Capital in the 21st century

Title: Capital in the 21st century

• URL

• The author mainly explores the historical evolution of wealth distribution from the late 18th century to 2010s, by looking at how wealth ownership changed in that time.

• The main question the book asks is why inequality fell between the First World War and the 1950s and why it has been increasing since.

• chapter1,2: the author compares the views of David Ricardo and Karl Marx, who believed inequality would keep growing, and Simon Kuznets and Robert Solow, who believed it would stabilise.
  • The first two chapters discuss the nature of growth, looking at how low economic and demographic growth is conducive to societies dominated by past wealth.

• chapter3,4: define the key concepts of income, capital, the capital/income ratio, and income from capital.

• chatper5,6: the author argues that what determines the fundamental nature of the capital/income ratio in the long run is the rate of savings divided by growth. In the long run, a nation with low growth and high rates of saving will have a high capital/income ratio.

• chapter7,8: analyse the concrete structure of inequality within different groups across society and concludes that capital ownership is still highly unequal.

• chapter 9,10: examine the causes of, and justifications for, labour income inequality, espcially recent high pays of managers.

• The author analyses, when the rate of growth is less than the return on capital, wealth will tend to accumulate to high levels.

• chapter11,12: conclude that while there are fewer large fortunes inherited in the 21st century, inheritance is still a significant source of inequality.

• The author also looks at the global distribution of wealth, that global wealth inequality is even more unequal than national wealth inequality.

• Over the next 20 years, the boomers will leave to their heirs the greatest concentration of inherited wealth the United States has ever seen. And that will result in an increased centralization of power. What’s the solution? the author said: We need to raise tax rates, and to institute a broader system of inheritance tax.