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On August 16, 2012, the South African police intervened in a labour conflict between workers at the Marikana platinum mine...
These are the first lines of the first chapter of French economist Thomas Piketty’s Capital in the Twenty-First Century, the most influential and talked about business book of 2014 by far. The book focuses on wealth and income inequality in Europe and the United States since the 18th century and is credited for mainstreaming the debate about inequality.
The book's central thesis is that when the rate of return on capital is greater than the rate of economic growth over the long term, the result is concentration of wealth, and this unequal distribution of wealth causes social and economic instability. Piketty proposes a global system of progressive wealth taxes to help reduce inequality and avoid the vast majority of wealth coming under the control of a tiny minority.
Here are some divergent views on Piketty’s tour de force:
Waldimar Pelser (Editor of Rapport)
“We assume that today, in the advanced economies at least, societies are more egalitarian than during the time of the Belle Époque in the late 19th Century, and that we won’t see those levels of obscene wealth and poverty again. Piketty, however, argues that we’re sliding back to those levels once more.
“I believe a completely equal society is also the most unjust, as it means additional effort is not rewarded. I was, therefore, rearing for a fight. But Piketty never denies the inherent, and fair, inequality that exists amongst humans.
“Piketty recognises that those likely to buy his book, what he calls ‘the patrimonial middleclass”, did not exist in the previous age of massive inequality. Today they constitute about 40 percent of income earners; these are people who work for their money, which was impossible in that previous age.
“He makes a distinction between wealth derived from capital and wealth derived from hard work. He believes the link between what you put in and what you get out is broken. He mentions the example of L’Oreal heiress Liliane Bettencourt, the richest woman on Earth, who has never worked a day for her wealth. If you are smarter, or work harder, then its right that you make more money than me, but the kind of wealth Bettencourt possesses, argues Piketty, has no public utility.
“Piketty proposes a global tax on extreme wealth. Capital needs to be confiscated where it’s so concentrated that it’s not productive or good for society. I’m not sure I agree; there would be too many unintended consequences.
“This book, however, remains very useful as a study of the state we find ourselves in and where we are headed. His description of our world is true, but I’m not so sure of the solutions he prescribes.
“The book made me realise that everything is political and that we cannot ignore economical debates.”
Listen to the Soundcloud clip for more detail regarding Pelser's views on Capital in the Twenty-First Century.
Loane Sharp (Economist at the Free Market Foundation)
“It’s a splendid book with great datasets. It’s beautifully written in a way only a Frenchman can write.
“There are, however, points which I disagree with. Jealousy is good in economics. It means you aspire to getting what other people have. Envy, however, is bad. It means you want to destroy what other people have.
“The ‘problem’ of inequality is often used to distract us from the real problem, which is poverty. The leading reason for inequality in South Africa, and the reason why black kids remain poor, is the very bad education children receive in government schools. I think this book creates a distraction from this.
“I don’t believe the concentration of wealth is a problem. I think the availability of opportunities for people to become wealthy is what’s critically important to the development of innovation.
“The so-called ‘one percent’ is not a homogenous group; there is tremendous flux and competition amongst them. I worry about an idle class of ‘armchair intellectuals’ whose opinions about capitalism will lead to its ultimate demise. Unemployment and poverty as issues has fallen to the wayside in this ridiculous conversation about inequality. We should focus and giving people the education they need to find jobs."
Lorenzo Fioramonti (Professor of Political Economy at the University of Pretoria)
“The book is brilliant, but too long and repetitive.
“I think this book has taken the world by storm because of the data the book is based on. We’ve been having this debate, without basing it on data, for a while now. Then comes Piketty and he gives us the most incredible dataset!
“Countries such as China and Brazil have significantly reduced poverty through systems of welfare that have allowed those at the bottom to rise up.
“A severe concentration of wealth makes it unlikely for an economy to sustainably grow at pace. A lot of capital remains idle and it gives these very rich individuals the power to restrain governments from acting progressively.
“This book is not about redistributing wealth per se. It’s about correcting what this system of capitalism is generating. It’s not about limiting productivity or innovation! By contrast; Piketty’s data shows that productivity and innovation were at its highest during times of comparative equality. As an example; compare the massive wealth created by Bill Gates in his garage with that of L’Oreal heiress Liliane Bettencourt. She’s the richest woman on Earth, but she hasn’t worked a day in her life!
“I think the central message in Piketty’s book is that, in times of very low growth, the only way to reactivate an economy is by redistributing some of the extremely unequally accumulated wealth.
“The extreme inequality seen in South Africa is one of the main impediments to growth. More money concentrated in fewer bank accounts cannot reenergize growth!"
Listen to the Soundcloud clip for more detail regarding Sharp's and Fioramonti's divergent views on Capital in the Twenty-First Century.
Gill Marcus (Governor of the South African Reserve Bank from November 2009 – October 2014)
“It’s difficult, because it’s very dense, but it’s superbly written. It’s probably one of the most important books of this century so far. It unpacks the most crucial issue of our time; inequality.”
Listen to the Soundcloud clip for more detail regarding Marcus'views on Capital in the Twenty-First Century.
Stephen Koseff (Investec CEO)
Koseff hated the book. He claims to have chucked it aside after reading only the first 30 pages.
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