Here there are echoes of Marx in Piketty. Even if countries with high inequality agreed to tax capital, it will simply flow to those countries that want it. In a world of extreme capital mobility is taxation even possible? Not only does capital chase higher returns but countries compete to attract capital in their quest for higher growth. His proposal for a global tax on capital is even weaker.

Even societies facing a demographic collapse, for example, Japan under Shinzo Abe, are trying hard to raise g and not tax capital away. In fact, this experience has been replicated in recent years in China and India where high growth has lifted many boats.īut Piketty does not consider high g to be a solution, given his pessimism-springing from the long-term trajectory of g in western countries.

But what stands out is the relatively high g. There are different spins to the story with some scholars arguing that governments of that age took care to ensure that inequality did not get out of hand. The long growth boom in the West from 1950 to 1973 (the year of the first oil shock) did take care of this problem. If g is raised, then this problem can be addressed.

One way to take care of a skewed s/g ratio and address inequality to an extent is to raise the rate of growth. The result is that the 21st century world is going to be vastly unequal.Īre these valid grounds for pessimism and his solution-a global tax on capital-a solution at all? The first thing to note is the extreme pessimism that Piketty has about the world’s growth prospects and the divergence between r and g (That discussion can be found on pages 353-358).

Capital in the 21st