Hey there reader. I hope you’re doing great. I started a new book this week, Capital in the Twenty-First Century by French macroeconomist, Thomas Piketty. The book is wonderful, I love it. Piketty’s thesis is simple enough: economic inequality happens when the return on investment is greater than growth (I=R>G).
- Almost all wealth was destroyed by the Great Depression and the 30 years of prosperity which followed were unlike any time since the industrial revolution.
- The average worker did not become wealthy from their work, but union membership helped after WW2. Work is primarily for paying bills.
- Education was correlated with increasing wages, but in the long run, education does little to decrease economic inequality.
- People build wealth by acquiring or inheriting property, investing, marrying and having children. An example: wealthy parents pay for a child to attend graduate school, the parents bequeath to them the down payment for their first house in an affluent neighborhood so their grandchildren can attend a high-quality public school. The adult children start their own business and repeat the cycle.
Piketty believes a global tax on wealth would reduce economic inequality and reduce the frequency and severity of recessions and depressions. I think he is right.