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.
Interpretation
Capitalism can lead to growing inequalities if capital earns more than the economy grows.
This quote by Thomas Piketty highlights the inherent risk in capitalism where the return on investments outpaces economic growth, leading to significant inequalities in wealth and undermining the principles of meritocracy that support democratic values. Piketty argues that such imbalances can create an unjust society where the wealthy accumulate more power and resources, ultimately threatening the fairness and integrity of democratic institutions.
In practice
During a lecture on economic theory, you could reference this quote to discuss the implications of capitalism on society.
Contrary to a tenacious myth, France is not owned by California pension funds or the Bank of China, any more than the United States belongs to Japanese and German investors. The fear of getting into such a predicament is so strong today that fantasy often outstrips reality. The reality is that inequality with respect to capital is a far greater domestic issue than it is an international one.
The main force pushing toward reduction in inequality has always been the diffusion of knowledge and the diffusion of education.
Over a long period of time, the main force in favor of greater equality has been the diffusion of knowledge and skills.
There is one great advantage to being an academic economist in France: here, economists are not highly respected in the academic and intellectual world or by political and financial elites. Hence they must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.
Having a decent share of the national wealth for the middle class is not bad for growth. It is actually useful both for equity and efficiency reasons.
The discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences.
THE CORRECTION, when it finally came, was not an overnight bursting of a bubble but a much more gentle letdown, a year-long leakage of value from key financial markets, a contraction too gradual to generate headlines and too predictable to seriously hurt anybody but fools and the working poor.
I believe myself to be writing a book on economic theory which will largely revolutionize - not, I suppose, at once but in the course of the next ten years - the way the world thinks about economic problems.
And you can't have a prosperous economy when the government is way overspending, raising tax rates, printing too much money, over regulating and restricting free trade. It just can't be done.
After adjusting for inflation, the average income of the top 5% of households grew by 38% from 1989 to 2013. By comparison, the average real income of the other 95% of households grew less than 10%.
What do you think a stimulus is? It’s spending - that's the whole point! Seriously.
The time has come to end this charade. The debts are unaffordable. If they won't cancel the debts I would suggest obstruction; you do it yourselves. Africa should say: 'thank you very much but we need this money to meet the needs of children who are dying right now so we will put the debt servicing payments into urgent social investment in health, education, drinking water, control of AIDS and other needs.'
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