It is rare that an economic treatise becomes a bestseller. French economist Thomas Piketty has authored an intellectually hefty book, Capital in the Twenty-First Century, which has given rise to so much discussion, making it a bestseller.
Its main insight is may be summed up in the simple formula: r > g. Here, r stands for the annual rate of return on capital (including profits, dividends, interest, rents and other income from capital, expressed as a percentage of total value). The other variable, g stands for the rate of growth of the economy.
The 700-page book takes us through complex economical analysis. But the profound implication is clear: Capital is growing faster than national income implying that inequality is widening. Piketty’s volume, translated from the French, has provoked wide discussion. For example, US President Barrack Obama called income inequality the “defining challenge of our time.” For many thinkers, vast extremes of wealth are a matter of justice or absence of it. There is a general recognition that economic extremes foster instability and are unsustainable over the long run. Piketty has some relevant insights on inequality. “According to the best available estimates, global output grew at an average annual rate of 1.6 per cent between 1700 and 2012.” At the same time, “the average long-run rate of return on stocks is 7-8 per cent in many countries. Investments in real estate and bonds frequently return 3-4 per cent.” This implies that concentrations of wealth keep on growing faster than income and income disparity keeps on widening.
Further Piketty mentions two phenomena that accelerate even further the mechanisms of disparity. The first is the tendency of capital to yield higher rates of return the more one owns. The second is the demographic trends in developed countries. Here the reduced population growth means that wealth is not divided among four, five or seven offspring, but among two or three, thus preserving intergenerational concentration of capital, which will last for many more years.
Therefore, Piketty holds that “at the beginning of the 1970s, the total value of private wealth (net of debt) stood between two and three and a half years of national income in all the rich countries, on all continents. 40 years later, in 2010, private wealth represented between four and seven years of national income in all the countries under study.” In other words, the ratio of wealth to income increases over time. According to Piketty, that ratio “could approach 700 per cent before the end of the 21st century.”
Nevertheless, Piketty rejects economic determinism. So he says: “The history of inequality is shaped by the way economic, social, and political actors view what is just and what is not, as well as by the relative power of those actors and the collective choices that result.” American author Earl Pike opines that “Capital in the Twenty-First Century is strong on diagnosis, weaker on remedies.” Noting how our intellectual conversation is now a conversation about economics, another author Benjamin Wallace-Wells asserts, “It isn’t just that economics is the topic we are most interested in; economics, increasingly, is the only language that we’re speaking.”
The larger question is: Is it true also in spirituality? Does spirituality also speak the language of economics? Though as spiritual persons, we are convinced that each person deserves respect and financial independence, do we create such a possibility? Could we enable a society where there is more of economic and spiritual egalitarianism? Could we ever say bye to spiritual intolerance and economic inequality?
(The writer is a professor of science and religion)
Kuruvilla Pandikattu