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 failure of Lehman Brothers demonstrated that liquidity provision by the Federal Reserve would not be sufficient to stop the crisis; substantial fiscal resources were necessary.
The present tax codes inhibit the mobility and formation of capital, add complexities and inequities which undermine the morale of the taxpayer, and make tax avoidance rather than market factors a prime consideration in too many economic decisions.
No government can give a selective advantage to a specific company, because that would make competition unfair.
When corporations refuse to practice due diligence by not establishing grievance mechanisms for remedy of abuses against the hidden 94% of their workforce in their global supply chains, they perpetuate a depraved model of profit-making that has driven inequality to a level now seen as a global risk in itself.
The Federal Budget can and should be made an instrument of prosperity and stability, not a deterrent to recovery.
Nothing so weakens government as persistent inflation.
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