I will confess that I haven’t read Thomas Piketty’s notorious new book. It is on my long list of things to do. So my comments are based on what I have heard others say about it, rather than a direct read. Nevertheless, I do have things to say.
Certainly, I share with him a general concern about inequality; as I have said, I think too much inequality is bad because of its social effects and because it tends to restrict growth.
However, I disagree with Piketty’s diagnosis of the cause and hence his prescription (a global wealth tax). I don’t think it’s nearly as simple as he makes out and in particular I don’t agree that it’s about a difference between the rates of return on capital and labour. One of the features of twenty-first century capitalism is low capital rents as a result of very high asset prices. Capital assets generate returns for their owners not through income but through capital gains. For ordinary people, savings give a poor return.
My other quibble with Piketty as summarised by the pundits (which may not be borne out following a full reading) is that he hasn’t considered demographics. Globally, rather than regionally, we are coming to the end of a baby boom. Labour costs on a global scale are low because of the bulge in China’s working-age population which will start to contract rapidly over the coming decades as the little princes of the one-child generation leave the workforce. This will shift the balance of power towards labour. We will see a similar process in the West, sooner: our ageing population needs lots of local labour to care for it. We didn’t need local labour to supply our needs in a consumer society – cheap Chinese labour made the stuff we bought – but we will need local labour to empty our bed-pans.