Extreme inequality: The challenge of our time.
One of today's recent best-sellers, both in Europe and the United States, was, oddly enough, a book on economic inequality by a little-known French economist by the name of Thomas Pikkety. "Capital In The 20th Century," which was originally published in France, then in the United States, is the first book on economics in modern publishing history, to become an international best seller.
Mr. Pikkety's thesis is simple enough: Rising inequality is due to the fact that wealth generally grows faster than the economy, and there are few economic forces that counteract the natural tendency of wealth to become concentrated, as greater wealth means greater opportunity to save and invest. In the absence of rapid economic growth, inequality grows, and wealth automatically accumulates over time. Self-made fortunes become the next generation's family fortunes, widening the gap between the rich and the poor.
Pikkety's overall theme is that the free-market system has a tendency to increase the concentration of wealth because the rate of return on property and investments has consistently been higher than the rate of economic growth.
Although wealth generally grows faster than the economy, there are few economic forces that counteract its natural tendency to become concentrated. In the absence of rapid economic growth, inequality grows, and since the rate of return on capital investment is generally higher than the rate of economic growth, wealth tends to accumulate over time.
Rising income inequality is, according to Mr. Pikkety, the inevitable outcome of unregulated, thriving market economies. The free market system has a natural tendency to increase the concentration of wealth because the rate of return on property and investment has consistently been higher than the rate of economic growth.
Income inequality, he warns, can lead to social instability, since extreme inequality threatens democratic values of justice and fairness. To counteract growing financial inequality, he suggests a global tax on wealth, which would then be re-distributed to those with less capital.