May 31, 2015

Piketty: A Practical Evaluation of Income Inequality

Piketty: A Practical Evaluation of Income Inequality

World-renowned economist Thomas Piketty discussed his latest book, “Capital in the Twenty-first Century,” which addresses the dynamics that drive the accumulation and distribution of capital, historical evolution of inequality, concentration of wealth, and the prospects for economic growth. Piketty utilizes World Top Income databases as well as the Economic and Social Research Council databases to analyse how income tax creates statistical categories.  He also emphasizes that access to fiscal data is integral to proper economic analysis and effective reforms. 

Piketty illustrates that there are significant drops in income inequality following World Wars and the Great Depression, as high accumulations of public and private wealth are sold off to cover the cost of war.  The periods following this drop have seen a significant increase in wealth inequality and the stagnation of middle class income.  Piketty argues that while globalization plays a role in these developments, insufficient investment in education and unreasonably high levels of top manager compensation must also be taken into consideration.  Piketty claims that although the standard of living has increased, the wealth disparity will only continue to grow unless global fiscal policies respond to meet the challenges of an evolving global market.

Institutions, policies, and the history of income and wealth play an important role on Piketty’s conclusions on how to address inequality.  Piketty states that the main driver of inequality is when returns on capital exceed the rate of economic growth. In this situation the rich continue to accumulate much more wealth and the economy does not grow fast enough for the other classes to keep up.  Piketty argues that these trends can lead to extreme inequality and can undermine the democratic process.

Although less serious than in the United States, wealth inequality threatens the European Union as well. The division in wealth between the Northern and Southern member states and high levels of youth unemployment throughout Europe threaten to destabilize Europe’s position on the global market and contribute to the Eurosceptic sentiment. The rapid growth of the technology sector and the effects of globalization created an opportunity for an enormous accumulation of wealth in the private sector. Governments that are fearful of slowing down such progress often participate in practices that allow some of the highest grossing companies to pay little to no taxes on their income. Piketty argues that tax reform is necessary in order to ensure that everyone is playing by the same rules and has the same opportunity for success.  Piketty’s lecture highlights how current economic trends threaten to squander opportunity for economic mobility if fiscal reform is not enacted on a global level.

SIMILAR TOPICS

June 01, 2015

Étienne Wasmer: “Taxation of Capital? Utopia”

One of the most authoritative critics of Piketty’s theory is Wasmer, Professor at Sciences Po Paris Read full article

May 31, 2015

Atkinson on combating inequality

"Taxation, the welfare state and employment". Read full article

May 31, 2015

The factory of inequality: from Austen and Balzac to Piketty

A journey exploring history, economics and literature with Marco Baliani Read full article

January 22, 2015

Social Mobility: the theme of the 10th Econfest

"Social mobility": this will the theme for Trento Festival of Economics, which next year will reach the milestone of the tenth edition. Scheduled from 29 May to 2 June, the event will offer in-depth reflection on a strategic and extremely topical subject. Read full article

KEY FACTS

View all

BUSINESS

View all

RESEARCH

View all

HERITAGE

View all

GOVERNMENT

View all
]]>