In “Capital in the Twenty First Century”, the book hitting bookstores this week, Thomas Piketty of the Paris School of Economics projects that current economic forces that concentrate more and more wealth among “the fortunate few” will very likely prevail for a long time. If so, he predicts, “inequality” will get much worse (see “A Relentless Widening of Disparity in Wealth,” Eduardo Porter, The New York Times, 3/11/14 @ http://nyti.ms/1cUPxja).
There was a time when in graduate school, budding economists were taught: ”Never predict. But if you must, do it very frequently.” Meaning, of course, that rapid change can make a prediction look foolish. Thomas Piketty is apparently not intimidated by such nostrums even with the increasing velocity of change in our time. He insists that income from wealth – capital – is growing, and will continue to grow, with much of that wealth invested with attractive returns, while wages are largely stagnant. Hence a widening disparity in wealth and the “inequality” that at some point may threaten social cohesion.
It’s only an economic theory, and like most such theories, reversible by many kinds of societal change, especially political. But it will likely resonate among many groups unhappy with their economic status. And business leaders would do well to monitor its acceptance among “influentials” as well. This meme might sprout legs. Brandon Milanovic, an expert in global income distribution at the City University of New York’s Graduate Center, has reportedly called Piketty’s book “one of the watershed books in economic thinking”.
The issue of such projected growing “inequality” is seminal. It goes to “fairness”, but it also goes to the need for broad-based prosperity in a healthy, growing economy as well as to social harmony. We had better hope that a solution to an issue so central – and so challenging — is, over time, attainable in a democracy with representative government.