When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.
Interpretation
Capitalism can lead to growing inequalities if capital earns more than the economy grows.
This quote by Thomas Piketty highlights the inherent risk in capitalism where the return on investments outpaces economic growth, leading to significant inequalities in wealth and undermining the principles of meritocracy that support democratic values. Piketty argues that such imbalances can create an unjust society where the wealthy accumulate more power and resources, ultimately threatening the fairness and integrity of democratic institutions.
In practice
During a lecture on economic theory, you could reference this quote to discuss the implications of capitalism on society.
Contrary to a tenacious myth, France is not owned by California pension funds or the Bank of China, any more than the United States belongs to Japanese and German investors. The fear of getting into such a predicament is so strong today that fantasy often outstrips reality. The reality is that inequality with respect to capital is a far greater domestic issue than it is an international one.
The main force pushing toward reduction in inequality has always been the diffusion of knowledge and the diffusion of education.
Over a long period of time, the main force in favor of greater equality has been the diffusion of knowledge and skills.
There is one great advantage to being an academic economist in France: here, economists are not highly respected in the academic and intellectual world or by political and financial elites. Hence they must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.
Having a decent share of the national wealth for the middle class is not bad for growth. It is actually useful both for equity and efficiency reasons.
The discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences.
To restore confidence in our markets and our financial institutions so they can fuel continued growth and prosperity, we must address the underlying problem. The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy.
All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.
It had been held that the economic system, any capitalist system, found its equilibrium at full employment. Left to itself, it was thus that it came to rest. Idle men and idle plant were an aberration, a wholly temporary failing. Keynes showed that the modern economy could as well find its equilibrium with continuing, serious unemployment. Its perfectly normal tendency was to what economists have since come to call an underemployment equilibrium.
Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.
Economists argue about the relative impact of immigrants versus robots on wage stagnation - voters don't care much. They blame immigrants. It's easier to get mad at a person from Macedonia or Mexico, taking your job than it is to get mad at a piece of technology from Silicon Valley.
The value of a currency is, ultimately, what someone will give you for it - whether in food, fuel, assets, or labor. And that's always and everywhere a subjective decision.
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