Chapter 15: Piketty's Warning

In 2014, an unlikely book became a global sensation. Capital in the Twenty-First Century, by the French economist Thomas Piketty, topped bestseller lists, sparked debates from academic journals to dinner tables, and made its author an intellectual celebrity. The book was dense with data, running to nearly seven hundred pages, with extensive technical appendices. Yet it touched a nerve.

Piketty's message was stark: capitalism, left to its own devices, tends toward ever-increasing inequality. The postwar decades of shared prosperity were the exception, not the rule. We are returning to the patterns of the nineteenth century—a world of inherited wealth, aristocratic concentration, and democracy under threat.

Whether or not you accept Piketty's framework, the data he assembled demands engagement. The story of the last four decades—the neoliberal era we traced in the previous chapter—is, undeniably, a story of concentration. TINA promised prosperity; Piketty documented who actually prospered. Understanding that story is essential to understanding the legitimacy crisis that now confronts market economies.

r > g

Piketty's core argument can be summarized in a simple inequality: r > g.

Here, r is the rate of return on capital—the average return that wealth earns through interest, dividends, rents, and capital gains. And g is the rate of economic growth—the pace at which total output expands.

When r exceeds g, wealth grows faster than the economy as a whole. Those who own capital see their fortunes expand faster than the incomes of those who work for wages. The share of national income going to capital owners increases; the share going to workers declines. Wealth concentrates.

This is not a temporary phenomenon but a structural tendency. Throughout most of history, Piketty argues, r has exceeded g. Returns on capital of 4-5 percent were typical in preindustrial economies; growth rates were 1 percent or less. The natural state of capitalism is concentration, not diffusion.

The twentieth century was exceptional. World wars destroyed capital. Depression eroded wealth. High taxes on top incomes and inheritances limited accumulation. Strong growth—fueled by population expansion, technological transformation, and catch-up by devastated economies—meant that g temporarily approached r. The result was the compression of inequality that characterized the postwar decades.

But that era is ending. Growth rates are slowing as populations age and technological catch-up completes. Capital is recovering its dominance. Returns on wealth are climbing relative to returns on labor. We are, Piketty argues, sliding back toward the concentration of the Belle Époque.

The Data

Piketty's contribution was not primarily theoretical. It was empirical: the painstaking assembly of long-run data on income and wealth distribution.

Previous generations of economists had treated inequality as either unmeasurable or unimportant. Piketty and his collaborators—especially Emmanuel Saez and Gabriel Zucman—constructed datasets spanning centuries and continents. Tax records, estate data, national accounts—all were mined to trace the evolution of who gets what.

The pictures that emerged were striking.

In the United States, the share of national income going to the top 1 percent fell from about 24 percent in 1928 to around 9 percent by 1970. It then rose steadily, reaching 22 percent by 2012—nearly back to pre-Depression levels.

Wealth concentration tells an even starker story. The top 0.1 percent of American families now hold as much wealth as the bottom 90 percent. This is not merely a return to nineteenth-century patterns; it exceeds them.

The data demolished the comfortable assumption that market economies naturally produce broadly shared prosperity. The postwar decades were not the new normal; they were an interlude. And the interlude is over.

Critiques and Responses

Piketty's work generated intense debate. Critics challenged his data and his interpretation alike.

On the data: Some pointed to errors in Piketty's spreadsheets—a minor scandal when first revealed, though subsequent corrections didn't fundamentally alter the findings. More substantively, measuring wealth is difficult. How do you value privately held businesses? How do you account for pension rights and social insurance? Different measurement choices produce different pictures of concentration.

On r > g: Critics noted that the relationship between r > g and inequality is more complex than the simple formula suggests. If wealth holders consume their returns rather than reinvesting, concentration doesn't automatically follow. If inheritance is divided among multiple heirs, large fortunes dissipate. The mechanism Piketty proposes doesn't operate as mechanically as the formula implies.

On causation: Rising inequality in recent decades may have more to do with changes in technology, globalization, and labor markets than with the r > g dynamic. The returns to skilled labor have risen while returns to unskilled labor have stagnated—a different story from capital versus labor.

On policy: Piketty proposed a global wealth tax to counter concentration. Critics dismissed this as utopian—how would it be administered? What would prevent capital flight? The political obstacles seem insurmountable.

Yet the core empirical findings have proven robust. However you explain it, inequality has increased dramatically. The gains of economic growth have accrued disproportionately to those at the top. This is not a contested interpretation but a documented fact.

Moreover, Piketty's data captures only what's measured—and as feminist economists have long noted, our measures are blind to care work, domestic labor, community maintenance. The ten to thirteen trillion dollars of unpaid care work performed globally each year doesn't appear in income statistics. When we measure inequality, we measure only the inequality that prices can see.

What Concentration Means

Why does inequality matter beyond the obvious question of fairness?

Political power: Wealth translates into political influence. Campaign contributions, lobbying, media ownership, revolving doors between government and industry—all are mechanisms by which economic power converts to political power. The Koch brothers' network budgeted nearly $900 million for the 2016 U.S. election cycle. Rupert Murdoch's media empire shapes political discourse across continents. When wealth concentrates, democracy becomes vulnerable to plutocracy.

Economic stability: Highly unequal economies may be more prone to instability. When the wealthy accumulate more than they can spend, demand may fall short of production capacity. Asset bubbles may form as excess wealth seeks returns. The 1920s and the 2000s—both periods of rising inequality—ended in financial catastrophe. This is not coincidence; Minsky's financial instability and Piketty's wealth concentration are connected pathologies.

Social cohesion: Shared prosperity binds societies together. When some succeed while others fall behind, social trust erodes. Resentment builds. Political entrepreneurs exploit grievances. The populist movements of recent years—from Brexit to Trump to the gilets jaunes in France—draw on genuine experiences of exclusion and decline. These are not simply cultural backlash; they are responses to economic betrayal.

Legitimacy: Here is the deepest issue. An economic system derives legitimacy from the belief that it is, in some sense, fair. Markets claim legitimacy through equal opportunity and voluntary exchange. But when birth determines wealth more than effort, when the game seems rigged, that legitimacy erodes. And legitimacy, once lost, is difficult to restore.

Piketty himself frames the issue in explicitly political terms. "It is important to be precise about the meaning of inequality," he writes. The question is not whether some inequality is efficient or even inevitable. The question is whether the levels and trends we observe are compatible with democratic self-governance.

The Coherentist Lens

From a coherentist perspective, concentration is a form of systemic dissonance.

Coordination mechanisms work when they align individual action with collective flourishing. Markets achieve this, imperfectly, through price signals that direct resources toward valued uses. But when wealth concentrates, power concentrates. And concentrated power distorts the signals. Prices reflect purchasing power, not need. Investment flows where returns are highest for those who already have. The system optimizes for the few while the many are excluded from its logic.

This is not resonance but capture. The system no longer coordinates for the whole; it extracts for a part. And extraction, sustained long enough, provokes resistance.

Piketty's data documents what coherentism would predict: that coordination mechanisms captured by concentrated interests lose their legitimacy. The postwar compromise worked because gains were broadly shared. When gains stopped being shared, the compromise frayed.

The Thread Forward

Piketty's warning is not merely about distribution. It's about sustainability. An economic system that concentrates wealth is an economic system that concentrates power is an economic system that undermines its own legitimacy is an economic system that provokes backlash.

We are living through that backlash now. The next chapter traces the crisis of the mixed economy consensus: the 2008 financial collapse, the pandemic response that shattered fiscal orthodoxies, and the rise of China as an alternative model. The question of legitimacy—how coordination mechanisms earn consent—becomes increasingly urgent.

For if neither pure markets nor pure planning nor the mixed compromise can sustain legitimacy, what comes next? The chronicle now turns toward that open question.