, bringing Piketty’s findings to a visually-inclined audience.
Publication and Initial Reception
When “Le Capital au XXI e siècle” first emerged in French in August 2013, it was immediately pegged as a “political and theoretical bulldozer” by Laurent Mauduit. Its arrival in the English-speaking world was met with similar awe. Paul Krugman lauded it as a “landmark,” and Branko Milanović , a former senior World Bank economist, declared it “one of the watershed books in economic thinking.” The buzz was so significant that the English translation was fast-tracked, its publication date accelerated by Belknap . It became an “overnight sensation,” even managing to dethrone Michael Lewis ’s Flash Boys: Cracking the Money Code from the top of the US best-seller list. Within a year, Stephanie Kelton was talking about a “Piketty phenomenon,” and in Germany, a veritable cottage industry of books dissecting Piketty’s critique had sprung up.
Contents
The book’s central thesis, the undeniable core of its argument, is that inequality isn’t some random cosmic accident. No, Piketty posits it’s an inherent feature of capitalism itself, a beast that can only be tamed, or at least nudged, through deliberate state interventionism . The implication is stark: if capitalism isn’t reformed, the very foundations of our democratic order are at risk.
Piketty’s analytical engine runs on a deceptively simple formula: the relationship between the rate of return on capital (r) and the rate of economic growth (g). He defines ‘r’ as encompassing all income derived from capital – profits , dividends , interest , rents , and so on. ‘g’, on the other hand, is the growth of society’s total income or output . His contention is that when ‘g’ falters, ‘r’ takes the lead, causing wealth to accumulate at a pace far exceeding income earned from labor. This naturally leads to wealth concentrating at the very top – the top 10%, the top 1%. Thus, the fundamental engine of divergence and escalating wealth inequality is encapsulated in the inequality r > g. He even extends this analysis to the realm of inheritance .
The book presents a compelling visual narrative, often illustrating the income of the top 1% in various countries. It highlights a trend: inequality dipped significantly in the mid-20th century but has been on a steady, upward trajectory in recent decades.
Piketty argues that this period of rising inequality was temporarily halted, even reversed, between roughly 1930 and 1975. This was a consequence of unique, almost catastrophic events: the two world wars , the devastating Great Depression , and a debt -fueled recession that effectively wiped out a substantial portion of accumulated wealth, particularly that held by the elite . These cataclysms paved the way for governments to implement policies aimed at redistributing income, especially in the post–World War II era. Furthermore, the rapid, global economic growth of that period began to diminish the relative importance of inherited wealth in the overall global economy .
However, Piketty contends that the world is now steadily returning to what he terms “patrimonial capitalism .” This is a system where inherited wealth reigns supreme, where a significant portion of the economy is dominated by assets passed down through generations. The power of this class, he warns, is ascendant, posing a threat of creating an oligarchy . To illustrate this historical pattern, he draws upon the literary works of Honoré de Balzac , Jane Austen , and Henry James , using their depictions of the rigid class structure rooted in accumulated capital in early 19th-century England and France to draw parallels with contemporary trends.
As a potential solution, Piketty proposes a radical, albeit politically challenging, idea: a global, annual wealth tax set at a maximum of 2%, coupled with a progressive income tax that could reach up to 80%. He readily admits, however, that such a system would be “politically impossible” in the current landscape.
Piketty’s forecast is for a future where economic growth remains sluggish, and inequality escalates dramatically, unless significant policy interventions are made. He believes the 20th century, with its relative dip in inequality, was an anomaly. His extensive data analysis suggests that, over extended historical periods, the average return on investment consistently outstrips income growth derived from productivity gains. He’s skeptical that technological advancements, while potentially boosting productivity, will automatically lead to sustained economic growth or a more equitable distribution of wealth. Relying on “caprices of technology” for a fairer society, he argues, is a precarious gamble, especially since technological progress can also facilitate the substitution of capital for labor, further concentrating wealth.
Reception
The book’s extraordinary success is often attributed to its timely arrival, as The Economist noted, addressing “the right subject at the right time.” Piketty himself acknowledged the widespread perception that “inequality and wealth in the United States have been widening.” The resonance of the Occupy movement ’s rallying cry, “We are the 99% ,” had already embedded concerns about inequality into the “zeitgeist of our age – an age of seemingly permanent crisis and austerity,” as Adam Booth aptly put it.
British author Paul Mason dismissed accusations of “soft Marxism” leveled against Piketty, arguing that Marx sought to expose capitalism’s inherent tendencies, while Piketty relies on social categories and historical data. Mason concluded that Piketty had, in fact, “placed an unexploded bomb within mainstream, classical economics.”
Other academics have built upon Piketty’s foundation. Historian [Walter Scheidel], in his own study of inequality, The Great Leveler (2017), concurs with Piketty that the gap is likely to widen but expresses skepticism about the feasibility of Piketty’s proposed solutions.
Praise
Paul Krugman hailed the book as a “magnificent, sweeping meditation on inequality” and declared it “the most important economics book of the year – and maybe of the decade.” He differentiated it from other economic bestsellers, emphasizing its status as “serious, discourse-changing scholarship.” Krugman further elaborated:
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] considered it a “triumph of economic history over the theoretical, mathematical modeling that has come to dominate the economics profession in recent years,” though he added a caveat: “Piketty’s analysis of the past is more impressive than his predictions for the future are convincing.”
Branko Milanović , formerly a senior economist at the World Bank , echoed the sentiment, calling it “one of the watershed books in economic thinking.”
British historian [Andrew Hussey] described the book as “epic” and “groundbreaking,” asserting that it “scientifically” proves the Occupy movement ’s assertion that “capitalism isn’t working.”
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.”
French historian and political scientist Emmanuel Todd deemed Capital in the Twenty-First Century a “masterpiece” and “a seminal book on the economic and social evolution of the planet.”
The French press, as previously noted, characterized it as a “political and theoretical bulldozer.”
The Economist observed: “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.”
[Will Hutton] drew parallels between Piketty and Milton Friedman , stating: “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.”
Clive Crook , while offering significant criticism, acknowledged the book’s immense praise, suggesting it was “greeted with… erotic intensity” due to a societal yearning for “scholarly respectability” to confirm the belief that inequality is, in the words of John Cassidy , “the defining issue of our era.”
The introduction to the 2017 essay collection After Piketty highlights Piketty’s prescient argument, made before Donald Trump’s election , that property owners would dominate the 21st-century political economy and manipulate forces to maintain high profit rates, thereby fostering plutocracy.
Criticism
Critique of the Normative Content
A significant line of critique questions Piketty’s focus on inequality as the central analytical problem without adequately exploring why it matters.
Martin Wolf of the Financial Times argued that Piketty assumes inequality is inherently bad without providing a clear justification, merely demonstrating its existence and exacerbation. Clive Crook echoed this sentiment, stating, “Aside from its other flaws, Capital in the 21st Century invites readers to believe not just that inequality is important, but that nothing else matters. This book wants you to worry about low growth in the coming decades not because that would mean a slower rise in living standards , but because it might … worsen inequality.”
Icelandic professor [Hannes H. Gissurarson] contends that Piketty is supplanting John Rawls as the left’s intellectual standard-bearer. Gissurarson criticizes Piketty not only for questioning common measures of wealth distribution but also for being, unlike Rawls, “much more concerned with the rich than with the poor.” While admitting the “rapid rise in the income of the super-rich of the world” is occurring, he doesn’t see it as a problem as long as the poor aren’t simultaneously becoming poorer.
Methodological Critique
[Lawrence Summers] takes issue with Piketty’s perceived underestimation of diminishing returns on capital, suggesting these returns will eventually cap inequality. Summers also challenges Piketty’s assumption that returns to wealth are consistently reinvested, arguing that a declining savings-to-wealth ratio would also place limits on societal inequality. He points to the shifting fortunes of the wealthiest Americans, noting that only a fraction of the 1982 list remained in 2012, and that increasingly, top incomes are derived from salaries rather than capital. Summers implies that globalization and technological change are more commonly cited by economists as drivers of rising top incomes.
[James K. Galbraith] criticizes Piketty’s reliance on an “empirical measure” that, he argues, is not tied to tangible physical capital and whose value is partly dependent on the rate of return itself – a rate Piketty doesn’t fully explain the origin of. Galbraith concludes, “Despite its great ambitions, his book is not the accomplished work of high theory that its title, length and reception (so far) suggest.”
Daron Acemoglu and James A. Robinson utilized the contrasting histories of Sweden and South Africa to argue that social inequality is far more dependent on institutional factors than on variables like the difference between the rate of return and growth. Their cross-country analysis, they claim, shows no correlation between the top 1%’s income share and this difference. The professors posit that “general laws,” as characterized by Piketty’s postulates, “are unhelpful as a guide to understand the past or predict the future because they ignore the central role of political and economic institutions in shaping the evolution of technology and the distribution of resources in a society.” Per Krusell and Anthony Smith further critique Piketty’s “second law of capitalism” as implausible, finding that empirically supported theories of savings contradict it.
Paul Romer suggests that while Piketty’s empirical data is presented with commendable clarity, the theoretical underpinnings are less detailed. Romer characterizes this approach as embodying “Empirical work is science; theory is entertainment,” labeling it an example of “mathiness .”
Lawrence Blume and Steven Durlauf, writing in the Journal of Political Economy, found Piketty’s work “unpersuasive when it turns from description to analysis… Both of us are very liberal (in the contemporary as opposed to classical sense), and we regard ourselves as egalitarians. We are therefore disturbed that Piketty has undermined the egalitarian case with weak empirical, analytical, and ethical arguments.”
Critique of Piketty’s Basic Concepts
German economist [Stefan Homburg] points out a conceptual flaw: Piketty conflates wealth with capital. Homburg argues that wealth encompasses not only capital goods (produced means of production ) but also land and other natural resources . He posits that the observed increases in wealth-to-income ratios are driven by rising land prices, not necessarily by an accumulation of machinery . Joseph E. Stiglitz concurs, noting that “a large fraction of the increase in wealth is an increase in the value of land , not in the amount of capital goods.”
This perspective is further developed by Matthew Rognlie, who, in a 2015 paper, argued that Piketty’s analysis of capital’s growing importance inadequately accounted for depreciation. Rognlie also found that “surging house prices are almost entirely responsible for growing returns on capital.” A similar critique was voiced in the 2014 paper “Does housing capital contribute to inequality? A comment on Thomas Piketty’s Capital in the 21st Century” by Odran Bonnet and colleagues.
Marxist academic [David Harvey], while praising Piketty for dismantling the notion that free market capitalism inherently distributes wealth widely and upholds individual liberties , remains largely critical. Harvey takes issue with Piketty’s “mistaken definition of capital,” which he defines as:
… a process, not a thing … a process of circulation in which money is used to make more money often, but not exclusively through the exploitation of labor power . Piketty defines capital as the stock of all assets held by private individuals, corporations and governments that can be traded in the market no matter whether these assets are being used or not.
Harvey further argues that Piketty’s proposed remedies are “naïve if not utopian ” and that Piketty has “certainly not produced a working model for capital of the twenty-first century. For that, we still need Marx or his modern-day equivalent.” Harvey also criticizes Piketty for dismissing Marx’s Das Kapital without having evidently read it.
Carlos Góes, an IMF economist, investigated Piketty’s central thesis—that r > g leads to wealth concentration—and found no empirical support. In fact, his research indicated the opposite trend in 75% of the countries studied. Piketty, in response, pointed out that Góes used income inequality measures instead of wealth inequality and inappropriately employed sovereign debt interest rates as the proxy for the rate of return on capital, rendering the comparison invalid.
Critique of the Proposed Measures
Philosopher Nicholas Vrousalis criticizes Piketty’s proposed solutions, arguing they misinterpret the nature of the political “counter-agency” needed to address inequality and wrongly assume compatibility with capitalism.
Critique of the Conventional Paradigm
Norwegian economist and journalist Maria Reinertsen contrasts Piketty’s work with Counting on Marilyn Waring: New Advances in Feminist Economics by Ailsa McKay and [Margunn Bjørnholt]. Reinertsen suggests that while Piketty’s focus remains predominantly on the wealthy, the feminist economics text challenges fundamental assumptions within the discipline about what economists should consider relevant.
Allegation of Data Errors
On May 23, 2014, Chris Giles, economics editor for the Financial Times , identified what he termed “unexplained errors” in Piketty’s data, particularly concerning the rise in wealth inequality since the 1970s. The FT article stated:
The data … contain a series of errors that skew his findings. The FT found mistakes and unexplained entries in his spreadsheets, similar to those which last year undermined the work on public debt and growth of Carmen Reinhart and Kenneth Rogoff .
The central theme of Prof Piketty’s work is that wealth inequalities are heading back up to levels last seen before World War I . The investigation undercuts this claim, indicating there is little evidence in Prof Piketty’s original sources to bear out the thesis that an increasing share of total wealth is held by the richest few.
Piketty responded robustly, defending his findings and citing subsequent studies, notably by Emmanuel Saez and [Gabriel Zucman], that corroborated his conclusions on rising wealth inequality, even showing a greater increase in the United States than he had reported. In an interview with Agence France-Presse , he accused the Financial Times of “dishonest criticism,” calling their stance “ridiculous” given that “all of its contemporaries recognise that the biggest fortunes have grown faster.”
The allegations generated significant media attention. However, some sources suggested the Financial Times had overstated its case. The Economist , then a sister publication, commented:
Mr Giles’s analysis is impressive, and one certainly hopes that further work by Mr Giles, Mr Piketty or others will clarify whether mistakes have been made, how they came to be introduced and what their effects are. Based on the information Mr Giles has provided so far, however, the analysis does not seem to support many of the allegations made by the FT , or the conclusion that the book’s argument is wrong.
Scott Winship, a sociologist and critic of Piketty, argued that the allegations were not “significant for the fundamental question of whether Piketty’s thesis is right or not… It’s hard to think Piketty did something unethical when he put it up there for people like me to delve into his figures and find something that looks sketchy… Piketty has been as good or better than anyone at both making all his data available and documenting what he does generally.”
Economists Alan Reynolds , Justin Wolfers , James Hamilton , and [Gabriel Zucman] also claimed the FT’s assertions were exaggerated. Paul Krugman remarked that “anyone imagining that the whole notion of rising wealth inequality has been refuted is almost surely going to be disappointed.” Emmanuel Saez , a colleague of Piketty, stated that “Piketty’s choice and judgement were quite good” and that his own research supported Piketty’s thesis. Piketty himself published a detailed point-by-point rebuttal on his website.
A 2017 study in [Social Science History] by [Richard Sutch] concluded that Piketty’s data for the top 10 percent wealth share from 1870 to 1970 were unreliable, as were his figures for the top 1 percent in the 19th century. Sutch noted that while the data for the 20th century were more robust, they tended to obscure the significant rise in inequality during the Roaring Twenties and its subsequent decline during the Great Depression.
Awards and Honours
- 2014 Financial Times and McKinsey Business Book of the Year Award
- 2014 National Book Critics Circle Award (General Nonfiction) finalist
- 2014 British Academy Medal
Editions
- Le Capital au XXI e siècle, Éditions du Seuil , Paris, 2013, ISBN 978-2021082289 (in French)
- Capital in the Twenty-First Century, Harvard University Press , 2014, ISBN 978-0674430006