The most comforting narrative of contemporary economics is a story of equilibrium and diminishing returns. If a firm becomes too profitable, mainstream scholars tell us, enterprising competitors will undercut it. There are diminishing returns to scale, because no firm can consistently dominate fields remote from its core competences. And even massive fortunes dissipate over time, as heirs proliferate.
Thomas Piketty rocketed to global prominence with Capital in the Twenty-First Century (2013), which told a very different story, one of increasing returns. When the rate of return on investment consistently outpaces economic growth, the rich get richer far faster than the rest. In 2018, Jeff Bezos accumulated roughly $150,000 per minute, as his net worth grew by $78.5 billion that year. While health economists routinely decry doctors’ salaries in the United States, almost no physician earns in a lifetime what Bezos accumulated in one day that year (about $213 million).
Far behind Bezos in the wealth sweepstakes lie a growing number of “ultra-high net worth individuals”—those with investable assets exceeding $30 million. Assume that the poorest, most risk-averse members of this elite conservatively invest their portfolio in bonds with an average annual return of 2 percent. They would accumulate $600,000 per year. Even if their consumption and taxes amounted to $550,000 per year, they would still be able to save $50,000 annually. That’s almost as much as the median 401(k) balance of Vanguard investors over sixty-five years of age (about $58,000), which most earned over a lifetime of work.
Piketty’s latest book, Capitalism and Ideology, is a prolix yet engaging effort both to contextualize and to defamiliarize agonizing figures like these. The context is an exhaustive survey of the history of inequality and its justifications. Analysis of slavery, feudalism, casteism, colonialism, and far more is balanced with a synthesis that compares these diverse methods of assuring that some human beings permanently enjoy more privileges and power than others. For example, Piketty explains that:
Compared with trifunctional societies, which were based on relatively rigid status disparities between clergy, nobility, and third estate and on a promise of functional complementarity, equilibrium, and cross-class alliances, ownership society saw itself as based on equal rights…. Everyone was entitled to secure enjoyment of his property—safe from arbitrary encroachment by king, lord, or bishop—under the protection of stable, predictable rules in a state of laws, not men.
A shared conception of divine right or natural order legitimized feudalism and caste systems, while ownership society promised a fair set of “rules of the game.”