2024 Author: Leah Sherlock | [email protected]. Last modified: 2023-12-17 05:25
How and under what laws is capital distributed? Why do some always remain poor, while others - no matter what - rich? The author of the popular book Capital in the 21st Century, Thomas Piketty, conducted his research and came to interesting conclusions. In his opinion, in 1914-1980, the gap between the strata of society was minimal.
Fundamental contradictions
Life in modern society is subject to its own laws. One of them is equality, that is, from an economic point of view, the ability to ensure one's well-being only at the expense of one's own abilities and desires. But Thomas Piketty, a professor at the Paris School of Economics (Capital in the 21st Century is his bestseller), argues that there is an increasing correlation between a person's personal success and the financial situation and connections of his family. Of course, this is contrary to the concept of equal opportunities.
As soon as it appeared, the book made a lot of noise, because the author raised many questions in it regarding the correctness of the postulates of a market economy. He does not exclude the correctness of Karl Marx, who asserted the inevitable death of capitalism.
Myths and reality
If in the 19th century no one was surprised that a small group of people "own the world", then in modern conditions this fact constantly causes disputes and doubts. Countries such as the United States, based on the proclamation of equal rights for all citizens without exception, require serious explanations for the gap between rich and poor.
For a long time, economists have argued that overall economic growth benefits everyone. Many books ("Capital in the 21st century" is an exception) tell that individual efforts and workaholism allow people to achieve unprecedented heights. And that society no longer rests on connections and inherited property. However, even the most primitive observations suggest otherwise.
If during the 19th-20th centuries the ratio of private capital and national income remained approximately equal (regardless of the structure - first land, then industrial assets and, finally, now - finance), then starting from the 70s of the 20th century the first one prevails. Over the past 50 years, this gap has exceeded 600%, i.e., national income is 6 times less than private capital.
Is there a reasonable and logical explanation for this? Undoubtedly. A high savings rate yields a decent annuity; the level of economic growth is rather low, and the privatization of state assets allows for even greater growth in the size of private capital. On the territory of the former USSR, it was denationalizationallowed a small number of citizens to significantly enrich themselves.
Historical background
Economic growth has always been below the return on capital, says Thomas Piketty. Inheritance-based capital in the 21st century only widens this gap. The fact is that by the beginning of the 20th century, 90% of the national we alth belonged to 10% of the people. The rest, regardless of mental abilities and efforts, had no property. Consequently, they had nothing to earn on.
The declaration of equality, the permission to vote and other achievements of a democratic society did nothing to change economic laws and the concentration of private capital in a "small group of people."
As terrible as it sounds, it was the two world wars and the need for recovery that created an unprecedented situation where savings income has fallen below economic growth. During the period 1914-1950, we alth increased by only 1-1.5% per year. In addition, the introduction of progressive taxation has increased the rate of economic growth. But capital in the 21st century again becomes more important than innovation and industrial development.
Middle class
It was in the post-war period that the so-called middle class appeared in Europe. Again, this was due to economic and political upheaval, not equality of opportunity. But the enthusiasm did not last long. By the 1970s, progressive specialists recordeda new increase in we alth inequality.
In his book Capital of the 21st Century, Thomas Piketty (the book has already been published in Russian) says that, despite the emergence of a middle class, the poorest segments of the population do not feel economic development in any way. The chasm between the strata of society is only growing.
However, since the 1980s, the scientist says, historical trends are returning. If in the mid-60s it was really possible to break out to the top of the economic pyramid due to one's own abilities, then by the end of the 20th century this path was closed. Thomas Piketty confirms all his reasoning with figures. He cites as an example the salaries of top-level employees and average workers. If top management increased their income by 8% per year, then all the rest - only by 0.5%.
The lucky ones
American economists attributed this unfair pay to the special skills, experience, education, and performance of company executives. However, the economic literature confirms that this is not actually the case. And even more than that, the salary level of a top manager does not depend on the quality of his decisions. Here, the so-called “pay for luck” phenomenon is observed: if a company develops dynamically under the influence of external factors, bonuses to employees automatically increase.
Inheritance or earnings
Capital in the 21st century for the first time in the history of mankind could be accumulated at the expense of one's mind and efforts. The author of the book deduced this postulate with the proviso that such an opportunity was only for people born in the period from 1910 to 1960year.
The realization of their talents has led people to believe that inequality of origin (and thus economic we alth) is a thing of the past. However, modern research confirms the opposite: the amount of inherited capital significantly exceeds that received in the course of the redistribution of income from labor. In support of his words, the author cites statistical data, including not only economic, but also demographic indicators.
The book "Capital in the XXI century", unfortunately, does not inspire optimism for those who seek to earn we alth on their own. The author studied the data for three centuries of social development and came to the conclusion that such economic inequality is the norm for humanity.
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