Brief Overview of Capital by Thomas Piketty
The main destabilizing force that causes wealth inequality is the private rate of return on capital or r, can be significantly higher for long periods of time than the rate of growth of income, output and wages or g, then r>g. Therefore those that rely on wages will grow at a much lower rate than those with capital, rents, dividends, interest, royalties, profits, and capital gains.
Mr. Piketty goes way back to show that r grows at about 4-5% while g grows at 1-1.5 %. therefore even if someone has enough to live off their wealth at about 1-1.5% each year, they would still have 2.5 to 3.5 % per year left over to grow. Those with more wealth can expect to grow at even greater rates. This relationship goes way back and Mr. Piketty forecasts that this relationship will continue well into the 21st Century.
The only solution to this widening gap of inequality is to institute a progressive wealth tax that will act as a leveler. The last real inequality levelers was World War I, the Depression and World War II. For example, the progressive tax would be 0.1 or 0.5 percent on wealth valued at 1 million Euros, 1 percent on fortunes valued at 1 to 5 million Euros, and 2 percent between 5 and 10 million or several billion Euros.
The challenge is that the industrialized world must cooperate to collect this tax. This is possible, as no one thought the euro would ever be passed and of course it was. As Mr. Piketty said it is politically possible to pass a world wide wealth tax: if you view economics as political science.
Mr. Piketty goes way back to show that r grows at about 4-5% while g grows at 1-1.5 %. therefore even if someone has enough to live off their wealth at about 1-1.5% each year, they would still have 2.5 to 3.5 % per year left over to grow. Those with more wealth can expect to grow at even greater rates. This relationship goes way back and Mr. Piketty forecasts that this relationship will continue well into the 21st Century.
The only solution to this widening gap of inequality is to institute a progressive wealth tax that will act as a leveler. The last real inequality levelers was World War I, the Depression and World War II. For example, the progressive tax would be 0.1 or 0.5 percent on wealth valued at 1 million Euros, 1 percent on fortunes valued at 1 to 5 million Euros, and 2 percent between 5 and 10 million or several billion Euros.
The challenge is that the industrialized world must cooperate to collect this tax. This is possible, as no one thought the euro would ever be passed and of course it was. As Mr. Piketty said it is politically possible to pass a world wide wealth tax: if you view economics as political science.